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AMERICAN EXPRESS
Financial Direct
Strategist Growth Fund, Inc.
1996 Annual Report
Strategist Growth Fund
Strategist Growth Trends Fund
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Table of contents
From the portfolio managers...............................1
Independent auditors' report (Funds)......................5
Financial statements (Funds)..............................6
Notes to financial statements (Funds).....................9
Independent auditors' report (Growth Portfolio)..........13
Financial statements (Growth Portfolio)..................14
Notes to financial statements (Growth Portfolio).........17
Investments in securities (Growth Portfolio).............21
Independent auditors' report (Growth Trends Portfolio)...28
Financial statements (Growth Trends Portfolio)...........29
Notes to financial statements (Growth Trends Portfolio)..32
Investments in securities (Growth Trends Portfolio)......36
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From the portfolio manager
picture of Mitzi Malevich
Strategist Growth Fund began operation at a time when the stock
market in general and growth stocks in particular were performing
very well. However, the market went through a psychological shift
over the summer that depressed prices of a broad range of stocks.
This was especially true of technology stocks, which make up close
to one-third of the Fund's Portfolio.
During a short span in June and July, investors became concerned
about the threat of rising inflation, and that the Federal Reserve
would be forced to bump interest rates in effort to offset such a
trend. In short order, a selloff occurred in the stock market,
which had a negative effect on the technology sector. These are
the stocks that had benefited the most from the market's recent
bull run.
As a result, the performance of the Fund slipped in the summer
months. This is the kind of short-term swing that can be expected
in a growth mutual fund. Growth stocks generally provide investors
with the best long-term return potential, but typically with more
short-term volatility than other types of mutual funds.
Prior to the period of the correction, I cut back on some of the
Portfolio's holdings and raised cash in the Portfolio. However,
within weeks, much of this cash was put to work. As the prices of
some stocks declined, I took advantage of the buying opportunity
and added to some of our stock holdings that continue to have
strong, long-term potential.
Typically, I retain a small cash position in the Portfolio. After
all, our focus is to provide shareholders with the opportunity for
capital appreciation through investments in growth stocks.
Therefore, this Portfolio will typically be virtually fully
invested and will not try to time the ups-and-downs of the market.
As this point, questions remain about the direction of long-term
interest rates. However, fears about a significant increase in the
rate of inflation seem unfounded based on all reports, which is a
positive sign. Other questions remain about corporate earnings,
another major factor that affects stock prices.
With such uncertainty, it is likely that short-term market
volatility will continue. But longer-term, I believe the
opportunities in growth stocks are as numerous and exciting as
ever. The Portfolio will remain close to fully invested in growth
stocks. I remain very optimistic that the long-term outlook for
stocks is strong, and that shareholders in this fund will be
positioned to benefit from that.
Mitzi Malevich
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From the portfolio manager
picture of Gordon Fines
The initial fiscal year for Strategist Growth Trends Fund was quite
short, beginning in mid-May, and ending less that three months
later. At the time of its inception, the stock market was in the
midst of a strong run, which particularly benefited growth stocks.
However, not long after this Fund officially opened, the stock
market ingeneral went through a summer correction.
This had a significant impact on the performance of the Fund during
June and July. Stocks began to stall out under the assumption that
interest rates would rise. Technology stocks were hardest hit.
This sector makes up about one-fifth of the Fund's Portfolio.
The cash reserves held in the Portfolio at the time, (about 11% of
the Portfolio's value) provided some cushion against the market's
correction, but the Portfolio could not avoid the general down
draft in stocks.
However, because I remain optimistic about the long-term direction
of the market, this correction resulted in few significant changes
to the Portfolio. As is the custom with Growth Trends Portfolio, I
try to take advantage of specific investment themes that I think
are positioned to benefit from market trends.
One of the Portfolio's most recent themes is agribusiness. The
positions we've built in seed, fertilizer and chemical companies
have served the Portfolio well. A good example of a company that
has strong potential here is Monsanto. This agri-chemical supplier
appears likely to benefit from the desire of many lesser-developed
countries to improve on the nutritional content of their diets.
This is also one way that the Portfolio takes advantage of the
increasing globalization of the markets. Although Monsanto is a
domestic firm, they are well-positioned to build their overseas
business. I also continue to seek out good foreign stocks, which
currently make up a small percentage of the Portfolio.
Looking ahead, it is likely that in the short run, the market will
go through a period of continued uncertainty about factors such as
inflation, interest rates and corporate earnings. That may lead to
further price volatility in the months ahead, which could have an
impact on shareholders of the Fund.
However, looking over the loner term, I think the fundamentals
remain quite favorable for stocks, particularly in the growth area.
In particular, it seems likely that over the coming months and
years, low inflation, modest economic growth, lower interest rates
and an accommodating Federal Reserve will propel the performance of
financial assets. Shareholders of this Fund should be well-
positioned to benefit from that trends over time.
Gordon Fines
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The board and shareholders
Strategist Growth Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities of Strategist Growth Fund and Strategist Growth Trends
(a series of Strategist Growth Fund, Inc.) as of July 31, 1996, and
the related statements of operations, statements of changes in net
assets and the financial highlights for the period from May 13,
1996 (commencement of operations) to July 31, 1996. These
financial statements and financial highlights are the
responsibility of fund management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Strategist Growth Fund and Strategist Growth Trends Fund at July
31, 1996, and the results of their operations, the changes in their
net assets for the period from May 13, 1996 (commencement of
operations) to July 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 6, 1996
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<TABLE>
<CAPTION>
Financial statements
Statements of assets and liabilities
Strategist Growth Fund, Inc.
July 31, 1996
Assets
Strategist Strategist Growth
Growth Fund Trends Fund
<S> <C> <C>
Investment in corresponding Portfolio (Note 1) $23,044,137 $24,602,746
Expense receivable from AEFC 3,769 3,229
Organizational costs (Note 1) 13,794 13,794
Total assets 23,061,700 24,619,769
Liabilities
Accrued distribution fee 155 165
Accrued administrative services fee 31 33
Payable to advisor 13,907 13,907
Other accrued expenses 47,845 46,761
Total liabilities 61,938 60,866
Net assets applicable to outstanding capital stock $22,999,762 $24,558,903
Represented by
Capital stock -- authorized 3,000,000,000 shares
per Fund of $.01 par value; outstanding 993,449
and 1,326,084 shares $ 9,934 $ 13,261
Additional paid-in-capital 25,226,128 25,183,363
Undistributed net investment income -- 21,361
Accumulated net realized loss (Note 1) (2,120,986) (1,395,162)
Unrealized appreciation (depreciation)
of investments (115,314) 736,080
Total - representing net assets applicable to
outstanding capital stock $22,999,762 $24,558,903
Net asset value per share of
outstanding capital stock $ 23.15 $ 18.52
See accompanying notes to financial statements.
Statements of operations
Strategist Growth Fund, Inc.
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Investment income
Strategist Strategist Growth
Growth Fund Trends Fund
Income:
Dividends (net of foreign taxes withheld of $0 and $210) $ 29,484 $ 58,541
Interest 19,565 33,632
Total income 49,049 92,173
Expenses (Note 2):
Distribution fee 12,999 13,414
Transfer agency fee 104 72
Administrative services fee 2,600 2,683
Compensation of board members 648 648
Postage 4,297 3,903
Registration fees 31,656 29,080
Reports to shareholders 2,313 2,100
Audit fees 6,975 9,206
Administrative 67 67
Other 1,867 1,867
Total feeder expenses 63,526 63,040
Expenses allocated from corresponding Portfolio 34,776 33,090
Total expenses 98,302 96,130
Less expenses reimbursed by AEFC (29,884) (25,318)
Total net expenses 68,418 70,812
Investment income (loss) -- net (19,369) 21,361
Realized and unrealized gain (loss) -- net
Net realized loss on security transactions (2,120,986) (1,395,162)
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Net change in unrealized appreciation or depreciation (115,314) 736,080
Net loss on investments (2,236,300) (659,082)
Net decrease in net assets resulting from operations $(2,255,669) $ (637,721)
See accompanying notes to financial statements.
Statements of changes in net assets
Strategist Growth Fund, Inc.
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Operations
Strategist Strategist Growth
Growth Fund Trends Fund
Investment income (loss) -- net $ (19,369) $ 21,361
Net loss on investments (2,120,986) (1,395,162)
Net change in unrealized appreciation or
depreciation of investments (115,314) 736,080
Net decrease in net assets resulting from operations (2,255,669) (637,721)
Capital share transactions (Note 3)
Proceeds from sales 25,205,431 25,146,624
Increase in net assets from capital share transactions 25,205,431 25,146,624
Total increase in net assets 22,949,762 24,508,903
Net assets at beginning of period (Note 1) 50,000 50,000
Net assets at end of period (including undistributed
net investment income of $0 for Strategist
Growth Fund and $21,361 for Stategist
Growth Trends Fund) $ 22,999,762 $ 24,558,903
See accompanying notes to financial statements.
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Notes to financial statements
Strategist Growth Fund, Inc.
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1. Summary of significant accounting policies
Strategist Growth Fund (Growth Fund) and Strategist Growth Trends
Fund (Growth Trends Fund) are series of capital stock within
Strategist Growth Fund, Inc. Each Fund is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-
end management investment company.
On April 15, 1996, American Express Financial Corporation (AEFC)
purchased 1,966 shares for Strategist Growth Fund and 2,632 shares
for Strategist Growth Trends Fund. Operations did not formally
commence until May 13, 1996.
Investments in Portfolios
Each of the Funds seeks to achieve its investment objectives by
investing all of its net investable assets in a corresponding
series (the Portfolio) of Growth Trust (the Trust). Growth Fund
invests all of its assets in the Growth Portfolio (Portfolio), an
open-end investment company that has the same objectives as the
Fund. Growth Portfolio invests primarily in stocks of U.S.
and foreign companies that appear to offer growth opportunities.
Growth Trends Fund invests all of its assets in the Growth Trends
Portfolio, an open-end investment company that has the same
objectives of the Fund. Growth Trends Portfolio invests primarily
in common stocks of companies showing potential for significant
growth and operating areas where ecomonic or technological changes
are occurring. Each Fund records daily its share of the
corresponding Portfolio's income, expenses and realized and
unrealized gains and losses. The financial statements of the
Portfolios are included elsewhere in this report and should be read
in conjunction with the Funds' financial statements.
Each Fund records its investment in the corresponding Portfolio at
value that is equal to the Fund's proportionate ownership interest
in the net assets of the Portfolio. As of July 31 ,1996, the
percentages of the corresponding Portfolio owned by Growth Fund and
Growth Trends Fund were 1.04% and 0.29%, respectively. Valuation
of securities held by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements.
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Organizational costs
Each Fund incurred organizational expenses in connection with the
start-up and initial registration of the Fund. These costs will be
amortized over 60 months on a straight-line basis beginning with
the commencement of operations. If any or all of the shares held by
AEFC representing initial capital of the Fund are redeemed during
the amortization period, the redemption proceeds will be reduced by
the pro rata portion of the unamortized organizational cost
balance.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Federal taxes
Since each Fund's policy is to comply with all sections of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to the shareholders, no
provision for income or excise taxes is required.
Net investment income (loss) and net realized gains (losses)
allocated from the Portfolios 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 Funds.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, undistributed net investment
income has been increased by $19,369 resulting in a net
reclassificiation adjustment to decrease paid-in-capital by $19,369
for Strategist Growth Fund.
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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 Funds at net asset value or payable in cash. Capital gains,
when available, are distributed along with the income dividend.
Other
At July 31, 1996, AEFC owned 1,966 shares for Stategist Growth Fund
and 2,632 shares for Strategist Growth Trends Fund. At July 31,
1996, American Express Company (the parent company of AEFC) owned
983,091 shares for strategist Growth Fund and 1,315,789 shares for
Strategist Growth Trends Fund.
___________________________________________________________________
2. Expenses and sales charges
In addition to the expenses allocated from the Portfolio, each Fund
accrues its own expenses as follows:
Each Fund entered into agreements with AEFC for providing
administrative services and serving as transfer agent. Under its
Administrative Services Agreement, each Fund pays AEFC for
administration and accounting services at a percentage of the
Fund's average daily net assets in reducing percentages from 0.05%
to 0.03% annually. Under this agreement, each Fund also pays taxes;
audit and certain legal fees; registration fees for shares; office
expenses; consultants' fees; compensation of board members;
corporate filing fees; organizational expenses; and any other
expenses properly payable by the Funds approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains
shareholder accounts and records. Each Fund pays AEFC an annual fee
per shareholder account of $20.
Under a Plan and Agreement of Distribution, each Fund pays American
Express Service Corp (the Distributor) a distribution fee at an
annual rate of 0.25% of the Fund's average daily net assets for
distibution related services.
A redemption fee of up to 1.0% is applied and retained by each
Fund, if shares are redeemed or exchanged within one year of
purchase.
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation. However, AEFC and the Distributor have agreed
to waive certain fees and to absorb certain other of Fund expenses
until Nov. 30, 1997. Under this agreement, each Fund's total
expenses will not exceed 1.30% of each of the Fund's average daily
net assets.
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____________________________________________________________
3. Capital share transactions
Transactions in shares of capital stock for the period indicated
are as follows:
Period ended July 31, 1996*
Growth Fund Growth Trends Fund
____________________________________________________________________________
Sold 993,449 1,326,084
____________________________________________________________________________
Net increase 993,449 1,326,084
____________________________________________________________________________
*Inception date was May 13, 1996.
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4. Capital loss carryover
For federal income tax purposes, capital loss carryovers were
$2,120,986 for Strategist Growth fund and $1,395,162 for Strategist
Growth Trends Fund at July 31, 1996. These capital loss carryovers
will expire in 2004 if not offset by subsequent capital gains. It
is unlikely the board will authorize a distribution of any net
realized capital gains for a fund until the respective capital loss
carryover has been offset or expires.
____________________________________________________________
5. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on page 8 of the prospectus.
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Independent auditors' report
The board of trustees and unitholders
Growth Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of Growth Portfolio as of July 31, 1996, and the related statements
of operations and changes in net assets for the period from May 13,
1996 (commencement of operations) to July 31, 1996. These financial
statements are the responsibility of fund management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Investment
securities held in custody are confirmed to us by the custodian. As
to securities purshased and sold but not received or delivered, and
securities on loan, we request confirmations from brokers, and
where replies are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Growth
Portfolio at July 31, 1996, and the results of its operations for
the year then ended and the changes in its net assets for the
period from May 13, 1996 (commencment of operations) to July 31,
1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 6, 1996
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Statement of assets and liabilities
Growth Portfolio
July 31, 1996
Assets
Investments in securities, at value (Note 1)
(identified cost $1,596,400,239) $2,191,506,852
Dividends and accrued interest receivable 1,116,073
Receivable for investment securities sold 22,095,500
U.S. government securities
held as collateral (Note 4) 74,151,956
Total assets 2,288,870,381
Liabilities
Disbursements in excess
of cash on demand deposit 6,693,434
Payable upon return
of securities loaned (Note 4) 76,891,356
Accrued investment management services fee 86,777
Other accrued expenses 31,666
Total liabilities 83,703,233
Net assets $2,205,167,148
See accompany notes to financial statements.
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Statement of operations
Growth Portfolio
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Investment income
Income:
Interest $1,881,058
Dividend 2,778,360
Total income 4,659,418
Expenses (Note 2):
Investment management services fee 3,271,780
Compensation of board members 1,640
Custodian fees 44,330
Audit fees 4,231
Administrative 185
Total expenses 3,322,166
Earning credits on cash balances (Note 2) (2,345)
Total net expenses 3,319,821
Investment income -- net 1,339,597
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions
(Note 3) 12,989,728
Net change in unrealized appreciation or
depreciation of investments (176,108,355)
Net loss on investments (163,118,627)
Net decrease in net assets
resulting from operations $(161,779,030)
See accompanying notes to financial statements.
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Statement of changes in net assets
Growth Portfolio
For the period from May 13, 1996 to (commencement of operations)
to July 31, 1996
Operations and distributions
Investment income - - net $1,339,597
Net realized gain on investments 12,989,728
Net change in unrealized appreciation or
depreciation of investments (176,108,355)
Net decrease in net assets
resulting from operations (161,779,030)
Net contributions 2,366,946,178
Total increase in net assets 2,205,167,148
Net assets at beginning of period (Note 1) --
Net assets at end of period $2,205,167,148
See accompanying notes to financial statements.
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Notes to financial statements
Growth Portfolio
___________________________________________________________________
1. Summary of significant accounting policies
The Growth Portfolio (Portfolio) is a series of Growth Trust
(Trust) and is registered under the Investment Company Act of 1940
(as amended) as a diversified, open-end management investment
company. Growth Portfolio seeks to provide unitholders with long-
term growth of capital by investing primarily in stocks of U.S. and
foreign companies that appear to offer growth opportunities. The
Portfolio also may invest in preferred stocks, convertible
securities, debt secutities derivative instruments and money market
instruments. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio. The Portfolio
commenced operations on May 13, 1996. At this time, an existing
fund transferred its assets to the Portfolio in return for an
ownership percentage of the Portfolio.
Significant accounting policies followed by the Portfolio are
summarized below:
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available
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 Portfolio may buy or write options traded on any U.S.
or foreign exchange or in the over-the-counter market where the
completion of the obligation is dependent upon the credit standing
of the other party. The Portfolio also may buy and sell put and
call options and write covered call options on portfolio securities
and may write cash-secured put options. The risk in writing a call <PAGE>
PAGE 17
option is that the Portfolio gives up the opportunity of profit if
the market price of the security increases. The risk in writing a
put option is that the Portfolio may incur a loss if the market
price of the security decreases and the option is exercised. The
risk in buying an option is that the Portfolio pays a premium
whether or not the option is exercised. The Portfolio also has the
additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Portfolio will realize a gain or loss upon expiration
or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost
for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or
paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Portfolio may buy and sell stock index futures
contracts traded on any U.S. or foreign exchange. The Portfolio
also may buy or write put and call options on these futures
contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Portfolio
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized gains
and losses. The Portfolio recognizes a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. In
the statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses
realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
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PAGE 18
The Portfolio may enter into forward foreign currency exchange
contracts for operational purposes and to protect against adverse
exchange rate fluctuation. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation
are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the
credit risk that the other party will not complete the obligations
of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a
partnership and each investor in the Portfolio is treated as the
owner of its proportionate share of the net assets, income,
expenses and realized and unrealized gains and losses of the
Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend
date and interest income, including level-yield amortization of
premium and discount, is accrued daily.
___________________________________________________________________
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.6% to 0.5%
annually. The fees may be increased or decreased by a performance
adjustment based on a comparison of the performance of Class A
shares of the IDS Growth Fund to the Lipper Growth Fund Index. The
maximum adjustment is 0.12% of the Portfolio's average daily net
assets on an annual basis. The adjustment increased the fee by
$330,001 for the period from May 13, 1996 to July 31, 1996.
Under the agreement, the Trust also pays taxes and nonadvisory
expenses, which include custodian fees to be paid to an affiliate
of AEFC; audit and certain legal fees; fidelity bond premiums;
registration fees for units; Portfolio office expenses;
consultants' fees; compensation of trustees; corporate filing fees;
expenses incurred in connection with lending securities of the
Portfolio;and any other expenses properly payable by the Trust or
Portfolio, approved by the board.
For the period from May 13, 1996 to July 31, 1996, the Portfolio's
custodian fees were reduced by $2,345 as a result of earnings
credits from overnight cash balances.
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PAGE 19
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $230,068,508 and $94,393,890
respectively, for the period from May 13, 1996 to July 31, 1996.
For the same period, the portfolio turnover rate was 5%. Realized
gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were
$189,172 for this period.
___________________________________________________________________
4. Lending of portfolio securities
At July 31, 1996, securities valued at $82,068,675 were on loan to
brokers. For collateral, the Portfolio received $2,739,400 in cash
and U.S. government securities valued at $74,151,956. Income from
securities lending amounted to $177,912 for the period ended July
31, 1996. The risks to the Portfolio of securities lending are that
the borrower may not provide additional collateral when required or
return the securities when done.
<PAGE>
PAGE 20
Investments in securities
<TABLE>
<CAPTION>
Growth Portfolio
July 31, 1996
(Percentages represent value of
investments compared to net assets)
____________________________________________________________________________________________________________________________
Common stocks (92.6%)
____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<C> <C> <C>
Airlines
(1.0%)
Northwest Airlines 600,000 (b,d) $22,050,000
_____________________________________________________________________________________________________________________________
Automotive & related (0.8%)
Gentex 400,000 (b) 7,500,000
Oxford Resources Cl A 400,000 (b) 9,500,000
___________
Total 17,000,000
_____________________________________________________________________________________________________________________________
Banks and savings & loans (1.3%)
MBNA 1,000,000 27,875,000
_____________________________________________________________________________________________________________________________
Beverages & tobacco (2.5%)
Coca-Cola 1,206,700 56,564,063
_____________________________________________________________________________________________________________________________
Building materials & construction (1.7%)
Clayton Homes 1,033,900 18,093,250
Tyco Intl 500,000 20,500,000
____________
Total 38,593,250
_____________________________________________________________________________________________________________________________
Communications equipment (15.8%)
ADC Telecom 600,000 (b) 25,350,000
Andrew 1,200,000 (b,d) 49,050,000
Cisco Systems 1,600,000 (b) 82,800,000
Ericsson (LM) Tel Cl B ADR 1,500,000 (c) 30,468,750
First Data 934,360 72,529,695
Silicon Graphics 700,000 (b) 16,450,000
Tellabs 1,200,000 (b) 71,700,000
____________
Total 348,348,445
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 21
Computers & office equipment (8.0%)
Compaq Computer 500,000 (b,d) 27,375,000
CSG Systems Intl 50,600 (b) 1,049,950
Danka Business Systems ADR 1,000,000 (c,d) 27,500,000
Gemstar Intl 150,000 (b) 3,637,500
Intuit 200,000 (b) 7,000,000
Microsoft 200,000 (b) 23,575,000
NETCOM On-Line Communication Services 400,000 (b) 7,500,000
Oracle Systems 1,350,000 (b) 52,818,750
Solectron 800,000 (b) 25,200,000
____________
Total 175,656,200
______________________________________________________________________________________________________________________________
Chemicals (1.1%)
Monsanto 750,000 23,437,500
______________________________________________________________________________________________________________________________
Electronics (7.5%)
Applied Materials 800,000 (b) 19,100,000
AVX 800,000 14,100,000
DuPont Photomasks 22,500 (b) 427,500
Harman Intl 500,000 22,437,500
Intel 500,000 37,562,500
Maxim Integrated Products 1,000,000 (b) 28,500,000
MEMC Electronic 600,000 (b) 21,225,000
SGS-Thomson Microelectronics 300,000 (b) 10,350,000
Vishay Intertechnology 630,000 11,655,000
____________
Total 165,357,500
_____________________________________________________________________________________________________________________________
Energy (1.0%)
Mobil 200,000 22,075,000
_____________________________________________________________________________________________________________________________
Energy equipment & services (3.5%)
Fluor 750,000 45,187,500
Schlumberger 400,000 (c) 32,000,000
____________
Total 77,187,500
_____________________________________________________________________________________________________________________________
Financial services (3.5%)
Green Tree 1,200,000 40,350,000
Merrill Lynch 600,000 36,225,000
____________
Total 76,575,000
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 22
Health care (10.9%)
Amgen 800,000 (b) 43,700,000
Boston Scientific 1,200,000 (b,d) 57,300,000
Gensia 161 (b) 835
IDEXX Laboratories 400,000 (b) 15,500,000
Johnson & Johnson 700,000 33,425,000
Medtronics 600,000 28,425,000
Perclose 34,800 (b) 687,300
Pfizer 800,000 55,900,000
Sola Intl 200,000 (b) 5,925,000
____________
Total 240,863,135
_____________________________________________________________________________________________________________________________
Health care services (6.3%)
HealthCare COMPARE 600,000 (b) 23,175,000
HEALTHSOUTH 2,000,000 (b) 60,750,000
Service Intl 1,000,000 (d) 55,125,000
____________
Total 139,050,000
_____________________________________________________________________________________________________________________________
Industrial equipment & services (4.5%)
Caterpillar 400,000 26,350,000
Deere 1,200,000 42,900,000
Sanifill 750,000 (b) 31,781,250
____________
Total 101,031,250
_____________________________________________________________________________________________________________________________
Industrial transportation (1.3%)
Wisconsin Central 900,000 (b) 28,125,000
_____________________________________________________________________________________________________________________________
Insurance (3.0%)
Risk Capital Holdings 883,300 (b) 15,347,337
Travelers 1,200,000 50,700,000
____________
Total 66,047,337
_____________________________________________________________________________________________________________________________
Leisure time & entertainment (5.8%)
Disney (Walt) 500,000 27,812,500
Duracell Intl 600,000 27,075,000
Harley Davidson 300,000 12,300,000
Marriott Intl 600,000 30,825,000
Mattel 1,200,000 29,700,000
____________
Total 127,712,500
_____________________________________________________________________________________________________________________________
Metals (3.6%)
Birmingham Steel 1,100,000 17,875,000
Nucor 1,200,000 56,250,000
Stillwater Mining 200,000 (b) 4,300,000
____________
Total 78,425,000
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (4.2%)
Alco Standard 1,000,000 43,750,000
Apollo Group 750,000 (b) 20,625,000
Manpower 200,000 6,800,000
Olsten 800,000 21,200,000
____________
Total 92,375,000
<PAGE>
PAGE 23
_____________________________________________________________________________________________________________________________
Textiles & apparel (2.9%)
Nike 500,000 51,437,500
St. John Knits 300,000 11,850,000
___________
Total 63,287,500
_____________________________________________________________________________________________________________________________
Utilities -- telephone (2.4%)
AirTouch Communications 900,000 (b) 24,750,000
MFS Communications 900,000 (b,d) 28,350,000
___________
Total 53,100,000
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $1,445,618,554) $2,040,736,180
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 24
<TABLE>
<CAPTION>
Short-term securities (6.8%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
<C> <C> <C> <C>
U.S. government agencies (0.3%)
Federal Home Loan Bank Disc Nt
08-01-96 5.29% $1,400,000 $ 1,400,000
Federal Home Loan Mtge Corp Disc Nt
08-29-96 5.24 2,400,000 2,390,256
Federal Natl Mtge Assn Disc Nts
08-06-96 5.24 520,000 519,622
08-20-96 5.24 2,000,000 1,994,490
____________
6,304,368
_____________________________________________________________________________________________________________________________
Certficate of deposit (0.2%)
Domestic
Harris Trust
08-09-96 5.40 5,700,000 5,700,000
_____________________________________________________________________________________________________________________________
Commercial paper (6.3%)
A.I. Credit
08-20-96 5.41 4,500,000 4,486,647
Ameritech
08-13-96 5.40 5,100,000 5,089,501
09-17-96 5.43 2,200,000 (e) 2,183,284
AT&T Capital
08-06-96 5.38 10,800,000 10,791,975
BellSouth Telephone
08-05-96 5.40 6,700,000 6,696,002
CAFCO
08-23-96 5.42 4,900,000 (e) 4,883,890
09-19-96 5.42 6,900,000 (e) 6,846,495
Cargill
08-27-96 5.31 3,600,000 3,586,246
CIT Group
08-16-96 5.41 5,900,000 5,886,774
Commercial Credit
08-08-96 5.39 8,500,000 8,491,125
Commerzbank U.S. Finance
08-26-96 5.31 5,500,000 5,479,795
Consolidated Rail
08-30-96 5.41 4,500,000 (e) 4,480,534
Metlife Funding
08-14-96 5.40 6,032,000 6,018,167
Mobil Australia Finance
08-02-96 5.35 1,800,000 (e) 1,799,574
Morgan Stanley Group
08-12-96 5.37 4,800,000 4,791,090
09-05-96 5.37 5,200,000 5,173,003
Penney (JC)
08-07-96 5.40 8,000,000 7,992,827
<PAGE>
PAGE 25
SAFECO Credit
08-23-96 5.41 4,300,000 4,285,889
St. Paul Companies
08-09-96 5.37 5,500,000 (e) 5,493,461
Sandoz
09-16-96 5.44 1,400,000 (e) 1,389,630
Smithkline Beecham
08-13-96 5.40 6,200,000 6,188,881
Societe Generale North America
08-12-96 5.39 3,700,000 3,693,952
Southwest Bell Telephone
08-05-96 5.39 9,500,000 9,494,353
Transamerica Finance
08-02-96 5.40 4,500,000 4,499,327
USAA Capital
09-06-96 5.33 2,600,000 2,586,220
09-19-96 5.39 4,200,000 4,168,941
U S WEST Communications
09-03-96 5.37 2,300,000 2,288,721
_____________
Total 138,766,304
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $150,781,685) $ 150,770,672
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,596,400,239)(f) $2,191,506,852
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Foreign security values are stated in U.S. dollars. Foreign securities represent 4.1% of the Fund's
net assets as of July 31, 1996.
(d) Security is partially or fully on loan. See Note 4 to the financial statements.
(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 the guidelines
established by the board.
(f) At July 31, 1996, the cost of securities for federal income tax purposes was $1,596,400,238
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $637,012,736
Unrealized depreciation (41,906,122)
______________________________________________________________________________________________
Net unrealized appreciation $595,106,614
______________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 26
The board of trustees and unitholders
Growth Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of Growth Trends Portfolio (a series of Growth Trust) as of July
31, 1996, and the related statements of operations and changes in
net assets for the period from May 13, 1996 (commencement of
operations) to July 31, 1996. These financial statements are the
responsibility of fund management. Our responsibility is to
express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Investment
securities held in custody are confirmed to us by the custodian.
As to securities purchased and sold but not received or delivered,
and securities on loan, we request confirmations from brokers, and
where replies are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Growth
Trends Portfolio at July 31, 1996, and the results of its
operations and the changes in its net assets for the period from
May 13, 1996 (commencement of operations) to July 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 6, 1996
<PAGE>
PAGE 27
<TABLE>
<CAPTION>
Statement of assets and liabilities
Growth Trends Portfolio
July 31, 1996
Assets
<S> <C>
Investments in securities, at value (Note 1)
Investments in securities of unaffiliated issuers
(identified cost $6,336,887,547) $8,454,639,876
Investments in securities of affiliated issuers
(identified cost $72,334,647) 133,031,250
Cash in bank on demand deposit 3,393,915
Dividends and accrued interest receivable 7,099,993
Receivable for investment securities sold 37,289,090
U.S. government securities held as collateral (Note 4) 640,540
Total assets 8,636,094,664
Liabilities
Payable for investment securities purchased 45,520,458
Payable upon return of securities loaned (Note 4) 5,018,140
Accrued investment management services fee 561,398
Other accrued expenses 155,470
Total liabilities 51,255,466
Net assets $8,584,839,198
See accompany notes to financial statements.
<PAGE>
PAGE 28
Statement of Operations
Growth Trends Portfolio
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Investment income
Income:
Interest $ 12,099,456
Dividends (net of foreign taxes withheld of $73,091) 20,448,561
Total income 32,548,017
Expenses (Note 2):
Investment management services fee 11,544,754
Compensation of board members 10,250
Custodian fees 256,677
Audit fees 4,582
Administrative 2,892
Other 11,403
Total expenses 11,830,558
Earnings credits on cash balances (Note 2) (6,141)
Total net expenses 11,824,417
Investment income -- net 20,723,600
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions (Note 3) 44,047,563
Net change in unrealized appreciation or depreciation (147,155,473)
Net loss on investments (103,107,910)
Net decrease in net assets resulting from operations $ (82,384,310)
See accompanying notes to financial statements.
<PAGE>
PAGE 29
Statement of changes in net assets
Growth Trends Portfolio
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Operations and distributions
Investment income -- net $ 20,723,600
Net realized gain on investments 44,047,563
Net change in unrealized appreciation or depreciation (147,155,473)
Net decrease in net assets resulting from operations ( 82,384,310)
Net contributions 8,667,223,508
Total increase in net assets 8,584,839,198
Net assets at beginning of period (Note 1) --
Net assets at end of period $8,584,839,198
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 30
Notes to financial statements
Growth Trends Portfolio
___________________________________________________________________
1. Summary of significant accounting policies
The Growth Trends Portfolio (Portfolio) is a series of Growth Trust
(Trust) and is registered under the Investment Company Act of 1940
as a diversified, open-end management investment company. Growth
Trends Portfolio invests primarily in common stocks of companies
showing potential for significant growth and operating in areas
where economic or technological changes are occurring. The
Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio. The Portfolio commenced operations on
May 13, 1996. At this time, an existing fund transferred its assets
to the Portfolio in return for an ownership percentage of the
Portfolio.
Significant accounting polices followed by the Portfolio are
summarized below:
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
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 Portfolio may buy or write options traded on any U.S.
or foreign exchange or in the over-the-counter market where the
completion of the obligation is dependent upon the credit standing
of the other party. The Portfolio also may buy and sell put and
call options and write covered call options on portfolio securities
and may write cash-secured put options. The risk in writing a call
option is that the Portfolio gives up the opportunity of profit if
the market price of the security increases. The risk in writing a
put option is that the Portfolio may incur a loss if the market <PAGE>
PAGE 31
price of the security decreases and the option is exercised. The
risk in buying an option is that the Portfolio pays a premium
whether or not the option is exercised. The Portfolio also has the
additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Portfolio will realize a gain or loss upon expiration
or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost
for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or
paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Portfolio may buy and sell stock index futures
contracts traded on any U.S. or foreign exchange. The Portfolio
also may buy or write put and call options on these futures
contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Portfolio
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized gains
and losses. The Portfolio recognizes a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. In
the statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses
realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange
contracts for operational purposes and to protect against adverse
exchange rate fluctuation. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation
<PAGE>
PAGE 32
are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the
credit risk that the other party will not complete the obligations
of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a
partnership and each investor in the Portfolio is treated as the
owner of its proportionate share of the net assets, income,
expenses and realized and unrealized gains and losses of the
Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend
date and interest income, including level-yield amortization of
premium and discount, is accrued daily.
___________________________________________________________________
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.6% to 0.5%
annually. The fees may be increased or decreased by a performance
adjustment based on a comparison of the performance of Class A
shares of IDS New Dimensions Fund to the Lipper Growth Fund Index.
The maximum adjustment is 0.12% of the Portfolio's average daily
net assets on an annual basis. The adjustment increased the fee by
$1,130,056 for the period from May 13, 1996 to July 31, 1996.
Under the agreement, the Trust also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees
to be paid to an affiliate of AEFC; audit and certain legal fees;
fidelity bond premiums; registration fees for units; Portfolio
office expenses; consultants' fees; compensation of trustees;
corporate filing fees; expenses incurred in connection with lending
securities of the Portfolio; and any other expenses properly
payable by the Trust or Portfolio, approved by the board.
For the period from May 13, 1996 to July 31, 1996, the Portfolio's
custodian fees were reduced by $6,141 as a result of earnings
credits from overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
<PAGE>
PAGE 33
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $883,856,643 and $586,814,919,
respectively, for the period from May 13, 1996 to July 31, 1996.
For the same period, the portfolio turnover rate was 7%. Realized
gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were
$66,667 for this period.
___________________________________________________________________
4. Lending of portfolio securities
At July 31, 1996, securities valued at $4,997,200 were on loan to
brokers. For collateral, the Portfolio received $4,377,600 in
cash and U.S. government securities valued at $640,540. Income from
securities lending amounted to $86,952 for the period ended July
31, 1996. The risks to the Portfolio of securities lending are that
the borrower may not provide additional collateral when required or
return the securities when due.
<PAGE>
PAGE 34
Investments in securities
Growth Trends Portfolio (Percentages represent value of
July 31, 1996 investments compared to net assets)
Investments in securities of unaffiliated issuers
Common stocks (86.7%)
Issuer Shares Value (a)
Aerospace & defense (5.3%)
Boeing 2,100,000 $185,850,000
Lockheed Martin 1,100,000 91,162,500
Raytheon 1,700,000 82,450,000
United Technologies 860,000 96,857,500
Total 456,320,000
Airlines (0.9%)
AMR 1,000,000 (b) 78,875,000
Automotive & related (1.3%)
Chrylser 4,000,000 113,500,000
Banks and savings & loans (5.4%)
Citicorp 3,200,000 262,000,000
MBNA 1,700,000 47,387,500
Norwest 3,700,000 131,350,000
State Street Boston 500,000 25,125,000
Total 465,862,500
Beverages & tobacco (3.9%)
Anheuser-Busch 1,150,000 85,962,500
Coca-Cola 3,200,000 150,000,000
PepsiCo 3,000,000 94,875,000
Total 330,837,500
Building materials & construction (0.6%)
Tyco Intl 1,300,000 53,300,000
Chemicals (3.3%)
IMC Global 1,100,000 43,450,000
Monsanto 7,000,000 218,750,000
Praxair 620,000 23,792,500
Total 285,992,500
Communications equipment & services (1.7%)
ADC Telecommunications 1,100,000 (b) 46,475,000
Andrew 1,000,000 (b) 40,875,000
Tellabs 1,000,000 (b) 59,750,000
Total 147,100,000
<PAGE>
PAGE 35
Computers & office equipment (16.2%)
Ceridian 2,100,000 (b) 91,350,000
Cisco Systems 6,000,000 (b) 310,500,000
Computer Associates Intl 2,100,000 106,837,500
Computer Sciences 1,260,000 (b) 85,680,000
First Data 2,300,000 178,537,500
Hewlett-Packard 3,330,000 146,520,000
Microsoft 1,200,000 (b) 141,450,000
Oracle 4,000,000 (b) 156,500,000
Parametric Technology 2,500,000 (b) 104,062,500
3Com 1,850,000 (b) 72,843,750
Total 1,394,281,250
Electronics (2.6%)
Intel 3,000,000 225,375,000
Energy (2.5%)
Amoco 300,000 20,062,500
Exxon 1,000,000 82,250,000
Mobil 1,000,000 110,375,000
Total 212,687,500
Energy equipment & services (1.6%)
Fluor 1,600,000 96,400,000
Sonat Offshore Drilling 800,000 39,200,000
Total 135,600,000
Financial services (1.6%)
Dean Witter 800,000 40,700,000
Household Intl 600,000 44,700,000
Morgan Stanley 1,050,000 51,187,500
Total 136,587,500
Food (2.2%)
ConAgra 4,000,000 170,000,000
Pioneer Hi-Bred Intl 400,000 21,500,000
Total 191,500,000
Health care (9.5%)
Amgen 2,400,000 (b) 131,100,000
Boston Scientific 1,000,000 (b) 47,750,000
Guidant 800,000 40,600,000
Johnson & Johnson 3,600,000 171,900,000
Medtronic 1,700,000 80,537,500
Merck 1,600,000 102,800,000
Pfizer 3,400,000 237,575,000
Total 812,262,500
Health care services (1.3%)
Cardinal Health 472,400 32,831,800
HBO & Co 1,200,000 73,500,000
Total 106,331,800 <PAGE>
PAGE 36
Household products (3.0%)
Gillette 2,100,000 133,612,500
Procter & Gamble 1,400,000 125,125,000
Total 258,737,500
Industrial equipment & services (1.7%)
Case 600,000 26,550,000
Deere 2,500,000 89,375,000
Illinois Tool Works 400,000 25,750,000
Total 141,675,000
Insurance (2.2%)
ACE Limited 1,000,000 44,000,000
American Intl Group 1,000,000 94,125,000
UNUM 840,000 51,240,000
Total 189,365,000
Leisure time & entertainment (1.8%)
Marriott Intl 1,800,000 92,475,000
Mattel 800,000 19,800,000
Mirage Resorts 2,000,000 (b) 45,000,000
Total 157,275,000
Media (1.0%)
A.H. Belo Series A 650,000 26,162,500
Infinity Broadcasting Cl A 900,000 (b) 24,750,000
Time Warner 1,000,000 34,875,000
Total 85,787,500
Metals (1.0%)
Aluminum Co of America 1,400,000 81,200,000
Multi-industry conglomerates (5.4%)
Alco Standard 1,650,000 72,187,500
Emerson Electric 1,477,200 124,638,750
General Electric 3,200,000 263,600,000
Total 460,426,250
Restaurants & lodging (2.6%)
Hospitality Franchise System 1,700,000 (b) 102,000,000
McDonald's 2,000,000 92,750,000
Promus Hotel 1,000,000 (b) 27,250,000
Total 222,000,000
Retail (2.9%)
Albertson's 1,300,000 53,300,000
Circuit City 700,000 22,050,000
Federated Department Stores 1,400,000 (b) 42,350,000
Home Depot 1,000,000 50,500,000
Kroger 500,000 (b) 18,875,000
Safeway 1,700,000 (b) 61,200,000
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PAGE 37
Total 248,275,000
Textiles & apparel (0.6%)
NIKE Cl B 500,000 51,437,500
Utilities -- telephone (1.7%)
AirTouch Communications 2,000,000 (b) 55,000,000
GTE 1,700,000 70,125,000
MFS Communications 700,000 (b) 22,050,000
Total 147,175,000
Foreign (2.9%) (c)
British Airways ADR 400,000 (d) 32,600,000
Reuters Holdings ADR 700,000 43,837,500
Royal Dutch Petroleum 300,000 (d) 45,262,500
Schlumberger 700,000 56,000,000
SmithKline Beecham ADR 1,350,000 72,562,500
Total 250,262,500
Total common stocks
(Cost: $5,322,021,805) $7,440,029,300
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PAGE 38
Short-term securities (11.8%)
Issuer Annualized Amount Value (a)
yield on payable at
date of maturity
purchase
U.S. government agencies (0.1%)
Federal Home Loan Bank Disc Nt
08-05-96 5.32 600,000 $ 599,647
Federal Home Loan Mtge Corp Disc Nt
08-16-96 5.25 7,900,000 7,882,784
Total 8,482,431
Commercial paper (11.5%)
ABN Amro
08-27-96 5.06 15,000,000 14,937,992
10-11-96 5.52 9,000,000 8,900,100
A.I. Credit
08-20-96 5.41 10,000,000 9,970,327
09-18-96 5.37 10,235,000 10,162,263
Alabama Power
08-23-96 5.31 6,700,000 6,678,340
American General Finance
08-01-96 5.38 1,500,000 1,500,000
08-01-96 5.35 10,100,000 10,100,000
Ameritech Capital Funding
08-13-96 5.40 13,600,000 13,572,004
08-27-96 5.41 10,400,000 (f) 10,355,472
08-29-96 5.42 1,200,000 (f) 1,194,564
Associates North America
09-25-96 5.42 10,000,000 9,913,640
AVCO Financial Services
08-01-96 5.40 3,500,000 3,500,000
08-19-96 5.34 9,000,000 8,974,609
08-29-96 5.34 8,300,000 8,263,616
10-22-96 5.49 8,700,000 8,588,676
10-30-96 5.49 5,400,000 5,321,952
10-31-96 5.50 18,000,000 17,741,480
BBV Finance (Delaware)
08-01-96 5.32 9,000,000 9,000,000
08-07-96 5.33 4,400,000 4,395,729
08-07-96 5.29 10,000,000 9,990,292
Becton Dickinson
08-28-96 5.44 7,000,000 6,971,650
BellSouth
08-28-96 5.42 6,958,000 6,928,555
09-17-96 5.38 9,800,000 9,731,678
Beneficial
09-12-96 5.39 10,000,000 9,937,583
CAFCO
09-11-96 5.44 15,000,000 14,901,870
Cargill
08-14-96 5.37 7,100,000 7,086,283
10-08-96 5.53 8,000,000 7,914,900
10-23-96 5.50 17,000,000 (f) 16,779,850 <PAGE>
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Chevron
08-21-96 5.43 13,000,000 12,966,995
Ciesco LP
08-21-96 5.40 6,100,000 (f) 6,079,364
08-23-96 5.34 7,000,000 6,974,122
09-13-96 5.45 10,000,000 9,928,793
10-01-96 5.43 10,000,000 9,904,417
CIT Group
08-16-96 5.41 15,000,000 14,966,375
Commercial Credit
08-08-96 5.39 5,400,000 5,394,361
Commerzbank U.S. Finance
08-13-96 5.35 8,000,000 7,982,181
08-14-96 5.39 16,700,000 16,661,560
CPC Intl
09-04-96 5.44 8,300,000 (f) 8,254,972
09-16-96 5.47 11,000,000 (f) 10,919,977
09-24-96 5.37 12,000,000 (f) 11,899,533
09-26-96 5.45 20,000,000 (f) 19,824,338
10-22-96 5.49 10,300,000 (f) 10,168,203
Dean Witter
08-05-96 5.37 3,800,000 3,796,830
Ford Motor Credit
09-05-96 5.39 15,000,000 14,921,979
Gannett
10-11-96 5.54 12,400,000 (f) 12,262,360
10-15-96 5.52 5,400,000 (f) 5,376,337
10-16-96 5.54 10,700,000 (f) 10,572,982
General Electric Capital
08-14-96 5.37 12,000,000 11,971,840
08-22-96 5.43 15,000,000 14,946,404
08-28-96 5.44 10,000,000 9,954,418
08-29-96 5.32 6,500,000 6,473,206
Goldman Sachs
08-05-96 5.36 6,000,000 5,995,299
08-23-96 5.39 5,000,000 4,981,030
09-09-96 5.50 1,400,000 1,390,947
09-10-96 5.47 7,000,000 6,954,606
10-21-96 5.53 2,200,000 2,172,188
Harris Trust
08-09-96 5.37 10,400,000 10,399,592
Hewlett-Packard
08-29-96 5.42 4,500,000 4,479,153
09-17-96 5.42 2,430,000 2,411,536
Household Finance
08-26-96 5.42 10,000,000 9,958,074
09-19-96 5.44 20,000,000 19,841,873
Kredietbank North America Finance
09-03-96 5.16 10,000,000 9,945,270
Lilly (Eli) & Co.
08-09-96 5.40 11,200,000 11,186,610
Merrill Lynch
08-23-96 5.43 3,700,000 3,686,576
Metlife Funding
09-09-96 5.39 9,700,000 9,643,675
Mobil Australia Finance (Delaware)
08-15-96 5.40 8,000,000 (f) 7,980,371
08-30-96 5.41 10,000,000 (f) 9,951,305
09-18-96 5.48 8,000,000 (f) 7,937,946 <PAGE>
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09-18-96 5.45 9,908,000 (f) 9,831,146
10-02-96 5.49 7,000,000 (f) 6,932,012
Morgan Stanley Group
08-08-96 5.40 6,000,000 5,993,735
09-06-96 5.37 7,100,000 7,062,086
Motorola
08-28-96 5.35 13,523,000 13,469,043
Natl Australia Funding (Delaware)
08-13-96 5.39 6,700,000 6,686,316
NationsBank
08-06-96 5.37 15,000,000 14,999,931
09-04-96 5.40 8,000,000 7,999,173
Norfolk Southern
08-29-96 5.37 5,000,000 (f) 4,977,144
PACCAR
08-26-96 5.34 9,000,000 8,962,856
Penney (JC) Funding
09-17-96 5.43 9,000,000 8,932,984
Pfizer
08-02-96 5.40 20,000,000 (f) 19,997,017
Pitney Bowes Credit
08-29-96 5.42 9,000,000 8,958,859
10-09-96 5.49 3,500,000 3,452,048
10-16-96 5.51 8,800,000 8,695,537
Reed Elsevier
09-20-96 5.47 20,000,000 (f) 19,839,148
SAFECO Credit
08-05-96 5.35 8,100,000 8,093,845
08-23-96 5.41 7,500,000 7,475,387
09-23-96 5.40 1,000,000 991,768
Sandoz
08-01-96 5.38 12,000,000 (f) 12,000,000
08-06-96 5.40 8,800,000 8,793,449
08-20-96 5.35 8,000,000 7,973,647
09-10-96 5.47 7,900,000 (f) 7,847,816
Siemens
08-20-96 5.41 9,100,000 9,070,024
09-18-96 5.44 1,300,000 1,289,701
SmithKline Beecham
08-13-96 5.40 15,600,000 15,572,024
Societe Generale North America
08-12-96 5.39 21,700,000 21,664,526
Southern California Gas
09-03-96 5.03 10,269,000 (f) 10,212,059
10-29-96 5.53 5,623,000 (f) 5,546,246
Southwestern Bell Telephone
09-10-96 5.37 8,500,000 8,449,567
Transamerica Financial
08-19-96 5.37 6,000,000 5,981,152
09-23-96 5.40 3,000,000 2,975,303
USAA Capital
08-07-96 5.40 9,100,000 9,091,856
08-12-96 5.37 14,000,000 13,972,579
08-19-96 5.34 10,000,000 9,968,587
08-23-96 5.41 6,700,000 6,678,013
09-06-96 5.33 5,100,000 5,072,970
U S WEST Communications
09-17-96 5.44 9,600,000 9,525,755
09-24-96 5.40 8,600,000 8,530,856 <PAGE>
PAGE 41
10-24-96 5.49 10,000,000 9,868,958
Total 987,866,146
Letters of credit (0.2%)
First Chicago - Commed Fuel
08-15-96 5.42 9,134,000 9,112,039
09-09-96 5.35 9,203,000 9,149,960
Total 18,261,999
Total short-term securities
(Cost: $1,014,865,742) $1,014,610,576
Total investments in securities of unaffiliated issuers
(Cost: $6,336,887,547) $8,454,639,876
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Investments in securities of affiliated issuer (e)
Common Stock (1.5%)
Issuer Shares Value (a)
Reynolds & Reynolds Cl A 2,750,000 $133,031,250
Total investments in securities of affiliated issuer
(Cost: $72,334,647) 133,031,250
Total investments in securities
(Cost: $6,409,222,194) (g) $8,587,671,126
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Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Presently non-income producing.
(c) 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) Investments representing 5% or more of the outstanding voting
securities of the issuer.
(f) 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.
(g) At July 31, 1996, the cost of securities for federal income tax
purposes was $6,409,235,783 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation 2,247,642,210
Unrealized depreciation (69,206,867)
Net unrealized appreciation 2,178,435,343
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American Express Service Corporation, Distributor
AMERICAN
EXPRESS
Financial
Direct
P.O. Box 59196
Minneapolis, MN 55459-0196
