1998 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 their mark 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.
<PAGE>
Contents
1998 annual report
From the chairman 4
From the portfolio managers 4
The Portfolio's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report (Fund) 9
Financial statements (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
1998 prospectus
The Fund in brief 3p
Goals 3p
Investment policies and risks 3p
Structure of the Fund 4p
Manager and distributor 4p
Portfolio managers 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 18p
How to purchase, exchange or redeem shares 19p
Alternative purchase arrangements 19p
How to purchase shares 21p
How to exchange shares 24p
How to redeem shares 25p
Reductions and waivers of the sales charge 30p
Special shareholder services 37p
Services 37p
Quick telephone reference 37p
Distributions and taxes 38p
Dividend and capital gain distributions 38p
Reinvestments 39p
Taxes 40p
How to determine the correct TIN 42p
How the Fund and Portfolio are organized 43p
Shares 43p
Voting rights 43p
Shareholder meetings 43p
Special considerations regarding
master/feeder structure 44p
Board members and officers 47p
Investment manager 49p
Administrator and transfer agent 50p
Distributor 50p
About American Express Financial Corporation 52p
General information 52p
Year 2000 53p
Appendix 54p
Descriptions of derivative instruments 54p
The purpose of this annual report is to tell investors how the Fund
performed.
(icon of) one open book inside of another
The prospectus, which is bound into the middle of this annual report,
describes the Fund in detail.
(This annual report is not part of the prospectus.)
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To our shareholders
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
(picture of) Richard H. Warden
Richard H. Warden
Portfolio manager
(picture of) G. Michael Kennedy
G. Michael Kennedy
Portfolio manager
From the chairman
If you're an experienced investor, you know that the past 12 months was a
highly volatile period in many financial markets. But history tells us that
substantial market moves are nothing new. Though they're often
unpredictable, declines -- whether they're brief or long-lasting, moderate
or substantial -- are always a possibility.
The potential for such volatility 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.
Before closing, I want to introduce a new portfolio manager for the Fund --
Michael Kennedy. Formerly director of research and a member of this
company's investment department, he will split management duties with
longtime manager Richard Warden.
(signature of) William R. Pearce
William R. Pearce
<PAGE>
From the portfolio managers
A very productive period was quickly turned into a modestly positive one by
a sharp decline in the U.S. stock market late in the fiscal year. In the
end, IDS Stock Fund's Class A shares recorded a total return of 2.0% for
the 12 months -- October 1997 through September 1998.
After sinking in the aftermath of the Asian financial crisis in the fall of
1997, the U.S. market spent most of last winter trying to hold its ground.
But by February, the worst of the "Asian flu" seemed to have passed, and
investors' optimism was renewed by ongoing reports of low inflation and,
for the most part, solid corporate profits. That combination was enough to
spark a two-month market surge that more than made up for the earlier
weakness.
Conditions remained relatively stable until late summer, when financial
turmoil resurfaced overseas, this time in Russia and Latin America. With
Asian economies already in shambles, this latest development cast a dark
cloud over the outlook for American companies' profits and forced stocks
into rapid retreat until the final few weeks of the period. Stocks of
financial services
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companies, a relatively large area of investment for the Fund, were
particularly weak.
Big-cap trend continues
As had been the case in recent years, large-capitalization growth stocks
most often led the market's upturns over the 12 months. The trend worked
partially in the Fund's favor, as it concentrates its investments in the
large-cap sector. However, part of the Fund's objective is to provide an
above-average dividend, which is generally not available from the
high-growth stocks that have usually set the pace for the market.
To shore up the Fund's dividend, we maintained a healthy exposure to
utility stocks, including providers of electricity and telephone service,
as well as convertible preferred stocks and convertible bonds. As for
changes to the portfolio, to reduce a large capital gain that shareholders
would have received in the form of a taxable distribution, we sold several
stocks for losses. To lessen the exposure to potential problems overseas,
we also reduced holdings in Europe somewhat.
Looking to the current fiscal year, the portfolio is more defensively
positioned than it was some months ago. This is reflected in a higher level
of cash reserves and an increased concentration in stocks of well-known
companies that often hold dominant positions in their industries. Should
earnings growth become tougher to maintain in the year ahead, we think such
companies will fare relatively well.
(signature of) Richard H. Warden
Richard H. Warden
(signature of) G. Michael Kennedy
G. Michael Kennedy
(This annual report is not part of the prospectus.)
<PAGE>
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 24.18
Sept. 30, 1997 $ 27.44
Decrease $ 3.26
Distributions
Oct. 1, 1997 - Sept. 30, 1998
From income $ 0.65
From capital gains $ 3.12
Total distributions $ 3.77
Total return* +2.0%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $24.05
Sept. 30, 1997 $27.32
Decrease $ 3.27
Distributions
Oct. 1, 1997 - Sept. 30, 1998
From income $ 0.46
From capital gains $ 3.12
Total distributions $ 3.58
Total return* +1.3%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $24.18
Sept. 30, 1997 $27.44
Decrease $ 3.26
Distributions
Oct. 1, 1997 - Sept. 30, 1998
From income $ 0.67
From capital gains $ 3.12
Total distributions $ 3.79
Total return* +2.1%**
*The prospectus discusses the effect of sales charges, if any, on the
various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
<PAGE>
The Portfolio's ten largest holdings
Percent Value
(of Portfolio's net assets) (as of Sept. 30, 1998)
General Electric 2.93% $119,343,750
Safeway 2.28 92,750,000
Schering-Plough 2.04 82,850,000
Rite Aid 1.74 71,000,000
AT&T 1.65 67,248,414
Wal-Mart Stores 1.61 65,550,000
Pfizer 1.56 63,562,500
MS-UNUM 1.45 59,028,961
3.25% Cv Preferred
Microsoft 1.42 57,782,813
Guidant 1.41 57,543,750
For further information about these holdings, please refer to the section
entitled "Investments in securities" herein.
(icon of) pie chart
The ten holdings listed here make up 18.09% of the Portfolio's net assets
(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.
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's
investments do well
o you receive capital gains when the gains on
investments sold by the Fund exceed losses
o you receive income when the Fund's stock dividends,
interest and short-term gains exceed its expenses.
All three make up your total return. And you potentially can increase your
investment if, like most investors, you reinvest your dividends and capital
gain distributions to buy additional shares of the Fund or another fund.
(This annual report is not part of the prospectus.)
<PAGE>
The Fund's long-term performance
How $10,000 has grown in IDS Stock Fund
$50,000
S&P 500
Stock Index
$40,000
$37,326
$30,000 Lipper Growth & Stock Fund
Income Fund Index Class A
$20,000
$10,000
$ 9,500
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Assumes: oHolding period from 10/1/88 to 9/30/98. oReturns do not reflect
taxes payable on distributions. oReinvestment of all income and capital
gain distributions for the Fund, with a value of $24,495. 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.
Average annual total return
(as of Sept. 30, 1998)
Since
1 year inception 5 years 10 years
Class A -3.06% --% 12.76% 14.08%
Class B* -2.25% 16.20%* --% --%
Class Y* 2.12% 17.82%* --% --%
*Inception date was March 20, 1995.
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.)
<PAGE>
The financial statements contained in Post-Effective Amendment #97 to
Registration Statement No. 2-11358 filed on or about November 25, 1998, are
incorporated herein by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(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.
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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.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the S&P 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Stock Index that are believed to have strong growth
potential. The Portfolio is managed using a research methodology by the Research
Department of AEFC. Goal is long-term appreciation.
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(This annual report is not part of the prospectus.)
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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.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks that generaly pay
dividends and bonds. Seeks growth of capital and income.
(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.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio that seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
(This annual report is not part of the prospectus.)
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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.
(icon of) Greek column
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.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
(This annual report is not part of the prospectus.)
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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.
(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
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, 1998
Class A
Income distributions
taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.43228
March 27, 1998 0.06940
June 26, 1998 0.08062
Sept. 25, 1998 0.06584
Total $0.64814
Capital gain distribution
taxable for long-term capital gain.
Payable date Per share
Dec. 29, 1997 $3.12588
Total distributions $3.77402
The distribution of $3.55816 per share, payable Dec. 29, 1997, consisted of
$0.08649 derived from net investment income, $0.34579 from net short-term
capital gains (a total of $0.43228 taxable as dividend income) and $3.12588
from net long-term capital gains.
The long-term gains distribution is divided into two rate categories: 28% -
$1.81832 and 20% - $1.30756.
(This annual report is not part of the prospectus.)
<PAGE>
Class B
Income distributions
taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.38084
March 27, 1998 0.02525
June 26, 1998 0.03119
Sept. 25, 1998 0.01802
Total $0.45530
Capital gain distribution
taxable for long-term capital gain.
Payable date Per share
Dec. 29, 1997 $3.12588
Total distributions $3.58118
The distribution of $3.50672 per share, payable Dec. 29, 1997, consisted of
$0.03505 derived from net investment income, $0.34579 from net short-term
capital gains (a total of $0.38084 taxable as dividend income) and $3.12588
from net long-term capital gains.
The long-term gains distribution is divided into two rate categories: 28% -
$1.81832 and 20% - $1.30756.
Class Y
Income distributions
taxable as dividend income, 100% qualifying for deduction by corporations.
Payable date Per share
Dec. 29, 1997 $0.43738
March 27, 1998 0.07359
June 26, 1998 0.08534
Sept. 25, 1998 0.07049
Total $0.66680
Capital gain distribution
taxable for long-term capital gain.
Payable date Per share
Dec. 29, 1997 $3.12588
Total distributions $3.79268
The distribution of $3.56326 per share, payable Dec. 29, 1997, consisted of
$0.09159 derived from net investment income, $0.34579 from net short-term
capital gains (a total of $0.43738 taxable as dividend income) and $3.12588
from net long-term capital gains.
The long-term gains distribution is divided into two rate categories: 28% -
$1.81832 and 20% - $1.30756.
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference*
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
612-671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
*You may experience delays when call volumes are high.
<PAGE>
AMERICAN EXPRESS
Financial Advisors
IDS 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.
