1997 SEMIANNUAL REPORT
IDS
Stock
Fund
(icon of) building with columns
The goals of IDS Stock Fund, Inc. are current income and growth of capital.
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc., Member SIPC.
<PAGE>
Big names,
big business
While some investors like to strive for the potentially outstanding returns that
can be generated by stocks of newer companies, others are more comfortable with
the usually steadier performance provided by stocks of more established
businesses. IDS Stock Fund focuses on stocks in the latter group, many of which
long ago made their marks in American enterprise and, in some cases, also have a
strong international business presence. These stocks offer the potential dual
benefit of growth along with a steady stream of dividend income.
Contents
From the president 3
From the portfolio manager 3
The Portfolio's ten largest holdings 5
Financial statements (Fund) 6
Notes to financial statements (Fund) 9
Financial statements (Portfolio) 17
Notes to financial statements (Portfolio) 20
Investments in securities 29
Board members and officers 35
IDS mutual funds 36
<PAGE>
To our shareholders
From the president
If you're an experienced investor, you know that the past two years have
been unusually strong ones in many 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 periodically review their
long-term goals and examine whether their investment program remains on
track to achieving them. Your quarterly investment statements are one part
of that monitoring process. The other is a meeting with your American
Express financial advisor. That becomes even more important if there's a
major change in your financial situation or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
President of the Fund
<PAGE>
From the portfolio manager
IDS Stock Fund posted solid results during the first half of its fiscal
year, despite considerable volatility in the stock market. For the six
months -- October 1996 through March 1997 -- the total return was 7.2% for
Class A shares. (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.)
Thanks to ongoing low inflation, low interest rates and healthy corporate
profits, the stock market was in the middle of a robust rally when the
period began last fall. Although the market stumbled briefly in December,
it soon regrouped to surge ahead in the first several weeks of 1997.
Mood swings
The mood of the market changed abruptly in mid-February, however, as
investors began focusing on the possibility of too-strong economic growth
fanning the fire of inflation. With long- term interest rates already on
the rise, selling pressure intensified and the market declined sharply
through the end of period.
As for the Fund, it enjoyed its best performance last fall, owing to its
emphasis on many of the large, blue-chip stocks that were powering the
rally. 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. I also 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 market's weak periods. On the
other hand, the Fund's holdings among foreign stocks (up to 19% of assets)
were sluggish compared to the U.S. market and, overall, tempered Fund
performance during the six months.
Conservative approach
My investment outlook is essentially unchanged as I prepare this report in
mid-April. While market fundamentals such as inflation and corporate
profits remain positive, I expect higher long-term interest rates to
present a hurdle for U.S. stocks over the near term. Therefore, I am
continuing to emphasize common stocks of solid, blue chip companies in
more stable economic sectors, complemented by foreign stocks and
high-yielding, convertible preferred stocks of U.S. companies.
Richard H. Warden
Richard H. Warden
Portfolio manager
<PAGE>
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $22.78
Sept. 30, 1996 $22.49
Increase $ 0.29
Distributions
Oct. 1, 1996 - Mar. 31, 1997
From income $ 0.54
From capital gains $ 0.79
Total distributions $ 1.33
Total return* +7.2%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $22.69
Sept. 30, 1996 $22.42
Increase $ 0.27
Distributions
Oct. 1, 1996 - Mar. 31, 1997
From income $ 0.46
From capital gains $ 0.79
Total distributions $ 1.25
Total return* +6.8%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $22.78
Sept. 30, 1996 $22.49
Increase $ 0.29
Distributions
Oct. 1, 1996 - Mar. 31, 1997
From income $ 0.56
From capital gains $ 0.79
Total distributions $ 1.35
Total return* +7.3%**
*The prospectus discusses the effect of sales charges, if any, on the various
classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Portfolio's ten largest holdings
Percent Value
(of Portfolio's net assets) (as of March 31, 1997)
General Electric 1.65% $57,068,750
Intel 1.61 55,650,000
NationsBank 1.52 52,606,250
EXEL 1.46 50,277,500
Kimberly-Clark 1.37 47,203,125
Safeway 1.34 46,375,000
UNUM 1.33 46,068,750
Freeport-McMoRan Copper & Gold 1.32 45,562,500
Boeing 1.29 44,381,250
Gillette 1.26 43,575,000
(icon of) pie chart
The ten holdings listed here make up 14.15%
of the Portfolio's net assets
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<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Stock Fund, Inc.
March 31, 1997
Assets
(Unaudited)
<S> <C> <C>
Investment in Equity Portfolio (Note 1) $3,453,892,494
--------------
Total assets 3,453,892,494
-------------
Liabilities
Accrued distribution fee 12,377
Accrued service fee 50,860
Accrued transfer agency fee 17,471
Accrued administrative services fee 11,453
Other accrued expenses 1,446
-----
Total liabilities 93,607
------
Net assets applicable to outstanding capital stock $3,453,798,887
==============
Represented by
Capital stock-- authorized 10,000,000,000 shares of $.01 par value $ 1,516,349
Additional paid-in capital 2,614,668,606
Undistributed net investment income 1,351,313
Accumulated net realized gain (Note 1) 173,215,546
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies 663,047,073
-----------
Total-- representing net assets applicable to outstanding capital stock $3,453,798,887
==============
Net assets applicable to outstanding shares: Class A $2,411,248,286
Class B $ 145,136,846
Class Y $ 897,413,755
Net asset value per share of outstanding capital stock: Class A shares 105,847,948 $ 22.78
Class B shares 6,396,021 $ 22.69
Class Y shares 39,390,900 $ 22.78
See accompanying notes to financial statements.
<PAGE>
Statement of operations
IDS Stock Fund, Inc.
Six months ended March 31, 1997
Investment income
(Unaudited)
Income:
Dividends $ 32,145,048
Interest 6,233,750
---------
Total income 38,378,798
----------
Expenses (Note 2):
Expenses, including investment management services fee, allocated from Equity Portfolio 8,280,899
Distribution fee-- Class B 489,716
Transfer agency fee 1,709,930
Incremental transfer agency fee-- Class B 7,105
Service fee
Class A 2,059,043
Class B 113,672
Administrative services fees and expenses 509,254
Compensation of board members 2,857
Compensation of officers 8,156
Postage 57,826
Registration fees 56,569
Reports to shareholders 46,433
Audit fees 541
Other 14,806
------
Total expenses 13,356,807
----------
Earnings credits on cash balances (Note 2) (69,497)
Total net expenses 13,287,310
----------
Investment income -- net 25,091,488
----------
Realized and unrealized gain -- net
Net realized gain on security and foreign currency transactions 195,746,947
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies 15,668,647
----------
Net gain on investments and foreign currencies 211,415,594
-----------
Net increase in net assets resulting from operations $236,507,082
============
See accompanying notes to financial statements.
<PAGE>
Statements of changes in net assets
IDS Stock Fund, Inc.
Operations and distributions March 31,1997 Sept. 30, 1996
Six months ended Eleven-month
(Unaudited) period ended
Investment income-- net $ 25,091,488 $ 62,152,554
Net realized gain on investments and foreign currencies 195,746,947 144,560,754
Net change in unrealized appreciation or depreciation of investments
and on translation of assets and liabilities in foreign currencies 15,668,647 307,696,966
---------- -----------
Net increase in net assets resulting from operations 236,507,082 514,410,274
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (21,889,604) (40,068,143)
Class B (761,035) (917,346)
Class Y (8,986,086) (16,474,443)
Net realized gain
Class A (113,973,806) (66,949,954)
Class B (6,116,806) (1,317,953)
Class Y (43,104,797) (25,308,530)
----------- -----------
Total distributions (194,832,134) (151,036,369)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 112,525,850 310,273,867
Class B shares 37,092,528 73,175,827
Class Y shares 137,324,699 206,212,641
Reinvestment of distributions at net asset value
Class A shares 125,338,311 98,054,599
Class B shares 6,824,407 2,216,336
Class Y shares 45,590,907 36,464,463
Payments for redemptions
Class A shares (164,825,448) (344,574,702)
Class B shares (Note 2) (6,609,729) (5,132,861)
Class Y shares (165,280,110) (207,758,852)
------------ ------------
Increase in net assets from capital share transactions 127,981,415 168,931,318
----------- -----------
Total increase in net assets 169,656,363 532,305,223
Net assets at beginning of period 3,284,142,524 2,751,837,301
------------- -------------
Net assets at end of period
(including undistributed net investment income of
$1,351,313 and $7,896,550) $3,453,798,887 $3,284,142,524
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Stock Fund, Inc.
(Unaudited as to March 31, 1997)
1. Summary of significant accounting policies
The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. 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 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.
Investment in Equity Portfolio
Effective May 13, 1996, the Fund began investing all of its assets in
Equity Portfolio (the Portfolio), a series of Growth and Income Trust, an
open-end investment company that has the same objectives as the Fund. This
was accomplished by transferring the Fund's assets to the Portfolio in
return for a proportionate ownership interest in the Portfolio. Equity
Portfolio invests primarily in common stocks and securities convertible
into common stocks.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is
equal to the Fund's proportionate ownership interest in the net assets of
the Portfolio. The percentage of the Portfolio owned by the Fund at March
31, 1997 was 99.98%. Valuation of securities held by the Portfolio is
discussed in Note 1 of the Portfolio's "Notes to financial statements,"
which are included elsewhere in this report.
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.
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 the shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) allocated
from the Portfolio 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. 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 declared and paid each calendar quarter from net investment
income, 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 income dividend.
2. Expenses and sales charges
In addition to the expenses allocated from the Portfolio, the Fund accrues
its own expenses as follows:
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for providing administrative services
and serving as transfer agent.
Under its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.04% to 0.02%
annually. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses, and any other
expenses properly payable by the Fund approved by the board.
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. 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.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $1,266,003 for Class A and $36,853 for Class
B for the six months ended March 31, 1997. The Fund also pays custodian
fees to American Express Trust Company, an affiliate of AEFC.
During the six months ended March 31, 1997, the Fund's transfer agency
fees were reduced by $69,497 as a result of earnings credits from
overnight cash balances.
3. Capital share transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended March 31, 1997
Class A Class B Class Y
Sold 4,780,112 1,585,470 5,838,468
Issued for reinvested 5,490,483 300,190 1,996,695
distributions
Redeemed (7,001,590) (282,138) (7,105,737)
---------- -------- ----------
Net increase 3,269,005 1,603,522 729,426
========= ========= =======
Eleven months ended Sept. 30, 1996
Class A Class B Class Y
Sold 14,630,112 3,448,528 9,749,258
Issued for reinvested 4,745,900 106,774 1,762,224
distributions
Redeemed (16,225,558) (241,151) (9,825,574)
----------- -------- ----------
Net increase 3,150,454 3,314,151 1,685,908
========= ========= =========
4. Change of Fund's fiscal year
The By-Laws of the Fund were amended on Jan. 10, 1996, changing it's
fiscal year end from Oct. 31 to Sept. 30, effective 1996.
<PAGE>
<TABLE>
<CAPTION>
5. 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
1997# 1996** 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43 $17.04 $19.26
beginning of period
Income from investment operations:
Net investment income .17 .43 .52 .58 .55 .64 .68 .83 .77 .56 .57
Net gains (losses) (both 1.45 3.17 1.96 .21 2.93 1.11 4.02 (.87) 3.26 1.13 1.15
realized and unrealized)
Total from investment 1.62 3.60 2.48 .79 3.48 1.75 4.70 (.04) 4.03 1.69 1.72
operations
Less distributions:
Dividends from net (.21) (.39) (.49) (.60) (.53) (.63) (.74) (.85) (.70) (.55) (.58)
investment income
Distributions from (1.12) (.68) (1.51) (1.95) (1.76) (1.09) (1.20) (2.61) -- (.75) (3.36)
realized gains
Total distributions (1.33) (1.07) (2.00) (2.55) (2.29) (1.72) (1.94) (3.46) (.70) (1.30) (3.94)
Net asset value, $22.78 $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43 $17.04
end of period
Ratios/supplemental data Class A
1997# 1996** 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of $2,411 $2,307 $1,984 $2,368 $2,059 $1,658 $1,513 $1,213 $1,347 $1,246 $1,309
period (in millions)
Ratio of expenses to .78%+ .80% + .79% .76% .73% .72% .65% .63% .60% .58% .57%
average daily net assets++
Ratio of net income to 1.43%+ 2.19%+ 2.61% 2.99% 2.75% 3.21% 3.59% 4.32% 3.94% 3.17% 2.53%
average daily net assets
Portfolio turnover rate 37% 71% 69% 75% 76% 77% 58% 26% 54% 27% 42%
(excluding short-term
securities) for the
underlying Portfolio
Total return+++ 7.2% 18.6% 14.4% 3.9% 18.8% 9.4% 29.0% (0.9%) 23.4% 10.1% 8.7%
Average brokerage $.0351 $.0388 -- -- -- -- -- -- -- -- --
commission rate for
the underlying Portfolio***
*For a share outstanding throughout the period. Rounded to
the nearest cent.
**The Fund's fiscal year-end was changed from Oct. 31 to
Sept. 30, effective 1996.
***Effective fiscal period 1996, the Fund is required to
disclose an average brokerage commission rate. The rate is
calculated by dividing the total brokerage commissions paid
on applicable purchases and sales of portfolio
securities for the period by the total number of related
shares purchased and sold.
+Adjusted to an annual basis.
++Effective fiscal period 1996, expense ratio is based on
total expenses of the Fund before reduction of earnings
credits on cash balances.
+++Total return does not reflect payment of a sales charge.
#Six months ended March 31, 1997 (Unaudited).
<PAGE>
Fiscal period ended Sept. 30,
Per share income and capital changes*
Class B Class Y
1997# 1996** 1995## 1997# 1996** 1995##
Net asset value, $22.42 $19.91 $18.03 $22.49 $19.96 $18.03
beginning of period
Income from investment operations:
Net investment income .09 .28 .27 .18 .47 .29
Net gains (both realized 1.43 3.17 1.92 1.46 3.17 2.01
and unrealized)
Total from investment operations 1.52 3.45 2.19 1.64 3.64 2.30
Less distributions:
Dividends from net (.13) (.26) (.31) (.23) (.43) (.37)
investment income
Distributions from (1.12) (.68) -- (1.12) (.68) --
realized gains
Total distributions (1.25) (.94) (.31) (1.35) (1.11) (.37)
Net asset value, $22.69 $22.42 $19.91 $22.78 $22.49 $19.96
end of period
Ratios/supplemental data
Class B Class Y
1997# 1996** 1995## 1997# 1996** 1995##
Net assets, end of $145 $107 $29 $897 $870 $738
period (in millions)
Ratio of expenses to 1.55%+ 1.57%+ 1.61%+ .61%+ .63%+ .64%+
average daily net assets++
Ratio of net income to .70%+ 1.61%+ 1.37%+ 1.59% +2.36%+ 2.38%+
average daily net assets
Portfolio turnover rate 37% 71% 69% 37% 71% 69%
(excluding short-term
securities) for the
underlying Portfolio
Total return++ 6.8% 17.8% 12.1% 7.3% 18.8% 12.8%
Average brokerage $.0351 $.0388 -- $.0351 $.0388 --
commission rate for
the underlying Portfolio***
*For a share outstanding throughout the period. Rounded to
the nearest cent.
**The Fund's fiscal year-end was changed from Oct. 31 to
Sept. 30, effective 1996.
***Effective fiscal period 1996, the Fund is required to
disclose an average brokerage commission rate. The rate is
calculated by dividing the total brokerage commissions paid
on applicable purchases and sales of portfolio
securities for the period by the total number of related
shares purchased and sold.
+Adjusted to an annual basis
++Effective fiscal period 1996, expense ratio is based on
total expenses of the Fund before reduction of earnings
credits on cash balances.
+++Total return does not reflect payment of a sales charge.
+Adjusted to an annual basis.
#Six months ended March 31,1997 (Unaudited).
##Inception date was March 20, 1995 for Class B and Class Y.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
Equity Portfolio
March 31, 1997
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C> <C>
Investments in securities of unaffiliated issuers (identified cost $2,914,403,825) $3,565,562,904
--------------
Investments in securities of affiliated issuers (identified cost $33,897,526) 45,858,072
Dividends and accrued interest receivable 8,265,522
Receivable for investment securities sold 66,257
U.S. government securities held as collateral (Note 4) 68,808,487
- ----------
Total assets 3,688,561,242
-------------
Liabilities
Disbursements in excess of cash on demand deposit 837,609
Payable for investment securities purchased 5,986,457
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 5) 60
Payable upon return of securities loaned (Note 4) 227,029,987
Accrued investment management services fee 156,030
Other accrued expenses 10,309
------
Total liabilities 234,020,452
-----------
Net assets $3,454,540,790
==============
See accompanying notes to financial statements.
<PAGE>
Statement of operations
Equity Portfolio
Six months ended March 31, 1997
Investment income (Unaudited)
Income:
Dividends (net of foreign taxes withheld of $250,326) $ 32,012,885
Dividends earned from affiliates 138,000
Interest 6,218,164
---------
Total income 38,369,049
----------
Expenses (Note 2):
Investment management services fee 8,118,125
Compensation of board members 9,199
Custodian fees 114,660
Audit fees 14,000
Administrative services fees and expenses 22,804
Other 5,107
-----
Total expenses 8,283,895
Earnings credits on cash balances (Note 2) (1,501)
- ------
Total net expenses 8,282,394
---------
Investment income -- net 30,086,655
----------
Realized and unrealized gain -- net
Net realized gain on security and foreign currency transactions
(including loss of $444,649 from foreign currency transactions) (Note 3) 195,764,259
Net change in unrealized appreciation or depreciation of investments
and on translation of assets and liabilities in foreign currencies 15,687,803
----------
Net gain on investments and foreign currencies 211,452,062
-----------
Net increase in net assets resulting from operations $241,538,717
============
See accompanying notes to financial statements.
<PAGE>
Statements of changes in net assets
Equity Portfolio
Operations
Six months ended For the period from
March 31, 1997 May 13, 1996*
(Unaudited) to Sept. 30, 1996
Investment income-- net $ 30,086,655 $ 38,250,649
Net realized gain (loss) on investments and foreign currencies 195,764,259 (4,205,188)
Net change in unrealized appreciation or depreciation
of investments and on translation
of assets and liabilities in foreign currencies 15,687,803 140,669,806
---------- -----------
Net increase in net assets resulting from operations 241,538,717 174,715,267
Net contributions (withdrawals) (72,046,022) 3,110,307,828
----------- -------------
Total increase in net assets 169,492,695 3,285,023,095
Net assets at beginning of period (Note 1) 3,285,048,095 25,000
- ------------- ------
Net assets at end of period $3,454,540,790 $3,285,048,095
============== ==============
</TABLE>
*Commencement of operations.
See accompanying notes to financial statements.
<PAGE>
Notes to financial statements
Equity Portfolio
(Unaudited as to March 31, 1997)
1. Summary of significant accounting policies
Equity Portfolio (the Portfolio) is a series of Growth and Income Trust
(the Trust) and is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. Equity
Portfolio invests primarily in common stocks and securities convertible
into common stocks. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio. On April 15, 1996, American
Express Financial Corporation (AEFC) contributed $25,000 to the Portfolio.
Operations did not formally commence until May 13, 1996, at which time, an
existing fund transferred its assets to the Portfolio in return for an
ownership percentage of the Portfolio.
Significant accounting policies followed by the Portfolio 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 Portfolio
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 Portfolio also
may buy or 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 Portfolio gives up the opportunity of
profit if the market price of the security increases. The risk in writing
a put option is that the Portfolio may incur a loss if the market price of
the security decreases and the option is exercised. The risk in buying an
option is that the Portfolio pays a premium whether or not the option is
exercised. The Portfolio also has the additional risk of 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
Portfolio 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 Portfolio may buy and sell financial futures contracts traded on any
U.S. or foreign exchange. The Portfolio 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 Portfolio is required to
deposit either cash or securities in an amount (initial margin) equal to a
certain percentage of the contract value. Subsequent payments (variation
margin) are made or received by the Portfolio each day. The variation
margin payments are equal to the daily changes in the contract value and
are recorded as unrealized gains and losses. The Portfolio recognizes a
realized gain or loss when the contract is closed or expires.
Foreign currency translations
and foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the purchase or sale of
securities and income and expenses are translated at the exchange rate on
the transaction date. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net
realized gains or losses from foreign currency transactions 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 Portfolio may enter into forward foreign currency exchange contracts
for operational purposes and to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Portfolio and the resulting unrealized
appreciation or depreciation are determined using foreign currency
exchange rates from an independent pricing service. The Portfolio is
subject to the credit risk that the other party will not complete the
obligations of the contract.
Illiquid securities
At March 31, 1997, investments in securities included issues that are
illiquid. The Portfolio 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, 1997 was
$10,633,993 representing 0.31% of the Portfolio's net assets. Pursuant to
guidelines adopted by the board, certain unregistered securities are
determined to be liquid and are not included within the 10% limitation
specified above.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership
and each investor in the Portfolio is treated as the owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Portfolio. Accordingly, as a
"pass-through" entity, the Portfolio does not pay any income dividends or
capital gain distributions.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
and interest income, including level-yield amortization of premium and
discount, is accrued daily.
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an Investment
Management Services Agreement with AEFC for managing its portfolio. Under
this agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's average
daily net assets in reducing percentages from 0.53% to 0.4% annually. The
fees may be increased or decreased by a performance adjustment based on a
comparison of the performance of Class A shares of IDS Stock Fund to the
Lipper Growth and Income Fund Index. The maximum adjustment is 0.08% of
the Portfolio's average daily net assets on an annual basis. The
adjustment decreased the fee by $163,261 for the six months ended March
31, 1997.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees to be paid to an
affiliate of AEFC, audit and certain legal fees, fidelity bond premiums,
registration fees for units, office expenses, consultants' fees,
compensation of trustees, corporate filing fees, expenses incurred in
connection with lending securities of the Portfolio, and any other
expenses properly payable by the Trust or Portfolio, approved by the
board.
During the six months ended March 31, 1997, the Portfolio's custodian fees
were reduced by $1,501 as a result of earnings credits from overnight cash
balances.
Pursuant to a Placement Agency Agreement, American Express Financial
Advisors Inc. acts as placement agent of the units of the Trust.
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $1,242,266,176 and $1,231,057,025,
respectively, for the six months ended March 31, 1997. For the same
period, the portfolio turnover rate was 37%. Realized gains and losses are
determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $255,491
during this period.
4. Lending of portfolio securities
At March 31, 1997, securities valued at $217,727,815 were on loan to
brokers. For collateral, the Portfolio received $158,221,500 in cash and
U.S. government securities valued at $68,808,487. Income from securities
lending amounted to $536,634 for the six months ended March 31, 1997. The
risks to the Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the securities when
due.
5. Foreign currency contracts
At March 31, 1997, the Portfolio had entered into a foreign currency
exchange contract that obligates the Portfolio to deliver currency at a
specified future date. The unrealized appreciation and/or depreciation
(see Summary of significant accounting policies) on this contract is
included in the accompanying financial statements. The terms of the open
contract are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
April 1, 1997 292,824 $66,197 $ -- $60
South African U.S. Dollar
Commercial
Rand
<PAGE>
Investments in securities
Equity Portfolio
March 31, 1997 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Investments in securities of unaffiliated issuers
Common stocks (82.1%)
Issuer Shares Value(a)
Aerospace & defense (2.8%)
Boeing 450,000 $ 44,381,250
General Motors Cl H 500,000 27,125,000
Lockheed Martin 306,084 25,711,056
Total 97,217,306
Airlines (0.8%)
AMR 350,000(b) 28,875,000
Automotive & related (1.6%)
Eaton 386,200 27,371,925
Genuine Parts 600,000 27,975,000
Total 55,346,925
Banks and savings & loans (6.0%)
Barnett Banks 800,000(c) 37,200,000
First Union 450,000 36,506,250
KeyCorp 600,000 29,250,000
Morgan (JP) 200,000 19,650,000
NationsBank 950,000 52,606,250
Norwest 400,000 18,500,000
Washington Mutual 250,000 12,078,125
Total 205,790,625
Beverages & tobacco (2.4%)
Anheuser-Busch 700,000 29,487,500
Coca-Cola 600,000 33,525,000
Philip Morris 200,000 22,825,000
Total 85,837,500
Chemicals (1.3%)
Monsanto 600,000 22,950,000
Praxair 500,000 22,437,500
Total 45,387,500
Communications equipment & services (0.9%)
Northern Telecommunications450,000 29,418,750
Computers & office equipment (4.1%)
Cisco Systems 400,000(b) 19,250,000
Compaq Computer 465,000(b) 35,630,625
Computer Associates Intl 250,000 9,718,750
Hewlett-Packard 550,000 29,287,500
Oracle 750,000(b) 28,921,875
Silicon Graphics 900,000(b) 17,550,000
Total 140,358,750
Electronics (1.6%)
Intel 400,000 55,650,000
Energy (1.5%)
Elf Aquitaine 500,000(c) 24,625,000
Unocal 700,000 26,687,500
Total 51,312,500
Food (1.2%)
ConAgra 400,000 21,700,000
CPC Intl 250,000 20,500,000
Total 42,200,000
Health care (8.6%)
ALZA 400,000 11,000,000
American Home Products 600,000 36,000,000
Amgen 500,000(b) 27,937,500
Baxter Intl 800,000 34,500,000
Guidant 500,000 30,750,000
Johnson & Johnson 650,000 34,368,750
Medtronic 500,000 31,125,000
Merck 200,000 16,850,000
Pfizer 425,000 35,753,125
Schering-Plough 550,000 40,012,500
Total 298,296,875
Health care services (1.2%)
Service Corp Intl 800,000 23,800,000
Tenet Healthcare 700,000 17,237,500
Total 41,037,500
Household products (3.4%)
Colgate-Palmolive 400,000 39,850,000
Gillette 600,000 43,575,000
Procter & Gamble 300,000 34,500,000
Total 117,925,000
Industrial equipment & services (2.6%)
AGCO 500,000 13,812,500
Deere 1,000,000 43,500,000
Illinois Tool Works 400,000 32,650,000
Total 89,962,500
Insurance (3.4%)
American Intl Group 300,000 35,212,500
EXEL 1,190,000 50,277,500
Travelers/Aetna
Property Casualty 1,000,000 31,750,000
Total 117,240,000
Leisure time & entertainment (0.6%)
Disney (Walt) 300,000 21,900,000
Media (1.0%)
Donnelley (RR) & Sons 1,000,000 34,875,000
Metals (4.6%)
Freeport-McMoRan
Copper & Gold 1,500,000 45,562,500
Getchell Gold 946,200 38,439,375
Martin Marietta Materials1,000,000 25,750,000
Stillwater Mining 890,000(b) 17,466,250
UCAR Intl 800,000(b) 31,700,000
Total 158,918,125
Multi-industry conglomerates (2.8%)
Emerson Electric 400,000 18,000,000
General Electric 575,000 57,068,750
Westinghouse Electric 1,200,000 21,300,000
Total 96,368,750
Paper & packaging (2.3%)
Crown Cork & Seal 600,000(b) 30,975,000
Kimberly-Clark 475,000 47,203,125
Total 78,178,125
Restaurants & lodging (0.6%)
Hilton Hotels 800,000 19,400,000
Retail (3.4%)
Federated Dept Stores 500,000(b) 16,437,500
Penney (JC) 550,000 26,193,750
Safeway 1,000,000(b,c) 46,375,000
Wal-Mart Stores 1,000,000 27,875,000
Total 116,881,250
Textiles & apparel (0.9%)
Nike Cl B 500,000 31,000,000
Transportation (0.6%)
Union Pacific 350,000 19,862,500
Utilities -- electric (0.8%)
FPL Group 600,000 26,475,000
Utilities -- telephone (4.6%)
AT&T 500,000 17,375,000
BellSouth 700,000 29,575,000
GTE500,000 23,312,500
MCI Communications 1,000,000 35,625,000
SBC Communications 500,000 26,312,500
U S West Communications 800,000 27,200,000
Total 159,400,000
Foreign (16.5%)(d)
Ashanti Goldfields 500,000(c) 6,875,000
Barclays 1,443,212 24,242,294
Bre-X Minerals 1,500,000 2,914,935
British Telecommunications4,000,000 29,317,404
Cimpor Cimentos de Portuga 602,000(e) 12,558,858
Commonwealth Bank 4,041,400(c) 26,676,744
Compagnie de General 225,000(c) 30,657,227
Ericsson (LM) ADR 7,000,000 33,250,000
Euro-Nevada Mining 23,300 673,289
Euro-Nevada Mining 230,400(e) 6,657,756
Natl Mutual 16,000,000 19,578,544
Railtrack 4,000,000 29,778,060
Renaissance Energy 500,000(b) 14,213,470
Repsol ADR 650,000 26,487,500
Royal Dutch Petroleum 150,000 26,250,000
Schlumberger 350,000 37,537,500
SGL Carbon 250,000 34,322,542
SmithKline Beecham ADR 500,000 35,000,000
South African Breweries 440,200(e) 13,944,563
Telefonos de Mexico 1,000,000(c) 38,500,000
TOTAL Cl B 700,000 29,662,500
Unilever 200,000 37,250,000
Veba 500,000(c) 28,312,350
Woolworths 10,000,000(c) 26,732,720
Total 571,393,256
Total common stocks of unaffiliated issuers
(Cost: $2,209,430,561) $2,836,508,737
Preferred stocks and other (9.8%)
Issuer Shares Value(a)
AirTouch Communications
4% 525,000 $12,140,625
Altera
8% 347,826(e) 15,086,953
Circuit City Stores
5.50% 535,715(e) 17,223,237
Citicorp
5.50% 250,000 24,718,750
ConAgra
4.50% Cv 350,000 17,762,500
Crown Cork & Seal
4.50% Cv 225,000 11,081,250
Duracell
3% 195,000 11,456,250
Finova Finance Trust
5.50% Cv 200,000 10,450,000
Hilton Hotels
8% 400,000(j) 9,350,000
Host Marriott Financial Trust
6.75% Cv 300,000(e) 16,875,000
Ikon Office Solutions
6.50% Cv 315,850 25,544,369
McKesson
4.50% Cv 200,000(f) 10,650,000
Medtronic
$2.76 Cv 275,000 17,231,500
Merck
4.50% Cv 225,000 17,690,625
Merrill Lynch
6.25% Cv 515,000 19,441,250
Natl Australia Bank
7.875% 270,000 6,750,000
Station Casinos
7.00% Cv 110,000 4,743,750
SunAmerica
$3.19 Cv 500,000 19,750,000
Telemex
7.75% Cv 665,000 26,101,250
UNUM
$2.34 Cv 650,000 46,068,750
Total preferred stocks
(Cost: $315,459,252) $340,116,059
<TABLE>
<CAPTION>
Bonds (3.9%)
Issuer Coupon Maturity Principal Value(a)
<S> <C> <C> <C> <C>
rate year amount
Domestic (2.8%)
Adaptec
Cv 4.75% 2004 $15,000,000(e) $ 14,756,250
Salomon-Applied Materials ELK
Cv 8.50 1998 24,645,969(f) 24,212,725
Salomon-Emerson Electric ELK
Cv 5.50 1999 30,084,390(f) 28,509,324
Federated Dept Stores 5.00 2003 5,000,000 5,800,000
Scandinavian Broadcasting
Cv Sub Deb 7.25 2005 15,000,000 13,687,500
Softkey Intl
Cv 5.50 2000 15,000,000(e) 11,550,000
Total 98,515,799
Foreign (1.1%) (d)
BAA Plc 5.75 2006 6,000,000 10,309,215
(British Pound)
Baan 4.50 2001 11,500,000(e) 13,397,500
(U.S. Dollar)
Dresdner 2.25 2001 15,000,000(i) 10,633,993
(Canadian Dollar)
William Resources 9.66 2002 4,500,000 3,142,808
(U.S. Dollar)
Total 37,483,516
Total bonds
(Cost: $136,635,502) $135,999,315
</TABLE>
Short-term securities (7.3%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
Certificate of deposit (0.1%)
Morgan Guaranty Trust
04-28-97 5.40% $4,600,000 $ 4,579,271
Commercial paper (7.1%)
American General Finance
04-24-97 5.36 12,400,000 12,357,854
Ameritech Capital Funding
04-14-97 5.34 5,400,000(g) 5,388,894
04-17-97 5.33 5,000,000(g) 4,988,222
Associates Corp North America
05-07-97 5.53 13,700,000 13,624,650
Barclays U.S. Funding
04-16-97 5.31 3,600,000 3,595,230
BellSouth Telecommunications
04-10-97 5.33 3,600,000 3,590,855
BHP Finance
04-03-97 5.27 7,000,000 6,997,958
CAFCO
04-21-97 5.37 3,800,000(g) 3,787,718
Cargill
05-08-97 5.36 3,600,000 3,577,586
Ciesco LP
04-15-97 5.34 4,600,000 4,590,501
Commercial Credit
04-22-97 5.34 7,600,000 7,576,459
04-24-97 5.35 7,600,000 7,574,217
Commerzbank U.S. Finance
05-20-97 5.48 30,100,000 29,971,560
Consolidated Natural Gas
04-30-97 5.29 1,820,000 1,811,057
Dean Witter, Discover & Co
04-15-97 5.38 600,000 598,427
05-06-97 5.36 8,200,000 8,157,588
Fleet Funding
04-07-97 5.29 7,000,000(g) 6,993,863
04-09-97 5.33 2,092,000(g) 2,089,536
04-10-97 5.29 10,000,000(g) 9,986,850
04-22-97 5.31 7,000,000(g) 6,978,481
Gateway Fuel
04-08-97 5.31 1,700,000 1,698,258
Household Finance
04-23-97 5.33 5,100,000 5,083,482
Kredietbank North America Finance
04-18-97 5.30 300,000 299,255
04-18-97 5.30 3,300,000 3,291,803
Metlife Funding
05-01-97 5.35 5,900,000 5,873,893
05-02-97 5.34 7,800,000 7,764,402
05-05-97 5.34 5,700,000 5,671,468
Mobil Australia Finance (Delaware)
04-30-97 5.35 6,500,000(g) 6,472,196
Morgan Stanley Group
05-20-97 5.34 2,500,000 2,480,281
Natl Australia Funding (Delaware)
04-28-97 5.49 17,500,000 17,428,337
Novartis Finance
04-04-97 5.32 4,400,000 4,398,057
04-21-97 5.34 4,800,000(g) 4,785,840
Pfizer
04-21-97 5.32 8,200,000(g) 8,175,901
Reed Elsevier
04-21-97 5.39 8,600,000(g) 8,572,388
St. Paul Companies
04-11-97 5.28 4,300,000(g) 4,293,729
Siemens
04-25-97 5.30 11,000,000 10,961,427
Southern California Gas
04-07-97 5.32 1,988,000(g) 1,986,244
Unilever Capital
04-07-97 5.34 3,000,000(g) 2,996,889
Total 246,471,356
Letter of credit (0.1%)
Bank of America -
Formosa Plastics
05-09-97 5.39 1,900,000 1,888,166
Total short-term securities
(Cost: $252,878,510) $252,938,793
Total investments in securities of unaffiliated issuers
(Cost: $2,914,403,825) $3,565,562,904
Investments in securities of affiliated issuers (h)
Common stocks (1.3%)
Issuer Shares Value(a)
Meridian Gold 3,800,000 $ 9,608,072
Mutual Risk Management 1,000,000 36,250,000
Total investments in securities of affiliated issuers
(Cost: $33,897,526) $ 45,858,072
Total investments in securities
(Cost: $2,948,301,351)(k) $3,611,420,976
See accompanying notes to investments in securities.>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Security is partially or fully on loan. See Note 4 to the financial
statements.
(d) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(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) 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.
(g) 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 the guidelines established
by the board.
(h) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliated during the
period ended March 31, 1997 are as follows:
Beginning Purchase Sales Ending Dividend
Issuer cost cost cost cost income
Meridian Gold $ 6,941,711 $ 275,758 $-- $ 7,217,469 $--
Mutual Risk
Management* 9,937,262 16,742,795 -- 26,680,057 138,000
--------- ---------- ---------- -------
Total $16,878,973 $17,018,553 $-- $33,897,526 $138,000
=========== =========== === =========== ========
*Issuer was not an affiliate for the entire fiscal period.
(i) Identifies issues considered to be illiquid (see Note 1 to the financial
statements). Information concerning such security holdings at March 31, 1997 is
as follows:
Security Aquisition Cost
date
Dresdner* 09-05-96 thru 09-11-96 $10,110,635
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(j) PRIDES -- Preferred Redeemed Increased Dividend Equity Securities are
structured as convertible preferred securities issued by a company. Investors
receive an enchanced yield but based upon a specific formula, potential
appreciation is limited. PRIDES pay dividends, have voting rights, are
non-callable for three years and upon maturity, convert into shares of common
stock.
(k) At March 31, 1997, the cost of securities for federal income tax purposes
was approximately $2,948,301,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was: > 33
Unrealized appreciation.........................................$731,944,000
Unrealized depreciation..........................................(68,824,000)
-----------
Net unrealized appreciation.....................................$663,120,000
============
<PAGE>
Board members and officers of the Fund
President and interested
board member
William R. Pearce
President and director, Board Services Corporation (provides
administrative services to boards including the boards of the IDS and
IDSLife funds and Master Trust portfolios).
Independent
board members
H. Brewster Atwater Jr.
Former chairman and chief executive officer, General Mills, Inc.
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 Reader's Digest Association, Inc.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Former chairman and chief executive officer,
Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, 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
Senior vice president, AEFC. Vice president - Investments for the Fund.
Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer for the
Fund.
Other officer
Leslie L. Ogg
Vice president, treasurer and corporate secretary of Board Services
Corporation. Vice president, general counsel and secretary for the Fund.
Refer to the SAI for the board members' and officers' biographies.
<PAGE>
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world globe
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks-and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
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.
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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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Growth and 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.
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 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 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 in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
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IDS Mutual
Invests in a Portfolio 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 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 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.
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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.
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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.
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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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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 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.
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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.
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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.
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Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
<PAGE>
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(R) 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
PAGE
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Stock Fund
IDS Tower 10
Minneapolis, MN 55440-0010
