1997 SEMIANNUAL REPORT
IDS
Small Company
Index Fund
(icon of) building
The goal of IDS Small Company Index Fund, a part of IDS Market Advantage Series,
Inc., is to achieve long-term capital appreciation. The Fund attempts to mirror
the performance of the Standard &Poor's Small Capitalization Stock Index(R) (S&P
SmallCap 600 Index(R)) by investing in all or a representative group of the
equity securities comprising that Index.
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
Good things, small packages
When people talk stocks, the conversation often centers on big, household names.
But the fact is that all companies were small once, and, as a group, the small
ones have actually provided a greater investment return than their more-sizable
siblings over the long run. Instead of trying to sort out the most likely
winners from the huge number of contenders, IDSSmall Company Index Fund simply
buys a representative sample of stocks from a popular index. Therefore, as the
index performs, so, too, should the Fund.
Contents
From the president 3
From the portfolio manager 3
The Fund's ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 20
Board members and officers 27
IDS mutual funds 28
<PAGE>
To our shareholders
From the president
If you're an experienced investor, you know that the past two years have
been unusually strong ones in many 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.
That fact reinforces the need for an investor to periodically review their
long-term goals and examine whether their investment program remain 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 Pearce
William R. Pearce
President of the Fund
<PAGE>
From the portfolio manager
A summer surge by small-capitalization stocks led to a strong gain by IDS
Small Company Index Fund during the first half of the fiscal year
(February through July 1997). For the six months, investors in Class A
shares realized a total return of 15.6%.
The period began with small stocks in a slump, as large-capitalization
issues continued to attract the bulk of investors' capital. The main
reason for the disparity was the perceived safety offered by the
large-caps. Their more-predictable earnings growth and trading liquidity
held extra appeal given investors' concern about a rise in long-term
interest rates that was brought on by a heightened fear of inflation. This
negative environment took a particular toll on technology and financial
services stocks, which make up a substantial portion of the small-cap
sector, and resulted in the Fund losing ground for the first two months of
the period.
By spring, though, inflation fears had pretty well subsided, interest
rates began coming down and money started flowing back into small-cap
issues. In May, led by small-cap technology stocks, the flow turned into a
torrent, as evidenced by the Fund's gain of more than 11% in that month
alone. The positive momentum continued through the final two months of the
period, enabling the Fund to tack on another double-digit advance during
that time.
Valuation gap
In addition to the easing of interest-rate fears, investors also returned
to small-caps because of the valuation gap that had built up between them
and their bigger brethren, the large-caps. (Valuation is an assessment of
a stock's price in relation to the company's earnings, cash flow, or some
other financial yardstick.) In this case, valuations for many large-cap
stocks had reached very high levels, while valuations for many small-caps
were relatively low. In simple terms, small-cap stocks looked cheap by
comparison.
During the six months, the Fund's portfolio held 598 of the 600 issues in
the Standard & Poor's Small Capitalization 600 Index, the remaining two
being left out because the stocks are not easily tradable. Their omission
had virtually no effect on the Fund's performance over the period.
As we enter a new fiscal year, the investment environment continues to
benefit from low inflation, moderate economic growth, low long-term
interest rates and generally good corporate profits. That's encouraging.
But, like all good things, this perfect world also will come to an end at
some point, and the stock market will stall out and, perhaps, retreat.
While I can't predict when that will happen, I can tell you that it's a
normal part of investing and that I expect it will prove to be only a
temporary interruption in what I believe is still a long-term positive
trend for stocks.
Guru Baliga
(picture of) Guru Baliga
Guru Baliga
Portfolio manager
<PAGE>
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1997 $ 6.37
Jan. 31, 1997 $ 5.51
Increase $ 0.86
Distributions
Feb. 1, 1997 - July 31, 1997
From income $ --
From capital gains $ --
Total distribution $ --
Total return* +15.6%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1997 $ 6.33
Jan. 31, 1997 $ 5.50
Increase $ 0.83
Distributions
Feb. 1, 1997 - July 31, 1997
From income $ --
From capital gains $ --
Total distribution $ --
Total return* +15.1%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1997 $ 6.38
Jan. 31, 1997 $ 5.51
Increase $ 0.87
Distributions
Feb. 1, 1997 - July. 31, 1997
From income $ --
From capital gains $ --
Total distribution $ --
Total return* +15.6%**
*The prospectus discusses the effect of sales charges, if any, on the various
classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of July 31, 1997)
Corrections Corp of America .98% $3,248,106
Charter One Financial .78 2,572,135
CompUSA .71 2,354,250
Camco Intl .71 2,350,411
Omnicare .68 2,249,025
TCF Financial .65 2,153,212
PhyCor .61 2,036,800
Provident Financial Group .61 2,031,881
Zions Bancorp .59 1,976,975
Keane .59 1,956,000
The ten holdings listed here make up 6.91% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Small Company Index Fund
July 31, 1997
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $293,653,629) $338,646,667
Cash in bank on demand deposit 983,828
Dividends and accrued interest receivable 128,658
Receivable for investment securities sold 3,648,292
U.S. government securities held as collateral (Note 4) 351,561
-------
Total assets 343,759,006
-----------
Liabilities
Payable for investment securities purchased 7,409,542
Payable upon return of securities loaned (Note 4) 4,436,961
Accrued investment management services fee 3,363
Accrued distribution fee 2,287
Accrued service fee 1,557
Accrued transfer agency fee 1,406
Accrued administrative services fee 849
Other accrued expenses 127,747
-------
Total liabilities 11,983,712
----------
Net assets applicable to capital stock $331,775,294
============
Represented by
Capital stock-- of $.01 par value (Note 1) $ 521,718
Additional paid-in capital 283,404,629
Operating loss-- net (240,183)
Accumulated net realized gain (loss) (Note 1) 3,096,092
Unrealized appreciation (depreciation) on investments 44,993,038
----------
Total-- representing net assets applicable to outstanding capital stock $331,775,294
============
Net assets applicable to outstanding shares: Class A $217,770,548
Class B $113,732,693
Class Y $ 272,053
Net asset value per share of outstanding capital stock: Class A shares 34,175,595 $ 6.37
Class B shares 17,953,570 $ 6.33
Class Y shares 42,650 $ 6.38
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Small Company Index Fund
Six months ended July 31, 1997
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $ 909,776
Interest 128,884
Less: Foreign taxes withheld (125)
----
Total income 1,038,535
---------
Expenses (Note 2):
Investment management services fee 396,932
Distribution fee -- Class B 260,284
Transfer agency fee 257,663
Incremental transfer agency fee-- Class B 6,405
Service fee
Class A 119,534
Class B 60,713
Class Y 24
Administrative services fees and expenses 103,539
Compensation of board members 6,947
Custodian fees 124,065
Postage 38,870
Registration fees 151,425
Reports to shareholders 20,718
Audit fees 7,000
Other 1,066
-----
Total expenses 1,555,185
Expenses voluntarily reimbursed by AEFC (Note 2) (246,852)
--------
1,308,333
Earnings credits on cash balances (Note 2) (29,615)
-------
Total net expenses 1,278,718
---------
Investment income (loss)-- net (240,183)
--------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (Note 3) 2,862,290
Net change in unrealized appreciation (depreciation) on investments 39,341,137
----------
Net gain (loss) on investments 42,203,427
----------
Net increase (decrease) in net assets resulting from operations $41,963,244
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Small Company Index Fund
Operations and distributions
July 31, 1997 For the period from
Six months ended Aug. 19, 1996* to
(Unaudited) Jan. 31, 1997
<S> <C> <C>
Investment income (loss)-- net $ (240,183) $ 398,738
Net realized gain (loss) on investments 2,862,290 317,573
Net change in unrealized appreciation (depreciation) on investments 39,341,137 5,651,901
---------- ---------
Net increase (decrease) in net assets resulting from operations 41,963,244 6,368,212
---------- ---------
Distributions to shareholders from:
Net investment income
Class A -- (320,723)
Class B -- (95,990)
Class Y -- (5)
Net realized gain
Class A -- (58,220)
Class B -- (24,313)
-------
Total distributions -- (499,251)
--------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 109,138,302 93,847,466
Class B shares 60,963,412 40,421,294
Class Y shares 274,176 816
Reinvestment of distributions at net asset value
Class A shares -- 356,913
Class B shares -- 119,807
Class Y shares -- 5
Payments for redemptions
Class A shares (14,418,228) (3,320,576)
Class B shares (Note 2) (2,977,959) (444,042)
Class Y shares (21,297) --
-------
Increase (decrease) in net assets from capital share transactions 152,958,406 130,981,683
----------- -----------
Total increase (decrease) in net assets 194,921,650 136,850,644
Net assets at beginning of period (Note 1) 136,853,644 3,000
----------- -----
Net assets at end of period $331,775,294 $136,853,644
============ ============
*Commencement of operations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Small Company Index Fund
(Unaudited as to July 31, 1997)
1
Summary of
significant
accounting policies
IDS Small Company Index Fund (a series of IDS Market Advantage Series,
Inc.) is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. IDS Market
Advantage Series has 10 billion authorized shares of capital stock that
can be allocated among the separate series as designated by the board. On
Aug. 16, 1996, American Express Financial Corporation (AEFC) invested
$3,000 in the Fund which represented 200 shares for Class A, Class B and
Class Y, respectively. Operations commenced on Aug. 19, 1996.
The Fund invests primarily in common stocks of small capitalization
companies that are expected to provide investment results that correspond
to the performance of the S&P SmallCap 600 Index. 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 during the ninth
calendar year of ownership. Class Y shares have no sales charge and are
offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price; securities for which
market quotations are not readily available 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.
Option transactions
In order to produce incremental earnings, protect gains and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and write options traded on any U.S. or foreign exchange where the
completion of the obligation is dependent upon the credit standing of the
other party. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities and may write cash-secured
put options. The risk in writing a call option is that the Fund gives up
the opportunity of profit if the market price of the security increases.
The risk in writing a put option is that the Fund may incur a loss if the
market price of the security decreases and the option is exercised. The
risk in buying an option is that the Fund pays a premium whether or not
the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary
market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The
Fund will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the
cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts traded on any U.S.
or foreign exchange. The Fund also may buy and write put and call options
on these futures contracts. Risks of entering into futures contracts and
related options include the possibility that there may be an illiquid
market and that a change in the value of the contract may not correlate
with changes in the value of the underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of the deferral
of losses on certain futures contracts, the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes and
losses deferred due to "wash sale" transactions. The character of
distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to the timing of dividend distributions,
the fiscal year in which amounts are distributed may differ from the year
that the income or realized gains (losses) were recorded by the Fund.
Dividends to shareholders
An annual dividend declared and paid at the end of the calendar year from
net investment income is reinvested in additional shares of the Fund at
net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
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.
The Fund entered into agreements with AEFC for managing its portfolio,
providing administrative services and serving as transfer agent. Under its
Investment Management Services Agreement, AEFC determines which securities
will be purchased, held or sold. The management fee is a percentage of the
Fund's average daily net assets in reducing percentages from 0.38% to
0.34% annually.
Under an 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 0.10% 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, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder
account for this service as follows:
oClass A $15
oClass B $16
oClass Y $15
2
Expenses and
sales charges
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 $1,366,870 for Class A and $11,376 for Class
B for the six months ended July 31, 1997. The Fund also pays custodian
fees to American Express Trust Company, an affiliate of AEFC.
AEFC has agreed to waive certain fees and to
absorb certain other of the Funds' expenses until July 31, 1997. Under
this agreement, the Fund's total expenses will not exceed 1.00% for Class
A, 1.76% for Class B and 0.92% for Class Y of the Fund's average daily net
assets.
During the six months ended July 31, 1997, the Fund's custodian and
transfer agency fees were reduced by $29,615 as a result of earnings
credits from overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $178,774,183 and $24,917,858,
respectively, for the six months ended July 31, 1997. Realized gains and
losses are determined on an identified cost basis.
4
Lending of
portfolio securities
At July 31, 1997, securities valued at $4,145,178 were on loan to brokers.
For collateral, the Fund received $4,085,400 in cash and U.S. government
securities valued at $351,561. Income from securities lending amounted to
$34,748 for the six months ended July 31, 1997. The risks to the Fund of
securities lending are that the borrower may not provide additional
collateral when required or return securities when due.
5
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended July 31, 1997
Class A Class B Class Y
Sold 19,497,266 10,910,621 46,206
Issued for reinvested -- -- --
distributions
Redeemed (2,593,870) (530,727) (3,757)
Net increase (decrease) 16,903,396 10,379,894 42,449
Period ended Jan. 31, 1997*
Class A Class B Class Y
Sold 17,818,761 7,633,710 --
Issued for reinvested 66,231 22,199 1
distributions
Redeemed (612,933) (82,433) --
Net increase (decrease) 17,271,999 7,573,476 1
* Inception date was Aug. 19, 1996
<PAGE>
<TABLE>
<CAPTION>
IDS Small Company Index Fund
6. Financial highlights
The table below shows certain important financial information for evaluating the
Fund's results.
Fiscal period ended Jan. 31,
Per share income and capital changesa
Class A Class B Class Y
<S> <C> <C> <C> <C> <C> <C>
1997c 1997b 1997c 1997b 1997c 1997b
Net asset value,
beginning of period $5.51 $5.00 $5.50 $5.00 $5.51 $5.00
Income from investment operations:
Net investment income (loss) -- .02 (.02) .02 -- .02
Net gains (losses) (both .86 .52 .85 .50 .87 .52
realized and unrealized)
Total from investment .86 .54 .83 .52 .87 .54
operations
Less distributions:
Dividends from net -- (.03) -- (.02) -- (.03)
investment income
Net asset value, $6.37 $5.51 $6.33 $5.50 $6.38 $5.51
end of period
Ratios/supplemental data
Class A Class B Class Y
1997c 1997b 1997c 1997b 1997c 1997b
Net assets, end of $218 $95 $114 $42 $-- $--
period (in millions)
Ratio of expenses to 1.00d,g 1.00%d,g 1.76d,g 1.76%d,g .92d,g .82%d,g
average daily net assetse
Ratio of net income (loss) to .03%d 1.55%d (.75%)d .63%d .66%d 1.93%d
average daily net assets
Portfolio turnover rate 12% 48% 12% 48% 12% 48%
(excluding short-term
securities)
Total returnf 15.6% 1 0.8% 15.1% 10.5% 15.6% 10.9%
Average brokerage $.0338 $.0266 $.0338 $.0266 $.0338 $.0266
commission rateh
aFor a share outstanding throughout the period. Rounded to the nearest cent.
bInception date. Period from Aug. 19, 1996 to Jan. 31, 1997.
cSix months ended July 31,1997 (Unaudited).
dAdjusted to an annual basis.
eExpense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
fTotal return does not reflect payment of a sales charge.
gAEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the
annual ratios of expenses would have been 1.23%, 2.01%, and 1.60% for
Class A, B and Y for the six months ended July 31, 1997, respectively,
and 1.48%, 2.60% and 1.22% for Class A, B, and Y for the period from
Aug. 19,1996 to Jan. 31,1997, respectively.
hThe Fund is required to disclose an average brokerage commission rate per
share for security trades on which commissions are charged. The comparability
of this information may be affected by the fact that commission rates
per share vary significantly among foreign countries.
</TABLE>
<PAGE>
Investments in securities
IDS Small Company Index Fund (Percentages represent
July 31, 1997 (Unaudited) value of investments
compared to net assets)
Common stocks (99.7%)
Issuer Shares Value(a)
Aerospace & defense (0.7%)
AAR 17,300 $ 618,475
Alliant Techsystems 12,600(b) 656,775
BE Aerospace 20,600(b) 739,025
Kaman Cl A 17,800 287,025
Total 2,301,300
Airlines (0.8%)
Air Express Intl 32,700 1,011,656
Comair Holdings 42,500 1,144,843
Mesa Airlines 27,100(b) 149,050
SkyWest 9,500 159,125
Total 2,464,674
Automotive & related (2.1%)
Breed Technologies 29,900 579,312
Custom Chrome 5,400(b) 89,775
Discount Auto Parts 16,000(b) 328,000
Gentex 33,500(b) 757,937
Intermet 23,800 401,625
Myers Inds 16,200 283,500
O'Reilly Automotive 9,900(b) 436,837
Simpson Inds 16,900 182,203
Smith (A.O.) 18,600 666,112
Spartan Motors 11,800 104,725
SPS Technologies 5,700(b) 471,319
SPX 11,400 592,800
Standard Motor Products 12,600 222,862
Standard Products 16,200 418,162
TBC 22,600(b) 192,100
Titan Intl 20,300 350,175
Walbro 8,200 181,425
Winnebago Inds 24,000 207,000
Wynn's Intl 12,350 370,500
Total 6,836,369
Banks and savings & loans (9.5%)
Astoria Financial 20,600 993,950
CCB Financial 15,600 1,298,700
Centura Banks 25,100 1,460,506
Charter One Financial 44,395 2,572,135
Coast Savings Financial 17,900(b) 861,437
Commercial Federal 20,450 815,444
Cullen/Frost Bankers 21,500 1,005,125
Deposit Guaranty 40,600 1,329,650
Downey Financial 25,775 600,880
First Commercial 32,525 1,427,034
First Financial 34,675 1,092,262
First Michigan Bank 26,320 858,690
FirstBank Puerto Rico 14,700 408,844
FirstMerit 31,000 1,511,250
JSB Financial 9,800 433,650
Keystone Financial 51,750 1,804,781
Magna Group 31,800 1,172,625
ONBANCorp 13,100 663,187
Provident Financial Group 39,550 2,031,881
RCSB Financial 14,200 734,850
Riggs Natl 29,200 631,450
Sovereign Bancorp 62,760 994,354
St. Paul Bancorp 33,225 791,170
TCF Financial 40,200 2,153,212
U.S. Trust 18,800 989,350
Whitney Holding 18,700 799,425
Zions Bancorp 55,300 1,976,975
Total 31,412,817
Beverages & tobacco (0.9%)
Canandaigua Wine 18,500(b) 787,406
Coca-Cola 8,600 419,250
DIMON 42,200 1,031,262
Schweitzer-Maudit Intl 15,600 609,375
Total 2,847,293
Building materials & construction (3.2%)
Apogee Enterprises 26,400 564,300
BMC West 11,300(b) 148,312
Butler Mfg 7,100 262,256
Continental Homes Holding 6,900 156,975
Hughes Supply 16,500 424,875
Insituform Technologies Cl A 25,800(b) 180,600
Insteel Inds 9,100 66,544
Juno Lighting 17,500 277,812
Lone Star Inds 10,900 577,700
MDC Holdings 16,600 167,037
Medusa 16,700 772,375
Morrison Knudsen 51,300(b) 663,694
Oakwood Homes 44,100 1,185,188
PLY GEM Inds 13,400 258,788
Republic Group 11,130 212,861
Ryland Group 15,300 252,450
Skyline 9,500 241,656
Southern Energy Homes 13,900(b) 142,475
Standard-Pacific 27,700 347,981
Stone & Webster 12,300 578,100
Texas Inds 19,800 643,500
TJ Intl 16,700 409,150
Toll Brothers 32,700(b) 680,569
Tredegar Inds 12,100 753,225
U.S. Home 10,900(b) 362,425
Universal Forest Products 16,000 238,000
Total 10,568,848
Chemicals (2.0%)
Air & Water Technologies Cl A 30,100(b) 94,062
Cambrex 11,100 530,025
Chemed 10,000 372,500
ChemFirst 19,400 539,562
Dames & Moore 16,700 219,187
Geon 22,400 431,200
Hauser 9,100(b) 52,894
Ionics 15,400(b) 652,575
Lilly Inds Cl A 21,600 481,950
MacDermid 7,700 444,675
Mississippi Chemical 26,305 558,981
OHM 25,500(b) 208,781
OM Group 20,500 708,531
Penwest 6,900 207,000
Quaker Chemical 8,300 139,025
Tetra Technologies 12,800(b) 356,800
WD-40 8,000 480,000
Total 6,477,748
Communications equipment & services (2.2%)
Allen Group 26,000(b) 663,000
Aspect Telecommunications 46,700(b) 987,267
Belden 25,000 968,750
Boston Technology 23,500(b) 624,219
BroadBand Technologies 12,800(b) 112,000
C-COR Electronics 8,600(b) 98,363
California Microwave 15,500(b) 236,375
Centigram Communications 6,000(b) 74,250
Dialogic 15,400(b) 531,300
Digi Intl 12,200(b) 140,300
Digital Microwave 17,600(b) 752,400
General Communication 47,200(b) 359,900
InterVoice 15,700(b) 157,000
Network Equipment
Technologies 19,700(b) 390,306
Oak Inds 16,700(b) 507,263
PictureTel 36,000(b) 355,500
Symmetricom 15,300(b) 250,538
TCSI 19,200(b) 135,600
Total 7,344,331
Computers & office equipment (8.3%)
Acxiom 49,400(b) 981,825
ADAC Laboratories 17,700 345,150
American Management
Systems 39,700(b) 1,019,793
Amtech 12,300(b) 57,656
Auspex Systems 23,400(b) 257,400
BancTec 20,200(b) 493,637
BISYS Group 24,400(b) 782,325
BMC Inds 26,200(b) 810,562
Boole & Babbage 18,000(b) 468,000
Broderbund Software 19,700(b) 427,244
Ciber 18,550(b) 651,569
Cognex 39,500(b) 1,343,000
Comverse Technology 23,700(b) 1,155,375
Control Data Systems 12,100(b) 244,269
Envoy 15,800(b,d) 472,025
Fair Isaac 12,300 551,194
FileNet 14,600(b) 259,150
Henry (Jack) & Associates 17,700 469,050
Hyperion Software 16,800(b) 451,500
Intermagnetics General 11,700(b) 143,325
Keane 32,000(b) 1,956,000
Komag 49,400(b) 1,028,137
Kronos 7,800(b) 191,100
MicroAge 15,000(b) 346,875
Natl Computer Systems 14,900 409,750
Natl Data 25,800 1,048,125
Network General 41,500(b) 674,375
New England Business
Services 13,100 386,450
Platinum Software 17,400(b) 197,925
PLATINUM Technology 58,500(b) 906,750
Primark 24,800(b) 674,250
Progress Software 11,700(b) 193,050
Read-Rite 45,400(b) 1,174,725
Sanmina 16,700(b) 1,214,925
Sterling Software 37,100(b) 1,261,400
System Software 39,900(b) 346,631
Tech Data 41,500(b) 1,540,687
Telxon 15,500 348,750
Vantive 23,000(b) 718,750
Viewlogic Systems 15,700(b) 231,575
Wall Data 8,800(b) 157,300
Xircom 21,500(b) 279,500
Zebra Technologies Cl A 23,000(b) 717,312
Total 27,388,391
Electronics (8.6%)
Anixter Intl 45,100(b) 794,887
Bell Inds 8,640(b) 147,960
Benchmark Electronics 5,500(b) 295,625
C-Cube Microsystems 34,900(b,d) 841,962
Chips & Technologies 21,100(b) 356,062
Cyrix 18,700(b,d) 475,681
Dallas Semiconductor 26,400 1,031,250
Dionex 11,800(b) 538,375
Dynatech 16,500(b) 587,812
Etec Systems 20,600(b) 1,117,550
Figgie Intl Cl A 17,300(b) 246,525
Fluke (John) Mfg 8,300 450,275
Gerber Scientific 21,900 462,637
Harmon Inds 6,400 150,400
Integrated Circuit Systems 11,500(b) 303,312
International Rectifier 48,900(b) 1,008,562
Itron 13,000(b) 310,375
Kent Electronics 25,100(b) 978,900
Kuhlman 15,600 483,600
Kulicke & Soffa Inds 21,500(b) 834,469
Lattice Semiconductor 21,700(b) 1,462,037
Marshall Inds 16,100(b) 653,056
Methode Electronics Cl A 34,000 705,500
Microchip Technology 50,850(b) 1,894,162
Novellus Systems 16,400(b) 1,722,000
Pacific Scientific 11,500 180,406
Park Electrochemical 11,200 337,400
Photronics 11,400(b) 627,000
Pioneer Standard Electronics 24,200 341,825
Plexus 7,100(b) 370,975
S3 47,200(b) 725,700
Speedfam Intl 13,000(b) 611,000
Standard Microsystems 14,400(b) 174,600
Three-Five Systems 7,600(b) 172,425
Trimble Navigation 21,100(b) 363,975
Tseng Laboratories 16,400(b) 57,400
Ultratech Stepper 19,800(b) 503,662
Unitrode 11,200(b) 665,700
Vicor 40,800(b) 1,009,800
Vitesse Semiconductor 33,650(b) 1,627,819
VLSI Technology 44,000(b) 1,303,500
Watkins-Johnson 7,800 271,050
Wyle Electronics 11,600 579,275
X-Rite 20,000 402,500
Zilog 19,500(b) 472,875
Total 28,651,861
Energy (3.5%)
Atmos Energy 15,700(d) 377,781
Barrett Resources 30,300(b) 878,700
Benton Oil & Gas 27,900(b) 423,731
Cabot Oil & Gas Cl A 21,600 444,150
Cross Timbers Oil 25,250 497,109
Devon Energy 31,100 1,183,744
HS Resources 16,000(b) 224,000
KCS Energy 27,700 602,475
Monterey Resources 52,366 798,582
Newfield Exploration 34,000(b) 816,000
Pogo Producing 32,300 1,320,263
Santa Fe Energy Resources 95,000(b) 819,375
Snyder Oil 29,400 547,575
St. Mary Land & Exploration 10,300 345,050
UNC 17,600(b) 255,200
United Meridian 34,200(b) 1,092,263
Vintage Petroleum 24,600 884,063
Wiser Oil 8,400 151,200
Total 11,661,261
Energy equipment & services (2.3%)
Box Energy Cl B 18,700(b) 126,225
Camco Intl 36,370 2,350,411
Daniel Inds 16,400 265,475
Input/Output 41,500(b) 897,437
Mesa 60,500(b,d) 336,531
Oceaneering Intl 22,500(b) 487,969
Plains Resources 15,600(b) 253,500
Pool Energy Services 18,200(b) 464,100
Pride Intl 44,400(b) 1,173,825
Seitel 9,800(b) 401,187
Tuboscope Vetco Intl 41,600(b) 1,003,600
Total 7,760,260
Financial services (3.2%)
Alex Brown 22,950 1,910,588
AMRESCO 34,700(b) 1,036,663
Bowne & Co 17,600 585,200
CMAC Investment 21,400 1,009,813
Eaton Vance 18,400 572,700
Insurance Auto Auctions 11,400(b) 105,450
Interra Financial 11,600 497,350
Legg Mason 17,900 1,099,731
Natl Auto Credit 26,300(b) 210,400
North American Mtge 13,800 370,875
Pioneer Group 24,300 634,838
Piper Jaffray 18,000 385,875
Quick & Reilly Group 36,300 952,875
Raymond James Financial 29,950 862,934
SEI Investments 17,700 515,513
Total 10,750,805
Food (2.0%)
Chiquita Brands Intl 53,600 777,200
DEKALB Genetics Cl B 17,000 1,299,438
Delta & Pine Land 27,400 1,041,200
Earthgrains 19,600 717,850
GoodMark Foods 7,100 117,150
J&J Snack Foods 8,000(b) 126,000
Mycogen 29,800(b) 668,638
Nash-Finch 10,900 220,725
Rykoff-Sexton 26,600 660,013
Smithfield Foods 17,800(b) 885,550
Total 6,513,764
Furniture & appliances (1.3%)
Bassett Furniture Inds 12,400 372,000
Ethan Allen Interiors 14,200 752,600
Fedders 35,600 215,825
Interface 22,800 629,850
La-Z-Boy 17,300 649,831
Mohawk Inds 33,200(b) 879,800
Rival (The) 9,100 156,975
Royal Appliance Mfg. 22,400(b) 194,600
Thomas Inds 10,000 296,250
Total 4,147,731
Health care (5.1%)
Advanced Tissue Sciences 35,400(b) 531,000
Alliance Pharmaceutical 29,200(b) 290,175
ALPHARMA Cl A 20,600 369,513
Ballard Medical Products 26,900 569,944
Bio-Technology General 44,900(b) 589,313
Cellpro 11,900(b) 36,444
Cephalon 23,100(b) 227,391
Circon 12,700(b) 203,994
Coherent 11,200(b) 548,800
Collagen 8,500 149,813
COR Therapeutics 18,800(b) 202,100
Cygnus 18,100(b) 339,375
Enzo Biochem 21,845(b) 344,059
ICN Pharmaceuticals 33,300 1,138,444
IDEXX Laboratories 36,700(b) 584,906
ImmuLogic Pharmaceutical 17,400(b) 51,113
Immune Response 20,800(b) 174,200
Invacare 28,500 602,063
Liposome 34,900(b) 246,481
MedImmune 20,700(b) 491,625
Mentor 23,600 724,225
Molecular Biosystems 16,900(b) 156,325
North American Vaccine 30,400(b,d) 573,800
Noven Pharmaceuticals 19,200(b) 196,800
PerSeptive Biosystems 20,600(b) 206,000
Pharmaceutical
Marketing Services 12,700(b) 147,638
Protein Design Labs 17,700(b) 497,813
Regeneron Pharmaceuticals 29,600(b) 296,000
ReSound 17,200(b) 86,000
Respironics 19,100(b) 494,213
Roberts Pharmaceutical 26,400(b) 264,000
Safeskin 25,200(b) 833,175
SciClone Pharmaceuticals 14,600(b) 59,313
SEQUUS Pharmaceuticals 29,200(b) 193,450
SpaceLabs Medical 9,300(b) 204,600
STERIS 33,100(b) 1,274,350
Summit Technology 29,200(b) 200,750
Sunrise Medical 18,100(b) 271,500
Syncor Intl 9,800(b) 138,425
Tecnol Medical Products 19,300(b) 434,250
TheraTech 19,500(b) 224,250
US Bioscience 23,200(b) 237,800
Vertex Pharmaceuticals 24,000(b) 843,000
VISX 14,500(b) 313,563
Vital Signs 12,500 218,750
Zoll Medical 4,900(b) 37,363
Total 16,818,106
Health care services (5.3%)
Cerner 31,700(b) 951,000
Coventry 31,700(b) 560,694
Express Scripts Cl A 16,100(b) 720,475
Genesis Health Ventures 33,800(b) 1,144,975
GranCare 22,900(b) 276,231
Integrated Health Services 23,800(d) 812,175
Lincare Holdings 27,600(b) 1,352,400
Living Centers of America 18,700(b) 735,144
Magellan Health Services 27,900(b) 831,769
Mariner Health Group 27,200(b) 365,500
OccuSystems 21,400(b) 609,900
Omnicare 76,400 2,249,025
Orthodontic Centers
of America 41,900(b) 775,150
Owens & Minor 30,700 456,663
Patterson Dental 20,600(b) 715,850
PhyCor 60,800(b) 2,036,800
Renal Treatment Centers 24,200(b) 713,900
RoTech Medical 24,400(b) 460,931
Sierra Health Services 17,300(b) 568,738
Universal Health
Services Cl B 30,800(b) 1,251,250
Total 17,588,570
Household products (1.2%)
Nature's Sunshine Products 17,600 360,800
Paragon 10,600(b) 185,500
Premark Intl 59,800 1,887,438
Scotts Cl A 18,100(b) 495,488
Sola Intl 23,200(b) 738,050
USA Detergents 13,200(b) 179,850
Valence Technology 20,200(b) 166,650
Total 4,013,776
Industrial equipment & services (2.6%)
Arctic Cat 28,100 295,050
Astec Inds 9,100(b) 134,794
Blount Intl 18,000 805,500
Clarcor 15,500 402,031
Dravo 13,900(b) 154,638
Flow Intl 13,400(b) 134,838
G & K Services Cl A 19,900 674,113
Global Industrial
Technologies 21,300(b) 403,369
Greenfield Inds 15,900 451,163
Halter Marine Group 17,500(b) 535,938
KEMET 37,200(b) 953,250
Lindsay Mfg 9,550 327,684
LSB Inds 11,100 43,706
Lydall 16,000(b) 376,000
Manitowoc 17,000 654,500
O'Sullivan 15,100 152,888
Regal Beloit 19,700 557,756
Roper Inds 14,800 828,800
Toro 12,000 438,000
Wolverines Tube 13,300(b) 390,688
Total 8,714,706
Insurance (4.0%)
ALLIED Group 19,400 908,162
American Bankers
Insurance Group 19,700 1,333,444
Capital Re 15,500 823,438
Compdent 9,800(b) 212,538
Enhance Financial
Services Group 17,600 880,000
Fidelity Natl Financial 13,170 236,237
First American Financial 10,900 461,888
Fremont General 28,100 1,201,275
Frontier Insurance Group 28,300 882,606
Gallagher (Arthur J) 15,900 576,375
Hilb, Rogal & Hamilton 12,100 205,700
Integon 15,400 388,850
Life Re 13,100 717,225
Orion Capital 26,300 1,099,669
Protective Life 29,500 1,500,813
Selective Insurance Group 14,300 761,475
Trenwick Group 11,200 428,400
Washington Natl 11,600 334,225
Zenith Natl 17,050 464,613
Total 13,416,933
Leisure time & entertainment (1.4%)
Aztar 42,300(b) 298,744
Bell Sports 13,800(b) 100,913
Carmike Cinemas Cl A 11,000(b) 347,875
Galoob Toys 17,000(b) 388,875
Grand Casinos 40,200(b) 630,638
Hollywood Park 22,900(b) 389,300
Huffy 12,800 188,800
K2 15,900 502,838
Mail Boxes Etc. 11,000(b) 302,500
Outboard Marine 19,000(d) 302,813
Players Intl 30,100(b) 124,163
RDM Sports Group 39,700(b) 32,256
Showboat 15,400 270,463
Thor Inds 8,000 200,000
WMS Inds 22,900(b) 561,050
Total 4,641,228
Media (2.7%)
ADVO 23,000(b) 416,875
Catalina Marketing 18,800(b) 801,350
GC Companies 7,800(b) 321,750
Intl Family
Entertainment Cl B 42,900(b) 1,474,688
Merrill 7,800 312,000
Metro Networks 15,800(b) 511,525
NTN Communications 21,700(b) 88,156
Plenum Publishing 4,000 158,000
Regal Cinemas 32,050(b) 1,029,606
Thomas Nelson 16,300 210,881
True North Communications 23,500 584,563
Valassis Communications 39,500(b) 1,108,469
Westwood One 30,900(b) 992,663
World Color Press 32,550(b) 931,744
Total 8,942,270
Metals (2.0%)
Acme Metals 11,200(b) 170,800
Amcast Industrial 8,100 207,056
AMCOL Intl 18,000 326,250
Birmingham Steel 28,500 518,344
Castle (AM) 13,300 300,081
Coeur d'Alene Mines 20,600(b) 270,375
Commercial Metals 14,800 469,900
Commonwealth Inds 9,400 207,975
Getchell Gold 25,500(b) 851,063
Handy & Harman 11,000 199,375
Hecla Mining 51,200(b) 262,400
IMCO Recycling 12,100 235,950
Material Sciences 14,800(b) 236,800
Mueller Inds 17,100(b) 767,363
Northwestern
Steel and Wire 20,500(b) 39,719
Pittston Burlington Group 19,500 482,625
Quanex 13,400 417,075
Steel Technologies 10,800 137,700
Stillwater Mining 19,100(b) 396,325
WHX 21,800(b) 196,200
Total 6,693,376
Miscellaneous (0.9%)
ABM Inds 19,300 446,313
Aquarion 7,000 188,125
Champion Enterprises 46,200(b) 759,413
Consumers Water 8,400 147,000
Philadelphia Suburban 18,600 356,888
Rural/Metro 11,750(b) 352,500
Southern California Water 8,500 193,906
United Water Resources 34,000 646,000
Total 3,090,145
Multi-industry conglomerates (4.1%)
Baldor Electric 25,500 796,875
Brady (WH) 21,000 622,125
CDI 19,000(b) 737,438
Corrections Corp
of America 73,300(b) 3,248,106
Cross (AT) Cl A 15,200 134,900
Cyrk Intl 10,600(b) 113,950
DeVRY 33,300(b) 978,188
Fisher Scientific Intl 19,300 934,844
Franklin Covey 23,400(b) 620,100
Griffon 28,700(b) 419,738
Interim Services 18,900(b) 861,131
NFO Research 13,100(b) 314,400
Norrell 25,300 800,113
Paxar 26,750(b) 548,375
Rexel 24,800(b) 452,600
Standex Intl 12,900 380,550
Triarc Cl A 28,800(b) 655,200
Valmont Inds 25,900 506,669
Whittaker 10,700(b) 119,706
Zero 11,900 316,838
Total 13,561,846
Paper & packaging (1.0%)
AptarGroup 17,700 900,488
Buckeye Cellulose 18,000(b) 648,000
Caraustar Inds 23,300 710,650
Mosinee Paper 14,850 404,663
Pope & Talbot 12,800 258,400
Shorewood Packaging 17,400(b) 367,575
Total 3,289,776
Restaurants & lodging (2.4%)
Applebee's Intl 30,200 906,000
Au Bon Pain Cl A 11,300(b) 85,456
Bertucci's 7,200(b) 45,000
Cheesecake Factory 10,800(b) 284,175
CKE Restaurants 39,000 1,350,375
Foodmaker 37,300(b) 685,387
IHOP 8,900(b) 282,575
Landry's Seafood
Restaurants 24,100(b) 614,550
Luby's Cafeterias 22,200 437,062
Marcus 18,800 470,000
Prime Hospitality 38,300(b) 703,762
Ruby Tuesday 16,300 414,631
Ryan's Family Steak Houses 45,500(b) 392,437
Shoney's 45,800(b) 277,662
Showbiz Pizza Time 18,000(b) 416,250
Sonic 12,600(b) 281,925
Taco Cabana Cl A 15,100(b) 73,613
TCBY Enterprises 22,900 157,437
Total 7,878,297
Retail (7.2%)
Arbor Drugs 37,500 923,438
Baker (J) 13,400 117,250
Bombay 35,100(b) 219,375
Books-A-Million 17,900(b) 87,263
Carson Pirie Scott 15,600(b) 517,725
Casey's General Stores 24,900 563,363
Cash America Intl 23,200 262,450
Cato Cl A 26,900 196,706
Checkpoint Systems 32,600(b) 513,450
CompUSA 87,600(b) 2,354,250
Damark Intl Cl A 7,900(b) 122,450
Designs 14,300(b) 71,500
Dress Barn 21,500(b) 467,625
Eagle Hardware & Garden 27,800(b) 587,275
Fabri-Centers of
America Cl A 17,200(b) 448,275
Filene's Basement 18,600(b) 117,413
Footstar 29,500(b) 789,125
Gottschalks 10,900(b) 85,838
Gymboree 24,500(b) 581,875
Hechinger Cl A 40,500(b) 106,313
Jan Bell Marketing 22,100(b) 49,725
Jumbosports 17,200(b) 62,350
Just For Feet 28,700(b) 554,269
Justin Inds 25,000 343,750
Lechters 14,100(b) 58,163
Lillian Vernon 8,800 147,400
Michaels Stores 22,300(b) 482,238
Nashua 5,800(b) 63,075
NBTY 17,900(b) 472,113
Phillips-Van Heusen 25,400 355,600
Pier 1 Imports 64,650 1,139,456
Proffitts 26,400(b) 1,399,200
Regis 21,400 529,650
Richfood Holdings 45,400 1,089,600
Ross Stores 47,600 1,505,350
Russ Berrie 20,900 534,256
Shopko Stores 31,100 898,013
Smith's Food & Drug Cl B 15,700(b) 932,188
Stein Mart 22,400(b) 658,000
Sturm Ruger 25,400 530,225
Swiss Army Brands 7,400(b) 98,050
The Men's Wearhouse 20,500(b) 758,500
The Sports Authority 30,200(b) 539,825
Whole Foods Market 18,800(b,d) 648,600
Williams-Sonoma 24,300(b) 1,049,456
Total 24,032,011
Textiles & apparel (2.3%)
Angelica 8,800 169,400
Ashworth 11,200(b) 115,500
Authentic Fitness 21,400 242,086
Brown Group 16,900 295,750
Cone Mills 23,900(b) 179,250
Delta Woodside Inds 22,500(b) 130,781
The Dixie Group 10,100(b) 107,943
Fieldcrest Cannon 8,400(b) 189,000
Galey & Lord 11,200(b) 189,000
Guilford Mills 21,100 456,287
Haggar 8,200 103,525
Hartmarx 31,500(b) 238,218
Johnston Inds 8,800 55,550
K-Swiss Cl A 6,100 112,087
Kellwood 20,400 633,675
Nautica Enterprises 37,900(b) 1,042,250
Oshkosh B'Gosh Cl A 11,400 243,675
Oxford Inds 8,700 265,350
Pillowtex 10,300 255,569
St. John Knits 16,200 737,100
Timberland Cl A 10,700(b) 691,487
Tultex 28,700(b) 163,231
Wolverine World Wide 40,000 1,092,500
Total 7,709,214
Transportation (2.2%)
American Freightways 30,000(b) 495,000
Arkansas Best 17,800(b) 166,875
Expeditors Intl
of Washington 23,200 878,700
Fritz 33,600(b) 363,300
Frozen Food Express Inds 16,100 148,925
Heartland Express 28,500(b) 705,375
Landstar System 12,400(b) 310,000
M.S. Carriers 11,800(b) 272,875
Offshore Logistics 19,800(b) 391,050
RailTex 8,300(b) 163,925
Rollins Truck Leasing 40,300 599,462
USFreightways 25,000 776,562
Wabash Natl 19,000 533,187
Werner Enterprises 36,600 786,900
Yellow 26,700(b) 720,900
Total 7,313,036
Utilities -- electric (1.4%)
Bangor Hydro-Electric 6,000 34,500
Central Hudson Gas
& Electric 17,000 564,187
Central Vermont
Public Service 11,100 137,362
CILCORP 13,100 549,381
Commonwealth
Energy System 20,400 521,475
Eastern Utilities Assn 19,400 373,450
Green Mountain Power 4,700 116,619
Interstate Power 9,100 272,431
Orange & Rockland Utilities 13,400 453,087
Sierra Pacific Resources 29,900 954,931
TNP Enterprises 12,800 313,600
United Illuminating 13,800 476,962
Total 4,767,985
Utilities -- gas (2.0%)
Cascade Natural Gas 10,200 168,300
Connecticut Energy 9,000 205,312
Energen 12,500 453,125
Kirby 23,000(b) 431,250
KN Energy 29,200 1,226,400
New Jersey Resources 17,300 547,112
Northwest Natural Gas 21,450 557,700
Pennsylvania Enterprises 9,500 251,750
Piedmont Natural Gas 28,300 707,500
Public Service Company
of North Carolina 18,500 365,375
Southwest Gas 25,400 471,487
Southwestern Energy 23,200 319,000
United Cities Gas 12,300 292,124
Wicor 17,700 710,213
Total 6,706,648
Utilities -- telephone (0.9%)
ACC 16,100(b) 587,650
CommNet Cellular 13,500(b) 470,812
Geotek Communications 56,500(b) 275,437
Orbital Sciences 30,900(b) 583,237
Tel-Save Holdings 61,600(b) 1,047,200
Total 2,964,336
Foreign (0.4%) (c)
Cineplex Odeon 169,300(b) 285,694
Glamis Gold 29,700(b) 207,900
Mutual Risk Management 18,200 894,075
Total 1,387,669
Total common stocks
(Cost: $285,664,343) $330,657,381
Short-term securities (2.4%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies (0.8%)
Federal Home Loan Mtge Corp Disc Nt
08-06-97 5.37% $ 1,700,000 $ 1,698,734
Federal Natl Mtge Assn Disc Nt
08-05-97 5.33 1,100,000 1,099,350
Total 2,798,084
Commercial paper (1.6%)
Cargill Global
08-22-97 5.52 2,600,000(e) 2,591,674
Exxon Asset Management
08-01-97 5.65 1,600,000(e) 1,600,000
Ford Motor Credit
08-04-97 5.66 1,000,000 999,528
Total 5,191,202
Total short-term securities
(Cost: $7,989,286) $ 7,989,286
Total investment in securities
(Cost: $293,653,629)(f) $338,646,667
See accompanying notes to investments in securities.
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Security is partially or fully on loan. See Note 4 to the financial
statements.
(e) Commercial paper sold within terms of 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.
(f) At July 31, 1997, the cost of securities for federal income tax purposes was
approximately $293,654,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation........................................$52,086,000
Unrealized depreciation.........................................(7,093,000)
Net unrealized appreciation....................................$44,993,000
<PAGE>
Board members and officers of the Fund
President and interested
board member
William R. Pearce
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).
Independent
board members
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.
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.
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.
Interested board
members who are
officers and/or
employees of AEFC
William H. Dudley
Senior advisor to the chief executive officer, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also
are officers and/or
employees of AEFC
Peter J. Anderson
Senior vice president, AEFC. Vice president - Investments for the Fund.
Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer for the
Fund.
Other officer
Leslie L. Ogg
President, treasurer and corporate secretary of Board Services
Corporation. Vice president, general counsel and secretary for the Fund.
Refer to the SAI for the board members' and officers' biographies.
<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 globe
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks-and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) flower
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth and 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.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) spinning toy
IDS Stock Fund
Invests in a Portfolio comprised primarily of 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
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth.
Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly 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
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current
income consistent with these objectives. An investment in
these funds is neither insured nor guaranteed by the U.S. government,
and there can be no assurance that these funds
will be able to maintain a stable net asset value of $1.00
per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
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
<PAGE>
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Small Company Index Fund
IDS Tower 10
Minneapolis, MN 55440-0010
