1998 SEMIANNUAL REPORT
IDS
Managed
Allocation
Fund
(icon of) spinning toy
The goal of IDS Managed Allocation Fund, a part of IDS Managed Retirement Fund,
Inc., is to maximize total return through a combination of growth of
capital and current income.
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) spinning toy
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 Allocation Fund has that
potential because it 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 chairman 3
From the portfolio manager 3
The Portfolio's ten largest holdings 5
Financial statements (Fund) 6
Notes to financial statements (Fund) 9
Financial statements (Portfolio) 17
Notes to financial statements (Portfolio) 20
Investments in securities 27
Board members and officers 43
IDS mutual funds 44
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when declines in Asian markets spawned a
sharp drop in several financial markets worldwide, including the U.S.
The potential for such volatility reinforces the need for investors to
review periodically their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other
is a meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial situation
or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
A generally good environment for financial assets, both in the U.S. and
Europe, resulted in a rewarding six months for IDS Managed Allocation
Fund. For the first half of the fiscal year -- October 1997 through March
1998 -- the Fund's Class A shares generated a total return of 8.9%. (This
figure includes a substantial capital gain that was paid to shareholders
in December 1997 and reduced the Fund's net asset value by the same amount
at that time.)
Although U.S. stocks got off to a good start, a financial crisis that
began in Southeast Asia drove prices down in major markets around the
world in late October. With that cloud of concern hanging over them,
stocks could do little more than mark time over the ensuing three months.
By February, though, the viewpoint that the `Asian flu' would pass without
serious impact on the world's major markets had emerged. Supported by
ongoing reports of low inflation, the U.S. market responded with a rally
that lasted through the end of the fiscal period. European stocks followed
suit as well, though to a somewhat lesser degree.
Bonds enjoy strong performance
U.S. bonds, on the other hand, enjoyed their best performance from October
through December. In their case, the Asian crisis was a benefit, as
worried investors sought out U.S. Treasury securities. The buying drove
down long-term interest rates into January, sending prices higher along
the way.
The Fund participated in the stock and bond run-ups here at home, as we
maintained healthy exposures to both asset classes (about 30% in U.S.
stocks and 15%-28% in bonds.) We also kept about 30% of the portfolio
invested in foreign stocks, chiefly in Europe, which also proved to be
productive. Looking at stock holdings on a sector basis, most of the money
was kept in consumer non-cyclical issues, which include health care,
food/beverage and consumer/household products, followed by roughly equal
amounts in financial services, technology and utility stocks. The only
notable changes to the portfolio during the six months were a reduction in
the amount of cash reserves and an increase in bond holdings.
Although it seems highly unlikely that the U.S. stock market will maintain
its recent powerful pace throughout the year, the investment environment
at this time (mid-April) remains largely favorable. The same can be said
of Europe, where stock prices may actually have more appreciation
potential than in the U.S. over the near term. Aside from those anchors of
the portfolio, we continue to maintain a substantial exposure to U.S.
bonds, as well as small but potentially very productive investments in
emerging markets.
Steven Merrell
(picture of) Steven Merrell
Steven Merrell
Portfolio manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $ 11.92
Sept. 30, 1997 $ 12.68
Decrease $ 0.76
Distributions
Oct. 1, 1997 - March 31, 1998
From income $ 0.68
From capital gains $ 1.03
Total distributions$ 1.71
Total return* +8.9%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $ 11.86
Sept. 30, 1997 $ 12.63
Decrease $ 0.77
Distributions
Oct. 1, 1997 - March 31, 1998
From income $ 0.64
From capital gains $ 1.03
Total distributions$ 1.67
Total return* +8.5%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1998 $ 11.92
Sept. 30, 1997 $ 12.68
Decrease $ 0.76
Distributions
Oct. 1, 1997 - March 31, 1998
From income $ 0.69
From capital gains $ 1.03
Total distributions$ 1.72
Total return* +9.0%**
* The prospectus discusses the effect of sales charges, if any, on the
various classes.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Portfolio's ten largest holdings
Percent Value
(of Portfolio's net assets) (as of March 31, 1998)
General Electric 1.41% $43,576,400
Coca-Cola 1.22 37,890,169
Royal Dutch Petroleum 1.06 32,951,249
U.S. Treasury Bond 1.06 32,704,960
6.75% 2000
Merck & Co .97 29,988,399
Ford Motor .94 29,165,625
BankAmerica .92 28,596,512
Banque Natl de Paris .88 27,141,611
Procter & Gamble .87 27,008,438
Telecomunicacoes Brasileiras- .84 25,962,499
Telebras ADR
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The ten holdings listed here make up 10.17%
of the Portfolio's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Managed Allocation Fund
March 31, 1998
Assets
(Unaudited)
<S> <C>
Investment in Total Return Portfolio (Note 1) $3,095,839,839
--------------
Liabilities
Accrued distribution fee 5,687
Accrued service fee 14,591
Accrued transfer agency fee 9,069
Accrued administrative services fee 2,587
Other accrued expenses 49,885
------
Total liabilities 81,819
------
Net assets applicable to outstanding capital stock $3,095,758,020
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,597,612
Additional paid-in capital 2,558,238,978
Excess of distributions over net investment income (2,084,731)
Accumulated net realized gain (loss) 120,106,024
Unrealized appreciation (depreciation) on investments and on translation of
assets and liabilities in foreign currencies 416,900,137
-----------
Total-- representing net assets applicable to outstanding capital stock $3,095,758,020
==============
Net assets applicable to outstanding shares: Class A $2,695,546,318
Class B $ 277,056,212
Class Y $ 123,155,490
Net asset value per share of outstanding capital stock: Class A shares 226,068,493 $ 11.92
Class B shares 23,363,471 $ 11.86
Class Y shares 10,329,277 $ 11.92
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Managed Allocation Fund
Six months ended March 31, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $11,341,357
Interest 38,373,794
Less foreign taxes withheld (185,733)
--------
Total income 49,529,418
----------
Expenses (Note 2):
Expenses allocated from Total Return Portfolio 6,976,779
Distribution fee -- Class B 939,963
Transfer agency fee 1,673,626
Incremental transfer agency fee-- Class B 13,391
Service fee
Class A 2,217,273
Class B 217,696
Class Y 58,482
Administrative services fees and expenses 458,138
Compensation of board members 6,587
Postage 45,000
Registration fees 92,861
Audit fees 4,812
Other 965
---
Total expenses 12,705,573
Earnings credits on cash balances (Note 2) (211,253)
--------
Total net expenses 12,494,320
----------
Investment income (loss) -- net 37,035,098
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 150,113,085
Financial futures contracts (9,064,355)
Foreign currency transactions 3,000,167
Option contracts written (1,444,360)
----------
Net realized gain (loss) on investments 142,604,537
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 74,541,441
----------
Net gain (loss) on investments and foreign currencies 217,145,978
-----------
Net increase (decrease) in net assets resulting from operations $254,181,076
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Managed Allocation Fund
Operations and distributions March 31, 1998 Sept. 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 37,035,098 $ 71,716,154
Net realized gain (loss) on investments 142,604,537 345,559,133
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 74,541,441 122,452,877
---------- -----------
Net increase (decrease) in net assets resulting from operations 254,181,076 539,728,164
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (34,942,292) (65,540,801)
Class B (2,588,118) (3,907,527)
Class Y (1,660,428) (3,162,775)
Net realized gain
Class A (314,653,758) (292,030,274)
Class B (30,968,697) (20,916,577)
Class Y (14,757,922) (13,571,619)
----------- -----------
Total distributions (399,571,215) (399,129,573)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 75,195,648 196,359,438
Class B shares 34,022,734 78,101,366
Class Y shares 13,977,019 32,047,202
Reinvestment of distributions at net asset value
Class A shares 345,413,854 354,268,365
Class B shares 33,363,511 24,680,194
Class Y shares 16,418,350 16,734,394
Payments for redemptions
Class A shares (236,489,538) (558,247,028)
Class B shares (Note 2) (19,774,074) (35,890,509)
Class Y shares (19,273,258) (48,656,445)
----------- -----------
Increase (decrease) in net assets from capital share transactions 242,854,246 59,396,977
----------- ----------
Total increase (decrease) in net assets 97,464,107 199,995,568
Net assets at beginning of period 2,998,293,913 2,798,298,345
------------- -------------
Net assets at end of period $3,095,758,020 $2,998,293,913
-------------- --------------
Undistributed (excess of distributions over) net investment income $ (2,084,731) $ 71,009
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Managed Allocation Fund
(Unaudited as to March 31, 1998)
1
Summary of
significant
accounting policies
The Fund is a series of IDS Managed Retirement Fund, Inc. and is
registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Fund has 10
billion authorized shares of capital stock that can be allocated among the
separate series as designated by the board. The Fund offers Class A, Class
B and Class Y shares. Class A shares are sold with a front-end sales
charge. Class B shares may be subject to a contingent deferred sales
charge and such shares automatically convert to Class A shares during the
ninth calendar year of ownership. Class Y shares have no sales charge and
are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Investment in Total Return Portfolio
Effective May 13, 1996, the Fund began investing all of its assets in
Total Return Portfolio (the 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. Total Return Portfolio seeks to provide shareholders maximum
total return through a combination of growth of capital and current
income.
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 the value that is
equal to the Fund's proportionate ownership interest in the net assets of
the Portfolio. The percentage of the Portfolio owned by the Fund at March
31, 1998 was 99.97%. 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.
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 from net investment income, declared and paid each calendar
quarter, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed
along with the last income dividend of the calendar year.
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 an agreement with American
Express Financial Corporation (AEFC) for providing administrative
services. Under its Administrative Services Agreement, the Fund pays AEFC
a fee for administration and accounting services at a percentage of the
Fund's average daily net assets in reducing percentages from 0.04% to
0.02% annually. Additional administrative service expenses paid by the
Fund are office expenses, consultants' fees and compensation of officers
and employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses and any other
expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC an annual fee per shareholder account for this service
as follows:
oClass A $15
oClass B $16
oClass Y $15
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing-related services. Under a Plan and Agreement of Distribution,
the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares for
distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents.
The fee is calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares and commencing on May 9,
1997, the fee is calculated at a rate of 0.10% of the Fund's average daily
net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $1,886,797 for Class A and $117,281 for
Class B for the six months ended March 31, 1998. The Fund also pays
custodian fees to American Express Trust Company, an affiliate of AEFC.
During the six months ended March 31, 1998, the Fund's transfer agency
fees were reduced by $211,253 as a result of earnings credits from
overnight cash balances.
3
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended March 31, 1998
Class A Class B Class Y
Sold 6,341,133 2,874,497 1,170,859
Issued for reinvested 31,716,679 3,082,511 1,507,722
distributions
Redeemed (20,057,360) (1,698,483) (1,669,495)
Net increase (decrease) 18,000,452 4,258,525 1,009,086
Year ended Sept. 30, 1997
Class A Class B Class Y
Sold 16,320,731 6,502,486 2,643,368
Issued for reinvested 31,097,328 2,176,773 1,468,689
distributions
Redeemed (46,167,773) (2,976,311) (4,038,230)
Net increase (decrease) 1,250,286 5,702,948 73,827
<PAGE>
<TABLE>
<CAPTION>
4.
Financial
highlights
The tables below show certain important financial
information for evaluating the Fund's results.
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998b 1997 1996c 1995 1994 1993 1992 1991 1990 1989 1988
Net asset value, $12.68 $12.20 $12.19 $11.29 $12.16 $11.91 $11.08 $9.01 $10.05 $7.48 $6.82
beginning of period
Income from investment operations:
Net investment income .15 .32 .24 .21 .13 .17 .21 .20 .27 .26 .16
(loss)
Net gains (losses) .80 1.97 .58 1.65 .03 1.07 2.04 2.45 (.39) 2.51 .66
(both realized and
unrealized)
Total from investment .95 2.29 .82 1.86 .16 1.24 2.25 2.65 (.12)2.77 .82
operations
Less distributions:
Dividends from net (.16) (.32) (.23) (.16) (.12) (.19) (.21) (.27) (.25) (.20) (.16)
investment income
Distributions from (1.55) (1.49) (.58) (.80) (.90) (.80) (1.20) (.31) (.67) -- --
realized gains
Excess distributions of -- -- -- -- (.01) -- (.01) -- -- -- --
realized gains
Total distributions (1.71) (1.81) (.81) (.96) (1.03) (.99) (1.42) (.58) (.92) (.20) (.16)
Net asset value, $11.92 $12.68 $12.20 $12.19 $11.29 $12.16 $11.91 $11.08 $9.01 $10.05 $7.48
end of period
Ratios/supplemental data
Class A
1998b 1997 1996c 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of $2,696 $2,639 $2,523 $2,602 $2,252 $1,845 $1,425 $1,007 $715 $700 $644
period (in millions)
Ratio of expenses to .80%e .84% .80%e .83% .85% .83% .85% .90% .90% .92% .88%
average daily net assetsd
Ratio of net income 2.58%e 2.55% 2.29% e 1.85% 1.13% 1.46% 1.94% 1.98% 2.94% 2.82% 2.07%
(loss) to average
daily net assets
Portfolio turnover rate 59% 99% 142% 90% 66% 61% 46% 81% 78% 73% 102%
(exluding short-term
securities)
Total returnf 8.9% 20.8% 7.1% 18.0% 1.0% 11.2% 22.3% 30.9% (1.2%) 37.3% 12.0%
Average brokerage $.0115 $.0339 $.0303 -- -- -- -- -- -- -- --
commission rateg
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 1998 (Unaudited).
c The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
d Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before
reduction of earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
g Effective fiscal year 1996, the Fund is required to disclose an average
brokerage commission
rate per share for security trades on which commissions are charged. The
comparability of this
information may be affected by the fact that commission rates per share vary
significantly among
foreign countries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class B Class Y
1998b 1997 1996c 1995d 1998b 1997 1996c 1995d
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $12.63 $12.15 $12.16 $10.41 $12.68 $12.20 $12.19 $10.41
beginning of period
Income from investment operations:
Net investment income (loss) .11 .23 .15 .11 .16 .33 .26 .16
Net gains (losses) (both .79 1.97 .57 1.74 .80 1.97 .58 1.76
realized and unrealized)
Total from investment .90 2.20 .72 1.85 .96 2.30 .84 1.92
operations
Less distributions:
Dividends from net (.12) (.23) (.15) (.10) (.17) (.33) (.25) (.14)
investment income
Distributions from (1.55) (1.49) (.58) -- (1.55) (1.49) (.58) --
realized gains
Total distributions (1.67) (1.72) (.73) (.10) (1.72) (1.82) (.83) (.14)
Net asset value, $11.86 $12.63 $12.15 $12.16 $11.92 $12.68 $12.20 $12.19
end of period
Ratios/supplemental data
Class B Class Y
1998b 1997 1996c 1995d 1998b 1997 1996c 1995d
Net assets, end of $277 $241 $163 $75 $123 $118 $113 $115
period (in millions)
Ratio of expenses to 1.57%f 1.60% 1.57%f 1.58%f .73%f .71% .63%f .65%f
average daily net assetse
Ratio of net income to 1.83%f 1.82% 1.61%f .94%f 2.66%f 2.69% 2.45%f1.95%f
average daily net assets
Portfolio turnover rate 59% 99% 142% 90% 59% 99% 142% 90%
(excluding short-term
securities)
Total returng 8.5% 19.9% 6.5% 17.7% 9.0% 20.9% 7.3% 18.4%
Average brokerage $.0115 $.0339 $.0303 -- $.0115 $.0339 $.0303 --
commission rateh
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 1998 (Unaudited).
c The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
d Inception date was March 20, 1995.
e Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
f Adjusted to an annual basis.
g Total return does not reflect payment of a sales charge.
h Effective fiscal year 1996, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions
are charged. The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign countries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
Total Return Portfolio
March 31, 1998
Assets
<S> <C>
(Unaudited)
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated issuers
(identified cost $2,797,183,595) $3,214,824,045
Investments in securities of affiliated issuer
(identified cost $13,079,176) 3,877,500
---------
Total investments in securities (identified cost $2,810,262,771) 3,218,701,545
Dividends and accrued interest receivable 17,023,012
Receivable for investment securities sold 5,798,286
Receivable from investment advisor 103,412
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 6,320
-----
Total assets 3,241,632,575
-------------
Liabilities
Disbursements in excess of cash on demand deposit 2,031,195
Payable for investment securities purchased 5,672,798
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 60,040
Payable upon return of securities loaned (Note 5) 133,307,096
Accrued investment management services fee 40,954
Option contracts written, at value
(premium received $12,524,889) (Note 6) 3,829,000
Other accrued expenses 58,033
------
Total liabilities 144,999,116
-----------
Net assets $3,096,633,459
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of operations
Total Return Portfolio
Six months ended March 31, 1998
Investment income
<S> <C>
(Unaudited)
Income:
Dividends $ 11,344,124
Interest 38,366,547
Less foreign taxes withheld (185,779)
--------
Total income 49,524,892
Expenses (Note 2):
Investment management services fee 6,586,309
Compensation of board members 10,382
Custodian fees 353,533
Audit fees 15,375
Other 20,894
------
Total expenses 6,986,493
Earnings credits on cash balances (Note 2) (8,010)
------
Total net expenses 6,978,483
---------
Investment income (loss) -- net 42,546,409
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 150,146,106
Financial futures contracts (9,066,534)
Foreign currency transactions 3,000,746
Option contracts written (Note 6) (1,444,694)
----------
Net realized gain (loss) on investments 142,635,624
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 74,565,496
----------
Net gain (loss) on investments and foreign currencies 217,201,120
-----------
Net increase (decrease) in net assets resulting from operations $259,747,529
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Total Return Portfolio
Operations March 31, 1998 Sept. 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 42,546,409 $ 82,689,056
Net realized gain (loss) on investments 142,635,624 345,627,464
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 74,565,496 122,489,698
---------- -----------
Net increase (decrease) in net assets resulting from operations 259,747,529 550,806,218
Net contributions (withdrawals) from partners (162,320,716) (350,789,437)
------------ ------------
Total increase (decrease) in net assets 97,426,813 200,016,781
Net assets at beginning of period 2,999,206,646 2,799,189,865
------------- -------------
Net assets at end of period $3,096,633,459 $2,999,206,646
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
Total Return Portfolio
(Unaudited as to March 31, 1998)
1
Summary of
significant
accounting policies
Total Return Portfolio (the Portfolio) is a series of Growth and Income
Trust (the Trust) and is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment
company. Total Return Portfolio seeks to provide maximum total return
through a combination of growth of capital and current income by investing
in U.S. equity securities, U.S. and foreign debt securities, foreign
equity securities and money market instruments. The Declaration of Trust
permits the Trustees to issue non-transferable interests in the Portfolio.
Significant accounting polices 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. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for
which market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current
interest rates; those maturing in 60 days or less are valued at amortized
cost.
Option transactions
In order to produce incremental earnings, protect gains and facilitate
buying and selling of securities for investment purposes, the Portfolio
may buy and write options traded on any U.S. or foreign exchange or in the
over-the-counter market where the completion of the obligation is
dependent upon the credit standing of the other party. The 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 financial futures contracts traded on any
U.S. or foreign exchange. The Portfolio also may buy and write put and
call options on these futures contracts. Risks of entering into futures
contracts and related options include the possibility that there may be an
illiquid market and that a change in the value of the contract or option
may not correlate with changes in the value of the underlying securities.
Upon entering into a futures contract, the 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.
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.
Illiquid securities
At March 31, 1998, investments in securities included issues that are
illiquid. The Portfolio currently limits investments in illiquid
securities to 10% of net assets, at market value, at the time of purchase.
The aggregate value of such securities at March 31, 1998 was $12,259,850
representing 0.40% of net assets. Pursuant to guidelines adopted by the
board, certain unregistered securities are determined to be liquid and are
not included within the 10% limitation specified above.
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
and 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 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 0.53% to 0.40% 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 Allocation
Fund to the Lipper Flexible Portfolio 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 $534,717 for the six months ended
March 31, 1998.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain
legal fees, fidelity bond premiums, registration fees for units, 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 and approved by the board.
During the six months ended March 31, 1998, the Portfolio's custodian fees
were reduced by $8,010 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 $1,804,281,817 and $1,498,809,376,
respectively, for the six months ended March 31, 1998. For the same
period, the portfolio turnover rate was 59%. Realized gains and losses are
determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $94,575
for the six months ended March 31, 1998.
<PAGE>
<TABLE>
<CAPTION>
4
Foreign currency
contracts
At March 31, 1998, the Portfolio had entered into 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. See
"Summary of significant accounting policies." The terms of the open
contracts are as follows:
Exchange Currency to Currency to Unrealized Unrealized
date be delivered be received appreciation depreciation
<S> <C> <C> <C> <C> <C>
April 1, 1998 3,758,676 2,036,119 $4,183 $ --
Deutsche Mark U.S. Dollar
April 2, 1998 1,567,996 1,106,662 -- 485
Canadian Dollar U.S. Dollar
April 2, 1998 4,057,591 2,195,666 2,137 --
Deutsche Mark U.S. Dollar
April 3, 1998 1,710,029 64,450,987 -- 59,555
U.S. Dollar Thai Baht
Total $6,320 $60,040
</TABLE>
<PAGE>
Notes to financial statements
Total Return Portfolio
5
Lending of
portfolio securities
At March 31, 1998, securities valued at $129,430,759 were on loan to
brokers. For collateral, the Portfolio received $133,307,096 in cash.
Income from securities lending amounted to $379,288 for the six months
ended March 31, 1998. 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
Option contracts
written
The number of contracts and premium amounts associated with option
contracts written is as follows:
Six months ended March 31, 1998
Puts Calls
Contracts Premium Contracts Premium
Balance Sept. 30, 1997 -- $ -- -- $ --
Opened 8,750 14,423,300 3,800 811,073
Closed (1,450) (553,981) -- --
Exercised (2,500) (1,016,216) (2,800) (651,578)
Expired (1,300) (328,214) (1,000) (159,495)
Balance March 31, 1998 3,500 $12,524,889 -- $ --
See "Summary of significant accounting policies."
<PAGE>
Investments in securities
Total Return Portfolio
March 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks - 63.4%
Issuer Shares Value(a)
Aerospace & defense - 1.7%
AlliedSignal 220,000 $9,240,000
Goodrich (BF) 120,000 6,127,500
Lockheed Martin 105,000 11,812,500
Raytheon Cl B 190,800 11,137,950
Rockwell Intl 242,500 13,913,438
Total 52,231,388
Airlines - 0.4%
AMR 77,000(b) 11,025,438
Automotive & related - 1.2%
Ford Motor 450,000 29,165,625
TRW 125,600 6,923,700
Total 36,089,325
Banks and savings & loans - 3.7%
BankAmerica 346,100 28,596,512
First Chicago NBD 250,000 22,031,250
First Union 450,928 25,590,164
Norwest 89,600 3,724,000
Toronto-Dominion Bank 3,257 141,272
Wachovia 265,100 22,483,794
Washington Mutual 179,700 12,887,859
Total 115,454,851
Beverages & tobacco - 2.4%
Coca-Cola 489,300 37,890,169
Fortune Brands 330,000 13,158,750
Philip Morris 556,000 23,178,250
Total 74,227,169
Building materials & construction - 0.7%
Masco 115,000 6,842,500
Tyco Intl 258,300 14,109,638
Total 20,952,138
Chemicals - 1.4%
Air Products & Chemicals 175,000 14,503,125
Henkel KGaA 235,966(g) 17,144,464
Monsanto 200,000 10,400,000
Total 42,047,589
Communications equipment & services - 0.8%
Lucent Technologies 85,000 10,869,375
Motorola 155,000 9,396,875
Tellabs 50,000(b) 3,356,250
Total 23,622,500
Computers & office equipment - 3.1%
3Com 75,000(b) 2,695,313
Automatic Data Processing 231,300 15,742,855
Bay Networks 140,000(b) 3,797,500
Cisco Systems 152,850(b) 10,451,119
Compaq Computer 288,000 7,452,000
Computer Associates Intl 113,250 6,540,188
Computer Sciences 100,000 5,500,000
Hewlett-Packard 169,100 10,716,713
Microsoft 196,800(b) $17,613,599
Parametric Technology 100,000(b) 3,331,250
Xerox 104,800 11,154,650
Total 94,995,187
Electronics - 0.8%
Harris 50,000 2,606,250
Intel 286,000 22,325,875
Total 24,932,125
Energy - 1.2%
Amoco 281,800 24,340,475
Unocal 350,000 13,540,625
Total 37,881,100
Energy equipment & services - 0.2%
Baker Hughes 180,800 7,277,200
Financial services - 1.3%
Fannie Mae 100,000 6,325,000
H&R Block 180,000 8,561,250
Travelers Group 419,500 25,170,000
Total 40,056,250
Food - 1.3%
Bestfoods 131,000 15,310,625
General Mills 173,000 13,148,000
Sara Lee 185,000 11,400,625
Total 39,859,250
Foreign - 24.7%(j)
Accor 61,732(b) 15,838,296
Adidas 33,049(b) 5,859,239
Air Canada 187,600(b) 1,702,143
Akbank T.A.S. ADR 120,000(b) 1,680,000
Anglogold ADR 987,950(b) 4,198,788
Argentaria 150,510(b) 12,462,214
Baan 108,253(b,g) 5,177,656
Banca Intesa 2,758,882(b) 17,250,434
Banque Natl de Paris 349,332(b) 27,141,611
Barclays 246,046(b) 7,357,241
Bayerische Vereinsbank 250,360(b,g) 18,271,489
BG 2,029,921(b) 10,495,709
Bombardier Cl B 130,000(b) 3,212,710
British Airways ADR 549,106(b) 5,558,859
Centrais Eletricas
Brasileiras ADR 452,000(g) 10,534,264
Cheung Kong Holdings 807,000(b) 5,727,984
China Merchants
Holdings Intl 6,594,000(b,g) 6,126,987
China North Inds 16,500,000(b,i) 3,877,500
China Resources
Enterprises 1,190,000(b) 2,411,083
China Telecom
(Hong Kong) 3,900,000(b) 7,901,868
Cia de Telecomunicaciones
de Chile ADR 230,000 6,339,375
City Developments 243,000(b) $1,196,192
Compal Electronics 366,000(b) 1,464,000
Compania Anonima Nacional
Telefonos de Venezuela
ADR 255,000(g) 10,662,188
Credit Suisse Group 66,069(b) 13,218,134
Credito Italiano 3,667,200(b,g) 18,112,583
EGIS 78,000(b) 4,204,852
Ericsson (LM) Cl B 124,490(b,g) 5,915,863
Fomento Economico
Mexicano Cl B 1,442,000(b) 10,481,424
Fujikura 770,000(b) 4,738,639
General Electric 1,644,544(b) 13,029,855
Great Universal Stores 1,047,203(b) 13,037,008
Grupo Financiero
Bancomer Cl B 5,309,900(b) 3,130,075
Grupo Televisa 120,600(b) 4,416,975
Hong Kong
Telecommunications 1,300,000(b) 2,684,286
Imperial Chemical Inds 506,327(b) 8,963,774
ING Groep 362,790(b) 20,589,136
Instituto Bancario
San Paolo di Torino 1,322,745(b) 18,536,560
Israel Chemical 1,600,000(b) 1,919,520
Johnson Matthey 445,179(b) 4,607,321
Koor Inds ADR 13,200(b) 326,700
Korea Electric Power 185,110(b,g) 2,405,762
Korea Electric Power 172,470(b) 1,713,921
Lukoil Holding ADR 93,500 6,572,490
Mannesmann 4,200(b) 3,074,278
Matav ADR 135,000(b) 4,201,875
Michelin Cl B 150,489(b,g) 8,982,352
Mosenergo ADR 260,000(b,g) 9,620,000
NEC 487,000(b) 4,897,594
Newbridge Networks 58,800(b) 1,567,308
Nordbanken Holding 820,996(b,g) 5,441,479
Northern Telecom 47,600 3,076,150
Novartis 11,340(b) 20,069,084
Otosan Otomobil Sanayii 6,160,000(b) 3,800,665
Oversea-Chinese Banking 555,440(b) 3,129,723
Panamerican Beverages ClA 50,000 2,006,250
Perez Companc 1,200,000(b) 8,065,210
Petro-Canada 442,500 7,904,854
Petroleo Brasileiro ADR 290,000(b,g) 6,886,252
Philips Electronics 146,530(b) 10,755,140
Rhone-Poulenc Cl A 475,476(b) 24,160,294
Rohm 42,000(b) 3,845,548
Royal Dutch Petroleum 580,000 32,951,249
Sakura Bank 1,664,000(b,g) 5,906,952
Samsung Electronics GDR 125,000(b) 3,375,000
Schlumberger 165,000 12,498,750
Schweizer Bankgesellschaft 10,359(b) 16,919,587
Shanghai Industrial
Holdings 1,558,000(b,g) 6,373,709
Shell Transport & Trading 922,593(b) 6,761,739
Singapore Technologies
Engineering 1,026,000(b) 908,470
SmithKline Beecham 541,336(b) 6,775,520
Sony 100,000(b) 8,480,618
Sumitomo Realty &
Development 1,325,000(b) 7,816,053
Synnex Technology Intl 164,000(b) $1,037,627
Telecom Italia 2,196,600(b,g) 13,457,558
Telecom Italia 2,885,666(b) 22,735,985
Telecomunicacoes
Brasileiras-Telebras
ADR 200,000 25,962,499
Telefonica de Argentina
ADR 364,000(g) 13,854,750
Telefonica del Peru ADR 75,000 1,617,188
Telefonos de Mexico
ADR Cl L 262,000 14,770,250
Thai Farmers Bank 724,000(b) 1,807,682
Tokyo Electron 120,000(b) 4,043,679
Toronto-Dominion Bank 285,000 12,315,622
TOTAL Cl B 81,000(b) 9,724,313
Unilever 1,340,560(b) 12,595,347
United Overseas Bank 398,000(b) 2,205,634
Vendex Intl 193,000(b) 12,221,636
Vimpel-Communications
ADR 57,000(b) 2,536,500
Vodafone 757,311 7,888,379
Westpac Banking 1,124,000(b) 7,522,775
Yapi Kredit Finance 175,000,000(b) 6,046,425
YPF Sociedad Anonima
ADR 67,000 2,278,000
Total 765,926,260
Furniture & appliances - 0.3%
Maytag 225,000 10,757,813
Health care - 5.1%
ALZA 97,800(b) 4,382,663
American Home Products 147,000 14,020,125
Amgen 116,000(b) 7,061,500
Baxter Intl 190,000 10,473,750
Boston Scientific 91,400(b) 6,169,500
Bristol-Myers Squibb 215,500 22,479,344
Guidant 59,600 4,373,150
Johnson & Johnson 319,000 23,386,687
Merck & Co 233,600 29,988,399
Pfizer 229,600 22,888,250
Schering-Plough 160,000 13,070,000
Total 158,293,368
Health care services - 0.7%
HBO & Co 73,400 4,431,525
Service Corp Intl 136,400 5,788,475
Tenet Healthcare 162,000(b) 5,882,625
United Healthcare 100,000 6,475,000
Total 22,577,625
Household products - 1.9%
Colgate-Palmolive 117,000 10,135,125
Gillette 172,800 20,509,200
Procter & Gamble 320,100 27,008,438
Total 57,652,763
Industrial equipment & services - 0.1%
Deere & Co 69,300 4,292,269
Insurance - 1.0%
Allstate 50,000 4,596,875
American Intl Group 70,000 8,815,625
SunAmerica 125,000 5,984,375
UNUM 185,670 10,246,663
Total 29,643,538
Media - 0.8%
CBS 398,000 13,507,125
Clear Channel
Communications 105,000(b) 10,290,000
Gannett 27,000 1,940,625
Total 25,737,750
Metals - 0.6%
Aluminum Co of America 158,800 10,927,425
Reynolds Metals 133,300 8,189,619
Total 19,117,044
Multi-industry conglomerates - 1.8%
Cendant 230,000(b) 9,113,750
Emerson Electric 45,000 2,933,438
General Electric 505,600 43,576,400
Total 55,623,588
Paper & packaging - 0.3%
Tenneco 225,000 9,604,688
Retail - 2.1%
Consolidated Stores 50,000(b) 2,146,875
Dayton Hudson 110,000 9,680,000
Home Depot 145,000 9,778,438
Kroger 220,000(b) 10,161,250
Penney (JC) 30,000 2,270,625
Rite Aid 180,000 6,165,000
Wal-Mart Stores 505,200 25,670,475
Total 65,872,663
Textiles & apparel - 0.2%
Nike Cl B 130,000 5,752,500
Transportation - 0.1%
Burlington Northern Santa Fe30,000 3,120,000
Utilities -- electric - 0.2%
Edison Intl 110,000 3,231,250
Unicom 75,000 2,625,000
Total 5,856,250
Utilities -- gas - 0.6%
Enron 405,000 18,781,875
Utilities -- telephone - 2.7%
AirTouch Communications 300,000(b) 14,681,250
Ameritech 136,000 6,723,500
AT&T 255,000 16,734,375
BellSouth 111,000 7,499,438
MCI Communications 94,000 4,653,000
SBC Communications 154,600 6,744,425
U S WEST
Communications 307,000 16,808,249
WorldCom 217,000(b) 9,344,563
Total 83,188,800
Total common stocks
(Cost: $1,586,959,596) $1,962,450,304
Preferred stocks & other - 0.4%
Issuer Shares Value(a)
Banca Intesa
Warrants 2,758,882 $4,070,495
Bar Technologies
Warrants 3,000 165,000
KMC Telecommunications
Holdings
Warrants 3,000 1,762,500
Martin Media 20,000(k) 2,000,000
Paxson Communications
12.50% Pay-in-kind
Exchangeable 21,110(h) 2,216,550
Rhone-Poulenc
Warrants 125,360(c) 705,969
Unifi Communications
Warrants 3,000 30
Total preferred stocks & other
(Cost: $6,561,784) $10,920,544
See accompanying notes to investments in securities.
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
Total Return Portfolio
Bonds - 27.5%
Issuer Coupon Principal Value(a)
rate amount
<S> <C> <C> <C>
U.S. government obligations - 2.9%
U.S. Treasury
04-30-00 6.75% $32,000,000 $32,704,960
06-30-02 6.25 8,000,000 8,166,000
08-15-04 7.25 20,000,000 21,646,200
08-15-23 6.25 9,700,000 10,000,215
08-15-27 6.375 20,000,000(g) 21,142,600
Total 93,659,975
Mortgage-backed securities - 2.1%
Federal Home Loan Mtge Corp
03-01-13 5.50 10,890,011 10,502,054
12-01-25 7.50 22,816,746 23,441,469
10-01-26 8.50 3,627,029 3,794,960
01-01-27 8.50 1,911,700 2,000,211
Federal Natl Mtge Assn
05-01-24 7.50 15,605,908 16,091,720
Collateralized Mtge Obligation
05-18-26 5.00 9,593,000 8,678,667
Total 64,509,081
Aerospace & defense - 0.3%
K&F Inds
Sr Sub Nts Series B
10-15-07 9.25 1,000,000 1,047,500
L-3 Communications
Sr Sub Nts Series B
05-01-07 10.375 1,035,000 1,146,263
Newport News Shipbuilding
Sr Nts
12-01-06 8.625 800,000 853,000
Northrop-Grumman
03-01-16 7.75 5,000,000 5,443,500
Total 8,490,263
Airlines - 0.2%
Northwest Airlines
Company Guaranty 1st Series 1991
01-02-15 8.07 3,934,345 4,263,177
01-02-15 8.97 1,954,104 2,129,700
Total 6,392,877
Banks and savings & loans - 1.3%
CAF
02-01-03 7.10 6,500,000 6,687,785
First Nationwide Holdings
Sr Sub Nts
10-01-03 10.625 1,960,000 2,200,100
Greenpoint Capital
Company Guaranty
06-01-27 9.10 1,300,000 1,433,393
Provident Cos
03-15-38 7.41 11,000,000 11,034,540
Union Planters Bank
Sub Nts
03-15-18 6.50 10,000,000 9,934,600
US Trust Capital
02-01-27 8.41 1,500,000(c) 1,632,330
Washington Mutual Capital
Company Guaranty
06-01-27 8.375 1,500,000(c) 1,631,565
Wilshire Financial Services
Series B
08-15-04 13.00 4,000,000 4,360,000
Total 38,914,313
Building materials & construction - 0.2%
AAF-McQuay
Sr Nts
02-15-03 8.875 2,535,000 2,509,650
Southdown
Sr Sub Nts Series B
03-01-06 10.00 2,350,000 2,614,375
Total 5,124,025
Chemicals - 0.1%
Polymer Group
Sr Sub Nts
03-01-08 8.75 4,000,000 4,090,000
Communications equipment & services - 0.4%
Interamericas Communications
10-27-07 14.00 500,000(b) 505,000
NTL
Zero Coupon
04-01-08 11.48 6,000,000(c,f) 6,576,074
RCN
Zero Coupon Sr Disc Nts
02-15-08 9.80 4,800,000(c,f) 3,024,000
Unifi Communications
Sr Nts
03-01-04 14.00 3,000,000 2,013,750
Total 12,118,824
Electronics - 0.1%
Thomas & Betts
01-15-06 6.50 4,500,000 4,491,270
Energy - 0.4%
Forcenergy
Sr Sub Nts
11-01-06 9.50 1,000,000 1,055,000
Transamerica Energy
06-15-02 11.50 600,000 598,500
Zero Coupon
06-15-02 13.00 1,300,000(f) 1,105,000
USX
03-01-08 6.85 10,000,000 10,041,900
Total 12,800,400
Energy equipment & services - 0.2%
Cliffs Drilling
Company Guaranty Series D
05-15-03 10.25 3,000,000 3,255,000
DI Inds
Sr Nts
07-01-07 8.875 1,500,000 1,552,500
Total 4,807,500
Financial services - 0.9%
Arcadia Financial
Sr Nts
03-15-07 11.50 1,825,000 1,815,875
Beneficial
Medium-term Nts
02-18-13 6.25 10,000,000 9,875,300
DTI Holdings
03-01-08 12.50 6,120,000(c) 3,595,500
Providian Natl Bank
Sr Nts
03-15-03 6.70 10,000,000 10,028,600
Sasco
02-25-28 6.76 2,500,000 2,515,234
Total 27,830,509
Food - 0.1%
Ameriserve Food
Company Guaranty
07-15-07 10.125 1,750,000 1,887,813
Foreign - 8.2%(j)
Airplanes GPA Cl D
(U.S. Dollar) Series 1
03-15-19 10.875 2,750,000 3,067,735
Argentine Republic
(U.S. Dollar)
03-31-23 5.50 28,000,000 21,419,999
Australis Media
(U.S. Dollar)
11-01-00 14.00 454,044 321,869
(U.S. Dollar) Zero Coupon
05-15-03 5.30 5,000,000(f) 1,250,000
05-15-03 5.30 40,885(f) 10,272
City of Moscow
(Russian Ruble) Zero Coupon
07-01-98 22.80 5,018,918(e) 4,630,454
12-31-98 21.80 6,153,151(e) 5,146,496
(U.S. Dollar)
05-31-00 9.50 3,000,000(c) 2,955,000
Comp Paranaense De Energ
(U.S. Dollar)
05-02-05 9.75 2,000,000(c) 2,025,000
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 2,500,000(c) 2,277,850
Daya Guna
(U.S. Dollar) Company Guaranty
06-01-07 10.00 2,400,000(c) 2,136,000
Delphes 2
(U.S. Dollar)
05-05-09 7.75 3,700,000 3,737,000
Doman Inds
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25% $2,300,000 $2,317,250
Equador
(U.S. Dollar)
02-27-15 6.69 3,338,010 2,150,930
Espirito Santo Centrais
(U.S. Dollar) Sr Nts
07-15-07 10.00 3,000,000(c) 2,940,000
Globo Communicacoes Participacoes
(U.S. Dollar) Sr Nts
12-05-08 10.625 2,275,000(c) 2,320,500
Govt of Algeria
(U.S. Dollar) Zero Coupon
12-31-20 1.27 2,675,000(e) 1,693,623
Govt of Russia
(Russian Ruble)
09-27-00 14.00 19,002,914 2,391,725
(U.S. Dollar)
07-28-00 10.375 4,000,000 3,620,000
(U.S. Dollar) Zero Coupon
12-29-49 6.60 2,500,000(e) 1,767,200
Greater Beijing
(U.S. Dollar) Sr Nts
06-15-04 9.25 1,200,000(c) 979,488
06-15-07 9.50 1,400,000(c) 1,127,742
Grupo Iusacell
(U.S. Dollar)
07-15-04 10.00 1,000,000 1,042,500
Grupo Televisa
(U.S. Dollar) Sr Nts Series A
05-15-03 11.375 2,750,000 3,031,875
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.875 2,200,000(c) 1,948,298
Hutchison Whampo Finance
(U.S. Dollar) Company Guaranty
08-01-17 7.45 1,000,000(c) 908,900
08-01-27 7.50 1,650,000(c) 1,489,571
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.625 5,000,000(c) 4,165,450
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.125 3,000,000(c) 3,142,500
IPC Magazines Group
(British Pound)
03-15-08 15.90 1,875,000(c) 3,113,910
(British Pound) Zero Coupon
03-15-08 17.76 2,000,000(c,e) 1,982,860
Jasmine Submarine Telecom
(U.S. Dollar) Sr Nts
05-30-11 8.48 1,273,610(c) 1,087,816
Korea Electric Power
(U.S. Dollar)
02-01-27 7.00 12,500,000 10,731,375
MDC Communications
(U.S. Dollar) Sr Sub Nts
12-01-06 10.50 1,000,000 1,078,750
Mexican Cetes
(Mexican Peso) Zero Coupon
06-04-98 23.32% 12,775,000(e) $1,541,176
Ministry Finance Russia
(U.S. Dollar)
11-27-01 9.25 850,000(c) 831,406
06-26-07 10.00 17,500,000(c) 16,657,812
Nationwide CSN Trust
(U.S. Dollar)
02-15-25 9.875 5,000,000(c) 5,983,850
Netia Holdings
(U.S. Dollar) Company Guaranty
11-01-07 10.25 6,000,000(c) 6,180,000
Philippine Long Distance Telephone
(U.S. Dollar)
03-06-07 7.85 1,250,000(c) 1,157,688
(U.S. Dollar) Medium-term Nts Series E
03-06-17 8.35 1,000,000(c) 899,080
Pindo Deli Finance Mauritius
(U.S. Dollar) Company Guaranty
10-01-07 10.75 1,300,000(c) 1,069,250
PLD Telekom
(U.S. Dollar) Zero Coupon
06-01-04 3.73 3,000,000(e) 3,000,000
Plitt Theatres
(U.S. Dollar) Sr Sub Nts
06-15-04 10.875 5,000,000 5,437,500
Poland Telecom Finance
(U.S. Dollar)
12-01-07 14.00 5,500,000(c) 6,118,750
Province of Mendoza
(U.S. Dollar)
09-04-07 10.00 2,000,000(c) 1,946,520
PTC Intl Finance
(U.S. Dollar) Zero Coupon Company Guaranty
07-01-07 10.75 2,000,000(e) 1,370,000
Republic of Argentina
(Argentine Peso)
07-10-02 8.75 18,000,000(c) 16,667,999
02-12-07 11.75 13,000,000 13,503,749
(U.S. Dollar)
07-10-02 8.750 10,000,000 9,260,000
Republic of Brazil
(U.S. Dollar)
04-15-14 8.00 5,701,300 4,778,402
05-15-27 10.125 10,500,000 10,473,750
Republic of Panama
(U.S. Dollar)
02-13-02 7.875 1,000,000(c) 1,008,140
Rogers Cantel
(U.S. Dollar)
06-01-08 9.375 2,800,000 2,968,000
Southern Peru Copper
(U.S. Dollar)
05-30-07 7.90 1,000,000 1,022,020
Tatneft Finance
(U.S. Dollar) Company Guaranty
10-29-02 9.00 2,000,000(c) 1,852,980
Texon Intl
(Deutsche Mark) Sr Nts
02-01-08 3.09 4,000,000 2,248,880
Tjiwi Kimia FN Mauritius
(U.S. Dollar) Company Guaranty
08-01-04 10.00% $2,900,000 $2,392,500
United Mexican States
(U.S. Dollar)
12-31-19 6.25 25,000,000 21,156,250
Veninfotel
(U.S. Dollar) Cv Pay-in-kind
03-01-02 10.00 2,000,000(h,k) 3,000,000
03-01-02 10.00 250,000(h,k) 375,000
Veritas Holdings
(U.S. Dollar) Sr Nts
12-15-03 9.625 1,273,000 1,366,884
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 11.50 5,000,000(c) 4,752,850
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 1,875,000(c) 2,048,231
Total 255,078,605
Furniture & appliances - 0.2%
Interface
Sr Sub Nts Series B
11-15-05 9.50 2,500,000 2,687,500
Lifestyle Furnishings
Company Guaranty
08-01-06 10.875 3,250,000 3,644,063
Total 6,331,563
Health care - 0.5%
Baxter Intl
02-15-28 6.625 10,000,000 9,776,400
Lilly (Eli)
01-01-36 6.77 5,000,000 5,131,150
Total 14,907,550
Health care services - 1.0%
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 2,500,000(c) 2,531,250
Manor Care
Sr Nts
06-15-06 7.50 7,000,000 7,433,930
Owens & Minor
Company Guaranty
06-01-06 10.875 3,200,000 3,580,000
Service Corp Intl
03-15-20 6.30 11,850,000 11,809,710
Vencor
Sr Sub Nts
07-15-07 8.625 4,000,000 4,500,000
Total 29,854,890
Household products - 0.2%
Revlon Consumer Products
Sr Nts
02-01-06 8.125 5,000,000(c) 5,075,000
Industrial equipment & services - 0.8%
AGCO
Sr Sub Nts
03-15-06 8.50 2,800,000 2,912,000
Alliance Imaging
Sr Sub Nts
12-15-05 9.625 5,000,000 5,225,000
Chattem
Sr Sub Nts
04-01-08 8.875 2,200,000(c) 2,233,000
Concentric Network
12-15-07 12.75 3,800,000 4,370,000
Imperial Holly
Company Guaranty
12-15-07 9.75 3,400,000 3,510,500
Jorgensen (Earle M)
Sr Nt
04-01-05 9.50 1,225,000(c) 1,240,313
Packaged Ice
Sr Nt
02-01-05 9.75 3,500,000(c) 3,578,750
Purina Mills
Sr Sub Nts
03-15-10 9.00 1,475,000(c) 1,526,625
Total 24,596,188
Insurance - 0.6%
American United Life Insurance
03-30-26 7.75 5,000,000(c,k) 5,145,350
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.675 1,500,000 1,660,620
Metropolitan Life Insurance
11-01-25 7.80 4,800,000(c) 5,209,872
Minnesota Mutual Life
09-15-25 8.25 4,500,000(c) 5,157,360
Total 17,173,202
Leisure time & entertainment - 1.3%
Icon Fitness
Zero Coupon Sr Disc Nts Series B
11-15-06 15.76 10,500,000(e) 6,168,750
Mirage Resorts
02-01-08 6.75 8,750,000 8,737,838
Speedway Motorsports
08-15-07 8.50 2,000,000 2,087,500
Time Warner
02-01-24 7.57 11,875,000 12,573,368
01-15-28 6.95 5,000,000 4,876,600
Venetian Casino/LV Sands
Mtge
11-15-04 12.25 3,940,000(c) 4,077,900
Sr Sub Nts
11-15-05 10.00 3,000,000(c) 2,846,250
Total 41,368,206
Media - 0.7%
CSC Holdings
Sr Sub Debs
05-15-16 10.50% $3,000,000 $3,510,000
Heritage Media
Sr Sub Nts
02-15-06 8.75 5,000,000 5,362,500
Lamar Advertising
Company Guaranty
12-01-06 9.625 800,000 872,000
Liberty Group
Sr Sub Nts
02-01-08 9.375 3,750,000 3,843,750
News America Holdings
10-15-12 10.125 2,175,000 2,531,809
TCI Communications
08-01-15 8.75 5,000,000 5,803,200
Total 21,923,259
Metals - 0.2%
Bar Technologies
Company Guaranty
04-01-01 13.50 3,000,000(c) 3,307,500
EnviroSource
Sr Nts
06-15-03 9.75 1,300,000(c) 1,329,250
06-15-03 9.75 530,000 541,925
Total 5,178,675
Miscellaneous - 0.8%
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 3,900,000 4,319,250
BTI Telecommunications
Sr Nts
09-15-07 10.50 1,150,000 1,170,125
FCB/NC Capital
Company Guaranty
03-01-28 8.05 4,625,000 4,681,748
Michael Petroleum
Sr Nts
04-01-05 11.50 1,250,000(c) 1,235,938
MSX Intl
Sr Sub Nts
01-15-08 11.375 2,450,000 2,548,000
NSM Steel
02-01-08 12.25 4,300,000 4,149,500
Company Guaranty
02-01-06 12.00 4,350,000 4,197,750
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,075,000 1,183,844
SFX Entertainment
Sr Sub Nts
02-01-08 9.125 2,400,000 2,376,000
Total 25,862,155
Multi-industry conglomerates - 0.2%
Pierce Leahy
Sr Sub Nts
07-15-06 11.125 488,000(c) 557,540
Prime Succession
Sr Sub Nts
08-15-04 10.75 1,275,000 1,402,500
USI American Holdings
Sr Nts Series B
12-01-06 7.25 3,000,000 3,030,240
Total 4,990,280
Municipal bonds - 0.1%
New Jersey Economic Development
Authority State Pension Funding
Revenue Bonds (MBIA Insured)
02-15-29 7.425 3,000,000 3,274,800
Paper & packaging - 0.5%
Gaylord Container
Sr Nts
06-15-07 9.375 9,000,000(c) 9,067,500
06-15-07 9.75 1,300,000 1,339,000
Owens-Illinois
Sr Nts
05-15-04 7.85 2,000,000 2,090,240
Silgan Holdings
06-01-09 9.00 2,050,000 2,147,375
Stone Container
Sr Sub Deb
04-01-02 12.25 1,000,000 1,030,000
Total 15,674,115
Restaurants & lodging - 0.3%
MGM Grand
02-06-08 6.875 10,000,000 9,820,500
Retail - 0.9%
Dayton Hudson
12-01-22 8.50 2,500,000 2,710,900
Great Atlantic & Pacific Tea
04-15-07 7.75 10,000,000 10,751,700
Kroger
Sr Nts
07-15-06 8.15 5,000,000 5,443,750
Wal-Mart CRAVE Trust
07-17-06 7.00 8,961,293(c) 9,192,673
Total 28,099,023
Textiles & apparel - 0.1%
Pillowtex
Sr Sub Nts
12-15-07 9.00 2,500,000(c) 2,615,625
Transportation - 0.4%
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000 9,957,000
Company Guaranty Medium-term Nts
01-15-06 6.95 3,000,000(c) 3,069,000
Total 13,026,000
Utilities -- electric - 0.7%
AES
Sr Sub Nts
11-01-07 8.50 3,200,000 3,312,000
Cleveland Electric Illuminating
07-01-00 7.19 3,000,000 3,049,020
CMS Energy
Sr Nts
05-15-02 8.125 2,900,000 2,982,331
El Paso Electric
1st Mtge Series B
05-01-01 7.75 5,000,000 5,137,850
Public Services Electric & Gas
1st & Ref Mtge
01-01-16 6.75 7,365,000 7,447,709
Total 21,928,910
Utilities -- gas - 0.2%
Columbia Gas System
Series E
11-28-10 7.32 5,043,000 5,199,837
Utilities -- telephone - 0.5%
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 2,485,000(k) 1,739,500
Intermedia Communications
Sr Nts Series B
11-01-07 8.875 1,600,000 1,716,000
McLeod USA
Sr Nts
03-15-08 8.375 2,300,000(c) 2,386,250
Omnipoint
Sr Nts
08-15-06 11.625 5,000,000 5,525,000
Worldcom
04-01-07 7.75 3,000,000 3,246,000
Total 14,612,750
Total bonds
(Cost: $834,135,549) $851,707,983
Options purchased - 0.8%
Issuer Number of Exercise Expiration Value(a)
shares price date
Call
Russell 2000 350,000 $438 Dec. 1998 $23,548,000
Total options purchased
(Cost: $12,524,889) $23,548,000
</TABLE>
<PAGE>
Short-term securities - 12.0%(l)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies - 0.6%
Federal Home Loan Bank Disc Nt
04-13-98 5.48% $2,100,000 $2,096,178
Federal Home Loan Mtge Corp Disc Nts
04-16-98 5.47 1,100,000 1,097,502
04-20-98 5.49 1,100,000 1,096,824
04-21-98 5.48 7,000,000 6,978,767
Federal Natl Mtge Assn Disc Nt
04-20-98 5.49 6,900,000 6,880,044
Total 18,149,315
Commercial paper - 11.0%
ABB Treasury Center USA
04-28-98 5.56 10,000,000(d) 9,958,450
BBV Finance (Delaware)
04-08-98 5.54 4,200,000 4,195,492
Bell Atlantic
04-03-98 5.54 12,100,000 12,096,282
04-07-98 5.54 5,800,000 5,794,664
Beneficial
05-18-98 5.57 7,000,000 6,949,462
CAFCO
04-20-98 5.55 7,500,000(d) 7,478,110
04-29-98 5.57 5,900,000(d) 5,874,577
Ciesco LP
04-15-98 5.56 11,400,000 11,375,484
04-20-98 5.54 10,200,000 10,170,392
04-24-98 5.55 3,900,000 3,886,246
05-14-98 5.54 3,200,000(d) 3,178,978
CIT Group Holdings
04-24-98 5.56 10,000,000 9,964,733
Commercial Credit
04-16-98 5.53 10,000,000 9,977,125
Commerzbank U.S. Finance
05-01-98 5.58 4,400,000 4,379,613
Consolidated Natural Gas
04-27-98 5.56 10,000,000 9,959,989
Daimler-Benz
04-23-98 5.52 13,800,000 13,753,785
Delaware Funding
04-17-98 5.54 9,100,000(d) 9,076,264
Dresdner US Finance
04-02-98 5.59 9,000,000 8,998,607
Ford Motor Credit
04-09-98 5.57 15,000,000 14,981,534
Heinz (HJ)
04-22-98 5.54 10,000,000 9,967,917
Household Finance
04-20-98 5.56 7,500,000 7,478,110
04-24-98 5.57 8,300,000 8,270,676
05-13-98 5.56 15,000,000 14,903,400
Intl Lease Finance
04-08-98 5.54 4,400,000 4,395,277
Kredietbank North America Finance
05-04-98 5.55 12,500,000 12,433,341
05-08-98 5.50 10,000,000 9,943,472
Morgan Stanley, Dean Witter, Discover & Co
05-05-98 5.56 7,800,000 7,759,336
Natl Australia Funding (Delaware)
05-11-98 5.54 5,700,000 5,665,167
NBD Bank Canada
04-13-98 5.56 2,100,000 2,096,122
New Center Asset Trust
04-09-98 5.55 10,000,000 9,987,733
04-14-98 5.52 15,000,000 14,970,317
Novartis Finance
04-08-98 5.52 4,200,000 4,194,465
Paccar Financial
04-14-98 5.54 5,000,000 4,990,033
04-22-98 5.56 4,700,000 4,684,811
Reed Elsevier
05-11-98 5.54 3,600,000(d) 3,578,000
SBC Communications Capital
04-23-98 5.53% $10,000,000(d) $9,966,450
Toyota Motor Credit
05-01-98 5.58 8,400,000 8,361,150
USAA Capital
04-22-98 5.55 8,000,000 7,974,287
Westpac Capital
04-07-98 5.57 16,700,000 16,684,581
Xerox Credit
04-01-98 5.51 9,000,000 9,000,000
Total 339,354,432
Letter of credit - 0.4%
Bank of America-
AES Hawaii
04-16-98 5.55% $12,600,000 $12,570,967
Total short-term securities
(Cost: $370,080,953) $370,074,714
Total investments in securities
(Cost $2,810,262,771)(m) $3,218,701,545
See accompanying notes to investments in securities.
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(e) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(f) 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.
(g) Security is partially or fully on loan. See Note 5 to the financial
statements.
(h) Pay-in-kind securities are securities in which the issuer has the option to
make interest or dividend payments in cash or in additional securities. The
securities issued as interest or dividends usually have the same terms,
including maturity date, as the pay-in-kind securities.
(i) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
six months ended March 31, 1998 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
China North Inds $13,079,176 $-- $-- $13,079,176 $-- $3,877,500
(j) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(k) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at March 31, 1998, is as follows:
Security Acquisition Cost
dates
American United Life*
7.75% 2026 2-13-96 $5,000,000
Geotek Communications
12.00% 2001 Cv Sr Sub Nts 3-4-96 2,485,000
Martin Media 12-22-97 2,000,000
Veninfotel
10.00% 2002
(U.S. Dollar) Cv Pay-in-kind 03-05-97 through 07-23-97 2,250,000
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(l) At March 31, 1998, cash or short-term securities were designated to cover
open put options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
Russell 2000 350,000 $38 Dec. 1998 $3,829,000
(m) At March 31, 1998, the cost of securities for federal income tax purpose was
approximately $2,809,965,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation....................................$457,221,000
Unrealized depreciation.................................... (48,484,000)
Net unrealized appreciation................................$408,737,000
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills,
Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, Leslie L. Ogg*
general counsel President, treasurer and corporate secretary of Board Services
and secretary Corporation.
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
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IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
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Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
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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.
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IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
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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.
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IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
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IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
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Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
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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.
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IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
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IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
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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.
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IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
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IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
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Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
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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.
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
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IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
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Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
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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.
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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.)
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IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
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IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
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Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
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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.
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For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS Fund
IDS Tower 10
Minneapolis, MN 55440-0010
