PAGE
IDS
Managed Retirement
Fund
1996 semiannual report
The goals of IDS Managed Retirement Fund, Inc. is to maximize total
return through a combination of growth of capital and current income.
Distributed by
American Express
Financial Advisors Inc.
Going where the action is
Today's investment marketplace is changing faster than ever. The key is
to be in the right place at the right time. Managed Retirement Fund has
that potential because it invest in a Portfolio that has the flexibility
to make sweeping shifts in its asset mix to take advantage of expected
trends in financial markets. While the focus historically has been on
U.S. stocks, the Portfolio can also hold foreign stocks, as well as
domestic and foreign bonds, plus cash-equivalent investments. For
investors, such flexibility can mean opportunity.
Contents
From the president 3
From the portfolio manager 3
Ten largest holdings 5
Financial statements (Fund) 6
Notes to financial statements (Fund) 9
Financial statements (Portfolio) 11
Notes to financial statements (Portfolio) 22
Investments in securities 33
Board members and officers 44
IDS mutual funds 45
To our shareholders
William R. Pearce
President of the Fund
Steven Merrell
Portfolio team manager
From the president
If you're an experienced investor, you know that 1990s have contained
some unusually strong periods for the U.S. Financial markets. Perhaps
just as important, you also know that 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.<PAGE>
That fact reinforces the need for investors to review
periodically their long-term goals and assess whether their investment
program remains on track to achieving them. Your quarterly investment
statements are one part of that monitoring process. The other is a meeting
with your American Express financial advisor. That becomes even more
important if there's a
major change in your financial situation or in the financial markets.
William R. Pearce
From the portfolio management team
This letter marks IDS Managed Retirement Fund's first report since it was
converted to an asset allocation strategy implemented by a team of
portfolio managers. The asset mix, which includes U.S. stocks and bonds,
foreign stocks and bonds, and cash reserves, varies according to the
management team's investment outlook for each asset class. Individual
security selections are based on evaluations provided by an internal
research staff.
Despite a downturn in the U.S. bond market late last winter, the
Portfolio produced positive results during the first half of the fiscal
year, December 1995 through May 1996. For the six months, the total
return (net asset value change, plus capital gains and dividend and
interest income) for Class A shares was approximately 4%.
The team devoted much of the first several weeks of the period to
restructuring the Portfolio in accordance with a change to team
management and an asset-allocation investment strategy. By the end of
January, the Portfolio mix was roughly as follows: 38% U.S. stocks, 31%
foreign stocks, 24% bonds (U.S. and foreign) amd 7% cash reserves.
U.S. stocks strong
Thanks to ongoing strength of the U.S. stock market, which continued to
benefit from healthy corporate profits and low inflation, domestic stock
made the biggest contribution to the Fund's performance during the six
months. Consistent with the Portfolio's investment style, virtually all
of its U.S. equities were concentrated in large, blue-chip companies that
help comprise the Standard & Poor's 500 stock index.<PAGE>
Foreign stocks, of which the largest exposure was to Japan, also
performed well for the Portfolio, though they could not match the U.S.'s
gains. Foreign bonds, too, proved to be positive, led by our holdings in
so-called "emerging" markets such as Poland, Argentina, Venezuela, Mexico
and China.
As noted at the outset, the only real disappointment during the period
was the U.S. bond market. After rallying strongly throughout nearly all
of 1995, bonds were able to carry their momentum only into January before
falling victim to fears that a strengthening economy would soon lead to
higher inflation. This psychological reversal sent long-term interest
rates up and bond prices down. The well-diversified Portfolio helped
cushion against the downturn, but couldn't completely avoid the negative
impact on net asset value.
Slight shifts
in response to the change in the U.S. bond environment, the team
lowered the fixed income portion of the Portfolio late in the period
and also reduced the average maturity level of our bond holdings. The
team put the money from the bond sales into small-capitalization U.S.
stocks, which the team believes are likely to outperform the broad stock
market in the months ahead. At period-end, the Portfolio mix was about
50% large-capitalization U.S. stocks, 25% foreign stocks, 20% U.S. and
foreign bonds, and 5% small-cap U.S. stocks.
As the Portfolio enters the final half of the fiscal year, the team
believes the fundamentals continue to favor stocks in the U.S., as bonds
may continue to face cyclical inflation pressures and the possibility of
temporarily higher longer-term interest rates. On the foreign front, the
team thinks the opportunities for both stocks and bonds remain good.
Naturally, the team will adjust the structure of the Portfolio should
the outlook for any investment sector change in the months ahead, as the
team strives to take advantage of the flexibility offered by the
Portfolio's asset allocation approach.
Steven Merrell
Portfolio team member
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1996 $12.01
Nov. 30, 1995 $12.19
Decrease $ 0.18
Distributions
Dec. 1, 1995 - May 31, 1996
From income $ 0.18
From capital gains $ 0.47
Total distributions $ 0.65
Total return* +4.2%**<PAGE>
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1996 $11.96
Nov. 30, 1995 $12.16
Decrease $ 0.20
Distributions
Dec. 1, 1995 - May 31, 1996
From income $ 0.15
From capital gains $ 0.47
Total distributions $ 0.62
Total return* +3.8%**
Class Y
(All figures per share)
Net asset value (NAV)
May 31, 1996 $12.02
Nov. 30, 1995 $12.19
Decrease $ 0.17
Distributions
Dec. 1, 1995 - May 31, 1996
From income $ 0.19
From capital gains $ 0.47
Total distributions $ 0.66
Total return* +4.3%**
*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>
PAGE
<TABLE>
<CAPTION>
Total Return Portfolio
The Portfolio's ten largest holdings
The ten holdings listed here make up 12.29% of the Portfolio's net assets
_____________________________________________________________________________________
Percent Value
(of Portfolio's net assets)(as of May 31, 1996)
_____________________________________________________________________________________
<S> <C> <C>
Philip Morris 1.56% $44,639,250
The largest cigarette company that has become the second
largest packaged-food company in the world as a result
of the Kraft acquisition.
Johnson & Johnson 1.36 38,755,250
A major producer of health-care products, including
consumer products, medical and dental devices and products
and a wide variety of ethical and over-the-counter drugs.
MCI Communications 1.28 36,414,988
The second-largest carrier, with 16% of long-distance voice
and data communication services in the United States.
Merck 1.25 35,666,538
One of the world's largest drug manufacturers.
ConAgra 1.24 35,421,375
This company is engaged in a variety of basic food
businesses, including feed and fertilizer, grain processing
and merchandising, agricultural chemicals, worldwide trading,
fresh and processed red meats, poultry products, and frozen
prepared foods and seafood.
Emerson Electric 1.18 33,607,713
A diversified manufacturer of electrical and electronic
products for use in commerical and industrial products,
appliances and construction-related components.
UNUM 1.12 31,966,200
Through its various subsidiaries, UNUM Corporation offers
a broad range of disability, health and life insurance, and
group pensions products.<PAGE>
AirTouch Communications 1.11 31,588,125
A subsidiary of Pacific Telesis, AirTouch Communications
is engaged in non-regulated wireless communication
operations, with cellular interest in the United States,
Germany, Japan, Italy, South Korea and Belgium.
American Home Products 1.10 31,522,200
This company is engaged in the discovery, development,
manufacture, distribution and sale of a diversified line
of products in three business segments: health care
products, agricultural products and food products.
General Electric 1.09 31,221,575
A diversified company with interest in manufacturing,
broadcasting (NBC), financial services and technology.
Excludes U.S. Treasury and government agency holdings that total 13% of the
Portfolio's net assets.
/TABLE
<PAGE>
PAGE
<TABLE>
<CAPTION>
Statement of assets and liabilities
IDS Managed Retirement Fund, Inc.
May 31, 1996
Assets
<S> <C>
(Unaudited)
Investment in Total Return Portfolio (Note 1) 2,854,628,826
Total assets 2,854,628,826
Liabilities
Accrued distribution fee 2,775
Accrued service fee 13,056
Accrued transfer agency fee 10,831
Accrued administrative services fee 2,421
Other accrued expenses 316,539
Total liabilities 345,622
Net assets applicable to outstanding capital stock 2,854,283,204
Represented by
Capital stock -- authorized 10,000,000,000
shares of $.01 par value 2,376,235
Additional paid-in-capital 2,352,492,391
Undistributed net investment income 12,861,956
Accumulated net realized gain (Note 1) 295,625,998
Unrealized appreciation of investments and on
translation of assets and liabilities in foreign
currencies 190,926,624
2,854,283,204
Total - representing net assets applicable to outstanding capital stock
Net assets applicable to outstanding shares:
Class A 2,609,434,891
Class B 137,235,558
Class Y 107,612,755
Net asset value per share of outstanding Class A shares 217,196,132 $12.01
capital stock Class B shares 11,472,614 $11.96
Class Y shares 8,954,732 $12.02
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
IDS Managed Retirement Fund, Inc.
Dec 1, 1995 to May 13, 1996 to
May 12, 1996 May 31, 1996 Total
(Note 1) (Unaudited)
<S> <C> <C> <C>
Investment Income
Income
Interest 20,236,208 2,685,932 22,922,140
Dividends(net of foreign taxes withheld of $1,188,478) 16,313,790 2,950,898 19,264,688
Total income 36,549,998 5,636,830 42,186,828
Expenses (Note 2):
Investment management services fee 5,077,387 0 5,077,387
Distribution fee -- Class B 331,726 57,145 388,871
Transfer agency fee 1,787,298 222,248 2,009,546
Incremental transfer agency fee -- Class B 7,547 1,185 8,732
Service fee
Class A 1,970,644 261,344 2,231,988
Class B 77,193 13,334 90,527
Administrative services fee 388,056 50,909 438,965
Compensation of board members 25,539 9,592 35,131
Compensation of officers 12,144 880 13,024
Custodian fees 249,077 0 249,077
Postage 191,302 14,268 205,570
Registration fees 130,807 14,664 145,471
Reports to shareholders 130,152 2,378 132,530
Audit fees 15,977 773 16,750
Administrative 11,493 383 11,876
Other 27,757 668 28,425
Total expenses 10,434,099 649,771 11,083,870
Earnings credits on cash balances (Note 2) (5,287) 0 (5,287)
10,428,812 649,771 11,078,583
Expenses, including investment management
services fee allocated from Total Return Portfolio 0 645,758 645,758
Total net expenses 10,428,812 1,295,529 11,724,341
Investment income -- net 26,121,186 4,341,301 30,462,487
Realized and unrealized gain (loss) -- net
Net realized gain on security and foreign
currency transactions (Note 4) 293,012,643 2,583,665 295,596,308
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currencies 817,501,189 46,323,607 863,824,796
Net gain on investments and foreign currency 36,772,008 48,907,272 85,679,280
Net increase in net assets
resulting from operations 62,893,194 53,248,573 116,141,767
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
IDS Managed Retirement Fund, Inc.
Operations and distributions May 31, 1996 Nov. 30, 1995
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income -- net 30,462,487 46,130,517
Net realized gain on investments 295,596,308 117,677,082
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currency 863,824,796 256,569,178
Net increase in net assets
resulting from operations 116,141,767 420,376,777
Distributions to shareholders from:
Net investment income
Class A 1,057,719,679 1,039,049,580
Class B (415,685) (200,233)
Class Y 1,072,932,149 1,072,510,845
Net realized gain
Class A 949,792,126 913,621,763
Class B 1,069,757,407 0
Class Y 1,068,217,018 0
Total distributions (150,706,426) (196,243,517)
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 167,141,947 417,761,343
Class B shares 66,765,902 72,721,659
Class Y shares 16,899,777 116,641,833
Reinvestment of distributions at net asset value
Class A shares 138,889,188 193,441,984
Class B shares 4,377,351 198,523
Class Y shares 6,334,481 1,230,979
Payments for redemptions
Class A shares 808,164,747 608,263,646
Class B shares (Note 2) 1,065,018,517 1,071,851,586
Class Y shares 1,044,995,039 1,054,870,545
Increase in net assets from
capital share transactions 97,361,477 315,756,626
Total increase in net assets 62,796,818 539,889,886
Net assets at beginning of period 2,791,486,386 2,251,596,500
Net assets at end of period 2,854,283,204 2,791,486,386
(including undistributed (excess of distributions over)
net investment income of $12,861,956 and $(353,026)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Managed Retirement Fund, Inc.
(Unaudited as to May 31, 1996)
________________________________________________________________________
1. Summary of significant accounting policies
The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. The
Fund seeks to provide shareholders maximum total return through a
combination of growth of capital and current income. 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 after eight years.
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.
Investment in Total Return Portfolio
Effective May 13, 1996, the Fund began investing all of its assets in the
Total Return Portfolio (Portfolio), a series of Growth and Income Trust, an
open-end investment company that has the same objectives as the Fund. This
was accomplished by transferring the Fund's assets to the Portfolio in
return for a proportionate ownership interest in the Portfolio. The
percentage of the Portfolio owned by the Fund at May 31, 1996 was 99.99%.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at value. Valuation of
securities held by the Portfolio is discussed in Note 1 of the Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
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.
<PAGE>
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 the shareholders, no provision for income or
excise taxes is required.
Net investment income (loss) and net realized gains (losses) allocated from
the Portfolio 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 declared and paid each calendar quarter from net investment
income 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.
________________________________________________________________________
2. Expenses and sales charges
In addition to the expenses allocated from the Portfolio, the Fund accrues
its own expenses as follows:
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for providing administrative services
and serving as transfer agent as follows: Under its Administrative
Services Agreement, the Fund pays AEFC 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. Under this agreement, the Fund
also pays taxes; audit and certain legal fees; registration fees for
shares; office expenses; consultant's fees; compensation of board members,
officers and employees; corporate filing fees; organizational expenses; and
any other expenses properly payable by the Fund approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder
account for this service as follows:
o Class A $15
o Class B $16
o Class Y $15
<PAGE>
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing-related services as follows: 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.
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state expense
limitation.
Sales charges received by American Express Financial Advisors for
distributing Fund shares were $3,365,591 for Class A and $38,551 for Class
B for the six months ended May 31, 1996.
The Fund had a retirement plan for its independent board members. Upon
retirement, board members receive monthly payments equal to one-half of the
retainer fee for as many months as they served as board members up to 120
months. There are no death benefits. The plan is not funded, but the Fund
recognizes the cost of payments during the time board members serve on the
board. The retirement plan expense amounted to $17,407 for the six months
ended May 31, 1996. The plan was terminated April 30,1996. The total
liability for the plan is $95,516, which will be paid out at some future
date.
_______________________________________________________
3. Capital share transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended May 31, 1996
Class A Class B Class Y
_______________________________________________________
Sold 14,183,497 5,680,099 1,433,672
Issued for reinvested 11,998,371 379,655 546,910
distributions
Redeemed (22,513,289) (741,882) (2,436,181)
_______________________________________________________
Net increase (decrease) 3,668,579 5,317,872 (455,599)
_______________________________________________________
<PAGE>
Year ended Nov. 30, 1995
Class A Class B* Class Y*
____________________________________________________
Sold 37,660,154 6,299,264 10,9940,208
Issued for reinvested 18,500,738 16,962 108,792
distributions
Redeemed (42,073,334) (161,484) (1,638,669)
_______________________________________________________
Net increase 14,087,558 6,154,742 9,410,331
_______________________________________________________
*Inception date was March 20, 1995.
________________________________________________________________
4. Pre-conversion to Master
Prior to transferring its securities to Total Return Portfolio on May 13,
1996, various transactions took place as stated below. Additional
information is disclosed in the Portolio's Notes to Financial Statements
which are included elsewhere in this report.
Expenses and sales charges
The management fee was adjusted by a performance incentive adjustment based
on the Fund's average daily net assets over a rolling 12-month period as
measured against the change in the Lipper Growth and Income Fund Index. The
adjustment decreased the fee by $962,244 for the period from Dec. 1, 1995
to May 12, 1996.
During the period from Dec. 1, 1995 to May 12, 1996, the Fund's custodian
fees were reduced by $5,287 as a result of earnings credits from overnight
cash balances.
Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $3,008,369,846 and $2,671,845,900
respectively, for the period from Dec. 1, 1995 to May 12, 1996.
Brokerage commissions paid to brokers affiliated with AEFC were $378,106
during this period.
Lending of portfolio securities
Income from securities lending amounted to $184,772 for the period from
Nov. 1, 1995 to May 12, 1996.
<PAGE>
5. Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
<TABLE>
<CAPTION>
IDS Managed Retirement Fund, Inc.
Performance
Financial Highlights
Fiscal period ended Nov. 30,
Per share income and capital changes*
Class A
1996** 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $12.19 $11.29 $12.16 $11.91 $11.08 $9.01
beginning of period
Income from investment operations:
Net investment income 0.13 0.21 0.13 0.17 0.21 0.2
Net gains (both realized 0.34 1.65 0.03 1.07 2.04 2.45
and unrealized)
Total from investment 0.47 1.86 0.16 1.24 2.25 2.65
operations
Less distributions:
Dividends from net 0.07 0.16 0.12 0.19 0.21 0.27
investment income
Distributions from 0.58 0.8 0.90 0.80 1.2 0.31
realized gains
Excess distribution of -- -- 0.01 -- 0.01 --
realized gains
Total distributions 0.65 0.96 1.03 0.99 1.42 0.58
Net asset value, $12.01 $12.19 $11.29 $12.16 $11.91 $11.08
end of period
Ratios/supplemental data
Class A
1996** 1995 1994 1993 1992 1991
Net assets, end of $2,609 $2,602 $2,252 $1,845 $1,425 $1,007
period (in millions)
Ratio of expenses to .77%+ .83% .85% .83% .85% .90%
average daily net assets
Ratio of net income 1.34%+ 1.85% 1.13% 1.46% 1.94% 1.98%
to average
daily net assets
Total return++ 4.2% 18.0% 1.0% 11.2% 22.3% 30.9%
Portfolio turnover rate 111% 90% 66% 61% 46% 81%
(excluding short-term
securities) for Total return portfolio
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Six months ended May 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
</TABLE>
IDS Managed Retirement Fund, Inc.
Performance
Financial Highlights
<TABLE>
<CAPTION>
Fiscal period ended Nov. 30,
Per share income and capital changes*
Class B Class Y
1996*** 1995** 1996*** 1995**
<S> <C> <C> <C> <C>
Net asset value, $12.16 $10.41 $12.19 $10.41
beginning of period
Income from investment operations:
Net investment income 0.08 0.11 0.15 0.16
Net gains(both realized 0.34 1.74 0.34 1.76
and unrealized)
Total from investment 0.42 1.85 0.49 1.92
operations
Less distributions:
Dividends from net 0.04 0.1 0.08 0.14
investment income
Distributions from 0.58 -- 0.58 --
realized gains
Total distributions 0.62 -- 0.66 --
Net asset value, $11.96 $12.16 $12.02 $12.19
end of period
Ratios/supplemental data
Class B Class Y
1996*** 1995** 1996*** 1995**
Net assets, end of $137 $75 $108 $115
period (in millions)
Ratio of expenses to 1.54%+ 1.58%+ .60%+ .65%+
average daily net assets
Ratio of net income (loss) .87%+ .94%+ .97%+ 1.95%+
to average
daily net assets
Total return++ 3.8% 17.7% 4.3% 18.4%
Portfolio turnover rate 111% 90% 111% 90%
(excluding short-term
securities) for Total return portfolio
*For share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
***Six months ended May 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
/TABLE
<PAGE>
Page
<TABLE>
<CAPTION>
Statement of assets and liabilities
Total Return Portfolio
May 31, 1996
Assets
(Unaudited)
<S> <C>
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated issuers
(identified cost $2,583,176,048) 2,777,850,809
Investment in security of affililated issuer
(identified cost $18,789,176) 13,690,000
Dividends and accrued interest receivable 13,507,893
Receivable for investment securities sold 98,711,425
Receivable from investment advisor 161,505
Unrealized appreciation on foreign contracts held, at value (Notes 1 and 4)1,681,031
U.S. government securities held as collateral (Note 5) 104,754,357
Total assets 3,010,357,020
Liabilities
Disbursements in excess of cash on demand deposit 2,481,845
Payable for investment securities purchased 38,435,661
Unrealized depreciation on foreign currency
contracts held, at value (Notes 1 and 4) 170,785
Payable upon return of securities loaned (Note 5) 114,522,956
Other accrued expenses 84,913
Total liabilities 155,696,160
Net assets 2,854,660,860
See accompanying notes to financial statements.
Statement of operations
Total Return Portfolio
For the period from May 13, 1996 (commencement of operations)
to May 31, 1996
Investment Income
(Unaudited)
Income:
Interest 2,685,950
Dividend (net of foreign taxes withheld of $25,756) 2,950,924
Total income 5,636,874
Expenses (Note 2):
Investment management services fee 594,923
Compensation of board members 327
Custodian fees 43,299
Audit fees 2,319
Administrative 15
Other 5,568
Total expenses 646,451
Earnings credits on cash balances (Note 2) (691)
Total net expenses 645,760
Investment income -- net 4,991,114
Realized and unrealized gain -- net
Net realized gain on security and foreign currency transactions
(including gain of $137,502 from foreign currency
transactions)(Note 3) 2,583,598
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currencies 46,323,889
Net gain on investments and foreign currency 48,907,487
Net increase in net assets resulting from operations 53,898,601
See accompanying notes to financial statements.
Statement of changes in net assets
Total Return Portfolio
For the period from May 13, 1996 to May 31, 1996
Operations and distributions
(Unaudited)
Investment income - net 4,991,114
Net realized gain on investments and foreign currency 2,583,598
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currency 46,323,889
Net increase in net assets resulting from operations 53,898,601
Net contributions 2,800,762,259
Total increase in net assets 2,854,660,860
Net assets at beginning of period (Note 1) --
Net assets at end of period 2,854,660,860
See accompanying notes to financial statements.
/TABLE
<PAGE>
Notes to financial statements
Total Return Portfolio
(Unaudited as to May 31, 1996)
______________________________________________________________________
1. Summary of significant accounting policies
The Total Return Portfolio (Portfolio) is a series of Growth and Income
Trust (Trust) and is registered under the Investment Company Act of 1940 as
a diversified, open-end management investment company. Total Return
Portfolio seeks to provide unitholders with a maximum total return through a
combination of growth of capital and current income by investing in U.S. and
foreign equity securities, U.S. and foreign debt securities and money market
instruments. The Declaration of Trust permits the Trustees to issue non-
transferable interests in the Portfolio. The Portfolio commenced operations
on May 13, 1996. At this time, an existing fund transferred its assets to
the Portfolio in return for an ownership percentage of the Portfolio.
Significant accounting policies followed by the Portfolio 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; securities for which
market quotations are not readily available, including illiquid securities,
are valued at fair value according to methods selected in good faith by the
board. Determination of fair value involves, among other things, reference
to market indexes, matrixes and data from independent brokers. 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.
<PAGE>
Option transactions
In order to produce incremental earnings, protect gains and facilitate
buying and selling of securities for investment purposes, the Portfolio may
buy or 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 Portfolio 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 Portfolio gives up the opportunity of profit if the market price of
the security increases. The risk in writing a put option is that the
Portfolio 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 Portfolio
pays a premium whether or not the option is exercised. The Portfolio 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
Portfolio 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 Portfolio may buy and sell stock index futures contracts traded on any
U.S. or foreign exchange. The Portfolio also may buy or 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 Portfolio 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 Portfolio 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 Portfolio recognizes a realized gain or
loss when the contract is closed or expires.
<PAGE>
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 may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement dates on securities transactions, and
other translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio 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 Portfolio and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Portfolio is subject to the
credit risk that the other party will not complete the obligations of the
contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains
and losses of the Portfolio. Accordingly, as a "pass-through" entity, the
Portfolio does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased
or sold. Dividend income is recognized on the ex-dividend date or upon
receipt of ex-dividend notification in the case of certain foreign
securities. Interest income, including level-yield amortization of premium
and discount, is accrued daily.
____________________________________________________________
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an Investment
Management Services Agreement with American Express Financial Corporation
(AEFC) for managing its portfolio. Under this agreement, AEFC determines
which securities will be purchased, held or sold. The management fee is a
percentage of the Portfolio's average daily net assets in reducing
percentages from 0.46% to 0.32% annually. The fees may be increased or
decreased by a performance adjustment based on a comparison of the
performance of Class A shares of IDS Managed Retirement Fund to the Lipper
Growth and Income Fund Index. The maximum adjustment is 0.08% of the
Portfolio's average daily net assets on an annual basis. The adjustment
decreased the fee by $199,270 for the period from May 13, 1996 to May 31,
1996.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees to be paid to an
affiliate of AEFC; audit and certain legal fees; fidelity bond premiums;
registration fees for units; Portfolio office expenses; consultants' fees;
compensation of trustees; corporate filing fees; expenses incurred in
connection with lending securities of the Portfolio; and any other expenses
properly payable by the Trust or Portfolio, approved by the board.
For the period from May 13, 1996 to May 31, 1996, the Portfolio's custodian
fees were reduced by $691 as a result of earnings credits from overnight
cash balances.
Pursuant to a Placement Agency Agreement, American Express Financial
Advisors Inc. acts as placement agent of the units of the Trust.
____________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-
term obligations) aggregated $118,151,317 and $265,682,325, respectively,
for the period from May 13, 1996 to May 31, 1996. For the same period, the
portfolio turnover rate was 4%. Realized gains and losses are determined on
an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $15,744 for
this period.
____________________________________________________________
4. Foreign currency contracts
At May 31, 1996, the Portfolio had entered into 14 foreign currency exchange
contracts that obligate the Portfolio to deliver currencies at specified
future dates.
The unrealized appreciation and/or depreciation on these contracts is
included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
Exchange date Currency to be Currency to be Unrealized Unrealized
delivered received appreciation depreciation
____________________________________________________________ __________
<S> <C> <C> <C> <C>
June 3, 1996 7,003,07 9,898,150 24,363 --
U.S. Dollar Singapore Dollar
June 4, 1996 614,881 403,485 10,339 --
U.S. Dollar British Pound
June 4, 1996 206,046,344 1,910,313 3,271 --
Japanese Yen U.S. Dollar
June 5, 1996 1,707,864 2,617,524 6,914 --
U.S. Dollar Deutsche Mark
June 5, 1996 1,014,636 1,556,350 -- 15,879
British Pound U.S. Dollar
<PAGE>
June 28, 1996 2,000,719 10,367,726 6,197 --
U.S. Dollar French Franc
June 28, 1996 519,511 2,673,766 -- 1,941
U.S. Dollar French Franc
July 31, 1996 44,269,124 8,901,000 310,975 --
French Franc U.S. Dollar
July 31, 1996 12,512,612 10,840,000 803,655 --
Swiss Franc U.S. Dollar
July 31, 1996 19,327,290 3,820,000 69,713 --
French Franc U.S. Dollar
July 31, 1996 5,112,900 4,370,000 268,952 --
Swiss Franc U.S. Dollar
July 31, 1996 22,795,200 4,500,000 76,797 --
French Franc U.S. Dollar
July 31, 1996 2,680,650 2,250,000 99,855 --
Swiss Franc U.S. Dollar
Aug. 30, 1996 24,377,255 14,210,000 -- 152,965
Dutch Guilder U.S. Dollar
_________ ________
1,681,031 170,785
</TABLE>
____________________________________________________________
5. Lending of portfolio securities
At May 31, 1996, securities valued at $111,443,966 were on loan to
brokers. For collateral, the Portfolio received $9,768,599 in cash and
u.s.government securities valued at $104,754,357. Income from securities
lending amounted to $31,782 for the period ended May 31, 1996. The risks
to the Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the securities when
due.
____________________________________________________________
6. Stock index futures contracts
At May 13, 1996 to May 31, 1996, investments in securities included
securities valued at $4,704,600 that were pledged as collateral to cover
initial margin deposits on 400 open sale contracts. The market value of
the open contracts at May 31, 1996 was $43, 225,000 with a net unrealized
loss of $165, 625.
_______________________________________________________
7. At May 31, 1996, investments in securities include an issue that is
illiquid. The Portfolio currently limits investments in illiquid securities
to 10% of the net assets, at market value, at the time of purchase. The
aggregate value of such securities at May 31, 1996, was $10,575,200,
representing 0.4% of the net assets. Pursuant to guidelines adopted by the
Portfolio's board of trustees, certain unregistered securities are
determined to be liquid and are not included within the 10% limitation
specified above.<PAGE>
PAGE
<TABLE>
<CAPTION>
Investment in securities
Total Return Portfolio (Percentages represent value of
May 31, 1996 (Unaudited) investments compared to net assets)
Investments in securities of unaffiliated issuers
_____________________________________________________________________________________________________________________________
Common stocks (71.6%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Aerospace & defense (1.4%)
Boeing 70,000 $ 5,967,500
General Dynamics 14,800 912,050
Goodrich (BF) 3,200 126,800
Lockheed Martin 38,900 3,262,737
Orbital Sciences 4,000 (b) 76,500
Raytheon 50,100 2,667,825
Rockwell Intl 469,300 27,395,388
_______________
Total 40,408,800
_____________________________________________________________________________________________________________________________
Airlines (--%)
Mesa Airlines 2,000 (b) 26,500
_____________________________________________________________________________________________________________________________
Automotive & related (2.1%)
Chrysler 306,700 20,433,887
Ford Motor 319,800 11,672,700
General Motors 475,700 26,222,962
Gentex 1,000 (b) 45,250
Goodyear Tire & Rubber 37,300 1,883,650
Hayes Wheels Intl 1,000 31,250
Smith (AO) 7,600 203,300
Winnebago Inds 12,200 114,375
______________
Total 60,607,374
_____________________________________________________________________________________________________________________________
Banks and savings & loans (3.0%)
Bank of New York 117,400 6,090,125
Barnett Banks 113,500 7,093,750
California Federal Bancorp 400 (b) 7,350
Citicorp 148,700 12,490,800
Collective Bancorp 6,000 147,000
First Chicago 185,200 8,079,350
First Union 197,100 12,047,738
Great Western Financial 66,900 1,538,700
KeyCorp 175,800 6,812,250
Mellon Bank 126,000 7,197,750
NationsBank 157,100 12,744,738
Norwest Corp 293,800 10,246,275
ONBANCorp 1,600 50,400
Roosevelt Financial 14,400 257,400
TCF Financial 2,200 75,350
______________
Total 84,878,976
Beverages & tobacco (4.1%)
Anheuser-Busch 420,600 29,967,750
Coca-Cola 612,400 28,170,400
PepsiCo 404,600 13,452,950
Philip Morris 449,200 44,639,250
______________
Total 116,230,350
_____________________________________________________________________________________________________________________________
Building materials & construction (1.1%)
Georgia-Pacific 13,200 953,700
Juno Lighting 2,000 30,500
Louisianna Pacific 107,400 2,644,725
Masco 98,200 3,068,750
Ryland Group 800 13,100
Sherwin-Williams 22,600 1,014,175
Temple-Inland 34,300 1,689,275
Tyco Intl 470,700 18,592,650
Weyerhauser 69,100 3,135,412
______________
Total 31,142,287
_____________________________________________________________________________________________________________________________
Chemicals (1.3%)
Chemed 4,600 173,075
Cytec Inds 800 (b) 71,600
Ionics 3,600 (b) 178,200
Monsanto 146,900 22,310,438
Morton Intl 5,500 209,000
Praxair 355,000 14,421,875
______________
Total 37,364,188
_____________________________________________________________________________________________________________________________
Communications equipment & services (0.9%)
Andrew 142,300 (b) 7,719,775
Aspect Telecommunications 2,600 (b) 147,550
BroadBand Technologies 800 (b) 24,500
California Microwave 3,400 (b) 65,025
Geotek Communications 6,000 (b) 83,250
Northern Telecom 302,800 16,426,900
Oak Inds 1,600 (b) 43,600
PictureTel 1,600 (b) 62,800
______________
Total 24,573,400
_____________________________________________________________________________________________________________________________
Computers & office equipment (4.6%)
American Management Systems 3,400 (b) 96,900
Auspex Systems 2,600 (b) 60,125
BISYS Group 1,800 (b) 66,150
Broderbund Software 1,600 (b) 67,400
Cisco Systems 126,800 (b,c) 6,942,300
Cognex 8,400 (b) 149,100
Compaq Computer 305,500 (b) 14,854,938
Computer Associates Intl 324,200 23,585,550
First Data 11,400 909,150
Hewlett-Packard 286,000 30,530,500
Komag 5,600 (b) 193,900
Landmark Graphics 3,000 (b) 56,250
Microsoft 107,700 (b) 12,789,375
Natl Data 3,200 120,800
Network General 2,400 (b) 57,000
New England Business Service 5,200 95,550
Oracle 557,550 (b) 18,468,844
Pitney Bowes 49,100 2,436,587
PLATINUM technology 400 (b) 7,275
Primark 400 (b) 14,100
Read-Rite 6,600 (b) 150,975
Sanmina 3,800 (b) 140,125
Silicon Graphics 387,900 (b) 10,667,250
Sterling Software 2,800 (b) 225,400
SunGard Data Systems 1,200 (b) 45,300
System Software 5,000 81,875
Tech Data 3,200 (b) 74,400
3Com 185,500 (b) 9,135,875
Viewlogic Systems 3,200 (b) 50,000
Zebra Technologies Cl A 3,000 (b) 75,750
______________
Total 132,148,744
_____________________________________________________________________________________________________________________________
Electronics (2.3%)
AMP 582,700 24,546,238
Applied Materials 247,500 (b) 9,219,375
Augat 1,600 34,600
Cyrix 1,600 (b) 49,400
Dynatech 2,200 (b) 76,725
Intel 292,500 22,083,750
Intl Rectifier 5,400 (b) 140,400
Lattice Semiconductor 2,400 (b) 83,100
LSI Logic 246,800 (b) 7,681,650
Microchip Technology 2,200 (b) 56,650
Novellus Systems 3,200 (b) 156,800
Pioneer Standard Electronics 4,000 60,500
SCI Systems 5,000 (b) 225,000
VLSI Technology 7,200 (b) 123,300
Zilog 3,200 (b) 118,000
_____________
Total 64,655,488
_____________________________________________________________________________________________________________________________
Energy (0.4%)
Amerada Hess 201,100 11,462,700
Barrett Resources 1,200 (b) 31,350
Snyder Oil 3,400 33,575
United Meridian 4,600 (b) 131,100
______________
Total 11,658,725
_____________________________________________________________________________________________________________________________
Energy equipment & services (--%)
Camco Intl 400 13,150
Fluor 8,500 554,625
Input/Output 400 (b) 16,150
Noble Drilling 13,800 (b) 184,575
Oceaneering Intl 600 (b) 9,900
Pride Petroleum Services 800 (b) 13,800
_____________
Total 792,200
_____________________________________________________________________________________________________________________________
Financial services (0.9%)
AMRESCO 2,600 47,775
Dean Witter 61,200 3,626,100
Federal Home Loan Mortgage 132,600 10,956,075
Household Intl 33,700 2,333,725
Inter-Regional Financial Group 600 15,000
Morgan Stanley Group 43,400 2,148,300
Natl Auto Credit 3,800 (b) 46,550
North American Mtge 2,400 41,400
Pioneer Group 4,600 127,650
Travelers 123,000 5,104,500
Waterhouse Investor Service 2,200 80,575
______________
Total 24,527,650
_____________________________________________________________________________________________________________________________
Food (1.3%)
Chiquita Brands Intl 6,200 82,925
ConAgra 831,000 35,421,375
Ralston-Purina Group 35,000 2,143,750
______________
Total 37,648,050
_____________________________________________________________________________________________________________________________
Furniture & appliances (--%)
Bassett Furniture 800 20,100
Ethan Allen Interiors 3,600 (b) 94,500
La-Z Boy Chair 1,800 58,725
Mohawk Inds 4,000 (b) 67,000
_____________
Total 240,325
_____________________________________________________________________________________________________________________________
Health care (7.2%)
Advanced Tissue Sciences 4,800 (b) 87,600
Alliance Pharmaceutical 3,400 (b) 73,525
ALZA 228,100 (b) 6,500,850
American Home Products 589,200 31,522,200
Amgen 191,000 (b) 11,364,500
Ballard Medical Products 3,200 63,600
Biomet 967,900 (b) 13,550,600
Boston Scientific 162,800 (b) 6,980,050
CellPro 400 (b) 7,300
Cephalon 2,800 (b) 75,600
IDEXX Laboratories 3,000 (b) 130,500
Johnson & Johnson 398,000 38,755,250
Lilly (Eli) 14,100 905,925
Liposome 3,000 (b) 60,000
Medtronic 212,000 11,925,000
Merck 551,900 35,666,538
North American Vaccine 1,800 (b) 40,725
Pfizer 388,100 27,458,075
Pharmacia & Upjohn 13,200 539,550
Protein Design Labs 1,800 (b) 47,250
Respironics 3,000 (b) 59,250
Roberts Pharmaceuticals 2,800 (b) 58,800
Schering-Plough 345,600 20,260,800
SEQUUS Pharmaceuticals 3,000 (b) 64,125
STERIS 5,000 (b) 171,250
Sunrise Medical 3,600 (b) 67,950
Sybron Intl 1,000 (b) 27,125
Tecnol Medical Products 400 (b) 7,900
______________
Total 206,471,838
_____________________________________________________________________________________________________________________________
Health care services (1.2%)
Cerner 400 (b) 10,000
Coventry 3,200 (b) 58,800
Express Scripts Cl A 1,000 (b) 50,000
Genesis Health Ventures 1,800 (b) 56,925
Integrated Health Services 3,400 88,825
Lincare Holdings 1,600 (b) 60,400
Magellan Health Services 2,600 (b) 62,400
Omnicare 1,000 55,750
Owens & Minor 12,000 150,000
Patterson Dental 1,600 (b) 51,600
PhyCor 2,000 (b) 108,500
Quantum Health Resources 600 (b) 10,500
Service Corp Intl 380,400 21,254,850
Sierra Health Services 3,600 (b) 116,100
United Healthcare 197,200 10,821,350
Universal Health Services Cl B 5,000 (b) 130,000
Vivra 3,000 (b) 102,375
______________
Total 33,188,375
______________________________________________________________________________________________________________________________
Household products (0.5%)
Clorox 61,900 5,269,237
Gillette 160,300 9,477,738
Nature's Sunhine Products 1,000 28,250
Paragon 6,200 (b) 152,675
______________
Total 14,927,900
______________________________________________________________________________________________________________________________
Industrial equipment & services (0.8%)
AGCO 600 18,075
BW/IP Holdings 6,800 134,300
Cincinnati Milacron 90,700 2,176,800
Deere 28,000 1,165,500
General Signal 483,200 18,482,400
Greenfield Inds 400 15,100
KEMET 3,000 (b) 66,750
Sanifill 4,000 (b) 179,500
Toro 600 16,725
______________
Total 22,255,150
_____________________________________________________________________________________________________________________________
Industrial transportation (0.4%)
American Freightways 4,800 (b) 61,200
Burlington Northern 13,100 1,110,225
Heartland Express 5,800 (b) 168,200
Landstar System 4,600 (b) 135,700
Offshore Logistics 8,000 (b) 116,000
Union Pacific 141,200 9,901,650
Wabash Natl 2,200 44,825
_____________
Total 11,537,800
_____________________________________________________________________________________________________________________________
Insurance (1.1%)
Enhance Financial Services Group 7,600 220,400
Protective Life 3,200 119,600
UNUM 541,800 31,966,200
______________
Total 32,306,200
_____________________________________________________________________________________________________________________________
Leisure time & entertainment (0.4%)
Aztar 4,400 (b) 50,600
Harrah's Entertainment 283,700 9,539,413
Marriott Intl 27,600 1,311,000
Mattel 15,625 425,781
WMS Inds 1,000 (b) 22,000
______________
Total 11,348,794
_____________________________________________________________________________________________________________________________
Media (1.2%)
Deluxe 46,300 1,678,375
GC Companies 1,000 (b) 36,750
Intl Family Entertainment Cl B 3,200 (b) 57,600
McGraw-Hill 106,400 4,987,500
Regal Cinemas 1,400 (b) 64,925
Time Warner 676,700 27,321,763
Valassis Communications 400 (b) 7,100
______________
Total 34,154,013
_____________________________________________________________________________________________________________________________
Metals (0.1%)
ALCOA 19,500 1,201,687
Coeur d'Alene Mines 4,000 88,500
Handy & Harman 1,800 31,725
Quanex 4,800 108,000
Reynolds Metals 37,700 2,035,800
Sunshine Mining & Refining 1,800 (b) 2,700
______________
Total 3,468,412
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (2.3%)
Emerson Electric 392,500 33,607,813
General Electric 377,300 31,221,575
Griffon 10,400 (b) 94,900
Interim Services 400 (b) 19,000
Standex Intl 1,400 37,275
Wyle Electronics 200 8,500
______________
Total 64,989,063
_____________________________________________________________________________________________________________________________
Paper & packaging (1.4%)
Bemis 75,100 2,487,687
Champion Intl 8,500 375,063
Crown Cork & Seal 389,800 18,223,150
Intl Paper 72,800 2,902,900
James River 369,200 9,183,850
Kimberly-Clark 57,900 4,219,462
Mead 42,300 2,273,625
Mosinee Paper 2,800 73,500
Shorewood Packaging 1,200 (b) 19,800
______________
Total 39,759,037
_____________________________________________________________________________________________________________________________
Restaurants & Lodging (0.1%)
Applebee's Intl 1,200 34,050
Luby's Cafeterias 93,900 2,312,287
______________
Total 2,346,337
_____________________________________________________________________________________________________________________________
Retail (2.8%)
Albertson's 37,200 1,483,350
Arbor Drugs 3,400 64,175
Bombay 8,000 (b) 62,000
Casey's General Store 12,200 288,225
Circuit City Stores 279,300 9,112,163
CompUSA 200 (b) 8,750
CUC Intl 327,900 (b) 12,132,300
Dress Barn 7,400 (b) 86,950
Federated Dept Stores 336,800 (b) 11,661,700
Gap 72,400 2,434,450
Home Depot 456,500 23,338,563
Kroger 345,600 (b) 13,564,800
May Dept Stores 82,800 3,922,650
Michaels Stores 6,000 99,750
Nordstrom 20,500 1,045,500
Phillips-Van Heusen 6,800 90,950
Pier One Imports 1,200 18,900
Proffitts 1,200 (b) 44,100
Richfood Holdings 1,200 40,200
Rite Aid 41,200 1,210,250
Ross Stores 1,000 39,250
Russ Berrie 5,800 81,925
Sports Authority 200 (b) 5,950
Stein Mart 6,200 (b) 105,400
Whole Foods Market 4,000 (b) 98,500
Williams-Sonoma 3,800 (b) 105,450
______________
Total 81,146,201
_____________________________________________________________________________________________________________________________
Textiles & apparel (0.3%)
Authentic Fitness 1,600 30,400
Nautica Enterprises 2,200 (b) 55,000
Nike Cl B 24,300 2,439,112
St. John Knits 1,400 59,150
V.F. Corp 74,400 4,529,100
Wolverine World Wide 1,200 39,900
_____________
Total 7,152,662
____________________________________________________________________________________________________________________________
Utilities--electric (1.3%)
Edison Intl 741,000 12,226,500
FPL Group 199,700 8,537,175
Northern States Power 331,000 15,557,000
Orange & Rockland Utilities 1,600 55,800
United Illuminating 12,600 464,625
______________
Total 36,841,100
_____________________________________________________________________________________________________________________________
Utilities--gas (0.1%)
Northwest Natural Gas 5,800 198,650
Piedmont Natural Gas 200 4,325
Southwestern Energy 13,600 212,500
Tenneco 62,000 3,332,500
______________
Total 3,747,975
Utilities--telephone (3.0%)
AirTouch Communications 991,000 (b) 31,588,125
Cellular Communications Cl A 2,600 (b) 139,750
CommNet Cellular 2,800 (b) 96,250
GTE 405,400 17,330,850
MCI Communications 1,250,300 36,414,988
______________
Total 85,569,963
_____________________________________________________________________________________________________________________________
Foreign (24.0%)(e)
Australia (1.0%)
Broken Hill Propriety 345,895 5,217,838
Pasminco 3,694,000 (b) 5,130,157
Westpac Banking 1,359,000 (d) 6,345 412
WMC 683,000 (b) 5,173,345
Woodside Petroleum 1,145,000 6,552,532
_____________
Total 28,419,284
_____________________________________________________________________________________________________________________________
Austria (0.1%)
Bohler-Uddeholm 20,100 (b,f) 1,618,779
_____________________________________________________________________________________________________________________________
Bermuda (0.4%)
Tempest Reinsurance Private 80,000 (b,g) 10,575,200
_____________________________________________________________________________________________________________________________
Brazil (0.2%)
Telebras ADR 108,600 6,991,125
_____________________________________________________________________________________________________________________________
Canada (0.6%)
Placer Dome 612,000 (d) 18,130,500
_____________________________________________________________________________________________________________________________
France (1.5%)
Casino Guichard Perrachon 20,210 (b) 848,930
Credit Commercial de France 230,000 11,085,946
Lafarge-Coppee (Bearer) 131,839 8,687,185
Lyonnaise des Eaux 98,555 (b) 9,557,889
Peugeot ADR 23,805 3,317,770
Total Petroleum Cl B 145,935 (b) 10,556,699
____________
Total 44,054,419
_____________________________________________________________________________________________________________________________
Germany (1.0%)
Commerzbank 24,713 (c) 5,148,373
Degussa 15,120 (b) 5,195,349
Henkel 15,600 (b) 6,555,996
Hoechst 23,805 (b) 7,919,145
Rhine Westphalia Electric 80,000 (b) 3,157,653
____________
Total 27,976,516
Hong Kong (1.0%)
Cheung Kong Holdings 697,000 (b) 5,157,257
Citic Pacific 1,600,000 (b) 6,575,936
Hutchison Whampoa 808,000 (b) 5,190,131
New World Development 2,424,000 (b,d) 11,497,653
______________
Total 28,420,977
_____________________________________________________________________________________________________________________________
Italy (0.9%)
ENI 2,216,280 (b) 10,522,609
Telecom Italia 4,170,900 (b) 8,348,010
INA 4,943,390 (b) 7,412,603
______________
Total 26,283,222
_____________________________________________________________________________________________________________________________
Japan (7.7%)
Dai Nippon Printing 330,000 (b) 6,108,566
DDI 1,100 (b) 9,529,363
Familymart Japan 69,300 (b) 3,168,513
Hitachi Metals 418,000 (b) 4,719,885
Itochu 1,200,000 (b) 8,618,630
Marui 270,000 (b) 5,547,688
Matsushita Electric 565,000 (b) 9,726,503
Mitsubishi Heavy Inds 1,130,000 (b) 9,716,044
Mitsubishi Material 1,500,000 (b) 8,746,354
Mitsui Fudosan 735,000 9,319,727
NEC 650,000 (b) 7,159,054
Nihon Cement 1,050,000 7,667,638
Nippon Denko 600,000 12,939,053
Nippon Express 723,000 (b) 7,226,989
Nippon Steel 2,750,000 (b) 9,341,013
NSK 1,130,000 (b) 8,555,138
Omron 170,000 (b) 3,445,786
Onward Kashiyama 407,000 (b) 6,629,830
Rohm 150,000 (b) 9,384,978
Sankyo Pharmaceuticals 271,000 (b) 6,421,028
Sanwa Bank 400,000 7,700,495
Sanyo Electric 1,325,000 (b) 7,885,372
Secom 113,000 (b) 7,321,024
Sumitomo Trust & Banking 500,000 (b) 6,941,552
Taisei 1,220,000 9,202,647
TDK 180,000 (b) 10,245,731
Tokio Marine & Fire 700,000 (b) 9,070,294
Yokogawa Electric 701,000 (b) 7,136,841
_____________
Total 219,475,736
_____________________________________________________________________________________________________________________________
Malaysia (0.3%)
Telekom Malaysia 233,000 (b) 2,127,939
United Engineers Malaysia 810,000 (b) 5,645,503
______________
Total 7,773,442
_____________________________________________________________________________________________________________________________
Netherlands (0.8%)
Akzo Nobel 83,030 (b) 10,046,421
Gucci 63,193 (b) 4,254,051
Intl Nederlanden Groep 81,600 (b) 6,716,010
KLM Royal Dutch Airlines 85,910 3,067,675
______________
Total 24,084,157
_____________________________________________________________________________________________________________________________
New Zealand (0.1%)
Carter Holt Harvey 1,513,000 (b) 3,301,361
_____________________________________________________________________________________________________________________________
Singapore (1.6%)
City Developments 1,161,000 (b) 8,902,236
Keppel 591,000 (b) 4,951,224
Malayan Banking Berhad 583,000 5,534,588
Overseas Chinese Banking 342,000 4,370,607
Overseas Union Bank 771,000 5,473,908
Sime Darby 1,486,000 (b) 3,988,063
Singapore Airlines 586,000 (b) 6,032,658
Straits Steamship 1,763,000 5,682,655
______________
Total 44,935,939
_____________________________________________________________________________________________________________________________
Spain (0.6%)
Repsol 170,000 5,813,547
Telefonica de Espana 592,710 10,641,278
______________
Total 16,454,825
_____________________________________________________________________________________________________________________________
Sweden (0.9%)
Asea Free Cl B 74,490 (b) 7,571,427
Ericsson (LM) Tel ADR Cl B 320,160 (b) 7,160,234
Scania ADR Cl A 107,222 3,027,340
Scania ADR Cl B 107,220 3,027,283
Swedbank 340,400 3,996,136
______________
Total 24,782,420
_____________________________________________________________________________________________________________________________
Switzerland (0.6%)
Sandoz 12,980 (b) 13,453,677
Swiss Bank 22,800 4,050,946
______________
Total 17,504,623
_____________________________________________________________________________________________________________________________
Thailand (0.3%)
Krung Thai Bank 783,000 3,988,272
Siam Commercial Bank 393,000 6,269,130
____________
Total 10,257,402
_____________________________________________________________________________________________________________________________
United Kingdom (4.4%)
British Airways 965,885 8,388,931
BTR 1,297,765 5,650,774
Glaxo Wellcome 1,117,685 (b) 14,565,354
Granada Group 747,900 (b) 9,537,817
HSBC Holdings 602,000 9,103,176
Kingfisher 1,009,890 (b) 9,530,090
La-Roche Holdings 1,150 (b) 8,815,779
NFC 3,521,910 (b) 8,404,358
Natl Westminster Bank 544,600 5,261,622
Premier Farnell 419,200 (b) 4,728,879
Redland 1,173,460 7,309,706
Shell Transportation 486,500 (b) 6,920,399
Siebe 998,840 (b) 13,388,060
Thorn Emi 255,047 7,090,033
Vodafone Group 1,480,160 (b) 5,860,101
______________
Total 124,555,079
_____________________________________________________________________________________________________________________________
Miscellaneous (--%)
ABM Inds 7,600 289,750
Corrections Corp America 1,600 (b) 120,000
______________
Total 409,750
_____________________________________________________________________________________________________________________________
Total common stocks of unaffiliated issuers
(Cost: $1,829,415,331) $2,044,118,633
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Preferred stock & other (0.1%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Straits Steamship
Warrants 441,000 (e) $ 624,899
Swiss Bank
Warrants 2,710 (e) 6,222
Station Casinos
7% Cv 15,000 890,625
_____________________________________________________________________________________________________________________________
Total preferred stock & other
(Cost: $1,150,888) $ 1,521,746
_____________________________________________________________________________________________________________________________
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Bonds (21.2%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (7.5%)
U.S. Treasury 5.75 % 1997 $51,000,000 (d) $ 50,828,130
6.25 2023 59,700,000 (d) 53,288,817
6.50 1997 32,250,000 32,448,337
6.75 2000 57,000,000 57,304,950
10.375 2012 16,000,000 (c) 20,116,800
______________
Total 213,987,034
_____________________________________________________________________________________________________________________________
Mortgage-backed securities (5.3%)
Federal Home Loan Mtge Corp 7.00 2026 19,983,496 19,060,059
7.50 2025 29,607,793 29,034,290
Federal Natl Mtge Assn 5.50 2024 3,884,689 3,390,595
6.00 2024-26 19,618,776 17,662,947
6.50 2025 32,802,149 30,434,488
7.00 2025 11,804,088 11,254,490
7.50 2024-25 39,099,554 38,378,558
Structured Assets Securities Corp
Collateralized Mtge Obligation 6.76 2028 2,500,000 2,437,891
______________
Total 151,653,318
_____________________________________________________________________________________________________________________________
Financial (0.6%)
Insurance
American United Life 7.75 2026 5,000,000 (f) 4,579,700
Metropolitan Life 7.80 2025 4,800,000 (f) 4,536,720
Minnesota Mutual Life 8.25 2025 4,500,000 (f) 4,518,900
Nationwide Trust
Credit Sensitive Nts 9.875 2025 3,500,000 (f) 3,816,015
______________
Total 17,451,335
_____________________________________________________________________________________________________________________________
Industrial (5.2%)
Aerospace & defense (0.4%)
Airplanes GPA 10.875 2019 2,750,000 2,873,750
Alliant Techsystems
Sr Sub Nts 11.75 2003 2,000,000 2,175,000
Northrop Grumman 7.75 2016 5,000,000 (f) 4,832,800
______________
Total 9,881,550
_____________________________________________________________________________________________________________________________
Airlines (0.5%)
AMR 9.75 2021 5,000,000 5,765,600
United Air Lines 9.75 2021 5,000,000 5,638,100
Valujet 10.25 2001 3,000,000 (f) 2,617,500
______________
Total 14,021,200
_____________________________________________________________________________________________________________________________
Building materials (0.3%)
AAF-McQuay
Sr Nts 8.875 2003 5,000,000 4,825,000
Southdown 10.00 2006 2,350,000 (f) 2,370,562
______________
Total 7,195,562
<PAGE>
Communications equipment & services (1.1%)
Geotek Communications
Cv 12.00 2001 3,000,000 (f) 4,545,000
GST Telecommunications
Zero Coupon 13.875 2000 9,000,000 (f,h) 5,670,000
Intl Cable Telephone
Cv 7.25 2005 14,500,000 18,415,000
Shared Technology
Zero Coupon Cv 3.57 1999 4,250,000 (f,h) 3,198,125
______________
Total 31,828,125
_____________________________________________________________________________________________________________________________
Electronics (0.1%)
Thomas & Betts 6.50 2006 4,500,000 (f) 4,166,190
_____________________________________________________________________________________________________________________________
Energy (0.1%)
UNC
Sr Sub 11.00 2006 1,900,000 1,928,500
_____________________________________________________________________________________________________________________________
Energy equipment & services (0.1%)
Cliff's Drilling
Sr Nts 10.25 2003 3,500,000 (f) 3,535,000
_____________________________________________________________________________________________________________________________
Furniture & appliances (0.1%)
Interface 9.50 2005 2,500,000 2,437,500
_____________________________________________________________________________________________________________________________
Health care (0.2%)
Dade Intl
Sr Sub 11.125 2006 2,000,000 (f) 2,070,000
Lilly (Eli) 6.77 2036 5,000,000 4,470,750
______________
Total 6,540,750
_____________________________________________________________________________________________________________________________
Health care services (0.3%)
Manor Care 7.50 2006 7,000,000 6,960,870
Owens & Minor
Sr Sub 10.875 2006 1,200,000 1,224,000
______________
Total 8,184,870
_____________________________________________________________________________________________________________________________
Industrial equipment & services (0.1%)
AGCO 8.50 2006 2,800,000 (d,f) 2,814,000
_____________________________________________________________________________________________________________________________
Leisure time & entertainment (0.4%)
AMF Group
Zero Coupon Cv 12.25 2001 3,500,000 (f,h) 1,916,250
Plitt Theatres 10.875 2004 5,000,000 5,087,500
Trump Holdings
Sr Nts 11.25 2006 3,725,000 3,785,531
______________
Total 10,789,281
_____________________________________________________________________________________________________________________________
Media (0.8%)
Cablevision Systems
Sr Sub Deb 10.50 2016 3,000,000 2,985,000
CS Wire Systems
Zero Coupon 11.375 2001 2,050,000 (f,h) 4,325,500
Echostar Satellite Broadcasting
Zero Coupon Cv 13.125 2000 3,500,000 (f,h) 2,323,125
Heritage Media Services
Sr Sub Nts 8.75 2006 5,000,000 4,762,500
New American Holdings 10.125 2012 2,175,000 2,410,074
Tele-Communications
Sr Deb 9.875 2022 5,000,000 5,341,600
______________
Total 22,147,799
_____________________________________________________________________________________________________________________________
Metals (0.1%)
Bar Technologies 13.50 2001 3,000,000 3,015,000
_____________________________________________________________________________________________________________________________
Restaurants & lodging (0.1%)
Flagstar
Sr Nts 10.750 2001 3,750,000 3,356,250
Sr Nts 10.875 2002 750,000 669,375
______________
Total 4,025,625
_____________________________________________________________________________________________________________________________
Retail (0.3%)
Dayton Hudson 8.50 2022 2,500,000 2,453,550
Hills Stores
Sr Nts 12.50 2003 1,500,000 (f) 1,533,750
Jitney-Jungle Stores of America
Sr Nts 12.00 2006 3,500,000 3,622,500
______________
Total 7,609,800
Textiles & apparel (0.1%)
Dominion Textiles 9.25 2006 3,500,000 3,447,500
_____________________________________________________________________________________________________________________________
Miscellaneous (0.1%)
Adams Outdoor Advertising 10.75 2006 3,900,000 (f) 3,968,250
_____________________________________________________________________________________________________________________________
Transportation (0.1%)
Enterprise Rent-A-Car 6.95 2006 3,000,000 (f) 2,799,600
_____________________________________________________________________________________________________________________________
Utilities (0.6%)
Electric (0.4%)
El Paso Electric
1st Mtge 7.75 2001 5,000,000 4,832,150
Public Service Electric & Gas
1st Mtge 6.75 2016 7,365,000 6,683,443
______________
Total 11,515,593
_____________________________________________________________________________________________________________________________
Gas (0.1%)
Columbia Gas Systems 7.32 2010 5,043,000 4,727,308
_____________________________________________________________________________________________________________________________
Telephone (0.1%)
Arch Communications
Zero Coupon Cv 10.875 2001 4,000,000 (h) 2,270,000
_____________________________________________________________________________________________________________________________
Foreign (1.9%)(e)
Argentina Republic
(U.S. Dollar) 5.25 % 2023 1,000,000 541,250
Argentina Republic Euro
(U.S. Dollar) 6.13 2005 2,750,000 2,126,094
Banco Nacional de Comercio Exterio
(U.S. Dollar) 7.25 2004 2,300,000 1,863,000
Corp Andina De Fomento
(U.S. Dollar) 7.10 2003 6,500,000 6,246,760
China Republic
(U.S. Dollar) 9.00 1996 2,500,000 2,290,775
Govt of Poland PDI Euro
(U.S. Dollar) 3.75 2014 8,150,000 (i) 6,137,969
Grupo Televisa
Sr Nts 11.375 2003 5,000,000 (f) 5,075,000
Sr Nts 11.875 2006 2,250,000 (f) 2,300,625
Imexsa Export Trust
(U.S. Dollar) 10.125 2003 3,000,000 (f) 2,996,250
Korea Electric Power
(U.S. Dollar) 7.75 2013 5,000,000 4,875,600
Republic of Brazil
(U.S. Dollar) 6.875 2012 4,750,000 (i) 3,111,250
Republic of Columbia
(U.S. Dollar) 8.70 2016 4,500,000 4,121,415
Rogers Cantel Mobile
(U.S. Dollar) 9.375 2008 2,800,000 2,800,000
United Mexican States
(U.S. Dollar) 11.50 2026 4,453,000 4,118,313
Venezuela
Interest Reduction
(U.S. Dollar) Front Loaded 7.31 2007 8,500,000 6,019,062
______________
Total 54,623,363
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $626,963,452) $ 606,564,053
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (4.4%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agency (0.1%)
Federal Home Loan Mtge
Disc Nt
06-12-95 5.21% $ 1,800,000 $ 1,797,140
_____________________________________________________________________________________________________________________________
Commercial paper (4.1%)
AIG Funding
06-05-96 5.30 5,500,000 5,496,779
AT&T
06-04-96 5.22 14,600,000 14,593,661
BBV Finance (Delaware)
06-27-96 5.30 4,800,000 4,781,696
BOC Group
06-21-96 5.30 24,200,000 24,129,013
BellSouth Telecommunications
06-04-96 5.30 2,000,000 1,999,120
Cargill
06-26-96 5.29 3,500,000 (j) 3,487,191
Commerzbank U.S. Finance
06-17-96 5.30 10,400,000 10,375,595
First Union Bank
06-24-96 5.29 2,600,000 2,600,000
Mobil Australia Finance (Delaware)
06-18-96 5.30 15,186,000 (j) 15,148,136
PACCAR Financial
06-14-96 5.31 3,700,000 3,692,932
Reed Elsevier
06-07-96 5.32 5,580,000 (j) 5,575,071
07-10-96 5.31 7,000,000 (j) 6,959,960
Siemens
07-02-96 5.29 5,400,000 5,375,495
Transamerica Finance
07-10-96 5.32 3,900,000 3,877,650
Wal-Mart Stores
06-03-96 5.27 9,795,000 9,792,138
_______________
Total 117,884,437
_____________________________________________________________________________________________________________________________
Letter of credit (0.2%)
Bank of America-
AES Barbers Point
07-11-96 5.31 6,000,000 5,964,800
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $125,646,377) $ 125,646,377
_____________________________________________________________________________________________________________________________
Total investments in securities of unaffiliated issuers
(Cost: $2,583,176,048) $2,777,850,809
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
Investment in securities of affiliated issuer (k)
_____________________________________________________________________________________________________________________________
<CAPTION>
Common stock (0.5%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
China North Inds 18,500,000 (b) $ 13,690,000
_____________________________________________________________________________________________________________________________
Total investments in securities of affiliated issuer
(Cost: $18,789,176) 18,500,000 $ 13,690,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $2,601,965,224)(l) $2,791,540,809
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Partially pledged initial deposit on the following open stock index futures sale contracts
(see Note 6 to the financial statements):
Type of Security Notional amount
____________________________________________________________________________
U.S. Treasury Bonds June 1996 $40,000,000
____________________________________________________________________________
<PAGE>
(d) Security is partially or fully on loan. See Note 5 to the financial statements.
(e) Foreign security values and principal amounts are stated in U.S. dollars.
(f) Represents securities sold under Rule 144A and are exempt from registration under the Securities
Act of 1933, as amended. These securities have been determined to be liquid under guidelines
established by the board.
(g) Identifies issues considered to be illiquid (see Note 7 to
the financial statements). Information concerning such security holdings at
May 31, 1996, is as follows:
Acquisition
Security date Cost
______________________________________________________________________
Tempest Reinsurance Private 09-13-93 $8,000,000
(h) For those zero coupon bonds that become coupon paying at a future date, the interest
rate disclosed represents the annualized effective yield from the date of acquisition
to interest reset date disclosed.
(i) Interest rate varies either based on a predetermined schedule or to reflect current
market conditions; rate shown is the effective rate on May 31, 1996.
(j) 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." These securities
have been determined to be liquid under guidelines established by the board.
(k) Investments representing 5% or more of the outstanding voting securities of the issuer.
(l) At May 31, 1996, the cost of securities for federal income tax purposes was
approximately $2,601,899,000 and the approximate aggregate gross unrealized appreciation
and depreciation based on that cost was:
Unrealized appreciation $243,555,000
Unrealized depreciation (53,913,000)
_____________________________________________________________
Net unrealized appreciation $189,642,000
_____________________________________________________________
/TABLE
<PAGE>
PAGE
Board members and officers
Board members and officers of the Fund
_____________________________________________________________________
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
_____________________________________________________________________
Independent board members
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for
Public Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs,
The Reader's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
_____________________________________________________________________
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Exective vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
<PAGE>
PAGE
John R. Thomas
Senior vice president, AEFC.
_____________________________________________________________________
Officers who also are officers and/or employees of AEFC.
Peter J.Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
_____________________________________________________________________
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the IDS
MUTUAL FUND GROUP.<PAGE>
PAGE
IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. 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
Income investments
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 Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
(icon of) globe
IDS Extra Income Fund
Invests mainly in 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<PAGE>
PAGE
IDS Selective Fund
Invests in 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 primarily in securities issued or guaranteed as to the timely
payment of principal and interest by the U.S. government, its agencies
and instrumentalities. Seeks a high level of current income and
safety of principal consistent with its type of investments.
(icon of) shield with eagle head enclosed
Tax-exempt income investments
These funds provide tax-free income by investing in municipal bonds.
The income is generally free from federal income tax. Risk varies
by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in 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 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 Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk bond
categories.
(icon of) shield with Greek column enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the fund but does not guarantee
the market value of the fund's shares.
(icon of) shield with star enclosed<PAGE>
PAGE
Growth and income investments
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. Moderate risk.
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 Managed Retirement Fund
Invests in 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.
(icon of) bird in a nest
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 Stock Fund
Invests in common stocks 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<PAGE>
PAGE
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 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 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
Growth investments
Funds in this group seek capital growth, primarily from common stocks.
They are high risk mutual funds with a potential for high reward.
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 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<PAGE>
PAGE
IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) flower
IDS Global Growth Fund
Invests in 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 New Dimensions Fund
Invests primarily in 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
Specialty growth investment
This fund aggressively seeks capital growth as a hedge against inflation.
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. This is the most aggressive and most speculative
IDS mutual fund.
(icon of) cart of precious gems
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>
PAGE
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota:
800-437-3133
Mpls./St. Paul area:
671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchTone phones only), including current
fund prices and performance, account values and recent account
transactions
National/Minnesota:
800-272-4445
Mpls./St. Paul area:
671-1630
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Managed Retirement Fund
IDS Tower 10
Minneapolis, MN 55440-0010
