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1997 ANNUAL REPORT
IDS
Stock
Fund
(prospectus enclosed)
(icon of) building with columns
The goals of IDS Stock Fund, Inc. are current income and growth of capital.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment policies, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
AMERICAN
EXPRESS
Financial
Advisors
Distributed by American Express Financial Advisors Inc.
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(icon of) building with columns
Big names,
big business
These are the names you know. They are the movers and shakers of today's
business world. Whether representing established U.S. firms or companies that
have made theirmark over-seas, the securities found in Stock Fund make up a
veritable who's who in the financial market. These stocks offer a dual benefit
of ongoing growth potential along with a steady stream of dividend income. And
as we move toward a more global economy, these blue chip, multi-national
companies are well-positioned to prosper in the 21st century.
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Contents
The purpose of this annual report is to tell investors how the Fund performed.
(icon of) one open book inside of another
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1997 annual report
From the chairman 4
From the portfolio manager 4
The Portfolio's ten largest holdings 6
Making the most of the Fund 7
The Fund'slong-term performance 8
Independent auditors' report (Fund) 9
Financialstatements (Fund) 10
Notes to financial statements (Fund) 13
Independent auditors' report (Portfolio) 19
Financial statements (Portfolio) 20
Notes to financial statements (Portfolio) 23
Investments in securities 29
IDS mutual funds 34
Federal income tax information 38
1997 prospectus
The Fund in brief 3p
Goals 3p
Investment policies and risks 3p
Structure of the Fund 4p
Manager anddistributor 4p
Portfolio manager 4p
Alternative purchase arrangements 4p
Sales charge and Fund expenses 5p
Performance 7p
Financial highlights 7p
Total returns 9p
Investment policies and risks 12P
Facts about investments and their risks 12p
Valuing Fund shares 16p
How to purchase, exchange or redeem shares 17p
Alternative purchase arrangements 17p
How to purchase shares 19p
How to exchange shares 22p
How to redeem shares 23p
Reductions and waivers of the sales charge 28p
Special shareholder services 33p
Services 33p
Quick telephone reference 33p
Distributions and taxes 34p
Dividend and capital gain distributions 34p
Reinvestments 35p
Taxes 36p
How to determine the correct TIN 38p
How the Fund and Portfolio are organized 39p
Shares 39p
Voting rights 39p
Shareholder meetings 39p
SpeciaL considerations regarding
master/feeder structure 40p
Board members and officers 41p
Investment manager 43p
Administrator and transfer agent 44p
Distributor 44p
About American Express Financial Corporation 46p
General information 46p
Appendix 47p
Descriptions of derivative instruments 47p
(This annual report is not part of the prospectus.)
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To our shareholders
(picture of) William R. Pearce, Chairman of the board
(picture of) Richard H. Warden, Portfolio Manager
From the chairman
If you're an experienced investor, you know that the past few years have been
unusually strong ones in many financial markets. Perhaps just as important,
history shows that bull markets don't last forever. Though they're often
unpredictable, declines -- whether they're brief or long-lasting, moderate or
substantial -- are always a possibility. We saw evidence of that in late
October, when declines in certain Asian markets spawned a sharp drop in the U.S.
stock market.
That fact reinforces the need for investors to review periodically their
long-term goals and examine whether their investment program remains on track to
achieving them. Your quarterly investment statements are one part of that
monitoring process. The other is a meeting with your American Express financial
advisor. That becomes even more important if there's a major change in your
financial situation or in the financial markets.
William R. Pearce
From the portfolio manager
A soaring stock market helped propel IDS Stock Fund to a highly rewarding fiscal
year, which ran from October 1996 through September 1997. For investors in the
Fund's Class A shares, the total return was 30.2%. (This figure includes a
substantial capital gain that was paid to shareholders last December and reduced
the Fund's net asset value by the same amount at that time.)
For most of the 12 months, stocks enjoyed a virtually ideal environment,
highlighted by low inflation, healthy corporate earnings, solid economic growth
and generally low long-term interest rates. In fact, the market experienced only
two setbacks worth noting - one last spring and another this past August, both
caused by a temporary run-up in interest rates.
Bigger is better
The strength of the market was largely confined to big, blue-chip companies with
robust earnings -- a condition that fits relatively well with this Fund's
(This annual report is not part of the prospetus.)
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investment focus. More specifically, the Fund's holdings in the financial
services (especially banks and insurance stocks), health care and technology/
telecommunications were the biggest contributors to its success, while
investments in aerospace and chemicals were comparatively weak. Interestingly,
as strong as the U.S. market was, the Fund's investments in foreign stocks (up
to 20% of portfolio assets at times) actually outperformed the domestic
holdings.
As for changes to the investment mix, as the period progressed, I shifted more
assets into relatively defensive stocks such as those in the food/beverage and
household-product sectors, as well as utilities, which provided above-average
yields. In addition, I cut back on investments in technology-related stocks,
many of which had been strong performers but also had reached what I believed
were vulnerable price levels. This conservative strategy worked well during the
stock market's weak periods, which, as it turned out, were few.
While I don't see any immediate obstacles for the stock market at this point
(mid-October), I won't be surprised if stocks undergo a correction, or moderate
downturn, before too long. Should that happen, I would view it as a healthy
development for the market, allowing it to gather itself for another sustained
advance. Given that outlook, I continue to emphasize common stocks of blue-chip
companies in comparatively stable economic sectors, augmented by high-yielding,
convertible preferred stocks and convertible bonds.
Richard H. Warden
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1997 $27.44
Sept. 30, 1996 $22.49
Increase $ 4.95
Distributions
Oct. 1, 1996 - Sept. 30, 1997
From income $ 0.76
From capital gains $ 0.79
Total distributions $ 1.55
Total return* +30.2%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1997 $27.32
Sept. 30, 1996 $22.42
Increase $ 4.90
Distributions
Oct. 1, 1996 - Sept. 30, 1997
From income $ 0.58
From capital gains $ 0.79
Total distributions $ 1.37
Total return* +29.2%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1997 $27.44
Sept. 30, 1996 $22.49
Increase $ 4.95
Distributions
Oct. 1, 1996 - Sept. 30, 1997
From income $ 0.79
From capital gains $ 0.79
Total distributions $ 1.58
Total return* +30.4%**
*The prospectus discusses the effect of sales charges, if any, on the
various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
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The Portfolio's ten largest holdings
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The ten holdings listed here make up 15.62% of the Portfolio's net asset
Percent Value
(of Portfolio's net assets) (as of Sept. 30, 1997)
General Electric 1.80% $74,868,750
Compaq Computer 1.80 74,750,000
EXEL 1.79 74,453,125
Royal Dutch Petroleum 1.73 72,150,000
Colgate-Palmolive 1.67 69,687,500
Pfize 1.44 60,062,500
Railtrack Group 1.39 57,838,316
Guidant 1.35 56,000,000
Rite Aid 1.33 55,437,500
UNUM 1.32 55,087,500
$2.34 Cv Preferred
(This annual report is not part of the prospectus.)
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Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular basis,
even when the price of your shares falls or the market declines. Investing in
this manner can be an effective way to accumulate shares to meet your long-term
goals.
How dollar cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnote to table) By investing an equal number of dollars each month....
(arrow in table pointing to April) you automatically buy more shares when the
per share market price is low....
(arrow pointing to Sept) and fewer shares when the per share market price
is high.
You have paid an average price of only $17.91 per share over the 10 months,
while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
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The Fund's long-term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's
investments do well
o you receive capital gains when the gains on
investments sold by the Fund exceed losses
o you receive income when the Fund's stock dividends, interest and short-term
gains exceed its expenses.
All three make up your total return. And you potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another fund.
How $10,000 has grown in IDS Stock Fund
$32,532
Stock Fund
Class A
$30,000
S&P 500
Stock Index
Lipper Growth &
Income Fund Index
$20,000
$10,000
$9,500
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
Average annual total return (as of Sept. 30, 1997)
1 year Since 5 years 10 years
inception*
Class A +23.71% --% +15.83% +12.51%
Class B +25.23% +22.38% --% --%
Class Y +30.38% +24.66% --% --%
*Inception date was March 20, 1995.
Assumes: o Holding period from 10/1/87 to 9/30/97. o Returns do not reflect
taxes payable on distributions. o Reinvestment of all income and capital
gain distributions for the Fund, with a value of $22,052. Also see
"Performance" in the Fund's current prospectus.
The Standard & Poor's 500 Stock Index, an unmanaged list of common stocks, is
frequently used as a general measure of market performance.
Lipper Growth and Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
On the graph above you can see how the Fund's total return compared to two
widely cited unmanaged performance indexes, the S&P 500 Stock Index and the
Lipper Growth & Income Fund Index. In comparing IDS Stock Fund (Class A) to the
two indexes, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5%, while such charges are not reflected in
the performance of the indexes.
Your investment and return values fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Average annual total return
figures reflect the impact of the applicable sales charge up to a maximum of 5%.
This was a period of widely fluctuating security prices. Past performance is no
guarantee of future results.
(This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #96 to
Registration statement No. 2-11358 filed on or about Nov. 25, 1997, are
incorporated herein by reference
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
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IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
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IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
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IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
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Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
(This annual report is not part of the prospectus.)
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IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
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IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
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IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
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IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
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IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
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(This annual report is not part of the prospectus.)
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Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
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IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
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(This annual report is not part os the prospectus.)
<PAGE>
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
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Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
(This annual report is not part of the prospectus.)
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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.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
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IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
(This annual report is not part of the prospectus.)
<PAGE>
Federal income tax information
IDS Stock Fund, Inc.
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. Some of the dividends listed below were reported to you on Form 1099-DIV,
Dividends and Distributions, last January. Dividends paid to you since the end
of last year will be reported to you on a tax statement sent next January.
Shareholders should consult a tax advisor on how to report distributions for
state and local purposes.
IDS Stock Fund, Inc.
Fiscal year ended Sept. 30, 1997
Class A
Income distributions
taxable as dividend income, 60.34% qualifying for deduction by corporations.
Payable date Per share
Dec. 27, 1996 $0.44465
March 27, 1997 0.09917
June 27, 1997 0.10021
Sept. 26, 1997 0.11516
Total $0.75919
Capital gain distribution taxable for long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.78958
Total distributions $1.54877
The distribution of $1.23423 per share, payable Dec. 27, 1996, consisted of
$0.11235 derived from net investment income, $0.33230 from net short-term
capital gains (a total of $0.44465 taxable as dividend income) and $0.78958 from
net long-term capital gains.
Class B
Income distributions
taxable as dividend income, 60.34% qualifying for deduction by corporations.
Dec. 27, 1996 $0.40380
March 27, 1997 0.05767
June 27, 1997 0.05595
Sept. 26, 1997 0.06693
Total distributions $0.58435
Capital gain distribution taxable for long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.78958
Total distributions $1.37393
The distribution of $1.19338 per share, payable Dec. 27, 1996, consisted of
$0.07150 derived from net investment income, $0.33230 from net short-term
capital gains (a total of $0.40380 taxable as dividend income) and $0.78958 from
net long-term capital gains.
Class Y
Income distributions
taxable as dividend income, 60.34% qualifying for deduction by corporations.
Dec. 27, 1996 $0.45449
March 27, 1997 0.10907
June 27, 1997 0.10718
Sept. 26, 1997 0.11980
Total distributions $0.79054
Capital gain distribution taxable for long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.78958
Total distributions $1.58012
The distribution of $1.24407 per share, payable Dec. 27, 1996, consisted of
$0.12219 derived from net investment income, $0.33230 from net short-term
capital gains (a total of $0.45449 taxable as dividend income) and $0.78958 from
net long-term capital gains.
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
American Express Financial Advisors 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
TTY Service
For the hearing impaired
800-846-4852
American Express Financial Advisors Easy Access Line
Automated account information (TouchTone(R) phones only),including current fund
prices and performance, account values and recent account transactions
800-862-7919
AMERICAN
EXPRESS
Financial
Advisors
IDS Stock Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
