1998 annual report
IDS
Progressive
Fund
(prospectus enclosed)
(icon of) shooting star
The goal of IDS Progressive Fund, Inc. is long-term growth of capital. The Fund
invests primarily in undervalued common stocks.
(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) shooting star
The power of patience
Everyone likes to get a bargain. In the investment world, bargains are
known as "value" stocks -- stocks whose prices are believed to be low in
relation to the true worth of their respective companies. In the case of
Progressive Fund, the focus is on small-company value stocks, which can get
overlooked as investors try to find a new "high-flier." Many of these
companies have already proved themselves in the marketplace and are
financially sound. Patient investors may benefit, however, when such stocks
get rediscovered and eventually rise to their fair values.
<PAGE>
Contents
1998 annual report
From the chairman 4
From the portfolio manager 4
The Fund's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 22
IDS mutual funds 26
Federal income tax information 30
1998 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative purchase arrangements 3p
Sales charge and Fund expenses 4p
Performance 6p
Financial highlights 6p
Total returns 8p
Investment policies and risks 10p
Facts about investments and their risks 11p
Alternative investment option 17p
Valuing Fund shares 17p
How to purchase, exchange or redeem shares 18p
Alternative purchase arrangements 18p
How to purchase shares 21p
How to exchange shares 24p
How to redeem shares 25p
Reductions and waivers of the sales charge 30p
Special shareholder services 35p
Services 35p
Quick telephone reference 35p
Distributions and taxes 36p
Dividend and capital gain distributions 36p
Reinvestments 37p
Taxes 38p
How to determine the correct TIN 40p
How the Fund is organized 41p
Shares 41p
Voting rights 41p
Shareholder meetings 41p
Board members and officers 41p
Investment manager 43p
Administrator and transfer agent 43p
Distributor 44p
About American Express Financial Corporation 45p
General information 45p
Year 2000 46p
Appendix 47p
Descriptions of derivative instruments 47p
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.
(This annual report is not part of the prospectus.)
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To our shareholders
From the chairman
If you're an experienced investor, you know that the past 12 months was a
highly volatile period in many financial markets. But history tells us that
substantial market moves are nothing new. Though they're often
unpredictable, declines -- whether they're brief or long-lasting, moderate
or substantial -- are always a possibility.
That potential for such volatility reinforces the need for investors to
periodically review their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other is
a meeting with your 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 steep stock-market decline late in the fiscal year reversed what until
then had been a productive period for IDS Progressive Fund. In the end, for
the 12 months -- October 1997 through September 1998 -- the Fund's Class A
shares lost 14.8%.
The period began on a sour note, as the fallout from a financial crisis in
Asia sent the U.S. stock market tumbling in the fall of 1997. With
investors trying to figure out how the Asian situation would ultimately
affect U.S. companies, stocks were kept off balance through January.
Finally, investors evidently decided that the effect of the "Asian flu"
wouldn't be too serious. Buoyed by ongoing reports of low inflation and
good economic growth here at home, they moved aggressively back into
stocks, resulting in a resounding rally during February and March.
But by mid-summer, the overseas problems re-emerged, this time in Russia
and Latin America. With investors already concerned that the profit growth
of U.S. companies might soon slack off, this proved to be too much for them
to bear. The stock-selling that resulted led to a third-quarter decline
that turned out to be the market's worst quarterly performance since 1990.
Bigger was better
As for the Fund, while its performance followed the basic pattern of the
broad market, it couldn't keep up with the market during the upturns. That
was largely a function of the fact that the bulk of the market's gains
continued to be generated by an increasingly small number of
large-capitalization growth stocks, as opposed to the smaller and less
highly valued stocks that form the foundation of this fund's portfolio.
In an effort to enhance performance, late in 1997, I raised the median
market capitalization of the portfolio by adding more mid-cap stocks. In
addition, I substantially reduced the level of cash reserves -- in effect,
putting more money to work in stocks and reduced holdings among industrial
stocks in favor of more consumer-related issues.
Although I think the worst is probably over for the U.S. stock market,
uncertainty about corporate earnings remains high as the new fiscal year
begins. Therefore, I plan to stay with a conservative approach that
emphasizes stocks that appear less vulnerable to potential earnings
shortfalls.
Kurt Winters
(picture of) Kurt Winters
Kurt Winters
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)
Sept. 30, 1998 $ 7.93
Sept. 30, 1997 $ 10.17
Decrease $ 2.24
Distributions
Oct. 1, 1997 - Sept. 30, 1998
From income $ 0.34
From capital gains $ 0.52
Total distributions $ 0.86
Total return* -14.8%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 7.80
Sept. 30, 1997 $ 10.03
Decrease $ 2.23
Distributions
Oct. 1, 1997 - Sept. 30, 1998
From income $ 0.29
From capital gains $ 0.52
Total distributions $ 0.81
Total return* -15.4%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 7.94
Sept. 30, 1997 $ 10.18
Decrease $ 2.24
Distributions
Oct. 1, 1997 - Sept. 30, 1998
From income $ 0.35
From capital gains $ 0.52
Total distributions $ 0.87
Total return* -14.7%**
* 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 Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of Sept. 30, 1998)
TCF Financial 2.13% $11,477,812
Nationwide Financial Services Cl A 2.12 11,359,375
Charter One Financial 2.04 10,945,000
Cincinnati Bell 2.04 10,920,000
First Security 1.89 10,133,750
Sierra Pacific Resources 1.81 9,703,125
Allmerica Financial 1.72 9,241,875
Carolina Power & Light 1.72 9,237,500
Policy Management Systems 1.71 9,173,249
Watson Pharmaceuticals 1.70 9,135,000
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 18.88% of the Fund's net assets
(This annual report is not part of the prospectus.)
<PAGE>
Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly.
You'll automatically buy more shares when the Fund's share price is low,
fewer shares when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner can be an effective way to accumulate shares to
meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each month...
(arrow in table pointing to April) you automatically buy more shares when the
per share market price is low...
(arrow in table pointing to September) and fewer shares when the per share
market price is high.
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 $10,000 has grown in IDS Progressive Fund
S&p 500
Stock Index
$40,000
Lipper Capital Appreciation
Fund Index
$30,000
$23,204
Progressive Fund
Class A
$20,000
$10,000
$ 9,500
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Average annual total return
(as of Sept. 30, 1998)
1 year Since Inception 5 years 10 years
Class A -19.03% --% +9.48% +8.78%
Class B -18.52% +9.67%* --% --%
Class Y -14.70% +11.33%* --% --%
*Inception date was March 20, 1995.
Assumes: oHolding period from 10/1/88 to 9/30/98. oReturns do not reflect
taxes payable on distributions. oReinvestment of all income and capital
gain distributions for the Fund, with a value of $11,428. 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.
Lipper Capital Appreciation 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 performance indexes, the S&P 500 and the Lipper Capital
Appreciation Fund Index. In comparing Progressive Fund (Class A) to the two
indexes, you should take into account the fact that the Fund'sperformance
reflects the maximum sales charge of 5%, while such charges are not
reflected in the performance of the indexes.
Your investment and return values fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. Average annual
total return figures reflect the impact of the applicable sales charge up
to a maximum of 5%. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
(This annual report is not part of the prospectus.)
<PAGE>
The financial statements contained in Post-Effective Amendment #65 to
Registration Statement No. 2-30059 filed on or about November 25, 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.
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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.
(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.
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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.
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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.
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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.
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(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.
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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.
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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.
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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
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. Dividends paid to you
since the end of last year will be reported to you on a tax statement sent
next January. Shareholders should consult a tax advisor on how to report
distributions for state and local purposes.
IDS Progressive Fund, Inc.
Fiscal year ended Sept. 30, 1998
Class A
Income distributions
Taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.34534
Capital gain distribution
Taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.51568
Total distributions $0.86102
The distribution of $0.86102 per share, payable Dec. 29, 1997, consisted of
$0.07741 derived from net investment income, $0.26793 from net short-term
capital gains (a total of $0.34534 taxable as dividend income) and $0.51568
from net long-term capital gains.
The long-term gains distribution is divided into two rate categories: 28%-
$0.41012 and 20% - $0.10556.
(This annual report is not part of the prospectus.)
<PAGE>
Class B
Income distribution
Taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.29691
Capital gain distribution
Taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.51568
Total distributions $0.81259
The distribution of $0.81259 per share, payable Dec. 29, 1997, consisted of
$0.02898 derived from net investment income, $0.26793 from net short-term
capital gains (a total of $0.29691 taxable as dividend income) and $0.51568
from net long-term capital gains.
The long-term gains distribution is divided into two rate categories: 28%-
$0.41012 and 20% - $0.10556.
Class Y
Income distributions
Taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.35499
Capital gain distribution
Taxable as long-term capital gain.
Payable date Per share
Dec. 29, 1997 $0.51568
Total distributions $0.87067
The distribution of $0.87067 per share, payable Dec. 29, 1997, consisted of
$0.08706 derived from net investment income, $0.26793 from net short-term
capital gains (a total of $0.35499 taxable as dividend income) and $0.51568
from net long-term capital gains.
The long-term gains distribution is divided into two rate categories: 28% -
$0.41012 and 20% - $0.10556.
(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:
612-671-3800
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 Progressive 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.
