1998 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.
<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 chairman 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 chairman
If you're an experienced investor, you know that the past few years have
been unusually strong 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 last October, when declines in Asian markets spawned a
sharp drop in several financial markets worldwide, including the U.S.
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.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
An excellent environment for large-capitalization stocks resulted in a
very productive six months for IDS Stock Fund. For the first half of the
fiscal year -- October 1997 through March 1998 -- the Fund's Class A
shares generated a total return of 13.5%. (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.)
After sinking in the aftermath of last fall's financial crisis in Asia,
the U.S. market spent most of the winter essentially treading water. But
by February, the worst of the Asian flu seemed to have passed, and
investors' optimism was renewed by continued reports of low inflation and,
for the most part, solid corporate profits. That combination was enough to
re-ignite the stock market, which went on a two-month tear that more than
made up for the doldrums of the previous months.
As had been the case since the start of the market's stunning surge that
began in early 1995, large-capitalization growth stocks most often led the
advance over the past six 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 set the red-hot pace for the market. On the other hand, the
Fund's comparatively substantial dividend helped cushion the net asset
value during difficult periods, such as last fall's Asia-induced downturn.
Strong sectors
Looking at the Fund's most-productive investments, stocks in the
pharmaceutical (such as Pfizer and Merck) and financial services
(BankAmerica, Travelers) sectors were especially strong. Solid
contributions also came from household product (Procter & Gamble,
Gillette) and retailing (Dayton Hudson, Wal-Mart) stocks. The Fund's
foreign holdings, which were concentrated in Europe and made up 10%-15% of
assets, paid off well, too.
To shore up the Fund's dividend, I maintained a healthy exposure to
utility stocks, mainly telephone companies, as well as convertible
preferred stocks and convertible bonds. Overall, the portfolio was little
changed during the six months. I did shift more money into financial
services, and brought foreign investments down a bit.
As for the rest of the fiscal year, the investment environment continues
to appear reasonably good, although I will be surprised if stocks don't
retreat at least modestly sometime before year-end. In any event, I plan
to keep the Fund concentrated in a wide range of stocks of large,
high-quality companies, complemented by higher-yielding securities that
contribute to the Fund's dividend.
Richard H. Warden
(picture of) Richard H. Warden
Richard H. Warden
Portfolio manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $27.06
Sept. 30, 1997 $27.44
Decrease $ 0.38
Distributions
Oct. 1, 1997 - March 31, 1998
From income $ 0.50
From capital gains $ 3.13
Total distributions $ 3.63
Total return* +13.5%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $26.92
Sept. 30, 1997 $27.32
Decrease $ 0.40
Distributions
Oct. 1, 1997 - March 31, 1998
From income $ 0.40
From capital gains $ 3.13
Total distributions $ 3.53
Total return* +13.1%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $27.06
Sept. 30, 1997 $27.44
Decrease $ 0.38
Distributions
Oct. 1, 1997 - March 31, 1998
From income $ 0.51
From capital gains $ 3.13
Total distributions $ 3.64
Total return* +13.6%**
*The prospectus discusses the effect of sales charges, if any, on the
various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Portfolio's ten largest holdings
Percent Value
(of Portfolio's net assets) (as of March 31, 1998)
General Electric 2.41% $112,043,750
Merck & Co 1.94 89,977,010
Colgate-Palmolive 1.87 86,625,000
Pfizer 1.72 79,750,000
EXEL 1.67 77,499,999
Safeway 1.59 73,875,000
Rite Aid 1.47 68,500,000
Mutual Risk Management 1.46 67,750,000
Schering-Plough 1.41 65,350,000
UNUM 1.40 65,038,354
3.25% Cv Preferred
(icon of) pie chart
The ten holdings listed here make up 16.94% of the Portfolio's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Stock Fund, Inc.
March 31, 1998
Assets
(Unaudited)
<S> <C>
Investments in Equity Portfolio (Note 1) $4,641,540,937
Liabilities
Accrued distribution fee 5,312
Accrued service fee 19,596
Accrued transfer agency fee 10,439
Accrued administrative services fee 3,416
Other accrued expenses 173,584
-------
Total liabilities 212,347
-------
Net assets applicable to outstanding capital stock $4,641,328,590
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,715,922
Additional paid-in capital 3,092,527,334
Undistributed net investment income (904,972)
Accumulated net realized gain (loss) 232,305,694
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 1,315,684,612
-------------
Total-- representing net assets applicable to outstanding capital stock 4,641,328,590
=============
Net assets applicable to outstanding shares: Class A $3,174,174,220
Class B $ 260,780,665
Class Y $1,206,373,705
Net asset value per share of outstanding capital stock Class A shares 117,320,837 $ 27.06
Class B shares 9,688,502 $ 26.92
Class Y shares 44,582,900 $ 27.06
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Stock Fund, Inc.
Six months ended March 31, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividend $ 33,949,382
Interest 5,955,179
Less foreign taxes withheld (414,734)
--------
Total income 39,489,827
Expenses (Note 2):
Expenses allocated from Equity Portfolio 9,898,657
Distribution fee -- Class B 834,248
Transfer agency fee 1,861,073
Incremental transfer agency fee-- Class B 9,975
Service fee
Class A 2,475,816
Class B 193,271
Class Y 559,170
Administrative services fees and expenses 592,614
Compensation of board members 7,047
Postage23,400
Registration fees 255,062
Audit fees 4,812
Other expenses 4,405
-----
Total expenses 16,719,550
Earnings credits on cash balances (Note 2) (185,466)
--------
Total net expenses 16,534,084
----------
Investment income (loss)-- net 22,955,743
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 291,485,631
Foreign currency transactions 1,120,588
---------
Net realized gain (loss) on investments 292,606,219
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 241,036,723
-----------
Net gain (loss) on investments and foreign currencies 533,642,942
-----------
Net increase (decrease) in net assets resulting from operations $556,598,685
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Stock Fund, Inc.
Operations March 31, 1998 Sept. 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 22,955,743 $ 58,375,366
Net realized gain (loss) on investments 292,606,219 490,531,772
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 241,036,723 427,269,463
----------- -----------
Net increase (decrease) in net assets resulting from operations 556,598,685 976,176,601
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (17,132,021) (44,462,913)
Class B (527,292) (1,646,156)
Class Y (6,992,874) (17,928,151)
Net realized gain
Class A (361,177,439) (113,973,806)
Class B (27,613,854) (6,116,806)
Class Y (141,133,199) (43,104,797)
------------ -----------
Total distributions (554,576,679) (227,232,629)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 116,453,116 242,084,917
Class B shares 39,654,859 72,920,015
Class Y shares 167,576,358 252,272,494
Reinvestment of distributions at net asset value
Class A shares 348,254,640 145,741,344
Class B shares 27,897,120 7,699,303
Class Y shares 130,889,602 53,455,672
Payment for redemptions
Class A shares (170,666,271) (340,439,519)
Class B shares (Note 2) (11,514,042) (16,926,750)
Class Y shares (172,051,554) (287,081,216)
------------ ------------
Increase (decrease) in net assets from capital share transactions 476,493,828 129,726,260
----------- -----------
Total increase (decrease) in net assets 478,515,834 878,670,232
Net assets at beginning of period 4,162,812,756 3,284,142,524
------------- -------------
Net assets at end of period $4,641,328,590 $4,162,812,756
============== ==============
Undistributed (excess of distributions over) net investment income $ (904,972) $ 791,472
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Stock Fund, Inc.
(Unaudited as to March 31, 1998)
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 has 10 billion authorized shares of capital stock. 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
shares during the ninth calendar year of ownership. 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, 1998 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 from net investment income, declared and paid each calendar
quarter, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed
along with the last income dividend of the calendar year.
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 an agreement with American
Express Financial Corporation (AEFC) for providing administrative
services. 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 and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC 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 and commencing on May 9,
1997, the fee is calculated at a rate of 0.10% of the Fund's average daily
net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $1,446,153 for Class A and $77,293 for Class
B for the six months ended March 31, 1998.
During the six months ended March 31, 1998, the Fund's transfer agency
fees were reduced by $185,466 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, 1998
Class A Class B Class Y
Sold 4,457,626 1,523,302 6,404,181
Issued for reinvested 14,516,447 1,170,158 5,454,441
distributions
Redeemed (6,506,427) (443,656) (6,712,511)
Net increase (decrease) 12,467,646 2,249,804 5,146,111
Year ended Sept. 30, 1997
Class A Class B Class Y
Sold 9,885,572 3,000,534 10,328,998
Issued for reinvested 6,259,225 333,244 2,293,106
distributions
Redeemed (13,870,549) (687,579) (11,846,789)
Net increase (decrease) 2,274,248 2,646,199 775,315
<PAGE>
<TABLE>
<CAPTION>
4
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(a) Class A
1998(b) 1997 1996(c) 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $27.44 $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43 $17.04
beginning of period
Income from investment operations:
Net investment income (loss) .14 .39 .43 .52 .58 .55 .64 .68 .83 .77 .56
Net gains (losses) (both 3.11 6.11 3.17 1.96 .21 2.93 1.11 4.02 (.87) 3.26 1.13
realized and unrealized)
Total from investment operations 3.25 6.50 3.60 2.48 .79 3.48 1.75 4.70 (.04) 4.03 1.69
Less distributions:
Dividends from net (.16) (.43) (.39) (.49) (.60) (.53) (.63) (.74) (.85) (.70) (.55)
investment income
Distributions from (3.47) (1.12) (.68) (1.51) (1.95) (1.76) (1.09) (1.20) (2.61) -- (.75)
realized gains
Total distributions (3.63) (1.55) (1.07) (2.00) (2.55) (2.29) (1.72) (1.94) (3.46) (.70) (1.30)
Net asset value, $27.06 $27.44 $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43
end of period
Ratios/supplemental data Class A
1998b 1997 1996c 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of $3,174 $2,877 $2,307 $1,984 $2,368 $2,059 $1,658 $1,513 $1,213 $1,347 $1,246
period (in millions)
Ratio of expenses to .77%e .78% .80%e .79% .76% .73% .72% .65% .63% .60% .58%
average daily net assetsd
Ratio of net income (loss) to 1.10%e 1.58% 2.19%e 2.61% 2.99% 2.75% 3.21% 3.59% 4.32% 3.94% 3.17%
average daily net assets
Portfolio turnover rate 41% 82% 71% 69% 75% 76% 77% 58% 26% 54% 27%
(excluding short-term
securities)
Total returnf 13.5% 30.2% 18.6% 14.4% 3.9% 18.8% 9.4% 29.0% (0.9%) 23.4% 10.1%
Average brokerage $.0447 $.0320 $.0388 -- -- -- -- -- -- -- --
commission rateg
a For a share outstanding throughout the period. Rounded to
the nearest cent.
b Six months ended March 31, 1998 (Unaudited).
c The Fund's fiscal year-end was changed from Oct. 31 to Sept.
30, effective 1996.
d Effective fiscal period 1996, expense ratio is based on
total expenses of the Fund before reduction of earnings credits on cash
balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
g Effective fiscal period 1996, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign countries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Sept. 30,
Per share income and capital changes(a)
Class B Class Y
1998(b) 1997 1996(c) 1995(d) 1998(b) 1997 1996(c) 1995(d)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $27.32 $22.42 $19.91 $18.03 $27.44 $22.49 $19.96 $18.03
beginning of period
Income from investment operations:
Net investment income (loss) .05 .22 .28 .27 .14 .42 .47 .29
Net gains (losses) (both realized 3.08 6.05 3.17 1.92 3.12 6.11 3.17 2.01
and unrealized)
Total from investment operations 3.13 6.27 3.45 2.19 3.26 6.53 3.64 2.30
Less distributions:
Dividends from net (.06) (.25) (.26) (.31) (.17) (.46) (.43) (.37)
investment income
Distributions from (3.47) (1.12) (.68) -- (3.47) (1.12) (.68) --
realized gains
Total distributions (3.53) (1.37) (.94) (.31) (3.64) (1.58) (1.11) (.37)
Net asset value, $26.92 $27.32 $22.42 $19.91 $27.06 $27.44 $22.49 $19.96
end of period
Ratios/supplemental data
Class B Class Y
1998b 1997 1996c 1995d 1998b 1997 1996c 1995d
Net assets, end of $261 $203 $107 $29 $1,206 $1,082 $870 $738
period (in millions)
Ratio of expenses to 1.53%f 1.55% 1.57%f 1.61%f .70%f .66% .63%f .64%f
average daily net assets(e)
Ratio of net income (loss) to .35%f .85% 1.61%f 1.37%f 1.17%f 1.71% 2.36%(f) 2.38%f
average daily net assets
Portfolio turnover rate 41% 82% 71% 69% 41% 82% 71% 69%
(excluding short-term
securities)
Total return(g) 13.1% 29.2% 17.8% 12.1% 13.6% 30.4% 18.8% 12.8%
Average brokerage $.0447 $.0320 $.0388 -- $.0447 $.0320 $.0388 --
commission rate(h)
a For a share outstanding throughout the period. Rounded to
the nearest cent.
b Six months ended March 31, 1998 (Unaudited).
c The Fund's fiscal year-end was changed from Oct. 31 to Sept.
30, effective 1996.
d Inception date was March 20, 1995.
e Effective fiscal period 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances. fAdjusted to an
annual basis.
g Total return does not reflect payment of a sales charge.
h Effective fiscal period 1996, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged.The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign countries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
Equity Portfolio
March 31, 1998
Assets
<S> <C>
(Unaudited)
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated issuers (identified cost $3,295,427,197) $4,571,456,107
Investments in securities of affiliated issuers (identified cost $40,790,575) 80,629,082
----------
Total investments in securities (identified cost $3,336,217,772) 4,652,085,189
Cash in bank on demand deposit 612,033
Dividends and accrued interest receivable 6,229,476
Receivable for investment securities sold 25,374,094
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 5) 7,055
U.S. government securities held as collateral (Note 4) 34,819,670
----------
Total assets 4,719,127,517
-------------
Liabilities
Payable for investment securities purchased 32,707,055
Payable upon return of securities loaned (Note 4) 43,645,870
Accrued investment management services fee 40,222
Other accrued expenses 63,192
Option contracts written, at value (premium received $266,176) (Note 6) 225,000
-------
Total liabilities 76,681,339
----------
Net assets $4,642,446,178
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of operations
Equity Portfolio
Six months ended March 31, 1998
Investment income
(Unaudited)
Income:
<S> <C> <C>
Dividends (including $200,000 earned from affiliates) $ 33,955,945
Interest 5,946,633
Less foreign taxes withheld (414,814)
--------
Total income 39,487,764
----------
Expenses (Note 2):
Investment management services fee 9,674,266
Compensation of directors 12,083
Custodian fees 185,130
Audit fees 14,438
Other 15,473
------
Total expenses 9,901,390
Earnings credit on cash balances (Note 2) (821)
----
Total net expenses 9,900,569
---------
Investment income (loss) -- net 29,587,195
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 291,530,307
Foreign currency transactions 1,120,772
---------
Net realized gain (loss) on investments 292,651,079
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 241,096,482
-----------
Net gain (loss) on investments and foreign currencies 533,747,561
-----------
Net increase (decrease) in net assets resulting from operations $563,334,756
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Equity Portfolio
Operations and distributions March 31, 1998 Sept. 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 29,587,195 $ 69,424,362
Net realized gain (loss) on investments 292,651,079 490,586,825
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 241,096,482 427,383,679
----------- -----------
Net increase (decrease) in net assets resulting from operations 563,334,756 987,394,866
Net contributions (withdrawals) from partners (84,689,343) (108,642,196)
----------- ------------
Total increase (decrease) in net assets 478,645,413 878,752,670
Net assets at beginning of period (Note 1) 4,163,800,765 3,285,048,095
------------- -------------
Net assets at end of period $4,642,446,178 $4,163,800,765
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
Equity Portfolio
(Unaudited as to March 31, 1998)
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.
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. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for
which market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. 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 and 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 and sell put and call options and write covered call options on
portfolio securities and may write cash-secured put options. The risk in
writing a call option is that the 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 and 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.
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 $275,747 for the six months ended March
31, 1998.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, 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 and approved by the board.
During the six months ended March 31, 1998, the Portfolio's custodian fees
were reduced by $821 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 $1,670,887,676 and $1,749,217,547,
respectively, for the six months ended March 31, 1998. For the same
period, the portfolio turnover rate was 41%. Realized gains and losses are
determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $116,703
for the six months ended March 31, 1998.
4
Lending of
portfolio securities
At March 31, 1998, securities valued at $43,645,870 were on loan to
brokers. For collateral, the Portfolio received $8,826,200 in cash and
U.S. government securities valued at $34,819,670. Income from securities
lending amounted to $154,939 for the six months ended March 31, 1998. 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, 1998, 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 on
this contract is included in the accompanying financial statements. See
"Summary of significant accounting policies." The terms of the open
contract are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
March 25,1998 5,511,383 9,229,252 $7,055 $--
British Pound U.S. Dollar
6
Options contracts
written
The number of contracts and premium amounts associated with option
contracts written is as follows:
Six months ended March 31, 1998
Calls
Contracts Premium
Balance March 31, 1997 -- $ --
Opened 2,000 266,176
Balance March 31, 1998 2,000 $266,176
See "Summary of significant accounting policies."
<PAGE>
Investments in securities
Equity Portfolio
March 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks - 85.0%
Issuer Shares Value(a)
Aerospace & defense - 1.2%
General Motors Cl H 450,000 $20,362,500
Lockheed Martin 306,084 34,434,450
Total 54,796,950
Airlines - 1.6%
AMR 300,000(b) 42,956,250
Northwest Airlines Cl A 500,000(b) 30,843,750
Total 73,800,000
Automotive & related - 1.0%
Ford Motor 700,000 45,368,750
Banks and savings & loans - 6.4%
BankAmerica 500,000 41,312,500
BankBoston 300,000 33,075,000
First Chicago NBD 500,000 44,062,500
First Union 1,000,000 56,750,000
Norwest 800,000 33,250,000
Wachovia 620,000 52,583,750
Washington Mutual 500,000 35,859,375
Total 296,893,125
Beverages & tobacco - 1.4%
Coca-Cola 525,000 40,654,687
Philip Morris 575,000 23,970,313
Total 64,625,000
Building materials & construction - 2.1%
American Standard 1,000,000(b) 45,875,000
Martin Marietta Materials1,148,500 49,600,844
Total 95,475,844
Computers & office equipment - 5.6%
Bay Networks 1,300,000(b) 35,262,500
Compaq Computer 1,500,000 38,812,500
Hewlett-Packard 300,000 19,012,500
Microsoft 300,000(b) 26,850,000
Network Associates 500,000(b) 33,125,000
PeopleSoft 1,000,000(b) 52,687,500
Xerox 500,000 53,218,750
Total 258,968,750
Electronics - 1.2%
Harris 600,000 31,275,000
Intel 300,000 23,418,750
Total 54,693,750
Energy - 0.6%
Exxon 400,000 27,050,000
Energy equipment & services - 0.4%
Cooper Cameron 300,000(b) 18,112,500
Financial services - 2.1%
Associates First Capital Cl A180,000 $14,220,000
CIT Group Cl A 1,000,000 32,625,000
Providian Financial 250,000 14,359,375
Travelers Group 600,000(d) 36,000,000
Total 97,204,375
Food - 2.1%
Bestfoods 250,000 29,218,750
General Mills 500,000 38,000,000
Sara Lee 500,000 30,812,500
Total 98,031,250
Foreign - 12.8%(c)
Bayerische Vereinsbank 300,000(b) 21,894,259
Dresdner Bank 450,000 20,483,295
Elf Aquitaine ADR 600,000(d) 38,850,000
Ericsson (LM) ADR 5,000,000 33,125,000
EXEL 1,000,000 77,499,999
General Electric 4,100,000(b) 32,484,632
Meridian Gold 3,800,000(f) 12,879,082
Mid Ocean 444,000 34,410,000
Mutual Risk Management 2,000,000(d,f) 67,750,000
Rhone-Poulenc Cl A 699,893(b) 35,563,565
Royal Dutch Petroleum 1,100,000 62,493,750
Schlumberger 525,000 39,768,750
SmithKline Beecham ADR 625,000 39,101,563
Unilever 775,000 53,184,375
Union Bank of Switzerland 15,000 24,499,836
Total 593,988,106
Furniture & appliances - 2.0%
Maytag 1,000,000 47,812,500
Sunbeam 1,000,000 44,062,500
Total 91,875,000
Health care - 10.7%
American Home Products 300,000 28,612,500
Baxter Intl 750,000 41,343,750
Bristol-Myers Squibb 600,000 62,587,500
Guidant 775,000 56,865,625
Johnson & Johnson 625,000 45,820,313
Medtronic 500,000 25,937,500
Merck & Co 700,892 89,977,010
Pfizer 800,000 79,750,000
Schering-Plough 800,000 65,350,000
Total 496,244,198
Health care services - 0.5%
Tenet Healthcare 700,000(b) 25,418,750
Household products - 4.0%
Colgate-Palmolive 1,000,000 86,625,000
Gillette 400,000 47,475,000
Procter & Gamble 600,000 50,625,000
Total 184,725,000
Industrial equipment & services - 2.4%
Deere & Co 950,000 $58,840,625
Illinois Tool Works 800,000 51,800,000
Total 110,640,625
Insurance - 2.1%
American Intl Group 375,000 47,226,562
Provident Cos 439,750 15,088,922
SunAmerica 750,000 35,906,250
Total 98,221,734
Leisure time & entertainment - 0.5%
Disney (Walt) 200,000 21,350,000
Media - 2.5%
CBS 1,000,000 33,937,500
Chancellor Media 500,000(b) 22,937,500
Clear Channel
Communications 600,000(b) 58,800,000
Total 115,675,000
Metals - 1.1%
Getchell Gold 1,025,000(b) 21,396,875
Stillwater Mining 1,170,000(b) 29,615,625
Total 51,012,500
Multi-industry conglomerates - 3.8%
Cendant 1,000,000(b) 39,625,000
Emerson Electric 400,000 26,075,000
General Electric 1,300,000 112,043,750
Total 177,743,750
Paper & packaging - 0.5%
Longview Fibre 1,636,300(g) 25,464,919
Retail - 7.7%
American Stores 1,100,000 28,600,000
Dayton Hudson 500,000 44,000,000
Home Depot 600,000 40,462,500
Penney (JC) 550,000 41,628,125
Rite Aid 2,000,000 68,500,000
Safeway 2,000,000(b) 73,875,000
Wal-Mart Stores 1,200,000 60,975,000
Total 358,040,625
Utilities -- electric - 1.9%
Carolina Power & Light 600,000 27,150,000
FPL Group 600,000 38,550,000
Northern States Power 400,000 23,600,000
Total 89,300,000
Utilities -- telephone - 6.8%
Ameritech 800,000 $39,550,000
AT&T 700,000 45,937,500
Bell Atlantic 300,000 30,750,000
BellSouth 700,000 47,293,750
Century Telephone
Enterprises 300,000 18,337,500
Cincinnati Bell 500,000 17,812,500
SBC Communications 600,000 26,175,000
Southern New England
Telecommunications 250,000 18,078,125
Teleport Communications
Group Cl A 425,000(b) 24,968,750
U S WEST
Communications Group 900,000 49,275,000
Total 318,178,125
Total common stocks
(Cost: $2,686,712,007) $3,942,898,626
Preferred stocks & other - 10.4%
Issuer Shares Value(a)
AirTouch Communications
4.00% Cv 525,000 $21,787,500
Altera
Cv 347,826(e) 15,638,257
Cendant
7.50% Cv PRIDES 920,000(l) 47,955,000
Emerson Electric
5.00% Cv PERCS 615,380(k) 36,935,723
Finova Finance Trust
5.50% Cv 213,900 17,005,050
Gillette
3.00% Cv Series G 195,000 17,501,250
Glenborough Realty Trust
7.75% Cv Series A 402,105 10,504,993
Host Marriott Financial Trust
6.75% Cv 300,000 17,175,000
Houston Inds
7.00% Cv ACES 325,000(j) 21,064,063
Intel
5.00% Cv PERCS 206,000(k) 31,697,220
McKesson
5.00% Cv 200,000(e) 16,275,000
Medtronic
5.00% Cv 884,250 38,234,970
Newell Financial Trust
5.25% Cm Cv 250,000 14,218,750
PLC Capital
6.50% Cv PRIDES 80,000(l) 4,940,000
Premier Parks
7.50% Cv 175,000 10,150,000
Rhone-Poulenc
Warrants 699,893 3,941,468
Service Corp Intl
5.00% Cv 1,100,000 $24,585,000
Sprint
8.25% Cv 154,325 9,896,091
SunAmerica
$3.19 Cv PERCS 500,000(k) 24,218,750
Union Pacific Capital
6.25% Cv 465,000 23,250,000
UNUM
3.25% Cv 1,217,092(b) $65,038,354
WorldCom
8.00% Cv 73,625 10,988,531
Total preferred stocks & other
(Cost: $420,529,521) $483,000,970
<PAGE>
<TABLE>
<CAPTION>
Bonds - 1.8%
Issuer Coupon Principal Value(a)
rate amount
<S> <C> <C> <C>
Costco
Zero Coupon Cv Sub Nts
08-01-17 3.51% $21,000,000(e,h) $14,096,250
Diamond Offshore Drilling
Cv Sr Sub Nts
09-15-07 3.13 7,050,000 6,944,250
Learning
Cv Sr Nts
11-01-00 5.50 15,000,000 13,800,000
Network Associates
Zero Coupon Cv Sub Deb
02-13-18 4.09 20,000,000(h) 9,125,000
Office Depot
Zero Coupon Cv Nt
11-01-08 3.70 7,300,000(h) 5,392,875
PLATINUM Technology
Cv Sub Nts
12-15-02 6.25 15,000,000(e) 15,600,000
Solectron
Cv Sub Nts
03-01-06 6.00 6,700,000 9,220,875
Xilinx
Cv Sub Nts
11-01-02 5.25 10,000,000 9,975,000
Total bonds
(Cost: $79,299,999) $84,154,250
</TABLE>
<PAGE>
Options purchased - 0.0%
Issuer Number of Exercise Expiration Value(a)
shares price date
Put
S&P 500 400,000 $15 April 1998 $1,300,000
Total options purchased
(Cost: $8,941,000) $1,300,000
Short-term securities - 3.0%
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies - 0.5%
Federal Home Loan Bank Disc Nt
04-01-98 5.46% $2,900,000 $2,900,000
Federal Home Loan Mtge Corp Disc Nt
04-23-98 5.47 600,000 598,002
Federal Natl Mtge Assn Disc Nt
04-13-98 5.54 20,000,000 19,963,132
Total 23,461,134
Commercial paper - 2.5%
BOC Group
04-01-98 6.09 4,300,000(i) 4,300,000
Clorox
05-13-98 5.59 2,100,000 2,086,378
Commerzbank U.S. Finance
04-27-98 5.57 8,000,000 7,967,933
Fleet Funding
04-16-98 5.56 3,900,000(i) 3,891,014
Glaxo Wellcome
04-24-98 5.63 10,300,000(i)10,263,083
Heinz (HJ)
04-22-98 5.54 5,800,000 5,781,392
Kellogg
05-01-98 5.57 10,600,000 10,550,975
Kredietbank North America Finance
04-27-98 5.52%$15,100,000 $15,036,391
Natl Australia Funding (Delaware)
05-11-98 5.54 1,300,000 1,292,056
New Center Asset Trust
04-14-98 5.52 15,000,000 14,970,317
Novartis Finance
05-01-98 5.55 8,500,000 8,460,900
Pacific Life Insurance
04-30-98 5.57 13,900,000 13,837,855
Toyota Motor Credit
05-01-98 5.58 10,000,000 9,953,750
Westpac Capital
04-17-98 5.54 8,900,000 8,878,165
Total 117,270,209
Total short-term securities
(Cost: $140,735,245) $140,731,343
Total investments in securities
(Cost $3,336,217,772)(m) $4,652,085,189
See accompanying notes to investments in securities.
<PAGE>
<TABLE>
<CAPTION>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Security is partially or fully on loan. See Note 4 to the financial
statements.
(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) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
six months ended March 31, 1998 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
<S> <C> <C> <C> <C> <C> <C>
Meridian Gold $14,110,518 $-- $-- $14,110,518 $ -- $12,879,082
Mutual Risk Management 26,680,057 -- -- 26,680,057 200,000 67,750,000
Total $40,790,575 $-- $-- $40,790,575 $200,000 $80,629,082
(g) At March 31, 1998, securities valued at $3,112,500 were held to cover open
call options written as follows:
Issuer Number of Exercise Expiration Value(a)
shares price date
Longview Fibre 200,000 $15 June 1998 $225,000
(h) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(i) Commercial paper sold within terms of a private placement memorandum, exempt
under Section 4(2) of the Securities Act of 1933, as amended, and may be sold
only to dealers in that program or other "accredited investors." This security
has been determined to be liquid under guidelines established by the board.
(j) ACES are automatically convertible to the underlying equity securities.
(k) PERCS (Preferred-Equity Redeemable Cumulative Securities) are convertible
preferred securities. PERCS are like buying an underlying common stock and
selling a call option against the position.
(l) PRIDES (Preferred Redeemable Increased Dividend Equity Securities) are
structured as convertible preferred securities. Investors receive an enhanced
yield but based upon a specific formula, potential appreciation is limited.
PRIDES pay dividends, have voting rights, are noncallable for three years and
upon maturity, convert into shares of common stock.
(m) At March 31, 1998, the cost of securities for federal income tax purposes
was approximately $3,336,218,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation......................................$1,364,487,000
Unrealized depreciation.........................................(48,620,000)
Net unrealized appreciation..................................$1,315,867,000
</TABLE>
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
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.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
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.
Officer
Vice president, Leslie L. Ogg*
general counsel President, treasurer and corporate secretary of Board Services
and secretary Corporation.
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
<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.
(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.
(icon of) trees
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, 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.
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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 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.
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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 of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
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IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
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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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For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
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:
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
AMERICAN EXPRESS Financial Advisors
IDS Stock Fund
IDS Tower 10
Minneapolis, MN 55440-0010
