1998 SEMIANNUAL REPORT
IDS
Research
Opportunities
Fund
(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).
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, informationgathered by a research analyst. IDSResearch
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.
Contents
From the chairman 3
From the portfolio manager 3
Ten largest holdings 5
Financial statements (Fund) 6
Notes to financial statements (Fund) 9
Financial statements (Portfolio) 16
Notes to financial statements (Portfolio) 19
Investments in securities 24
Board members and officers 27
IDS mutual funds 28
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong ones in the many financial markets. Perhaps just as
important, 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. We saw
evidence of that last October, when financial turmoil in Southeast Asia
sparked a sharp decline in worldwide stock markets, including the U.S.
The potential for such volatility reinforces the need for an investor to
review periodically 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) William R. Pearce
William R. Pearce
Chairman of the board
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From the portfolio manager
The past six months was something of a roller-coaster ride for IDS
Research Opportunities Fund. At the conclusion of the period - August 1997
through January 1998 - the Fund's Class A shares lost 0.9%.
After setting a torrid pace earlier in 1997, the stock market struggled
for much of the past six months. The market got off to a bad start in
August, as currency declines in Southeast Asia and rising long-term
interest rates here at home took a toll on U.S. stocks. Although the
market rallied the following month, by late October the so-called "Asian
flu" was in full force, weakening stock markets throughout most of the
world, including the U.S. The situation improved over the following three
months, though, as good corporate profits and falling long-term interest
rates eventually overcame investors' fears regarding the turmoil in Asia.
The Fund's performance basically tracked that of the broad market, but its
fluctuations were greater. That was a result of two factors: a smaller
portfolio (about 70 stocks, versus the 500 in the Standard & Poor's index)
and a greater concentration in technology-related stocks, which usually
display above-average price volatility.
The second factor was readily apparent late in 1997, as several of the
Fund's technology holdings experienced severe price declines in the wake
of the Asian situation. Some of them rebounded in January, but not enough
to make up for the downturn in previous months.
Consistent contributors
Much more consistent contributors were holdings among health care and
financial services companies, the other two areas of substantial exposure
for the Fund. Stocks in the consumer staple sector, which include
food/beverage and other consumer product producers, were also generally
productive investments.
In keeping with the Fund's strategy, I kept the portfolio essentially
fully invested - that is, the great majority of assets remained in stocks
rather than cash reserves. The only notable shifts in asset mix were an
increased exposure to energy-related stocks late in 1997 and reduced
exposure to the technology sector, the latter resulting from generally
lower stock prices at year-end.
As for the rest of the fiscal year, I expect we'll see a tug-of-war
between those who believe the Asian situation will be an ongoing major
problem and those who expect it to be relatively minor and short-lived.
Ultimately, the strength of corporate earnings will resolve the issue, and
that matter probably won't be settled before mid-year, at the earliest.
Guru Baliga
(picture of) Guru Baliga
Guru Baliga
Portfolio Manager
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Class A
6 - month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1998 $6.25
July 31, 1997 $6.86
Decrease $0.61
Distributions
Aug. 1, 1997 - Jan. 31, 1998
From income $0.52
From capital gains $0.03
Total distributions $0.55
Total return* -0.9%**
Class B
6 - month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1998 $6.18
July 31, 1997 $6.82
Decrease $0.64
Distributions
Aug. 1, 1997 - Jan. 31, 1998
From income $0.52
From capital gains $0.03
Total distributions $0.55
Total return* -1.2%**
Class Y
6 - month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1998 $6.27
July 31, 1997 $6.88
Decrease $0.61
Distributions
Aug. 1, 1997 - Jan. 31, 1998
From income $0.52
From capital gains $0.03
Total distributions $0.55
Total return* -0.8%**
*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.
<PAGE>
The Portfolio's ten largest holdings
Percent Value
(of Portfolio's net assets)(as of Jan. 31, 1998)
UNUM 4.37% $17,782,163
Coca-Cola 3.50 14,232,050
Royal Dutch Petroleum 3.41 13,888,749
Amoco 3.32 13,508,250
BankAmerica 2.82 11,448,168
Rockwell Intl 2.77 11,247,637
Washington Mutual 2.48 10,087,249
First Union 2.44 9,939,325
Wachovia 2.29 9,322,225
H&R Block 2.16 8,775,000
(icon of) pie chart
The ten holdings listed here make up 29.56% of the Portfolio's net assets
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<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Research Opportunities Fund
Jan. 31, 1998
Assets
(Unaudited)
<S> <C> <C>
Investment in Aggressive Growth Portfolio (Note 1) $405,270,413
------------
Liabilities
Accrued distribution fee 2,811
Accrued service fee 1,930
Accrued transfer agency fee 468
Accrued administrative services fee 641
Other accrued expenses 67,448
------
Total liabilities 73,298
------
Net assets applicable to outstanding capital stock $405,197,115
============
Represented by
Capital stock-- $.01 par value (Note 1) 650,840
Additional paid-in capital 382,612,678
Investment loss-- net (105,393)
Accumulated net realized gain (loss) 7,702,835
Unrealized appreciation (depreciation) on investments 14,336,155
----------
Total-- representing net assets applicable to outstanding capital stock $405,197,115
============
Net assets applicable to outstanding shares: Class A $267,368,851
Class B $137,826,897
Class Y $ 1,367
Net asset value per share of outstanding capital stock:Class A shares 42,774,404 $ 6.25
Class B shares 22,309,351 $ 6.18
Class Y shares 218 $ 6.27
See accompanying notes to financial statements.
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Statement of operations
IDS Research Opportunities Fund
Six months ended Jan. 31, 1998
Investment income
(Unaudited)
Income:
Dividends $2,071,794
Interest 279,311
Less foreign taxes withheld (1,305)
------
Total income 2,349,800
---------
Expenses:
Expenses allocated from Aggressive Growth Portfolio 1,157,321
Distribution fee -- Class B 438,894
Transfer agency fee 343,060
Incremental transfer agency fee-- Class B 8,331
Service fee
Class A 204,515
Class B 102,218
Administrative services fees and expenses 104,594
Compensation of board members 3,767
Postage 19,373
Registration fees 73,711
Reports to shareholders 3,030
Audit fees 2,125
Other 347
---
Total expenses 2,461,286
Earnings credits on cash balances (Note 2) (6,093)
------
Total net expenses 2,455,193
---------
Investment income (loss)-- net (105,393)
--------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 19,010,730
Financial futures contracts 518,211
-------
Net realized gain (loss) on investments 19,528,941
Net change in unrealized appreciation (depreciation) on investments (20,225,870)
-----------
Net gain (loss) on investments (696,929)
--------
Net increase (decrease) in net assets resulting from operations $ (802,322)
==========
See accompanying notes to financial statements.
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<CAPTION>
Financial statements
Statements of changes in net assets
IDS Research Opportunities Fund
Operations and distributions
Six months ended For the period from
Jan. 31, 1998 Aug. 19. 1996 * to
(Unaudited) July 31, 1997
<S> <C> <C>
Investment income (loss)-- net $ (105,393) $ (26,708)
Net realized gain (loss) on investments 19,528,941 19,658,628
Net change in unrealized appreciation (depreciation) on investments (20,225,870) 34,562,025
----------- ----------
Net increase (decrease) in net assets resulting from operations (802,322) 54,193,945
-------- ----------
Distributions to shareholders from:
Net realized gain
Class A (20,650,850) (83,530)
Class B (10,690,411) (33,125)
Class Y (109) (1)
---- --
Total distributions (31,341,370) (116,656)
----------- --------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 80,087,862 181,559,006
Class B shares 47,123,811 83,675,945
Class Y shares 50 --
Reinvestment of distributions at net asset value
Class A shares 19,600,110 80,796
Class B shares 10,635,874 33,025
Class Y shares 109 1
Payments for redemptions
Class A shares (15,790,894) (14,786,859)
Class B shares (Note 2) (5,346,261) (3,612,057)
---------- ----------
Increase (decrease) in net assets from capital share transactions 136,310,661 246,949,857
----------- -----------
Total increase (decrease) in net assets 104,166,969 301,027,146
Net assets at beginning of period (Note 1) 301,030,146 3,000
----------- -----
Net assets at end of period $405,197,115 $301,030,146
============ ============
*Commencement of operations
See accompanying notes to financial statements.
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<PAGE>
Notes to financial statements
IDS Research Opportunities Fund
(Unaudited as to Jan. 31, 1998)
1
Summary of
significant
accounting policies
IDS Research Opportunities 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. IDS Growth Fund, Inc.
has 10 billion authorized shares of capital stock that can be allocated
among the separate series as designated by the board. On Aug. 16, 1996,
American Express Financial Corporation (AEFC) invested $3,000 in the Fund
that represented 200 shares for Class A, Class B and Class Y,
respectively. Operations commenced on Aug. 19, 1996.
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 shares during the ninth calendar year of ownership. 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 Aggressive Growth Portfolio
The Fund invests all of its assets in the Aggressive Growth Portfolio (the
Portfolio), a series of Growth Trust, an open-end investment company that
has the same objectives as the Fund. The Portfolio invests primarily in
equity securities of companies that comprise the S&P 500.
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 that 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 Jan. 31,
1998 was 99.63%. 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.
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.
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the
end of the calendar year, 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:
The Fund entered into agreements with American Express Financial
Corporation (AEFC) for providing administrative services and serving as
transfer agent. Under an Administrative Services Agreement, the Fund pays
AEFC a fee for administration and accounting services at a percentage of
the Fund's average daily net assets in reducing percentages from 0.06% to
0.03% annually. Additional administrative service expenses paid by the
Fund are office expenses, consultants' fees and compensation of officers
and employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses and any other
expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC an annual fee per shareholder account for this service
as follows:
o Class A $15
o Class B $16
o Class Y $15
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 and commencing on May 9,
1997, the fee is calculated at a rate of 0.10% of the Fund's average daily
net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $1,291,708 for Class A and $36,846 for Class
B for the six months ended Jan. 31, 1998.
During the six months ended Jan. 31, 1998, the Fund's transfer agency fees
were reduced by $6,093 as a result of earnings credits from overnight cash
balances.
3
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Jan. 31, 1998
Class A Class B Class Y
Sold 12,203,882 7,241,852 --
Issued for reinvested 3,187,528 1,749,034 18
distributions
Redeemed (2,410,527) (836,348) --
Net increase (decrease) 12,980,883 8,154,538 18
Period ended July 31, 1997*
Class A Class B Class Y
Sold 32,312,708 14,758,932 --
Issued for reinvested 14,725 6,034 --
distributions
Redeemed (2,534,112) (610,353) --
Net increase (decrease) 29,793,321 14,154,613 --
* Inception date was Aug. 19, 1996.
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<CAPTION>
4
Financial
highlights
The table below shows certain important financial information for
evaluating the Fund's results.
Fiscal period ended July 31,
Per share income and capital changes(a)
Class A Class B Class Y
1998(b) 1997(c) 1998(b) 1997(c) 1998(b) 1997(c)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $6.86 $5.00 $6.82 $5.00 $6.88 $5.00
beginning of period
Income from investment operations:
Net investment income (loss) .01 .01 (.01) (.02) .01 .01
Net gains (losses) (.07) 1.86 (.08) 1.85 (.07) 1.88
(both realized
and unrealized)
Total from investment (.06) 1.87 (.09) 1.83 (.06) 1.89
operations
Less distributions:
Distributions from (.55) (.01) (.55) (.01) (.55) (.01)
realized gains
Net asset value, $6.25 $6.86 $6.18 $6.82 $6.27 $6.88
end of period
Ratios/supplemental data
Class A Class B Class Y
1998(b) 1997(c) 1997(b) 1997(c) 1997(b) 1997(c)
Net assets, end of $267 $205 $138 $96 $-- $--
period (in millions)
Ratio of expenses to 1.15%d 1.52%d 1.91%d 2.25%d 1.08%d 1.45%d
average daily net assetse
Ratio of net income (loss) .20%d .20%d (.57%)d (.53%)d .27%d .33%d
to average daily net assets
Portfolio turnover rate 85% 171% 85% 171% 85% 171%
(excluding short-term
securities)
Total return(f) (0.9%) 37.4% (1.2%) 36.5% (0.8%) 37.7%
Average brokerage $.0522 $.0405 $.0522 $.0405 $.0522 $.0405
commission rate(g)
a For a share outstanding throughout the period. Rounded to the nearest
cent.
b Six months ended Jan. 31, 1998 (Unaudited).
c Inception date. Period from Aug. 19, 1996 to July 31, 1997.
d Adjusted to an annual basis.
e Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
f Total return does not reflect payment of a sales charge.
g The Fund is required to disclose an average brokerage commission rate
per share for security trades on which commissions are charged.
The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign
countries.
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<PAGE>
Financial statements
Statement of assets and liabilities
Aggressive Growth Portfolio
Jan. 31, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
(identified cost $388,326,811) $402,631,406
Cash in bank on demand deposit 1,195,532
Dividends and accrued interest receivable 343,615
Receivable for investment securities sold 8,460,306
---------
Total assets 412,630,859
-----------
Liabilities
Payable for investment securities purchased 5,401,303
Accrued investment management services fee 7,095
Option contracts written, at value
(premium received $354,863) (Note 5) 411,563
Other accrued expenses 27,735
------
Total liabilities 5,847,696
---------
Net assets $406,783,163
============
See accompanying notes to financial statements.
<PAGE>
Statement of operations
Aggressive Growth Portfolio
Six months ended Jan. 31, 1998
Investment income
(Unaudited)
Income:
Dividends $ 2,079,948
Interest 279,412
Less foreign taxes withheld (1,311)
------
Total income 2,358,049
---------
Expenses (Note 2):
Investment management services fee 1,134,324
Compensation of board members 3,767
Custodian fees 23,410
Audit fees 6,375
Other 1,181
-----
Total expenses 1,169,057
Earnings credits on cash balances (Note 2) (7,190)
------
Total net expenses 1,161,867
---------
Investment income (loss)-- net 1,196,182
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 19,277,609
Financial futures contracts 522,948
-------
Net realized gain (loss) on investments 19,800,557
Net change in unrealized appreciation (depreciation) on investments(20,502,597)
-----------
Net gain (loss) on investments (702,040)
--------
Net increase (decrease) in net assets resulting from operations $ 494,142
===========
See accompanying notes to financial statements.
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<CAPTION>
Financial statements
Statements of changes in net assets
Aggressive Growth Portfolio
Operations
Six months ended For the period from
Jan. 31, 1998 Aug. 19, 1996* to
(Unaudited) July 31, 1997
<S> <C> <C>
Investment income (loss)-- net $ 1,196,182 $ 1,393,497
Net realized gain (loss) on investments 19,800,557 19,764,774
Net change in unrealized appreciation (depreciation) on investments (20,502,597) 34,895,804
Net increase (decrease) in net assets resulting from operations 494,142 56,054,075
Net contributions (withdrawals) from partners 103,852,690 246,378,256
Total increase (decrease) in net assets 104,346,832 302,432,331
Net assets at beginning of period (Note 1) 302,436,331 4,000
Net assets at end of period $406,783,163 $302,436,331
*Commencement of operations
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
Aggressive Growth Portfolio
(Unaudited as to Jan. 31, 1998)
1
Summary of
significant
accounting policies
Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust
(the Trust) and is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company.
Aggressive Growth Portfolio invests primarily in equity securities of
companies that comprise the S&P 500. The Declaration of Trust permits the
Trustees to issue non-transferable interests in the Portfolio. On Aug. 16,
1996, American Express Financial Corporation (AEFC) contributed $4,000 to
the Portfolio. Operations commenced on Aug. 19, 1996.
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. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for
which market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. 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 and 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 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 financial futures contracts traded on any
U.S. or foreign exchange. The Portfolio also may buy and 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.
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 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 0.65% to 0.5% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain
legal fees, fidelity bond premiums, registration fees for units, 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 and approved by the board.
During the six months ended Jan. 31, 1998, the Portfolio's custodian fees
were reduced by $7,190 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.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $390,372,816 and $289,442,848,
respectively, for the six months ended Jan. 31, 1998. For the same period,
the portfolio turnover rate was 85%. Realized gains and losses are
determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $63,261
for the six months ended Jan. 31, 1998.
4
Stock index
futures contracts
Investments in securities at Jan. 31, 1998, included securities valued at
$1,560,938 that were pledged as collateral to cover initial margin
deposits on 53 open purchase contracts. The market value of the open
purchase contracts at Jan. 31, 1998 was $13,088,350 with a net unrealized
gain of $145,312.
5
Option
contracts written
The number of contracts and premium amounts associated with the option
contracts written is as follows:
Six months ended Jan. 31, 1998
Puts Calls
Contracts Premium Contracts Premium
Balanced July 31, 1997 -- $ -- -- $ --
Opened 550 96,847 1,450 258,016
Balance Jan. 31, 1998 550 $96,847 1,450 $258,016
See Summary of significant accounting policies.
<PAGE>
Investments in securities
Aggressive Growth Portfolio
Jan. 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks (95.5%)
Issuer Shares Value(a)
Aerospace & defense (5.2%)
AlliedSignal 60,000 $ 2,336,250
Goodrich (BF) 21,000 880,688
Lockheed Martin 32,000 3,330,000
Raytheon Cl B 61,800 3,221,325
Rockwell Intl 201,300 11,247,637
Total 21,015,900
Airlines (0.5%)
AMR 15,300(b) 1,931,625
Automotive & related (2.8%)
Ford Motor 168,700 8,603,700
TRW 51,700 2,630,238
Total 11,233,938
Banks and savings & loans (11.7%)
BankAmerica 161,100 11,448,168
First Chicago NBD 90,900 6,783,413
First Union 206,800(f) 9,939,325
Wachovia 119,900 9,322,225
Washington Mutual 157,000 10,087,249
Total 47,580,380
Beverages & tobacco (6.4%)
Coca-Cola 219,800 14,232,050
Fortune Brands 130,000 4,972,500
Philip Morris 165,000 6,847,500
Total 26,052,050
Building materials & construction (0.8%)
Tyco Intl 70,050 3,108,469
Chemicals (1.8%)
Air Products & Chemicals 92,100(f) 7,373,756
Communications equipment & services (2.1%)
Tellabs 166,050(b) 8,499,684
Computers & office equipment (6.0%)
Automatic Data Processing 83,200 4,976,400
Compaq Computer 208,700 6,274,043
Computer Associates Int l91,150 4,848,041
Computer Sciences 51,900(b) 4,405,013
Hewlett-Packard 63,700 3,822,000
Total 24,325,497
Electronics (3.3%)
Applied Materials 102,600(b) 3,366,563
Intel 79,600 6,447,600
KLA-Tencor 94,200(b) 3,532,500
Total 13,346,663
Energy (4.9%)
Amoco 166,000 $13,508,250
Unocal 182,350 6,268,281
Total 19,776,531
Energy equipment & services (0.6%)
Baker Hughes 60,000 2,313,750
Financial services (4.3%)
H&R Block 200,000(f) 8,775,000
MBNA 148,700 4,618,994
Travelers Group 85,000 4,207,500
Total 17,601,494
Food (3.0%)
Bestfoods 28,200 2,749,500
ConAgra 99,100 3,134,038
General Mills 40,000 2,977,500
Sara Lee 60,000 3,273,750
Total 12,134,788
Furniture & appliances (0.3%)
Maytag 35,000 1,345,313
Health care (13.9%)
ALZA 171,800(b,f) 6,120,375
American Home Products 86,700 8,274,430
Amgen 92,300(b) 4,615,000
Baxter Intl 25,000 1,392,188
Boston Scientific 33,500(b) 1,700,125
Bristol-Myers Squibb 79,200 7,895,250
Guidant 25,000 1,606,250
Johnson & Johnson 121,700 8,146,293
Merck & Co 50,000 5,862,500
Pfizer 61,700 5,055,544
Schering-Plough 81,200 5,876,850
Total 56,544,805
Health care services (3.5%)
HBO & Co 98,800 5,168,475
Service Corp Intl 140,000 5,460,000
Tenet Healthcare 53,000(b) 1,828,500
United Healthcare 33,000 1,691,250
Total 14,148,225
Household products (3.6%)
Colgate-Palmolive 69,500 5,090,875
Gillette 49,900 4,927,625
Proctor & Gamble 60,000 4,702,500
Total 14,721,000
Insurance (5.4%)
SunAmerica 110,000 4,420,625
UNUM 365,700 17,782,163
Total 22,202,788
Media (1.5%)
CBS 102,700$ 3,074,581
Clear Channel
Communications 38,000(b) 2,926,000
Total 6,000,581
Metals (0.8%)
Aluminum Co of America 24,300 1,855,913
Reynolds Metals 26,400 1,664,850
Total 3,520,763
Multi-industry conglomerates (1.0%)
Minnesota Mining & Mfg 50,000 4,175,000
Paper & packaging (0.6%)
Tenneco 61,000 2,474,313
Retail (4.7%)
Dayton Hudson 51,600 3,711,975
Jostens 70,000 1,579,375
Kroger 59,600(b) 2,331,850
Rite Aid 35,000(e) 2,185,313
Toys "R" Us 125,000(b) 3,351,563
Wal-Mart Stores 148,800(f) 5,933,399
Total 19,093,475
Utilities -- gas (0.8%)
Enron 78,100 3,236,269
Utilities -- telephone (2.1%)
Airtouch Communications 196,500(b,f) 8,621,438
Foreign (3.9%)(c)
Royal Dutch Petroleum 271,000 13,888,749
Schlumberger 30,000 2,210,625
Total 16,099,374
Total common stocks
(Cost: $374,173,274) $388,477,869
Short-term securities (3.5%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies (2.1%)
Federal Home Loan Mtge Corp Disc Nts
02-09-98 5.39% $ 900,000 $ 898,792
02-20-98 5.51 800,000 797,569
Federal Natl Mtge Assn Disc Nt
02-27-98 5.43 7,000,000 6,971,597
Total 8,667,958
Commercial paper (1.4%)
Bell Atlantic Financing
02-12-98 5.48 1,100,000 1,097,998
Delaware Funding
02-06-98 5.48 1,400,000(d) 1,398,724
Pacific Life Insurance
02-26-98 5.50 2,400,000 2,390,501
Xerox Credit
02-18-98 5.51 600,000 598,356
Total 5,485,579
Total short-term securities
(Cost: $14,153,537) $ 14,153,537
Total investments in securities
(Cost: $388,326,811)(g) $402,631,406
See accompanying notes to investments in securities.
<PAGE>
Investments in securities
Aggressive Growth Portfolio
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid
under guidelines established by the board.
(e) Security is partially pledged as initial margin deposit on the
following open stock index futures purchase contracts (see Note 4 to the
financial statements):
Type of security Notional amount
Standard & Poor's 500 Stock Index, March 1998 $13,250,000
(f) At Jan. 31, 1998, securities valued at $4,900,000 were held to cover open
call options written as follows:
Issuer Shares Exercise Expiration Value
price date
Airtouch Communications 25,000 $45 Feb. 1998 $ 28,125
ALZA 20,000 35 Feb. 1998 31,250
H&R Block 25,000 40 Feb. 1998 104,687
H&R Block 25,000 40 April 1998 126,564
Wal-Mart Stores 50,000 40 Feb. 1998 50,000
------
Total $340,626
========
At Jan. 31, 1998, cash or short-term securities were designated to cover
open put options written as follows:
Issuer Shares Exercise Expiration Value
price date
Air Products & Chemicals 30,000 $50 Feb. 1998 $60,000
First Union 25,000 75 Feb. 1998 10,937
------
Total $70,937
=======
(g) At Jan. 31,1998, the cost of securities for federal income tax purposes
was approximately $388,327,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation.....................$25,265,000
Unrealized depreciation.....................(10,961,000)
Net unrealized appreciation.................$14,304,000
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills,
Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, Leslie L. Ogg*
general counsel President, treasurer and corporate secretary of Board Services
and secretary Corporation.
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
<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
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
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
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.
<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 Research Opportunities Fund
IDS Tower 10
Minneapolis, MN 55440-0010
