IDS
Equity Value
Fund
1999 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
(icon of) magnifying glass
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 strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
Distributed by American Express Financial Advisors Inc.
AMERCIAN EXPRESS Financial Advisors
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Stocks for the Bargain-hunter
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.
IDS EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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Table of Contents
1999 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
The 10 Largest Holdings 7
Making the Most of the Fund 8
The Fund's Long-term Performance 9
Independent Auditors' Report 10
Financial Statements 11
Notes to Financial Statements 14
Investments in Securities 21
Federal Income Tax Information 27
1999 PROSPECTUS
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 5p
Past Performance 6p
Fees and Expenses 8p
Management 9p
Buying and Selling Shares 9p
Valuing Fund Shares 9p
Investment Options 10p
Purchasing Shares 11p
Sales Charges 14p
Exchanging/Selling Shares 18p
Distributions and Taxes 23p
Personalized Shareholder
Information 25p
About the Company 26p
Quick Telephone Reference 28p
Financial Highlights 29p
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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(picture of) Arne H. Carlson
Arne H. Carlson
Chariman of the board
From the Chairman
It is an honor for me to join the IDS Mutual Fund Group as chairman of the board
and chief executive officer for each of the funds. I have served for the past
eight years as governor of Minnesota and also for the past 20 years as a
constitutional officer responsible for the pension investments made on behalf of
government employees. My responsibility in the upcoming years is to serve your
interests.
By law, half the members of a mutual fund board must be independent of their
investment manager and distributor. I am one of those persons. I am not an
employee of American Express Financial Corporation (AEFC), nor do I own stock in
American Express Company. Both are fine companies, but the law clearly states
that to fully represent your interests I must be independent.
Having said that, I have a great deal of respect for the capabilities of AEFC
and for the services it provides to investors. Your financial advisor assists
you in financial planning, conducts regular investment reviews and responds to
your questions and needs. This is a very personal service that makes AEFC a
partner in your financial future. I know that AEFC has an investment focus on
the long-term performance of our economy and that it wants you to participate in
that growth. Consistent with that, our board is here to serve you and represent
your interests in a professional manner.
Arne H. Carlson
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
From the Portfolio Manager
IDS Equity Value Fund rebounded from a substantial loss during the first half of
the fiscal year to post a positive result for the period as a whole. For the 12
months -- April 1998 through March 1999 -- the Fund's Class A shares gained
1.31%. (A portion of that return came in the form of a capital gain, which was
paid to shareholders in December 1998 and reduced the Fund's net asset value by
the same amount at that time.)
IDS EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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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. But any thoughts of a sustained advance were quickly shoved
aside 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.
But with the remarkable resilience they've shown in recent years, stocks not
only righted themselves during the autumn but also began to regain some lost
ground. Supported by three reductions in short-term interest rates by the
Federal Reserve, the tentative advance soon turned into a roaring rally that
would show gains in six of the next seven months and culminate in an all-time
high for the market by the end of the fiscal year in March.
LESS-VOLATILE PERFORMANCE
The Fund's performance pattern generally followed that of the broad market, but
the ups and downs were less dramatic -- a reflection of the Fund's
value-oriented investment style. During the rebound, holdings among financial
services (the Fund's largest area of investment), technology and energy stocks
made the biggest contributions. As the fiscal year progressed, I increased the
exposure to financial services stocks, whose prices appeared attractively low.
As the new fiscal year begins, the stock market continues to experience very
narrow leadership; the largest growth stocks, helped in recent months by the
soaring Internet sector, remain responsible for the lion's share of the market's
returns.
Its value approach has kept the Fund from fully participating in the market's
recent climb. But with inflation still in check, the economy still humming and
growth picking up in other parts of the world, a broader range of stocks could
begin to show good performance. The Fund is structured to respond to just such a
rally. But if the market's tone deteriorates, the Fund's avoidance of the
riskier, high-flying stocks should allow it to hold up relatively well.
Kurt Winters
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $11.32
March 31, 1998 $12.85
Decrease $ 1.53
Distributions -- April 1, 1998 - March 31, 1999
From income $ 0.33
From capital gains $ 1.29
Total distributions $ 1.62
Total return* +1.31%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $11.33
March 31, 1998 $12.85
Decrease $ 1.52
Distributions -- April 1, 1998 - March 31, 1999
From income $ 0.24
From capital gains $ 1.29
Total distributions $ 1.53
Total return* +0.54%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $11.34
March 31, 1998 $12.87
Decrease $ 1.53
Distributions -- April 1, 1998 - March 31, 1999
From income $ 0.34
From capital gains $ 1.29
Total distributions $ 1.63
Total return* +1.40%**
*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.
IDS EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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The 10 Largest Holdings
Percent Value
(of net assets) (as of March 31, 1999)
Citigroup 2.99% $76,937,438
American Intl Group 2.91 74,908,125
BankAmerica 2.82 72,390,624
American Stores 2.31 59,399,999
Mobil 2.24 57,639,999
Bank One 2.10 53,961,249
Dayton Hudson 2.09 53,633,125
Chevron 2.06 53,062,500
Houston Inds 1.93 49,706,250
7.00% Cv Preferred
Texaco 1.88 48,237,500
For further detail about these holdings, please refer to the section entitled
"Investments in Securities" herein.
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The 10 holdings listed here
make up 23.33% of net assets
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Making the Most of the Fund
BUILD YOUR ASSETS SYSTEMATICALLY
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares fall or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Accumulated Average Your average
shares* market price cost per share
per share
Jan Feb Mar Apr May Jun
$20
$18
$16
$15 42.25 $15 $14.20
$14
$12
$10 $10
$5
$15
$10 $10
$8 $8 $10 85.0 $7.66 $7.05
$5 $5 $5
$15
$10 $10
$8
$7
$6
$5
$4 $4
*Shares purchased is determined by dividing the amount invested per month by the
current share price.
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. 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.
IDS EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
How $10,000 has grown in IDS Equity Value Fund
$50,000
$40,000 S&P 500
Stock Index
$30,000 $36,031
IDS Equity
Value Fund
Class B
$20,000
Lipper Growth
& Income Index
$10,000
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99
Average annual total return (as of March 31, 1999):
1 year Since 5 years 10 years (B)
inception (A & Y)
Class A -3.76% +18.10%* --% --%
Class B -2.99% --% +16.04% +13.68%
Class Y +1.40% +19.79%* --% --%
*Inception date was March 20, 1995.
Assumes: Holding period from 4/1/89 to 3/31/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $21,805. Also see "Past Performance"
in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the S&P 500 Index and the Lipper Growth &
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.
S&P500 Index, 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.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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The financial statements contained in Post-Effective Amendment #34 to
Registration Statement No. 2-89288 filed on or about May 26, 1999, are
incorporated herein by reference.
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Federal Income Tax Information
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. 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, 1999
Class A
Income distributions taxable as dividend income, 100% qualifying for deduction
by corporations.
Payable date Per share
June 26, 1998 $0.05959
Sept. 25, 1998 0.03966
Dec. 22, 1998 0.20090
March 25, 1999 0.03094
Total $0.33109
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $1.29357
Total distributions $1.62466
The distribution of $1.49447 per share, payable Dec. 22, 1998, consisted of
$0.03843 from net investment income, $0.16247 from net short-term capital gains
(a total of $0.20090 taxable as dividend income) and $1.29357 from net long-term
capital gains.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Class B
Income distributions taxable as dividend income, 100% qualifying for deductions
by corporations.
Payable date Per share
June 26, 1998 $0.03560
Sept. 25, 1998 0.01684
Dec. 22, 1998 0.17940
March 25, 1999 0.00892
Total $0.24076
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $1.29357
Total distributions $1.53433
The distribution of $1.47297 per share, payable Dec. 22, 1998, consisted of
$0.01693 from net investment income, $0.16247 from net short-term capital gains
(a total of $0.17940 taxable as dividend income) and $1.29357 from net long-term
capital gains.
Class Y
Income distributions taxable as dividend income, 100% qualifying for deduction
by corporations.
Payable date Per share
June 26, 1998 $0.06184
Sept. 25, 1998 0.04146
Dec. 22, 1998 0.20290
March 25, 1999 0.03375
Total $0.33995
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $1.29357
Total distributions $1.63352
The distribution of $1.49647 per share, payable Dec. 22, 1998, consisted of
$0.04043 from net investment income, $0.16247 from net short-term capital gains
(a total of $0.20290 taxable as dividend income) and $1.29357 from net long-term
capital gains.
IDS EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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BULKRATE
U.S. POSTAGE
PAID
PERMIT NO. 85
SPENCER, IA
S-6382 G (5/99)
IDS Equity Value Fund
IDS Tower 10
Minneapolis, MN 55440-0010
