1998 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 EXPRESS Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) trees
Going for Growth
In the long run, a company's stock price usually reflects its business fortunes.
Therefore, if a company thrives, its stock tends to follow suit. That's why many
long-term investors, including Growth Fund, focus on growth stocks -- those of
companies that enjoy rising sales and profits. While there will be interruptions
along the way, patient investors look forward to sharing in that same
prosperity.
<PAGE>
Contents
The purpose of this annual report is to tell investors how the Fund performed.
(icon of) one open book inside of another
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1998 annual report
From the chairman 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
1998 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 45p
General information 45p
Year 2000 46p
Appendix 47p
Descriptions of derivative instruments 47p
(This annual report is not part of the prospectus.)
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in 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 investors 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 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
<PAGE>
From the portfolio manager
A strong recovery early in 1998 allowed IDS Growth Fund to generate
positive results for the past fiscal year. For the period - August 1997
through July 1998 - the total return for the Fund's Class A shares was
6.3%.
The tremendous bull market for stocks came to a temporary halt when the
period began last August, as rising interest rates took a toll on most
issues. But the biggest problem materialized in October, when currencies
and stock markets in Asia and other emerging markets went into a virtual
free-fall.
The result was severely weakened economies in many countries that had been
substantial buyers of U.S. goods, particularly technology-related
products. The unstable situation immediately cast doubt on American
companies' ability to sustain their earnings growth and soon spawned a
wave of stock-selling. For the Fund, the situation overseas was a
particular problem, given that technology stocks constituted the largest
portion of the portfolio.
By February, though, investors apparently had decided that American
companies would weather the `Asian flu' relatively well, and, with support
from ongoing indications of subdued inflation and a still-solid economy,
they sent the market soaring through April. The rally petered out at that
point, as the possibility of weaker corporate profits and higher interest
rates dampened investors' enthusiasm.
Large-caps strong
Working in the Fund's favor was the continued strength of
large-capitalization growth stocks. Within that broad category, the Fund's
largest area of investment was in technology-related stocks, which were
highly volatile but, on the whole, productive. Consumer-related stocks,
including those of healthcare, beverage and retail companies, constituted
another substantial investment and proved to be comparatively consistent,
positive performers. Financial services stock provided very good results
for the 12 months, thanks chiefly to a decline in long-term interest
rates.
As is the norm for this Fund, there was little portfolio turnover - a
reflection of my buy-and-hold management style. Also, I maintained only a
small amount of cash reserves (less than 3%), as I prefer to keep the
great majority of assets working in stocks.
Looking to the fiscal year that's just begun, the investment environment
hasn't changed markedly in the past several months: The economy continues
to grow; inflation remains subdued; and long-term interest rates have yet
to experience a substantial increase. While those factors may continue to
work in stocks' favor, should corporate profits slack off to a meaningful
degree, the market may well retreat. But even if it does, I don't think
that will alter what still strikes me as a fundamentally positive
longer-term outlook for stocks. As for the Fund, I plan to maintain the
emphasis on large-capitalization stocks of high-quality companies with
healthy growth rates and dominant positions in their respective markets.
Mitzi Malevich
(picture of) Mitzi Malevich
Mitzi Malevich
Portfolio manager
(This annual report is not part of the prospectus.)
<PAGE>
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $36.58
July 31, 1997 $35.47
Increase $ 1.11
Distributions
Aug. 1, 1997 - July 31, 1998
From income $ --
From capital gains $ 0.96
Total distributions $ 0.96
Total return* +6.3%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $35.61
July 31, 1997 $34.82
Increase $ 0.79
Distributions
Aug. 1, 1997 - July 31, 1998
From income $ --
From capital gains $ 0.96
Total distributions $ 0.96
Total return* +5.5%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $36.74
July 31, 1997 $35.60
Increase $ 1.14
Distributions
Aug. 1, 1997 - July 31, 1998
From income $ --
From capital gains $ 0.96
Total distributions $ 0.96
Total return* +6.4%**
*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, 1998)
Travelers Group 4.54% $241,200,000
Tellabs 3.97 210,787,500
WorldCom 3.79 200,925,000
Microsoft 3.74 198,225,000
Merrill Lynch & Co 3.67 195,000,000
Pfizer 3.32 176,000,000
Waste Management 3.30 175,021,875
Cisco Systems 3.25 172,350,000
Coca-Cola 3.05 161,915,606
Washington Mutual 2.82 149,765,625
For further detail about these holdings, please refer to the section entitled
"Investments in securities" herein.
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The ten holdings listed here make up 35.45% 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
invested market price purchased
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
(footnote to table) By investing an equal number of dollars each month....
(arrow in table pointing to April) you automatically buy more shares when
the per share market price is low...
(arrow in table pointing to September) and fewer shares when the per share
market price is high.
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.
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 Fun
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.
(This annual report is not part of the prospectus.)
<PAGE>
The Fund's long-term performance
How your $10,000 has grown in IDS Growth Fund
X
$59,567 Growth Fund
Class A
$50,000
X
S&P 500
Stock Index
$40,000
X
Lipper Growth
Fund Index
$30,000
$20,000
$10,000
$9,500
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Average annual total return
(as of July 31, 1998)
1 year Since 5 years 10 years
inception*
Class A +1.01% --% +21.02% +19.54%
Class B +1.51% +26.16% --% --%
Class Y +6.40% +27.83% --% --%
*Inception date was March 20, 1995.
Assumes: o Holding period from 8/1/88 to 7/31/98. 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 $39,325. 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.
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
performancereflects the maximum sales charge of 5%, while suchcharges 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.
(This annual report is not part of the prospectus.)
<PAGE>
The financial statements contained in Post-Effective Amendment #62 to
Registration Statement No. 2-38355 filed on or about Sept. 28, 1998 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.
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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.
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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.
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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.
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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.
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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 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 Stock 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.)
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.
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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 that generaly pay
dividends 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 that 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.)
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.)
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 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, 1998
Class A
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.95952
Total distribution $0.95952
The long-term capital gains distribution is divided into two categories:
28% - $0.14326 and 20% - $0.81626.
Class B
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.95952
Total distribution $0.95952
The long-term capital gains distribution is divided into two categories:
28% - $0.14326 and 20% - $0.81626.
Class Y
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.95952
Total distribution $0.95952
The long-term capital gains distribution is divided into two categories:
28% - $0.14326 and 20% - $0.81626.
(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
*You may experience delays when call volumes are high.
AMERICAN EXPRESS Financial Advisors
IDS Growth Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
1998 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 Inc.
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
The purpose of this annual report is to tell investors how the Fund performed.
(icon of) one open book inside of another
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1998 annual report
From the chairman 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 31
IDS mutual funds 34
Federal income tax information 38
1998 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 48p
Investment manager 50p
Administrator and transfer agent 51p
Distributor 52p
About American Express Financial Corporation 53p
General information 53p
Year 2000 54p
Appendix 55p
Descriptions of derivative instruments 55p
(This annual report is not part of the prospectus.)
<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
<PAGE>
From the portfolio manager
A surge late in the fiscal year resulted in a double-digit return by IDS
Research Opportunities Fund. For the 12-month period -- August 1997
through July 1998 -- the Fund's Class A shares generated a total return of
10.8%.
The period got off to a bad start, 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.
It took until February before investors regained enough confidence to
drive stock prices higher. Buoyed by ongoing reports of solid economic
growth and still-tame inflation, plus a decline in long-term interest
rates, they sent the market on a two-month tear that made the doldrums of
the previous months well worth enduring.
As has been the case in recent years, the market's advance was powered by
large-capitalization stocks. And, as the period wore on, the gains became
increasingly concentrated among a shrinking group of issues representing
companies that could be depended on to consistently produce above-average
earnings growth. Unless a stock was part of that select group, it had
little chance of enjoying a meaningful price increase. Overall, the Fund
owned some of those stocks, but not enough to match the often-blistering
pace of the broad market.
Health care provided consistent performance
The majority of assets were spread among technology, financial services,
health care, retailing and consumer-product stocks. Technology was clearly
the most volatile group, and the Fund's tech holdings provided mixed
overall results. Most consistent, on the other hand, were the health care
stocks, which benefited from their companies' generally robust profits.
Most disappointing for the Fund were oil services stocks, which were hurt
by declining oil prices.
In keeping with the Fund's strategy, I kept the portfolio essentially
fully invested -- that is, the great majority of assets (about 95%)
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.
At this writing (early August), the new fiscal year has gotten off to a
volatile start, a trend that could well continue for some months. Although
inflation, interest rates and economic growth continue to work in stocks'
favor, the likelihood of weaker overall corporate profits may present a
hurdle for the market and could easily cause stocks to retreat. In any
event, we will continue to employ diligent research to identify the stocks
that appear best able to gain ground in what could be an increasingly
challenging investment environment.
Guru Baliga
(picture of) Guru Baliga
Guru Baliga
Portfolio manager
(This annual report is not part of the prospectus.)
<PAGE>
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $6.98
July 31, 1997 $6.86
Increase $0.12
Distributions
Aug. 1, 1997 - July 31, 1998
From income $0.52
From capital gains $0.03
Total distributions $0.55
Total return* +10.8%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $6.88
July 31, 1997 $6.82
Increase $0.06
Distributions
Aug. 1, 1997 - July 31, 1998
From income $0.52
From capital gains $0.03
Total distributions $0.55
Total return* +9.9%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $7.01
July 31, 1997 $6.88
Increase $0.13
Distributions
Aug. 1, 1997 - July 31, 1998
From income $0.52
From capital gains $0.03
Total distributions $0.55
Total return* +10.9%**
*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, 1998)
General Electric 3.37% $17,630,288
Royal Dutch Petroleum 3.22 16,855,499
Coca-Cola 3.21 16,766,863
Warner-Lambert 3.13 16,366,837
US West Communications Group 2.86 14,977,025
Bristol-Myers Squibb 2.63 13,752,256
Intl Business Machines 2.50 13,077,749
Amgen 2.36 12,344,843
Schering-Plough 2.30 12,006,675
Colgate-Palmolive 2.14 11,212,669
For further detail about these holdings, please refer to the section entitled
"Investments in securities" herein.
(icon of) pie chart
The ten holdings listed here make up 27.72% 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
invested market price purchased
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
(footnote to table) By investing an equal number of dollars each month....
(arrow in table pointing to April) you automatically buy more shares when
the per share market price is low...
(arrow in table pointing to September) and fewer shares when the per share
market price is high.
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.
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.
(This annual report is not part of the prospectus.)
<PAGE>
The Fund's long-term performance
How your $10,000 has grown in IDS Research Opportunities Fund
X
S&P 500
Stock Index
$14,462
Research
Opportunities Fund
Class A
$10,000
$9,500
8/96 10/96 1/97 4/97 7/97 10/97 1/98 4/98 7/98
Average annual total return
(as of July 31, 1998)
1 year Since inception*
Class A +5.23% +20.85%
Class B +5.92% +21.45%
Class Y +10.93% +24.27%
*Inception date was Aug. 19, 1996.
Assumes: o Holding period from 9/1/96 to 7/31/98. 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 $1,192. 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.
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 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.
(This annual report is not part of the prospectus.)
<PAGE>
The financial statements contained in Post-Effective Amendment #62 to
Registration Statement No. 2-38355 filed on or about Sept. 28, 1998 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 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 Stock 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.)
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 that generaly pay
dividends 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 that 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.)
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.)
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 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
Fiscal period ended July 31, 1998
Class A
Income distribution
taxable as dividend income, 13.78% qualifying for deduction by
corporations.
Payable date Per share
Dec. 29, 1997 $0.51840
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.02738
Total distributions $0.54578
The distributions of $0.54578 per share, payable Dec. 29, 1997, consisted
of $0.51840 from net short-term capital gains and $0.02738 from net
long-term capital gains.
The long-term capital gains distribution is divided into two rate
categories: 28% - $0.00239 and 20% - $0.02499.
(This annual report is not part of the prospectus.)
Class B
Income distribution
taxable as dividend income, 13.78% qualifying for deduction by
corporations.
Payable date Per share
Dec. 29, 1997 $0.51840
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.02738
Total distributions $0.54578
The distributions of $0.54578 per share, payable Dec. 29, 1997, consisted
of $0.51840 from net short-term capital gains and $0.02738 from net
long-term capital gains.
The long-term capital gains distribution is divided into two rate
categories: 28% - $0.00239 and 20% - $0.02499.
Class Y
Income distribution
taxable as dividend income, 13.78% qualifying for deduction by
corporations.
Payable date Per share
Dec. 29, 1997 $0.51840
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.02738
Total distributions $0.54578
The distributions of $0.54578 per share, payable Dec. 29, 1997, consisted
of $0.51840 from net short-term capital gains and $0.02738 from net
long-term capital gains.
The long-term capital gains distribution is divided into two rate
categories: 28% - $0.00239 and 20% - $0.02499.
(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
*You may experience delays when call volumes are high.
<PAGE>
AMERICAN EXPRESS Financial Advisors
IDS Research Opportunities Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<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.
