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1996 ANNUAL REPORT
IDS Growth Fund
(prospectus enclosed)
(Icon of) trees
The goal of IDS Growth Fund is long-term growth of capital.
(This annual report includes a prospectus that describes in detail
the fund's objective, investment policies, risks, sales charges,
fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
Distributed by American Express Financial Advisors Inc.
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(Icon of) trees
Going for Growth
In the long run, a company's stock price usually reflects its
business fortunes. Therefore, if a company thrives, its stock
tends to follow suit. That's why many long-term investors,
including Growth Fund, focus on growth stocks - those of companies
that enjoy rising sales and profits. While there will be
interruptions along the way, patient investors look forward to
sharing in that same prosperity.
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Contents
(Icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund
performed.
The prospectus, which is bound into the middle of this annual
report, describes the Fund in detail.
1996 annual report
From the president 4
From the portfolio manager 4
Ten largest holdings 6
Making the most of your Fund 7
Long-term performance 8
Independent auditors' report (Fund) 9
Financial statements (Fund) 10
Notes to financial statements (Fund) 13
Independent auditor's report (Portfolio) 19
Financial statements (Portfolio) 20
Notes to financial statements (Portfolio) 23
Investments in securities 32
IDS mutual funds 35
Federal income tax information 38
1996 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Structure of the Fund 4p
Manager and distributor 4p
Portfolio manager 4p
Alternative purchase arrangements 4p
Sales charge and Fund expenses 5p
Performance 7p
Financial highlights 7p
Total returns 9p
Investment policies and risks 12p
Facts about investments and their risks 12p
Valuing Fund shares 16p
How to purchase, exchange or redeem shares 17p
Alternative purchase arrangements 17p
How to purchase shares 19p
How to exchange shares 22p
How to redeem shares 23p
Reductions and waivers of the sales charge 28p
Special shareholder services 33p
Services 33p
Quick telephone reference 33p
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Distributions and taxes 34p
Dividend and capital gain distributions 34p
Reinvestments 35p
Taxes 36p
How to determine the correct TIN 38p
How the Fund is organized 39p
Shares 39p
Voting rights 39p
Shareholder meetings 39p
Special considerations regarding
master/feeder structure 40p
Board members and officers 41p
Investment manager 43p
Administrator and transfer agent 44p
Distributor 44p
About American Express Financial Corporation 46p
General information 46p
Appendix 47p
Descriptions of derivative instruments 47p
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PAGE 5
To our shareholders
(Photo of) William R. Pearce, President of the Fund
(Photo of) Mitzi Malevich, Portfolio manager
From the president
The volatility in the stock market in recent months has put some
investors, even experienced ones, on edge. Although no one can
know exactly what will happen next, history tells us that ups and
downs are intrinsic to stock investing.
But history also shows that changing strategies with every twist
and turn of the market is an impractical and, worse yet, typically
unproductive way to invest. What matters more, therefore, is how
we react to market volatility.
If we take a long-term view and accept the downs with the ups, we
improve our chances of success. For in the investment world, the
race most often goes not to the swift, but to the persistent.
Along the way, of course, you'll still want to review your
investment program to make sure it's on track to achieving your
financial goals. Your American Express financial advisor will help
you do just that, and I suggest you take advantage of his or her
services on a regular basis.
On May 13, 1996, the Fund began investing its assets in Growth
Portfolio instead of directly in securities of individual
companies. Following the portfolio manager's letter are the
financial statements of both the Fund and Portfolio. The notes to
the financials and the prospectus go into more detail of how the
new structure works.
William R. Pearce
From the portfolio manager
Despite a precipitous decline by growth stocks late in the fiscal
year, IDS Growth Fund generated a double-digit total return for
shareholders during the August 1995 through July 1995 period. (A
substantial part of the return came in the form of a capital gain
that was paid to shareholders last december and reduced the Fund's
net asset value by the same amount at that time.)
For the 12 months, the Fund's return exceeded that of the average
for growth mutual funds as measured by the Lipper Growth Fund
Index.
The powerful bull market set motion at the start of 1995 continued
for the first several months of the fiscal period, as stocks rode
an ongoing wave of moderate economic growth, low inflation, healthy
corporate profits and falling long-term interest rates. Although
stocks of virtually all stripes performed positively, those of
growth companies were best overall as their generally impressive
earnings attracted an increasing amount of investors' capital.
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Technology, health care strong
Moreover, to the particular benefit of this Fund, growth stocks in
the technology and health-care sectors - where we maintained much
of the portfolio - were often at the forefront of the market's
advance. Complementing them were good gains among our financial
services stocks, a group to which we lessened our exposure as the
period progressed. We also found winners among energy, metals,
food/beverage and telecommunications stocks.
One portfolio shift worth noting was our decision last fall to sell
our stocks of retailers, based on our negative view of prospects
for that business sector. That strategy paid off, as retailers
experienced a generally lean holiday sales season. More important
to the Fund's success during the first several months of the fiscal
period, however, was our fundamental policy of holding minimal cash
reserves, whose return was far below what we were able to realize
from stocks.
A psychological shift
Although there was only modest change in key fundamentals such as
inflation, economic growth and corporate profits, by early summer
of this year many professional investors, spurred mainly by a run-
up in long-term interest rates, evidently decided that stocks had
run their course for the time being and it was time to sell. As is
usually the case, they first went after those issues that had risen
the most - namely, growth stocks, especially those in the
technology area. The result was that, in June and July, funds such
as this one were forced to give back a sizable portion of their
previous gains, some 12% in the case of this Fund. It was a
frustrating way to end what had been a very gratifying fiscal year.
Still, substantial swings in value are a fact of life for a
relatively aggressive fund such as this one. And frankly, I won't
be surprised to see more of them in the months ahead. But, I
continue to believe that the opportunities in growth stocks are as
numerous and exciting as ever. Over time, I expect them to prove
rewarding for the Fund and its shareholders. Mean while, I look
forward to updating you on our results six months from now.
Mitzi Malevich
Class A
12- month performance
(All figures per share)
Net asset value (NAV)
July 31, 1996 $23.16
July 31, 1995 $21.50
Increase $ 1.66
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Distributions
Aug. 1, 1995 - July 31, 1996
From income $ .01
From capital gains $ 1.14
Total distributions $ 1.15
Total return* +13.3%**
Class B
12-month performance
(all figures per share)
Net asset value (NAV)
July 31, 1996 $22.92
July 31, 1995 $21.45
Increase $ 1.47
Distributions
Aug. 1. 1995 - July 31, 1996
From income $ .00
From capital gains $ 1.14
Total distributions $ 1.14
Total return* +12.4%**
Class Y
12-month performance
(all figures per share)
Net asset value (NAV)
July 31, 1996 $23.21
July 31, 1995 $21.51
Increase $ 1.70
Distributions
Aug. 1, 1995 - July 31, 1996
From income $ .02
From capital gains $1.14
Total distributions $ 1.16
Total return* +13.4%**
* The prospectus discusses the effect of sales charge, if any on
the various classes.
**The total return is a hypothetical investment in the Fund with
all distributions reinvested.
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PAGE 8
The Portfolio's ten largest holdings
Pie Chart: The ten holdings listed here make up 28.19% of the
Portfolio's net assets
___________________________________________________________________
Percent Value
(of Portfolio's net assets) (as July 31, 1996)
___________________________________________________________________
Cisco Systems 3.75% $82,800,000
A leader in the "router" segment of the networks industry. Cisco
routers allow interconnection of PC's, minicomputers and mainframe
to local and global networks.
First Data 3.29 72,529,695
Operates in one business segment providing high-quality, high
volume information processing and related services to specific
client groups: the transaction card, payment instruments,
teleservices, mutual funds, health care receivables and information
management industries.
Tellabs 3.25 71,700,000
Designer, manufacturer and marketer of a broad range of products
and equipment for use by telephone companies, the Bell System,
specialized common carriers and other providers of
telecommunication services.
HEALTHSOUTH 2.75 60,750,000
A fast-growing chain of hospitals and outpatient centers. The
company specializes in patient rehabilitation that enables patients
to return to a normal lifestyle as soon as possible after
accidents, surgery or illness.
Boston Scientific 2.60 57,300,000
Developer, manufacturer and marketer of medical devices. The
company's products are used in a broad range of medical
specialties, including cardiology, vascular surgery, urology,
gastroenterology and radiology.
Coca-Cola 2.57 56,564,063
The world's largest producer and distributor of soft drinks,
concentrates and syrups.
Nucor 2.55 56,250,000
One of the largest and most profitable domestic steel mini-mills.
Nucor is a leading producer of the joist and girders used in
construction.
Pfizer 2.53 55,900,000
A leading producer of pharmaceutical, hospital products, animal
health items, non-prescription medications and specialty chemicals.
Service Intl 2.50 55,125,000
Operates funeral homes, cemeteries, crematories and other funeral
and cemetery related businesses located throughout Europe, North
America and the Pacific Rim.
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Oracle Systems 2.40 52,818,750
One of the largest independent vendors of database-management
software. Oracle offers a wide variety of new products,
enhancements and applications software, supported by excellent
service.
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Making the most of your Fund
Average annual total return
(as of July 31, 1996)
1 year Since inception* 5 years 10 years
Class A +7.61% --% +15.11% +13.69%
Class B +7.43% +21.80% --% --%
Class Y +13.44% +25.61% --% --%
* Inception date was March 20, 1995.
The performance of Class B and Class Y will vary from the
performance of Class A based on differences in sales charges and
fees.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Figures reflect the deduction of the maximum 5% sales charge. This
was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
Build your assets systematically
One of the best ways to invest in the fund is by dollar-cost
averaging -- a time-tested strategy that can make market
fluctuations work for you. To dollar-cost average, simply invest a
fixed amount of money regularly. You'll automatically buy more
shares when the Fund's share price is low, fewer shares when it is
high.
This does not ensure a profit or avoid a loss if the market
declines. But, if you can continue to invest regularly through
changing market conditions, it can be an effective way to
accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more
shares when the per share market price is low.
(arrow in table pointing to September) and fewer shares when the
per share market price is high.<PAGE>
PAGE 11
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
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The Fund's long term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do
well
o you receive capital gains when the gains on investments sold
by the Fund exceed losses
o you receive income when the Fund's stock dividends, interest
and short-term gains exceed its expenses.
All three make up your total return. And you potentially can
increase your investment if, like most investors, you reinvest your
dividends and capital gain distributions to buy additional shares
of the Fund or another fund.
How your $10,000 has grown in IDS Growth Fund
$36,109
Growth Fund
Class A
S&P 500
Stock Index
Lipper Growth Fund Index
$9,500
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96
Average annual total return
(as of July 31, 1996)
1 year Since inception* 5 years 10 years
Class A +7.61% --% +15.11% +13.69%
Class B +7.43% +21.80% +--% --%
Class Y +13.44% +25.61% +--% --%
* Inception date was March 20, 1995.
Assumes: Holding period from 8/1/86 to 7/31/96. Returns do not
reflect taxes payable on distributions. Reinvestment of all income
and capital gain distributions for the Fund, with a value of
$25,568. Also see "Performance" in the Fund's current prospectus.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which the fund invests.
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PAGE 13
Lipper Growth Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally
similar to this fund, although some funds in the index may have
somewhat different investment policies or objectives.
On the graph above you can see how the fund's total return compared
to two widely cited unmanaged performance indexes, the S&P 500
Stock Index and the Lipper Growth Fund Index. In comparing Growth
Fund to the two indexes, you should take into account the fact that
the fund's performance reflects the maximum sales charge of 5%,
while such charges are not reflected in the performance of the
indexes. If you were actually to buy either individual stocks or
growth mutual funds, any sales charges that you pay would reduce
your total return as well.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
This was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
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Independent auditors' report
___________________________________________________________________
The board and shareholders
IDS Growth Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, of IDS Growth Fund (a series of IDS Growth Fund,Inc.)
as of July 31, 1996, and the related statement of operations for
the year then ended and the statements of changes in net assets for
each of the years in the two-year period ended July 31, 1996, and
the financial highlights for each of the years in the ten-year
period ended July 31, 1996. These financial statements and the
financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. 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
Growth Fund at July 31, 1996, and the results of its operations,
changes in its net assets and the financial highlights for the
periods stated in the first paragraph above, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 6, 1996
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PAGE 15
Statement of assets and liabilities
IDS Growth Fund
July 31, 1996
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investment in Growth Portfolio (Note 1) $2,182,123,011
Total assets 2,182,123,011
Liabilities
Disbursement in excess of cash on demand deposit 100
Accrued distribution fee 5,657
Accrued service fee 10,150
Accrued transfer agency fee 7,889
Accrued administrative services fee 2,762
Other accrued expenses 359,264
Total liabilities 385,822
Net assets applicable to outstanding capital stock $2,181,737,189
Represented by
Capital stock -- authorized 10,000,000,000
shares of $.01 par value $ 943,188
Additional paid-in-capital 1,518,871,436
Accumulated net realized gain (Note 1) 66,700,638
Unrealized appreciation of investments 595,221,927
Net assets applicable to outstanding shares: $2,181,737,189
Class A $1,871,320,106
Class B $ 281,101,412
Class Y $ 29,315,671
Net asset value per share of outstanding Class A shares 80,790,697 $ 23.16
capital stock Class B shares 12,265,133 $ 22.92
Class Y shares 1,262,972 $ 23.21
See accompanying notes to financial statements.
</TABLE>
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Statement of operations
IDS Growth Fund
Year ended July 31, 1996
<TABLE>
<CAPTION>
Aug. 1, 1995 to May 13, 1996 to
May 12, 1996 July 31, 1996 Total
(Note 1 and 4)
Investment income
<S> <C> <C> <C>
Income:
Dividends $ 9,443,030 $ 2,748,876 $ 12,191,906*
Interest 5,010,541 1,861,493 6,872,034
Total Income 14,453,571 4,610,369 19,063,940
Expenses (Note 2):
Investment management services fee 8,770,070 -- 8,770,070
Distribution fee - - Class B 652,772 435,033 1,087,805
Transfer agency fee 1,588,204 604,793 2,192,997
Incremental transfer agency fee -- Class B 15,332 8,750 24,082
Service fee
Class A 2,126,051 750,257 2,876,308
Class B 153,093 101,358 254,451
Administrative services fee 637,866 233,195 871,061
Compensation of board members 20,003 7,691 27,694
Compensation of officers 7,683 4,302 11,985
Custodian fees 69,984 -- 69,984
Postage 134,891 63,300 198,191
Registration fees 230,627 145,142 375,769
Reports to shareholders 41,134 18,700 59,834
Audit fees 19,573 5,427 25,000
Administrative 8,891 3,224 12,115
Other 17,730 15,676 33,406
Total expenses 14,493,904 2,396,848 16,890,752
Earnings credits on cash balances (Note 4) (6,678) -- (6,678)
14,487,226 2,396,848 16,884,074
Expenses, including investment management services fees
allocated from Growth Portfolio -- 3,285,045 3,285,045
Total net expenses 14,487,226 5,681,893 20,169,119
Investment loss -- net (33,655) (1,071,524) (1,105,179)
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions 96,512,819 15,110,714 111,623,533
Net change in unrealized appreciation or depreciation 252,572,044 (175,993,041) 76,579,003
Net gain (loss) on investments 349,084,863 (160,882,327) 188,202,536
Net increase (decrease) in net assets
resulting from operations $349,051,208 $(161,953,851) $187,097,357
* Net of foreign taxes withheld of $88,052
See accompanying notes to financial statements
</TABLE>
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Statement of changes in net assets
IDS Growth Fund
<TABLE>
<CAPTION>
Operations and distributions July 31, 1996 July 31, 1995
Year ended Year ended
<S> <C> <C>
Investment income (loss) - net $ (1,105,179) $ 1,926,511
Net realized gain on investments 111,623,533 47,367,171
Net change in unrealized appreciation or
depreciation of investments 76,579,003 305,991,050
Net increase in net assets
resulting from operations 187,097,357 355,284,732
Distributions to shareholders from:
Net investment income
Class A (745,861) (2,221,716)
Class Y (10,284) --
Net realized gain
Class A (76,543,593) (83,810,550)
Class B (5,509,162) --
Class Y (639,403) --
Total distributions (83,448,303) (86,032,266)
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 705,002,561 250,703,122
Class B shares 251,558,924 35,052,302
Class Y shares 25,249,056 7,107,887
Reinvestment of distributions at net asset value
Class A shares 75,873,952 84,354,729
Class B shares 5,493,274 --
Class Y shares 649,686 --
Payments for redemptions
Class A shares (394,806,319) (170,480,957)
Class B shares (Note 2) (12,785,969) (402,110)
Class Y shares (5,236,466) (121,596)
Increase in net assets from capital share transactions 650,998,699 206,213,377
Total increase in net assets 754,647,753 475,465,843
Net assets at beginning of period 1,427,089,436 951,623,593
Net assets at end of period
(including undistributed net investment income
of $0 and $756,145) $2,181,737,189 $1,427,089,436
See accompanying notes to financial statements
</TABLE>
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PAGE 18
Notes to financial statements
IDS Growth Fund, Inc.
____________________________________________________________
1. Summary of significant accounting policies
IDS Growth Fund (a series of IDS Growth Fund, Inc.) is registered
under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Fund
offers Class A, Class B and Class Y shares. Class A shares are sold
with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge and such shares automatically
convert to Class A after eight years. Class Y shares have no sales
charge and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee, transfer agency fee and service fee
(class specific expenses) differs among classes. Income, expenses
(other than class specific expenses) and realized and unrealized
gains or losses on investments are allocated to each class of
shares based upon its relative net assets.
Investment in Growth Portfolio
Effective May 13, 1996, the Fund began investing all of its assets
in the Growth Portfolio (Portfolio), a series of Growth Trust, an
open-end investment company that has the same objectives as the
Fund. This was accomplished by transferring the Fund's assets to
the Portfolio in return for a proportionate ownership interest in
the Portfolio. Growth Portfolio invest primarily in stocks of U.S.
An foreign companies that appear to offer growth opportunities.
The Fund records daily its share of the Portfolio's income,
expenses and realized and unrealized gains and losses. The
financial statements of the Portfolio are included elsewhere in
this report and should be read in conjunction with the Fund's
financial statements.
The Fund records its investment in the Portfolio at value which is
equal to the Fund's proportionate ownership interest in the net
assets of the Portfolio. The percentage of the Portfolio owned by
the Fund at July 31, 1996 was 98.96%. Valuation of securities held
by the Portfolio is discussed in Note 1 of the Portfolio's Notes to
Financial Statements, which are included elsewhere in this report.
Use of estimates
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 at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
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PAGE 19
Federal taxes
Since the Fund's policy is to comply with all sections of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to the shareholders, no
provision for income or excise taxes is required.
Net investment income (loss) and net realized gains (losses)
allocated from the Portfolio may differ for financial statement and
tax purposes primarily because of the deferral of losses on certain
futures contracts, the recognition of certain foreign currency
gains (losses) as ordinary income (loss) for tax purposes, and
losses deferred due to "wash sale" transactions. The character of
distributions made during the year from net investment income or
net realized gains may differ from their ultimate characterization
for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized
gains (losses) were recorded by the Fund.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, undistributed net investment
income has been increased by $1,105,179 and paid-in-capital has
been decreased by $1,105,179.
Dividends to shareholders
An annual dividend declared and paid at the end of the calendar
year from net investment income is reinvested in additional shares
of the Fund at net asset value or payable in cash. Capital gains,
when available, are distributed along with the income dividend.
________________________________________________________________
2. Expenses and sales charges
In addition to the expenses allocated from the Portfolio, the Fund
accrues its own expenses as follows:
Effective March 20, 1995, the Fund entered into agreements with
American Express Financial Corporation (AEFC) for providing
administrative services and serving as transfer agent. Under its
Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at a percentage of the
Fund's average daily net assets in reducing percentages from 0.05%
to 0.03% annually. Under this agreement, the Fund also pays taxes;
audit and certain legal fees; registration fees for shares; office
expenses; consultant's fees; compensation of board members,
officers and employees; corporate filing fees; organizational
expenses; and any other expenses properly payable by the Fund
approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains
shareholder accounts and records. The Fund pays AEFC an annual fee
per shareholder account for this service as follows:
Class A $15
Class B $16
Class Y $15
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PAGE 20
Also effective March 20, 1995, the Fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services . Under a Plan and Agreement
of Distribution, the Fund pays a distribution fee at an annual rate
of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of the
Fund's average daily net assets attributable to Class A and Class B
shares.
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
Sales charges received by American Express Financial Advisors for
distributing Fund shares were $8,347,400 for Class A and $70,598
for Class B for the period ended July 31, 1996.
Prior to April 30, 1996, the Fund had a retirement plan for its
independent board members. The plan was terminated April 30, 1996.
The retirement plan expense amounted to $13,971 for the period.
The total liability for the plan is $62,611 which will be paid out
at some future date.
_________________________________________________________________
3. Capital share transactions
Transactions in shares of capital stock for the periods indicated
are as follows:
Year ended July 31, 1996
Class A Class B Class Y
____________________________________________________________
Sold 30,026,905 10,775,556 1,074,249
Issued for reinvested 3,405,937 248,093 29,133
distributions
Redeemed (16,841,935) (550,504) (222,683)
____________________________________________________________
Net increase 16,590,907 10,473,145 880,699
____________________________________________________________
Year ended July 31, 1995
Class A Class B* Class Y*
____________________________________________________________
Sold 13,666,035 1,812,389 388,348
Issued for reinvested 5,080,692 -- --
distributions
Redeemed (9,255,889) (20,401) (6,075)
____________________________________________________________
Net increase 9,490,838 1,791,988 382,273
____________________________________________________________
*Inception date was March 20, 1995.
<PAGE>
PAGE 21
____________________________________________________________
4. Pre-conversion to Master
Prior to transferring its securities to Growth Portfolio on May 13,
1996, various transactions took place as stated below.
Expenses and sales charges
Prior to the conversion on May 13, 1996, the Fund paid an
investment management fee to AEFC. Subsequent to the conversion,
the investment management fee is assessed st the Portfolio level.
(See the footnotes to the Portfolio financial statement for the
terms of the investment management agreement which remain
unchanged). Prior to the conversion, the management fee was
adjusted by a performance incentive adjustment based on the Fund's
average daily net assets over a rolling 12-month period as measured
against the change in the Lipper Growth Fund Index. The adjustment
increased the fee by $919,558 for the period from Aug. 1, 1995 to
May 12, 1996.
During the period from Aug. 1, 1995 to May 12, 1996, the Fund's
custodian fees were reduced by $6,678 as a result of earnings
credits from overnight cash balances.
Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $674,762,313 and $295,169,274
respectively, for the period from Aug. 1, 1995 to May 12, 1996.
Brokerage commissions paid to brokers affiliated with AEFC were
$23,844 during this period.
Lending of portfolio securities
Income from securities lending amounted to $246,679 for the period
from Aug. 1, 1995 to May 12, 1996.
___________________________________________________________________
5. Financial highlights
"Financial highlights " showing per data and selected information
is presented on pages 7 and 8 of the prospectus.
<PAGE>
PAGE 22
Independent auditors' report
The board of trustees and unitholders
Growth Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of Growth Portfolio (a series of Growth Trust) as of July 31, 1996,
and the related statements of operations and changes in net assets
for the period from May 13, 1996 (commencement of operations) to
July 31, 1996. These financial statements are the responsibility of
fund management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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. Investment
securities held in custody are confirmed to us by the custodian. As
to securities purchased and sold but not received or delivered, and
securities on loan, we request confirmations from brokers, and
where replies are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 Growth
Portfolio at July 31, 1996, and the results of its operations for
the year then ended and the changes in its net assets for the
period from May 13, 1996 (commencement of operations) to July 31,
1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 6, 1996
<PAGE>
PAGE 23
Statement of assets and liabilities
Growth Portfolio
July 31, 1996
Assets
Investments in securities, at value (Note 1)
(identified cost $1,596,400,239) $2,191,506,852
Dividends and accrued interest receivable 1,116,073
Receivable for investment securities sold 22,095,500
U.S. government securities
held as collateral (Note 4) 74,151,956
Total assets 2,288,870,381
Liabilities
Disbursements in excess
of cash on demand deposit 6,693,434
Payable upon return
of securities loaned (Note 4) 76,891,356
Accrued investment management services fee 86,777
Other accrued expenses 31,666
Total liabilities 83,703,233
Net assets $2,205,167,148
See accompany notes to financial statements.
<PAGE>
PAGE 24
Statement of operations
Growth Portfolio
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Investment income
Income:
Interest $1,881,058
Dividend 2,778,360
Total income 4,659,418
Expenses (Note 2):
Investment management services fee 3,271,780
Compensation of board members 1,640
Custodian fees 44,330
Audit fees 4,231
Administrative 185
Total expenses 3,322,166
Earning credits on cash balances (Note 2) (2,345)
Total net expenses 3,319,821
Investment income -- net 1,339,597
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions
(Note 3) 12,989,728
Net change in unrealized appreciation or
depreciation of investments (176,108,355)
Net loss on investments (163,118,627)
Net decrease in net assets
resulting from operations $(161,779,030)
See accompanying notes to financial statements.
<PAGE>
PAGE 25
Statement of changes in net assets
Growth Portfolio
For the period from May 13, 1996 to (commencement of operations)
to July 31, 1996
Operations and distributions
Investment income - - net $ 1,339,597
Net realized gain on investments 12,989,728
Net change in unrealized appreciation or
depreciation of investments (176,108,355)
Net decrease in net assets
resulting from operations (161,779,030)
Net contributions 2,366,946,178
Total increase in net assets 2,205,167,148
Net assets at beginning of period (Note 1) --
Net assets at end of period $2,205,167,148
See accompanying notes to financial statements.
<PAGE>
PAGE 26
Notes to financial statements
Growth Portfolio
___________________________________________________________________
1. Summary of significant accounting policies
The Growth Portfolio (Portfolio) is a series of Growth Trust
(Trust) and is registered under the Investment Company Act of 1940
(as amended) as a diversified, open-end management investment
company. Growth Portfolio seeks to provide unitholders with long-
term growth of capital by investing primarily in stocks of U.S. and
foreign companies that appear to offer growth opportunities. The
Portfolio also may invest in preferred stocks, convertible
securities, debt securities derivative instruments and money market
instruments. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio. The Portfolio
commenced operations on May 13, 1996. At this time, an existing
fund transferred its assets to the Portfolio in return for an
ownership percentage of the Portfolio.
Significant accounting policies followed by the Portfolio are
summarized below:
Use of estimates
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 at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available
are valued at fair value according to methods selected in good
faith by the board. Determination of fair value involves, among
other things, reference to market indexes, matrixes and data from
independent brokers. Short-term securities maturing in more than 60
days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains and
facilitate buying and selling of securities for investment
purposes, the Portfolio may buy or write options traded on any U.S.
or foreign exchange or in the over-the-counter market where the
completion of the obligation is dependent upon the credit standing
of the other party. The Portfolio also may buy and sell put and
call options and write covered call options on portfolio securities
and may write cash-secured put options. The risk in writing a call
option is that the Portfolio gives up the opportunity of profit <PAGE>
PAGE 27
if the market price of the security increases. The risk in writing
a put option is that the Portfolio may incur a loss if the market
price of the security decreases and the option is exercised. The
risk in buying an option is that the Portfolio pays a premium
whether or not the option is exercised. The Portfolio also has the
additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Portfolio will realize a gain or loss upon expiration
or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost
for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or
paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Portfolio may buy and sell stock index futures
contracts traded on any U.S. or foreign exchange. The Portfolio
also may buy or write put and call options on these futures
contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Portfolio
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized gains
and losses. The Portfolio recognizes a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and
foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. In
the statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses
realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
<PAGE>
PAGE 28
The Portfolio may enter into forward foreign currency exchange
contracts for operational purposes and to protect against adverse
exchange rate fluctuation. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation
are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the
credit risk that the other party will not complete the obligations
of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a
partnership and each investor in the Portfolio is treated as the
owner of its proportionate share of the net assets, income,
expenses and realized and unrealized gains and losses of the
Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend
date and interest income, including level-yield amortization of
premium and discount, is accrued daily.
___________________________________________________________________
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.6% to 0.5%
annually. The fees may be increased or decreased by a performance
adjustment based on a comparison of the performance of Class A
shares of the IDS Growth Fund to the Lipper Growth Fund Index. The
maximum adjustment is 0.12% of the Portfolio's average daily net
assets on an annual basis. The adjustment increased the fee by
$330,001 for the period from May 13, 1996 to July 31, 1996.
Under the agreement, the Trust also pays taxes and nonadvisory
expenses, which include custodian fees to be paid to an affiliate
of AEFC; audit and certain legal fees; fidelity bond premiums;
registration fees for units; Portfolio office expenses;
consultants' fees; compensation of trustees; corporate filing fees;
expenses incurred in connection with lending securities of the
Portfolio;and any other expenses properly payable by the Trust or
Portfolio, approved by the board.
For the period from May 13, 1996 to July 31, 1996, the Portfolio's
custodian fees were reduced by $2,345 as a result of earnings
credits from overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
<PAGE>
PAGE 29
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $230,068,508 and $94,393,890
respectively, for the period from May 13, 1996 to July 31, 1996.
For the same period, the portfolio turnover rate was 5%. Realized
gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were
$189,172 for this period.
___________________________________________________________________
4. Lending of portfolio securities
At July 31, 1996, securities valued at $82,068,675 were on loan to
brokers. For collateral, the Portfolio received $2,739,400 in cash
and U.S. government securities valued at $74,151,956. Income from
securities lending amounted to $177,912 for the period ended July
31, 1996. The risks to the Portfolio of securities lending are that
the borrower may not provide additional collateral when required or
return the securities when done.
<PAGE>
PAGE 30
Investments in securities
<TABLE>
<CAPTION>
Growth Portfolio
July 31, 1996
(Percentages represent value of
investments compared to net assets)
____________________________________________________________________________________________________________________________
Common stocks (92.6%)
____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<C> <C> <C>
Airlines (1.0%)
Northwest Airlines 600,000 (b,d) $22,050,000
_____________________________________________________________________________________________________________________________
Automotive & related (0.8%)
Gentex 400,000 (b) 7,500,000
Oxford Resources Cl A 400,000 (b) 9,500,000
___________
Total 17,000,000
_____________________________________________________________________________________________________________________________
Banks and savings & loans (1.3%)
MBNA 1,000,000 27,875,000
_____________________________________________________________________________________________________________________________
Beverages & tobacco (2.5%)
Coca-Cola 1,206,700 56,564,063
_____________________________________________________________________________________________________________________________
Building materials & construction (1.7%)
Clayton Homes 1,033,900 18,093,250
Tyco Intl 500,000 20,500,000
____________
Total 38,593,250
_____________________________________________________________________________________________________________________________
Communications equipment (15.8%)
ADC Telecom 600,000 (b) 25,350,000
Andrew 1,200,000 (b,d) 49,050,000
Cisco Systems 1,600,000 (b) 82,800,000
Ericsson (LM) Tel Cl B ADR 1,500,000 (c) 30,468,750
First Data 934,360 72,529,695
Silicon Graphics 700,000 (b) 16,450,000
Tellabs 1,200,000 (b) 71,700,000
____________
Total 348,348,445
_____________________________________________________________________________________________________________________________
Computers & office equipment (8.0%)
Compaq Computer 500,000 (b,d) 27,375,000
CSG Systems Intl 50,600 (b) 1,049,950
Danka Business Systems ADR 1,000,000 (c,d) 27,500,000
Gemstar Intl 150,000 (b) 3,637,500
Intuit 200,000 (b) 7,000,000
Microsoft 200,000 (b) 23,575,000
NETCOM On-Line Communication Services 400,000 (b) 7,500,000
Oracle Systems 1,350,000 (b) 52,818,750
Solectron 800,000 (b) 25,200,000
____________
Total 175,656,200
______________________________________________________________________________________________________________________________
Chemicals (1.1%)
Monsanto 750,000 23,437,500
______________________________________________________________________________________________________________________________
Electronics (7.5%)
Applied Materials 800,000 (b) 19,100,000
AVX 800,000 14,100,000
DuPont Photomasks 22,500 (b) 427,500
Harman Intl 500,000 22,437,500
Intel 500,000 37,562,500
Maxim Integrated Products 1,000,000 (b) 28,500,000
MEMC Electronic 600,000 (b) 21,225,000
SGS-Thomson Microelectronics 300,000 (b) 10,350,000
Vishay Intertechnology 630,000 11,655,000
____________
Total 165,357,500
_____________________________________________________________________________________________________________________________
Energy (1.0%)
Mobil 200,000 22,075,000
<PAGE>
PAGE 31
_____________________________________________________________________________________________________________________________
Energy equipment & services (3.5%)
Fluor 750,000 45,187,500
Schlumberger 400,000 (c) 32,000,000
____________
Total 77,187,500
_____________________________________________________________________________________________________________________________
Financial services (3.5%)
Green Tree 1,200,000 40,350,000
Merrill Lynch 600,000 36,225,000
____________
Total 76,575,000
_____________________________________________________________________________________________________________________________
Health care (10.9%)
Amgen 800,000 (b) 43,700,000
Boston Scientific 1,200,000 (b,d) 57,300,000
Gensia 161 (b) 835
IDEXX Laboratories 400,000 (b) 15,500,000
Johnson & Johnson 700,000 33,425,000
Medtronics 600,000 28,425,000
Perclose 34,800 (b) 687,300
Pfizer 800,000 55,900,000
Sola Intl 200,000 (b) 5,925,000
____________
Total 240,863,135
_____________________________________________________________________________________________________________________________
Health care services (6.3%)
HealthCare COMPARE 600,000 (b) 23,175,000
HEALTHSOUTH 2,000,000 (b) 60,750,000
Service Intl 1,000,000 (d) 55,125,000
____________
Total 139,050,000
_____________________________________________________________________________________________________________________________
Industrial equipment & services (4.5%)
Caterpillar 400,000 26,350,000
Deere 1,200,000 42,900,000
Sanifill 750,000 (b) 31,781,250
____________
Total 101,031,250
_____________________________________________________________________________________________________________________________
Industrial transportation (1.3%)
Wisconsin Central 900,000 (b) 28,125,000
_____________________________________________________________________________________________________________________________
Insurance (3.0%)
Risk Capital Holdings 883,300 (b) 15,347,337
Travelers 1,200,000 50,700,000
____________
Total 66,047,337
_____________________________________________________________________________________________________________________________
Leisure time & entertainment (5.8%)
Disney (Walt) 500,000 27,812,500
Duracell Intl 600,000 27,075,000
Harley Davidson 300,000 12,300,000
Marriott Intl 600,000 30,825,000
Mattel 1,200,000 29,700,000
____________
Total 127,712,500
_____________________________________________________________________________________________________________________________
Metals (3.6%)
Birmingham Steel 1,100,000 17,875,000
Nucor 1,200,000 56,250,000
Stillwater Mining 200,000 (b) 4,300,000
____________
Total 78,425,000
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (4.2%)
Alco Standard 1,000,000 43,750,000
Apollo Group 750,000 (b) 20,625,000
Manpower 200,000 6,800,000
Olsten 800,000 21,200,000
____________
Total 92,375,000
_____________________________________________________________________________________________________________________________
Textiles & apparel (2.9%)
Nike 500,000 51,437,500
St. John Knits 300,000 11,850,000
___________
Total 63,287,500
<PAGE>
PAGE 32
_____________________________________________________________________________________________________________________________
Utilities -- telephone (2.4%)
AirTouch Communications 900,000 (b) 24,750,000
MFS Communications 900,000 (b,d) 28,350,000
___________
Total 53,100,000
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $1,445,618,554) $2,040,736,180
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (6.8%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
<C> <C> <C> <C>
U.S. government agencies (0.3%)
Federal Home Loan Bank Disc Nt
08-01-96 5.29% $1,400,000 $ 1,400,000
Federal Home Loan Mtge Corp Disc Nt
08-29-96 5.24 2,400,000 2,390,256
Federal Natl Mtge Assn Disc Nts
08-06-96 5.24 520,000 519,622
08-20-96 5.24 2,000,000 1,994,490
____________
6,304,368
_____________________________________________________________________________________________________________________________
Certificate of deposit (0.2%)
Domestic
Harris Trust
08-09-96 5.40 5,700,000 5,700,000
_____________________________________________________________________________________________________________________________
Commercial paper (6.3%)
A.I. Credit
08-20-96 5.41 4,500,000 4,486,647
Ameritech
08-13-96 5.40 5,100,000 5,089,501
09-17-96 5.43 2,200,000 (e) 2,183,284
AT&T Capital
08-06-96 5.38 10,800,000 10,791,975
BellSouth Telephone
08-05-96 5.40 6,700,000 6,696,002
CAFCO
08-23-96 5.42 4,900,000 (e) 4,883,890
09-19-96 5.42 6,900,000 (e) 6,846,495
Cargill
08-27-96 5.31 3,600,000 3,586,246
CIT Group
08-16-96 5.41 5,900,000 5,886,774
Commercial Credit
08-08-96 5.39 8,500,000 8,491,125
Commerzbank U.S. Finance
08-26-96 5.31 5,500,000 5,479,795
Consolidated Rail
08-30-96 5.41 4,500,000 (e) 4,480,534
Metlife Funding
08-14-96 5.40 6,032,000 6,018,167
Mobil Australia Finance
08-02-96 5.35 1,800,000 (e) 1,799,574
Morgan Stanley Group
08-12-96 5.37 4,800,000 4,791,090
09-05-96 5.37 5,200,000 5,173,003
Penney (JC)
08-07-96 5.40 8,000,000 7,992,827
SAFECO Credit
08-23-96 5.41 4,300,000 4,285,889
St. Paul Companies
08-09-96 5.37 5,500,000 (e) 5,493,461
Sandoz
09-16-96 5.44 1,400,000 (e) 1,389,630
Smithkline Beecham
08-13-96 5.40 6,200,000 6,188,881
<PAGE>
PAGE 33
Societe Generale North America
08-12-96 5.39 3,700,000 3,693,952
Southwest Bell Telephone
08-05-96 5.39 9,500,000 9,494,353
Transamerica Finance
08-02-96 5.40 4,500,000 4,499,327
USAA Capital
09-06-96 5.33 2,600,000 2,586,220
09-19-96 5.39 4,200,000 4,168,941
U S WEST Communications
09-03-96 5.37 2,300,000 2,288,721
_____________
Total 138,766,304
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $150,781,685) $ 150,770,672
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,596,400,239)(f) $2,191,506,852
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Foreign security values are stated in U.S. dollars. Foreign securities represent 4.1% of the Fund's
net assets as of July 31, 1996.
(d) Security is partially or fully on loan. See Note 4 to the financial statements.
(e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program
or other "accredited investors." This security has been determined to be liquid under the guidelines
established by the board.
(f) At July 31, 1996, the cost of securities for federal income tax purposes was $1,596,400,238
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $637,012,736
Unrealized depreciation (41,906,122)
______________________________________________________________________________________________
Net unrealized appreciation $595,106,614
______________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 34
IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposits (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
Income investments
The funds in this group invest their assets primarily in corporate
bonds or government securities to seek interest income. Secondary
objective is capital growth. Risk varies by bond quality.
IDS Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
(icon of) globe
IDS Extra Income Fund
Invests mainly in long-term, high-yielding corporate fixed-income
securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
(icon of) greek column
<PAGE>
PAGE 35
IDS Selective Fund
Invests in high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term
investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests primarily in securities issued or guaranteed as to the
timely payment of principal and interest by the U.S. government,
its agencies and instrumentalities. Seeks a high level of current
income and safety of principal consistent with its type of
investments.
(icon of) shield with eagle head enclosed
Tax-exempt income investments
These funds provide tax-free income by investing in municipal
bonds. The income is generally free from federal income tax. Risk
varies by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in medium- and lower-quality municipal bonds and
notes. Lower-quality securities generally involve greater risk of
principal and income.
(icon of) shield with basket of apples enclosed
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to
provide income to residents of each respective state that is exempt
from federal, state and local income taxes. (New York is the only
state that is exempt at the local level.)
(icon of) shield with U.S. enclosed
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk
bond categories.
(icon of) shield with Greek column enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the fund but does not guarantee
the market value of the fund's shares.
(icon of) shield with star enclosed
<PAGE>
PAGE 36
Growth and income investments
These funds focus on securities of medium to large, well-
established companies that offer long-term growth of capital and
reasonable income from dividends and interest. Moderate risk.
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The fund may invest up to 20% of
its assets in the U.S. market.
(icon of) three flags
IDS Managed Allocation Fund
Invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market instruments.
The fund provides diversification among these major investment
categories and has a target mix that represents the way the fund's
investments will be allocated over the long term. Seeks maximum
total return.
(icon of) bird in a nest
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of capital and
income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Stock Fund
Invests in common stock of companies representing many sectors of
the economy. Seeks current income and growth of capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) three growing flowers
<PAGE>
PAGE 37
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests primarily in high-yielding common stocks to seek high
current income and, secondarily, to benefit from the growth
potential offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a balance between common stocks and senior securities
(preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Growth investments
Funds in this group seek capital growth, primarily from common
stocks. They are high risk mutual funds with a potential for high
reward.
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies
emphasizing technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities
comprising the S&P SmallCap 600 Index, as it strives to provide
long-term capital appreciation.
(icon of) office building
IDS Progressive Fund
Invests primarily in undervalued common stocks. The fund holds
stocks for the long term with the goal of capital growth.
(icon of) shooting star
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IDS Global Growth Fund
Invests in stocks of companies throughout the world that are
positioned to meet market needs in a changing world economy. These
companies offer above-average potential for long-term growth.
(icon of) world
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests primarily in equity securities of companies included in the
S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the
Research Department of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests primarily in companies with significant growth potential
due to superiority in technology, marketing or management. The
fund frequently changes its industry mix.
(icon of) dimension
Specialty growth investment
This fund aggressively seeks capital growth as a hedge against
inflation.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic
companies that explore for, mine and process or distribute gold and
other precious metals. This is the most aggressive and most
speculative IDS mutual fund.
(icon of) cart of precious gems
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For more complete information about any of these funds, including
charges and expenses, you can obtain a prospectus by contacting
your financial advisor or writing to American Express Shareholder
Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it
carefully before you invest or send money.
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Federal income tax information
IDS Growth Fund
The Fund is required by the Internal Revenue Code of 1986 to tell
its shareholders about the tax treatment of the dividends it pays
during its fiscal year. Some of the dividends listed below were
reported to you on a Form 1099-DIV, Dividends and Distributions,
last January. Dividends paid to you since the end of last year will
be reported to you on a tax statement sent next January.
Shareholders should consult a tax advisor on how to report
distributions for state and local purposes.
IDS Growth Fund
Fiscal year ended July 31, 1996
Class A
Income distributions
taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
___________________________________________________
Dec. 29, 1995 $0.01040
___________________________________________________
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
___________________________________________________
Dec. 29, 1995 $1.13970
___________________________________________________
Total distributions $1.15010
___________________________________________________
The distribution of $1.15010 per share, payable Dec. 29, 1995,
consisted of $0.01040 from net investment income and $1.13970 from
net long-term capital gains.
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Class B
Income distributions
taxable as dividend income, non qualifying for deduction by
corporations.
Payable date Per share
___________________________________________________
Dec. 29, 1995 $0.01040
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
___________________________________________________
Dec. 29, 1995 $1.13970
___________________________________________________
Total distributions $1.15010
___________________________________________________
The distribution of $1.15010 per share, payable Dec. 29, 1995,
consisted of $0.0104 from net investment income and $1.13970 from
net long-term capital gains.
Class Y
Income distributions
taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
___________________________________________________
Dec. 29, 1995 $0.01040
___________________________________________________
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
___________________________________________________
Dec. 29, 1995 $1.13970
___________________________________________________
Total distributions $1.15010
___________________________________________________
The distribution of $1.15010 per share, payable Dec. 29, 1995,
consisted of $0.01040 from net short-term capital gains and
$1.13970 from net long-term capital gains.
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Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
AMERICAN
EXPRESS
FINANCIAL
ADVISORS
IDS Growth Fund
IDS Tower 10
Minneapolis, MN 55440-0010
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PAGE 43
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report and
prospectus are placed
in a blue strip at the
top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report and prospectus. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
