1998 semiannual report
IDS
Equity Value
Fund
(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.
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.
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
IDS Equity Value Fund recorded a loss during the first half of the fiscal
year, as the U.S. stock market experienced a sharp downturn. For the six
months -- April through September 1998 -- the value of the Fund's Class A
shares declined 15.1%.
Although still somewhat nervous about the financial upheaval in several
Asian economies, the U.S. stock market managed to gain a bit of ground by
the middle of last summer. In fact, with inflation and long-term interest
rates still low and the economy still on solid ground, it appeared that
the market might be able to sustain its advance.
That notion was quickly shoved aside, though, when markets in Russia and
Latin America began to crumble. Fearing that the spreading weakness in
foreign economies would ultimately hurt the profit growth of American
companies, especially those doing business overseas, investors engaged in
a rash of stock-selling that drove the U.S. market down close to 20% from
mid-July through August. A rebound in September ended the period on a
positive note but couldn't make up for the damage that had been done.
Effect is widespread
Virtually all stock sectors were affected, but financial services and
technology bore the brunt of the blow. The Fund had substantial exposure
to the former group as well as oil services, which suffered early in the
period because of slumping oil prices. Utility stocks, on the other hand,
held up quite well -- a plus for the Fund as it owned a fair number of
them. As the period progressed, I increased the Fund's commitment to some
of the weakened sectors, especially stocks of financial services
companies.
While I take some encouragement from the fact that the market bounced back
in September, I think the investment environment is likely to remain
unsettled over the near term as investors continue to ponder the outlook
for interest rates, the economy and corporate profits. As those factors
are sorted out, I plan to stick to a conservative investment approach that
emphasizes stocks that appear less vulnerable to dramatic market swings
and the vagaries of global economies.
Kurt Winters
(picture of) Kurt Winters
Kurt Winters
Portfolio Manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 10.79
March 31, 1998 $ 12.85
Decrease $ 2.06
Distributions
April 1, 1998 - Sept. 30, 1998
From income $ 0.10
From capital gains $ --
Total distributions $ 0.10
Total return* -15.1%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 10.79
March 31, 1998 $ 12.85
Decrease $ 2.06
Distributions
April 1, 1998 - Sept. 30, 1998
From income $ 0.05
From capital gains $ --
Total distributions $ 0.05
Total return* -15.4%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1998 $ 10.81
March 31, 1998 $ 12.87
Decrease $ 2.06
Distributions
April 1, 1998 - Sept. 30, 1998
From income $ 0.10
From capital gains $ --
Total distributions $ 0.10
Total return* -15.1%**
*The prospectus discusses the effect of sales charges, if any, on the
various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of Sept. 30, 1998)
Washington Mutual 2.92% $67,921,875
Intl Business Machines 2.89 67,199,999
Royal Dutch Petroleum 2.72 63,103,124
First Union 2.66 61,808,905
First Chicago NBD 2.63 61,050,625
American Stores 2.49 57,937,500
Lincoln Natl 2.44 56,752,500
Household Intl 2.27 52,828,125
Marsh & McLennan 2.25 52,252,425
American Intl Group 2.06 47,817,000
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 25.33% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Equity Value Fund
Sept. 30, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $2,435,138,516) $2,334,308,936
Dividends and accrued interest receivable 3,531,507
Receivable for investment securities sold 1,685,614
---------
Total assets 2,339,526,057
-------------
Liabilities
Disbursements in excess of cash on demand deposit 456,949
Payable for investment securities purchased 16,022,626
Accrued investment management services fee 32,315
Accrued distribution fee 31,912
Accrued service fee 11,498
Accrued transfer agency fee 9,421
Accrued administrative services fee 2,123
Other accrued expenses 179,378
-------
Total liabilities 16,746,222
----------
Net assets applicable to outstanding capital stock $2,322,779,835
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,152,372
Additional paid-in capital 2,096,024,210
Undistributed net investment income 2,109,365
Accumulated net realized gain (loss) 323,540,821
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies (Note 6) (101,046,933)
------------
Total-- representing net assets applicable to outstanding capital stock $2,322,779,835
==============
Net assets applicable to outstanding shares: Class A $ 819,069,657
Class B $1,502,803,355
Class Y $ 906,823
Net asset value per share of outstanding capital stock: Class A shares 75,925,445 $ 10.79
Class B shares 139,227,831 $ 10.79
Class Y shares 83,920 $ 10.81
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Equity Value Fund
Six months ended Sept. 30, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $ 27,677,108
Interest 4,810,232
Less foreign taxes withheld (334,653)
--------
Total income 32,152,687
----------
Expenses (Note 2):
Investment management services fee 6,419,818
Distribution fee -- Class B 6,652,879
Transfer agency fee 1,640,239
Incremental transfer agency fee-- Class B 68,652
Service fee
Class A 736,406
Class B 1,536,995
Class Y 549
Administrative services fees and expenses 433,470
Compensation of board members 8,101
Custodian fees 90,502
Postage184,090
Registration fees 38,978
Report to shareholders 50,612
Audit fees 11,000
Other 3,899
-----
Total expenses 17,876,190
Earnings credits on cash balances (Note 2) (66,582)
-------
Total net expenses 17,809,608
----------
Investment income (loss) -- net 14,343,079
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 131,456,316
Financial futures contracts (Note 6) (4,441,675)
Foreign currency transactions (6,653)
------
Net realized gain (loss) on investments 127,007,988
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (572,882,643)
------------
Net gain (loss) on investments and foreign currencies (445,874,655)
------------
Net increase (decrease) in net assets resulting from operations $(431,531,576)
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Equity Value Fund
Operations and distributions
Sept. 30, 1998 March 31, 1998
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 14,343,079 $ 44,149,201
Net realized gain (loss) on investments 127,007,988 422,193,012
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (572,882,643) 194,604,248
------------ -----------
Net increase (decrease) in net assets resulting from operations (431,531,576) 660,946,461
------------ -----------
Distributions to shareholders from:
Net investment income
Class A (6,974,293) (14,592,544)
Class B (7,674,299) (25,394,091)
Class Y (9,113) (8,643)
Net realized gain
Class A -- (109,070,518)
Class B -- (262,181,189)
Class Y -- (105,799)
--------
Total distributions (14,657,705) (411,352,784)
----------- ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 199,463,944 313,592,254
Class B shares 105,171,724 228,336,652
Class Y shares 378,014 1,662,004
Reinvestment of distributions at net asset value
Class A shares 6,700,932 119,771,945
Class B shares 7,585,825 285,215,356
Class Y shares 9,113 114,442
Payments for redemptions
Class A shares (69,042,805) (79,284,928)
Class B shares (Note 2) (238,577,926) (295,082,643)
Class Y shares (352,176) (706,679)
-------- --------
Increase (decrease) in net assets from capital share transactions 11,336,645 573,618,403
---------- -----------
Total increase (decrease) in net assets (434,852,636) 823,212,080
Net assets at beginning of period 2,757,632,471 1,934,420,391
------------- -------------
Net assets at end of period $2,322,779,835 $2,757,632,471
============== ==============
Undistributed net investment income $ 2,109,365 $ 2,423,991
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Equity Value 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 and/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
Dividends from net investment income, declared and paid each calendar
quarter, are reinvested in additional shares of the Fund at net asset value
or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
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 0.53% to 0.4% 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 0.04% to 0.02%
annually. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses and any other
expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund
pays AECSC an annual fee per shareholder account for this service as
follows:
oClass A $15
oClass B $16
oClass 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 $1,604,752 for Class A and $410,557 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 $66,582 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 $1,530,805,901 and $1,244,776,578,
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 $3,339 for
the six months ended Sept. 30, 1998.
Income from securities lending amounted to $58,371 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
Options contracts
written
The number of contracts and premium amounts associated with options
contracts written is as follows:
Six months ended Sept. 30, 1998
Calls
Contracts Premium
Balance March 31, 1998 871 $ 573,794
Exercised (871) (573,794)
Balance Sept. 30, 1998 -- $ --
5
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 16,158,976 8,627,414 30,790
Issued for reinvested 569,556 635,689 769
distributions
Redeemed (5,779,449) (19,525,863) (30,046)
Net increase (decrease) 10,949,083 (10,262,760) 1,513
Year ended March 31, 1998
Class A Class B Class Y
Sold 24,247,788 17,906,145 126,503
Issued for reinvested 10,301,681 24,578,884 9,895
distributions
Redeemed (6,191,307) (22,768,273) (54,137)
Net increase (decrease) 28,358,162 19,716,756 82,261
<PAGE>
6
Stock index
futures contracts
At Sept. 30, 1998, investments in securities included securities valued at
$5,830,313 that were pledged as collateral to cover initial margin deposits
on 120 open purchase contracts. The market value of the open purchase
contracts at Sept. 30, 1998 was $30,780,000 with a net unrealized loss of
$215,748. See "Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
Notes to financial statements
IDS Equity Value Fund
7
Financial
highlights
The tables below show certain important financial information for
evaluating the Fund's results.
Fiscal period ended 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, $12.85 $11.63 $11.07 $9.21 $9.17 $9.46 $8.90 $8.22 $7.92 $7.96
beginning of period
Income from investment operations:
Net investment income (loss) .05 .21 .21 .18 .19 .18 .19 .22 .26 .29
Net gains (losses) (both (2.06) 3.30 1.69 2.12 .47 .37 1.18 .98 .48 .51
realized and unrealized)
Total from investment (2.01) 3.51 1.90 2.30 .66 .55 1.37 1.20 .74 .80
operations
Less distributions:
Dividends from net (.05) (.20) (.22) (.16) (.19) (.18) (.19) (.22) (.26) (.31)
investment income
Distributions from -- (2.09) (1.12) (.28) (.43) (.66) (.62) (.30) (.18) (.53)
realized gains
Total distributions (.05) (2.29) (1.34) (.44) (.62) (.84) (.81) (.52) (.44) (.84)
Net asset value, $10.79 $12.85 $11.63 $11.07 $9.21 $9.17 $9.46 $8.90 $8.22 $7.92
end of period
Class B
Ratios/supplemental data
1998b 1998 1997 1996 1995 1994 1993 1992 1991 1990
Net assets, end of $1,503 $1,922 $1,509 $1,296 $1,304 $1,031 $758 $497 $370 $311
period (in millions)
Ratio of expenses to 1.60%d 1.61% 1.64% 1.69% 1.61% 1.56% 1.63% 1.66% 1.66% 1.61%
average daily net assets(c)
Ratio of net income (loss) to .85%d 1.69% 1.83% 1.71% 2.10% 1.93% 2.15% 2.56% 3.41% 3.61%
average daily net assets
Portfolio turnover rate 52% 95% 60% 54% 85% 70% 48% 72% 65% 67%
(excluding short-term
securities)
Total return(e) (15.4%) 32.6% 17.6% 25.2% 7.7% 5.5% 16.0% 15.0% 10.1% 9.9%
Average brokerage $.0536 $.0461 $.0516 -- -- -- -- -- -- --
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 changesa
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, $12.85 $11.62 $11.06 $9.21 $9.10 $12.87 $11.64 $11.07 $9.21 $9.23
beginning of period
Income from investment operations:
Net investment income (loss) .10 .32 .29 .21 .01 .10 .34 .32 .26 --
Net gains (losses) (both) (2.06) 3.30 1.70 2.16 .15 (2.06) 3.29 1.70 2.14 .03
realized and unrealized)
Total from investment (1.96) 3.62 1.99 2.37 .16 (1.96) 3.63 2.02 2.40 .03
operations
Less distributions:
Dividends from net (.10) (.30) (.31) (.24) (.05) (.10) (.31) (.33) (.26) (.05)
investment income
Distributions from -- (2.09) (1.12) (.28) -- -- (2.09) (1.12) (.28) --
realized gains
Total distributions (.10) (2.39) (1.43) (.52) (.05) (.10) (2.40) (1.45) (.54) (.05)
Net asset value, $10.79 $12.85 $11.62 $11.06 $9.21 $10.81 $12.87 $11.64 $11.07 $9.21
end of period
Class A Class Y
Ratios/supplemental data
1998c 1998 1997 1996 1995b 1998c 1998 1997 1996 1995b
Net assets, end of $819 $835 $426 $332 $6 $1 $1 $-- $-- $--
period (in millions)
Ratio of expenses to .85%e .85% .89% .90% .91%e .77%e .76% .71% .75% --%f
average daily net assetsd
Ratio of net income (loss) 1.60%e 2.43% 2.60% 2.74% 2.43%e 1.68%e 2.10% 2.78% 2.73% --%f
to average daily net assets
Portfolio turnover rate 52% 95% 60% 54% 85% 52% 95% 60% 54% 85%
(excluding short-term
securities)
Total returng (15.1%) 33.6% 18.5% 26.1% 1.8% (15.1%) 33.8% 18.7% 26.4% .3%
Average brokerage $.0536 $.0461 $.0516 -- -- $.0536 $.0461 $.0516 -- --
commission rateh
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 two shares were 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 Equity Value Fund
Sept. 30, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks (97.1%)
Issuer Shares Value(a)
Aerospace & defense (2.0%)
AlliedSignal 690,000 $24,408,750
Rockwell Intl 590,000 21,313,750
Total 45,722,500
Airlines (0.9%)
AMR383,000(b) 21,232,563
Automotive & related (3.5%)
Ford Motor 680,000 31,917,500
General Motors 505,000 27,617,188
TRW472,000 20,945,000
Total 80,479,688
Banks and savings & loans (11.0%)
BankAmerica 632,500 38,029,063
First Chicago NBD 891,250 61,050,625
First Union 1,207,500 61,808,905
NationsBank 517,500(b) 27,686,250
Washington Mutual 2,012,500 67,921,875
Total 256,496,718
Beverages & tobacco (0.9%)
Fortune Brands 710,000 21,033,750
Building materials & construction (1.0%)
American Standard 890,000(b) 23,473,750
Chemicals (1.9%)
Air Products & Chemicals 650,000 19,337,500
Du Pont (EI) de Nemours 435,000 24,414,375
Total 43,751,875
Communications equipment & services (2.1%)
Motorola 625,000 26,679,688
Northern Telecom 681,000(c) 21,792,000
Total 48,471,688
Computers & office equipment (7.0%)
3Com 902,200(b) 27,122,388
Compaq Computer 934,000 29,537,750
Electronic Data Systems 390,000 12,943,125
Hewlett-Packard 470,000 24,880,625
Intl Business Machines 525,000 67,199,999
Total 161,683,887
Electronics (1.9%)
AMP 385,000 13,763,750
Applied Materials 465,000(b) 11,741,250
Texas Instruments 345,000 18,198,750
Total 43,703,750
Energy (12.8%)
Chevron 485,000 $40,770,313
Elf Aquitaine ADR 377,200(c) 23,457,125
ENI 5,000,000(b,c) 30,654,500
Exxon 495,000 34,742,813
Mobil 595,000 45,182,812
Royal Dutch Petroleum 1,325,000(c) 63,103,124
Texaco 625,000 39,179,688
Tosco 740,000 15,910,000
Unocal 105,900 3,838,875
Total 296,839,250
Energy equipment & services (1.2%)
Halliburton 579,100 16,540,544
Santa Fe Intl 804,600 12,370,725
Total 28,911,269
Financial services (4.1%)
Boston Properties 280,000 7,980,000
Household Intl 1,408,750 52,828,125
Travelers Group 937,250 35,146,875
Total 95,955,000
Food (3.5%)
Bestfoods 489,000 23,685,938
General Mills 431,300 30,191,000
Sara Lee 516,000 27,864,000
Total 81,740,938
Health care (6.2%)
American Home Products 541,000 28,334,875
Amgen 368,000(b) 27,807,000
Baxter Intl 497,500 29,601,250
Johnson & Johnson 374,000 29,265,500
Merck & Co 228,000(d) 29,540,250
Total 144,548,875
Health care services (0.8%)
Columbia/HCA Healthcare 942,700 18,912,919
Household products (2.1%)
Kimberly-Clark 580,000 23,490,000
Procter & Gamble 350,000 24,828,125
Total 48,318,125
Industrial equipment & services (1.5%)
Browning-Ferris Inds 735,000 22,233,750
Case 328,400 7,142,700
Illinois Tool Works 101,200 5,515,400
Total 34,891,850
Insurance (6.8%)
American Intl Group 621,000 47,817,000
Lincoln Natl 690,000 56,752,500
Marsh & McLennan 1,050,300 52,252,425
Total 156,821,925
Leisure time & entertainment (0.8%)
Mattel 680,000 19,040,000
Media (0.5%)
CBS 464,300 11,259,275
Multi-industry conglomerates (1.7%)
Emerson Electric 650,000 40,462,500
Paper & packaging (1.1%)
Tenneco 750,000 24,656,250
Real estate investment trust (2.2%)
Equity Office Properties
Trust 310,000 7,595,000
Nationwide Health
Properties 250,000 5,625,000
ProLogis Trust 540,000 12,217,500
Simon Property Group 525,000 15,618,750
Spieker Properties 290,000 10,657,500
Total 51,713,750
Retail (4.8%)
American Stores 1,800,000 57,937,500
Costco Cos 460,000(b) 21,792,500
Dayton Hudson 860,000 30,745,000
Total 110,475,000
Transportation (2.2%)
Burlington Northern Santa Fe815,000 26,080,000
Union Pacific 589,000 25,106,125
Total 51,186,125
Utilities -- electric (5.7%)
Carolina Power & Light 465,000 21,477,188
CMS Energy 620,000 27,008,750
Duke Energy 457,000 30,247,688
New Century Energies 700,000 34,081,249
Northern States Power 680,000 19,082,500
Total 131,897,375
Utilities -- gas (0.9%)
Coastal 600,000 20,250,000
Utilities -- telephone (6.1%)
Ameritech 600,000 28,425,000
BCE 340,000(c) 9,498,750
BellSouth 375,000 28,218,750
SBC Communications 639,500 28,417,781
U S WEST Communications
Group 895,000 46,931,562
Total 141,491,843
Total common stocks
(Cost: $2,355,481,607) $2,255,422,438
Preferred stock (1.1%)
Issuer Shares Value(a)
Houston Inds
7.00% Cv ACES 330,000(e) $25,183,125
Total preferred stock
(Cost: $25,952,119) $25,183,125
Short-term securities (2.3%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (1.5%)
Federal Farm Credit Disc Nt
11-02-98 5.11% $4,800,000 $4,778,283
Federal Home Loan Mtge Corp Disc Nts
10-02-98 5.47 9,700,000 9,698,531
10-06-98 5.44 1,100,000 1,099,172
10-14-98 5.44 5,400,000 5,389,431
10-28-98 5.32 5,200,000 5,179,330
Federal Natl Mtge Assn Disc Nt
10-20-98 5.18 8,200,000 8,177,625
Total 34,322,372
Commercial paper (0.8%)
Ford Motor Credit
10-09-98 5.54 3,700,000 3,695,470
Glaxo Wellcome
10-27-98 5.54 500,000(f) 498,007
Goldman Sachs Group
10-06-98 5.53 5,500,000 5,495,791
Heinz (HJ)
10-02-98 5.53 4,700,000 4,699,283
Reed Elsevier
10-09-98 5.58 5,000,000(f) 4,992,450
Total 19,381,001
Total short-term securities
(Cost: $53,704,790) $53,703,373
Total investments in securities
(Cost: $2,435,138,516)(g) $2,334,308,936
See accompanying notes to investments in securities.
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 6.39% of net assets.
(d) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 6 to the financial statements):
Type of security Contracts
Standard & Poor's 500 Stock Index, Dec. 1998 120
(e) ACES are automatically convertible to the underlying equity securities.
(f) 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.
(g) At Sept. 30, 1998, the cost of securities for federal income tax purposes
was approximately $2,435,139,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation ........................................$ 166,398,000
Unrealized depreciation .........................................(267,228,000)
Net unrealized depreciation ....................................$(100,830,000)
<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 Equity Value Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
