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1997 ANNUAL REPORT
IDS Equity Value Fund
(prospectus enclosed)
(Icon of) Three growing flowers
The goal of IDS Equity Value Fund, a part of IDS Strategy Fund,
Inc., is growth of capital and income. The Fund invests primarily
in equity securities that provide income, offer the opportunity for
long-term capital growth, or both.
(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., Member
SIPC.
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(Icon of) Three growing flowers
Stocks for the bargain-hunter
Just like almost everything else, prices of companies that are
believed to be sound sometimes are reduced. That is, for any of a
variety of reasons, they fall out of favor with investors and their
stock prices decline. These so-called "value" stocks represent a
classic opportunity to buy low in the market, which is what Equity
Value Fund seeks to do. Should investors rediscover the potential
of such companies, the stocks may well recover and benefit
shareholders accordingly.
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Contents
The purpose of this annual report is to tell investors how the Fund
performed.
(Icon of) One open book inside of another.
The prospectus, which is bound into the middle of this annual
report, describes the Fund in detail.
1997 annual report
From the president 4
From the portfolio manager 4
Ten largest holdings 6
Making the most of your Fund 7
Long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 29
IDS mutual funds 33
Federal income tax information 37
1997 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative purchase arrangements 3p
Sales charge and Fund expenses 4p
Performance 6p
Financial highlights 6p
Total returns 8p
Investment policies and risks 11p
Facts about investments and their risks 12p
Alternative investment option 18p
Valuing Fund shares 18p
How to purchase, exchange or redeem shares 19p
Alternative purchase arrangements 19p
How to purchase shares 22p
How to exchange shares 25p
How to redeem shares 26p
Reductions and waivers of the sales charge 31p
Special shareholder services 35p
Services 35p
Quick telephone reference 35p
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Distributions and taxes 36p
Dividend and capital gain distributions 36p
Reinvestments 37p
Taxes 38p
How to determine the correct TIN 40p
How the Fund is organized 41p
Shares 41p
Voting rights 41p
Shareholder meetings 41p
Board members and officers 42p
Investment manager 44p
Administrator and transfer agent 44p
Distributor 45p
About American Express Financial Corporation 46p
General information 46p
Appendix 47p
Descriptions of derivative instruments 47p
(This annual report is not part of the prospectus.)
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To our shareholders
(Photo of) William R. Pearce, President of the Fund
(Photo of) Thomas W. Medcalf, Portfolio manager
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
bullmarkets 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
From the portfolio manager
The past fiscal year was a favorable period for the Fund, as it
recorded a healthy advance while proving to be less volatile than
the stock market as a whole. The result was a 18.5% total return
for investors in Class A shares during the 12 months from April
1996 through March 1997. (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.)
The broad stock market bobbed up and down for the first several
months of the period, as investors tried to sort out various
economic data and come up with a consensus on the outlook for
corporate earnings and interest rates. It wasn't until last
September that a generally positive view prevailed. From that
point, the market wasted no time mounting a powerful rally that
eventually put it at an all-time high by mid-February. The period
ended on a sour note, however, as a rise in long-term interest
rates caused the market to stumble sharply during the final weeks.
(This annual report is not part of the prospectus.)
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Value less volatile
For the Fund, it was a less dramatic 12 months. Value stocks, true
to their nature, neither soared as high nor slumped as low as did
the broad market. This was evident during the market's decline
late in the period, as the Fund's investments held up much better
than stocks as a whole. This is often the case with value stocks,
as their above-average dividends and below-average valuations tend
to provide a measure of price support during market sell-offs.
The most productive period for the Fund was last fall, when it
rallied smartly along with the market. Stocks of banks and
insurance companies, a longtime staple of the Fund, led the way
during that time, as they did for the Fund throughout most of the
fiscal year. Consumer stocks, which include the pharmaceutical and
food/beverage sectors, constituted another area of substantial
investment exposure and generally provided positive results.
Conservative measures
Looking at changes to the Fund's portfolio, as the market climbed
higher, I gradually made it more defensive to provide something of
a cushion in the event of a downturn. This strategy centered on
adding more electric and telephone utility stocks, as well as
stocks of real estate investment trusts, all of which offer well-
above-average dividends and, generally, less price volatility.
As for the current fiscal year, I think a conservative investment
approach remains appropriate. While economic growth and inflation
are still favorable as I prepare this report in mid-April, the
Federal Reserve has recently raised short-term interest rates and
may well do so again. If so, I expect that will keep the market
off balance until, at some point, reports of healthy corporate
earnings and unthreatening inflation can provide a counterweight.
In the meantime, if the market encounters choppy conditions, the
Fund's value orientation should continue to serve it relatively
well.
Thomas W. Medcalf
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $11.62
March 31, 1996 $11.06
Increase $ 0.56
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Distributions
April 1, 1996 - March 31, 1997
From income $ 0.59
From capital gains $ 0.84
Total distributions $ 1.43
Total return* +18.5%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $11.63
March 31, 1996 $11.07
Increase $ 0.56
Distributions
April 1, 1996 - March 31, 1997
From income $ 0.50
From capital gains $ 0.84
Total distributions $ 1.34
Total return* +17.6%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1997 $11.64
March 31, 1996 $11.07
Increase $ 0.57
Distributions
April 1, 1996 - March 31, 1997
From income $ 0.61
From capital gains $ 0.84
Total distributions $ 1.45
Total return* +18.7%**
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*The prospectus discusses the effect of sales charges, if any,
on the various classes.
**The total return is a hypothetical investment in the Fund with
all distributions reinvested.
(This annual report is not part of the prospectus.)
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PAGE 9
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of March 31, 1997)
Gannett 1.66% $32,203,125
Royal Dutch Petroleum 1.58 30,625,000
Dow Chemical 1.55 30,000,000
Mobil 1.52 29,390,625
SBC Communications 1.50 28,943,750
AT&T 1.48 28,668,750
Penney (JC) 1.48 28,575,000
Baxter Intl 1.45 28,031,250
SmithKline Beecham ADR 1.45 28,000,000
Chevron 1.44 27,850,000
The ten holdings listed here make up 15.11% of the Fund'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
Mar 100 17 5.88 XXXXXx
Apr 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
(footnotes 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 in table pointing to September) and fewer shares when the
per share market price is high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
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The Fund's long-term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do
well
o you receive capital gains when the gains on investments sold
by the Fund exceed losses
o you receive income when the Fund's stock dividends, interest
and short-term gains exceed its expenses.
All three make up your total return. And you potentially can
increase your investment if, like most investors, you reinvest your
dividends and capital gain distributions to buy additional shares
of the Fund or another fund.
How your $10,000 has grown in IDS Equity Value Fund
$33,649
IDS Equity
Value Fund
Class B
S&P 500
Stock Index
$30,000
$20,000
Lipper Growth
& Income Index
$10,000
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
Average annual total return
(as of March 31, 1997)
1 year Since Inception* 5 years 10 years
Class A +12.53% +19.63% --% --%
Class B +13.55% --% +14.06% +12.83%
Class Y +18.67% +22.57% --% --%
*Inception date was March 20, 1995
On the graph above you can see how the Fund's total return compared
to two widely cited performance indexes, the S&P 500 and the Lipper
Growth and Income Fund Index. Sales charges are not reflected in
the performance of the indexes.
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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.
Assumes: Holding period from 4/1/87 to 3/31/97. Returns do not
reflect taxes payable on distributions. Reinvestment of all income
and capital gain distributions for the Fund, with a value of
$18,652. Also see "Performance" in the Fund's current prospectus.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which the Fund invests.
Lipper Growth & Income Fund Index, published by Lipper Analytical
Services, Inc. includes 30 funds that are generally similar to this
Fund, although some funds in the index may have somewhat different
investment policies or objectives.
(This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #29
to Registration Statement No. 2-89288 filed on or about May 29,
1997 are incorporated herein by reference.
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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 holding two worlds
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.
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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) office 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
(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.
(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.
(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<PAGE>
PAGE 16
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 of 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 which 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
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) coins
(This annual report is not part of the prospectus.)
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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.
(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.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or
guaranteed as to the timely payment of principal and interest by
the U.S. government, its agencies and instrumentalities. Seeks a
high level of current income and safety of principal consistent
with its type of investments.
(icon of) shield with eagle head enclosed
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 enclosed
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 enclosed
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IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to
provide income to residents of each respective state that is exempt
from federal, state and local income taxes. (New York is the only
state that is exempt at the local level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-
quality municipal bonds and notes. Lower-quality securities
generally involve greater risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities
with intermediate-term maturities issued by state and local
government units. Goal is to seek a high level of current income
exempt from federal taxes.
(icon of) shield with a tree enclosed
Money market funds
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. An investment in these funds is
neither insured nor guaranteed by the U.S. government, and there
can be no assurance that these funds will be able to maintain a
stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposit (CDs) and
other bank securities.
(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>
PAGE 19
Federal income tax information
IDS Equity Value Fund
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 a 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 adviser on how to
report distributions for state and local purposes.
IDS Equity Value Fund
Fiscal year ended March 31, 1997
Class A
Income distributions
taxable as dividend income, 45.75% qualifying for deduction by
corporations.
Payable date Per share
June 28, 1996 $0.08983
Sept. 27, 1996 0.08673
Dec. 27, 1996 0.34400
March 27, 1997 0.06790
Total $0.58846
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.84407
Total distributions $1.43253
The distribution of $1.18807 per share, payable Dec. 27, 1996,
consisted of $0.06461 derived from net investment income, $0.27939
from net short-term capital gains (a total of $0.34400 taxable as
dividend income) and $0.84407 from net long-term capital gains.
(This annual report is not part of the prospectus.)<PAGE>
PAGE 20
Federal income tax information
IDS Equity Value Fund
Class B
Income distributions
taxable as dividend income, 45.75% qualifying for deduction by
corporations.
Payable date Per share
June 28, 1996 $0.06867
Sept. 27, 1996 0.06563
Dec. 27, 1996 0.32116
March 27, 1997 0.04562
Total $0.50108
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.84407
Total distributions $1.34515
The distribution of $1.16523 per share, payable Dec. 27, 1996,
consisted of $0.04177 derived from net investment income,
$0.27939 from net short-term capital gains (a total of $0.32116
taxable as dividend income) and $0.84407 from net long-term capital
gains.
(This annual report is not part of the prospectus.)<PAGE>
PAGE 21
Class Y
Income distributions
taxable as dividend income, 45.75% qualifying for deduction by
corporations.
Payable date Per share
June 28, 1996 $0.09478
Sept. 27, 1996 0.09157
Dec. 27, 1996 0.34917
March 27, 1997 0.07278
Total distributions $0.60830
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.84407
Total distributions $1.45237
The distribution of $1.19324 per share, payable Dec. 27, 1996,
consisted of $0.06978 derived from net investment income,
$0.27939 from net short-term capital gains (a total of $0.34917
taxable as dividend income) and $0.84407 from net long-term capital
gains.
(This annual report is not part of the prospectus.)<PAGE>
PAGE 22
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
TTY Service
For the hearing impaired
800-846-4852
American Express Financial Advisors Easy Access Line
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
800-862-7919
AMERICAN
EXPRESS
Financial
Advisors
IDS Equity Value Fund
IDS Tower 10
Minneapolis, MN 55440-0010
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PAGE 23
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.
