1998 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
(S&P SmallCap 600 Index) 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.
<PAGE>
(icon of) building
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 chairman 3
From the portfolio manager 3
The Fund's ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 20
Board members and officers 27
IDS mutual funds 28
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong 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. We saw
evidence of that last October, when financial turmoil in Southeast Asia
sparked a sharp decline in worldwide stock markets, including the U.S.
The potential for such volatility reinforces the need for an investor 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
It was an up-and-down six months for IDS Small Company Index Fund, as
turmoil in foreign markets kept small-capitalization stocks from
establishing any sustained progress. For the first half of the Fund's
fiscal year -- February through July 1998 -- its Class A shares generated a
slight loss of 0.6%.
The struggles to come were nowhere to be found at the outset of the period,
though. Thanks to dissipating fear regarding the negative impact of the
financial crisis in Asia and a continuation of the positive investment
environment here at home, small stocks skyrocketed during February and
March. For the Fund, this meant a gain of more than 12%.
But the good times were not to last, as investors began to return to the
perceived safe haven offered by the large, blue-chip stocks that have led
the market for much of the past few years. By the end of the period, they
had all but abandoned small stocks. To illustrate the severity of the
decline, the Russell 2000, a stock index commonly used as a proxy for
small-cap issues, slid about 19% from its peak in April.
Technology proves
most volatile
The most volatile stock sector during the six months was technology, which
soared and sank with the mood of investors regarding potential fallout from
the Asian situation. On the other side of the spectrum were the consumer
staples such as food and drug stocks, whose relatively consistent earnings
growth lured nervous investors. Financial services stocks, which include
insurance, banking and brokerage, fared well thanks to a decline in
interest rates. Cyclicals, which include economically sensitive groups such
as autos and retailers, proved to be a mixed bag. Those four categories
made up nearly 80% of the Fund's investments, with about equal portions in
each. All but 1% of the assets were kept in U.S. stocks.
As we begin the second half of the fiscal year, the valuation level of
small-cap stocks continues to be unusually attractive compared with
large-cap issues. Put another way, their prices appear cheap in relation to
their companies' growth rates.
Historically, this "bargain" condition has eventually attracted investors
and led to higher stock prices. While I do expect that to happen at some
point, at this time (mid-August) the small-stock sector continues to
operate under the cloud of the Asian situation. Once that passes, and
assuming the domestic investment environment remains sound, small stocks
should enjoy better performance.
Guru Baliga
(picture of) Guru Baliga
Guru Baliga
Portfolio manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $ 6.43
Jan. 31, 1998 $ 6.47
Decrease $ 0.04
Distributions
Feb. 1, 1998 - July 31, 1998
From income $ --
From capital gains $ --
Total distribution $ --
Total return* -0.6%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $ 6.34
Jan. 31, 1998 $ 6.40
Decrease $ 0.06
Distributions
Feb. 1, 1998 - July 31, 1998
From income $ --
From capital gains $ --
Total distribution $ --
Total return* -0.9%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $ 6.44
Jan. 31, 1998 $ 6.47
Decrease $ 0.03
Distributions
Feb. 1, 1998 - July 31, 1998
From income $ --
From capital gains $ --
Total distribution $ --
Total return* -0.5%**
*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, 1998)
DEKALB Genetics Cl B .91% $7,669,999
American Bankers Insurance Group .74 6,236,313
Platinum Technology .73 6,170,258
Protective Life .68 5,752,831
Vitesse Semiconductor .68 5,739,974
CCB Financial .68 5,693,349
Lincare Holdings .66 5,537,174
Comair Holdings .60 5,075,250
STERIS .59 4,995,899
Safeskin .58 4,856,830
For further detail about these holdings, please refer to the section
entitled "Investments in securities" herein.
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The ten holdings listed here make up 6.85% of the Fund's net assets
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<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Small Company Index Fund
July 31, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $872,370,830) $861,813,033
Cash in bank on demand deposit 2,111,166
Dividends and accrued interest receivable 300,085
Receivable for investment securities sold 7,632,249
U.S government securities held as collateral (Note 4) 1,310,000
---------
Total assets 873,166,533
-----------
Liabilities
Payable for investment securities purchased 10,423,807
Payable upon return of securities loaned (Note 4) 20,662,200
Accrued investment management services fee 8,564
Accrued distribution fee 6,522
Accrued service fee 4,074
Accrued transfer agency fee 4,345
Accrued administrative services fee 1,754
Other accrued expenses 114,035
-------
Total liabilities 31,225,301
----------
Net assets applicable to outstanding capital stock $841,941,232
============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,316,019
Additional paid-in capital 822,622,173
Net operating loss (1,347,331)
Accumulated net realized gain (loss) 29,913,050
Unrealized appreciation (depreciation) of investments (Note 5) (10,562,679)
-----------
Total-- representing net assets applicable to outstanding capital stock $841,941,232
============
Net assets applicable to outstanding shares: Class A $525,982,293
Class B $314,816,537
Class Y $ 1,142,402
Net asset value per share of outstanding capital stock: Class A shares 81,795,540 $ 6.43
Class B shares 49,628,910 $ 6.34
Class Y shares 177,431 $ 6.44
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
IDS Small Company Index Fund
Six months ended July 31, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $ 2,927,858
Interest 436,211
Less foreign taxes withheld (935)
----
Total income 3,363,134
---------
Expenses (Note 2):
Investment management services fee 1,463,843
Distribution fee -- Class B 1,103,896
Transfer agency fee 760,656
Incremental transfer agency fee-- Class B 20,163
Service fee
Class A 434,787
Class B 256,929
Class Y 560
Administrative services fees and expenses 310,251
Compensation of board members 4,772
Custodian fees 158,257
Postage 35,946
Registration fees 156,847
Reports to shareholders 6,221
Audit fees 7,000
Other 13,654
------
Total expenses 4,733,782
Earnings credits on cash balances (Note 2) (23,317)
-------
Total net expenses 4,710,465
---------
Investment income (loss) -- net (1,347,331)
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 23,556,773
Financial futures contracts 553,497
-------
Net realized gain (loss) on investments 24,110,270
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (49,466,593)
-----------
Net gain (loss) on investments and foreign currencies (25,356,323)
-----------
Net increase (decrease) in net assets resulting from operations $(26,703,654)
============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Small Company Index Fund
Operations and distributions
July 31, 1998 Jan. 31, 1998
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ (1,347,331) $ (1,058,953)
Net realized gain (loss) on investments 24,110,270 14,887,784
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (49,466,593) 33,252,013
----------- ----------
Net increase (decrease) in net assets resulting from operations (26,703,654) 47,080,844
----------- ----------
Distributions to shareholders from:
Net realized gain
Class A -- (5,245,145)
Class B -- (3,004,087)
Class Y -- (10,721)
-------
Total distributions -- (8,259,953)
------- ----------
Capital share transactions (Note 6)
Proceeds from sales
Class A shares (Note 2) 192,974,040 301,545,821
Class B shares 119,120,749 177,300,599
Class Y shares 604,098 911,375
Reinvestment of distributions at net asset value
Class A shares -- 4,865,785
Class B shares -- 2,986,421
Class Y shares -- 10,721
Payments for redemptions
Class A shares (42,948,341) (36,734,310)
Class B shares (Note 2) (17,798,852) (9,507,988)
Class Y shares (216,165) (143,602)
-------- --------
Increase (decrease) in net assets from capital share transactions 251,735,529 441,234,822
Total increase (decrease) in net assets 225,031,875 480,055,713
Net assets at beginning of period 616,909,357 136,853,644
----------- -----------
Net assets at end of period $841,941,232 $616,909,357
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDSSmall Company Index Fund
(Unaudited as to July 31, 1998)
1
Summary of
significant
accounting policies
The Fund is a series of IDS Market Advantage Series, Inc. and 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.
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 shares during the ninth
calendar year of ownership. Class Y shares have no sales charge and are
offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for which
market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued
at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and write options traded on any U.S. or foreign exchange or in the
over-the-counter market where the completion of the obligation is dependent
upon the credit standing of the other party. The Fund also may buy and sell
put and call options and write covered call options on portfolio securities
and may write cash-secured put options. The risk in writing a call option
is that the Fund gives up the opportunity of profit if the market price of
the security increases. The risk in writing a put option is that the Fund
may incur a loss if the market price of the security decreases and the
option is exercised. The risk in buying an option is that the Fund pays a
premium whether or not the option is exercised. The Fund also has the
additional risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost
of a security for a purchased put or call option is adjusted by the amount
of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts traded on any U.S. or
foreign exchange. The Fund also may buy and write put and call options on
these futures contracts. Risks of entering into futures contracts and
related options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
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 from net investment income, declared and paid at the end
of the calendar year, 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.
2
Expenses and
sales charges
The Fund entered into agreements with American Express Financial
Corporation (AEFC) for managing its portfolio and providing administrative
services. Under its Investment Management Services Agreement, AEFC
determines which securities will be purchased, held or sold. The management
fee is a percentage of the Fund's average daily net assets in reducing
percentages from 0.38% to 0.34% annually.
Under its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.10% 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, 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
The Fund entered into agreements with American Express Financial Advisors
Inc. for distribution and shareholder servicing-related services. Under a
Plan and Agreement of Distribution, the Fund pays a distribution fee at an
annual rate of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents.
The fee is calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares and 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $3,131,127 for Class A and $125,125 for Class
B for the six months ended July 31, 1998. The Fund also pays custodian fees
to American Express Trust Company, an affiliate of AEFC.
AEFC agreed to waive certain fees and to absorb certain other of the Funds'
expenses until July 31, 1998. Under this agreement, the Fund's total
expenses would 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, 1998, the Fund's custodian and
transfer agency fees were reduced by $23,317 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 $357,876,959 and $104,028,790,
respectively, for the six months ended July 31, 1998. Realized gains and
losses are determined on an identified cost basis.
4
Lending of
portfolio securities
At July 31, 1998, securities valued at $19,692,232 were on loan to brokers.
For collateral, the Fund received $19,352,200 in cash and U.S. government
securities valued at $1,310,000. Income from securities lending amounted to
$222,089 for the six months ended July 31, 1998. 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
Financial
futures
contracts
Investments in securities at July 31, 1998, included securities valued at
$1,265,925 that were pledged as collateral to cover initial margin deposits
on one open purchase contract. The market value of the open purchase
contract at July 31, 1998, was $280,750 with a net unrealized loss of
$4,882.
6
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended July 31, 1998
Class A Class B Class Y
Sold 27,391,078 17,118,472 85,207
Issued for reinvested -- -- --
distributions
Redeemed (6,130,435) (2,569,838) (31,070)
Net increase (decrease) 21,260,643 14,548,634 54,137
Year ended Jan. 31, 1998
Class A Class B Class Y
Sold 48,477,409 28,574,068 143,930
Issued for reinvested 754,620 467,432 1,661
distributions
Redeemed (5,969,331) (1,534,900) (22,498)
Net increase (decrease) 43,262,698 27,506,600 123,093
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<TABLE>
<CAPTION>
7
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 changes(a)
Class A Class B Class Y
1998c 1998 1997b 1998c 1998 1997b 1998c 1998 1997b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $6.47 $5.51 $5.00 $6.40 $5.50 $5.00 $6.47 $5.51 $5.00
Income from investment operations:
Net investment income (loss) -- -- .02 (.02) (.05) .02 -- -- .02
Net gains (losses) (both (.04) 1.05 .52 (.04) 1.04 .50 (.03) 1.05 .52
realized and unrealized)
Total from investment (.04) 1.05 .54 (.06) .99 .52 (.03) 1.05 .54
operations
Less distributions:
Dividends from net -- -- (.03) -- -- (.02) -- -- (.03)
investment income
Distributions from -- (.09) -- -- (.09) -- -- (.09) --
realized gains
Total distributions -- (.09) (.03) -- (.09) (.02) -- (.09) (.03)
Net asset value, 6.43 $6.47 $5.51 $6.34 $6.40 $5.50 $6.44 $6.47 $5.51
end of period
Ratios/supplemental data
Class A Class B Class Y
1998c 1998 1997b 1998c 1998 1997b 1998c 1998 1997b
Net assets, end of $526 $391 $95 $315 $225 $42 $1 $1 --
period (in millions)
Ratio of expenses to .91%d 1.00%g 1.00%d,g 1.67%d 1.76%g 1.76%d,g .83%d .92%g .82%d,g
average daily net assets(e)
Ratio of net income (loss) to (.06%)d (.05%) 1.55%d (.82%)d (.81%) .63%d .02%d .01% 1.93%d
average daily net assets
Portfolio turnover rate 13% 25% 48% 13% 25% 48% 13% 25% 48%
(excluding short-term
securities)
Total return(f) (0.6%) 19.0% 10.8% (0.9%) 18.1% 10.5% (0.5%) 19.1% 10.9%
Average brokerage $.0305 $.0340 $.0266 $.0305 $.0340 $.0266 $.0305 $.0340 $.0266
commission rate(h)
a For a share outstanding throughout the period. Rounded to the nearest
cent.
b Inception date. Period from Aug. 19, 1996 to Jan. 31, 1997.
c Six months ended July 31, 1998 (Unaudited).
d Adjusted to an annual basis.
e Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
f Total return does not reflect payment of a sales charge.
g AEFC reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses would have been 1.05% and 1.48% for
Class A, 1.81% and 2.60% for Class B, and .92% and 1.22 for Class Y,
for the year ended 1998 and the period ended 1997, respectively.
h The Fund is required to disclose an average brokerage commission rate per
share for security trades on which commissions are charged. The
comparability of this information may be affected by the fact that
commission rates per share vary significantly among foreign countries.
</TABLE>
<PAGE>
Investments in securities
IDS Small Company Index Fund
July 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks (99.7%)
Issuer Shares Value(a)
Aerospace & defense (0.8%)
AAR66,950 $1,694,672
Alliant Techsystems 31,600(b) 2,055,975
BE Aerospace 54,700(b) 1,678,606
Kaman Cl A 56,000 938,000
Total 6,367,253
Airlines (1.1%)
Air Express Intl 83,200 1,835,600
Comair Holdings 160,800 5,075,250
Mesa Air Group 68,100(b) 536,288
SkyWest 55,900 1,509,300
Total 8,956,438
Automotive & related (2.7%)
Breed Technologies 88,600(c) 1,290,238
Central Parking 71,100 3,568,330
Discount Auto Parts 39,700(b) 1,012,350
Gentex 172,000(b) 2,655,249
Global Motorsport Group 12,400(b) 249,550
Intermet 61,300 1,187,688
Myers Inds 43,720 1,027,420
O'Reilly Automotive 51,000(b) 1,804,125
Simpson Inds 43,500 519,281
Smith (AO) 37,800 1,561,613
Spartan Motors 30,400 163,400
SPS Technologies 29,800(b) 1,562,638
SPX 30,600(b,c) 1,738,463
Standard Motor Products 31,200 663,000
Standard Products 40,700 1,081,094
TBC 56,500(b) 353,125
Titan Intl 52,400 733,600
Walbro 20,800(b) 205,400
Winnebago Inds 56,900 665,019
Wynn's Intl 46,775 850,720
Total 22,892,303
Banks and savings & loans (7.9%)
Astoria Financial 63,700 3,192,963
Banknorth Group 37,100 1,296,181
Carolina First 42,000 1,029,000
CCB Financial 49,400 5,693,349
Centura Banks 63,800 4,414,163
Commercial Federal 97,225 2,734,453
Cullen/Frost Bankers 53,600 2,847,500
Downey Financial 67,513 2,194,173
First Midwest Bankcorp 71,500 2,967,250
FirstBank Puerto Rico 73,000 1,984,688
FirstMerit 156,800 4,596,200
HUBCO 71,900 2,332,256
JSB Financial 23,900 1,295,081
Keystone Financial 123,850 4,141,234
Provident Financial Group 103,750 4,850,312
Queens County Bancorp 36,100 1,597,425
Riggs Natl 73,600 2,033,200
Silicon Valley Bancshares 49,200(b) 1,525,200
St. Paul Bancorp 97,325 2,189,813
Susquehanna Bancshares 81,700 1,838,250
TrustCo Bank NY 56,400 $1,679,663
U.S. Trust 45,300 3,638,155
United Bankshares 94,100 2,611,275
UST Corp 72,000 1,800,000
Whitney Holding 50,100 2,317,125
Total 66,798,909
Beverages & tobacco (0.6%)
Canandaigua Wine Cl A 45,200(b) 2,130,050
Coca-Cola 20,000 1,200,000
DIMON 107,800 1,172,325
Schweitzer-Mauduit Intl 38,700 940,894
Total 5,443,269
Building materials & construction (3.4%)
Apogee Enterprises 67,500 875,391
Building Materials Holding
Corp 29,800(b) 368,775
Butler Mfg 18,600 573,113
Horton (DR) 127,200 2,750,699
Hughes Supply 55,100 1,690,881
Insituform Technologies Cl A65,500(b) 867,875
Insteel Inds 19,500 112,125
Juno Lighting 44,300 930,300
Lone Star Inds 25,800 1,876,950
M.D.C. Holdings 43,800 900,638
Morrison Knudsen 129,800(b) 1,736,075
Oakwood Homes 111,800 2,263,950
Republic Group 28,330 564,829
Ryland Group 35,600 807,675
Skyline 22,500 724,219
Southern Energy Homes 32,400(b) 307,800
Standard Pacific 71,900 1,231,288
Stone & Webster 31,000 1,123,750
Texas Inds 50,700 1,888,575
TJ Intl 40,900 950,925
Toll Brothers 89,100(b) 2,333,306
Tredegar Inds 88,800 2,053,500
U.S. Home 28,500(b) 1,066,969
Universal Forest Products 49,400 784,225
Total 28,783,833
Chemicals (1.8%)
Cambrex 60,400 1,619,475
Chemed 24,000 763,500
ChemFirst 51,000 984,938
Dames & Moore Group 42,500 531,250
Geon 58,200 1,305,863
Hauser 33,500(b) 207,281
Ionics 38,900(b) 1,235,075
Lilly Inds Cl A 58,900 1,178,000
MacDermid 62,300 2,168,819
Mississippi Chemical 66,205 1,075,831
OM Group 58,900 2,182,980
Penford 17,800 500,625
Quaker Chemical 23,900 427,213
TETRA Technologies 32,700(b) 433,275
WD-40 39,500 962,813
Total 15,576,938
Communications equipment & services (2.1%)
Allen Group 65,000(b) $585,000
Aspect Telecommunications 121,500(b) 3,876,608
Belden 62,700 1,653,713
BroadBand Technologies 34,400(b) 126,850
C-COR Electronics 23,900(b) 355,513
California Microwave 39,200(b) 558,600
Centigram Communications 17,700(b) 192,488
CommScope 118,600(b) 2,075,499
Dialogic 39,100(b) 1,378,275
Digi Intl 32,400(b) 623,700
Digital Microwave 109,100(b) 555,728
General Communication Cl A 118,900(b) 549,913
General Semiconductor 88,900(b) 833,438
InterVoice 34,900(b) 647,831
Network Equipment
Technologies 51,700(b) 626,863
Oak Inds 43,300(b) 1,607,513
P-COM 102,500(b) 595,781
PictureTel 92,600(b) 752,375
SymmetriCom 37,900(b) 227,400
TCSI 51,600(b) 251,550
Total 18,074,638
Computers & office equipment (10.0%)
Acxiom 125,600(b) 2,873,100
ADAC Laboratories 47,400(b) 1,291,650
American Management
Systems 101,600(b) 3,048,000
Amtech 35,800(b) 217,038
Analysts Intl 54,350 1,273,828
Applied Magnetics 56,900(b,c) 320,063
Auspex Systems 59,100(b) 177,300
Avid Technology 56,400(b) 1,977,525
BancTec 52,500(b) 843,281
Billing Information Concepts81,400(b) 1,083,638
BISYS Group 64,200(b) 2,656,275
BMC Inds 65,200 456,400
Boole & Babbage 67,850(b) 1,560,550
Broderbund Software 50,000(b) 1,050,000
Ciber 111,800(b) 3,773,249
Cognex 100,300(b) 1,742,713
Computer Task Group 50,300 1,634,750
E*TRADE Group 94,400(b,c) 2,572,400
Envoy 50,600(b,c) 1,897,500
Exabyte 53,200(b) 332,500
Fair Isaac & Co 33,600 1,289,400
FileNet 74,300(b) 1,801,775
Hadco 31,800(b) 858,600
Harbinger 101,100(b) 875,147
Henry (Jack) & Associates 45,400 1,841,538
Hutchinson Technology 47,900(b) 1,035,838
Hyperion Software 45,800(b) 1,225,150
Intermagnetics General 29,856(b) 240,714
Komag 124,200(b) 403,650
Kronos 20,000(b) 695,000
Macromedia 94,000(b) 1,539,250
Mercury Interactive 41,300(b) 1,708,788
MicroAge 47,300(b) 659,244
MICROS Systems 38,500(b) 1,443,750
Midway Games 92,899(b) 1,376,066
Natl Computer Systems 73,800 $1,642,050
Natl Data 81,200 3,344,424
Natl Instruments 79,200(b) 2,059,200
New England Business Service33,300 1,007,325
Platinum Software 62,600(b) 1,275,475
Platinum Technology 195,300(b) 6,170,258
Primark 54,400(b) 1,400,800
Progress Software 41,150(b) 838,431
Read-Rite 117,200(b) 805,750
Sanmina 100,600(b,c) 4,589,874
System Software Associates 113,700(b) 611,138
Technology Solutions 63,400(b) 1,614,719
Telxon 37,900 933,288
Vanstar 104,600(b) 1,046,000
Vantive 61,900(b) 688,638
Wall Data 23,900(b) 328,625
Whittman-Hart 56,100(b) 2,584,106
Xircom 54,800(b) 1,140,525
Xylan 103,600(b,c) 2,557,624
Zebra Technologies Cl A 58,600(b) 1,900,838
Total 84,314,758
Electronics (6.6%)
Analogic 30,500 1,242,875
Anixter Intl 113,900(b) 2,071,556
Bell Inds 22,540(b) 236,670
Benchmark Electronics 27,800(b) 557,738
Burr-Brown 88,350(b) 1,728,347
C-Cube Microsystems 89,100(b) 1,447,875
Cable Design Technologies 69,650(b) 1,458,297
CTS 33,350 977,572
Dallas Semiconductor 67,200 2,158,800
Dionex 54,400(b) 1,207,000
Electro Scientific Inds 27,000(b) 654,750
Electroglas 46,600(b) 562,113
Etec Systems 52,600(b) 1,775,249
Gerber Scientific 54,400 1,516,400
Harman Intl Inds 44,600 1,758,913
Harmon Inds 24,950 575,409
Helix Technology 54,200 657,175
Innovex 34,700 468,450
Integrated Circuit Systems 29,900(b) 381,225
Intl Rectifier 124,400(b) 808,600
Itron 35,800(b,c) 356,881
Kent Electronics 65,700(b) 989,606
Kuhlman 39,900 1,516,200
Kulicke & Soffa Inds 56,500(b) 805,125
Lattice Semiconductor 55,900(b) 1,697,963
Marshall Inds 40,300(b) 942,013
Methode Electronics Cl A 86,000 1,249,688
Microchip Technology 127,250(b) 3,901,007
Novellus Systems 81,500(b) 3,198,874
Park Electrochemical 27,000 513,000
Photronics 58,400(b) 1,058,500
Pioneer-Standard Electronics64,400 575,575
Plexus 35,800(b) 722,713
S3 124,000(b) 515,375
Scott Technologies Cl A 44,400 638,250
SpeedFam Intl 38,200(b) 644,625
Standard Microsystems 37,800(b) 328,388
Technitrol 39,100 923,738
Three-Five Systems 18,700(b) $299,200
Trimble Navigation 55,100(b) 668,088
Ultratech Stepper 50,600(b) 1,062,600
Unitrode 58,400(b) 773,800
Vicor 103,300(b) 1,342,900
Vitesse Semiconductor 174,600(b) 5,739,974
VLSI Technology 110,300(b) 1,764,800
Watkins-Johnson 20,200 464,600
X-Rite 50,600 531,300
Total 55,469,797
Energy (2.5%)
Atmos Energy 72,200 2,111,850
Barrett Resources 76,600(b) 2,499,075
Benton Oil & Gas 71,500(b) 580,938
Cabot Oil & Gas Cl A 59,200 1,013,800
Cross Timbers Oil 112,325 1,698,916
Devon Energy 77,600 2,502,599
HS Resources 44,800(b) 495,600
KCS Energy 70,600 489,788
Newfield Exploration 87,200(b) 1,727,650
Pogo Producing 90,400 1,762,800
Santa Fe Energy Resources 247,000(b) 2,176,687
Snyder Oil 80,400 1,447,200
St. Mary Land & Exploration 26,900 531,275
Vintage Petroleum 124,900 1,787,631
Wiser Oil 21,000 198,188
Total 21,023,997
Energy equipment & services (1.0%)
Daniel Inds 42,100 720,963
Input/Output 107,400(b) 1,671,413
Oceaneering Intl 55,200(b) 772,800
Plains Resources 40,300(b) 720,363
Pool Energy Services 50,400(b) 453,600
Pride Intl 120,100(b) 1,426,187
Remington Oil & Gas Cl B 49,300(b) 240,338
Seitel 53,100(b) 723,487
Tuboscope 107,400(b) 1,503,599
Total 8,232,750
Financial services (4.1%)
AmeriCredit 73,600 2,484,000
AMRESCO 103,000(b) 2,941,937
Bowne & Co 44,100 1,954,181
CMAC Investment 54,400 3,002,200
Dain Rauscher 29,900 1,614,600
Delphi Financial Group Cl A 45,968 2,579,954
Eaton Vance 43,800 1,938,150
Insurance Auto Auctions 27,800(b) 368,350
Legg Mason 66,233 4,044,352
Mutual Risk Management 93,900 3,579,938
Pioneer Group 61,100 1,603,875
PMT Services 115,000(b) 2,637,813
Raymond James Financial 116,275 2,979,547
SEI Investments 43,100 3,229,806
Total 34,958,703
Food (3.1%)
Chiquita Brands Intl 155,400(c) 1,855,088
Corn Products Intl 85,900(b) 2,555,525
DEKALB Genetics Cl B 83,200 7,669,999
Delta & Pine Land 91,533 4,113,264
Earthgrains 103,600 3,548,300
Fleming Cos 91,700 1,404,156
GoodMark Foods 16,900 473,200
J & J Snack Foods 21,200(b) 408,100
Nash Finch 26,700 397,163
Ralcorp Holdings 78,000(b) 1,530,750
Smithfield Foods 89,900(b) 2,135,125
Total 26,090,670
Furniture & appliances (1.8%)
Bassett Furniture Inds 31,200 865,800
Ethan Allen Interiors 69,100 2,854,694
Fedders 93,400 618,775
Interface 125,100 2,048,513
La-Z-Boy 42,800 2,439,600
Mohawk Inds 126,200(b) 3,927,974
Natl Presto Inds 17,600 700,700
Rival 23,300 311,638
Royal Appliance Mfg 54,000(b) 317,250
Thomas Inds 38,500 859,031
Total 14,943,975
Health care (6.3%)
Advanced Tissue Sciences 91,700(b,c) 269,369
Alliance Pharmaceutical 75,300(b) 338,850
Alpharma Cl A 61,400(d) 1,519,650
Ballard Medical Products 73,400 1,504,700
Bio-Technology General 114,700(b) 788,563
Cephalon 67,900(b) 407,400
Circon 31,400(b) 471,000
Coherent 55,600(b) 583,800
Collagen 22,000 367,125
Cooper Cos 36,100(b) 1,148,431
COR Therapeutics 57,400(b) 803,600
Cygnus 49,500(b) 377,438
Datascope 37,600(b) 855,400
Diagnostic Products 33,300 926,156
Enzo Biochem 59,612(b) 700,441
Hologic 32,500(b) 538,281
IDEXX Laboratories 92,500(b) 2,081,250
Immune Response 55,800(b,c) 575,438
Incyte Pharmaceuticals 63,700(b) 2,297,181
Invacare 72,400 1,710,450
Jones Medical Inds 69,000 2,195,063
Liposome 91,600(b) 503,800
Marquette Medical Systems 42,800(b) 1,032,550
MedImmune 63,700(b) 3,744,365
Mentor 60,100 1,217,025
Molecular Biosystems 44,200(b) 267,963
North American Vaccine 77,400(b,c) 1,083,600
Noven Pharmaceuticals 47,600(b) 285,600
PAREXEL Intl 59,300(b) 2,040,291
Pharmaceutical Marketing
Services 29,000(b) 253,750
Protein Design Labs 44,200(b) 834,275
Regeneron Pharmaceuticals 73,900(b) 591,200
ReSound 47,600(b) 232,050
Respironics 78,300(b) 1,169,606
Roberts Pharmaceutical 73,300(b) 1,520,975
Safeskin 129,300(b) 4,856,830
SEQUUS Pharmaceuticals 75,400(b) 706,875
Spacelabs Medical 22,800(b) 393,300
STERIS 81,900(b) 4,995,899
Summit Technology 75,900(b) 417,450
Sunrise Medical 49,300(b) 591,600
Syncor Intl 25,500(b) 462,188
TheraTech 51,700(b) 439,450
U.S. Bioscience 59,900(b) 426,788
Vertex Pharmaceuticals 61,000(b) 1,273,375
VISX 36,700(b) 2,293,750
Vital Signs 31,200 600,600
Total 52,694,741
Health care services (4.8%)
Access Health 56,200(b) 1,482,275
American Oncology
Resources 78,700(b) 934,563
Cerner 78,900(b) 2,238,788
Coventry Health Care 141,900(b) 1,019,906
Curative Health Services 30,600(b) 937,125
Express Scripts Cl A 40,400(b) 2,970,663
Genesis Health Ventures 85,200(b) 1,405,800
Integrated Health Services 107,300 3,326,300
Lincare Holdings 139,300(b) 5,537,174
Magellan Health Services 76,000(b) 1,529,500
Mariner Health Group 70,100(b) 836,819
NCS HealthCare Cl A 47,500(b) 1,374,531
Orthodontic Centers
of America 114,600(b) 2,019,825
Owens & Minor 78,200 967,725
Patterson Dental 80,000(b) 2,900,000
Pediatrix Medical Group 36,600(b) 1,404,525
PhyCor 160,200(b) 1,461,825
Renal Care Group 64,000(b) 2,624,000
Sierra Health Services 65,950(b) 1,187,100
Universal Health Services
Cl B 78,100(b) 4,002,625
Total 40,161,069
Household products (0.6%)
Nature's Sunshine Products 44,000 913,000
Scotts Cl A 45,000(b) 1,479,375
Sola Intl 58,800(b) 1,712,550
USA Detergents 32,700(b) 435,319
Valence Technology 55,100(b) 275,500
Total 4,815,744
Industrial equipment & services (3.7%)
Applied Industrial
Technologies 53,100 899,381
Applied Power Cl A 67,200 2,226,000
Arctic Cat 69,300 658,350
Astec Inds 22,400(b) 828,800
Barnes Group 48,700 1,363,600
Blount Intl Cl A 90,200 2,401,574
Clarcor 58,500 1,049,344
Dravo 34,200(b) 324,900
Flow Intl 36,700(b) 403,700
G & K Services Cl A 49,200 2,447,699
Global Industrial
Technologies 53,000(b) 712,188
Graco 62,300 1,752,188
Halter Marine Group 68,100(b) 1,081,088
JLG Inds 106,300 1,647,650
KEMET 97,400(b) 1,205,325
Lawson Products 27,000 615,938
Lindsay Mfg 33,125 770,156
LSB Inds 29,100 114,581
Lydall 39,000(b) 553,313
Manitowoc 41,500 1,390,250
O'Sullivan 37,000 337,625
Regal Beloit 50,500 1,139,406
Robbins & Myers 26,900 766,650
Roper Inds 74,900 1,718,019
Superior Services 64,700(b) 1,819,687
Toro 30,800 835,450
Watsco 36,800 1,145,400
Wolverine Tube 33,600(b) 1,167,600
Total 31,375,862
Insurance (5.9%)
Allied Group 73,600 3,468,400
American Bankers Insurance
Group 103,400 6,236,313
Capital Re 76,500 2,524,500
CompDent 24,100(b) 403,675
Enhance Financial Services
Group 90,200 2,830,025
Executive Risk 26,000 1,259,375
Fidelity Natl Financial 55,557 2,093,804
First American Financial 129,950 3,443,675
Fremont General 83,700 4,786,594
Frontier Insurance Group 90,320 1,603,180
Gallagher (Arthur J) 40,700 1,594,931
Hilb, Rogal & Hamilton 31,000 577,375
Life Re 41,500 3,784,281
NAC Re 44,300 2,278,681
Orion Capital 66,500 3,216,938
Protective Life 148,700 5,752,831
Selective Insurance Group 70,800 1,371,750
Trenwick Group 28,800 1,000,800
Zenith Natl Insurance 40,950 1,097,972
Total 49,325,100
Leisure time & entertainment (1.2%)
Aztar 110,300(b) 641,119
Bell Sports 32,700(b) 324,956
Carmike Cinemas Cl A 27,700(b) 715,006
Galoob Toys 44,500(b) 422,750
Grand Casinos 101,700(b) 1,264,894
Hollywood Park 63,000(b) 693,000
Huffy 30,000 523,125
K2 40,200 763,800
Players Intl 77,900(b) 379,763
Polaris Inds 63,100 2,405,687
Primadonna Resorts 68,800(b) 860,000
Thor Inds 29,600 741,850
Total 9,735,950
Media (3.0%)
ADVO 54,300(b) 1,676,513
Catalina Marketing 44,400(b) 2,192,250
Consolidated Graphics 30,470(b) 1,792,017
GC Cos 18,600(b) 869,550
Gibson Greetings 39,900(b) 907,725
HA-LO Inds 60,400(b) 1,744,050
Harland (John H) 75,100 1,182,825
Merrill 39,100 928,625
Metro Networks 39,800(b) 1,522,350
Thomas Nelson 41,900 573,506
True North
Communications 106,720 3,081,540
Valassis Communications 94,300(b) 3,577,506
Westwood One 76,300(b,d) 1,907,500
World Color Press 92,550(b) 3,152,484
Total 25,108,441
Metals (1.7%)
Acme Metals 31,300(b) 109,550
Amcast Inds 22,600 429,400
AMCOL Intl 68,400 897,750
Birmingham Steel 70,600 736,888
Castle (AM) 34,000 660,875
Coeur d'Alene Mines 52,000(b,c) 380,250
Commercial Metals 35,700 995,138
Commonwealth Inds 37,600 312,550
Getchell Gold 74,800(b) 1,009,799
Glamis Gold 74,600(b) 233,125
Hecla Mining 132,500(b) 637,656
IMCO Recycling 39,900 640,894
Material Sciences 37,800(b) 394,538
Mueller Inds 84,600(b) 2,892,262
Northwestern Steel & Wire 60,000(b) 176,250
Pittston Burlington Group 49,400 589,713
Quanex 33,800 921,050
Steel Technologies 28,300 265,313
Stillwater Mining 49,400(b) 1,352,324
WHX46,000(b,c) 514,625
Total 14,149,950
Miscellaneous (1.8%)
ABM Inds 50,100 1,477,950
American States Water 21,800 539,550
Aquarion 18,100 631,238
Champion Enterprises 114,600(b) 3,036,899
Commerce Bancorp 54,125 2,462,687
Consumers Water 22,000 624,250
Cross (AT) Cl A 39,000 404,625
Paragon Health Network 99,495(b) 1,206,377
Philadelphia Suburban 65,700 1,404,338
Rural/Metro 34,650(b) 398,475
United Water Resources 88,600 1,644,638
Volt Information Sciences 35,900(b) 1,009,688
Total 14,840,715
Multi-industry conglomerates (2.7%)
Baldor Electric 89,333 1,853,660
Brady (WH) Cl A 57,200 1,172,600
CDI 48,400(b) 1,188,825
Cyrk Intl 35,600(b) 356,000
DeVry 166,700(b) 3,396,512
Franklin Covey 58,900(b) 1,163,275
Griffon 73,400(b) 825,750
Interim Services 112,900(b) 2,935,399
NFO Worldwide 50,700(b) 893,588
Norrell 66,000 1,266,375
Paxar 117,012(b) 1,096,988
Pre-Paid Legal Services 54,000(b) 1,815,750
Standex Intl 31,600 884,800
Triarc Cos Cl A 73,500(b) 1,676,719
Valmont Inds 66,200 1,059,200
Whittaker 26,500(b) 397,500
ZERO Corp 29,500 818,625
Total 22,801,566
Paper & packaging (0.9%)
AptarGroup 43,400 2,671,812
Buckeye Technologies 88,900(b) 2,022,474
Caraustar Inds 61,000 1,666,063
Pope & Talbot 32,600 344,338
Shorewood Packaging 65,300(b) 873,388
Total 7,578,075
Restaurants & lodging (2.4%)
Applebee's Intl 72,500 1,613,125
Au Bon Pain Cl A 28,500(b) 235,125
CEC Entertainment 43,900(b) 1,174,325
Cheesecake Factory (The) 48,300(b) 941,850
CKE Restaurants 111,950 4,184,130
Consolidated Products 50,075(b) 923,258
Foodmaker 94,100(b) 1,482,074
IHOP 23,600(b) 935,150
Landry's Seafood
Restaurants 72,300(b) 867,600
Luby's Cafeterias 56,000 913,500
Marcus 73,600 1,145,400
Prime Hospitality 130,500(b) 1,851,469
Ruby Tuesday 79,300 1,224,194
Ryan's Family
Steak Houses 107,300(b) 1,166,888
Shoney's 118,900(b) 371,563
Sonic 46,450(b) 917,388
Taco Cabana Cl A 36,800(b) 211,600
TCBY Enterprises 56,500 462,594
Total 20,621,233
Retail (7.0%)
AnnTaylor Stores 61,600(b) 1,297,450
Baker (J) 34,300 353,719
Bindley Western Inds 51,700 1,583,313
Bombay 90,400(b) 480,250
Books-A-Million 43,800(b) 216,263
Casey's General Stores 126,600 1,930,650
Cash America Intl 58,300 878,144
Cato Cl A 65,900 873,175
Checkpoint Systems 80,100(b) 826,031
CPI 23,700 592,500
Damark Intl Cl A 18,000(b) 144,000
Dress Barn 55,500(b) 1,290,375
Eagle Hardware & Garden 69,700(b) 1,498,550
Fabri-Centers of America Cl A45,500(b) 1,063,563
Filene's Basement 50,100(b) 212,925
Footstar 67,200(b) 2,490,600
Goody's Family Clothing 80,000(b) 2,005,000
Gottschalks 26,100(b) 203,906
Gymboree 59,500(b) 714,000
Hancock Fabrics 50,700 519,675
Jan Bell Marketing 66,900(b) 476,663
Just For Feet 72,000(b) 1,665,000
Justin Inds 63,500 865,188
Lechters 41,500(b) 171,188
Lillian Vernon 23,200 379,900
Linens `N Things 93,500(b) 2,629,688
Men's Wearhouse 80,100(b) 2,533,162
Michaels Stores 69,700(b) 2,282,675
Nashua 16,000(b) 245,000
NBTY 162,300(b) 2,688,093
Phillips-Van Heusen 64,800 891,000
Pier 1 Imports 243,925 3,796,082
Regis 57,200 1,651,650
Richfood Holdings 114,700 2,480,388
Russ Berrie 53,900 1,239,700
ShopKo Stores 62,200(b) 1,819,350
Sports Authority 75,500(b) 962,625
Stein Mart 111,700(b) 1,179,831
Sturm, Ruger & Co 64,800 980,100
Swiss Army Brands 19,500(b) 214,500
Whole Foods Market 63,000(b) 3,417,749
Williams-Sonoma 133,500(b) 4,413,843
Zale 86,100(b) 2,669,100
Total 58,826,564
Textiles & apparel (2.2%)
Angelica 21,800 486,413
Ashworth 35,900(b) 261,397
Authentic Fitness 53,800 712,850
Brown Group 42,800 690,150
Cone Mills 61,600(b) 431,200
Delta Woodside Inds 58,600 271,025
Dixie Group 27,100(b) 216,800
Galey & Lord 28,200(b) 348,975
Guilford Mills 62,500 1,113,281
Haggar 20,200 232,300
Hartmarx 82,700(b) 558,225
Johnston Inds 24,800(b) 100,750
K-Swiss Cl A 13,500 322,313
Kellwood 51,700 1,641,475
Nautica Enterprises 94,700(b) 2,441,483
Oshkosh B'Gosh Cl A 23,600 967,600
Oxford Inds 21,500 646,344
Pillowtex 33,600 1,092,000
St. John Knits 40,400 1,378,650
Stride Rite 113,400 1,374,975
Timberland Cl A 27,500(b) 1,773,750
Tultex 74,100(b) 166,725
Wolverine World Wide 103,300 1,678,625
Total 18,907,306
Transportation (1.9%)
American Freightways 75,800(b) 682,200
Arkansas Best 47,500(b) 371,094
Expeditors Intl of
Washington 59,200 2,360,599
Fritz Cos 86,200(b) 818,900
Frozen Food Express Inds 40,500 329,063
Heartland Express 72,000(b) 1,359,000
Landstar System 27,300(b) 955,500
M.S. Carriers 29,300(b) 842,375
Offshore Logistics 53,500(b) 581,813
RailTex 21,400(b) 304,950
Rollins Truck Leasing 145,300 1,689,113
USFreightways 62,700 1,567,500
Wabash Natl 55,700 1,207,994
Werner Enterprises 115,000 1,854,374
Yellow Corp 65,300(b) 1,044,800
Total 15,969,275
Utilities -- electric (1.7%)
Bangor Hydro Electric 16,900(b) 156,325
Central Hudson Gas & Electric41,100 1,772,438
Central Vermont Public Service27,300 339,544
CILCORP 32,800 1,535,450
Commonwealth Energy
System 52,100 1,849,549
Eastern Utilities Associates49,400 1,241,175
Green Mountain Power 12,700 160,338
Orange & Rockland Utilities 32,600 1,752,250
Sierra Pacific Resources 74,500 2,635,437
TNP Enterprises 32,000 1,032,000
United Illuminating 34,300 1,749,300
Total 14,223,806
Utilities -- gas (1.7%)
Cascade Natural Gas 27,100 399,725
Connecticut Energy 24,500 627,813
Energen 70,500 1,211,719
Kirby 51,200(b) 1,100,800
New Jersey Resources 43,000 1,472,750
Northwest Natural Gas 59,450 1,560,563
Pennsylvania Enterprises 23,800 595,000
Piedmont Natural Gas 73,100 2,129,037
Public Service Co of North
Carolina 49,000 980,000
Southwest Gas 65,900 1,532,175
Southwestern Energy 58,800 529,200
WICOR 89,500 1,918,656
Total 14,057,438
Utilities -- telephone (0.9%)
Brightpoint 124,400 1,772,700
Inter-Tel 65,000 1,042,031
Orbital Sciences 88,100(b) 2,400,725
Tel-Save Holdings 156,100(b,c) 1,951,250
Total 7,166,706
Total common stocks
(Cost: $850,845,569) $840,287,772
Short-term securities (2.6%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies (1.5%)
Federal Home Loan Bank Disc Nt
08-26-98 5.49% $1,700,000 $1,693,542
Federal Home Loan Mtge Corp Disc Nts
08-28-98 5.50 9,000,000 8,963,078
08-31-98 5.51 1,300,000 1,294,053
09-04-98 5.49 900,000 895,359
Total 12,846,032
Commercial paper (1.1%)
BBV Finance (Delaware)
08-11-98 5.53 3,300,000 3,294,949
CAFCO
09-14-98 5.58 1,500,000(e) 1,489,843
Gillette
08-03-98 5.65 2,000,000(e) 1,999,372
Motorola
08-18-98 5.53 1,900,000 1,895,065
Total 8,679,229
Total short-term securities
(Cost: $21,525,261) $21,525,261
Total investments in securities
(Cost: $872,370,830)(f) $861,813,033
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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(d) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 5 to the financial statements):
Type of security Contract
Standard & Poor's 500 Stock Index, Sept. 1998 1
(e) 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.
(f) At July 31, 1998, the cost of securities for federal income tax purposes was
approximately $872,371,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation....................................$ 97,217,000
Unrealized depreciation...................................... (107,775,000)
Net unrealized depreciation................................$ (10,558,000)
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills,
Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Retired chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, Leslie L. Ogg*
general counsel President of Board Services Corporation.
and secretary
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Vice president Frederick C. Quirsfeld*
Vice president, AEFC
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.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the S&P 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Stock Index that are believed to have strong growth
potential. The Portfolio is managed using a research methodology by the Research
Department of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks that generaly pay
dividends and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio that seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
Quick telephone reference*
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
*You may experience delays when call volumes are high.
<PAGE>
AMERICAN EXPRESS Financial Advisors
IDS Small Company Index Fund
IDS Tower 10
Minneapolis, MN 55440-0010
