1998 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.
<PAGE>
(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.
<PAGE>
(icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund performed.
The prospectus, which is bound into the middle of this annual report,
describes the Fund in detail.
Contents
1998 annual report
From the chairman 4
From the portfolio manager 4
The Fund's ten largest holdings 6
Making the most of the Fund 7
The Fund's 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
1998 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 11p
Alternative investment option 16p
Valuing Fund shares 16p
How to purchase, exchange or redeem shares 17p
Alternative purchase arrangements 17p
How to purchase shares 20p
How to exchange shares 23p
How to redeem shares 24p
Reductions and waivers of the sales charge 29p
Special shareholder services 33p
Services 33p
Quick telephone reference 33p
Distributions and taxes 34p
Dividend and capital gain distributions 34p
Reinvestments 35p
Taxes 36p
How to determine the correct TIN 38p
How the Fund is organized 39p
Shares 39p
Voting rights 39p
Shareholder meetings 39p
Board members and officers 40p
Investment manager 42p
Administrator and transfer agent 42p
Distributor 43p
About American Express Financial Corporation 44p
General information 44p
Year 2000 45p
Appendix 46p
Descriptions of derivative instruments 46p
(This annual report is not part of the prospectus.)
<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.
Before closing, I also want to introduce a new portfolio manager for this
fund -- Kurt Winters, who assumed that role this past December. For a
review of the past fiscal year, please consult his letter, which begins on
this page.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
(This annual report is not part of the prospectus.)
<PAGE>
From the portfolio manager
Although unable to keep up with the often red-hot pace of the broad stock
market, IDS Equity Value Fund generated a substantial return during the
past fiscal year. For the 12 months -- April 1997 through March 1998 --
investors in the Fund's Class A were rewarded with a total return of
33.6%.
Fueled by a low rate of inflation, generally favorable long-term interest
rates, solid economic growth and good corporate earnings, the stock market
unleashed a powerful rally that began shortly after the start of the
period. By autumn, though, the market had cooled, and over the next
several months, stocks moved in fits and starts but ultimately could do no
more than hold their ground.
It took until February before the market could mount a meaningful advance.
By then, concerns related to a financial crisis in Asia had simmered down,
and ongoing reports of low inflation and generally good corporate profits
had begun to restore investors' confidence. The result was a sharp surge
by stocks during the final two months of the period.
As for the Fund, its value-oriented investment style was forced to play
second fiddle to the high-powered, large-capitalization growth stocks that
have generally led the market in recent years. Nevertheless, the Fund did
participate in the market's advances while faring better during the
downturns. The latter point was especially evident last fall, when the
outbreak of the Asian crisis sent the U.S. market reeling. Although it,
too, lost some ground, the Fund experienced considerably less negative
impact. That is the history of this Fund -- a more muted response to both
the upturns and downturns in the market.
A repositioned portfolio
Upon becoming manager of the Fund last January, I implemented some changes
to make it somewhat less conservative in its investment approach. These
included: reducing the level of cash reserves from about 23% of assets to
about 11% and increasing holdings among technology-related stocks from
virtually zero to about 7%. Both of these shifts proved beneficial to
performance when the market took off in February and March and technology
stocks rebounded from a difficult fall and winter.
Looking to the current fiscal year, should stocks keep rising, the Fund
should be able to participate more fully now than in the past, largely
because of the reduced cash reserves. On the other hand, if stock
performance weakens, I believe the Fund's value orientation should allow
it to perform relatively well compared with the market as a whole.
Kurt Winters
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
(This annual report is not part of the prospectus.)
<PAGE>
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $12.85
March 31, 1997 $11.62
Increase $ 1.23
Distributions
April 1, 1997 - March 31, 1998
From income $ 0.84
From capital gains $ 1.55
Total distributions $ 2.39
Total return* +33.6%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $12.85
March 31, 1997 $11.63
Increase $ 1.22
Distributions
April 1, 1997 - March 31, 1998
From income $ 0.74
From capital gains $ 1.55
Total distributions $ 2.29
Total return* +32.6%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $12.87
March 31, 1997 $11.64
Increase $ 1.23
Distributions
April 1, 1997 - March 31, 1998
From income $ 0.85
From capital gains $ 1.55
Total distributions $ 2.40
Total return* +33.8%**
* The prospectus discusses the effect of sales charges, if any, on the
various classes.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of March 31, 1998)
Amoco 3.13% $86,375,000
Royal Dutch Petroleum 3.09 85,218,749
Mobil 2.42 66,648,425
Gannett 2.11 58,182,813
U S WEST Communications Group 2.03 56,118,749
Penney (JC) 1.92 52,905,563
American Home Products 1.73 47,687,499
CMS Energy 1.70 46,937,500
American Stores 1.70 46,800,000
Ameritech 1.61 44,493,750
(icon of) pie chart
The ten holdings listed here make up 21.44% of the Fund's net assets
(This annual report is not part of the prospectus.)
<PAGE>
Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging --
a time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly.
You'll automatically buy more shares when the Fund's share price is low,
fewer shares when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner can be an effective way to accumulate shares to
meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(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.)
<PAGE>
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
$43,800
$50,000 IDS Equity
Value Fund
Class B
$40,000 S&P 500
Stock Index
$30,000
$20,000
Lipper Growth
& Income Index
$10,000
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Assumes: o Holding period from 4/1/88 to 3/31/98. oReturns do not reflect
taxes payable on distributions. oReinvestment of all income and capital
gain distributions for the Fund, with a value of $26,103. 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.
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.
Average annual total return
(as of March 31, 1998)
1 year Since inception* 5 years 10 years
Class A +26.93% +23.82% --% --%
Class B +28.61% --% +17.17% +15.92%
Class Y +33.76% +26.09% --% --%
* 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.
Your investment and return values fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. Average annual
total return figures reflect the impact of the applicable sales charge up
to a maximum of 5%. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
(This annual report is not part of the prospectus.)
<PAGE>
The financial statements contained in Post-Effective Amendment #30 to
Registration Statement No. 2-89288 filed on or about May 28, 1998, are
incorporated herein by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(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
(This annual report is not part of the prospectus.)
<PAGE>
IDS mutual funds
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, 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
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 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
(This annual report is not part of the prospectus.)
<PAGE>
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
(This annual report is not part of the prospectus.)
<PAGE>
IDS mutual funds
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 perspectus.)
<PAGE>
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
Form 1099-DIV, Dividends and Distributions, last January. Dividends paid
to you since the end of last year will be reported to you on a tax
statement sent next January. Shareholders should consult a tax advisor on
how to report distributions for state and local purposes.
IDS Equity Value Fund, Inc.
Fiscal year ended March 31, 1998
Class A
Income distributions
taxable as dividend income, 43.81% qualifying for deduction by
corporations.
Payable date Per share
June 27, 1997 $0.08427
Sept. 26, 1997 0.09534
Dec. 29, 1997 0.60156
March 27, 1998 0.04986
Total $0.83103
Capital gain distribution
taxable for long-term capital gain.
Payable date Per share
Dec. 29, 1997 $1.55404
Total distributions $2.38507
The distribution of $2.15560 per share, payable Dec. 29, 1997, consisted
of $0.06382 from net investment income, $0.53774 from net short-term
capital gains (a total of $0.60156 taxable as dividend income) and
$1.55404 from net long-term capital gains.
The long-term capital gains distribution is divided into two rate
categories: 28% - $0.72791 and 20% - $0.82613.
(This annual report is not part of the prospectus.)
<PAGE>
Federal income tax information
Class B
Income distributions
taxable as dividend income, 43.81% qualifying for deductions by
corporations.
Payable date Per share
June 27, 1997 $0.06075
Sept. 26, 1997 0.06962
Dec. 29, 1997 0.57499
March 27, 1998 0.02795
Total $0.73331
Capital gain distribution
taxable for long-term capital gain.
Payable date Per share
Dec. 29, 1997 $1.55404
Total distributions $2.28735
The distribution of $2.12903 per share, payable Dec. 29, 1997, consisted
of $0.03725 from net investment income, 0.53774 from net short-term
capital gains (a total of $0.57499 taxable as dividend income) and
$1.55404 from net long-term capital gains.
The long-term capital gains distribution is divided into two rate
categories: 28% - $0.72791 and 20% - $0.82613.
(This annual report is not part of the prospectus.)
<PAGE>
Class Y
Income distributions
taxable as dividend income, 43.81% qualifying for deduction by
corporations.
Payable date Per share
June 27, 1997 $0.08879
Sept. 26, 1997 0.10012
Dec. 29, 1997 0.60582
March 27, 1998 0.05227
Total $0.84700
Capital gain distribution
taxable for long-term capital gain.
Payable date Per share
Dec. 29, 1997 $1.55404
Total distributions $2.40104
The distribution of $2.15986 per share, payable Dec. 29, 1997, consisted
of $0.06808 from net investment income, $0.53774 from net short-term
capital gains (a total of $0.60582 taxable as dividend income) and
$1.55404 from net long-term capital gains.
The long-term capital gains distribution is divided into two rate
categories: 28% - $0.72791 and 20% - $0.82613.
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
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 Equity Value Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
1998 ANNUAL REPORT
IDS
Strategy
Aggressive
Fund
(prospectus enclosed)
(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.
(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.
<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.
<PAGE>
(icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund performed.
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
Contents
1998 annual report
From the chairman 4
From the portfolio manager 4
The Fund's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 22
IDS mutual funds 26
Federal income tax information 30
1998 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 10p
Facts about investments and their risks 10p
Alternative investment option 16p
Valuing Fund shares 16p
How to purchase, exchange or redeem shares 17p
Alternative purchase arrangements 17p
How to purchase shares 19p
How to exchange shares 22p
How to redeem shares 22p
Reductions and waivers of the sales charge 27p
Special shareholder services 34p
Services 34p
Quick telephone reference 34p
Distributions and taxes 35p
Dividend and capital gain distributions 35p
Reinvestments 36p
Taxes 37p
How to determine the correct TIN 38p
How the Fund is organized 39p
Shares 39p
Voting rights 40p
Shareholder meetings 40p
Board members and officers 40p
Investment manager 42p
Administrator and transfer agent 42p
Distributor 43p
About American Express Financial Corporation 45p
General information 45p
Year 2000 46p
Appendix 47p
Descriptions of derivative instruments 47p
(This annual report is not part of the prospectus.)
<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
periodically review their long-term goals and examine whether their
investment program remains on track to achieving them.
Before closing, I also want to introduce a new interim portfolio manager
for this Fund. Louis Giglio assumed that role in April, shortly after the
end of the fiscal year. For a review of the past period, please consult
the accompanying letter from David Bayer, the Fund's manager during that
time.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
A strong stock market and an improved performance by mid-size growth
stocks combined for a highly rewarding fiscal year for IDS Strategy
Aggressive Fund. For the 12 months -- April 1997 through March 1998 --
investors in Class A shares realized a total return of 46.2%.
The period began almost on cue with a rebound by the stock market, which
had been in a slump brought by a rise in long-term interest rates. By May,
the market had reached full speed, which it maintained through much of the
summer.
From that point, stocks spent the next several months making essentially
no progress, as periodic concerns about inflation and, beginning last
fall, financial crisis in Asia kept stocks off balance much of the time.
It wasn't until this past February that investors became satisfied that
inflation was still under control and that the `Asian flu' wasn't going to
severely penalize corporate profits. That was enough to send stocks
soaring over the final two months of the period.
(This annual report is not part of the prospectus.)
Market begins
to broaden out
Through the first several months of the period, stocks of large, blue-chip
companies (commonly called `large-caps') maintained their long-time
leadership role in the market. But by summer small- and mid-cap stocks
began to pick up the pace and, in fact, even outperformed their larger
counterpoints at times over the ensuing months.
This `broadening out' of the market worked to the advantage of this fund,
which primarily focuses on mid-cap stocks of rapidly growing companies.
While its largest areas of investment remained in the technology, health
care and business services sectors, the Fund's best-performing stocks
represented a wide range of businesses that also included financial
services, telecommunications, travel/leisure, media and retailing.
A long-term growth strategy
Although I added a number of new stocks to the portfolio, I didn't alter
my fundamental strategy of investing in companies - most of them mid-size,
or mid-cap that are leaders in their respective markets and boast
excellent long-term growth prospects. Because I try to hold stocks long
enough for them to reach what I feel is their full potential, portfolio
turnover was relatively low during the 12 months. The only notable change
was a reduction in stocks of telecommunications and semiconductor
companies late last year, a strategy designed to lessen the negative
impact of the Asian crisis.
Although my tenure as portfolio manager ended this past April, I can offer
that I believe the Fund's future, certainly for the near term, is
genuinely bright. The market has recently begun to appropriately reward
the stocks of high-quality, mid-size growth companies - the core holdings
of this Fund. And unless there is some marked change to the positive
investment fundamentals we still enjoy, I expect that trend to continue.
David Bayer
Louis Giglio
(picture of)Louis Giglio
Louis Giglio
Portfolio manager
<PAGE>
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $22.12
March 31, 1997 $18.34
Increase $ 3.78
Distributions
April 1, 1997 - March 31, 1998
From income $ --
From capital gains $ 3.95
Total distributions $ 3.95
Total return* 46.2%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $21.48
March 31, 1997 $18.04
Increase $ 3.44
Distributions
April 1, 1997 - March 31, 1998
From income $ --
From capital gains $ 3.95
Total distributions $ 3.95
Total return* 45.1%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $22.22
March 31, 1997 $18.40
Increase $ 3.82
Distributions
April 1, 1997 - March 31, 1998
From income $ --
From capital gains $ 3.95
Total distributions $ 3.95
Total return* 46.3%**
* 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.
(This annual report is not part of the prospectus.)
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of March 31, 1998)
HBO & Co 4.85% $69,896,137
PeopleSoft 4.44 63,952,087
Paychex 2.71 38,934,735
Cisco Systems 2.65 38,122,480
Robert Half Intl 2.59 37,288,800
Outdoor Systems 2.28 32,871,093
Finova Group 2.08 29,979,150
Health Management Associates Cl A 1.94 27,980,222
Cadence Design Systems 1.92 27,609,974
Promus Hotel 1.83 26,359,909
(icon of) pie chart
The ten holdings listed here make up 27.29% of
the Fund's net assets
(This annual report is not part of the prospectus.)
<PAGE>
Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging --
a time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly.
You'll automatically buy more shares when the Fund's share price is low,
fewer shares when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner can be an effective way to accumulate shares to
meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(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.)
<PAGE>
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 Strategy Aggressive Fund
$50,000
S&P 500
Stock Index
$40,000 Russell Midcap
Growth Index
$30,000 $41,681
IDS Strategy
Aggressive Fund
$20,000 Class B
Lipper Small Cap
Fund Index
$10,000
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Assumes: oHolding period from 4/1/88 to 3/31/98. oReturns do not reflect
taxes payable on distributions. oReinvestment of all income and capital
gain distributions for the Fund, with a value of $18,247. o Also see
"Performance" in the Fund's current prospectus.
Standard &Poor's 500 Stock Index (S&P500), an unmanaged list of common
stocks, is frequently used as a general measure of market performance.
However, the S&P500 companies are generally larger than those in which the
Fund invests.
Lipper Small Cap Fund Index includes 30 funds that are generally similar
to the Fund, although some funds in the index may have somewhat different
investment policies or objectives.
Russell Midcap Growth Index, an unmanaged list of common stocks, measures
the performance of the 800 smallest companies in the Russell 1000 Index,
representing approximately 35% of the total market capitalization of the
Russell 1000 Index.
Average annual total return
(as of March 31, 1998)
Since
1 year inception* 5 years 10 years
Class A +38.87 +23.30% --% --%
Class B +41.08% --% +16.40 +15.34%
Class Y +46.34 +24.96% --% --%
*Inception date was March 20, 1995.
On the graph above you can see how the Fund's total return compared to
three widely cited performance indexes, the S&P500, the Lipper Small Cap
Fund Index and the Russell Midcap Growth Index. Sales charges are not
reflected in the performance of the indexes.
Your investment and return values fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. Average annual
total return figures reflect the impact of the applicable sales charge up
to a maximum of 5%. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
(This annual report is not part of the prospectus.)
<PAGE>
The financial statements contained in Post-Effective Amendment #30 to
Registration Statement No. 2-89288 filed on or about May 28, 1998, are
incorporated herein by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(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.
(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 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) 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.
(This annual report is not part of the prospectus.)
<PAGE>
Federal income tax information
IDS Strategy Aggressive 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. The dividends listed below were reported to you on Form 1099-DIV,
Dividends and Distributions, last January. Shareholders should consult a tax
advisor on how to report distributions for state and local purposes.
IDS Strategy Aggressive Fund
Fiscal year ended March 31, 1998
Class A
Capital gain distribution
taxable as long-term capital gain.
payable date per share
Dec. 29, 1997 $3.94813
The long-term capital gains distribution is divided into two categories:
28%--$1.81535 and 20%--$2.13278.
(This annual report is not part of the prospectus.)
<PAGE>
Class B
Capital gain distribution
taxable as long-term capital gain.
payable date per share
Dec. 29, 1997 $3.94813
The long-term capital gains distribution is divided into two categories:
28%--$1.81535 and 20%--$2.13278.
Class Y
Capital gain distribution
taxable as long-term capital gain.
payable date per share
Dec. 29, 1997 $3.94813
The long-term capital gains distribution is divided into two categories:
28%--$1.81535 and 20%--$2.13278.
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
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 Strategy Aggressive Fund
IDS Tower 10
Minneapolis, MN 55440-0010
