IDS Research
Opportunities
Fund
1999 SEMIANNUAL REPORT
(icon of) ruler
The goal of IDS Research Opportunities Fund, a part of IDS Growth Fund, Inc., is
long-term growth of capital.
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
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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
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements (Fund) 7
Notes to Financial Statements (Fund) 10
Financial Statements (Portfolio) 15
Notes to Financial Statements (Portfolio)18
Investments in Securities 22
<PAGE>
From the Chairman
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
It is an honor for me to join the IDSMutual Fund Group as chairman of the board
and chief executive officer for each of the funds. I have served for the past
eight years as governor of Minnesota and also for the past 20 years as a
constitutional officer responsible for the pension investments made on behalf of
governmental employees. My responsibility in the coming years is to serve your
interests.
By law, half the members of a mutual fund board must be independent of their
investment manager and distributor. I am one of those persons. I am not an
employee of American Express Financial Corporation, nor do I own stock in
American Express Company. Both are fine companies, but the law clearly states
that to fully represent your interests I must be independent.
Having said that, I have a great deal of respect for the capabilities of
American Express Financial Corporation and for the services it provides
investors. Your financial advisor assists you in financial planning, conducts
regular investment reviews, and responds to your questions and needs. This is a
very personal service that makes AEFCa partner in your financial future. I know
that AEFC has an investment focus on the long-term performance of our economy.
AEFC wants you to participate in that growth. Our board is here to serve you and
to represent your interests in a professional manner.
Arne H. Carlson
From the Portfolio Manager
(picture of) Keith Tufte
Keith Tufte
Portfolio Manager
IDS Research Opportunities Fund recovered from a bad start to finish the first
half of the fiscal year with a substantial gain. For the six months -- August
1998 through January 1999 -- the total return from the Fund's Class A shares was
16.33%. (Part of the return was in the form of a capital gain, which was paid to
shareholders last December and reduced the Fund's net asset value by the same
amount at that time.)
The stock market was in rapid retreat when the period began, as worries about a
possible slump in corporate profits fueled widespread stock-selling. Most of the
damage was done by the end of August, but by that time the Fund had lost more
than 15% of its value.
Investors' moods brightened in the fall, though, as three reductions in
short-term interest rates by the Federal Reserve restored some calm to the
financial markets. Stocks wasted little time in responding, as they began a
resolute advance that not only made up for the late-summer swoon but took the
market to an all-time high in early January. The Fund largely kept up with the
powerful pace of the market, gaining more than 30% from September through the
end of the period in January.
Large-caps lead again
As has been the case in recent years, large-capitalization growth stocks most
often led the way during the market's advances. That worked to the advantage of
the Fund, as it confines its investments to stocks of companies in the Standard
& Poor's 500, the most representative unmanaged index of large-cap stocks. Among
the Fund's biggest holdings for the period were: General Electric, Warner
Lambert, Coca-Cola, Bristol Myers Squibb, Intel, MCI Worldcom and U.S. West.
On a stock sector basis, the largest investment (about one-fourth of assets) was
in consumer non-cyclical stocks, which include the food, beverage and
pharmaceutical areas. The rest of the portfolio was largely made up of
technology (including computers, telecommunications), financial services
(insurance, brokerage), consumer cyclical (retailing, housing) and utilities
(electricity, telephone service), each of which accounted for roughly 15% to 20%
of assets.
As for the second half of the fiscal year, the investment environment is little
changed from several months ago: inflation remains low, economic growth is still
solid, and interest rates have yet to experience a meaningful increase. The
biggest question to be answered in the months ahead is how strong corporate
earnings will be. As always, the Fund's investments continue to be concentrated
in those companies that our securities analysts believe have the best earnings
prospects and, as a result, the best chance to outperform the stock market as a
whole.
Keith Tufte
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Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1999 $7.75
July 31, 1998 $6.98
Increase $0.77
Distributions -- Aug. 1, 1998 - Jan. 31, 1999
From income $0.32
From capital gains $0.03
Total distributions $0.35
Total return* +16.33%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1999 $7.60
July 31, 1998 $6.88
Increase $0.72
Distributions -- Aug. 1, 1998 - Jan. 31, 1999
From income $0.32
From capital gains $0.03
Total distributions $0.35
Total return* +15.89%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1999 $7.77
July 31, 1998 $7.01
Increase $0.76
Distributions -- Aug. 1, 1998 - Jan. 31, 1999
From income $0.34
From capital gains $0.03
Total distributions $0.37
Total return* +16.39%**
*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 10 Largest Holdings
Percent Value
(of net assets) (as of Jan. 31, 1999)
Intel 3.44% $21,943,969
General Electric 3.06 19,538,213
MCI WorldCom 3.05 19,433,879
Bristol-Myers Squibb 2.90 18,471,818
Ameritech 2.75 17,570,725
Intl Business Machines 2.62 16,712,399
Pfizer 2.49 15,859,462
AT&T 2.46 15,663,450
Warner-Lambert 2.45 15,635,812
Wal-Mart Stores 2.40 15,325,199
For further detail about these holdings, please refer to the section entitled
"Investments in Securities" herein.
(icon of) pie chart
The 10 holdings listed here
make up 27.62% of net assets
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<CAPTION>
Financial Statements
Statement of assets and liabilities
IDS Research Opportunities Fund
Jan. 31, 1999 (Unaudited)
Assets
<S> <C>
Investment in Aggressive Growth Portfolio (Note 1) $636,019,388
------------
Liabilities
Accrued distribution fee 4,575
Accrued service fee 2,948
Accrued transfer agency fee 1,109
Accrued administrative services fee 945
Other accrued expenses 25,425
------
Total liabilities 35,002
------
Net assets applicable to outstanding capital stock $635,984,386
============
Represented by
Capital stock-- $.01 par value (Note 1) $ 826,353
Additional paid-in capital 504,265,292
Net operating loss (388,125)
Accumulated net realized gain (loss) 6,579,636
Unrealized appreciation (depreciation) on investments 124,701,230
-----------
Total -- representing net assets applicable to outstanding capital stock $635,984,386
============
Net assets applicable to outstanding shares: Class A $405,322,577
Class B $230,289,545
Class Y $ 372,264
Net asset value per share of outstanding capital stock: Class A shares 52,287,661 $ 7.75
Class B shares 30,299,714 $ 7.60
Class Y shares 47,923 $ 7.77
See accompanying notes to the financial statements.
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<CAPTION>
Statement of operations
IDS Research Opportunities Fund
Six months ended Jan. 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 2,998,471
Interest 225,655
Less foreign taxes withheld (19,023)
-------
Total income 3,205,103
---------
Expenses (Note 2):
Expenses allocated from Aggressive Growth Portfolio 1,708,074
Distribution fee-- Class B 703,912
Transfer agency fee 465,285
Incremental transfer agency fee-- Class B 11,859
Service fee
Class A 293,453
Class B 163,571
Administrative services fees and expenses 150,794
Compensation of board members 4,127
Postage 34,768
Registration fees 46,548
Reports to shareholders 15,135
Audit fees 2,500
Other 1,316
-----
Total expenses 3,601,342
Earnings credits on cash balances (Note 2) (9,175)
- ------
Total net expenses 3,592,167
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Investment income (loss) -- net (387,064)
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Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 5,171,331
Financial futures contracts 1,804,809
---------
Net realized gain (loss) on investments 6,976,140
Net change in unrealized appreciation (depreciation) on investments 81,915,890
----------
Net gain (loss) on investments 88,892,030
----------
Net increase (decrease) in net assets resulting from operations $88,504,966
===========
See accompanying notes to financial statements.
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<CAPTION>
Statements of changes in net assets
IDS Research Opportunities Fund
Jan. 31, 1999 July 31, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ (387,064) $ 166,575
Net realized gain (loss) on investments 6,976,140 38,530,756
Net change in unrealized appreciation (depreciation) on investments 81,915,890 8,223,315
---------- ---------
Net increase (decrease) in net assets resulting from operations 88,504,966 46,920,646
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (166,906) --
Class B -- --
Class Y (840) --
Net realized gain
Class A (17,205,662) (20,657,813)
Class B (9,873,913) (10,689,824)
Class Y (15,203) (109)
------- ----
Total distributions (27,262,524) (31,347,746)
----------- -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 45,444,159 142,356,044
Class B shares 27,882,684 86,426,593
Class Y shares 321,504 --
Reinvestment of distributions at net asset value
Class A shares 16,504,029 19,606,825
Class B shares 9,814,371 10,635,286
Class Y shares 16,043 109
Payments for redemptions
Class A shares (33,372,022) (39,846,496)
Class B shares (Note 2) (13,064,240) (14,553,014)
Class Y shares (32,977) --
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Increase (decrease) in net assets from capital share transactions 53,513,551 204,625,347
---------- -----------
Total increase (decrease) in net assets 114,755,993 220,198,247
Net assets at beginning of period 521,228,393 301,030,146
----------- -----------
Net assets at end of period $635,984,386 $521,228,393
============ ============
Undistributed (excess of distributions over) net investment income $ (388,125) $ 166,685
------------ ------------
See accompanying notes to financial statements.
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Notes to Financial Statements
IDS Research Opportunities Fund
(Unaudited as to Jan. 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of IDS Growth Fund, Inc. and 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.
The Fund offers Class A, Class B and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The 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 the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at Jan. 31, 1999, was 99.72%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolio's "Notes to financial statements" (included elsewhere in this report).
Use of estimates Preparing financial
statements that conform to generally accepted accounting principles requires
management to make estimates (e.g., on assets and liabilities) that could differ
from actual results.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to the shareholders. No provision for income or excise taxes is
thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred 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, when available, 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 an agreement with American Express Financial Corporation
(AEFC) to provide administrative services. 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 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 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
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 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 $768,616 for Class A and $95,923 for Class B for
the six months ended Jan. 31, 1999.
During the six months ended Jan. 31, 1999, the Fund's transfer agency fees were
reduced by $9,175 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, 1999
Class A Class B Class Y
Sold 6,637,484 4,170,006 50,440
Issued for reinvested distributions 2,251,879 1,364,778 2,185
Redeemed (4,913,776) (1,970,303) (4,920)
Net increase (decrease) 3,975,587 3,564,481 47,705
Year ended July 31, 1998
Class A Class B Class Y
Sold 21,213,882 13,008,512 --
Issued for reinvested distributions 3,188,620 1,748,937 18
Redeemed (5,883,949) (2,177,029) --
Net increase (decrease) 18,518,553 12,580,420 18
4. BANK BORROWINGS
The Fund entered into a revolving credit agreement with U.S. Bank, N.A., whereby
the Fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The Fund must have asset coverage for
borrowings not to exceed the aggregate of 333% of advances equal to or less than
five business days plus 367% of advances over five business days. The agreement,
which enables the Fund to participate with other IDS Funds, permits borrowings
up to $200 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the
Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90
days after such loan is executed. The Fund also pays a commitment fee equal to
its pro rata share of the amount of the credit facility at a rate of 0.05% per
annum. The Fund had no borrowings outstanding during the six months ended Jan.
31, 1999.
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<CAPTION>
5. 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 changesa
Class A Class B Class Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999c 1998 1997b 1999c 1998 1997b 1999c 1998 1997b
Net asset value, beginning of period $6.98 $6.86 $5.00 $6.88 $6.82 $5.00 $7.01 $6.88 $5.00
Income from investment operations:
Net investment income (loss) .01 .02 .01 (.02) (.02) (.02) .03 .03 .01
Net gains (losses)
(both realized and unrealized) 1.11 .65 1.86 1.09 .63 1.85 1.10 .65 1.88
Total from investment operations 1.12 .67 1.87 1.07 .61 1.83 1.13 .68 1.89
Less distributions:
Dividends from net investment income -- -- -- -- -- -- (.02) -- --
Distributions from realized gains (.35) (.55) (.01) (.35) (.55) (.01) (.35) (.55) (.01)
Total distributions (.35) (.55) (.01) (.35) (.55) (.01) (.37) (.55) (.01)
Net asset value, end of period $7.75 $6.98 $6.86 $7.60 $6.88 $6.82 $7.77 $7.01 $6.88
Ratios/supplemental data
Class A Class B Class Y
1999c 1998 1997b 1999c 1998 1997b 1999c 1998 1997b
Net assets, end of period (in millions)$405 $337 $205 $230 $184 $96 $-- $-- $--
Ratio of expenses to
average daily net assetsd 1.10%e 1.12% 1.52%e 1.86%e 1.88% 2.25%e 1.04%e .87% 1.45%e
Ratio of net investment income (loss)
to average daily net assets .13%e .30% .20%e (.64%)e(.46%)(.53%)e .17%e .40% .33%e
Portfolio turnover rate
(excluding short-term securities) 56% 148% 171% 56% 148% 171% 56% 148% 171%
Total returnf 16.33% 10.76% 37.44% 15.89% 9.92% 36.48% 16.39% 10.93% 37.66%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date. Period from Aug. 19, 1996 to July 31, 1997.
c Six months ended Jan. 31, 1999 (Unaudited).
d Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
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Financial Statements
Statement of assets and liabilities
Aggressive Growth Portfolio
Jan. 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $508,248,308) $633,030,092
Cash in bank on demand deposit 711,530
Dividends and accrued interest receivable 573,114
Receivable for investment securities sold 7,438,864
---------
Total assets 641,753,600
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Liabilities
Payable for investment securities purchased 3,947,156
Accrued investment management services fee 10,657
Other accrued expenses 10,887
------
Total liabilities 3,968,700
---------
Net assets $637,784,900
============
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
Statement of operations
Aggressive Growth Portfolio
Six months ended Jan. 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 3,007,773
Interest 225,196
Less foreign taxes withheld (19,088)
-------
Total income 3,213,881
---------
Expenses (Note 2):
Investment management services fee 1,673,343
Compensation of board members 4,197
Custodian fees 33,620
Audit fees 7,500
Other 3,571
-----
Total expenses 1,722,231
Earnings credits on cash balances (Note 2) (8,904)
------
Total net expenses 1,713,327
Investment income (loss) -- net 1,500,554
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 5,186,669
Financial futures contracts 1,810,607
---------
Net realized gain (loss) on investments 6,997,276
Net change in unrealized appreciation (depreciation) on investments 82,119,769
----------
Net gain (loss) on investments 89,117,045
----------
Net increase (decrease) in net assets resulting from operations $90,617,599
===========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
Aggressive Growth Portfolio
Jan. 31, 1999 July 31, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss) -- net $ 1,500,554 $ 3,194,481
Net realized gain (loss) on investments 6,997,276 38,876,071
Net change in unrealized appreciation (depreciation) on investments 82,119,769 8,046,666
---------- ---------
Net increase (decrease) in net assets resulting from operations 90,617,599 50,117,218
---------- ----------
Net contributions (withdrawals) from partners 24,053,444 170,560,308
---------- -----------
Total increase (decrease) in net assets 114,671,043 220,677,526
Net assets at beginning of period 523,113,857 302,436,331
----------- -----------
Net assets at end of period $637,784,900 $523,113,857
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Aggressive Growth Portfolio
(Unaudited as to Jan. 31, 1999)
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.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
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 that reflects fair value
as quoted by dealers who make markets in these securities or by 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
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends 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 as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
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 being unable 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 when the option transaction expires or closes. 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
To gain exposure to or protect itself from market changes, 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 of 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,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date 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 its contract obligations.
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. As a "pass-through" entity, the Portfolio therefore
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.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended Jan. 31, 1999, the Portfolio's custodian fees were
reduced by $8,904 as a result of earnings credits from overnight cash balances.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $312,571,664 and $294,073,427, respectively, for the six
months ended Jan. 31, 1999. For the same period, the portfolio turnover rate was
56%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $13,941 for the
six months ended Jan. 31, 1999.
4. STOCK INDEX FUTURES CONTRACTS
Investments in securities at Jan. 31, 1999, included securities valued at
$2,875,000 that were pledged as collateral to cover initial margin deposits on
27 open purchase contracts. The market value of the open purchase contracts at
Jan. 31, 1999, was $8,650,125 with a net unrealized gain of $280,455.
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<CAPTION>
Investments in Securities
Aggressive Growth Portfolio
Jan. 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (97.9%)
Issuer Shares Value(a)
Aerospace & defense (0.3%)
<S> <C> <C>
AlliedSignal 4,700 $183,300
Goodrich (BF) 14,000 476,000
Rockwell Intl 27,800 1,207,563
Total 1,866,863
Airlines (0.4%)
Southwest Airlines 97,900 2,631,063
Automotive & related (2.8%)
Dana 72,900 2,998,013
Danaher 32,900 1,760,150
Ford Motor 104,100 6,395,644
General Motors 73,900 6,632,524
Total 17,786,331
Banks and savings & loans (7.2%)
Bank One 153,112 8,019,241
BankAmerica 123,151 8,235,723
State Street 123,100 8,801,650
Wachovia 70,200 6,221,475
Washington Mutual 186,700 7,841,400
Wells Fargo 200,000 6,987,500
Total 46,106,989
Beverages & tobacco (1.8%)
Coca-Cola 171,400 11,215,988
Chemicals (0.5%)
Waste Management 63,248 3,158,447
Communications equipment & services (2.8%)
Lucent Technologies 91,900 10,344,493
Tellabs 88,450(b) 7,584,588
Total 17,929,081
Computers & office equipment (16.5%)
3Com 149,300(b) 7,017,100
America Online 39,400(b) 6,922,088
Cisco Systems 125,200(b) 13,967,624
Compaq Computer 265,000 12,620,625
Computer Sciences 19,600 1,343,825
Electronic Data Systems 116,800 6,124,700
EMC 124,200(b) 13,522,275
First Data 248,700 9,528,319
Gateway 2000 26,100(b) 2,016,225
Intl Business Machines 91,200 16,712,399
Novell 244,200 4,975,575
Parametric Technology 92,500(b) 1,208,281
Unisys 131,900 4,369,188
Xerox 33,200 4,116,800
Total 104,445,024
Electronics (3.8%)
Applied Materials 26,700(b) 1,687,106
Intel 155,700 21,943,969
LSI Logic 20,800(b) 579,800
Total 24,210,875
Energy (3.5%)
Anadarko Petroleum 49,000 1,326,063
Chevron 63,200 4,724,200
Mobil 69,500 6,094,281
Royal Dutch Petroleum 155,000(c) 6,209,687
Texaco 87,500 4,145,313
Total 22,499,544
Financial services (3.6%)
Associates First Capital Cl A 153,626 6,231,455
Household Intl 178,100 7,825,269
MBNA 240,700 6,724,556
Providian Financial 21,200 2,137,225
Total 22,918,505
Food (2.5%)
Bestfoods 82,400 4,145,750
General Mills 55,000 4,616,563
Sara Lee 150,000 3,825,000
Sysco 111,600 3,041,100
Total 15,628,413
Health care (15.4%)
ALZA 35,700(b) 1,805,081
American Home Products 29,300 1,719,544
Amgen 94,400(b) 12,065,499
Baxter Intl 96,200 6,824,188
Boston Scientific 86,200(b) 2,106,513
Bristol-Myers Squibb 144,100 18,471,818
Guidant 118,200 6,966,413
Medtronic 83,000 6,614,063
Pfizer 123,300 15,859,462
Schering-Plough 190,700 10,393,150
Warner-Lambert 216,600 15,635,812
Total 98,461,543
Health care services (0.4%)
Tenet Healthcare 53,000(b) 1,099,750
United Healthcare 33,000 1,476,750
Total 2,576,500
Household products (1.3%)
Procter & Gamble 87,900 7,987,913
Industrial equipment & services (0.2%)
Browning-Ferris Inds 42,400 1,166,000
Insurance (2.6%)
American General 108,850 7,762,366
Lincoln Natl 107,350 8,943,597
Total 16,705,963
Leisure time & entertainment (1.3%)
Disney (Walt) 247,000 8,151,000
Media (0.7%)
Tele-Communications Cl A 67,600 4,634,825
Multi-industry conglomerates (4.6%)
General Electric 186,300 19,538,213
Tyco Intl 130,950(c) 10,091,334
Total 29,629,547
Paper & packaging (0.6%)
Intl Paper 68,000 2,690,250
Owens-Illinois 40,400(b) 1,181,700
Total 3,871,950
Restaurants & lodging (0.6%)
Wendy's Intl 170,100 4,050,506
Retail (13.1%)
Albertson's 77,700 4,739,700
American Stores 86,400 3,132,000
Circuit City Stores 72,000 3,978,000
Costco Companies 92,000(b) 7,624,500
CVS 129,300 7,079,175
Dayton Hudson 123,500 7,873,124
Home Depot 135,900 8,204,962
Kroger 77,900(b) 4,946,650
Meyer (Fred) 63,200(b) 3,950,000
Rite Aid 56,500 2,775,563
Safeway 108,100(b) 6,067,113
TJX Companies 130,700 3,863,819
Wal-Mart Stores 178,200 15,325,199
Walgreen 67,200(d) 4,200,000
Total 83,759,805
Transportation (0.7%)
Burlington Northern Santa Fe 137,500 4,760,938
Utilities -- gas (0.5%)
Enron 49,000 3,234,000
Utilities -- telephone (10.2%)
Ameritech 269,800 17,570,725
AT&T 172,600 15,663,450
MCI WorldCom 243,685(b) 19,433,879
U S WEST Communications Group 199,500 12,306,656
Total 64,974,710
Total common stocks
(Cost: $499,580,539) $624,362,323
</TABLE>
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<CAPTION>
Short-term securities (1.4%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies
Federal Home Loan Bank Disc Nt
<S> <C> <C> <C>
03-19-99 4.75% $1,700,000 $1,689,302
Federal Home Loan Mtge Corp Disc Nts
02-02-99 5.05 1,500,000 1,499,371
02-10-99 5.04 700,000 698,928
02-12-99 5.06 500,000 499,092
02-16-99 5.07 700,000 698,337
03-08-99 4.80 700,000 696,568
03-08-99 4.81 1,500,000 1,492,631
03-12-99 4.81 500,000 497,278
03-17-99 4.74 400,000 397,593
Federal Natl Mtge Assn Disc Nt
02-19-99 4.81 500,000 498,669
Total short-term securities
(Cost: $8,667,769) $8,667,769
Total investments in securities
(Cost: $508,248,308)(e) $633,030,092
See accompanying notes to investments in securities.
</TABLE>
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<CAPTION>
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. As of Jan. 31, 1999, the
value of foreign securities represented 2.55% of net assets.
(d) 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 Contracts
<S> <C>
S&P 500 Index, March 1999 27
(e) At Jan. 31, 1999, the cost of securities for federal income tax purpose was
approximately $508,248,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $138,614,000
Unrealized depreciation (13,832,000)
Net unrealized appreciation $124,782,000
</TABLE>
<PAGE>
Quick telephone reference
AMERICAN EXPRESS FINANCIAL ADVISORS TELEPHONE TRANSACTION SERVICE
Sales and exchanges, dividend payments or reinvestments and automatic payment
arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 612-671-3800
AMERICAN EXPRESS CLIENT SERVICE CORPORATION
Fund performance, objectives and account inquiries: 800-862-7919
TTY SERVICE
For the hearing impaired: 800-846-4852
AMERICAN EXPRESS FINANCIAL ADVISORS
Automated account information (TouchTone(R) telephones only), including current
Fund prices and performance, account values and recent account
transactions: 800-862-7919
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