IDS
Mutual
1996 semiannual report
(Picture of icon: a balanced scale)
The goal of IDS Mutual is to provide a balance of growth of capital and
current income. The Fund divides its investments between common stocks
and senior securities (bonds and preferred stocks).
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
(Picture of icon: balanced scale)
A beneficial balance
A balanced portfolio is one of the building blocks of investment
planning. And balance is what IDS Mutual is all about. The Fund starts
with a focus on stocks, many of which are part of the who's who of
corporate America. To help balance the fluctuations inherent in stocks,
as well as provide greater income to investors, bonds are added to the
portfolio. The result: a Fund that strives to provide income above that
of a pure stock fund, while still providing potential for capital
appreciation.
Contents
From the president 3
From the portfolio manager 3
Ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 26
Board members and officers 36
IDS mutual funds 37
To our shareholders
(Picture of: William R. Pearce)
William R. Pearce
President of the Fund
(Picture of: Thomas W. Metcalf)
Thomas W. Metcalf
Equity portfolio manager
(Picture of: Ed Labenski)
Ed Labenski
Fixed-income portfolio manager
From the president
If you're an experienced investor, you know that 1995 was an unusually
strong year for the U.S. financial markets. Perhaps just as important, you
also know that history shows that bull markets don't last forever. Though
they're often unpredictable, declines --whether they're brief or
long-lasting, moderate or substantial -- are always a possibility.
That fact reinforces the need for investors to review periodically their
long-term goals and assess 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 imporatnat if there's
a major change in your financial situation or in the financial markets.
William R. Pearce
From the portfolio managers
Despite a downturn in the bond market late in the period, IDS Mutual
recorded a positive performance during the first half of its fiscal
year. For the October 1995 through March 1996 period, investors in Class A
shares realized a total return of 7.3% (This includes a capital gain paid
to shareholders last December, which reduced the Fund's net asset value by
a like amount at that time.)
The favorable factors of declining long-term interest rates, low inflation
and moderate economic growth and good corporate profits, which had
dominated the investment environment since the beginning of 1995, remained
in place as the period began. The stock market responded well, registering
a solid advance for the period.
Value picks up
Unlike the previous several months, during which time growth stocks,
particularly high-flying technology issues, consistently outperformed other
types of stocks, the past six months saw value stocks begin to reassert
themselves. While our emphasis on value had previously tempered FUND
performance, this time it periodically worked in our favor. A perfect
example came last November, when we were essentially unaffected by
a sharp sell-off among technology stocks while we concurrently enjoyed
good gain from our value-oriented stocks in the banking, insurance and
retailing areas.
As for changes to the stock portfolio, we gradually increased our exposure
to foreign issues, which offered increasingly good value in relation to
the U.S. market as the latter continued to rise. We also added to our
holdings, whose substantial dividends met our above-market yield criterion
for the Fund.
Roller-coaster for bonds
On the bond side, the rally that had been in place since the outset of 1995
continued into January of this year, benefiting our corporate and
government holdings during that time. Then the environment changed
abruptly. The possibility of a pick-up in economic growth and, thus,
inflation soon sent long-term interest rates higher and bond prices lower.
The tumble, which lasted through March, proved to be a substantial drag on
Fund performance during the final several weeks of the period.
As we enter the second half of the fiscal year, the portfolio structure
remains as it has been for some time: about 59% in stocks, about 35% in
bonds and 6% in cash reserves. Although the bond market decline was
disappointing, we are encouraged by the fact that value stocks performed
well in March. In what we expect will be a more uncertain stock market
this year, this could indicate that investors will turn more toward the
high-quality, high dividend value stocks that dominate our portfolio.
Barring a sustained slide in bonds, that should allow the Fund to deliver
positive performance, including a healthy dividend, in the months ahead.
Thomas W. Metcalf
Ed Labenski
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
_____________________________
March 31, 1996 $13.23
_____________________________
Sept. 30, 1995 $12.69
_____________________________
Increase $ 0.54
_____________________________
Distributions
Oct. 1, 1995 - March 31, 1996
_____________________________
From income $ 0.25
_____________________________
From capital gains $ 0.13
_____________________________
Total distributions $ 0.38
_____________________________
Total return* +7.3%**
_____________________________
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
_____________________________
March 31, 1996 $13.13
_____________________________
Sept. 30, 1995 $12.66
_____________________________
Increase $ 0.47
_____________________________
Distributions
Oct. 1, 1995 - March 31, 1996
_____________________________
From income $ 0.21
_____________________________
From capital gains $ 0.13
_____________________________
Total distributions $ 0.34
_____________________________
Total return* +6.9%**
_____________________________
<PAGE>
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
_____________________________
March 31, 1996 $13.19
_____________________________
Sept. 30, 1995 $12.69
_____________________________
Increase $ 0.50
_____________________________
Distributions
Oct. 1, 1995 - March 31, 1996
_____________________________
From income $ 0.26
_____________________________
From capital gains $ 0.13
_____________________________
Total distributions $ 0.39
_____________________________
Total return* +7.4%**
_____________________________
*The prospectus discusses the
effect of the sales charges, if any, on
the various classes.
PAGE
<TABLE>
<CAPTION> IDS Mutual
The fund's ten largest holdings
_____________________________________________________________________________________
Percent Value
(of fund's net assets)(as of March 31, 1996)
_____________________________________________________________________________________
<S> <C> <C>
General Electric .99% $38,937,500
A diversified company with interests in manufacturing,
broadcasting (NBC), financial services and technology.
Dow Chemical .94 36,921,875
The second largest U.S. chemical company. Dow produces
basic chemicals and plastics, industrial specialties and
household, drug and agricultural products.
Baxter Intl .92 36,200,000
The largest distributor of hospital and medical supplies,
with additional business in the specialty medical products
and home care industries.
NationsBank .92 36,056,250
A bank holding company with strong presence in North Carolina,
South Carolina, Texas, Virgina, Florida and Georgia.
General Motors .92 35,943,750
A high-technology applications company engaged in automotive
electronics, defense electronics, telecommunications and
commercial technology.
Anheuser-Busch .90 35,371,875
The leading brewer in the United States. The company is also a
producer of baked goods and snacks, and is an operator of
theme parks.
Gannett .90 35,306,250
A diversified news and information company with interests in
newspaper publishing, television and radio broadcasting, outdoor
advertising and other relared business services.
American Home Products .90 35,221,875
A large, diversified drug company whose major business
include drug, consumer health, food and household products.
GTE .87 34,003,125
The corporation's two major business segments are telephone
operations and telecommunications products area.
KPN .85 33,575,000
The telephone company of the Netherlands, which was made a public
company recently. Besides providing long distance, cellular service
and cablevision, the company also runs the Dutch postal srevice.
Excludes U.S. Treasury and government agency holdings that total 19% of the Fund's
net assets.
/TABLE
<PAGE>
PAGE
<TABLE>
<CAPTION>
Statement of assets and liabilities
IDS Mutual
March 31, 1996
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
(Unaudited)
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $3,625,576,241) $3,980,833,233
Cash in bank on demand deposit 835,199
Dividends and accrued interest receivable 32,982,055
Receivable for investment securities sold 20,995,454
Unrealized appreciation on foreign currency contracts held,
at value (Notes 1 and 4) 2,410,885
U.S. government securities held as collateral (Note 5) 90,753,195
Receivable from investment advisors 47,912
_____________________________________________________________________________________________________________
Total assets 4,128,857,933
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Dividends payable to shareholders 3,799,733
Payable for investment securities purchased 16,797,255
Payable upon return of securities loaned (Note 5) 183,826,095
Accrued investment management services fee 96,740
Accrued distribution fee 3,434
Accrued transfer agency fee 28,042
Accrued administrative services fee 7,037
Other accrued expenses 442,113
_____________________________________________________________________________________________________________
Total liabilities 205,000,449
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $3,923,857,484
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- $.01 par value; (Note 1) $ 2,968,781
Additional paid-in capital 3,418,576,041
Undistributed net investment income 24,792
Accumulated net realized gain (Note 1) 144,595,394
Unrealized appreciation of investments and on translation of assets and
liabilities in foreign currencies 357,692,476
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $3,923,857,484
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $2,734,406,797
Class B $ 83,650,569
Class Y $1,105,800,118
Net asset value per share of outstanding capital stock: Class A shares 206,684,931 $ 13.22
Class B shares 6,372,450 $ 13.18
Class Y shares 83,820,815 $ 13.22
See accompanying notes to financial statements. <PAGE>
PAGE
Financial statements
Statement of operations
IDS Mutual
Six months ended March 31, 1996
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
(Unaudited)
Income:
Interest $ 51,386,600
Dividends (net of foreign taxes withheld of $892,055) 38,769,374
_____________________________________________________________________________________________________________
Total income 90,155,974
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 9,262,658
Distribution fee -- Class B 211,828
Transfer agency fee 2,449,534
Incremental transfer agency fee - Class B 4,144
Service fee
Class A 2,265,518
Class B 49,297
Administrative services fee 618,613
Compensation of board members 2,164
Compensation of officers 14,979
Custodian fees 218,309
Postage 115,898
Registration fees 213,587
Reports to shareholders 26,117
Audit fees 16,875
Administrative 12,048
Other 19,815
_____________________________________________________________________________________________________________
Total expenses 15,501,384
_____________________________________________________________________________________________________________
Earnings credits on cash balances (Note 2) (3,968)
_____________________________________________________________________________________________________________
Total net expenses 15,497,416
_____________________________________________________________________________________________________________
Investment income -- net 74,658,558
_____________________________________________________________________________________________________________
Realized and unrealized gain -- net
_____________________________________________________________________________________________________________
Net realized gain on security and foreign currency transactions
(including gain of $133,592 from foreign currency transactions) (Note 3) 141,605,221
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies 47,005,241
_____________________________________________________________________________________________________________
Net gain on investments and foreign currency 188,610,462
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $263,269,020
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Mutual
_____________________________________________________________________________________________________________
Operations and distributions March 31,1996 Sept. 30, 1995
_____________________________________________________________________________________________________________
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income -- net $ 74,658,558 $ 144,088,721
Net realized gain on investments and foreign currency 141,605,221 37,926,459
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies 47,005,241 320,251,829
_____________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations 263,269,020 502,267,009
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (52,110,921) (117,584,771)
Class B (1,134,494) (432,989)
Class Y (21,530,138) (26,282,638)
Net realized gain
Class A (25,940,984) (127,571,078)
Class B (539,949) --
Class Y (10,056,220) --
Excess distribution of realized gain
Class A (93,103) (1,051,260)
Class B (2,027) --
Class Y (38,462) (319,960)
_____________________________________________________________________________________________________________
Total distributions (111,446,298) (273,242,696)
_____________________________________________________________________________________________________________
Capital share transactions (Note 4)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 119,897,478 354,292,541
Class B shares 50,295,186 32,239,278
Class Y shares 315,950,822 879,303,339
Reinvestment of distributions at net asset value
Class A shares 67,344,848 217,251,464
Class B shares 1,626,380 416,785
Class Y shares 31,623,216 26,602,598
Payments for redemptions
Class A shares (159,827,672) (1,135,236,869)
Class B shares (Note 2) (2,823,619) (533,909)
Class Y shares (156,935,946) (97,142,295)
_____________________________________________________________________________________________________________
Increase in net assets from capital share transactions 267,150,693 277,192,932
_____________________________________________________________________________________________________________
Total increase in net assets 418,973,415 210,896,184
Net assets at beginning of period 3,504,884,069 2,787,770,640
_____________________________________________________________________________________________________________
Net assets at end of period
(including undistributed net investment income of
$24,792 and $141,787) $3,923,857,484 $2,998,666,824
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
PAGE
Notes to financial statements
IDS Mutual
(Unaudited as to March 31, 1996)
______________________________________________________________________________
1. Summary of significant accounting policies
The Fund is a series of IDS Investment Series, Inc. and registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. IDS Investment Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the board. The Fund divides its investments between
common stocks and senior securities (bonds and preferred stocks). The Fund
offers Class A, Class B and Class Y shares. Class A shares are sold with a
front-end sales charge. Class B shares may be subject to a contingent deferred
sales charge and such shares automatically convert to Class A after eight
years. Class Y shares, which the Fund also began offering on March 20, 1995,
have no sales charge and are offered only to qualifying institutional
investors.
All classes of shares have identical voting, dividend, liquidation and other
rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price; securities for which market quotations
are not readily available, including illiquid securities, are valued at fair
value according to methods selected in good faith by the board. Determination
of fair value involves, among other things, reference to market indexes,
matrixes and data from independent brokers. 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.
Futures transactions
In order to gain exposure to or protect itself from changes in the market, the
Fund may buy and sell futures contracts traded on any U.S. or foreign
exchange. The Fund also may buy or write put and call options on these futures
contracts. Risks of entering into futures contracts include the possibility
that there may be an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund 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 Fund 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 Fund recognizes a realized gain or loss when the contract is
closed or expires.
Foreign currency translations and
foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange.
Foreign currency amounts related to the purchase or sale of securities and
income and expenses are translated at the exchange rate on the transaction
date. The effect of changes in foreign exchange rates on realized and
unrealized security gains or losses is reflected as a component of such gains
or losses. In the statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign currency, closed
forward contracts, exchange gains or losses realized between the trade date
and settlement dates on securities transactions, and other translation gains
or losses on dividends, interest income and foreign withholding taxes.
The Fund 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 Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete the obligations of the contract.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders, no provision for income or excise taxes is
required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of the deferral of
losses on certain futures contracts, the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes and losses
deferred due to "wash sale" transactions. The character of distributions made
during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes. The
effect on dividend distributions of certain book-to-tax differences is
presented as "excess distributions" in the statement of changes in net assets.
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
Dividends from net investment income, declared and paid each calendar quarter,
are reinvested in additional shares of the Fund at net asset value or payable
in cash. Capital gains, when available, are distributed along with the last
income dividend of the calendar year.
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. Expenses and sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio, providing
administrative services and serving as transfer agent as follows: Under its
Investment Management Services Agreement, AEFC determines which securities
will be purchased, held or sold. The management fee is a percentage of the
Fund's average daily net assets in reducing percentages from 0.53% to 0.4%
annually. The fee is adjusted upward or downward by a performance incentive
adjustment based on the Fund's average daily net assets over a rolling 12-
month period as measured against the change in the Lipper Balanced Fund Index.
The maximum adjustment is 0.08% of the Fund's average daily net assets after
deducting 1% from the performance difference. If the performance difference is
less than 1%, the adjustment will be zero. The adjustment decreased the fee by
$24,161 for the six months ended March 31, 1996.
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.04% to 0.02% annually.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder account
for this service as follows:
o Class A $15
o Class B $16
o Class Y $15
Also effective March 20, 1995, the Fund entered into agreements with American
Express Financial Advisors Inc. for distribution and shareholder servicing-
related services as follows: Under a Plan and Agreement of Distribution, the
Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average
daily net assets attributable to Class B shares for distribution-related
services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents. The
fee is calculated at a rate of 0.175% of the Fund's average daily net assets
attributable to Class A and Class B shares.
AEFC will assume and pay any expenses (except taxes and brokerage commissions)
that exceed the most restrictive applicable state expense limitation.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $2,439,296 for Class A and $19,062 for Class B
for the six months ended March 31, 1996. The Fund also pays custodian fees to
American Express Trust Company, an affiliate of AEFC.
During the six months ended March 31, 1996, the Fund's custodian and transfer
agency fees were reduced by $3,968 as a result of earnings credits from
overnight cash balances.
The Fund has a retirement plan for its independent board members. Upon
retirement, board members receive monthly payments equal to one-half of the
retainer fee for as many months as they served as board members up to 120
months. There are no death benefits. The plan is not funded, but the Fund
recognizes the cost of payments during the time board members serve on the
board. The retirement plan expense amounted to $11,009 for the six months
ended March 31, 1996. The plan was terminated April 30, 1996. The total
liability for the plan is $105,085, which will be paid out at some future
date.
______________________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $957,100,770 and $752,409,171, respectively, for the
six months ended March 31, 1996. Realized gains and losses are determined on
an identified cost basis.
______________________________________________________________________________
4. Foreign currency contracts
At March 31, 1996, the Fund had entered into six foreign currency exchange
contracts that obligate the Fund to deliver currencies at specified future
dates. The unrealized appreciation and/or depreciation on these contracts is
included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
Exchange date Currency to be Currency to be Unrealized
delivered received appreciation
______________________________________________________________________________
<S> <C> <C> <C>
April 3, 1996 1,995,614 1,314,149 $ 10,237
U.S Dollar British Pound
May 22,1996 38,900,000 59,888,495 558,215
British Pound U.S. Dollar
May 22, 1996 14,575,000 22,444,625 214,835
British Pound U.S. Dollar
May 22, 1996 34,020,000 52,376,512 489,208
British Pound U.S. Dollar
May 22, 1996 81,400,000 50,238,727 814,632
Dutch Guilder U.S. Dollar
May 20, 1996 154,000,000 27,378,751 323,758
Danish Krona U.S. Dollar
__________
$2,410,885
</TABLE>
5. Capital share transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
<TABLE>
________________________________________________________________________________________
Six months ended March 31, 1996
Class A Class B Class Y
________________________________________________________________________________________
<S> <C> <C> <C>
Sold 9,133,740 3,851,071 24,345,218
Issued for reinvested 5,143,917 124,427 2,414,752
distributions
Redeemed (12,189,052) (214,453) (11,986,326)
________________________________________________________________________________________
Net increase 2,088,605 3,761,045 14,773,644
________________________________________________________________________________________
Year ended Sept. 30, 1995
Class A Class B* Class Y*
________________________________________________________________________________________
Sold 30,312,458 2,621,280 74,793,637
issued for reinvested
didtributions 19,120,967 33,440 2,181,788
Redeemed (97,099,300) (43,315) (7,928,254)
________________________________________________________________________________________
Net increase (decrease) (47,665,875) 2,611,405 69,047,171
________________________________________________________________________________________
* Inception date was March 20, 1995
_________________________________________________________________________________________
</TABLE>
6. Lending of portfolio securities
At March 31, 1996, securities valued at $178,382,690 were on loan to brokers.
For collateral, the Fund received $93,072,900 in cash and U.S. government
securities valued at $90,753,195. Income from securities lending amounted to
$169,857 for the six months ended March 31, 1996. The risks to the Fund of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
______________________________________________________________________________
7. Illiquid securities
At March 31, 1996, investments in securities included issues that are
illiquid. The Fund currently limits investments in illiquid securities to 10%
of the net assets, at market value, at the time of purchase. The aggregate
value of such securities at March 31, 1996, was $780,700 which represents
0.02% of net assets. Pursuant to guidelines adopted by the Fund's board,
certain unregistered securities are determined to be liquid and are not
included within the 10% limitation specified above.
______________________________________________________________________________
8. Financial highlights
<TABLE>
The tables below show certain important financial
information for evaluating the Fund's results.
Fiscal period ended Sept. 30,
Per share income and capital changes*
Class A
1996** 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $12.69 $11.89 $13.13 $12.62 $12.00 $10.39
beginning of period
Income from investment operations:
Net investment income .26 .58 .56 .55 .61 .66
Net gains (losses) .66 1.29 (.56) 1.39 .91 2.01
(both realized
and unrealized)
Total from investment .92 1.87 -- 1.94 1.52 2.67
operations
Less distributions:
Dividends from net (.25) (.54) (.56) (.55) (.60) (.67)
investment income
Distributions from (.13) (.51) (.68) (.88) (.30) (.39)
realized gains
Total distributions (.38) (1.05) (1.24) (1.43) (.90) (1.06)
Net asset value, $13.23 $12.69 $11.89 $13.13 $12.62 $12.00
end of period
Ratios/supplemental data
Class A
1996** 1995 1994 1993 1992 1991
Net assets, end of period $2,734 $2,596 $2,999 $2,788 $2,222 $1,889
(in millions)
Ratio of expenses to .86%+ .83% .79% .79% .78% .71%
average daily net assets
Ratio of net income 3.93%+ 4.58% 4.57% 4.41% 4.99% 5.81%
to average daily net assets
Portfolio turnover rate 22% 38% 69% 48% 50% 47%
(excluding short-term
securities)
Total return++ 7.3% 16.8% (0.1%) 16.7%13.3% 26.9%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Six months ended March 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
<PAGE>
Financial highlights
Fiscal period ended Sept. 30,
Per share income and capital changes*
Class B Class Y
1996*** 1995** 1996*** 1995**
Net asset value, $12.66 $11.67 $12.69 $11.67
beginning of period
Income from investment operations:
Net investment income .18 .25 .26 .32
Net gains .63 1.11 .63 1.11
(both realized
and unrealized)
Total from investment .81 1.36 .89 1.43
operations
Less distributions:
Dividends from net (.21) (.37) (.26) (.41)
investment income
Distributions from (.13) -- (.13) --
realized gains
Total distributions (.34) -- (.39) --
Net asset value, $13.13 $12.66 $13.19 $12.69
end of period
Ratios/supplemental data
Class B Class Y
1996*** 1995** 1996*** 1995**
Net assets, end of period $84 $33 $1,106 $876
(in millions)
Ratio of expenses to 1.63%+ 1.65%+ .69%+ .70%+
average daily net assets
Ratio of net income 3.25%+ 3.94%+ 4.12%+ 4.58%+
to average daily net assets
Portfolio turnover rate 22% 38% 22% 38%
(excluding short-term
securities)
Total return++ 6.9% 7.4% 6.2% 12.2%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
***Six months ended March 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
</TABLE>
PAGE
<TABLE>
<CAPTION> Investments in securities
IDS Mutual (Percentages represent value of
March 31, 1996 (Unaudited) investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (58.3%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Aerospace & defense (1.5%)
Raytheon 600,000 $ 30,750,000
Rockwell Intl 500,000 29,437,500
_______________
Total 60,187,500
_____________________________________________________________________________________________________________________________
Automotive & related (2.4%)
Ford Motor 800,000 27,500,000
General Motors 675,000 35,943,750
Genuine Parts 650,000 29,250,000
______________
Total 92,693,750
_____________________________________________________________________________________________________________________________
Banks and savings & loans (5.9%)
Banc One 750,000 26,718,750
BankAmerica 300,000 23,250,000
Barnett Banks 450,000 28,012,500
First Union 500,000 30,250,000
Morgan (JP) 375,000 31,125,000
National City 750,000 26,343,750
NationsBank 450,000 36,056,250
Norwest 800,000 29,400,000
______________
Total 231,156,250
_____________________________________________________________________________________________________________________________
Beverages & tobacco (2.5%)
Anheuser-Busch 525,000 35,371,875
Philip Morris 375,000 32,906,250
UST 1,000,000 31,875,000
______________
Total 100,153,125
_____________________________________________________________________________________________________________________________
Building materials (0.7%)
Masco 1,000,000 29,000,000
_____________________________________________________________________________________________________________________________
Chemicals (3.5%)
ARCO Chemical 575,000 29,828,125
Dow Chemical 425,000 36,921,875
See accompanying notes to investments in securities.
<PAGE>
PAGE
Lubrizol 850,000 25,075,000
Nalco Chemical 800,000 24,600,000
Rohm & Haas 300,000 19,950,000
______________
Total 136,375,000
_____________________________________________________________________________________________________________________________
Computers & office equipment (1.5%)
IBM 225,000 25,003,125
Xerox 265,000 33,257,500
______________
Total 58,260,625
_____________________________________________________________________________________________________________________________
Energy (3.5%)
Amoco 450,000 32,512,500
Atlantic Richfield 225,000 26,775,000
Exxon 400,000 32,650,000
Mobil 250,000 28,968,750
Ultramar 600,000 17,325,000
______________
Total 138,231,250
_____________________________________________________________________________________________________________________________
Financial services (2.9%)
Alexander Haagen Properties 141,200 1,623,800
AMLI 375,000 7,546,875
Avalon 300,000 6,450,000
CBL & Associates 400,000 8,450,000
Crown America 518,500 3,953,562
Developers Diversified Realty 300,000 8,812,500
Equity Residential 550,000 17,187,500
Gables Residential 400,000 9,600,000
Mills 332,600 5,862,075
Paragon 450,000 7,931,250
Simon Properties 600,000 13,800,000
Taubman Centers 1,100,000 10,862,500
Wellsford 500,000 10,937,500
______________
Total 113,017,562
_____________________________________________________________________________________________________________________________
Food (0.8%)
Earthgrains 21,000 627,375
General Mills 500,000 29,187,500
____________
Total 29,814,875
_____________________________________________________________________________________________________________________________
Furniture & appliances (0.6%)
Maytag 1,000,000 20,250,000
Stanley Works 42,000 2,310,000
______________
Total 22,560,000
_____________________________________________________________________________________________________________________________
Health care (1.8%)
American Home Products 325,000 35,221,875
Baxter Intl 800,000 36,200,000
_______________
Total 71,421,875
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE
Health care services (0.8%)
LTC Properties 350,000 5,687,500
Meditrust 500,000 16,937,500
Omega Healthcare Investors 300,000 8,587,500
______________
Total 31,212,500
_____________________________________________________________________________________________________________________________
Household Products (0.8%)
Unilever NV 225,000 30,543,750
_____________________________________________________________________________________________________________________________
Industrial equipment & services (0.3%)
General Signal 358,000 12,977,500
_____________________________________________________________________________________________________________________________
Industrial transporation (1.8%)
GATX 400,000 18,400,000
Norfolk Southern 250,000 21,250,000
Union Pacific 450,000 30,881,250
______________
Total 70,531,250
_____________________________________________________________________________________________________________________________
Insurance (3.3%)
American General 750,000 25,875,000
ITT Hartford 450,000 22,050,000
Marsh & McLennan 300,000 27,862,500
Providian 575,000 25,659,375
St. Paul Companies 525,000 29,137,500
______________
Total 130,584,375
_____________________________________________________________________________________________________________________________
Media (2.0%)
Gannett 525,000 35,306,250
Knight-Ridder 350,000 23,843,750
McGraw-Hill 225,000 19,518,750
______________
Total 78,668,750
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (2.4%)
Emerson Electric 375,000 30,281,250
General Electric 500,000 38,937,500
Textron 300,000 24,000,000
______________
Total 93,218,750
_____________________________________________________________________________________________________________________________
Paper & packaging (1.2%)
Union Camp 550,000 27,293,750
Westvaco 675,000 19,828,125
______________
Total 47,121,875
_____________________________________________________________________________________________________________________________
Retail (4.0%)
Dayton Hudson 375,000 31,828,125
Intimate Brands 500,000 9,687,500
May Department Stores 650,000 31,362,500
Melville 750,000 26,906,250
Nordstrom 500,000 24,218,750
Shopko Stores 800,000 11,200,000
TJX 800,000 2020,100,000
______________
Total 155,303,125
<PAGE>
PAGE
Utilities-electric (2.7%)
Edison Intl 1,400,000 23,975,000
General Public 750,000 24,750,000
Northern States Power 400,000 19,500,000
PECO Energy 750,000 19,968,750
Unicom 600,000 16,200,000
______________
Total 104,393,750
_____________________________________________________________________________________________________________________________
Utilities-telephone (2.4%)
Bell Atlantic 525,000 32,418,750
BellSouth 800,000 29,600,000
GTE 775,000 34,003,125
______________
Total 96,021,875
_____________________________________________________________________________________________________________________________
Foreign (9.0%) (h)
Anglian Water 1,500,000 13,737,000
BTR 5,000,000 24,075,000
English China Clay 2,500,000 11,332,500
Hanson ADR 1,900,000 (c) 28,500,000
Imperial Chemical Inds 2,250,000 31,698,000
KPN ADR 850,000 33,575,000
Repsol S.A. ADR 800,000 29,900,000
Royal Dutch Petroleum 225,000 (c) 31,781,250
Severn Trent Water 1,238,015 11,223,844
SmithKline Beecham 650,000 (c) 33,475,000
Southern Water 1,029,044 11,779,467
Tele Danmark 1,050,000 (c) 27,168,750
Thames Water 1,823,893 15,991,894
Tomkins 6,750,000 26,061,750
Total 700,000 23,800,000
______________
Total 354,099,455
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $1,965,080,806) $2,287,548,767
____________________________________________________________________________________________________________________________
Preferred stocks (0.4%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Reynolds Metals
3.31% Cv 300,000 15,450,000
Virginia-American Water
5.05% Cm 2,400 (i) 206,400
Western Resources
4.25% Cm 10,000 (i) 574,300
_____________________________________________________________________________________________________________________________
Total preferred stocks and other
(Cost: $15,842,233) $ 16,230,700
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE
<TABLE>
<CAPTION>
Bonds (32.6%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (12.7%)
U.S. Treasury 5.75% 2003 $20,000,000 $ 19,323,200
5.875 2004 20,000,000 (c) 19,404,600
5.875 2005 10,000,000 9,640,100
6.00 1997 20,000,000 20,084,600
6.25 2000 40,000,000 (c) 40,196,000
6.25 2023 80,000,000 74,000,800
6.375 1997 40,000,000 40,378,400
6.75 2000 15,000,000 15,357,300
6.875 2000 20,000,000 20,571,200
7.125 1999 62,650,000 64,783,859
7.25 2016 15,000,000 15,665,100
7.50 2001 19,675,000 20,890,718
9.375 2006 13,500,000 (c) 16,415,190
10.375 2012 40,000,000 51,924,400
Govt Trust Ctfs Israel 9.250 2001 10,000,000 10,901,400
Resolution Funding Corp 8.125 2019 45,000,000 50,967,900
Zero Coupon 6.75 2017 39,704,000 (d) 8,599,092
______________
Total 499,103,859
_____________________________________________________________________________________________________________________________
Mortgage-backed securities (6.7%)
Collateralized Mtge Obligation Trust 9.95 2014 5,000,000 5,303,200
Federal Home Loan Mtge Corp 5.50 2009 5,761,024 5,413,576
6.50 2007 947,927 935,642
6.75 2008 2,785,881 2,687,512
8.00 2024 9,485,732 9,666,530
Collateralized Mtge Obligation 7.50 2003 7,800,000 7,982,754
8.50 2022 7,000,000 7,396,410
Inverse Floater 3.45 1997 5,146,043 (e) 4,903,355
Trust Series Z 6.50 2023 19,907,927 (f) 15,499,473
8.25 2024 5,813,427 (f) 5,906,035
Federal Natl Mtge Assn 5.50 2009 8,334,764 7,863,349
6.50 2023-24 33,100,214 31,466,057
7.40 2004 33,750,000 (c) 35,354,138
7.50 2002-14 3,747,325 3,808,979
9.00 2024 9,542,172 10,019,281
Collateralized Mtge Obligation 4.50 2007 11,900,000 10,026,821
5.00 2024 6,696,552 6,236,365
Inverse Floater 6.52 2023 2,171,477 (e) 1,691,754
Trust Series Z 6.00 2024 6,763,119 (f) 5,065,441
6.50 2023 16,531,338 (f) 13,184,322
7.00 2016-22 49,491,925 (f) 45,613,349
7.50 2014 7,991,385 (f) 7,583,505
8.00 2006-20 19,200,520 (f) 19,499,522
_____________
Total 263,107,370
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE
Financial (2.5%)
Banks and savings & loans (0.2%)
First Bank System 6.875 2007 5,750,000 5,680,368
_____________________________________________________________________________________________________________________________
Commercial finance (0.9%)
Carco Auto Master Trust
Asset-Backed Obligation 7.875 1998 6,000,000 6,031,500
GMAC 7.50 1999 8,000,000 8,249,520
Premium Auto
Asset-Backed Obligation 6.45 1998 7,000,000 7,058,030
Salomon Brothers 6.75 2006 7,000,000 6,515,880
Standard Credit Card Trust 5.95 2004 8,550,000 8,149,689
______________
Total 36,004,619
_____________________________________________________________________________________________________________________________
Financial services (0.8%)
Associates 6.00 2000 6,000,000 5,915,040
Avco Financial 7.25 1999 6,500,000 6,662,305
Corporate Property Investors 7.18 2013 1,500,000 (g) 1,438,455
General Electric Capital
Reset Nts 8.65 2018 4,000,000 (k) 4,009,840
Intl Lease Finance
Medium Term Nts 5.99 1998 5,000,000 4,991,600
Nationwide Trust
Credit Sensitive Nts 9.875 2025 3,500,000 (g) 3,883,250
Property Trust America STET 7.50 2014 5,000,000 4,618,250
______________
Total 31,518,740
_____________________________________________________________________________________________________________________________
Insurance (0.6%)
American United Life 7.75 2026 4,000,000 (g) 3,716,640
Nationwide Mutual Insurance 7.50 2024 4,000,000 (g) 3,673,960
New York Life 7.50 2023 5,000,000 (g) 4,775,550
Principal Mutual 8.00 2044 7,150,000 (g) 6,796,933
SunAmerica 8.125 2023 5,150,000 5,243,318
______________
Total 24,206,401
_____________________________________________________________________________________________________________________________
Industrial (4.3%)
Aerospace & defense (0.3%)
United Technologies 8.875 2019 9,500,000 11,063,605
_____________________________________________________________________________________________________________________________
Beverages & tobacco (0.1%)
Coca-Cola 7.375 2093 3,000,000 3,038,640
_____________________________________________________________________________________________________________________________
Building materials (0.1%)
Owens-Corning Fiberglas 9.375 2012 3,500,000 3,938,375
_____________________________________________________________________________________________________________________________
Computers & office equipment (0.3%)
Apple Computer 6.50 2004 6,100,000 5,336,524
IBM 6.375 2000 5,100,000 5,111,424
______________
Total 10,447,948
_____________________________________________________________________________________________________________________________
Electronics (0.1%)
Harris 10.375 2018 4,000,000 4,401,920
_____________________________________________________________________________________________________________________________
PAGE
Energy (0.4%)
Occidental Petroleum
Medium Term Nts 6.25 2000 6,500,000 6,413,940
Standard Oil 9.00 2019 9,000,000 9,597,420
______________
Total 16,011,360
_____________________________________________________________________________________________________________________________
Food (0.5%)
Grand Met
Cv 6.50 2000 20,000,000 (g) 22,100,000
_____________________________________________________________________________________________________________________________
Health care (1.0%)
Johnson & Johnson 8.00 1998 20,000,000 20,174,000
Kaiser Foundation 9.55 2005 6,000,000 7,048,440
Lilly (Eli) 6.77 2036 5,000,000 4,627,050
Schering-Plough
Zero Coupon 7.31 1996 9,300,000 (d,g) 8,958,225
______________
Total 40,807,715
_____________________________________________________________________________________________________________________________
Household products (0.1%)
Proctor & Gamble 8.00 2024 3,000,000 3,272,850
_____________________________________________________________________________________________________________________________
Media (0.2%)
Cox Communication 7.625 2025 9,000,000 8,930,700
_____________________________________________________________________________________________________________________________
Paper & packaging (0.8%)
Crown Cork & Seal 8.00 2023 6,000,000 5,979,900
Federal Paper Board 10.00 2011 7,000,000 8,737,120
Intl Paper 5.125 2012 13,400,000 10,729,246
Pope & Talbot 8.375 2013 4,500,000 4,196,340
______________
Total 29,642,606<PAGE>
PAGE
Retail (0.1%)
Penney (JC) 9.05 2001 4,500,000 4,975,425
_____________________________________________________________________________________________________________________________
Transportation (0.2%)
Burlington Northern 7.00 2025 10,200,000 9,402,666
_____________________________________________________________________________________________________________________________
Utilities (3.3%)
Electric (1.5%)
Arizona Public Service
Sale Lease-Backed Obligation 8.00 2015 5,400,000 5,393,682
Commonwealth Edison 6.50 1997 10,000,000 10,053,500
Pacific Gas & Electric 8.25 2022 4,600,000 4,746,004
Pennsylvania Power & Light
1st Mtge 9.25 2019 5,000,000 5,351,500
Public Service Electric & Gas 6.75 2016 13,000,000 12,153,570
Texas Utilities Electric
1st Mtge 7.375 2025 7,050,000 6,629,044
Wisconsin Electric Power
1st Mtge 6.875 2095 8,000,000 7,211,440
7.75 2023 5,500,000 5,586,515
______________
Total 57,125,255
_____________________________________________________________________________________________________________________________
Telephone (1.8%)
Bell Telephone Pennsylvania 7.375 2033 5,000,000 4,849,050
BellSouth Telecommunications 6.50 2005 9,000,000 (c) 8,919,180
7.00 2095 10,000,000 9,548,700
GTE 8.75 2021 5,000,000 5,724,950
9.375 2000 4,600,000 5,090,544
Illinois Bell Telephone
1st Mtge 4.375 2003 4,600,000 3,995,974
New York Telephone 4.875 2006 13,000,000 11,219,910
Pacific Bell Telephone 6.625 2034 6,100,000 5,409,053
7.375 2043 7,500,000 7,200,150
U S WEST 6.625 2005 7,000,000 6,934,410
_______________
Total 68,891,921
_____________________________________________________________________________________________________________________________
Foreign (3.1%)(h)
ABN Amro Bank
(U.S. Dollar) 7.125 2093 7,000,000 6,536,670
Asian Development Bank
(U.S. Dollar) 9.125 2000 17,700,000 19,597,971
Canadian Natl Railway
(U.S. Dollar) 7.625 2023 6,000,000 5,881,500
Carter Holt Harvey
(U.S. Dollar) 7.625 2002 8,750,000 9,053,800
Govt of Canada
(Canadian Dollar) 7.66 2001 7,500,000 6,268,275
Govt of Poland PDI Euro
(U.S. Dollar) 3.75 2014 10,000,000 (k) 7,543,750
Hydro Quebec
(Canadian Dollar) 10.875 2001 10,000,000 8,451,381
Interamer Development Bank Euro
(U.S. Dollar) 9.50 2000 5,000,000 5,528,100
KFW Intl Finance
(U.S. Dollar) 8.00 2010 6,750,000 7,298,168
Korea Electric Power
(U.S. Dollar) 7.75 2013 7,255,000 7,194,131
PAGE
Mass Transit Railway
(U.S. Dollar) 7.25 2005 6,265,000 6,235,304
Petronas
(U.S. Dollar) 7.75 2015 10,000,000 (g) 10,149,400
Republic of Italy
(U.S. Dollar) 6.875 2023 13,000,000 11,700,000
Republic of Poland
(U.S. Dollar) 7.75 2000 5,000,000 (g) 5,106,250
State of Israel
(U.S. Dollar) 6.375 2005 7,300,000 6,971,719
__________________
Total 123,516,419
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $1,244,622,423) $ 1,277,188,762
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (10.2%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agency (0.3%)
Federal Home Loan Mtge Corp
Disc Nt
05-03-96 5.23% $10,000,000 $ 9,949,600
_____________________________________________________________________________________________________________________________
Certificate of deposit (0.2%)
Harris Trust
04-03-96 5.22 7,500,000 7,499,999
_____________________________________________________________________________________________________________________________
Commercial paper (9.7%)
Alabama Power
05-21-96 5.12 5,700,000 5,654,046
05-30-96 5.16 6,520,000 6,457,680
06-11-96 5.14 6,000,000 5,931,550
American General
05-02-96 5.20 6,000,000 (j) 5,971,620
Ameritech Capital
06-07-96 5.17 5,000,000 (j) 4,946,042
Associates North America
05-06-96 5.18 8,500,000 8,452,975
06-04-96 5.35 4,500,000 4,455,612
AT&T Capital
05-10-96 5.10 5,000,000 4,968,554
Beneficial
05-01-96 5.38 5,000,000 4,976,222
CAFCO
04-16-96 5.19 5,000,000 (j) 4,986,676
04-24-96 5.21 7,200,000 7,174,150
06-27-96 5.32 8,300,000 (j) 8,185,460
07-01-96 5.32 3,700,000 (j) 3,646,671
Cargill
06-19-96 5.10 6,500,000 (j) 6,417,829
PAGE
06-26-96 5.33 10,700,000 10,553,187
Chevron
04-12-96 5.25 10,500,000 (j) 10,480,170
Ciesco
05-30-96 5.34 6,500,000 6,437,871
06-10-96 5.14 7,700,000 7,613,343
06-21-96 5.31 8,957,000 (j) 8,841,007
CIT Group
04-17-96 5.26 8,100,000 8,078,818
05-24-96 5.37 7,800,000 7,736,484
Clorox
05-20-96 5.31 4,500,000 4,465,844
Coca-Cola
04-26-96 5.27 5,175,000 5,153,500
Colgate-Palmolive
06-26-96 5.34 7,100,000 (j) 7,002,582
Commercial Credit
04-09-96 5.23 7,500,000 7,489,167
Commerzbank U.S. Finance
06-12-96 5.30 9,600,000 9,489,000
Consolidated Rail
05-10-96 5.19 5,300,000 (j) 5,266,667
CPC Intl
05-22-96 5.15 6,000,000 (j) 5,923,225
Dresdner
05-22-96 5.23 10,600,000 10,513,056
Fleet Funding
05-10-96 5.32 5,000,000 (j) 4,969,933
Gannett
04-16-96 5.27 8,800,000 (j) 8,778,183
04-17-96 5.31 6,000,000 (j) 5,982,417
04-22-96 5.28 6,000,000 (j) 5,979,875
General Electric Capital
05-01-96 5.39 10,000,000 9,952,267
Kredietbank North American Finance
04-15-96 5.32 9,100,000 9,078,564
09-03-96 5.16 5,000,000 4,880,403
Lincoln Natl
04-25-96 5.32 6,000,000 (j) 5,977,033
Morgan Stanley Group
04-18-96 5.24 4,000,000 3,989,001
Natl Australia Funding
04-08-96 5.43 6,400,000 6,390,216
NationsBank
05-21-96 5.12 9,100,000 9,096,950
Norfolk Southern
04-29-96 5.20 900,000 (j) 895,636
PACCAR Financial
05-29-96 5.12 5,000,000 4,952,979
Penny (JC)
05-17-96 5.27 4,000,000 3,969,420
PepsiCo
04-02-96 5.20 8,700,000 8,696,244
05-03-96 5.37 6,000,000 (j) 5,969,683
Proctor & Gamble
05-22-96 5.10 2,300,000 2,280,804
Reed Elsevier
04-04-96 5.22 8,500,000 (j) 8,493,861
Southwestern Bell Capital
05-08-96 5.26 4,000,000 (j) 3,975,998
PAGE
Siemens
05-15-96 5.27 4,200,000 4,169,743
05-29-96 5.33 6,900,000 6,835,111
05-30-96 5.32 7,200,000 7,131,180
Southern California Gas
04-26-96 5.35 6,115,000 (j) 6,089,493
06-25-96 5.34 2,418,000 (j) 2,386,792
Toyota Motor Credit
04-23-96 5.33 2,200,000 2,192,212
Transamerica Financial
05-09-96 5.20 6,600,000 6,559,377
05-17-96 5.20 7,500,000 7,443,745
05-29-96 5.30 6,800,000 6,736,052
Unilever Capital
04-19-96 5.23 6,500,000 (j) 6,481,222
USAA Capital
04-30-96 5.30 9,000,000 8,959,157
05-20-96 5.29 5,900,000 5,852,846
--------------
Total 382,415,405
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $400,030,779) $ 399,865,004
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $3,625,576,241)(l) $3,980,833,233
_____________________________________________________________________________________________________________________________
<PAGE>
________________________________________________________________________________________________________________
PAGE
Notes to investments in securities
________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Security is partially or fully on loan. See Note 5 to the financial statements.
(d) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on
the date of acquisition.
(e) Inverse floaters represent securities which pay interest at a rate that increases (decreases) in the
same magnitude as, or in a multiple of, a decline (increase) in the LIBOR (London InterBank Offering Rate) Index.
Interest rate disclosed is the rate in effect on March 31, 1996.
(f) This security is a collateralized mortgage obligation that pays no interest or principal during its initial
accrual period until payment of previous series within the trust have been paid off. Interest is accrued at an
effective yield; similar to a zero coupon bond.
(g) Represents a security sold under Rule 144A which is exempt from registration under the Securities
Act of 1933, as amended. This security has been determined to be liquid under guidelines established
by the board.
(h) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated
in the currency indicated.
(i) Identifies issues considered to be illiquid (see Note 6 to the financial statements). Information
concerning such security holdings at March 31, 1996, is as follows:
Acquisition
Security date Cost
__________________________________________________________________________________
American United Life 02-13-96 $4,000,000
Virgina American Water 07-13-5613-56 240,000
Western Resource 09-08-50 1,000,000
(j) Commercial paper sold within terms of a private placement memorandum, exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, and
may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(k) Interest rate varies to reflect current market conditions, rate shown is the
effective rate on March 31, 1996.
(l) At March 31, 1996, the cost of securities for federal income tax purposes was
approximately $3,621,827,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $417,154,000
Unrealized depreciation (58,148,000)
__________________________________________________________________________________
Net unrealized appreciation $359,006,000
__________________________________________________________________________________
</TABLE>
PAGE
Board members and officers
Board members and officers of the Fund
_____________________________________________________________________
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
_____________________________________________________________________
Independent board members
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for
Public Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs,
The Readers's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board and chief executive officer, The Valspar Corporation.
_____________________________________________________________________
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
_____________________________________________________________________
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice President of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
___________________________________________________________________
Other officer
Leslie L. Ogg
Vice president general Counsel and secretary of all funds in
the IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.<PAGE>
PAGE
IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. 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
Income investments
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 Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
(icon of) globe
IDS Extra Income Fund
Invests mainly in 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<PAGE>
PAGE
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 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 primarily in 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 investments
These funds provide tax-free income by investing in municipal bonds.
The income is generally free from federal income tax. Risk varies
by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in 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<PAGE>
PAGE
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 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
Growth and income investments
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. Moderate risk.
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 Managed Retirement Fund
Invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market
instruments. The fund provides diversification among these
major investments categories and has a target mix that
represents the way the fund's investments will be allocated
over the long term.
(icon of) bird in a nest
<PAGE>
PAGE
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of
capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Stock Fund
Invests in common stocks 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 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 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<PAGE>
PAGE
Growth investments
Funds in this group seek capital growth, primarily from common stocks.
They are high risk mutual funds with a potential for high reward.
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 Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) flower
IDS Global Growth Fund
Invests in 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 New Dimensions Fund
Invests primarily in 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
<PAGE>
PAGE
Specialty growth investment
This fund aggressively seeks capital growth as a hedge against inflation.
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. This is the most aggressive and most speculative
IDS mutual fund.
(icon of) cart of precious gems
For more complete information about any of these funds, including charges
and expenses, you can obtain a prospectus by contacting your financial
advisor or writing to American Express Shareholder Service, P.O. Box 534,
Minneapolis, MN 55440-0534. Read it carefully before you invest or send money.
<PAGE>
PAGE
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota:
800-437-3133
Mpls./St. Paul area:
671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchTone phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota:
800-272-4445
Mpls./St. Paul area:
671-1630
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Mutual
IDS Tower 10
Minneapolis, MN 55440-0010
IDS
Diversified
Equity
Income
Fund
1996 semiannual report
(Picture of icon: two puzzle pieces)
The primary goal of IDS Diversified Equity Income Fund is to provide a
high level of income. Its secondary goal is to provide capital growth.
The Fund invests mainly in dividend paying stocks.
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(Picture of icon: two puzzle pieces)
Dual-purpose stocks
Some of the most successful investments over the years have been stocks
that reward investors in two ways--through growth in the value of the
share price as well as through payment of regular dividend income.
Diversified Equity Income sets its sights on stocks that can provide
this double-barreled benefit. The Fund takes advantage of opportunities
across various industries, among different types of securities and in
markets throughout the world to find investments that meet its
combination growth-and-dividend requirements.
Contents
From the president 3
From the portfolio manager 3
Ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 23
Board members and officers 28
IDS mutual funds 29
<PAGE>
To our shareholders
(Picture of: William R. Pearce)
William R. Pearce
President of the Fund
(Picture of: Keith Tufte)
Keith Tufte
Portfolio manager
From the president
If you're an experienced investor, you know that 1995 was an unusually
strong year for the U.S. financial markets. Perhaps just as important,
you also know that history shows that bull markets don't last forever.
Though they're often unpredictable, declines --whether they're brief
or long-lasting, moderate or substantial -- are always a possibility.
That fact reinforces the need for investors to review periodically
their long-term goals and assess 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 imporatnat if there's a
major change in your financial situation or in the financial markets.
William R. Pearce
From the portfolio manager
Shifts in portfolio structure and a generally stong stock market resulted
in an improved performance by IDS Diversified Equity Income Fund during
the first half of the fiscal year. For investors in the Fund's Class A
shares, that meant a double-digit total return for the period October
1995 through March 1996.
The stock market continued to move forward during the past six months,
as low inflation, low interest rates and often excellent corporate
profits provided the underpinnings for higher stock prices. But while
aggressive growth stocks led the market's advance through last summer,
more conservative, blue chip sotcks generally performed best over the fall
and winter. Because the focus of the Fund is on blue chips, particularly
the ones that generate substantial dividends, that trend worked to our
advantage.
Diversification proves beneficial
Our well-diversified portfolio also paid off, as we enjoyed gains from
a variety of stock sectors. For example, when concerns rose about the
possibility of the economy falling into recession, our "defensive"
holdings amoung telephone utilities and banks did well. Other times, when
it appeared that the economy was getting ready to take off, our stocks of
"cyclical" companies, such as chemicals and autos, provided a boost.
Also beneficial were there changes we made to the portfolio. First, we
lowered our exposure to real estate investment trusts (REITs), whose
relatively poor price performance had been a drag on Fund results.
Second, we reduced our holdings among foreign stocks and moved that
money into the U.S. market, which continued to outperform most
foreign markets. And third we cut back on our cash reserves and put
a greater percentage of assets to work in stocks, which proved to
be far more productive.
Conservative structure may be an advantage
As we enter the second half of the fiscal year, we've seen increasing
volatility in the stock market, as uncertainty about the strength of
the economy, corporate profits and the direction of long-term
interest rates has risen. Should this trend continue, we expect our
portfolio's broad diversification to again be an advantage as stock
sectors take turns advancing and declining. What's more, while it
has tempered our gains during strong market run-ups, the porfolio's
above-average yield should provide the Fund with a cushion during
potential market drops. Our current plans are to stick to the
structure we employed during the past six months: a
concentration on high-quality, high-yield holdings spread among
a wide range of industries and a modest amount of cash.
Keith Tufte
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
____________________________
March 31, 1996 $ 8.60
____________________________
Sept. 30, 1995 $ 7.89
____________________________
Increase $ .71
____________________________
Distributions
Oct. 1, 1995 - March 31, 1996
____________________________
From income $ 0.12
____________________________
From capital gains $ --
____________________________
Total distributions $ 0.12
____________________________
Total return* +10.5%**
____________________________
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
____________________________
March 31, 1996 $ 8.60
____________________________
Sept. 30, 1995 $ 7.89
____________________________
Increase $ 0.71
____________________________
Distributions
Oct. 1, 1995 - March 31, 1996
____________________________
From income $ 0.09
____________________________
From capital gains $ --
____________________________
Total distributions $ 0.09
____________________________
Total return* +10.1%**
____________________________
<PAGE>
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
____________________________
March 31, 1996 $ 8.60
____________________________
Sept. 30, 1995 $ 7.89
____________________________
Increase $ 0.71
____________________________
Distributions
Oct. 1, 1995 - March 31, 1996
____________________________
From income $ 0.13
____________________________
From capital gains $ --
____________________________
Total distributions $ 0.13
____________________________
Total return* +10.6%**
____________________________
*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>
PAGE
<TABLE>
<CAPTION>
The Fund's ten largest holdings
IDS Diversified Equity Income Fund, Inc.
The ten holdings here make up 13.55% of the Fund's total net assets.
____________________________________________________________________________________
Percent Value
(of Fund's net assets)(as of March 31, 1996)
____________________________________________________________________________________
<S> <C> <C>
First Union 1.52% $19,965,000
A bank-holding company based in Charlotte, North Carolina with a strategic market
position in NOrth Carolina, South Carolina and Florida.
Philip Morris 1.50 19,743,750
The largest cigarette company that has become the second largest packaged-food company
in the world as a result of the Kraft acquistion.
Intimate Brands 1.40 18,406,250
A leading specialty retailer of intimate apparel and personal care products, operating
primarily under its Victoria's Secret and Bath & Body Works brand names.
GTE 1.37 17,988,750
The corporation's two major business segments are telephone operations and
telecommunications products and services.
Crown Cork & Seal 1.35 17,760,000
4.59% Cv Preferred
NationsBank 1.34 17,627,500
A bank holding company with a strong presence in North Carolina, South Carolina, Texas,
Virginia, Florida and Georgia.
Service Corp 1.31 17,168,750
3.125% Cv Preferred
General Signal 1.28 16,856,250
A leading producer of capital goods for the process control, electrical and
telecommunications industries.
General Electric 1.24 16,353,750
A diversified company with interest in manufacturing, broadcasting (NBC), financial
services and technology.
American Home Products 1.24 16,256,250
This company is engaged in the discovery, development, manufacture, distribution and
sales of a diversified line of products in three business segments: health care
products, agricultural products and food products.
</TABLE>
PAGE
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Diversified Equity Income Fund
March 31, 1996
_____________________________________________________________________________________________________________
Assets
______________________________________________________________________________________________________________
(Unaudited)
<S> <C>
Investments in securities, at value (Note 1)
Investments in securities of unaffiliated issuers (identified cost $1,182,275,372) $1,326,135,389
Investments in securities of affiliated issuer (identified cost $13,588,577) 16,192,750
Dividends and accrued interest receivable 4,217,633
Receivable for investment securities sold 27,902,569
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 6) 531
U.S. government securities held as collateral (Note 5) 13,017,206
_____________________________________________________________________________________________________________
Total assets 1,387,466,078
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 603,802
Dividends payable to shareholders 686,700
Payable for investment securities purchased 34,597,211
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 6) 32,757
Payable upon return of securities loaned (Note 5) 36,797,406
Accrued investment management services fee 36,485
Accrued distribution fee 2,872
Accrued service fee 12,244
Accrued transfer agency fee 10,556
Accrued administrative services fee 2,562
Other accrued expenses 196,198
_____________________________________________________________________________________________________________
Total liabilities 72,978,793
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $1,314,487,285
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- $.01 par value (Note 1) $ 1,529,337
Additional paid-in capital 1,115,126,181
Undistributed net investment income 276,519
Accumulated net realized gain (Note 1) 51,123,237
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies (Note 6) 146,432,011
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $1,314,487,285
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $1,212,302,521
Class B $ 70,663,770
Class Y $ 31,520,994
Net asset value per share of outstanding capital stock: Class A shares 141,044,798 $ 8.60
Class B shares 8,221,600 $ 8.60
Class Y shares 3,667,275 $ 8.60
See accompanying notes to financial statements. <PAGE>
PAGE
Financial statements
Statement of operations
IDS Diversified Equity Income Fund
Six months ended March 31, 1996
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
(Unaudited)
Income:
Dividends (net of foreign taxes withheld of $108,052) $20,446,185
Dividends earned from affiliate 384,867
Interest 2,669,164
_____________________________________________________________________________________________________________
Total income 23,500,216
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 3,106,773
Distribution fee -- Class B 183,561
Transfer agency fee 939,111
Incremental transfer agency fee -- Class B 4,007
Service fee
Class A 987,568
Class B 42,776
Administrative services fee 219,845
Compensation of board members 19,589
Compensation of officers 8,336
Custodian fees 125,102
Postage 77,569
Registration fees 133,984
Reports to shareholders 52,027
Audit fees 11,250
Administrative 6,455
Other 10,845
_____________________________________________________________________________________________________________
Total expenses 5,928,798
Earnings credits on cash balances (Note 2) (10,801)
______________________________________________________________________________________________________________
Total net expenses 5,917,997
______________________________________________________________________________________________________________
Investment income -- net 17,582,219
_____________________________________________________________________________________________________________
Realized and unrealized gain -- net
_____________________________________________________________________________________________________________
Net realized gain on security and foreign currency transactions
(including gain of $253,255 from foreign currency transactions) (Note 3) 75,450,738
Net change in unrealized appreciation or depreciation of investments
and on translation of assets and liabilities in foreign currencies 29,334,826
_____________________________________________________________________________________________________________
Net gain on investments and foreign currency 104,785,564
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $122,367,783
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Diversified Equity Income Fund
_____________________________________________________________________________________________________________
Operations and distributions March 31, 1996 Sept. 30, 1995
_____________________________________________________________________________________________________________
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income -- net $ 17,582,219 $ 39,794,044
Net realized gain (loss) on investments and foreign currency 75,450,738 (24,830,621)
Net change in unrealized appreciation or depreciation of investments
and on translation of assets and liabilities in foreign currencies 29,334,826 106,070,195
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations 122,367,783 121,033,618
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (16,721,884) (37,225,409)
Class B (514,570) (181,960)
Class Y (436,634) (434,055)
Net realized gain
Class A -- (39,678,584)
Excess distributions of realized gain
Class A -- (523,553)
Class B -- (9,768)
Class Y -- (11,614)
_____________________________________________________________________________________________________________
Total distributions (17,673,088) (78,064,943)
_____________________________________________________________________________________________________________
Capital share transactions (Note 4)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 112,073,579 242,586,941
Class B shares 36,501,973 30,516,349
Class Y shares 6,186,942 29,279,592
Reinvestment of distributions at net asset value
Class A shares 16,589,923 76,213,964
Class B shares 513,857 187,686
Class Y shares 452,656 443,647
Payments for redemptions
Class A shares (106,216,817) (202,458,780)
Class B shares (Note 2) (2,154,622) (716,415)
Class Y shares (3,355,170) (5,962,282)
_____________________________________________________________________________________________________________
Increase in net assets from capital share transactions 60,592,321 170,090,702
_____________________________________________________________________________________________________________
Total increase in net assets 165,287,016 213,059,377
Net assets at beginning of period 1,149,200,269 936,140,892
_____________________________________________________________________________________________________________
Net assets at end of period
(including undistributed net investment income of
$276,519 and $367,388) $1,314,487,285 $1,149,200,269
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE
Notes to financial statements
IDS Diversified Equity Income Fund
(Unaudited as to March 31, 1996)
______________________________________________________________________________
1. Summary of significant accounting policies
The Fund is a series of IDS Investment Series, Inc. and registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. The Fund invests mainly in dividend-paying
stocks. IDS Investment Series, 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. Class A shares
are sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Class B shares automatically convert to
Class A after eight years. Class Y shares have no sales charge and are offered
only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation and other
rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price; securities for which market quotations
are not readily available, including illiquid securities, are valued at fair
value according to methods selected in good faith by the board. Determination
of fair value involves, among other things, reference to market indexes,
matrixes and data from independent brokers. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains, and facilitate buying
and selling of securities for investment purposes, the Fund may buy or write
options traded on any U.S. or foreign exchange or in the over-the-counter
market where the completion of the obligation is dependent upon the credit
standing of the other party. The Fund also may buy and sell put and call
options and write covered call options on portfolio securities and may write
cash-secured put options. The risk in writing a call option is that the Fund
gives up the opportunity of profit if the market price of the security
increases. The risk in writing a put option is that the Fund 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 Fund pays a premium whether or not the
option is exercised. The Fund also has the additional risk of not being able
to enter into a closing transaction if a liquid secondary market does not
exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of
premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market, the
Fund may buy and sell futures contracts traded on any U.S. or foreign
exchange. The Fund also may buy or write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility that there may be an illiquid market and that a change
in the value of the contract or option may not correlate with changes in the
value of the underlying securities.
Upon entering into a futures contract, the Fund 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 Fund 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 Fund recognizes a realized gain or loss when the contract is
closed or expires.
Foreign currency translations and
foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange.
Foreign currency amounts related to the purchase or sale of securities and
income and expenses are translated at the exchange rate on the transaction
date. The effect of changes in foreign exchange rates on realized and
unrealized security gains or losses is reflected as a component of such gains
or losses. In the statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign currency, closed
forward contracts, exchange gains or losses realized between the trade date
and settlement dates on securities transactions, and other translation gains
or losses on dividends, interest income and foreign withholding taxes.
The Fund 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 Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete the obligations of the contract.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders, no provision for income or excise taxes is
required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of the deferral of
losses on certain futures contracts, the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes and losses
deferred due to "wash sale" transactions. The character of distributions made
during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes. The
effect on dividend distributions of certain book-to-tax differences is
presented as "excess distributions" in the statement of changes in net assets.
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
Dividends from net investment income, declared daily and paid each calendar
quarter, are reinvested in additional shares of the Fund at net asset value or
payable in cash. Capital gains, when available, are distributed along with
the last income dividend of the calendar year.
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. Expenses and sales charges
Effective March 20, 1995 the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio, providing
administrative services and serving as transfer agent as follows: Under its
Investment Management Services Agreement, AEFC determines which securities
will be purchased, held or sold. The management fee is a percentage of the
Fund's average daily net assets in reducing percentages from 0.53% to 0.4%
annually.
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.04% to 0.02% annually.
<PAGE>
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder account
for this service as follows:
o Class A $15
o Class B $16
o Class Y $15
Also effective March 20, 1995, the Fund entered into agreements with American
Express Financial Advisors Inc. for distribution and shareholder servicing-
related services as follows: Under a Plan and Agreement of Distribution, the
Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average
daily net assets attributable to Class B shares for distribution-related
services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents. The
fee is calculated at a rate of 0.175% of the Fund's average daily net assets
attributable to Class A and Class B shares.
AEFC will assume and pay any expenses (except taxes and brokerage commissions)
that exceed the most restrictive applicable state expense limitation.
Sales charges received by American Express Financial Advisors Inc. for
distributing fund shares were $2,043,606 for Class A and $13,697 for Class B
for the six months ended March 31, 1996. The Fund also pays custodian fees to
American Express Trust Company, an affiliate of AEFC.
During the six months ended March 31, 1996, the Fund's custodian and transfer
agency fees were reduced by $10,801 as a result of earnings credits from
overnight-cash balances.
The Fund has a retirement plan for its independent board members. Upon
retirement, board members receive monthly payments equal to one-half of the
retainer fee for as many months as they served as board members up to 120
months. There are no death benefits. The plan is not funded but the Fund
recognizes the cost of payments during the time board members serve on the
board. The retirement plan expense amounted to $7,221 for the six months ended
March 31, 1996. The plan was terminated April 30, 1996. The total liability
for the plan $14,710, which will be paid at some future date.
______________________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $661,515,296 and $576,183,851, respectively, for the
six months ended March 31, 1996. Realized gains and losses are determined on
an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $89,118 for
the six months ended March 31, 1996.
<PAGE>
4. Capital share transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
<TABLE>
Six months ended March 31, 1996
Class A Class B Class Y
________________________________________________________________________
<S> <C> <C> <C>
Sold 13,649,202 4,496,925 709,375
Issued for reinvested 1,854,438 57,433 50,893
distributions
Redeemed (12,806,080) (339,890) (408,615)
________________________________________________________________________
Net increase 2,697,560 4,214,468 351,653
________________________________________________________________________
Year ended Sept. 30, 1995
Class A Class B* Class Y*
________________________________________________________________________
Sold 33,110,396 4,077,608 4,061,650
Issued for reinvested 10,713,866 24,242 57,935
distributions
Redeemed (27,645,516) (94,718) (803,963)
________________________________________________________________________
Net increase 16,178,746 4,007,132 3,315,622
________________________________________________________________________
*Inception date was March 20, 1995.
______________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
5. Lending of portfolio securities
At March 31, 1996, securities valued at $36,474,650 were on loan to brokers.
For collateral, the Fund received $23,780,200 in cash and U.S. government
securities valued at $13,017,206. Income from securities lending amounted to
$72,542 for the six months ended March 31, 1996. The risks to the Fund of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
<PAGE>
6. Foreign currency contracts
At March 31, 1996, the Fund had entered into five foreign currency exchange
contracts that obligate the Fund to deliver currencies at specified future
dates. The unrealized appreciation and/or depreciation on these contracts is
included in the accompanying financial statements. The terms of the open
contracts are as follows:
Exchange date Currency to be Currency to be Unrealized Unrealized
delivered received appreciation depreciation
______________________________________________________________________________________
<S> <C> <C> <C> <C>
April 1, 1996 13,576,155 1,755,772 $ 499 $ --
Hong Kong Dollar U.S. Dollar
April 2, 1996 2,401,323 310,501 32 --
Hong Kong Dollar U.S. Dollar
April 3, 1996 2,581,718 1,562,027 -- 473
Dutch Guilder U.S. Dollar
April 9, 1996 889,841 1,357,960 -- 249
British Pound U.S. Dollar
June 14, 1996 9,450,000 14,376,285 -- 32,035
British Pound U.S. Dollar
______ _______
$531 $32,757
______________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7. Financial highlights
The tables below show certain important financial
information for evaluating the Fund's results.
Fiscal period ended Sept. 30,
Per share income and capital changes*
Class A
1996*** 1995 1994 1993 1992 1991**
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $7.89 $7.66 $7.73 $6.48 $5.98 $5.00
beginning of period
Income from investment operations:
Net investment income .12 .30 .27 .28 .31 .30
Net gains .71 .53 .20 1.31 .58 .98
(both realized
and unrealized)
Total from investment .83 .83 .47 1.59 .89 1.28
operations
Less distributions:
Dividends from net (.12) (.29) (.27) (.28) (.30) (.30)
investment income
Distributions from -- (.31) (.27) (.06) (.09) --
realized gains
Total distributions (.12) (.60) (.54) (.34) (.39) (.30)
Net asset value, $8.60 $7.89 $7.66 $7.73 $6.48 $5.98
end of period
Ratios/supplemental data
Class A
1996*** 1995 1994 1993 1992 1991**
Net assets, end of period $1,212 $1,091 $936 $487 $162 $23
(in millions)
Ratio of expenses to .94%+ .94% .88% .96% 1.08%++ .90%++
average daily net assets
Ratio of net income 2.91%+ 3.95% 3.75% 3.94% 4.79%++ 5.97%++
to average daily net assets
Portfolio turnover rate 49% 98% 95% 73% 34% 74%
(excluding short-term
securities)
Total return+++ 10.5% 11.8% 6.3% 25.0% 15.4% 25.9%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date. Period from Oct. 15, 1990 to Sept. 30, 1991.
***Six months ended March 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++During the periods ended Sept. 30, 1991 and 1992, AEFC reimbursed the Fund
for expenses in excess of 0.9% of its average daily net assets, on an annual
basis. Had AEFC not done so, the ratios of expenses and net investment income
would have been 1.34% and 5.53% for 1991 and 1.13% and 4.74% for 1992.
+++Total return does not reflect payment of a sales charge.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
Fiscal period ended Sept. 30,
Per share income and capital changes*
Class B Class Y
1996*** 1995** 1996*** 1995**
<S> <C> <C> <C> <C>
Net asset value, $7.89 $7.13 $7.89 $7.13
beginning of period
Income from investment operations:
Net investment income .08 .19 .13 .22
Net gains .72 .74 .71 .74
(both realized
and unrealized)
Total from investment .80 .93 .84 .96
operations
Less distributions:
Dividends from net (.09) (.17) (.13) (.20)
investment income
Net asset value, $8.60 $7.89 $8.60 $7.89
end of period
Ratios/supplemental data
Class B Class Y
1996*** 1995** 1996*** 1995**
Net assets, end of period $71 $32 $32 $26
(in millions)
Ratio of expenses to 1.71%+ 1.77%+ .77%+ .80%+
average daily net assets
Ratio of net income 2.19%+ 3.00%+ 3.09%+ 3.95%+
to average daily net assets
Portfolio turnover rate 49% 98% 49% 98%
(excluding short-term
securities)
Total return++ 10.1% 13.1% 10.6% 13.6%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
***Six months ended March 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
</TABLE>
PAGE
<TABLE>
<CAPTION>
Investments in securities
IDS Diversified Equity Income Fund (Percentages represent value of
March 31, 1996 (Unaudited) investments compared to net assets)
Investments in securities of unaffiliated issuers
_____________________________________________________________________________________________________________________________
Common stocks (73.8%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Aerospace & defense (1.7%)
Rockwell Intl 180,000 $ 10,597,500
United Technologies 100,000 11,225,000
______________
Total 21,822,500
_____________________________________________________________________________________________________________________________
Automotive & related (2.8%)
Chrysler 220,000 13,695,000
Ford Motor 360,000 12,375,000
Genuine Parts 240,000 10,800,000
______________
Total 36,870,000
_____________________________________________________________________________________________________________________________
Banks and savings & loans (6.4%)
Banc One 280,000 9,975,000
First Chicago 350,000 14,525,000
First Union 330,000 19,965,000
KeyCorp 169,600 6,550,800
Morgan (JP) 180,000 14,940,000
NationsBank 220,000 17,627,500
______________
Total 83,583,300
_____________________________________________________________________________________________________________________________
Beverages & tobacco (3.8%)
Anheuser-Busch 215,000 14,485,625
Philip Morris 225,000 19,743,750
UST 480,000 15,300,000
______________
Total 49,529,375
______________________________________________________________________________________________________________________________
Building materials (1.2%)
Weyerhaeuser 340,000 15,682,500
______________________________________________________________________________________________________________________________
Chemicals (3.1%)
Dow Chemical 155,000 13,465,625
duPont (EI) deNemours 155,000 12,865,000
Nalco Chemical 470,000 14,452,500
______________
Total 40,783,125
_____________________________________________________________________________________________________________________________
Computers & office equipment (1.0%)
Pitney Bowes 270,000 13,230,000
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
Electronics (2.1%)
AMP 50,000 2,068,750
Harris 170,000 10,518,750
Thomas & Betts 200,000 15,000,000
______________
Total 27,587,500
_____________________________________________________________________________________________________________________________
Energy (3.6%)
Amoco 165,000 11,921,250
Chevron 200,000 11,225,000
Exxon 145,000 11,835,625
Mobil 105,000 12,166,875
______________
Total 47,148,750
_____________________________________________________________________________________________________________________________
Food (0.8%)
ConAgra 14,750 599,219
General Mills 175,000 10,215,625
______________
Total 10,814,844
______________________________________________________________________________________________________________________________
Health care (4.7%)
American Home Products 150,000 16,256,250
Bristol-Myers Squibb 135,000 11,559,375
Lilly (Eli) 140,000 9,100,000
Pharmacia & Upjohn 285,000 11,364,375
Warner Lambert 130,000 13,422,500
______________
Total 61,702,500
_____________________________________________________________________________________________________________________________
Health care services (0.8%)
LTC Properties 215,000 3,493,750
US Healthcare 160,000 7,340,000
______________
Total 10,833,750
_____________________________________________________________________________________________________________________________
Household products (2.1%)
Avon Products 165,000 14,148,750
Clorox 165,000 14,210,625
______________
Total 28,359,375
_____________________________________________________________________________________________________________________________
Industrial machines & services (1.3%)
General Signal 465,000 16,856,250
_____________________________________________________________________________________________________________________________
Industrial transportation (0.9%)
Union Pacific 170,000 11,666,250
_____________________________________________________________________________________________________________________________
Insurance (3.2%)
Amer General 280,000 9,660,000
Lincoln Natl 220,000 11,165,000
Marsh & McLennan 115,000 10,680,625
SAFECO 320,000 10,720,000
______________
Total 42,225,625
_____________________________________________________________________________________________________________________________
Media (0.9%)
McGraw-Hill 140,000 12,145,000
_____________________________________________________________________________________________________________________________
Metals (0.8%)
ALCOA 165,000 10,333,125
Multi-industry conglomerates (3.1%)
Emerson Electric 150,900 12,185,175
General Electric 210,000 16,353,750
Minnesota Mining & Mfg 185,000 12,001,875
______________
Total 40,540,800
_____________________________________________________________________________________________________________________________
Paper & packaging (1.7%)
Intl Paper 225,000 8,859,375
Union Camp 270,000 13,398,750
______________
Total 22,258,125
_____________________________________________________________________________________________________________________________
Real estate (5.4%)
Beacon Office Property 130,000 3,428,750
Cali Realty 150,000 3,356,250
Duke Realty 125,000 3,765,625
Felcor Hotel 200,000 6,200,000
Gable Residential Trust 165,000 3,960,000
Manufactured Home Communities 145,000 2,573,750
Mid-America Apart Communities 212,000 5,459,000
Oasis 170,000 3,995,000
OMEGA Healthcare Investors 180,000 5,152,500
Public Storage 175,000 3,565,625
Reckson Associates Realty 80,000 2,450,000
RFS Hotel Investors 530,000 9,208,750
South West Property Trust 280,000 3,745,000
Storage Trust Realty 175,000 3,893,750
Storage USA 115,000 3,953,125
Sun Communities 125,000 3,406,250
Wellsford 155,000 3,390,625
______________
Total 71,504,000
_______________________________________________________________________________________________________________________________
Retail (3.5%)
Intimate Brands 950,000 18,406,250
May Dept Stores 320,000 15,440,000
Penney (JC) 245,000 12,188,750
______________
Total 46,035,000
_______________________________________________________________________________________________________________________________
Utilities-electric (4.1%)
Duke Power 205,000 10,352,500
FPL Group 225,000 10,181,250
Northern States Power 240,000 11,700,000
Public Service of Colorado 320,000 11,280,000
Southern Co 435,000 10,385,625
______________
Total 53,899,375
_____________________________________________________________________________________________________________________________
Utilities-gas (1.3%)
Enron 319,000 8,214,250
Enron Global Power 50,000 1,843,750
Tenneco 125,000 6,984,375
______________
Total 17,042,375
_____________________________________________________________________________________________________________________________
Utilities-telephone (3.6%)
BellSouth 390,000 14,430,000
GTE 410,000 17,988,750
SBC Communications 290,000 15,261,250
______________
Total 47,680,000
_____________________________________________________________________________________________________________________________
Foreign (9.9%)(d)
British Petroleum ADR 95,000 10,093,750
Grand Met 1,100,000 7,085,100
Hanson Inds ADR 575,000 (c) 8,625,000
HSBC Holdings 520,000 7,798,440
Konink PTT Nederland 255,000 (b) 10,031,445
Repsol (SA) ADR 275,000 10,278,125
Royal Dutch Petroleum 100,000 (c) 14,125,000
SmithKline Beecham 255,000 (c) 13,132,500
South China Morning Post 11,500,000 7,498,000
Tele Danmark ADR 390,000 (c) 10,091,250
Tomkins 2,620,000 10,115,820
Total 310,000 10,540,000
Unilever NV 75,000 10,181,250
______________
Total 129,595,680
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $836,068,171) $ 969,729,124
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Preferred stocks & other (14.5%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
AirTouch Communications
4% Cv 450,000 13,556,250
Arrow Electronics
5.50% Cv 330,000 15,249,300
ATL Richfield
$9 Cv 220,000 (f) 6,325,000
Browning Ferris
7.25% Cv 405,000 13,567,500
Circuit City Stores
5.50% 357,143 (e) 10,433,040
COINTEL
7% 100,000 (g) 5,325,000
ConAgra
4.50% Cv 325,000 13,284,375
Corning Delaware
6% 195,000 10,603,125
Crown Cork & Seal
4.50% Cv 370,000 (c) 17,760,000
Duracell Intl
3% Cv 135,000 6,665,625
Gannett
4.50% Cv 200,000 13,425,000
James River
9% 290,000 7,177,500
Merck
4.50% Cv 210,000 13,203,750
MFS Communication
2.68% Cv 125,000 6,890,625
Service Corp
3.125% Cv 205,000 17,168,750
Sonoco Products
$2.25 Cv 170,000 10,030,000
Vishay Intertechnology
6% Cv 355,000 10,206,250
_____________________________________________________________________________________________________________________________
Total preferred stocks & other
(Cost: $182,020,233) $ 190,871,090
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Bonds (5.6%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
Mortgage-backed security (1.9%)
<S> <C> <C> <C>
Federal Natl Mtge Assn 7.00% 2025 $25,000,000 $ 24,359,500
Collateralized Mtge Obligation 9.25 2016 16,752 16,911
______________
Total 24,376,411
_____________________________________________________________________________________________________________________________
Industrial (3.7%)
Chemicals (0.8%)
US Filter
Cv 6.00 2005 8,500,000 (e) 10,359,375
_____________________________________________________________________________________________________________________________
Computers & office equip (0.6%)
Softkey Intl
Cv 5.50 2000 9,500,000 (e) 7,742,500
_____________________________________________________________________________________________________________________________
Electronics (1.0%)
AMP
Cv 4.50 1998 32,500,000 (h) 13,549,250
_____________________________________________________________________________________________________________________________
Health care services (0.6%)
Tenet Healthcare
Sr Nts 8.625 2003 7,000,000 7,210,000
______________________________________________________________________________________________________________________________
Media (0.5%)
Viacom
Sub Deb 8.00 2006 7,000,000 6,702,500
______________________________________________________________________________________________________________________________
Utilities-telephone (0.2%)
Rogers Cantel Mobile 10.75 2001 3,000,000 (d) 3,142,500
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $72,184,933) $ 73,082,536
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Options purchased (0.3%)
_____________________________________________________________________________________________________________________________
Issuer Number Exercise Expiration Value(a)
of contracts price date
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Put
S&P 500 3,000 $625 June 1996 $ 4,312,500
_____________________________________________________________________________________________________________________________
Total options purchased
(Cost: $3,859,625) $ 4,312,500
_____________________________________________________________________________________________________________________________
/TABLE
<PAGE>
Short-term securities (6.7%)
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
U.S. government agencies (0.6%)
<S> <C> <C>
Federal Home Loan Mtge Corp
Disc Nt
04-15-96 5.28% $2,400,000 $ 2,394,379
Federal Natl Mgte Assn Disc Nts
04-16-96 5.20 3,200,000 3,192,172
04-16-96 5.31 2,100,000 2,094,744
______________
Total 7,681,295
_____________________________________________________________________________________________________________________________
Commercial paper (6.1%)
Albertson's
05-09-96 5.38 7,800,000 7,753,633
Aon
05-13-96 5.29 1,200,000 1,191,963
Associates Corp North America
04-26-96 5.37 4,500,000 4,481,944
Commerzbank US Finance
05-01-96 5.37 4,500,000 4,478,600
Fleet Funding
04-04-96 5.24 3,600,000 (i) 3,597,395
Merrill Lynch
04-08-96 5.25 1,900,000 1,897,516
Nestle
04-04-96 5.22 2,700,000 2,698,050
PepsiCo
05-03-96 5.37 2,000,000 (i) 1,989,894
05-10-96 5.38 6,400,000 6,361,004
SAFECO
04-24-96 5.39 5,500,000 5,479,490
04-25-96 5.37 8,500,000 8,467,157
Sandoz
04-24-96 5.37 4,500,000 (i) 4,483,281
04-29-96 5.37 3,300,000 3,285,287
05-02-96 5.39 3,300,000 3,283,756
Siemens
05-29-96 5.33 3,200,000 3,169,907
Toyota
04-02-96 5.22 700,000 699,697
05-15-96 5.35 8,100,000 8,044,938
USL Capital
04-02-96 5.21 4,100,000 4,098,227
04-03-96 5.24 5,000,000 4,997,105
______________
Total 80,458,844
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $88,142,410) $ 88,140,139
_____________________________________________________________________________________________________________________________
Total investments in securities of unaffiliated issuers
(Cost: $1,182,275,372) $1,326,135,389
_____________________________________________________________________________________________________________________________
Investments in securities of affiliated issuer (j)
_____________________________________________________________________________________________________________________________
Preferred stock (1.2%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Alco Standard
6.50% Cv 170,450 16,192,750
_____________________________________________________________________________________________________________________________
Total investments in securities of affiliated issuer
(Cost: $13,588,577) 16,192,750
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,195,863,949)(k) $1,342,328,139
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Security is partially or fully on loan. See Note 5 to the financial statements.
(d) Foreign security values and principal amounts are stated in U.S. dollars.
(e) Represents a security sold under Rule 144A, which is exempt from registration under
the Securities Act of 1933, as amended. This security has been determined to be liquid
under guidelines established by the board.
(f) ACES are automatically convertible equity securities.
(g) PRIDES -- Preferred Redeemed Increased Dividend Equity Securities are structured
as convertible preferred securities issued by a company. Investors receive an enhanced
yield but based upon a specific formula, potential appreciation is limited. PRIDES pay
dividends, have voting rights, are noncallable for three years and upon maturity, convert
into shares of common stock.
(h) ELKS are equity-linked securities that are structured as an interest-bearing debt
security of a brokerage firm and linked to the common stock of another company. The
terms of ELKS differ from those of ordinary debt securities in that the principal amount
received at maturity is not fixed but is based on the price of the common stock the ELK is
linked to. The principal amount disclosed equals the current estimated future value of
the amount to be received upon maturity.
(i) Commercial paper sold within terms of a private placement memorandum, exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, and may be
sold only to dealers in that program or other "accredited investors." This security has
been determined to be liquid under guidelines established by the board.
(j) Investment representing 5% or more of the outstanding voting securities of the issuer.
(k) At March 31, 1996, the cost of securities for federal income tax purposes was approximately $1,195,844,000
and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $159,312,000
Unrealized depreciation (12,828,000)
___________________________________________________________________________________________
Net unrealized appreciation $146,484,000
___________________________________________________________________________________________
</TABLE>
PAGE
Board members and officers
Board members and officers of the Fund
_____________________________________________________________________
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
_____________________________________________________________________
Independent board members
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for
Public Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs,
The Readers's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board and chief executive officer, The Valspar Corporation.
_____________________________________________________________________
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
_____________________________________________________________________
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice President of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
___________________________________________________________________
Other officer
Leslie L. Ogg
Vice president general Counsel and secretary of all funds in
the IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.<PAGE>
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IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. 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.
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Income investments
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 Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
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IDS Extra Income Fund
Invests mainly in 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 high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term
investments. Seeks current income and preservation of capital.
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IDS Federal Income Fund
Invests primarily in 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.
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Tax-exempt income investments
These funds provide tax-free income by investing in municipal bonds.
The income is generally free from federal income tax. Risk varies
by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in medium- and lower-quality municipal bonds and
notes. Lower-quality securities generally involve greater risk of
principal and income.
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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.)
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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.
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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.
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Growth and income investments
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. Moderate risk.
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.
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IDS Managed Retirement Fund
Invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market
instruments. The fund provides diversification among these
major investments categories and has a target mix that
represents the way the fund's investments will be allocated
over the long term.
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IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities 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.
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IDS Stock Fund
Invests in common stocks of companies representing many
sectors of the economy. Seeks current income and growth of capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
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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.
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IDS Diversified Equity Income Fund
Invests 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 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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Growth investments
Funds in this group seek capital growth, primarily from common stocks.
They are high risk mutual funds with a potential for high reward.
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 Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
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IDS Growth Fund
Invests primarily in 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 Global Growth Fund
Invests in 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 New Dimensions Fund
Invests primarily in companies with significant growth
potential due to superiority in technology, marketing or management.
The fund frequently changes its industry mix.
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The fund holds
stocks for the long term with the goal of capital growth.
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Specialty growth investment
This fund aggressively seeks capital growth as a hedge against inflation.
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. This is the most aggressive and most speculative
IDS mutual fund.
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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.
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Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota:
800-437-3133
Mpls./St. Paul area:
671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchTone phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota:
800-272-4445
Mpls./St. Paul area:
671-1630
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Diversified Equity Income Fund
IDS Tower 10
Minneapolis, MN 55440-0010
