1998 semiannual report
IDS
Strategy
Aggressive
Fund
(icon of) chess piece
The goal of IDS Strategy Aggressive Fund, a part of IDS Strategy Fund, Inc., is
long-term growth of capital. The Fund invests primarily in common stocks that
are selected for their above-average growth potential.
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) chess piece
Corporate climbers
All rapidly growing companies pass through various stages. During their middle
stage, they're known in the investment world as "mid-caps." Stocks of such
companies, which are the main focus of this Fund, offer investors an attractive
combination: the potential for above-average corporate growth without the
initial risks that are inherent in brand-new businesses.
Contents
From the chairman 3
From the portfolio manager 3
The Fund's ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 24
Board members and officers 27
IDS mutual funds 28
<PAGE>
To our shareholders
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.
That potential for such volatility reinforces the need for investors to
periodically review their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other is
a meeting with your American Express financial advisor. That becomes even
more important if there's a major change in your financial situation or in
the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
A sharp decline in the U.S. stock market resulted in a substantial loss for
IDS Strategy Aggressive Fund during the first half of the fiscal year. For
the six months -- April through September 1998 -- the value of the Fund's
Class A shares fell 15.3%.
The investment environment was still positive as the period began:
inflation remained low; long-term interest rates were down; and corporate
profits continued to be reasonably strong. Against that backdrop, the stock
market, though still quite volatile, made its way to higher ground by
mid-summer.
It was then that a second bout of the "Asian flu" (the financial crisis
that ran through Southeast Asia in the fall of 1997) hit, this time in
Russia and Latin America. Already fearful that profits of U.S. companies
would decline as a result of reduced exports to Asia, investors took this
latest outbreak a sure sell signal. As a result, the Dow Jones Industrial
Average fell by nearly 20% from mid-July to the end of August.
Much of the downturn was concentrated in technology and financial services
stocks, two groups that composed a substantial portion of the Fund's
portfolio. A moderate rebound by the market in the following month
concluded the period on a positive note, but it couldn't prevent the market
from recording its worst quarterly performance (July through September)
since 1990.
Some portfolio shifts
Like most aggressive stock funds, there was essentially no place for this
one to hide during the decline. I did sell some stocks, mainly in
telecommunications equipment and financial services, that appeared
especially vulnerable to slower economic growth. I also reduced holdings
among oil-services stocks, which struggled in the wake of falling oil
prices. One benefit of those sales was that they greatly reduced a capital
gain that had built up in the Fund and would have resulted in a large
taxable distribution to shareholders at the end of 1998.
At period-end, there were about 90 stocks in the portfolio, compared with
about 100 six months earlier. That number may come down somewhat, as I
think a more concentrated portfolio has better potential for gain. The mix
of the holdings is largely the same; the largest exposure is to the
technology and health care sectors, which continue to offer the best
earnings-growth potential, followed by financial services.
There's also about 12% of the portfolio in cash reserves at this time
(mid-October). That means there's money available to take advantage of
lower prices on stocks of companies that continue to look quite promising.
Sooner or later, stocks will get back on the positive track, and my goal is
to position the Fund to make the most of that opportunity.
Louis Giglio
(picture of) Louis Giglio
Louis Giglio
Portfolio Manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 18.79
March 31, 1998 $ 22.12
Decrease $ 3.33
Distributions
April 1, 1998 - Sept. 30, 1998
From income $ --
From capital gains $ --
Total distributions $ --
Total return* -15.3%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 18.17
March 31, 1998 $ 21.48
Decrease $ 3.31
Distributions
April 1, 1998 - Sept. 30, 1998
From income $ --
From capital gains $ --
Total distributions $ --
Total return* -15.7%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 18.87
March 31, 1998 $ 22.22
Decrease $ 3.35
Distributions
April 1, 1998 - Sept. 30, 1998
From income $ --
From capital gains $ --
Total distributions $ --
Total return* -15.3%**
*The prospectus discusses the effect of the sales charge, if any, on the
various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of Sept. 30, 1998)
HBO & Co 5.78% $68,300,925
Paychex 4.42 52,201,231
Cisco Systems 4.38 51,695,338
PeopleSoft 3.35 39,600,224
Robert Half Intl 2.84 33,550,209
BMC Software 2.77 32,722,050
Clear Channel Communications 2.45 28,975,000
Watson Pharmaceuticals 2.42 28,531,650
Outdoor Systems 2.32 27,421,875
Health Management Associates Cl A 2.16 25,550,000
For further detail about these holdings, please refer to the section
entitled "Investments in securities" herein.
(icon of) pie chart
The ten holdings listed here make up 32.89% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Strategy Aggressive Fund
Sept. 30, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $840,898,783) $1,176,599,203
Dividends and accrued interest receivable 201,147
Receivable for investment securities sold 9,396,959
---------
Total assets 1,186,197,309
-------------
Liabilities
Disbursements in excess of cash on demand deposit 1,040,790
Payable for investment securities purchased 3,909,506
Accrued investment management services fee 19,870
Accrued distribution fee 14,501
Accrued service fee 5,839
Accrued administrative services fee 1,638
Accrued transfer agency fee 5,939
Other accrued expenses 25,159
------
Total liabilities 5,023,242
---------
Net assets applicable to outstanding capital stock $1,181,174,067
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 641,045
Additional paid-in capital 810,254,888
Investment loss-- net (7,259,176)
Accumulated net realized gain (loss) 41,836,890
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 335,700,420
-----------
Total-- representing net assets applicable to outstanding capital stock $1,181,174,067
==============
Net assets applicable to outstanding shares: Class A $ 496,191,994
Class B $ 684,980,299
Class Y $ 1,774
Net asset value per share of outstanding capital stock: Class A shares 26,414,182 $ 18.79
Class B shares 37,690,196 $ 18.17
Class Y shares 94 $ 18.87
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Strategy Aggressive Fund
Six months ended Sept. 30, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $ 1,596,646
Interest 1,091,293
Less foreign taxes withheld (6,574)
------
Total income 2,681,365
---------
Expenses (Note 2):
Investment management services fee 4,071,114
Distribution fee -- Class B 3,104,146
Transfer agency fee 1,042,490
Incremental transfer agency fee-- Class B 41,205
Service fee
Class A 468,889
Class B 715,937
Administrative services fees and expenses 343,425
Compensation of board members 5,258
Custodian fees 71,330
Postage 57,756
Registration fees 26,712
Reports to shareholders 16,575
Audit fees 10,500
Other 5,714
-----
Total expenses 9,981,051
Earnings credits on cash balances (Note 2) (40,510)
Total net expenses 9,940,541
---------
Investment income (loss) -- net (7,259,176)
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on investments (Note 3) 20,901,157
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (226,291,336)
------------
Net gain (loss) on investments and foreign currencies (205,390,179)
------------
Net increase (decrease) in net assets resulting from operations $(212,649,355)
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Strategy Aggressive Fund
Operations and distributions
Sept. 30, 1998 March 31, 1998
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ (7,259,176) $ (11,803,234)
Net realized gain (loss) on investments 20,901,157 154,471,744
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (226,291,336) 336,920,376
------------ -----------
Net increase (decrease) in net assets resulting from operations (212,649,355) 479,588,886
------------ -----------
Distributions to shareholders from:
Net realized gains
Class A -- (83,874,202)
Class B -- (140,309,083)
Class Y -- (307)
--- ----
Total distributions -- (224,183,592)
--- ------------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 318,474,429 340,431,367
Class B shares 31,517,127 66,677,585
Reinvestment of distributions at net asset value
Class A shares -- 82,381,141
Class B shares -- 139,598,839
Class Y shares -- 307
Payments for redemptions
Class A shares (279,786,583) (355,498,254)
Class B shares (Note 2) (116,391,093) (211,275,232)
------------ ------------
Increase (decrease) in net assets from capital share transactions (46,186,120) 62,315,753
----------- ----------
Total increase (decrease) in net assets (258,835,475) 317,721,047
Net assets at beginning of period 1,440,009,542 1,122,288,495
------------- -------------
Net assets at end of period $1,181,174,067 $1,440,009,542
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Strategy Aggressive Fund
(Unaudited as to Sept. 30, 1998)
1
Summary of
significant
accounting policies
The Fund is a series of IDS Strategy Fund, Inc. and 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 invests primarily in common stocks that are
selected for their above-average growth potential. 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.
Significant accounting policies followed by the Fund 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 Fund 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 Fund 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 Fund gives up the opportunity of profit if the market price of
the security increases. The risk in writing a put option is that the Fund
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 Fund pays a
premium whether or not the option is exercised. The Fund 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 Fund
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 Fund may buy and sell financial futures contracts traded on any U.S. or
foreign exchange. The Fund 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 Fund 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 Fund 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 Fund 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, if any, may
arise from sales of foreign currency, closed forward contracts, exchange
gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes.
The Fund 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 Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the
credit risk that the other party will not complete the obligations of the
contract.
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 shareholders, no provision for income or
excise taxes is required.
Net investment income (loss) and net realized gains (losses) 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
An annual dividend declared and paid by the end of the calendar year from
net investment income, when available, is reinvested in additional shares
of the Fund at net asset value or payable in cash. Capital gains, when
available, are distributed along with the income dividend.
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
Expenses and
sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio and
providing administrative services. Under its Investment Management Services
Agreement, AEFC determines which securities will be purchased, held or
sold. The management fee is a percentage of the Fund's average daily net
assets in reducing percentages from 0.6% to 0.5% annually.
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 0.05% to 0.03%
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 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 $383,236 for Class A and $206,539 for Class B
for the six months ended Sept. 30, 1998. The Fund also pays custodian fees
to American Express Trust Company, an affiliate of AEFC.
During the six months ended Sept. 30, 1998, the Fund's custodian and
transfer agency fees were reduced by $40,510 as a result of earnings
credits from overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $407,557,765 and $559,497,934,
respectively, for the six months ended Sept. 30, 1998. Realized gains and
losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $58,457 for
the six months ended Sept. 30, 1998.
Income from securities lending amounted to $2,013 for the six months ended
Sept. 30, 1998. The risks to the fund of securities lending are that the
borrower may not provide additional collateral when required or return the
securities when due.
<PAGE>
4
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Sept. 30, 1998
Class A Class B Class Y
Sold 14,420,220 1,537,808 --
Issued for reinvested -- -- --
distributions
Redeemed (12,768,448) (5,378,230) --
Net increase (decrease) 1,651,772 (3,840,422) --
Year ended March 31, 1998
Class A Class B Class Y
Sold 16,117,055 3,275,267 --
Issued for reinvested 4,427,898 7,710,962 16
distributions
Redeemed (16,805,791) (10,293,611) --
Net increase (decrease) 3,739,162 692,618 16
<PAGE>
<TABLE>
<CAPTION>
Notes to financial statements
IDS Strategy Aggressive Fund
5
Financial
highlights
The tables below show certain important financial information for
evaluating the Fund's results.
Fiscal period ended March 31,
Per share income and capital changes(a)
Class B
1998b 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $21.48 $18.04 $18.83 $14.90 $14.39 $15.12 $15.37 $13.73 $12.42 $9.98
beginning of period
Income from investment operations:
Net investment income (loss) (.15) (.18) (.18) (.18) (.05) (.14) (.11) (.03) .15 .01
Net gains (losses) (3.16) 7.57 .52 5.21 .71 .83 .61 2.35 2.01 2.43
(both realized and unrealized)
Total from investment (3.31) 7.39 .34 5.03 .66 .69 .50 2.32 2.16 2.44
operations
Less distributions:
Dividends from net -- -- -- -- -- -- -- (.01) (.16) --
investment income
Distributions from -- (3.95) (1.13) (1.10) (.15) (1.42) (.75) (.67) (.69) --
realized gains
Total distributions -- (3.95) (1.13) (1.10) (.15) (1.42) (.75) (.68) (.85) --
Net asset value, $18.17 $21.48 $18.04 $18.83 $14.90 $14.39 $15.12 $15.37 $13.73 $12.42
end of period
Ratios/supplemental data
Class B
1998b 1998 1997 1996 1995 1994 1993 1992 1991 1990
Net assets, end of $685 $892 $737 $710 $776 $652 $582 $473 $352 $283
period (in millions)
Ratio of expenses to 1.75%d 1.77% 1.80% 1.85% 1.80% 1.71% 1.75% 1.62% 1.61% 1.49%
average daily net assets(c)
Ratio of net income (loss) to (1.36%)d (1.21%) (.91%) (.77%) (.41%) (.99%) (.82%) (.27%) 1.17% .14%
average daily net assets
Portfolio turnover rate 36% 95% 80% 101% 111% 55% 49% 52% 64% 33%
(excluding short-term
securities)
Total return(e) (15.7%) 45.1% 1.2% 34.1% 4.7% 4.1% 3.2% 16.8% 18.9% 24.4%
Average brokerage $.0571 $.0262 $.0245 -- -- -- -- -- -- --
commission rate(f)
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Sept. 30, 1998 (Unaudited).
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
f Effective fiscal year 1997, 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 March 31,
Per share income and capital changes(a)
Class A Class Y
1998c 1998 1997 1996 1995b 1998c 1998 1997 1996 1995b
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $22.12 $18.34 $18.99 $14.91 $14.87 $22.22 $18.40 $19.16 $14.89 $15.19
beginning of period
Income from investment operations:
Net investment income (loss) (.06) (.03) (.03) -- .01 (.06) -- -- .03 --
Net gains (losses) (3.27) 7.76 .51 5.18 .03 (3.29) 7.77 .37 5.34 (.30)
(both realized
and unrealized)
Total from investment (3.33) 7.73 .48 5.18 .04 (3.35) 7.77 .37 5.37 (.30)
operations
Less distributions:
Distributions from -- (3.95) (1.13) (1.10) -- -- (3.95) (1.13) (1.10) --
realized gains
Net asset value, $18.79 $22.12 $18.34 $18.99 $14.91 $18.87 $22.22 $18.40 $19.16 $14.89
end of period
Ratios/supplemental data
Class A Class Y
1998c 1998 1997 1996 1995b 1998c 1998 1997 1996 1995b
Net assets, end of $496 $548 $386 $348 $7 $-- $-- $-- $-- $--
period (in millions)
Ratio of expenses to 1.00%e 1.01% 1.04% 1.07% 1.18%e .91%e .88% .85% .92% --%f
average daily net assets(d)
Ratio of net income (loss) (.60%)e (.45%) (.15%) --% 1.26%e (.52%)e (.35%) .03% .12% --%f
to average daily net assets
Portfolio turnover rate 36% 95% 80% 101% 111% 36% 95% 80% 101% 111%
(excluding short-term securities)
Total return(g) (15.3%) 46.2% 2.0% 35.1% .04% (15.3%) 46.3% 2.2% 35.3% (2.0%)
Average brokerage $.0571 $.0262 $.0245 -- -- $.0571 $.0262 $.0245 -- --
commission rate(h)
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Six months ended Sept. 30, 1998 (Unaudited).
d Effective fiscal year 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 Ratios of expenses and net investment income to average daily net assets is
not presented for Class Y as only one share was outstanding during the
period.
g Total return does not reflect payment of a sales charge.
h Effective fiscal year 1997, 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>
Investments in securities
IDS Strategy Aggressive Fund
Sept. 30, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks (87.7%)
Issuer Shares Value(a)
Airlines (0.3%)
SkyWest 200,000 $3,825,000
Automotive & related (0.3%)
Central Parking 79,100 3,984,663
Banks and savings & loans (3.6%)
Astoria Financial 165,000 6,950,625
Centura Banks 139,850 8,793,069
Crestar Financial 297,800 16,900,150
Washington Mutual 306,000 10,327,500
Total 42,971,344
Building materials & construction (0.9%)
Building One Services 100,000 1,237,500
Fairfield Communities 200,000(b) 2,000,000
Martin Marietta Materials 158,300 6,836,581
Total 10,074,081
Chemicals (0.8%)
Waste Management 200,000(b) 9,612,500
Commercial finance (2.2%)
Finova Group 509,200 25,428,175
Communications equipment & services (3.0%)
American Tower Cl A 400,000 10,200,000
Ascend Communications 300,000(b) 13,650,000
Tellabs 300,000(b) 11,943,750
Total 35,793,750
Computers & office equipment (24.3%)
BEA Systems 250,000(b) 5,406,250
BMC Software 544,800(b) 32,722,050
CBT Group Public ADR 400,000 (c) 5,400,000
Cisco Systems 836,325(b) 51,695,338
Compuware 142,300(b) 8,377,913
CSG Systems Intl 100,000(b) 4,425,000
Documentum 125,000(b) 4,953,125
Edwards (JD) & Co 200,000 9,600,000
Fiserv 205,800(b) 9,479,663
FORE Systems 250,000 4,156,250
Intuit 200,000(b) 9,312,500
JDA Software Group 300,000 4,143,750
Legato Systems 100,000(b) 5,137,500
Maxtor 1,150,000 10,062,500
Metzler Group 200,000(b) 6,850,000
Network Associates 600,000(b) 21,300,000
PeopleSoft 1,213,800(b) 39,600,224
Platinum Technology 300,000(b) 5,400,000
Policy Management Systems 150,000(b) 6,075,000
Sterling Commerce 500,000(b) 17,312,500
Veritas Software 262,500(b) 14,503,125
Whittman-Hart 600,000(b) 11,025,000
Total 286,937,688
Electronics (0.8%)
Amkor Technology 450,000 2,193,750
Etec Systems 100,000(b) 2,606,250
Uniphase 100,000(b) 4,100,000
Total 8,900,000
Energy (0.6%)
Anadarko Petroleum 183,200 7,202,050
Financial services (5.9%)
Heller Financial 250,000 6,000,000
Knight/Trimark Group Cl A 375,000 3,093,750
Mutual Risk Management 250,000(c) 8,843,750
Paychex 1,012,388 52,201,231
Total 70,138,731
Food (0.2%)
Aurora Foods 175,000 2,406,250
Health care (5.7%)
Arterial Vascular Engineering200,000(b) 7,400,000
Elan ADR 169,200(b,c) 12,192,975
Guidant 150,000 11,137,500
Sofamor Danek Group 95,600(b) 8,508,400
Watson Pharmaceuticals 562,200(b) 28,531,650
Total 67,770,525
Health care services (10.9%)
Cardinal Health 150,000 15,487,500
HBO & Co 2,365,400 68,300,925
Health Management
Associates Cl A 1,400,000(b) 25,550,000
Sunrise Assisted Living 350,000 12,009,375
Total Renal Care Holdings 300,000(b) 7,200,000
Total 128,547,800
Insurance (2.3%)
ACE439,500(c) 13,185,000
UNUM 279,700 13,897,594
Total 27,082,594
Leisure time & entertainment (1.2%)
Carnival Cl A 250,000 7,953,125
Royal Caribbean Cruises 250,000 6,640,625
Total 14,593,750
Media (7.6%)
Chancellor Media 600,000(b) 20,025,000
Clear Channel
Communications 610,000(b) 28,975,000
Outdoor Systems 1,406,250(b) 27,421,875
Univision Communications
Cl A 450,000(b) 13,387,500
Total 89,809,375
Miscellaneous (0.3%)
Software AG Systems 200,000 $3,400,000
Multi-industry conglomerates (5.8%)
AccuStaff 350,000(b) 5,096,875
Interim Services 400,000(b) 8,225,000
Robert Half Intl 776,850(b) 33,550,209
Tyco Intl 400,000(c) 22,100,000
Total 68,972,084
Restaurants & lodging (0.6%)
Papa John's Intl 200,000(b) 6,600,000
Retail (7.0%)
Bed Bath & Beyond 300,000(b) 7,012,500
CDW Computer Centers 298,500(b) 15,895,125
Consolidated Stores 189,700(b) 3,722,863
Dollar General 218,750 5,824,219
Kohl's 300,000(b) 11,700,000
Office Depot 500,000(b) 11,218,750
Rite Aid 584,820 20,761,109
Stage Stores 515,700(b) 6,285,094
Total 82,419,660
Transportation (0.6%)
Kansas City Southern Inds 214,900 7,521,500
Utilities -- telephone (2.7%)
Cincinnati Bell 275,000 7,150,000
COLT Telecom Group ADR 327,400(c) 11,131,600
Intermedia Communications 339,800(b) 8,346,338
Qwest Communications Intl 150,000 4,696,875
Total 31,324,813
Total common stocks
(Cost: $699,650,432) $1,035,316,333
Preferred stock & other (0.6%)
Issuer Shares Value(a)
Jan Bell
Warrants 2,473 $19
Sinclair Broadcast Group
Cv 138,000 6,693,000
Total preferred stock & other
(Cost: $6,658,500) $6,693,019
Short-term securities (11.4%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies (4.6%)
Federal Home Loan Mtge Corp Disc Nts
10-02-98 5.46% $4,900,000 $4,899,260
10-08-98 5.45 6,788,000 6,780,826
10-28-98 5.32 11,000,000 10,956,275
10-30-98 5.19 11,500,000 11,452,106
11-12-98 5.15 12,300,000 12,226,527
Federal Natl Mtge Assn Disc Nt
10-09-98 5.45 8,200,000 8,190,087
Total 54,505,081
Commercial paper (5.8%)
CAFCO
11-06-98 5.53 1,700,000(d) 1,690,667
Delaware Funding
10-13-98 5.55 800,000(d) 798,528
Fleet Funding
10-13-98 5.56 4,800,000(d) 4,791,168
Gannett
10-20-98 5.52 6,000,000 5,982,615
Glaxo Wellcome
10-27-98 5.54 8,800,000(d) 8,764,917
Goldman Sachs Group
10-15-98 5.55 2,100,000 2,095,492
GTE Funding
10-29-98 5.27 8,800,000 8,764,068
Household Finance
11-02-98 5.53 6,600,000 6,567,733
Motorola
11-24-98 5.24 13,400,000 13,295,480
Pfizer
11-02-98 5.53 6,400,000(d) 6,368,711
Procter & Gamble
11-09-98 5.23 3,300,000 3,281,410
UBS Finance (Delaware)
10-05-98 5.55 4,100,000 4,097,495
Xerox Credit
10-05-98 5.53 1,300,000 2,298,593
Total 68,796,876
Letter of credit (1.0%)
Bank of America-
AES Hawaii
10-08-98 5.53 11,300,000 11,287,893
Total short-term securities
(Cost: $134,589,851) $134,589,851
Total investments in securities
(Cost: $840,898,783)(e) $1,176,599,203
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. As of Sept. 30, 1998,
the value of foreign securities represented 6.17% of net assets.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(e) At Sept. 30, 1998, the cost of securities for federal income tax purposes
was approximately $840,899,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation.........................................$394,429,000
Unrealized depreciation..........................................(58,729,000)
Net realized appreciation.......................................$335,700,000
<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
Retired 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 of Board Services Corporation.
and secretary
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
Vice president Frederick C. Quirsfeld*
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 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.
(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 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
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.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(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.
<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 Strategy Aggressive Fund
IDS Tower 10
Minneapolis, MN 55440-0010
