1997 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.)
American
Expresss
Financial
Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
Going for Growth
(Icon of) Trees
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.
<PAGE>
(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.
Contents
1997 annual report
From the president 4
From the portfolio manager 4
The Portfolio's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report (Fund) 9
Financial statements (Fund) 10
Notes to financial statements (Fund) 13
Independent auditors' report (Portfolio) 18
Financial statements (Portfolio) 19
Notes to financial statements (Portfolio) 22
Investments in securities 31
IDS mutual funds 34
Federal income tax information 38
1997 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
Distributions and taxes 34p
Dividend and capital gain distributions 34p
Reinvestments 35p
Taxes 36p
How to determine the correct TIN 38p
How the Fund and Portfolio are 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
(This annual report is not part of the prospectus.)
<PAGE>
To our shareholders
(picture of) William R. Pearce
President of the Fund
From the president
If you're an experienced investor, you know that the past two years have
been unusually strong ones in many financial markets. Perhaps just as
important, you also know that history shows that bull markets don't last
forever. Though they're often unpredictable, declines -- whether they're
brief or long-lasting, moderate or substantial -- are always a
possibility.
That fact reinforces the need for investors to periodically review their
long-term goals and examine whether their investment program remains on
track to achieving them. Your quarterly investment statements are one part
of that monitoring process. The other is a meeting with your financial
advisor. That becomes even more important if there's a major change in
your financial situation or in the financial markets.
William R. Pearce
(picture of) Mitzi Malevich
Portfolio manager
From the portfolio manager
IDS Growth Fund recorded an exceptionally good gain during the past 12
months, as the stock market staged its strongest rally in many years. The
result was a total return of 57% for investors in Class A shares over the
August 1996 through July 1997 period. The return was comfortably ahead of
that generated by the stock market as a whole, as measured by the Standard
& Poor's 500 stock index, a group of unmanaged stocks commonly used as a
gauge for the market. (Part of the Fund's return came in the form of a
capital gain, which was paid to shareholders last December and reduced the
Fund's net asset value by the same amount at that time.)
As if on cue, the stock market began its advance just as the fiscal year
got underway. Buoyed by ongoing reports of low inflation, solid corporate
profits and an expanding economy, the market powered its way through the
fall and winter before stalling out in mid-March. By that time, heightened
fear of rising inflation had driven up long-term interest rates, which in
turn drove the market down by close to 10% during the ensuing
(This annual report is not part of the prospectus.)
<PAGE>
weeks. But by May, stocks had shaken off the setback and were off and running
to new highs through the end of the period.
Large growth stocks set pace
For the most part, the market's advance was led by stocks of large,
rapidly growing companies, a trend that works to this Fund's advantage. To
the Fund's further benefit, stocks of technology-related companies,
including computer hardware and software producers, and consumer-related
companies, including health-care providers and food/beverage producers,
recorded some of the biggest gains during the 12 months. As they have for
several years, those two business sectors comprised more than half of the
Fund's investments, with Microsoft, Cisco Systems, Tellabs, Nike,
Coca-Cola and HEALTHSOUTH among the best individual performers. There was
little turnover in the portfolio, as I continued to be optimistic about
the long-term prospects for the great majority of holdings.
Also working to the Fund's benefit was its very low level of cash
reserves, as it proved to be much more rewarding to keep virtually all of
the assets invested in stocks. This low-cash, or "fully invested,"
strategy is consistent with my investment style and, while it does make
the Fund more vulnerable during market downturns, I believe it allows for
a higher return over the long run.
As I wrote in my letter to you six months ago, I continue to find the
investment environment largel favorable. Inflation remains low,
corporations are still reporting solid profits and long-term interest
rates continue to be at a comfortable level. Those fundamentals haven't
changed. What has changed is that the stock market is at a much higher
level than it was when the fiscal year began in August 1996, which makes
it more vulnerable to a negative change in any of the fundamentals. But
more important, even if the market does experience a downturn in the
months ahead, I don't think that will alter the underlying bias of the
market, which, I believe, will continue to work in favor of patient,
persistent investors over the next few years.
Mitzi Malevich
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1997 $35.47
July 31, 1996 $23.16
Increase $12.31
Distributions
Aug. 1, 1996 - July 31, 1997
From income $ --
From capital gains $ .68
Total distributions $ .68
Total return* +57.0%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1997 $34.82
July 31, 1996 $22.92
Increase $11.90
Distributions
Aug. 1, 1996 - July 31, 1997
From income $ --
From capital gains $ .68
Total distributions $ .68
Total return* +55.8%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1997 $35.60
July 31, 1996 $23.21
Increase $12.39
Distributions
Aug. 1, 1996 - July 31, 1997
From income $ --
From capital gains $ .68
Total distributions $ .68
Total return* +57.2%**
*The prospectus discusses the effect of sales charges, if any on the
various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
<PAGE>
The Portfolio's ten largest holdings
Percent Value
(of Portfolio's net assets) (as of July 31, 1997)
Travelers Group 3.48% $143,875,000
Tellabs 3.48 143,700,000
Washington Mutual 3.35 138,250,000
Cisco Systems 3.08 127,300,000
HEALTHSOUTH 3.08 127,200,000
Hewlett-Packard 3.05 126,112,500
Compaq Computer 2.76 114,250,000
Merrill Lynch 2.73 112,700,000
Applied Materials 2.67 110,250,000
Schlumberger 2.59 106,925,000
(Icon of) pie chart
The ten holdings listed here make up 30.27% of the Portfolio's net assets
(This annual report is not part of the prospectus.)
<PAGE>
Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging --
a time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly.
You'll automatically buy more shares when the Fund's share price is low,
fewer shares when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner can be an effective way 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
By investing an equal number of dollars each month... (arrow pointing to April)
you automatically buy more shares when the per share market price is low...
(arrow pointing to Sept.) and fewer shares when the per share market price is
high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
<PAGE>
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
$40,000 $41,811
Growth Fund
Class A
$30,000
$20,000
S&P 500
Stock Index
Lipper Growth
Fund Index
$10,000
$ 9,500
'87 '88 '89 '90 '91 '92 '93 '94 '95 ' 96 '97
Average annual total return
(as of July 31, 1997
1 year Since 5 years 10 years
inception
Class A +49.15% --% +22.49% +15.37%
Class B +51.81% +35.73%* --% --%
Class Y +57.23% +38.13%* --% --%
* Inception date was March 20, 1995.
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 (Class A) 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.
Your investment and return values fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. Average annual total
return figures reflect the impact of the applicable sales charge up to a
maximum of 5%. This was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
Assumes: o Holding period from 8/1/87 to 7/31/97. o Returns do not reflect taxes
payable on distributions. o Reinvestment of all income and capital gain
distributions for the Fund, with a value of $28,789. 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 Portfolio
invests.
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.
(This annual report is not part of the prospectus.)
<PAGE>
The financial statements contained in Post-Effective Amendment #61 to
Registration Statement No. 2-38355 filed on or about September 26, 1997, are
incorporated herein by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small-and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
(This annual report is not part of the prospectus.)
<PAGE>
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are
made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
(This annual report is not part of the prospectus.)
<PAGE>
IDS mutual Funds
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high-and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium-and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
(This annual report is not part of the prospectus.)
<PAGE>
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with
these objectives. An investment in these funds is neither insured nor guaranteed
by the U.S. government, and there can be no assurance that these funds will be
able to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
(This annual report is not part of the prospectus.)
<PAGE>
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. The dividends listed below were reported to you on a Form
1099-DIV, Dividends and Distributions, last 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, 1997
Class A
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.68351
Total distribution $0.68351
(This annual report is not part of the prospectus.)
<PAGE>
Class B
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.68351
Total distribution $0.68351
Class Y
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.68351
Total distribution $0.68351
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota:
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS Growth Fund
IDS Tower 10
Minneapolis, MN 55440-0010
S-6455 M (9/97)
<PAGE>
1997 ANNUAL REPORT
IDS
Research
Opportunities
Fund
(prospectus enclosed)
(icon of) magnifying glass
The goal of IDS Research Opportunities Fund, a part of IDS Growth Fund, Inc., is
long-term growth of capital. The Portfolio will be managed using a research
methodology developed by American Express Financial Corporation, which is
designed to give investors the opportunity to achieve a return in excess of the
Standard & Poor's 500 Composite Stock Price Index (S&P 500).
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment policies, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
AMERICAN EXPRESS Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) magnifying glass
The rewards of research
Behind every decision to buy or sell a stock is information -- in most cases,
information gathered by a research analyst. IDS Research Opportunities Fund is
designed to make the most of that research by investing only in Standard &
Poor's 500 stocks that carry our analysts' highest rating. The intention is to
construct a portfolio that has the potential to outperform the stock market as a
whole.
<PAGE>
Contents
(Icon of) One open book inside of another
The purpose of this annual report is to tell investors how the Fund performed.
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1997 annual report
From the president 4
From the portfolio manager 4
The Portfolio's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report (Fund) 9
Financial statements (Fund) 10
Notes to financial statements (Fund) 13
Independent auditors' report (Portfolio) 21
Financial statements (Portfolio) 22
Notes to financial statements (Portfolio) 25
Investments in securities 32
IDS mutual funds 35
Federal income tax information 39
1997 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Structure of the Fund 4p
Manager and distributor 4p
Portfolio manager 5p
Alternative purchase arrangements 5p
Sales charge and Fund expenses 6p
Performance 9p
Financial highlights 9p
Total returns 10p
Investment policies and risks 12p
Facts about investments and their risks 14p
Valuing Fund shares 20p
How to purchase, exchange or redeem shares 21p
Alternative purchase arrangements 21p
How to purchase shares 24p
How to exchange shares 26p
How to redeem shares 26p
Reductions and waivers of the sales charge 31p
Special shareholder services 36p
Services 36p
Quick telephone reference 36p
Distributions and taxes 37p
Dividend and capital gain distributions 37p
Reinvestments 38p
Taxes 39p
How to determine the correct TIN 41p
How the Fund and Portfolio are organized 42p
Shares 42p
Voting rights 43p
Shareholder meetings 44p
Special considerations regarding
master/feeder structure 45p
Board members and officers 49p
Investment manager 50p
Administrator and transfer agent 51p
Distributor 52p
About American Express Financial Corporation 54p
General information 54p
Appendix 55p
Descriptions of derivative instruments 55p
(This annual report is not part of the prospectus.)
<PAGE>
To our shareholders
(picture of) William R. Pearce
President of the Fund
From the president
If you're an experienced investor, you know that the past two years have
been unusually strong ones in many financial markets. Perhaps just as
important, you also know that history shows that bull markets don't last
forever. Though they're often unpredictable, declines -- whether they're
brief or long-lasting, moderate or substantial -- are always a
possibility.
That fact reinforces the need for an investor to periodically review their
long-term goals and examine whether their investment program remains on
track to achieving them. Your quarterly investment statements are one part
of that monitoring process. The other is a meeting with your American
Express financial advisor. That becomes even more important if there's a
major change in your financial situation or in the financial markets.
William R. Pearce
(picture of) Guru Baliga
Portfolio manager
From the portfolio manager
IDS Research Opportunities Fund took good advantage of a powerful bull
market to post an uncommonly strong gain during the past fiscal year,
which ran from Aug. 19, 1996 (the Fund's inception date) through July
1997. Over that period, the Fund's Class A shares generated a total return
of 37.4%.
The timing of the Fund's introduction proved to be splendidly fortunate,
as the stock market was just beginning its remarkable rally. At that time,
August 1996, the foundation for the advance had just fallen into place:
Inflation was tame; long-term interest rates had leveled off; corporations
were reporting robust profits; and the economy appeared healthy.
Supported by those excellent fundamentals, perhaps no one should have been
surprised when, for the next 12 months, the market went on an almost
uninterrupted march. The only meaningful downturn (just under 10%) came
late last winter, when worries about a potential rise in the inflation
rate sent long-term interest rates higher. But the inflation
(This annual report is not part of the prospectus.)
<PAGE>
fears soon subsided, rates came back down, and the market was again on its
way to higher ground. To put the strength of the rally in perspective, the
market's 16.6% surge in the second quarter (April through June) was its
best quarterly performance since 1991.
Health care, technology
financial services strong
The Fund's performance basically tracked that of the broad market -- two
striking advances sandwiched around a moderate, mid-period slump.
Moreover, the business sectors that drove the stock market -- health care,
technology and financial services -- to a large degree also drove the
Fund. Among the top individual performers for the Fund were, in no
particular order: Northern Telecom, Intel, Computer Associates, Boston
Scientific, American Home Products, Gillette, Schering Plough, Merck,
Boeing, Alcoa, NationsBank, BankBoston and Providian.
The only real disappointment over the period was what turned out to be the
premature sale of certain high-priced technology stocks -- primarily 3COM,
Compaq Computer and Intel -- that rebounded sharply from the late-winter
slump. On the other hand, being highly selective paid off when it came to
retailing, a sector that struggled for most of the fiscal year. During the
12 months, there was an average of about 50 stocks in the portfolio.
As we begin a new fiscal year, the investment environment continues to
benefit from low inflation, moderate economic growth, low long-term
interest rates and generally good corporate profits. That's encouraging.
But, like all good things, this perfect world also will come to an end at
some point, and the stock market will stall out and, perhaps, retreat.
While I can't predict when that will happen, I can tell you that it's a
normal part of investing and that I expect it will prove to be only a
temporary interruption in what I believe is still a long-term positive
trend for the stock market.
Guru Baliga
Class A
Aug. 19, 1996* - July 31, 1997
(All figures per share)
Net asset value (NAV)
July 31, 1997 $6.86
Aug. 19, 1996* $5.00
Increase $1.86
Distributions
Aug. 19, 1996* - July 31. 1997
From income $ --
From capital gains $0.01
Total distributions $0.01
Total return** +37.4%***
Class B
Aug. 19, 1996* - July 31, 1997
(All figures per share)
Net asset value (NAV)
July 31, 1997 $6.82
Aug. 19, 1996* $5.00
Increase $1.82
Distributions
Aug. 19, 1996* - July 31, 1997
From income $ --
From capital gains $0.01
Total distributions $0.01
Total return** +36.5%***
Class Y
Aug. 19, 1996* - July 31, 1997
(All figures per share)
Net asset value (NAV)
July 31, 1997 $6.88
Aug. 19, 1996* $5.00
Increase $1.88
Distributions
Aug. 19, 1996* - July 31, 1997
From income $ --
From capital gains $0.01
Total distributions $0.01
Total return** +37.7%***
*Inception date.
**The prospectus discusses the effect of sales charges, if any, on the
various classes.
***The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
<PAGE>
The Portfolio's ten largest holdings
Percent Value
(of Portfolio's net assets) (as of July 31, 1997)
Gillette 4.09% $12,375,000
Coca-Cola 3.78 11,440,100
Providian Financial 3.55 10,741,294
Bristol-Myers Squibb 3.35 10,134,125
SunAmerica 3.28 9,905,060
Northern Telecommunications 3.05 9,227,641
Motorola 2.79 8,432,812
Johnson & Johnson 2.78 8,412,187
UNUM 2.53 7,654,000
Rockwell Intl 2.42 7,304,062
(icon of) pie chart
The ten holdings listed here make up 31.62% of the Portfolio's net assets
(This annual report is not part of the prospectus.)
<PAGE>
Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging --
a time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly.
You'll automatically buy more shares when the Fund's share price is low,
fewer shares when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner 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
By investing an equal number of dollars each month... (arrow pointing to April)
you automatically buy more shares when the per share market price is low...
(arrow pointing to Sept) and fewer shares when the per share market price is
high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
<PAGE>
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 Research Opportuities Fund
S&P 500
Stock Index $13,435
$10,000 Research
$9,500 Opportunities Fund
Class A
8/96 9/96 10/96 11/96 12/96 1/97 2/97 3/97 4/97 5/97 6/97 7/97
Average annual total return
(as of July 31, 1997)
Since inception*
Class A +30.64%
Class B +32.48%
Class Y +37.66%
* Inception date was Aug. 19, 1996.
On the graph above you can see how the Fund's total return compared to a
widely cited performance index, the S&P 500 Stock Index. In comparing IDS
Research Opportunities Fund (Class A) to this index, you should take into
account the fact that the Fund's performance reflects the maximum sales
charge of 5%, while such charges are not reflected in the performance of
the index.
Your investment and return values fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. Average annual
total return figures reflect the deduction of the applicable sales charge
up to a maximum of 5%. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
Assumes: o Holding period from 9/1/96 to 7/31/97. o Returns do not reflect
taxes payable on distributions. o Reinvestment of all income and capital
gain distributions for the Fund, with a value of $13. Also see
"Performance" in the Fund's current prospectus.
The Standard & Poor's 500 Stock Index, an unmanaged list of common stocks,
is frequently used as a general measure of performance. However, the S&P
500 companies are generally larger than those in which the Portfolio
invests.
(This annual report is not part of the prospectus.)
<PAGE>
The financial statements contained in Post-Effective Amendment #61 to
Registration Statement No. 2-38355 filed on or about September 26, 1997, are
incorporated herein by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small-and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
(This annual report is not part of the prospectus.)
<PAGE>
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are
made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
(This annual report is not part of the prospectus.)
<PAGE>
IDS mutual Funds
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high-and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium-and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
(This annual report is not part of the prospectus.)
<PAGE>
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with
these objectives. An investment in these funds is neither insured nor guaranteed
by the U.S. government, and there can be no assurance that these funds will be
able to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
(This annual report is not part of the prospectus.)
<PAGE>
Federal income tax information
IDS Research Opportunities 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. The dividends listed below were reported to you on a
Form 1099-DIV, Dividends and Distributions, last January.
Shareholders should consult a tax advisor on how to report
distributions for state and local purposes.
IDS Research Opportunities Fund, Inc.
Fiscal period ended July 31, 1997
Class A
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.00543
Class B
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.00543
Class Y
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 30, 1996 $0.00543
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Fiancial Advisors
IDS Research Opportunities Fund
IDS Tower 10
Minneapolis, MN 55440-0010
S-6356 C (9/97)
<PAGE>
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
