<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 3 (File No. 33-63905) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 (File No. 811-7401) X
STRATEGIST GROWTH FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Eileen J. Newhouse - IDS Tower 10,
Minneapolis, Minnesota 55440-0010
(612) 671-2772
It is proposed that this filing will become effective (check
appropriate box):
immediately upon filing pursuant to paragraph (b)
X on Sept. 27, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) 1996 pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f of
the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice
for the fiscal period ended July 31, 1996 was filed on or about
Sept. 25, 1996.
Growth Trust has also executed this Amendment to the Registration
Statement.
<PAGE>
PAGE 2
Cross reference sheet for the Fund showing the location in its
prospectus and the Statement of Additional Information of the
information called for by the items enumerated in Parts A and B of
Form N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE>
<CAPTION>
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<C> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) The Funds in brief; Fund expenses 11 Table of Contents
(b) The Funds in brief; Fund expenses
(c) The Funds in brief; Fund expenses 12 NA
3(a) NA 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) NA (c) Additional Investment Policies
(d) Security Transactions
4(a) The Funds in brief; Investment policies
and risks; How the Funds and Portfolios 14(a) Board Members and Officers
are organized (b) Board Members and Officers
(b) Investment policies and risks (c) Board Members and Officers
(c) Investment policies and risks
15(a) NA
5(a) Board members and officers (b) NA
(b)(i) Investment manager; About the Advisor (c) Board Members and Officers
(b)(ii) Investment manager; Administrator and
transfer agent 16(a)(i) How the Funds and Portfolios are organized*;
(b)(iii) Investment manager About the Advisor
(c) Portfolio managers (a)(ii) Agreements: Investment Management Services
(d) Administrator and transfer agent Agreement, Plan and Supplemental
(e) Administrator and transfer agent Agreement of Distribution/Distribution Agreement
(f) Investment manager; Administrator and (a)(iii) NA
transfer agent; Distributor (b) NA
(g) About the Advisor (c) NA
(d) Agreements: Administrative Services Agreement
5A(a) NA (e) NA
(b) NA (f) Agreements: Plan and Supplemental Agreement of
Distribution/Distribution Agreement
6(a) Shares; Voting rights (g) NA
(b) NA (h) Custodian; Independent Auditors
(c) NA (i) Agreements: Transfer Agency Agreement; Custodian
(d) NA
(e) Cover page; Special shareholder services 17(a) NA
(f) Dividend and capital gains distributions; (b) Brokerage Commissions Paid to Brokers Affiliated
Reinvestments with the Advisor
(g) Taxes (c) Security Transactions
(h) Special considerations regarding master/ (d) Security Transactions
feeder structure (e) Security Transactions
7(a) Distributor 18(a) Shares; Voting rights*
(b) Valuing Fund shares (b) NA
(c) NA
(d) How to purchase shares 19(a) Investing in the Fund
(e) NA (b) Valuing Fund shares*; Investing in the Funds;
(f) Distributor Redeeming Shares
(c) Redeeming Shares
8(a) How to redeem shares; Special considerations
regarding master/feeder structure 20 Taxes
(b) NA
(c) How to purchase, exchange or redeem shares: 21(a) Agreements: Plan and Supplemental Agreement of
Other important information Distribution/Distribution Agreement, Placement
(d) How to purchase, exchange or redeem shares: Agency Agreement
How to redeem shares
(b) Agreements: Plan and Supplemental Agreement of
9 None Distribution/Distribution Agreement, Placement
Agency Agreement
22(a) NA
(b) Performance Information (for all funds except
money market funds)<PAGE>
PAGE 3
23 Financial Statements
*Designates page number in prospectus.
</TABLE>
<PAGE>
PAGE 4
Strategist Growth Fund, Inc.
Prospectus
Sept. 27, 1996
This prospectus describes three diversified, no-load mutual funds.
Strategist Growth Fund, Inc. is a mutual fund with three series of
capital stock representing interests in Strategist Growth Fund,
Strategist Growth Trends Fund and Strategist Special Growth Fund.
Each Fund has its own goal and investment policies.
The goal of each of the Funds is long-term growth of capital.
Each Fund has chosen to participate in a master/feeder structure.
Each Fund seeks to achieve its goal by investing all of its assets
in a corresponding Portfolio of Growth Trust. Each Portfolio is a
separate investment company managed by American Express Financial
Corporation that has the same goal as the Fund. This arrangement
is commonly known as a master/feeder structure.
This prospectus contains facts that can help you decide if one or
more of the Funds is the right investment for you. Read it before
you invest and keep it for future reference.
Additional facts about the Funds are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission (SEC) and available for reference, along with other
related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI, dated Sept. 27, 1996, is
incorporated here by reference. For a free copy, contact American
Express Financial Services Direct.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
American Express Financial Direct
P.O. Box 59196
Minneapolis, MN 55459-0196
1-800-AXP-SERV
TTY: 1-800-710-5260
<PAGE>
PAGE 5
Table of contents
The Funds in brief
Goals and types of Fund investments and their risks
Structure of the Funds
Manager and distributor
Portfolio managers
Fund expenses
Performance
Financial highlights
Total returns
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
How to purchase shares
How to exchange shares
How to redeem shares
Systematic purchase plans
Other important information
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Funds and Portfolios are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About the Advisor
Appendix
Descriptions of derivative instruments
<PAGE>
PAGE 6
The Funds in brief
Strategist Growth Fund, Inc. (the Company) is a mutual fund with
three series of capital stock representing interests in Strategist
Growth Fund (Growth Fund), Strategist Growth Trends Fund (Growth
Trends Fund) and Strategist Special Growth Fund (Special Growth
Fund) (the Funds). Each Fund is a diversified mutual fund with its
own goals and investment policies. Each of the Funds seeks to
achieve its goals by investing all of its assets in a corresponding
series (the Portfolio) of Growth Trust (the Trust) rather than by
directly investing in and managing its own portfolio of securities.
Goals and types of Fund investments and their risks
Growth Fund seeks to provide shareholders with long-term growth of
capital. It does so by investing all of its assets in Growth
Portfolio, a Portfolio of the Trust with the same investment
objective as Growth Fund. Growth Portfolio is a diversified mutual
fund that invests primarily in stocks of U.S. and foreign companies
that appear to offer growth opportunities. Growth Portfolio also
may invest in preferred stocks, convertible securities, debt
securities, derivative instruments and money market investments.
Growth Trends Fund seeks to provide shareholders with long-term
growth of capital. It does so by investing all of its assets in
Growth Trends Portfolio, a Portfolio of the Trust with the same
investment objective as Growth Trends Fund. Growth Trends
Portfolio is a diversified mutual fund that invests primarily in
common stocks of U.S. and foreign companies showing potential for
significant growth. These companies usually operate in areas where
dynamic economic and technological changes are occurring. Growth
Trends Portfolio also may invest in preferred stocks, debt
securities, derivative instruments and money market instruments.
Special Growth Fund seeks to provide shareholders with long-term
growth of capital. It does so by investing all of its assets in
Aggressive Growth Portfolio, a Portfolio of the Trust with the same
investment objective as Special Growth Fund. Aggressive Growth
Portfolio is a diversified mutual fund that invests primarily in
the equity securities of companies that comprise the Standard &
Poor's 500 Composite Stock Price Index (S&P 500). Aggressive
Growth Portfolio does not seek to replicate the S&P 500. Rather,
it invests in those securities within the universe of S&P 500
stocks that Aggressive Growth Portfolio's advisor believes are
undervalued or that offer potential for long-term capital growth.
Ordinarily, at least 65% of Aggressive Growth Portfolio's total
assets will be invested in equity securities. Aggressive Growth
Portfolio will be managed using a research methodology developed by
the Research Department of American Express Financial Corporation
(the Advisor) that is designed to achieve a return in excess of the
return of the S&P 500.
Undervalued stocks and stock of companies with above-average growth
rates can provide higher returns to investors than stocks of other
companies, although the prices of these stocks can fluctuate more.
Thus, Special Growth Fund is appropriate for long-term investors
who seek above average investment returns and, in return, are <PAGE>
PAGE 7
willing to accept a relatively high degree of short-term price
variability and investment risk.
Because investments involve risk, a Fund cannot guarantee achieving
its goals. Some of the Portfolios' investments may be considered
speculative and involve additional investment risks.
Structure of the Funds
Each Fund uses what is commonly known as a master/feeder structure.
This means that it is a feeder fund that invests all of its assets
in a Portfolio which is its master fund. The Portfolio actually
invests in and manages the securities and has the same goal and
investment policies as the Fund. This structure is described in
more detail in the section captioned "Special considerations
regarding master/feeder structure." Here is an illustration of the
structure:
Investors
buy shares in
the Fund
The Fund
invests in
the Portfolio
The Portfolio
invests in securities,
such as stocks or bonds
Manager and distributor
Each Portfolio is managed by the Advisor, a provider of financial
services since 1894. The Advisor currently manages more than $51
billion in assets. These assets are managed by a team of highly
skilled, experienced professionals, backed by one of the nation's
largest investment departments. Our team of professionals includes
portfolio managers, senior economists and supporting staff, stock
and bond analysts including Chartered Financial Analysts, and
investment managers and researchers based in London and Hong Kong
who add a global dimension to our expertise. These professionals
evaluate thousands of securities.
Shares of the Funds are sold through American Express Service
Corporation (the Distributor), an affiliated company of the
Advisor.
Portfolio managers
Growth Portfolio
Mitzi Malevich joined the Advisor in 1983 and serves as vice
president and senior portfolio manager. She has managed the assets
of Growth Portfolio and its predecessor fund since 1992 after
having been a portfolio manager of pension fund accounts. She also
serves as portfolio manager of IDS Life Funds A and B.
<PAGE>
PAGE 8
Growth Trends Portfolio
Gordon Fines joined the Advisor in 1981 and serves as vice
president and senior portfolio manager. He has managed the assets
of Growth Trends Portfolio and its predecessor fund since 1991.
Mr. Fines also leads the growth team for the Advisor and serves as
portfolio manager of IDS Life Growth Dimensions Fund.
Aggressive Growth Portfolio
Guru Baliga joined the Advisor in 1991 as a research analyst. He
became portfolio manager of Aggressive Growth Portfolio and IDS
Small Company Index Fund in August 1996. He has been portfolio
manager of IDS Blue Chip Advantage Fund since 1994. He has been
part of the portfolio management team of Total Return Portfolio and
its predecessor fund since 1995, and is a portfolio manager of IDS
Advisory Accounts that are managed similarly to the Portfolio.
Fund expenses
The purpose of the following table and example is to summarize the
aggregate expenses of each Fund and its corresponding Portfolio and
to assist investors in understanding the various costs and expenses
that investors in the Fund may bear directly or indirectly. The
Company's board believes that, over time, the aggregate per share
expenses of a Fund and its corresponding Portfolio should be
approximately equal to (and may be less than) the per share
expenses a Fund would have if the Company retained its own
investment advisor and the assets of each Fund were invested
directly in the type of securities held by the corresponding
Portfolio. For additional information concerning Fund and
Portfolio expenses, see "How the Funds and Portfolios are
organized."
Shareholder transaction expenses+
Maximum sales charge on purchases*
(as a percentage of offering price)
Growth Special
Growth Fund Trends Fund Growth Fund
0% 0% 0%
Annual Fund and allocated Portfolio operating expenses
(% of average daily net assets):
<TABLE>
<CAPTION>
Growth Special
Growth Fund Trends Fund Growth Fund**
<S> <C> <C> <C>
Management fee*** 0.65% 0.59% 0.65%
12b-1 fee 0.25 0.25 0.25
Other expenses**** 0.40 0.46 0.50
Total (after 1.30 1.30 1.40
reimbursement)
</TABLE>
+A wire redemption charge, currently $15, is deducted from the
shareholder's Investment Management Account for wire redemptions
made at the request of the shareholder.
*There are no sales loads; however, each Fund reserves the right
upon 60 days' advance notice to shareholders to impose a redemption
fee of up to 1% on shares redeemed within one year of purchase. <PAGE>
PAGE 9
Special Growth Fund has no present intention to implement a
redemption fee within the first year of operation.
**Expenses are those expected to be incurred during Special Growth
Fund's initial fiscal period ending July 31, 1997.
***The management fee is paid by the Trust on behalf of each
Portfolio. It includes the impact of a performance fee that
increased the management fee by 0.02% for Growth Fund and 0.01% for
Growth Trends Fund for the fiscal period from May 13, 1996 to July
31, 1996.
****Other expenses include an administrative services fee, a
transfer agency fee and other nonadvisory expenses. Expense ratios
are based on total expenses of the Fund before applying earnings
credit on cash balances.
The Advisor and the Distributor have agreed to waive certain fees
and to absorb certain other Fund expenses until July 31, 1997.
Under this agreement, a Fund's total expenses will not exceed
1.30%. Without this agreement, the estimated Other expenses and
Total fund operating expense would have been: 0.96% and 1.86% for
Growth Fund, 0.92% and 1.76% for Growth Trends Fund and 1.13% and
2.03% for Special Growth Fund.
Example: Suppose for each year for the next 10 years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
Growth Special
Growth Fund Trends Fund Growth Fund
1 year $ 13 $ 13 $ 14
3 years 41 41 44
5 years 71 71 77
10 years 157 157 168
The table and example do not represent actual expenses, past or
future. Actual expenses may be higher or lower than those shown.
Because the Funds pay annual distribution (12b-1) fees of 0.25% per
year, long-term shareholders may indirectly pay an equivalent of
more than a 7.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
Performance
Financial highlights
<TABLE>
<CAPTION>
Fiscal period ended July 31, 1996*
Strategist Strategist Growth
Growth Fund Trends Fund
<S> <C> <C>
Per share income and capital changes**
Net asset value, beginning of period $25.43 $19.00
Income from investment operations:
Net investment income (loss) (.02) .01
Net losses (both realized and unrealized) (2.26) (.49)
Total from investment operations (2.28) (.48)
<PAGE>
PAGE 10
Net asset value, end of period $23.15 $18.52
Ratios/supplemental data
Net assets, end of period (in millions) $23 $25
Ratio of expenses to
average daily net assets++ 1.30%+ 1.30%+
Ratio of net income (loss)
to average daily net assets (.37)%+ .39%+
Total return (9.0)% (2.5)%
Portfolio turnover rate (excluding
short-term securities)
for the underlying Portfolio 5% 7%
*Inception date was May 13, 1996.
**For a share outstanding throughout the period. Rounded to the nearest cent.
+Adjusted to an annual basis.
++The Advisor and the Distributor voluntarily limited total operating expenses to 1.3%
of average daily net assets. Without this agreement, the ratio of expenses to average
daily net assets would have been 1.86% for Strategist Growth Fund and 1.76% for
Strategist Growth Trends Fund. Expense ratios are based on total expenses of the Fund
before applying earnings credits on cash balances.
</TABLE>
The information in this table has been audited by KPMG Peat Marwick
LLP, independent auditors. The independent auditors' report and
additional information about the performance of Growth and Growth
Trends Funds are contained in the Funds' annual report which, if
not included with this prospectus, may be obtained without charge.
Special Growth Fund began operations on Aug. 19, 1996 and therefore
is not included in the table or annual report.
Total returns
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
<PAGE>
PAGE 11
Average annual total returns as of July 31, 1996
<TABLE>
<CAPTION>
Purchase 1 year 5 years Since 10 years
made ago ago inception* ago
<S> <C> <C> <C> <C>
Growth Fund** +13.25% +16.29% -- % +14.27%
Growth Trends Fund** +16.48 +15.20 -- +15.67
Lipper Growth Fund Index + 8.89 +12.30 -- +12.21
IDS Advisory Accounts*** +19.20 +16.30 +19.47 --
S&P 500 +16.39 +13.61 +14.60 +13.94
</TABLE>
Cumulative total returns as of July 31, 1996
<TABLE>
<CAPTION>
Purchase 1 year 5 years Since 10 years
made ago ago inception* ago
<S> <C> <C> <C> <C>
Growth Fund** +13.25% +112.67% -- % +279.60%
Growth Trends Fund** +16.48 +102.89 -- +328.75
Lipper Growth Fund Index + 8.89 + 78.63 -- +216.45
IDS Advisory Accounts*** +19.20 +112.76 +300.94 --
S&P 500 +16.39 + 89.30 +189.75 +268.84
</TABLE>
* Inception date for the Advisory Accounts was October 11,
1988.
** On May 13, 1996, IDS Growth Fund and IDS New Dimensions Fund
(the predecessor funds) converted to a master/feeder
structure and transferred all of their assets to Growth
Portfolio and Growth Trends Portfolio, respectively. The
performance information in the foregoing tables represents
performance of the corresponding predecessor funds prior to
March 20, 1995 and of Class A shares of the corresponding
predecessor funds from March 20, 1995 through May 13, 1996,
adjusted to reflect the absence of sales charges on shares of
the Funds sold through this prospectus. The historical
performance has not been adjusted for any difference between
the estimated aggregate fees and expenses of the Funds and
historical fees and expenses of the predecessor funds.
*** The examples show combined performance returns for IDS
Advisory Accounts (Advisory Accounts) that are managed by the
Advisor using the same strategy used to manage Special Growth
Fund. The Advisory Accounts' performance reflects
reinvestment of dividends and is calculated net of brokerage
commissions and management fees. At July 31, 1996, the
composite included all 14 fully discretionary, equity
Advisory Accounts under management using this strategy with
total assets of $792.5 million, which is 66% of the total
assets using this strategy and 3% of total assets under
management by the Advisor. Terminated accounts are not
purged from the composite. Expenses and fees associated with
registering a mutual fund have not been deducted from those
returns. The returns for Special Growth Fund will be lower,
initially, due to these expenses and fees. Returns shown
should not be considered a representation of Special Growth
Fund's future performance.
<PAGE>
PAGE 12
These examples show total returns from hypothetical investments in
each Fund. These returns are compared to those of popular indexes
for the same periods.
For purposes of calculation, information about each Fund makes no
adjustments for taxes an investor may have paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of a Fund's future performance.
Lipper Growth Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally
similar to Growth Fund and Growth Trends Fund. Some funds in the
index may have somewhat different investment policies or objectives
than the Portfolios to which they are compared.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which Growth and Growth Trends Portfolios invest.
The Advisory Accounts, like Aggressive Growth Portfolio, invest in
those stocks included in the S&P 500 that the Advisor believes will
outperform the S&P 500 within the 6- to 12-month period following
investment because, in the Advisor's opinion, such stocks are
undervalued or have above-average growth potential. The index
reflects reinvestment of all distributions and changes in market
prices, but excludes brokerage commissions or other fees.
Investment policies and risks
Each Fund and corresponding Portfolio has the same investment
policies.
Growth Fund/Growth Portfolio - Growth Portfolio invests primarily
in common stocks and securities convertible into common stocks of
U.S. and foreign corporations. Growth Portfolio will invest in
companies that appear to offer growth opportunities; companies
that, because of new management, markets or other factors, show
promise of substantially improved results; and companies whose
future may be dependent upon maintaining technological superiority
over their competitors. Other investments include preferred
stocks, convertible securities, debt securities, derivative
instruments or money market instruments.
Growth Trends Fund/Growth Trends Portfolio - Growth Trends
Portfolio invests primarily in common stocks of U.S. and foreign
corporations showing potential for significant growth. These
companies usually operate in areas where dynamic economic and
technological changes are occurring. They also may exhibit
excellence in technology, marketing or management. Other
investments include preferred stocks, debt securities, derivative
instruments and money market instruments.
<PAGE>
PAGE 13
Special Growth Fund/Aggressive Growth Portfolio - Aggressive Growth
Portfolio invests primarily in equity securities of companies
comprising the S&P 500 that, in the opinion of the Advisor, are
undervalued in relation to their long-term earning power or the
asset value of their issuers or that have above-average growth
potential. Ordinarily, at least 65% of Aggressive Growth
Portfolio's total assets will be invested in equity securities
consisting of common stocks, preferred stocks, securities
convertible into common stocks, securities having common stock
characteristics such as rights and warrants and foreign equity
securities.
Securities may be undervalued because of several factors, including
the following: market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments affecting
the issuer of the security. Companies also may be undervalued
because they are part of an industry that is out of favor with
investors even though the individual companies may be financially
sound and have high rates of earning growth. Any or all of these
factors may provide buying opportunities at attractive prices
relevant to the long-term prospects for the companies in question.
Companies with above average growth potential generally will have
steady earnings and cash flow growth, good and/or improving balance
sheets, strong positions in their market niches and the ability to
perform well in a stagnant economy.
Aggressive Growth Portfolio may invest more than 25% of its total
assets in equity securities of companies included in the S&P 500
that are primarily engaged in either the utilities or the energy
industry. If Aggressive Growth Portfolio concentrates its
investments in one or both of these industries, the value of its
shares will be especially affected by factors peculiar to these
industries, and may fluctuate more widely than the value of shares
of a fund that invests in a broader range of industries.
Aggressive Growth Portfolio will concentrate its investments in
either of these industries only to the extent that the S&P becomes
heavily weighted in that industry. Aggressive Growth Portfolio's
concentration policy can be changed only if holders of a majority
of the outstanding voting securities agree to make the change. See
"Utilities industry" and "Energy industry" below.
Research methodology: The Advisor's Research Department has
designed a proprietary research rating system that is used as the
basis for rating securities of issuers listed on the S&P 500. The
research ratings range from a "strong buy" to "strong sell."
Aggressive Growth Portfolio will invest primarily in equity
securities that the Research Department rates highly and expects to
outperform the S&P 500. The securities in which Aggressive Growth
Portfolio invests will not correspond entirely to the S&P 500
securities recommended by the Research Department because some of
these recommendations may not be appropriate investments for the
Portfolio due to diversification, liquidity or other requirements
that apply to registered investment companies. In addition, some
of the recommendations may not be appropriate for Aggressive Growth
Portfolio under its investment objective or investment limitations.
<PAGE>
PAGE 14
Moreover, other Advisor clients who receive the Research
Department's recommendations may place purchase or sale orders that
make it more difficult for Aggressive Growth Portfolio to implement
its own orders to buy or sell the same securities.
The various types of investments described above that the portfolio
managers use to achieve investment performance are explained in
more detail in the next section and in the SAI.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of larger, established companies that pay dividends may be
less volatile than the stock market as a whole. Stocks of
companies experiencing significant growth and operating in areas of
financial and technological change may be subject to more abrupt or
erratic price movements than stocks of larger, established
companies or the stock market as a whole. Therefore, some of the
securities in which the Portfolios invest involve substantial risk
and may be considered speculative.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Market risk: Each Portfolio is subject to market risk because it
invests primarily in common stocks. Market risk is the possibility
that common stock prices will decline over short or even extended
periods. The U.S. stock market tends to be cyclical, with periods
when stock prices generally rise and periods when stock prices
generally decline.
Utilities industry: Utility stocks, including electric, gas,
telephone and other energy-related (e.g., nuclear) utilities
stocks, generally offer dividend yields that exceed those of
industrial companies and their prices tend to be less volatile than
stocks of industrial companies. However, utility stocks can still
be affected by the risks of the stock market in general, as well as
factors specific to public utilities companies. Many utility
companies, especially electric utility companies, historically have
been subject to the risk of increases in fuel and other operating
costs, changes in interest rates on borrowing for capital
improvement programs, changes in applicable laws and regulations,
and costs and operating constraints associated with compliance with
environmental regulations. In addition, because securities issued
by utility companies are particularly sensitive to movements in
interest rates, the equity securities of these companies are more
affected by movements in interest rates than the equity securities
of other companies. Each of these risks could adversely affect the
ability of public utilities companies to declare or pay dividends
and the ability of holders of common stock, such as a Portfolio, to
realize any value from the assets of the company upon liquidation
or bankruptcy.
<PAGE>
PAGE 15
Energy industry: Energy companies include the conventional areas
of oil, gas, electricity and coal, as well as newer sources of
energy such as geothermal, nuclear, oil shale and solar power.
These companies include those that produce, transmit, market or
measure energy, as well as those companies involved in exploring
for new sources of energy. Securities of companies in the energy
field are subject to changes in value and dividend yield which
depend largely on the price and supply of energy fuels. Swift
price and supply fluctuations may be caused by events relating to
international politics, energy conservation, the success of
exploration projects and tax or other governmental regulatory
policies.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, convertible securities
trade more like common stock.
Debt securities: The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The price of bonds below investment grade may react
more to the ability of the issuing company to pay interest and
principal when due. These bonds have greater price fluctuations
and are more likely to experience a default.
Growth Portfolio and Aggressive Growth Portfolio invest in bonds
given the four highest ratings by Moody's Investors Service, Inc.
or by Standard & Poor's Corporation or in bonds of comparable
quality in the judgment of the investment manager. Growth Trends
Portfolio, in addition to investing in investment grade bonds, may
invest up to 5% of its net assets in bonds below investment grade.
Securities that are subsequently downgraded in quality may continue
to be held by a Portfolio and will be sold only when the investment
manager believes it is advantageous to do so.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made, including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency may be purchased using a forward
contract in which the price of the foreign currency in U.S. dollars
is established on the date the trade is made, but delivery of the
currency is not made until the securities are received. As long as
a Portfolio holds foreign currencies or securities valued in
foreign currencies, the value of those assets will be affected by
changes in the value of the currencies relative to the U.S. dollar.
<PAGE>
PAGE 16
Because of the limited trading volume in some foreign markets,
efforts to buy or sell a security may change the price of the
security, and it may be difficult to complete the transaction.
Growth Portfolio may invest up to 25% of its total assets in
foreign investments. Growth Trends Portfolio may invest up to 30%
of its total assets in foreign investments. Aggressive Growth
Portfolio may invest up to 20% of its total assets in foreign
securities that are included in the S&P 500, or which will be
included in the S&P 500 in the near future, or in Canadian money
market instruments.
Derivative instruments: A portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties and inability to close such instruments. A Portfolio will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Portfolios will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of each
Portfolio's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. This does not, however,
limit the portion of a Portfolio's assets at risk to 5%. The
Portfolios are not limited as to the percentage of their assets
that may be invested in permissible investments, including
derivatives, except as otherwise explicitly provided in this
prospectus or the SAI. For descriptions of these and other types
of derivative instruments, see the Appendix to this prospectus and
the SAI.
Securities and other instruments that are illiquid: A security or
other instrument is illiquid if it cannot be sold quickly in the
normal course of business. Some investments cannot be resold to
the U.S. public because of their terms or government regulations.
All securities and other instruments, however, can be sold in
private sales, and many may be sold to other institutions and
qualified buyers or on foreign markets. Each portfolio manager
will follow guidelines established by the board and consider <PAGE>
PAGE 17
relevant factors such as the nature of the security and the number
of likely buyers when determining whether a security is illiquid.
No more than 10% of a Portfolio's net assets will be held in
securities and other instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades or the equivalent are used to meet daily cash needs
and at various times to hold assets until better investment
opportunities arise. Generally, less than 25% of a Portfolio's
total assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that
amount for a limited period of time.
The investment policies described above may be changed by the
boards.
Lending portfolio securities: Each Portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless holders of a majority of the
outstanding voting securities approve otherwise, loans may not
exceed 30% of a Portfolio's net assets.
Portfolio turnover: Aggressive Growth Portfolio does not expect
its portfolio turnover rate to exceed 200% during its initial
fiscal period. High portfolio turnover can lead to increased
brokerage commissions and taxes.
Valuing Fund shares
The net asset value (NAV) is the value of a single Fund share. It
is the total value of a Fund's investments in the corresponding
Portfolio and other assets, less any liabilities, divided by the
number of shares outstanding. The NAV is the price at which you
purchase Fund shares and the price you receive when you sell your
shares. It usually changes from day to day, and is calculated at
the close of business, normally 3 p.m. Central time, each business
day (any day the New York Stock Exchange is open).
To establish the net assets, all securities held by a Portfolio are
valued as of the close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at
amortized cost.
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board.
<PAGE>
PAGE 18
How to purchase, exchange or redeem shares
How to purchase shares
You may purchase shares of the Funds through an Investment
Management Account (IMA) maintained with American Express Service
Corporation (the Distributor). There is no fee to open an IMA
account. Payment for shares must be made directly to the
Distributor.
Complete an IMA Account Application (available by calling 1-800-
AXP-SERV) and mail the application to American Express Financial
Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Corporations
and other organizations should contact the Distributor to determine
which additional forms may be necessary to open an IMA account.
If you already have an IMA account, you may buy shares in the Funds
as described below and need not open a new account.
You may deposit money into your IMA account by check, wire or many
other forms of electronic funds transfer (securities may also be
deposited). All deposit checks should be made payable to the
Distributor. If you would like to wire funds into your existing
IMA account, please contact the Distributor at 1-800-AXP-SERV for
instructions.
Minimum Fund investment requirements. Your initial investment in a
Fund may be as low as $2,000 ($1,000 for custodial accounts,
Individual Retirement Accounts and certain other retirement plans).
The minimum subsequent investment is $100. These requirements may
be reduced or waived as described in the SAI.
When and at what price shares will be purchased. You must have
money available in your IMA account in order to purchase Fund
shares. If your request and payment (including money transmitted
by wire) are received and accepted by the Distributor before 2 p.m.
Central time, your money will be invested at the net asset value
determined as of the close of business (normally 3 p.m. Central
time) that day. If your request and payment are received after
that time, your request will not be accepted or your payment
invested until the next business day. (See "Valuing Fund shares.")
Methods of purchasing shares. There are three convenient ways to
purchase shares of the Funds. You may choose the one that works
best for you. The Distributor will send you confirmation of your
purchase request.
By phone:
You may use money in your IMA account to make initial and
subsequent purchases. To place your order, call 1-800-AXP-
SERV.
<PAGE>
PAGE 19
By mail:
Written purchase requests (along with any checks) should be
mailed to American Express Financial Direct, P.O. Box 59196,
Minneapolis, MN 55459-0196, and should contain the following
information:
o your IMA account number (or an IMA Account Application)
o the name of the Fund(s) and the dollar amount of shares
you would like purchased
Your check should be made out to the Distributor. It will be
deposited into your IMA account and used, as necessary, to
cover your purchase request.
By systematic purchase:
Once you have opened an IMA account, you may authorize the
Distributor to automatically purchase shares on your behalf
at intervals and in amounts selected by you. (See
"Systematic purchase plans.")
Other purchase information. Each Fund reserves the right, in its
sole discretion and without prior notice to shareholders, to
withdraw or suspend all or any part of the offering made by this
prospectus, to reject purchase requests or to change the minimum
investment requirements. All requests to purchase shares of the
Fund are subject to acceptance by the Fund and the Distributor and
are not binding until confirmed or accepted in writing. The
Distributor will charge a $15 service fee against an investor's IMA
account if his or her investment check is returned because of
insufficient or uncollected funds or a stop payment order.
How to exchange shares
The exchange privilege allows you to exchange your investment in a
Fund at no charge for shares of other funds in the Strategist Fund
Group available in your state. For complete information, including
fees and expenses, read the prospectus carefully before exchanging
into a new fund. Any exchange will involve the redemption of Fund
shares and the purchase of shares in another fund on the basis of
the net asset value per share of each fund. An exchange may result
in a gain or loss and is a taxable event for federal income tax
purposes. When exchanging into another fund you must meet that
fund's minimum investment requirements. Each Fund reserves the
right to modify, terminate or limit the exchange privilege. The
current limit is four exchanges per calendar year. The Distributor
and the Funds reserve the right to reject any exchange, limit the
amount or modify or discontinue the exchange privilege, to prevent
abuse or adverse effects on the Funds and their shareholders.
How to redeem shares
The price at which shares will be redeemed. Shares will be
redeemed at the net asset value per share next determined after
receipt by the Distributor of proper redemption instructions, as
described below.<PAGE>
PAGE 20
Payment of redemption proceeds. Normally, payment for redeemed
shares will be credited directly to your IMA account on the next
business day. However, the Fund may delay payment, but no later
than seven days after the Distributor receives your redemption
instructions in proper form. Redemption proceeds will be held
there or mailed to you depending on the account standing
instructions you selected.
If you recently purchased shares by check, your redemption proceeds
may be held in your IMA account until your check clears (which may
take up to 10 days from the purchase date) before a check is mailed
to you.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Redeeming shares held in an IRA or qualified retirement account may
subject you to certain federal taxes, penalties and reporting
requirements. Consult your tax advisor.
Methods of exchanging or redeeming shares
By phone:
You may exchange or redeem your shares by calling 1-800-AXP-SERV.
Telephone exchanges or redemptions may be difficult to implement
during periods of drastic economic or market changes. If you
experience difficulties in exchanging or redeeming shares by
telephone, you can mail your exchange or redemption requests as
described below.
To properly process your telephone exchange or redemption request
we will need the following information:
o your IMA account number and your name (for exchanges, both
funds must be registered in the same ownership)
o the name of the fund from which you wish to exchange or
redeem shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged,
if applicable
Telephone exchange or redemption requests received before 2 p.m.
(Central time) on any business day, once the caller's identity and
account ownership have been verified by the Distributor, will be
processed at the net asset value determined as of the close of
business (normally 3 p.m. Central time) that day.
By mail:
You may also request an exchange or redemption by writing to
American Express Financial Direct, P.O. Box 59196, Minneapolis, MN
55459-0196. Once an exchange or redemption request is mailed it is
irrevocable and cannot be modified or canceled.
<PAGE>
PAGE 21
To properly process your mailed exchange or redemption request, we
will need a letter from you that contains the following
information:
o your IMA account number
o the name of the fund from which you wish to exchange or
redeem shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged,
if applicable
o a signature of at least one of the IMA account holders in the
exact form specified on the account
Telephone transactions. You may make purchase, redemption and
exchange requests by mail or by calling 1-800-AXP-SERV where
trained representatives are available to answer questions about the
Funds and your account. The privilege to initiate transactions by
telephone is automatically available through your IMA account.
Each Fund will honor any telephone transaction believed to be
authentic and will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. This includes
asking identifying questions and tape recording calls. If these
procedures are not followed, a Fund may be liable for losses due to
unauthorized or fraudulent instructions. Telephone privileges may
be modified or discontinued at any time.
Systematic purchase plans
The Distributor offers a Systematic Purchase Plan (SPP) that allows
you to make periodic investments in the Funds automatically and
conveniently. A SPP can be used as a dollar cost averaging program
and saves you the time and expense associated with writing checks
or wiring funds.
Investment minimums: You can make automatic investments in any
amount, from $100 to $50,000.
Investment methods: Automatic investments are made from your IMA
account and you may select from several different investment
methods to make automatic investment(s):
a) Using uninvested cash in your IMA account: If you elect to
use this option to make your automatic investments,
uninvested cash in your IMA account will be used to make the
investment and, if necessary, shares of your Money Market
Fund will be redeemed to cover the balance of the purchase.
b) Using bank authorization or direct deposit: Bank
authorizations (transfers from a bank checking or savings
account) and direct deposit (automatic deposit of all or a
portion of a payroll or government check) are two of the
investment method options that are available through SPP.
Money is transferred into your IMA account and automatic
investments can be made using these amounts.
<PAGE>
PAGE 22
If you elect to use bank authorizations and/or direct deposit for
your automatic investments, you will select two dates: a transfer
date (when the money is transferred into your IMA account) and your
investment date. The automatic investment date selected may be the
same day of your bank authorization or direct deposit. Your
investment date should be on or close to the transfer/deposit date
in order to minimize uninvested cash in your IMA account.
If you make changes to your bank authorization or direct deposit
date, it may also be necessary to change your automatic investment
date to coincide with the new transfer/deposit date.
Investment frequency: You can select the frequency of your
automatic investments (twice monthly, monthly or quarterly) and
choose either the 5th or the 20th of the month for your automatic
investment dates. Quarterly investments are made on the date
selected in the first month of each quarter (January, April, July
and October).
Changing instructions to an already established plan: If you want
to change the fund(s) selected for your SPP you may do so by
calling 1-800-AXP-SERV, or by sending written instructions clearly
outlining the changes to American Express Financial Direct, P.O.
Box 59196, Minneapolis, MN 55459-0196. Written notification must
include the following:
o The funds with SPP that you want to cancel
o The newly selected fund(s) in which you want to begin
making automatic investments and the amount to be
invested in each fund
o The investment frequency and investment dates for your
new automatic investments
Information on changing bank authorization and direct deposit
instructions is included in the Systematic Purchase Plan Terms and
Conditions brochure which you will receive after enrolling in SPP.
Terminating your SPP. If you wish to terminate your SPP, you may
call 1-800-AXP-SERV, or send written instructions to American
Express Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-
0196.
Terminating bank authorizations and direct deposit. If you wish to
terminate your bank authorizations, you may do so at any time by
notifying American Express Financial Direct in writing. You must
notify your employer or government agency to cancel direct deposit.
Your bank authorization and/or direct deposit will not
automatically terminate when you cancel your SPP.
IMPORTANT: If you are canceling your bank authorizations and/or
direct deposit and you wish to cancel your SPP, you must also
provide instructions stating that the Distributor should cancel
your SPP. You may notify the Distributor by sending written
instructions to the address above or telephoning 1-800-AXP-SERV. <PAGE>
PAGE 23
Your systematic investments will continue using IMA account assets
if the Distributor does not receive notification to terminate your
systematic investments as well.
To avoid procedural difficulties, the Distributor should receive
instructions to change or terminate your SPP or bank authorizations
at least 10 days prior to your scheduled investment date.
Additional information. This information is only a summary of the
Systematic Purchase Plan Terms and Conditions brochure that you
will receive if you choose to enroll in SPP. Please read it
carefully and keep it for future reference.
Other important information
Minimum balance and account requirements. Each Fund reserves the
right to redeem your shares if, as a result of redemptions, the
aggregate value of your holdings in the Fund drops below $1,000
($500 in the case of custodial accounts, IRAs and other retirement
plans). You will be notified in writing 30 days before the Fund
takes such action to allow you to increase your holdings to the
minimum level. If you close your IMA account, the Fund will
automatically redeem your shares.
Wire transfers to your bank. Funds can be wired from your IMA
account to your bank account. Call the Distributor for additional
information on wire transfers. A $15 service fee will be charged
against your IMA account for each wire sent.
No person has been authorized to give any information or to make
any representations not contained in this prospectus in connection
with the offering being made by this prospectus and, if given or
made, such information or representation must not be relied upon as
having been authorized by the Funds or their Distributor. This
prospectus does not constitute an offering by the Funds or by the
Distributor in any jurisdiction in which such offering may not be
lawfully made.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
you will receive these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
<PAGE>
PAGE 24
Quick telephone reference
American Express Financial Direct Team
Fund performance, objectives and account inquiries, redemptions and
exchanges, dividend payments or reinvestments and automatic payment
arrangements
1-800-AXP-SERV
TTY Service
For the hearing impaired
1-800-710-5260
Distributions and taxes
As a shareholder you are entitled to your share of a Fund's net
income and any net gains realized on its investments. Each Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
Investment income is allocated to a Fund by its corresponding
Portfolio, less direct and allocated expenses. Each Fund's net
realized capital gains or losses, if any, consist of the net
realized capital gains or losses allocated to the Fund from its
corresponding Portfolio. A Fund's net investment income from
dividends and interest is distributed to you by the end of the
calendar year as dividends. Short-term capital gains are
distributed at the end of the calendar year and are included in net
investment income. Long-term capital gains are realized whenever a
security held for more than one year is sold for a higher price
than was paid for it. A Fund will offset any net realized capital
gains by any available capital loss carryovers. The net realized
capital gains, if any, are distributed at the end of the calendar
year as capital gain distributions. Before they're distributed,
both net investment income and net long-term capital gains are
included in the value of each share. After they're distributed,
the value of each share drops by the per-share amount of the
distribution. (If your distributions are reinvested, the total
value of your holdings will not change.)
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of a Fund, unless you request the
Fund in writing or by phone to pay distributions to you in cash.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
<PAGE>
PAGE 25
Taxes
Growth and Growth Trends Funds have received a Private Letter
Ruling from the Internal Revenue Service stating that, for purposes
of the Internal Revenue Code, each Fund will be regarded as
directly holding its allocable share of the income and gain
realized by the Portfolio. Special Growth Fund is in the process
of obtaining this same Private Letter Ruling.
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in the
year the Fund declares them regardless of whether you take them in
cash or reinvest them.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a net investment income or a capital gain
distribution. You pay the full pre-distribution price for the
shares, then receive a portion of your investment back as a
distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
<PAGE>
PAGE 26
<TABLE>
<CAPTION>
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
<S> <C>
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors
Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
</TABLE>
For details on TIN requirements, call 1-800-AXP-SERV for federal
Form W-9, "Request for Taxpayer Identification Number and
Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to each Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Funds and Portfolios are organized
Each Fund is a series of Strategist Growth Fund, Inc., an open-end
management investment company, as defined in the Investment Company
Act of 1940. The Company was incorporated on Sept. 1, 1995 in
Minnesota. The Company's headquarters are at IDS Tower 10,
Minneapolis, MN 55440-0010.
Shares
The Company currently is composed of three Funds, each issuing its
own series of capital stock. Each Fund is owned by its
shareholders. All shares issued by a Fund are of the same class --
capital stock. Par value is 1 cent per share. Both full and
fractional shares can be issued.
<PAGE>
PAGE 27
The shares of each Fund making up the Company represent an interest
in that Fund's assets only (and profits or losses), and, in the
event of liquidation, each share of a Fund would have the same
rights to dividends and assets as every other share of that Fund.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Funds have cumulative voting rights.
Shareholder meetings
The Company does not hold annual shareholder meetings. However,
the board members may call meetings at their discretion, or on
demand by holders of 10% or more of the Company's outstanding
shares, to elect or remove board members.
Special considerations regarding master/feeder structure
Each Fund pursues its goals by investing its assets in a master
fund called a Portfolio. This means that a Fund does not invest
directly in securities; rather the Portfolio invests in and manages
its portfolio of securities. Each Portfolio is a separate
investment company, but it has the same goals and investment
policies as the Fund. The goals and investment policies of each
Portfolio are described under the captions "Investment policies and
risks" and "Facts about investments and their risks." Additional
information on investment policies may be found in the SAI.
Board considerations: The board considered the advantages and
disadvantages of investing each Fund's assets in a Portfolio. The
board believes that the master/feeder structure will be in the best
interest of each Fund and its shareholders since it offers the
opportunity for economies of scale. A Fund may redeem all of its
assets from the Portfolio at any time. Should the board determine
that it is in the best interest of a Fund and its shareholders to
terminate its investment in the Portfolio, it would consider hiring
an investment advisor to manage the Fund's assets, or other
appropriate options. A Fund would terminate its investment if the
Portfolio changed its goals, investment policies or restrictions
without the same change being approved by the Fund.
Other feeders: Each Portfolio sells securities to other affiliated
mutual funds and may sell securities to non-affiliated investment
companies and institutional accounts (known as feeders). These
feeders buy the Portfolio's securities on the same terms and
conditions as the Fund and pay their proportionate share of the
Portfolio's expenses. However, their operating costs and sales
charges are different from those of the Fund. Therefore, the
investment returns for other feeders are different from the returns
of a Fund. Information about other feeders may be obtained by
calling a service representative at 1-800-437-3133.
<PAGE>
PAGE 28
Each feeder that invests in a Portfolio is different and activities
of its investors may adversely affect all other feeders, including
the Fund. For example, if one feeder decides to terminate its
investment in a Portfolio, the Portfolio may elect to redeem in
cash or in kind. If cash is used, the Portfolio will incur
brokerage, taxes and other costs in selling securities to raise the
cash. This may result in less investment diversification if entire
investment positions are sold, and it also may result in less
liquidity among the remaining assets. If in-kind distribution is
made, a smaller pool of assets remains that may affect brokerage
rates and investment options. In both cases, expenses may rise
since there are fewer assets to cover the costs of managing those
assets.
Shareholder meetings: Whenever a Portfolio proposes to change a
fundamental investment policy or to take any other action requiring
approval of its security holders, the Fund will hold a shareholder
meeting. The Fund will vote for or against the Portfolio's
proposals in proportion to the vote it receives for or against the
same proposals from its shareholders.
Board members and officers
Shareholders of the Company elect a board that oversees the
operations of the Funds and chooses the Company's officers. The
Company's officers are responsible for day-to-day business
decisions based on policies set by the board. Information about
the board members and officers of both the Company and the Trust is
found in the SAI under the caption "Board Members and Officers."
Investment manager
Each Portfolio pays the Advisor for managing its assets. Each Fund
pays its proportionate share of the fee. Under the Investment
Management Services Agreement, the Advisor is paid a fee for these
services based on the average daily net assets of each Portfolio,
as follows:
Growth Portfolio
Growth Trends Portfolio Aggressive Growth Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.600% First $0.25 0.650%
Next 1.0 0.575 Next 0.25 0.625
Next 1.0 0.550 Next 0.50 0.600
Next 3.0 0.525 Next 1.0 0.575
Over 6.0 0.500 Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500
For Growth Portfolio and Growth Trends Portfolio, these fees may be
increased or decreased by a performance adjustment based on a
comparison of performance to the Lipper Growth Fund Index. The
maximum adjustment is 0.12% of each Portfolio's average daily net
assets on an annual basis.
<PAGE>
PAGE 29
Under the agreement, each Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses.
Administrator and transfer agent
The Funds pay the Advisor for shareholder accounting and transfer
agent services under two agreements. The first agreement, the
Administrative Services Agreement, has a declining annual rate that
decreases as assets increase. For Growth Fund and Growth Trends
Fund, the fee ranges from 0.05% to 0.03%. For Special Growth Fund,
the fee ranges from 0.06% to 0.03%. The second agreement, the
Transfer Agency Agreement, has an annual fee for each Fund of $20
per shareholder account.
Distributor
The Funds sell shares through the Distributor under a Distribution
Agreement. The Distributor is located at P.O. Box 59196,
Minneapolis, MN 55459-0196 and is a wholly owned subsidiary of
Travel Related Services, Inc., a wholly owned subsidiary of
American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center, New
York, NY 10285. Financial consultants representing the Distributor
provide information to investors about individual investment
programs, the Funds and their operations, new account applications,
exchange and redemption requests. The Funds reserve the right to
sell shares through other financial intermediaries or
broker/dealers. In that event, the account terms would also be
governed by rules that the intermediary may establish.
To help defray costs, including costs for marketing, sales
administration, training, overhead, direct marketing programs,
advertising and related functions, the Funds pay the Distributor a
distribution fee, also known as a 12b-1 fee. This fee is paid
under a Plan and Agreement of Distribution that follows the terms
of Rule 12b-1 of the Investment Company Act of 1940. Under this
Agreement, each Fund pays a distribution fee at an annual rate of
0.25% of the Fund's average daily net assets for distribution-
related services. This fee will not cover all of the costs
incurred by the Distributor.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation. The Advisor and the Distributor have agreed to waive
certain fees and to absorb certain other Fund expenses until July
31, 1997. Under this agreement, a Fund's total expenses will not
exceed 1.30%.
About the Advisor
The Advisor is located at IDS Tower 10, Minneapolis, MN 55440-0010.
It is a wholly owned subsidiary of American Express Company. The
Portfolios may pay brokerage commissions to broker-dealer
affiliates of the Advisor.
<PAGE>
PAGE 30
Appendix
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments a
Portfolio may use. At various times a Portfolio may use some or
all of these instruments and is not limited to these instruments.
It may use other similar types of instruments if they are
consistent with the Portfolio's investment goal and policies. For
more information on these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy or sell an instrument for
a set price on a future date. A Portfolio may buy and sell options
and futures contracts to manage its exposure to changing interest
rates, security prices and currency exchange rates. Options and
futures may be used to hedge a Portfolio's investments against
price fluctuations or to increase market exposure.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 31
STATEMENT OF ADDITIONAL INFORMATION
FOR
STRATEGIST GROWTH FUND, INC.
Sept. 27, 1996
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the Funds' prospectus and the
financial statements contained in the Annual Report which may be
obtained by calling American Express Financial Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260) or by writing to P.O. Box
59196, Minneapolis, MN 55459-0196.
This SAI is dated Sept. 27, 1996, and it is to be used with the
Funds' prospectus dated Sept. 27, 1996, and the Annual Report for
the fiscal period ended July 31, 1996.
<PAGE>
PAGE 32
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p. 3
Security Transactions.........................................p.14
Brokerage Commissions Paid to Brokers Affiliated
with the Advisor..............................................p.17
Performance Information.......................................p.17
Valuing Fund Shares...........................................p.19
Investing in the Funds........................................p.20
Redeeming Shares..............................................p.21
Pay-out Plans.................................................p.22
Capital Loss Carryover........................................p.23
Taxes.........................................................p.23
Agreements....................................................p.24
Board Members and Officers....................................p.28
Custodian.....................................................p.34
Independent Auditors..........................................p.35
Financial Statements...................p.35 and see Annual Report
Prospectus....................................................p.35
Appendix A: Description of Bond Ratings......................p.36
Appendix B: Foreign Currency Transactions....................p.39
Appendix C: Options and Stock Index Futures Contracts........p.44
Appendix D: Mortgage-Backed Securities.......................p.51
Appendix E: Dollar-Cost Averaging............................p.52
<PAGE>
PAGE 33
ADDITIONAL INVESTMENT POLICIES
Strategist Growth Fund, Inc. (the Company) is a mutual fund with
three series of capital stock representing interests in Strategist
Growth Fund (Growth Fund), Strategist Growth Trends Fund (Growth
Trends Fund) and Strategist Special Growth Fund (Special Growth
Fund) (Growth Fund, Growth Trends Fund and Special Growth Fund are
collectively referred to herein as the Funds, and individually, a
Fund). Each Fund is a diversified mutual fund with its own goals
and investment policies. Each of the Funds seeks to achieve its
goals by investing all of its assets in a corresponding series
(each a Portfolio) of Growth Trust (the Trust), a separate
investment company, rather than by directly investing in and
managing its own portfolio of securities.
Fundamental investment policies adopted by a Fund or Portfolio
cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as defined
in the Investment Company Act of 1940 (the 1940 Act). Whenever a
Fund is requested to vote on a change in the investment policies of
the corresponding Portfolio, the Company will hold a meeting of
Fund shareholders and will cast the Fund's vote as instructed by
the shareholders.
Notwithstanding any of the Fund's other investment policies, a Fund
may invest its assets in an open-end management investment company
having substantially the same investment objectives, policies and
restrictions as the Fund for the purpose of having those assets
managed as part of a combined pool.
Investment Policies applicable to Growth Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless holders of a
majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
<PAGE>
PAGE 34
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the Portfolio's total assets, based
on current market value at time of purchase, can be invested in any
one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (the Advisor), to the board members and
officers of the Advisor or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or <PAGE>
PAGE 35
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in stock index futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest more than 10% of its assets in securities of investment
companies. Under one state's law, the Portfolio is limited to
investments in the open market where no commission or profit to a
sponsor or dealer results from the purchase other than the
customary broker's commission, or when the purchase is part of a
plan or merger, consolidation, reorganization or acquisition.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines <PAGE>
PAGE 36
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc.
(Moody's) or Standard & Poor's Corporation (S&P) or the equivalent
and may use repurchase agreements with broker-dealers registered
under the Securities Exchange Act of 1934 and with commercial
banks. A risk of a repurchase agreement is that if the seller
seeks the protection of the bankruptcy laws, the Portfolio's
ability to liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in
the form of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as
the securities into which they may be converted. ADRs are <PAGE>
PAGE 37
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
the prospectus.
Investment Policies applicable to Growth Trends Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless holders of a
majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Concentrate in any one industry. According to the present
interpretation by the SEC, this means no more than 25% of the
Portfolio's total assets, based on current market value at time of
purchase, can be invested in any one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
<PAGE>
PAGE 38
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to the Advisor, to the board
members and officers of the Advisor or to its own board members and
officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in stock index futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest more than 10% of its total assets in securities of
investment companies. Under one state's law, the Portfolio is
limited to investments in the open market where no commission or <PAGE>
PAGE 39
profit to a sponsor or dealer results from the purchase other than
the customary broker's commission, or when the purchase is part of
a plan or merger, consolidation, reorganization or acquisition.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits, and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors, such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
<PAGE>
PAGE 40
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's or S&P or the equivalent and may
use repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in
the form of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as
the securities into which they may be converted. ADRs are
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
the prospectus.
Investment Policies applicable to Aggressive Growth Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless holders of a
majority of the outstanding shares agree to make the change, the
Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has no present intention to
borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
<PAGE>
PAGE 41
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling financial instruments
(such as options and futures contracts) or from investing in
securities or other instruments backed by, or whose value is
derived from, physical commodities.
'Make a loan of any part of its assets to the Advisor, to the board
members and officers of the Advisor or to its own board members and
officers.
'Lend Portfolio securities in excess of 30% of its net assets. In
making loans, the Portfolio receives the market price in cash, U.S.
government securities, letters of credit or such other collateral
as may be permitted by regulatory agencies and approved by the
board. If the market price of the loaned securities goes up, the
Portfolio will get additional collateral when required or return
the securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
'Concentrate in any industry except in either or both the energy or
utilities industries. According to the present interpretation by
the SEC, this means no more than 25% of the Portfolio's total
assets, based on current market value, can be invested in any one
industry other than the energy and/or utility industries.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in options, futures contracts and
other financial instruments.<PAGE>
PAGE 42
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
policy, collateral arrangements for margin deposits on a futures
contract are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest more than 10% of its total assets in securities of
investment companies. Under one state's law, the Portfolio is
limited to investments in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than
the customary broker's commission, or when the purchase is part of
a plan or merger, consolidation, reorganization or acquisition.
'Invest in a company to control or manage it.
'Invest in exploration or development programs such as oil, gas or
mineral leases.
'Purchase securities of an issuer if the board members and officers
of the Portfolio and of the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Portfolio and the Advisor
who own more than 0.5% of an issuer's securities are added
together, and if in total they own more than 5%, the Portfolio will
not purchase securities of that issuer.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and other
instruments that are illiquid. For purposes of this policy
illiquid securities include some privately placed securities,
public securities and Rule 144A securities that for one reason or
another may no longer have a readily available market, repurchase
agreements with maturities greater than seven days, non-negotiable
fixed-time deposits and over-the-counter options.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
<PAGE>
PAGE 43
forward commitments to purchase the securities. When-issued
securities or forward commitments are subject to market
fluctuations and they may affect the Portfolio's total assets the
same as owned securities.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only, fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant
factors including frequency of trades, the number of dealers
willing to purchase or sell the security and the nature of
marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investment in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's or S&P or the equivalent and may
use repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities included in the S&P
500 that are traded in the form of American Depository Receipts
(ADRs). ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities of
foreign issuers. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in the U.S.
securities market. Thus, these securities are not denominated in
the same currency as the securities into which they may be
converted. ADRs are considered to be foreign investments and thus
subject to the risks and investment limitation set forth under <PAGE>
PAGE 44
"Foreign investments" in the prospectus.
For a discussion of bond ratings, see Appendix A. For a discussion
on foreign currency transactions, see Appendix B. For a discussion
on options and stock index futures contracts, see Appendix C. For
a discussion on mortgage-backed securities, see Appendix D. For a
discussion on dollar-cost averaging, see Appendix E.
SECURITY TRANSACTIONS
Subject to policies set by the board, the Advisor is authorized to
determine, consistent with each Portfolio's investment goal and
policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, the
Advisor has been directed to use its best efforts to obtain the
best available price and most favorable execution except where
otherwise authorized by the board. In selecting broker-dealers to
execute transactions, the Advisor may consider the price of the
security, including commission or mark-up, the size and difficulty
of the order, the reliability, integrity, financial soundness and
general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services
provided by the broker.
The Advisor has a strict Code of Ethics that prohibits its
affiliated personnel from engaging in personal investment
activities that compete with or attempt to take advantage of
planned portfolio transactions for any fund or trust for which it
acts as investment manager. The Advisor carefully monitors
compliance with its Code of Ethics.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has adopted a
policy authorizing the Advisor to do so to the extent authorized by
law, if the Advisor determines, in good faith, that such commission
is reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or the Advisor's overall responsibilities to
the portfolios advised by the Advisor.
Research provided by brokers supplements the Advisor's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. The Advisor has obtained, and in
the future may obtain, computer hardware from brokers, including <PAGE>
PAGE 45
but not limited to personal computers that will be used exclusively
for investment decision-making purposes, which include the
research, portfolio management and trading functions and other
services to the extent permitted under an interpretation by the
SEC.
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge, the
Advisor must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits the
Advisor to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research
services it has provided. The second procedure permits the
Advisor, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded in the over-the-
counter market to a firm that does not make a market in that
security. The commission paid generally includes compensation for
research services. The third procedure permits the Advisor, in
order to obtain research and brokerage services, to cause the
Portfolio to pay a commission in excess of the amount another
broker might have charged. The Advisor has advised the Trust it is
necessary to do business with a number of brokerage firms on a
continuing basis to obtain such services as the handling of large
orders, the willingness of a broker to risk its own money by taking
a position in a security, and the specialized handling of a
particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some Portfolio
transactions may not be effected at the lowest commission, but the
Advisor believes it may obtain better overall execution. The
Advisor has assured the Trust that under all three procedures the
amount of commission paid will be reasonable and competitive in
relation to the value of the brokerage services performed or
research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if, in the professional opinion of the person responsible
for selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by the Advisor in providing advice to all the Trusts in
the Preferred Master Trust Group, their corresponding Funds and
other accounts advised by the Advisor, even though it is not
possible to relate the benefits to any particular fund, portfolio
or account.
Each investment decision made for a Portfolio is made independently
from any decision made for other portfolios, funds or accounts
advised by the Advisor or any of its subsidiaries. When a
Portfolio buys or sells the same security as another portfolio,
fund or account, the Advisor carries out the purchase or sale in a
way the Trust agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or <PAGE>
PAGE 46
sold by the Portfolio, the Portfolio hopes to gain an overall
advantage in execution. The Advisor has assured the Trust it will
continue to seek ways to reduce brokerage costs.
On a periodic basis, the Advisor makes a comprehensive review of
the broker-dealers it uses and the overall reasonableness of their
commissions. The review evaluates execution, operational
efficiency and research services.
For the fiscal period from May 13, 1996, to July 31, 1996, Growth
Portfolio and Growth Trends Portfolio paid total brokerage
commissions of $230,628 and $1,488,847, respectively. Aggressive
Growth Portfolio began operations on Aug. 19, 1996. Substantially
all firms through whom transactions were executed provide research
services.
No transactions were directed to brokers because of research
services they provided to a Portfolio.
As of the fiscal period ended July 31, 1996, each Portfolio held
securities of its regular brokers or dealers or of the parents of
those brokers or dealers that derived more than 15% of gross
revenue from securities-related activities as presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Period
Growth Portfolio
Merrill Lynch $36,225,000
Morgan Stanley Group 9,964,093
Growth Trends Portfolio
Dean Witter $44,496,830
Goldman Sachs 21,494,070
Merrill Lynch 3,686,576
Morgan Stanley Group 64,243,321
NationsBank 22,999,104
For the fiscal periods 1996 and 1995, the portfolio turnover rates
were 22% and 30% for Growth Portfolio and 41% and 54% for Growth
Trends Portfolio. Aggressive Growth Portfolio does not expect its
portfolio turnover rate to exceed 200% during its initial fiscal
period. For periods prior to the commencement of operations of
Growth Portfolio and Growth Trends Portfolio, turnover rates are
based on the turnover rates of the corresponding IDS Funds, which
transferred all of their assets to the Portfolios on May 13, 1996.
A high turnover rate (in excess of 100%) results in higher fees and
expenses.
<PAGE>
PAGE 47
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR
Affiliates of American Express Company (American Express) (of which
the Advisor is a wholly owned subsidiary) may engage in brokerage
and other securities transactions on behalf of the Portfolios
according to procedures adopted by the board and to the extent
consistent with applicable provisions of the federal securities
laws. The Advisor will use an American Express affiliate only if
(i) the Advisor determines that the Portfolio will receive prices
and executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for the Portfolio and (ii) the affiliate charges the Portfolio
commission rates consistent with those the affiliate charges
comparable unaffiliated customers in similar transactions and if
such use is consistent with terms of the Investment Management
Services Agreement.
The Advisor may direct brokerage to compensate an affiliate. The
Advisor will receive research on South Africa from New Africa
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send
research to the Advisor and in turn the Advisor will direct trades
to a particular broker. The broker will have an agreement to pay
New Africa Advisors. All transactions will be on a best execution
basis. Compensation received will be reasonable for the services
rendered.
Information about brokerage commissions paid by Growth Portfolio
and Growth Trends Portfolio to brokers affiliated with the Advisor
for the fiscal period from May 13, 1996 to July 31, 1996 is
contained in the following table:
<TABLE>
<CAPTION>
For the Fiscal Period from May 13, 1996 to July 31, 1996,
Aggregate Percent of
Dollar Aggregate Dollar
Amount of Percent of Amount of
Nature Commissions Aggregate Transactions
of Paid to Brokerage Involving Payment
Portfolio Broker Affiliation Broker Commissions of Commissions
<S> <C> <C> <C> <C> <C>
Growth American
Enterprise (1) $189,172 16.93% N/A
Investment
Growth American
Trends Enterprise (1) 66,667 1.04 N/A
Investment
</TABLE>
(1) Wholly owned subsidiary of the Advisor.
PERFORMANCE INFORMATION
A Fund may quote various performance figures to illustrate past
performance. Average annual total return used by the Funds will be
based on standardized methods of computing performance as required
by the SEC. An explanation of the methods used by the Funds to
compute performance follows below.
<PAGE>
PAGE 48
Average annual total return
A Fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
A Fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
a Fund over a specified period of time according to the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
In its sales material and other communications, a Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
On May 13, 1996, IDS Growth Fund and IDS New Dimensions Fund (the
IDS Funds), two open-end investment companies managed by the
Advisor, transferred all of their respective assets to Growth
Portfolio and Growth Trends Portfolio, respectively, in exchange
for units of the Portfolios. Also on May 13, 1996, Growth Fund and
Growth Trends Fund transferred all of their respective assets to
the corresponding Portfolio of the Trust in connection with the
commencement of their operations.
On March 20, 1995, the IDS Funds converted to a multiple class
structure pursuant to which three classes of shares are offered:
Class A, Class B and Class Y. Class A shares are sold with a 5%<PAGE>
PAGE 49
sales charge, a 0.175% service fee and no 12b-1 fee. Performance
quoted by Growth Fund and Growth Trends Fund is based on the
performance and yield of the corresponding IDS Fund prior to March
20, 1995 and to Class A shares of the corresponding IDS Fund from
March 20, 1995 through May 13, 1996, adjusted for differences in
sales charge. The historical performance for these periods has not
been adjusted for any difference between the estimated aggregate
fees and expenses of the Funds and historical fees and expenses of
the IDS Funds.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day and
dividing that figure by the number of shares outstanding at the end
of the previous day.
On Aug. 1, 1996, the first business day following the end of the
fiscal period, the computation looked like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
Fund shareholder transactions at end of previous day of one share
<S> <C> <C> <C> <C> <C>
Growth $23,475,200 divided by 993,449 equals $23.63
Growth Trends 24,956,901 1,326,084 18.82
</TABLE>
In determining net assets before shareholder transactions, the
securities held by each Fund's corresponding Portfolio are valued
as follows as of the close of business of the New York Stock
Exchange (the Exchange):
'Securities, except bonds other than convertibles, traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the
closing bid and asked prices, looking first to the bid and asked
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the Exchange. Foreign securities <PAGE>
PAGE 50
quoted in foreign currencies are translated into U.S. dollars at
the current rate of exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close
of the Exchange that will not be reflected in the computation of a
Portfolio's net asset value. If events materially affecting the
value of such securities occur during such period, these securities
will be valued at their fair value according to procedures decided
upon in good faith by the board.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value as
determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When
possible, bonds are valued by a pricing service independent from
the Portfolio. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
The Exchange, American Express Service Corporation (AESC) and each
of the Funds will be closed on the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
INVESTING IN THE FUNDS
A Fund's minimum initial investment requirement is $2,000 ($1,000
for Custodial Accounts, Individual Retirement Accounts and certain
other retirement plans). Subsequent investments of $100 or more
may be made. These minimum investment requirements may be changed
at any time and are not applicable to certain types of investors.
The Securities Investor Protection Corporation (SIPC) will provide
account protection, in an amount up to $500,000, for securities
including Fund shares (up to $100,000 protection for cash), held in
an Investment Management Account maintained with AESC. Of course,
SIPC account protection does not protect shareholders from share
price fluctuations.
<PAGE>
PAGE 51
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Funds to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of a Portfolio's securities is not reasonably practicable
or it is not reasonably practicable for a Fund to determine the
fair value of its net assets, or
'The SEC, under the provisions of the 1940 Act, as amended,
declares a period of emergency to exist.
Should a Fund stop selling shares, the board members may make a
deduction from the value of the assets held by the Fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all shareholders.
Redemptions by a Fund
A Fund reserves the right to redeem, involuntarily, the shares of
any shareholder whose account has a value of less than a minimum
amount but only where the value of such account has been reduced by
voluntary redemption of shares. Until further notice, it is the
policy of a Fund not to exercise this right with respect to any
shareholder whose account has a value of $1,000 or more ($500 in
the case of Custodial accounts, IRA's and other retirement plans).
In any event, before a Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that
the value of the shares in the account is less than the minimum
amount and allow the shareholder 30 days to make an additional
investment in an amount which will increase the value of the
shareholder's accounts to at least $1,000.
Redemptions in Kind
The Company has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates a Fund to redeem shares in cash, with respect
to any one shareholder during any 90-day period, up to the lesser
of $250,000 or 1% of the net assets of a Fund at the beginning of
such period. Although redemptions in excess of this limitation
would normally be paid in cash, a Fund reserves the right to make
payments in whole or in part in securities or other assets in case
of an emergency, or if the payment of such redemption in cash would
be detrimental to the existing shareholders of a Fund as determined
by the board. In such circumstances, the securities distributed <PAGE>
PAGE 52
would be valued as set forth in the Prospectus. Should a Fund
distribute securities, a shareholder may incur brokerage fees or
other transaction costs in converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. While the plans differ
on how the pay-out is figured, they all are based on the redemption
of your investment. Net investment income dividends and any
capital gain distributions will automatically be reinvested, unless
you elect to receive them in cash. If you are redeeming a tax-
qualified plan account for which American Express Trust Company
acts as custodian, you can elect to receive your dividends and
other distributions in cash when permitted by law. If you redeem
an IRA or a qualified retirement account, certain restrictions,
federal tax penalties and special federal income tax reporting
requirements may apply. You should consult your tax advisor about
this complex area of the tax law.
To start any of these plans, please submit an authorization form
supplied by American Express Financial Direct. For a copy, write
or call American Express Financial Direct, 1-800-AXP-SERV (TTY: 1-
800-710-5260), P.O. Box 59196, Minneapolis, MN 55459-0196. Your
authorization must be received in the Minneapolis headquarters at
least five days before the date you want your payments to begin.
The initial payment must be at least $50. Payments will be made on
a monthly, bimonthly, quarterly, semiannual or annual basis. Your
choice is effective until you change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. The Funds reserve
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete re-
demption of all shares in your account with the Fund by the end of
the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value for each payment and that amount will be sent to
you. The length of time these payments continue is based on the
number of shares in your account with the Fund.
<PAGE>
PAGE 53
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until your account with the Fund is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in the account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account with the Fund is $10,000 on
the payment date.
CAPITAL LOSS CARRYOVER
For federal income tax purposes, Growth Fund and Growth Trends Fund
had total capital loss carryovers of $2,120,986, and $1,395,162,
respectively, at July 31, 1996, that if not offset by subsequent
capital gains will expire in 2004.
It is unlikely that the board will authorize a distribution of any
net realized capital gains until the available capital loss
carryover has been offset or has expired except as required by
Internal Revenue Service rules.
TAXES
Dividends received should be treated as dividend income for federal
income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Funds' dividend
that is attributable to dividends the Funds have received from
domestic (U.S.) securities. For the fiscal period from May 13,
1996 to July 31, 1996, no distributions were paid for Growth Fund
or Growth Trends Fund.
Capital gain distributions, if any, received by individual and
corporate shareholders, should be treated as long-term capital
gains regardless of how long they owned their shares. Short-term
capital gains earned by the Funds are paid to shareholders as part
of their ordinary income dividend and are taxable as ordinary
income, not capital gain.
You may be able to defer taxes on current income from a Fund by
investing through an IRA, 401(k) plan account or other qualified
retirement account. If you move all or part of a non-qualified
investment in a Fund to a qualified account, this type of exchange
is considered a sale of shares. You pay no sales charge, but the
exchange may result in a gain or loss for tax purposes, or excess
contributions under IRA or qualified plan regulations.
<PAGE>
PAGE 54
Under federal tax law, by the end of a calendar year a Fund must
declare and pay dividends representing 98% of ordinary income for
that calendar year and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. A Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. Each Fund intends to comply with
federal tax law and avoid any excise tax.
A Fund may be subject to U.S. taxes resulting from holdings in a
passive foreign investment company (PFIC). A foreign corporation
is a PFIC when 75% or more of its gross income for the taxable year
is passive income or if 50% or more of the average value of its
assets consists of assets that produce or could produce passive
income.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor as to the
application of federal, state and local income tax laws to Fund
distributions.
AGREEMENTS
Investment Management Services Agreement
The Trust, on behalf of each Portfolio, has an Investment
Management Services Agreement with the Advisor. For its services,
the Advisor is paid a fee from the assets of each Portfolio, based
upon the following schedule:
Growth Portfolio
Growth Trends Portfolio Aggressive Growth Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.600% First $0.25 0.650%
Next 1.0 0.575 Next 0.25 0.625
Next 1.0 0.550 Next 0.50 0.600
Next 3.0 0.525 Next 1.0 0.575
Over 6.0 0.500 Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500
On July 31, 1996, the daily rates applied to the Portfolios' net
assets on an annual basis were equal to 0.584% for Growth Portfolio
and 0.535% for Growth Trends Portfolio. The fee is calculated for
each calendar day on the basis of net assets at the close of
business two days prior to the day for which the calculation is
made.
<PAGE>
PAGE 55
Before the fee based on the asset charge is paid for Growth
Portfolio and Growth Trends Portfolio, it is increased or decreased
based on investment performance compared to the Lipper Growth Fund
Index (the Index). Solely for purposes of calculating the
performance incentive adjustment, the Index is compared to the
performance of Class A shares of another fund that invests in the
Portfolio (the comparison fund). For Growth Portfolio and Growth
Trends Portfolio, the comparison funds are IDS Growth Fund and IDS
New Dimensions Fund, respectively. The adjustment, determined
monthly, will be calculated using the percentage point difference
between the change in the net asset value of one share of the
comparison fund and the change in the Index. The performance of
the comparison fund is measured by computing the percentage
difference between the opening and closing net asset value of one
share, as of the last business day of the period selected for
comparison, adjusted for dividend or capital gain distributions
which are treated as reinvested at the end of the month during
which the distribution was made. The performance of the Index for
the same period is established by measuring the percentage
difference between the beginning and ending Index for the
comparison period. The performance is adjusted for dividend or
capital gain distributions (on the securities which comprise the
Index), which are treated as reinvested at the end of the month
during which the distribution was made. One percentage point will
be subtracted from the calculation to help assure that incentive
adjustments are attributable to the Advisor's management abilities
rather than random fluctuations and the result multiplied by 0.01%.
That number will be multiplied times the Portfolio's average net
assets for the comparison period and then divided by the number of
months in the comparison period to determine the monthly
adjustment.
Where the comparison fund performance exceeds that of the Index,
the base fee will be increased. Where the performance of the Index
exceeds the performance of the comparison fund, the base fee will
be decreased. The maximum monthly increase or decrease will be
0.12% of average net assets on an annual basis.
The 12 month comparison period rolls over with each succeeding
month, so that it always equals 12 months, ending with the month
for which the performance adjustment is being computed. For the
fiscal period from May 13, 1996 to July 31, 1996, the adjustment
increased the fee by $330,001 for Growth Portfolio and by
$1,130,056 for Growth Trends Portfolio.
The management fee is paid monthly. For the fiscal period from May
13, 1996 to July 31, 1996, the total amount paid was $3,271,780 for
Growth Portfolio and $11,544,754 for Growth Trends Portfolio.
Aggressive Growth Portfolio began operations on Aug. 19, 1996.
Under the Agreement, a Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; office expenses; consultants' fees; compensation of
board members, officers and employees; corporate filing fees;<PAGE>
PAGE 56
organizational expenses; expenses incurred in connection with
lending portfolio securities; and expenses properly payable by the
Portfolios, approved by the board. For the fiscal period from May
13, 1996 to July 31, 1996, the Portfolios paid nonadvisory expenses
of $48,041 for Growth Portfolio and $279,663 for Growth Trends
Portfolio. Aggressive Growth Portfolio began operations on Aug.
19, 1996.
Administrative Services Agreement
The Company, on behalf of each Fund, has an Administrative Services
Agreement with the Advisor. Under this agreement, each Fund pays
the Advisor for providing administration and accounting services.
The fee is payable from the assets of each Fund and is calculated
as follows:
Growth Fund
Growth Trends Fund Special Growth Fund
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.050% First $0.25 0.060%
Next 1.0 0.045 Next 0.25 0.055
Next 1.0 0.040 Next 0.50 0.050
Next 3.0 0.035 Next 1.0 0.045
Over 6.0 0.030 Next 1.0 0.040
Next 3.0 0.035
Over 6.0 0.030
On July 31, 1996, the daily rates applied to the Funds' net assets
on an annual basis were equal to 0.06% for Growth Fund and 0.05%
for Growth Trends Fund. The fee is calculated for each calendar
day on the basis of net assets as of the close of business two
business days prior to the day for which the calculation is made.
For the fiscal period from May 13, 1996 to July 31, 1996, the Funds
paid fees of $2,600 for Growth Fund and $2,683 for Growth Trends
Fund. Special Growth Fund began operations on Aug. 19, 1996.
Under the agreement, each Fund also pays taxes; audit and certain
legal fees; registration fees for shares; office expenses;
consultant's fees; compensation of board members, officers and
employees; corporate filing fees; organizational expenses; and
expenses properly payable by each Fund approved by the board.
Transfer Agency Agreement
The Company, on behalf of each Fund, has a Transfer Agency
Agreement with the Advisor. This agreement governs the
responsibility for administering and/or performing transfer agent
functions, for acting as service agent in connection with dividend
and distribution functions and for performing shareholder account
administration agent functions in connection with the issuance,
exchange and redemption or repurchase of the Funds' shares. The
fee is determined by multiplying the number of shareholder accounts
at the end of the day by a rate of $20 per year and dividing by the
number of days in the year. The fees paid to the Advisor may be<PAGE>
PAGE 57
changed from time to time upon agreement of the parties without
shareholder approval. For the fiscal period from May 13, 1996 to
July 31, 1996, the Funds paid fees of $104 for Growth Fund and $72
for Growth Trends Fund. Special Growth Fund began operations on
Aug. 19, 1996.
Placement Agency Agreement
Pursuant to a Placement Agency Agreement, the Distributor acts as
placement agent of the units of the Trust.
Plan and Agreement of Distribution/Distribution Agreement
To help the Distributor defray the costs of distribution and
servicing, the Company and the Distributor have entered into a Plan
and Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing Fund shares. Under the Plan, the
Distributor is paid a fee at an annual rate of 0.25% of a Fund's
average daily net assets.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time with
respect to a Fund by vote of a majority of board members who are
not interested persons of the Company and have no direct or
indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or by vote of a majority of the
outstanding voting securities of a Fund or by the Distributor. The
Plan (or any agreement related to it) will terminate in the event
of its assignment, as that term is defined in the 1940 Act, as
amended. The Plan may not be amended to increase the amount to be
spent for distribution without shareholder approval, and all
material amendments to the Plan must be approved by a majority of
the board members, including a majority of the board members who
are not interested persons of the Company and who do not have a
financial interest in the operation of the Plan or any agreement
related to it. The selection and nomination of such disinterested
board members is the responsibility of such disinterested board
members. No board member who is not an interested person has any
direct or indirect financial interest in the operation of the Plan
or any related agreement. For the fiscal period from May 13, 1996
to July 31, 1996, the Funds paid fees of $12,999 for Growth Fund
and $13,414 for Growth Trends Fund. Special Growth Fund began
operations on Aug. 19, 1996.
Total fees and expenses
Total combined fees and nonadvisory expenses of both the Fund and
the Portfolio cannot exceed the most restrictive applicable state
limitation. Currently, the most restrictive applicable state
expense limitation, subject to exclusion of certain expenses, is
2.5% of the first $30 million of a Fund's average daily net assets,<PAGE>
PAGE 58
2% of the next $70 million and 1.5% of average daily net assets
over $100 million, on an annual basis. At the end of each month,
if the fees and expenses of a Fund exceed this limitation for the
Fund's fiscal year in progress, the Advisor will assume all
expenses in excess of the limitation. The Advisor then may bill
the Fund for such expenses in subsequent months up to the end of
that fiscal year, but not after that date. No interest charges are
assessed by the Advisor for expenses it assumes. For the fiscal
period from May 13, 1996 to July 31, 1996, the Funds paid total
fees and nonadvisory expenses of $68,418 for Growth Fund and
$70,812 for Growth Trends Fund. Special Growth Fund began
operations on Aug. 19, 1996. The Advisor and the Distributor have
agreed to waive certain fees and to absorb certain other Fund
expenses until July 31, 1997. Under this agreement, a Fund's total
expenses will not exceed 1.30%.
BOARD MEMBERS AND OFFICERS
The following is a list of the Company's board members and
officers, who are also board members and officers of all 13 funds
in the Strategist Fund Group. All shares of the Funds have
cumulative voting rights with respect to the election of board
members.
Directors and officers of the Strategist Fund Group
Rodney P. Burwell
Born in 1939
Xerxes Corporation
7901 Xerxes Ave. S.
Minneapolis, MN
Chairman, Xerxes Corporation (fiberglass storage tanks). Director,
Children's Broadcasting Network, Vaughn Communications, Sunbelt
Nursery Group, Fairview Corporation.
William J. Heron Jr.*
Born in 1941
American Express Company
World Financial Center
New York, NY
Vice president of all funds in the Strategist Fund Group.
President of American Express Financial Direct since 1995. Chief
executive officer, Swig Investment Company from 1993 to 1995.
Group Executive, Citicorp/Citibank from 1985 to 1993.
Jean B. Keffeler
Born in 1945
The Keffeler Company
3033 Excelsior Blvd.
Minneapolis, MN
President, The Keffeler Company (management advisory services).
Director, National Computer Systems, American Paging Systems, Inc.<PAGE>
PAGE 59
Thomas R. McBurney
Born in 1938
McBurney Management Advisors
1800 International Centre
900 2nd Ave. S.
Minneapolis, MN
President, McBurney Management Advisors. Director, The Valspar
Corporation (paints), Wenger Corporation, Security American
Financial Enterprises, Allina, Space Center Enterprises,
Greenspring Corporation.
James A. Mitchell*
Born in 1941
2900 IDS Tower
Minneapolis, MN
President of all funds in the Strategist Fund Group. Executive
vice president and director of the Advisor. Chairman of the board
and chief executive officer of IDS Life Insurance Company.
Director, IDS Life Funds.
*Interested person of the Company by reason of being an officer,
board member, employee and/or shareholder of the Advisor or
American Express.
In addition to Mr. Mitchell, who is president, and Mr. Heron, who
is vice president, the Funds' other officers are:
Eileen J. Newhouse
Born in 1955
IDS Tower 10
Minneapolis, MN
Secretary of all funds in the Strategist Fund Group. Counsel of
the Advisor.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the Strategist Fund Group. Director,
senior vice president and chief financial officer of the Advisor.
Director and executive vice president and controller of IDS Life
Insurance Company.
Members of the board who are not officers of the Advisor or an
affiliate receive an annual fee of $1,000 for Growth Fund and
$1,000 for Growth Trends Fund. No fee will be paid for Special
Growth Fund until the Fund reaches $20 million in assets. Once the
assets of all funds in the Strategist Fund Group reach $100
million, members of the board who are not officers of the Advisor
or an affiliate also will receive a fee of $1,000 for attendance at
board meetings. Board members serving more than one fund will <PAGE>
PAGE 60
receive an aggregate of $1,000 whether attending one or more
meetings held on the same day. The cost of the fee will be shared
by the funds served by the director.
During the fiscal period from May 13, 1996 to July 31, 1996, the
members of the board received no compensation. On July 31, 1996,
the Funds' board members and officers as a group owned less than 1%
of the outstanding shares of each Fund.
The following is a list of the Trust's board members and officers,
who, except for Mr. Dudley, are board members and officers of all
five Trusts in the Preferred Master Trust Group and all 43 funds in
the IDS MUTUAL FUND GROUP. Mr. Dudley is a board member of all
five Trusts in the Preferred Master Trust Group and the 34 publicly
offered funds in the IDS MUTUAL FUND GROUP. All units have
cumulative voting rights with respect to the election of board
members.
Trustees and officers of the Preferred Master Trust Group
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of the Advisor.
Robert F. Froehlke+
Born in 1922
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
<PAGE>
PAGE 61
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of the Advisor.
Previously, senior vice president, finance and chief financial
officer of the Advisor.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors)
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Melvin R. Laird
Born in 1922
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
President of all Trusts in the Preferred Master Trust Group since
April 1996 and president of all funds in the IDS MUTUAL FUND GROUP
since June 1993. Former vice chairman of the board, Cargill,
Incorporated (commodity merchants and processors).
<PAGE>
PAGE 62
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Councils of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of the Advisor.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The
Valspar Corporation (paints). Director, Bemis Corporation
(packaging), Donaldson Company (air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person of the Trust by reason of being an officer and
employee of the Trust.
**Interested person of the Trust by reason of being an officer,
board member, employee and/or shareholder of the Advisor or
American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
<PAGE>
PAGE 63
In addition to Mr. Pearce, who is president, the Trust's other
officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all Trusts in the
Preferred Master Trust Group and of all funds in the IDS MUTUAL
FUND GROUP.
Officers who also are officers and/or employees of the Advisor.
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Vice president-investments of all Trusts in the Preferred Master
Trust Group. Director and senior vice president-investments of the
Advisor.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all Trusts in the Preferred Master Trust Group.
Director, senior vice president and chief financial officer of the
Advisor. Director and executive vice president and controller of
IDS Life Insurance Company.
Members of the board who are not officers of a Portfolio or of the
Advisor receive an annual fee of $1,500 for Growth Portfolio,
$5,100 for Growth Trends Portfolio and $100 for Aggressive Growth
Portfolio. They also receive attendance and other fees. These
fees include for each day in attendance at meetings of the Board,
$50; for meetings of the Contracts and Investment Review
Committees, $50; meetings of the Audit Committee, $25; for
traveling from out-of-state, $9; and as Chair of the Contracts
Committee, $90. Expenses for attending meetings are reimbursed.
<PAGE>
PAGE 64
During the fiscal period July 31, 1996, the members of the board,
for attending up to 5 meetings, received the following
compensation, in total, from all Portfolio's in the Preferred
Master Trust Group.
<TABLE>
<CAPTION>
Compensation Table
for Growth Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS Mutual Fund Group
<S> <C> <C> <C> <C>
Lynne V. Cheney $163.34 $ 0 $ 0 $69,250.06
Robert F. Froehlke 165.34 0 0 69,550.06
Anne P. Jones 163.34 0 0 70,750.06
Melvin R. Laird 175.34 0 0 72,850.06
E.W. Spencer 175.34 0 0 75,050.06
Wheelock Whitney 175.34 0 0 70,300.06
C. Angus Wurtele 143.34 0 0 66,750.06
Compensation Table
for Growth Trends Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS Mutual Fund Group
Lynne V. Cheney $592.50 $ 0 $ 0 $69,250.06
Robert F. Froehlke 594.50 0 0 69,550.06
Anne P. Jones 592.50 0 0 70,750.06
Melvin R. Laird 604.50 0 0 72,850.06
E.W. Spencer 604.50 0 0 75,050.06
Wheelock Whitney 604.50 0 0 70,300.06
C. Angus Wurtele 572.50 0 0 66,750.06
</TABLE>
During the fiscal period from May 13, 1996 to July 31, 1996, no
board member or officer earned more than $60,000 from the Growth
Portfolio and Growth Trends Portfolio, respectively. All board
members and officers as a group earned $1,640 from Growth Portfolio
and $10,250 from Growth Trends Portfolio.
CUSTODIAN
The Trust's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, through a custodian agreement. Each
Fund also retains the custodian pursuant to a custodian agreement.
The custodian is permitted to deposit some or all of its securities
in central depository systems as allowed by federal law. For its
services, the Portfolios pay the custodian a maintenance charge per
Portfolio and a charge per transaction in addition to reimbursing
the custodian's out-of-pocket expenses.
<PAGE>
PAGE 65
INDEPENDENT AUDITORS
The Funds' and corresponding Portfolios' financial statements
contained in the Annual Report to shareholders for the fiscal
period ended July 31, 1996 were audited by independent auditors,
KPMG Peat Marwick LLP, 4200 Norwest Center, 90 S. Seventh St.,
Minneapolis, MN 55402-3900. The independent auditors also provide
other accounting and tax-related services as requested by the
Funds.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1996 Annual Report to
shareholders, pursuant to Section 30(d) of the 1940 Act, as
amended, are hereby incorporated in this SAI by reference. No
other portion of the Annual Report, however, is incorporated by
reference.
PROSPECTUS
The prospectus dated Sept. 27, 1996, is hereby incorporated in this
SAI by reference.
<PAGE>
PAGE 66
APPENDIX A
DESCRIPTION OF BOND RATINGS
These ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price.
Ratings by Moody's Investors Service, Inc. are Aaa, Aa, A, Baa, Ba,
B, Caa, Ca and C.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba are judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small.<PAGE>
PAGE 67
Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or
interest.
Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any
real investment standing.
Ratings by Standard & Poor's Corporation are AAA, AA, A, BBB, BB,
B, CCC, CC, C and D.
AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB is regarded as having adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher-rated
categories.
BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating.
B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.<PAGE>
PAGE 68
CC typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC- rating. The C rating may be
used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the due
date, even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.
<PAGE>
PAGE 69
APPENDIX B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since a Portfolio may hold cash and cash-
equivalent investments in foreign currencies, the value of a
Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, a Portfolio may incur costs in
connection with conversions between various currencies.
Spot Rates and Forward Contracts. A Portfolio conducts its foreign
currency exchange transactions either at the spot (cash) rate
prevailing in the foreign currency exchange market or by entering
into forward currency exchange contracts (forward contracts) as a
hedge against fluctuations in future foreign exchange rates. A
forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days
from the contract date, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirements. No commissions are charged at any stage for trades.
A Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When a
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, a Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
A Portfolio also may enter into forward contracts when management
of a Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all securities denominated in such foreign currency. The
precise matching of forward contract amounts and the value of
securities involved generally will not be possible since the future
value of such securities in foreign currencies more than likely
will change between the date the forward contract is entered into
and the date it matures. The projection of short-term currency
market movements is extremely difficult and successful execution of
a short-term hedging strategy is highly uncertain. A Portfolio
will not enter into such forward contracts or maintain a net
exposure to such contracts when consummating the contracts would
obligate a Portfolio to deliver an amount of foreign currency in <PAGE>
PAGE 70
excess of the value of securities or other assets denominated in
that currency.
A Portfolio will designate cash or securities in an amount equal to
the value of a Portfolio's total assets committed to consummating
forward contracts entered into under the second circumstance set
forth above. If the value of the securities declines, additional
cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of a
Portfolio's commitments on such contracts.
At maturity of a forward contract, a Portfolio may either sell the
security and make delivery of the foreign currency or retain the
security and terminate its contractual obligation to deliver the
foreign currency by purchasing an offsetting contract with the same
currency trader obligating it to buy, on the same maturity date,
the same amount of foreign currency.
If a Portfolio retains a security and engages in an offsetting
transaction, a Portfolio will incur a gain or a loss (as described
below) to the extent there has been movement in forward contract
prices. If a Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline between the date a
Portfolio enters into a forward contract for selling foreign
currency and the date it enters into an offsetting contract for
purchasing the foreign currency, a Portfolio will realize a gain to
the extent that the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to buy. Should
forward prices increase, a Portfolio will suffer a loss to the
extent the price of the currency it has agreed to buy exceeds the
price of the currency it has agreed to sell.
It is impossible to forecast what the market value of portfolio
securities will be at the expiration of a contract. Accordingly,
it may be necessary for a Portfolio to buy additional foreign
currency on the spot market (and bear the expense of such purchase)
if the market value of the security is less than the amount of
foreign currency a Portfolio is obligated to deliver and a decision
is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received on the sale of the
security if its market value exceeds the amount of foreign currency
a Portfolio is obligated to deliver.
A Portfolio's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities.
It simply establishes a rate of exchange that can be achieved at
some point in time. Although such forward contracts tend to
minimize the risk of loss due to a decline in value of hedged
currency, they tend to limit any potential gain that might result
should the value of such currency increase.<PAGE>
PAGE 71
Although a Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and unitholders should be aware of currency
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a
lesser rate of exchange should the Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. A Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in
the value of securities, a Portfolio may buy put options on the
foreign currency. If the value of the currency does decline, a
Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the
adverse effect on a Portfolio which otherwise would have resulted.
As in the case of other types of options, however, the benefit to a
Portfolio derived from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in
the direction or to the extent anticipated, a Portfolio could
sustain losses on transactions in foreign currency options which
would require it to forego a portion or all of the benefits of
advantageous changes in such rates.
A Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, when a Portfolio
anticipates a decline in the dollar value of foreign-denominated
securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will
most likely not be exercised and the diminution in value of
securities will be fully or partially offset by the amount of the
premium received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
a Portfolio would be required to buy or sell the underlying
currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, a
Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable
movements on exchange rates.<PAGE>
PAGE 72
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if a Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in a Portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting a Portfolio to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. A Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put options and write covered call options on currency <PAGE>
PAGE 73
futures.
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. A Portfolio may use currency futures for the same
purposes as currency forward contracts, subject to Commodity
Futures Trading Commission (CFTC) limitations. All futures
contracts are aggregated for purposes of the percentage
limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of a Portfolio's investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect a Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of a Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of a Portfolio's
investments denominated in that currency over time.
A Portfolio will hold securities or other options or futures
positions whose values are expected to offset its obligations. A
Portfolio will not enter into an option or futures position that
exposes a Portfolio to an obligation to another party unless it
owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient
to cover its potential obligations.
<PAGE>
PAGE 74
APPENDIX C
OPTIONS AND STOCK INDEX FUTURES CONTRACTS
A Portfolio may buy or write options traded on any U.S. or foreign
exchange or in the over-the-counter market. A Portfolio may enter
into stock index futures contracts traded on any U.S. or foreign
exchange. A Portfolio also may buy or write put and call options
on these futures and on stock indexes. Options in the over-the-
counter market will be purchased only when the Advisor believes a
liquid secondary market exists for the options and only from
dealers and institutions the Advisor believes present a minimal
credit risk. Some options are exercisable only on a specific date.
In that case, or if a liquid secondary market does not exist, a
Portfolio could be required to buy or sell securities at
disadvantageous prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash or securities of equivalent value (in the case of a
put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition, the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price. The risk of
the writer is potentially unlimited, unless the option is covered.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options may benefit a Portfolio and its
unitholders by improving a Portfolio's liquidity and by helping to
stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options <PAGE>
PAGE 75
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, the Portfolio pays a premium and a commission. It then
pays a second commission on the purchase or sale of the underlying
security when the option is exercised. For record keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment.
The risk a Portfolio assumes when it buys an option is the loss of
the premium. To be beneficial to a Portfolio, the price of the
underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the
premium paid, the commissions paid both in the acquisition of the
option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of
a put) of the underlying security. Even then the price change in
the underlying security does not ensure a profit since prices in
the option market may not reflect such a change.
Writing covered options. A Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'All options written by a Portfolio will be covered. For covered
call options if a decision is made to sell the security, a
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'A Portfolio will deal only in standard option contracts traded on
national securities exchanges or those that may be quoted on NASDAQ
(a system of price quotations developed by the National Association
of Securities Dealers, Inc.).
'A Portfolio will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by a Portfolio, it will conform to the requirements of those
states. For example, California limits the writing of options to
50% of the assets of a Portfolio.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Internal
Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.<PAGE>
PAGE 76
If a covered call option is exercised, the security is sold by a
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. A
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding call options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
Options are valued at the close of the New York Stock Exchange. An
option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily
available, at the mean of the last bid and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied by the difference between the index value on the
last trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.
For example, excluding any transaction costs, if a Portfolio enters
into one futures contract to buy the S&P 500 Index at a specified
future date at a contract value of 150 and the S&P 500 Index is at
154 on that future date, a Portfolio will gain $500 x (154-150) or
$2,000. If a Portfolio enters into one futures contract to sell
the S&P 500 Index at a specified future date at a contract value of
150 and the S&P 500 Index is at 152 on that future date, a
Portfolio will lose $500 x (152-150) or $1,000.
Unlike the purchase or sale of an equity security, no price would
be paid or received by a Portfolio upon entering into futures <PAGE>
PAGE 77
contracts. However, a Portfolio would be required to deposit with
its custodian, in a segregated account in the name of the
futures broker, an amount of cash or U.S. Treasury bills equal to
approximately 5% of the contract value. This amount is known as
initial margin. The nature of initial margin in futures
transactions is different from that of margin in security
transactions in that futures contract margin does not involve
borrowing funds by a Portfolio to finance the transactions.
Rather, the initial margin is in the nature of a performance bond
or good-faith deposit on the contract that is returned to a
Portfolio upon termination of the contract, assuming all
contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the
broker would be made on a daily basis as the price of the
underlying stock index fluctuates, making the long and short
positions in the contract more or less valuable, a process known as
marking to market. For example, when a Portfolio enters into a
contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, a Portfolio
will receive from the broker a variation margin payment equal to
that increase in value. Conversely, if the price of the underlying
stock index declines, a Portfolio would be required to make a
variation margin payment to the broker equal to the decline in
value.
How a Portfolio Would Use Stock Index Futures Contracts. A
Portfolio intends to use stock index futures contracts and related
options for hedging and not for speculation. Hedging permits a
Portfolio to gain rapid exposure to or protect itself from changes
in the market. For example, a Portfolio may find itself with a
high cash position at the beginning of a market rally.
Conventional procedures of purchasing a number of individual issues
entail the lapse of time and the possibility of missing a
significant market movement. By using futures contracts, a
Portfolio can obtain immediate exposure to the market and benefit
from the beginning stages of a rally. The buying program can then
proceed and once it is completed (or as it proceeds), the contracts
can be closed. Conversely, in the early stages of a market
decline, market exposure can be promptly offset by entering into
stock index futures contracts to sell units of an index and
individual stocks can be sold over a longer period under cover of
the resulting short contract position.
A Portfolio may enter into contracts with respect to any stock
index or sub-index. To hedge a Portfolio successfully, however, a
Portfolio must enter into contracts with respect to indexes or sub-
indexes whose movements will have a significant correlation with
movements in the prices of securities.
Special Risks of Transactions in Stock Index Futures Contracts.
1. Liquidity. A Portfolio may elect to close some or all of its
contracts prior to expiration. The purpose of making such a move
would be to reduce or eliminate the hedge position held by a <PAGE>
PAGE 78
Portfolio. A Portfolio may close its positions by taking opposite
positions. Final determinations of variation margin are then made,
additional cash as required is paid by or to a Portfolio, and a
Portfolio realizes a gain or a loss.
Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such
futures contracts. For example, futures contracts transactions can
currently be entered into with respect to the S&P 500 Stock Index
on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Stock Index on the New York Futures Exchange and the
Value Line Composite Stock Index on the Kansas City Board of Trade.
Although a Portfolio intends to enter into futures contracts only
on exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a liquid secondary
market will exist for any particular contract at any particular
time. In such event, it may not be possible to close a futures
contract position, and in the event of adverse price movements, a
Portfolio would have to make daily cash payments of variation
margin. Such price movements, however, will be offset all or in
part by the price movements of the securities subject to the hedge.
Of course, there is no guarantee the price of the securities will
correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
2. Hedging Risks. There are several risks in using stock index
futures contracts as a hedging device. One risk arises because the
prices of futures contracts may not correlate perfectly with
movements in the underlying stock index due to certain market
distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors
may close the contracts through offsetting transactions which could
distort the normal relationship between the index and futures
markets. Second, the margin requirements in the futures market are
lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does
the securities market. Increased participation by speculators in
the futures market also may cause temporary price distortions.
Because of price distortion in the futures market and because of
imperfect correlation between movements in stock indexes and
movements in prices of futures contracts, even a correct forecast
of general market trends may not result in a successful hedging
transaction over a short period.
Another risk arises because of imperfect correlation between
movements in the value of the futures contracts and movements in
the value of securities subject to the hedge. If this occurred, a
Portfolio could lose money on the contracts and also experience a
decline in the value of its securities. While this could occur,
the Advisor believes that over time the value of securities will
tend to move in the same direction as the market indexes and will
attempt to reduce this risk, to the extent possible, by entering
into futures contracts on indexes whose movements it believes will
have a significant correlation with movements in the value of<PAGE>
PAGE 79
securities sought to be hedged. It also is possible that if a
Portfolio has hedged against a decline in the value of the stocks
held in its Portfolio and stock prices increase instead, a
Portfolio will lose part or all of the benefit of the increased
value of its stock which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if a Portfolio has insufficient cash, it may have to
sell securities to meet daily variation margin requirements. Such
sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. A Portfolio may
have to sell securities at a time when it may be disadvantageous to
do so.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Options on stock index
futures contracts are similar to options on stock except that
options on futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the period of the option. If the option
is closed instead of exercised, the holder of the option receives
an amount that represents the amount by which the market price of
the contract exceeds (in the case of a call) or is less than (in
the case of a put) the exercise price of the option on the futures
contract. If the option does not appreciate in value prior to the
exercise date, a Portfolio will suffer a loss of the premium paid.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A Portfolio exercising a put, for
example, would receive the difference between the exercise price
and the current index level. Such options would be used in the
same manner as options on futures contracts.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEX FUTURES
CONTRACTS AND OPTIONS ON STOCK INDEXES. As with options on stocks,
the holder of an option on a futures contract or on a stock index
may terminate a position by selling an option covering the same
contract or index and having the same exercise price and expiration
date. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a
liquid secondary market. A Portfolio will not purchase options
unless the market for such options has developed sufficiently, so
that the risks in connection with options are not greater than the
risks in connection with stock index futures contracts transactions
themselves. Compared to using futures contracts, purchasing
options involves less risk to a Portfolio because the maximum
amount at risk is the premium paid for the options (plus
transaction costs). There may be circumstances, however, when
using an option would result in a greater loss to a Portfolio than
using a futures contract, such as when there is no movement in the
level of the stock index.<PAGE>
PAGE 80
TAX TREATMENT. As permitted under federal income tax laws, a
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in a Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option, a Portfolio will either make a 1256(d) election and
treat the option as a mixed straddle or mark to market the option
at fiscal year end and treat the gain/loss as 40% short-term and
60% long-term. Certain provisions of the Internal Revenue Code may
also limit a Portfolio's ability to engage in futures contracts and
related options transactions. For example, at the close of each
quarter of a Portfolio's taxable year, at least 50% of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30% of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. A
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (a Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 81
APPENDIX D
MORTGAGE-BACKED SECURITIES
A mortgage pass through certificate is one that represents an
interest in a pool, or group, of mortgage loans assembled by the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association
(FNMA) or non-governmental entities. In pass-through certificates,
both principal and interest payments, including prepayments, are
passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and
the actual yield (or total return) to a Portfolio, which is
influenced by both stated interest rates and market conditions, may
be different than the quoted yield on certificates. Some U.S.
government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to a Portfolio.
Stripped Mortgage-Backed Securities. A Portfolio may invest in
stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. If prepayments of principal are greater than anticipated, an
investor may incur substantial losses. On an IO, if prepayments of
principal are slower than anticipated, the yield on a PO will be
affected more severely than would be the case with a traditional
mortgage-backed security.
Mortgage-Backed Security Spread Options. A Portfolio may purchase
mortgage-backed security (MBS) put spread options and write covered
MBS call spread options. MBS spread options are based upon the
changes in the price spread between a specified mortgage-backed
security and a like-duration Treasury security. MBS spread options
are traded in the OTC market and are of short duration, typically
one to two months. A Portfolio would buy or sell covered MBS call
spread options in situations where mortgage-backed securities are
expected to underperform like-duration Treasury securities.<PAGE>
PAGE 82
APPENDIX E
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a Fund to meet long-term goals.
Dollar-cost averaging
___________________________________________________________________
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
PAGE 83
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
<PAGE>
PAGE 84
<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)
<PAGE>
PAGE 85
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.
</TABLE>
<PAGE>
PAGE 86
Notes to financial statements
Strategist Growth Fund, Inc.
___________________________________________________________________
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.
<PAGE>
PAGE 87
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.
<PAGE>
PAGE 88
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.
<PAGE>
PAGE 89
____________________________________________________________
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.
___________________________________________________________________
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.
<PAGE>
PAGE 90
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
<PAGE>
PAGE 91
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.
<PAGE>
PAGE 92
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.
<PAGE>
PAGE 93
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.
<PAGE>
PAGE 94
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 95
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.
<PAGE>
PAGE 96
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.
<PAGE>
PAGE 97
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 98
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 99
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 100
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 101
_____________________________________________________________________________________________________________________________
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 102
<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 103
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 104
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 105
<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 106
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 107
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 (103,107,910)
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 108
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 109
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 110
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 111
___________________________________________________________________
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 112
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 113
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 114
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
<PAGE>
PAGE 115
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
<PAGE>
PAGE 116
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>
PAGE 117
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>
PAGE 118
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 119
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
<PAGE>
PAGE 120
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
<PAGE>
PAGE 121
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
<PAGE>
PAGE 122
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Financial Statements filed as part of this post-effective
amendment:
Strategist Growth Fund, Inc.:
Independent Auditors' Report dated September 6, 1996
Statement of assets and liabilities, July 31, 1996
Statement of operations, for the period from May 13, 1996 to
July 31, 1996
Statement of changes in net assets, for the period from May
13, 1996 to July 31, 1996
Notes to financial statements
Growth Portfolio:
Independent Auditors' Report dated September 6, 1996
Statement of assets and liabilities, July 31, 1996
Statement of operations, for the period from May 13, 1996 to
July 31, 1996
Statement of changes in net assets, for the period from May
13, 1996 to July 31, 1996
Notes to financial statements
Investments in securities, July 31, 1996
Notes to investments in securities
Growth Trends Portfolio:
Independent Auditors' Report dated September 6, 1996
Statement of assets and liabilities, July 31, 1996
Statement of operations, for the period from May 13, 1996 to
July 31, 1996
Statement of changes in net assets, for the period from May
13, 1996 to July 31, 1996
Notes to financial statements
Investments in securities, July 31, 1996
Notes to investments in securities
(b) EXHIBITS:
1.(a) Articles of Incorporation, dated Sept. 1, 1995, filed
electronically on or about Nov. 1, 1995 as Exhibit 1 to
Registrant's initial Registration Statement, are
incorporated herein by reference.
(b) Articles of Amendment of Express Direct Growth Fund,
Inc., filed electronically on or about April 17, 1996 as
Exhibit 1(b) to Registrant's Pre-Effective Amendment No.
1, are incorporated herein by reference.
2. Form of By-laws, filed electronically on or about April 17,
1996 as Exhibit 2 to Registrant's Pre-Effective Amendment No.
1, are incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.<PAGE>
PAGE 123
5. Not Applicable.
6.(a) Form of Distribution Agreement between Strategist Growth
Fund, Inc., on behalf of Strategist Growth Fund and
Strategist Growth Trends Fund, and American Express
Service Corporation filed electronically on or about
April 17, 1996 as Exhibit 6 to Registrant's Pre-Effective
Amendment No. 1 to Registration Statement No. 33-63905,
is incorporated herein by reference.
6.(b) Form of Distribution Agreement between Strategist Growth
Fund, Inc., on behalf of Strategist Aggressive Growth
Fund, and American Express Service Corporation filed
electronically on or about May 24, 1996 as Exhibit 6 to
Registrant's Post-Effective Amendment No. 1 to
Registration Statement No. 33-63905, is incorporated
herein by reference.
7. Not Applicable.
8.(a) Form of Custodian Agreement between Strategist Growth
Fund, Inc., on behalf of Strategist Growth Fund and
Strategist Growth Trends Fund, and American Express Trust
Company filed electronically on or about April 17, 1996
as Exhibit 8 to Registrant's Pre-Effective Amendment No.
1 to Registration Statement No. 33-63905, is incorporated
herein by reference.
8.(b) Form of Addendum to Custodian Agreement between
Strategist Growth Fund, Inc., on behalf of Strategist
Growth Fund and Strategist Growth Trends Fund, and
American Express Trust Company and American Express
Financial Corporation dated May 13, 1996, is filed
electronically herewith.
8.(c) Form of Custodian Agreement between Strategist Growth
Fund, Inc., on behalf of Strategist Aggressive Growth
Fund, and American Express Trust Company filed
electronically on or about May 24, 1996 as Exhibit 8 to
Registrant's Post-Effective Amendment No. 1 to
Registration Statement No. 33-63905, is incorporated
herein by reference.
8.(d) Form of Addendum to Custodian Agreement between
Strategist Growth Fund, Inc., on behalf of Strategist
Aggressive Growth Fund, and American Express Trust
Company and American Express Financial Corporation filed
electronically on or about July 30, 1996 as Exhibit 8(b)
to Registrant's Post-Effective Amendment No. 2 to
Registration Statement No. 33-63905, is incorporated
herein by reference.
9.(a) Form of Transfer Agency Agreement between Strategist
Growth Fund, Inc., on behalf of Strategist Growth Fund
and Strategist Growth Trends Fund, and American Express
Financial Corporation filed electronically on or about
April 17, 1996 as Exhibit 9(a) to Registrant's Pre-
Effective Amendment No. 1 to Registration Statement No.
33-63905, is incorporated herein by reference.<PAGE>
PAGE 124
9.(b) Form of Transfer Agency Agreement between Strategist
Growth Fund, Inc., on behalf of Strategist Aggressive
Growth Fund, and American Express Financial Corporation
filed electronically on or about May 24, 1996 as Exhibit
9(a) to Registrant's Post-Effective Amendment No. 1 to
Registration Statement No. 33-63905, is incorporated
herein by reference.
9.(c) Form of Administrative Services Agreement between
Strategist Growth Fund, Inc., on behalf of Strategist
Growth Fund and Strategist Growth Trends Fund, and
American Express Financial Corporation filed
electronically on or about April 17, 1996 as Exhibit 9(b)
to Registrant's Pre-Effective Amendment No. 1 to
Registration Statement No. 33-63905, is incorporated
herein by reference.
9.(d) Form of Administrative Services Agreement between
Strategist Growth Fund, Inc., on behalf of Strategist
Aggressive Growth Fund, and American Express Financial
Corporation filed electronically on or about May 24, 1996
as Exhibit 9(b) to Registrant's Post-Effective Amendment
No. 1 to Registration Statement No. 33-63905, is
incorporated herein by reference.
9.(e) Copy of Agreement and Declaration of Unitholders between
IDS Growth Fund, Inc., on behalf of IDS Growth Fund, and
Strategist Growth Fund, Inc., on behalf of Strategist
Growth Fund, is filed electronically herewith.
9.(f) Copy of Agreement and Declaration of Unitholders between
IDS New Dimensions Fund, Inc. and Strategist Growth Fund,
Inc., on behalf of Strategist Growth Trends Fund, is
filed electronically herewith.
9.(g) Form of Agreement and Declaration of Unitholders between
IDS Growth Fund, Inc., on behalf of IDS Research
Opportunities Fund, and Strategist Growth Fund, Inc., on
behalf of Strategist Aggressive Growth Fund, filed
electronically on or about July 30, 1996 as Exhibit 9(c)
to Registrant's Post-Effective Amendment No. 2 to
Registration Statement No. 33-63905, is incoporated
herein by reference.
10. Opinion and consent of counsel as to the legality of the
securities being registered is filed with Registrant's most
recent 24f-2 notice.
11. Independent auditors' consent is filed electronically
herewith.
12. Not Applicable.
13. Copy of Share Purchase Agreement between Strategist Growth
Fund, Inc. and American Express Financial Corporation filed
electronically on or about April 17, 1996 as Exhibit 13 to
Registrant's Pre-Effective Amendment No. 1 to Registration
Statement No. 33-63905, is incorporated herein by reference.
<PAGE>
PAGE 125
14. Not Applicable.
15.(a) Form of Plan and Agreement of Distribution between
Strategist Growth Fund, Inc., on behalf of Strategist
Growth Fund and Strategist Growth Trends Fund, and
American Express Service Corporation filed electronically
on or about April 17, 1996 as Exhibit 15 to Registrant's
Pre-Effective Amendment No. 1 to Registration Statement
No. 33-63905, is incorporated herein by reference.
15.(b) Form of Plan and Agreement of Distribution between
Strategist Growth Fund, Inc., on behalf of Strategist
Aggressive Growth Fund, and American Express Service
Corporation filed electronically on or about May 24,
1996, as Exhibit 15 to Registrant's Post-Effective
Amendment No. 1 to Registration Statement No. 33-63905,
is incorporated herein by reference.
16. Copy of schedule for computation of each performance quotation
provided in the Registration Statement in response to Item
22(b), filed on or about April 17, 1996 as Exhibit 16 to
Registrant's Pre-Effective Amendment No. 1 to Registration
Statement No. 33-63905, is incorporated herein by reference.
17. Financial data schedules are filed electronically herewith.
18. Not Applicable.
19(a) Directors' Power of Attorney to sign Amendments to this
Registration Statement, dated April 24, 1996, filed
electronically on or about May 24, 1996 as Exhibit 19(a)
to Registrant's Post-Effective Amendment No. 1 to
Registration Statement No. 33-63905, is incorporated
herein by reference.
19(b) Officers' Power of Attorney to sign Amendments to this
Registration Statement, dated April 24, 1996, filed
electronically on or about May 24, 1996 as Exhibit 19(b)
to Registrant's Post-Effective Amendment No. 1 to
Registration Statement No. 33-63905, is incorporated
herein by reference.
19(c) Trustees' Power of Attorney to sign Amendments to this
Registration Statement, dated April 11, 1996, filed
electronically on or about April 17, 1996 as Exhibit
19(a) to Registrant's Pre-Effective Amendment No. 1, is
incorporated herein by reference.
19(d) Officers' Power of Attorney to sign Amendments to this
Registration Statement, dated April 11, 1996, filed
electronically on or about April 17, 1996 as Exhibit
19(b) to Registrant's Pre-Effective Amendment No. 1, is
incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
<PAGE>
PAGE 126
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Sept. 10, 1996
Common Stock
Strategist Growth Fund 99
Strategist Growth Trends Fund 65
Strategist Special Growth Fund 2
Item 27. Indemnification
Reference is hereby made to Article IV of Registrant's Articles of
Incorporation filed electronically on or about Nov. 1, 1995 as
Exhibit 1 to Registrant's initial registration statement and
Article X of Registrant's By-laws filed electronically on or about
April 17, 1996 as Exhibit 2 to Registrant's Pre-Effective Amendment
No. 1.<PAGE>
PAGE 127
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<PAGE>
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
PAGE 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Strategist Growth
Fund, Inc., certifies that it meets the requirements for the
effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Minneapolis and State of Minnesota on the 26th day
of September, 1996.
STRATEGIST GROWTH FUND, INC.
By /s/ James A. Mitchell*
James A. Mitchell
President
By /s/ Melinda S. Urion*
Melinda S. Urion
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on the 26th day
of September, 1996.
Signature Title
By /s/ Rodney P. Burwell** Director
Rodney P. Burwell
By /s/ William J. Heron Jr.** Director
William J. Heron
By /s/ Jean B. Keffeler** Director
Jean B. Keffeler
By /s/ Thomas R. McBurney** Director
Thomas R. McBurney
By /s/ James A. Mitchell** Director
James A. Mitchell
* Signed pursuant to Officers' Power of Attorney dated April 24,
1996, filed electronically as Exhibit 19(b) to Registrant's Post-
Effective Amendment No. 1, by:
Eileen J. Newhouse
<PAGE>
PAGE 129
** Signed pursuant to Directors' Power of Attorney dated April 24,
1996, filed electronically as Exhibit 19(a) to Registrant's Post-
Effective Amendment No. 1, by:
Eileen J. Newhouse
<PAGE>
PAGE 130
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, GROWTH TRUST consents to the filing
of this Amendment to the Registration Statement signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis and State of Minnesota on the 26th day of September,
1996.
GROWTH TRUST
By /s/ William R. Pearce**
William R. Pearce
President
By /s/ Melinda S. Urion**
Melinda S. Urion
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated on the 26th day
of September, 1996.
Signatures Capacity
/s/ William R. Pearce* Trustee
William R. Pearce
/s/ Lynne V. Cheney* Trustee
Lynne V. Cheney
/s/ William H. Dudley* Trustee
William H. Dudley
/s/ Robert F. Froehlke* Trustee
Robert F. Froehlke
/s/ David R. Hubers* Trustee
David R. Hubers
/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Melvin R. Laird* Trustee
Melvin R. Laird
<PAGE>
PAGE 131
Signatures Capacity
Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
* Signed pursuant to Trustees' Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(a) to Registrant's Pre-
Effective Amendment No. 1, by:
___________________________________
Leslie L. Ogg
** Signed pursuant to Officers' Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(b) to Registrant's Pre-
Effective Amendment No. 1, by:
___________________________________
Leslie L. Ogg
<PAGE>
PAGE 132
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 3 TO REGISTRATION
STATEMENT No. 33-63905
This Amendment to the Registration Statement comprises the
following papers and documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial statements.
Part C.
Other information.
The signatures.
<PAGE>
PAGE 1
EXHIBIT INDEX
Exhibit 8(b): Addendum to Custodian Agreement between Strategist
Growth Fund, Inc., on behalf of Strategist Growth
Fund and Strategist Growth Trends Fund, and American
Express Trust Company and American Express Financial
Corporation.
Exhibit 9(e): Agreement and Declaration of Unitholders between IDS
Growth Fund, Inc. and Strategist Growth Fund, Inc.
on behalf of Strategist Growth Fund.
Exhibit 9(f): Agreement and Declaration of Unitholders between IDS
New Dimensions Fund, Inc. and Strategist Growth
Fund, Inc. on behalf of Strategist Growth Trends
Fund.
Exhibit 11: Independent Auditors' Consent.
Exhibit 17: Financial data schedules.
<PAGE>
PAGE 1
ADDENDUM TO THE CUSTODIAN AGREEMENT
THIS ADDENDUM TO THE CUSTODIAN AGREEMENT dated May 13, 1996
between Strategist Growth Fund, Inc. (the Company) on behalf of its
underlying series funds (the Funds) and American Express Trust
Company (the Custodian) is made pursuant to Section 12 of the
Agreement to reflect the Corporation's arrangement of investing all
of the Funds' assets in corresponding portfolios of a master trust.
American Express Financial Corporation (AEFC) serves as
administrator for the Company and for the master trust in which the
Funds invest.
The Comapany, the Custodian and AEFC agree as follows:
The parties to this Agreement acknowledge that, so long as the
Funds invest all of their assets in corresponding portfolios of a
master trust, the only assets held by the Funds will be units of
the corresponding portfolios of the master trust. The parties
agree that the Custodian is entitled to rely upon AEFC for an
accounting of the number of units held, purchased or redeemed by
the Company and to delegate to AEFC responsibility for all
reporting to the Company. AEFC agrees to indemnify and hold
harmless the Custodian from all claims and liabilities incurred or
assessed against the Custodian in connection with the accounting
for and reporting to the Company by AEFC.
IN WITNESS WHEREOF, the Company, the Custodian and AEFC have caused
this addendum to the Custodian Agreement to be executed on May 13,
1996 which shall remain in effect until terminated by one of the
parties on written notice to the other parties to this Addendum.
STRATEGIST GROWTH FUND, INC.
Strategist Growth Fund
Strategist Growth Trends Fund
By ____________________________
James A. Mitchell
President
AMERICAN EXPRESS TRUST COMPANY
By ____________________________
Chandrakant A. Patel
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By ____________________________
Richard W. Kling
Senior Vice President
<PAGE>
PAGE 1
GROWTH PORTFOLIO
AGREEMENT AND DECLARATION OF UNITHOLDERS
This AGREEMENT AND DECLARATION OF UNITHOLDERS is made at
Minneapolis, Minnesota, as of this 13th day of May, 1996 by the
holders of beneficial interest of Growth Portfolio, a separate
series of Growth Trust.
WITNESS that
WHEREAS, the Declaration of Trust for Growth Trust provides
for no restrictions on the transfer of units therein; and
WHEREAS, the holders of units in Growth Portfolio desire to
restrict the transfer of their units in Growth Portfolio;
NOW, THEREFORE, the undersigned hereby declare that they will
not transfer any units in Growth Portfolio held by them without the
prior written consent of the other unitholders holding at least two
thirds of the Growth Portfolio's units outstanding (excluding the
units of the holder seeking to effect the transfer) and that any
attempted transfer in violation of this agreement shall be null and
void. This agreement shall not affect the rights of any unitholder
to redeem units in Growth Portfolio as provided for in the
Declaration of Trust. The undersigned also acknowledge that the
remedy of damages for the violation of this agreement would be
inadequate and therefore further agree that this agreement shall be
enforceable solely by the remedy of specific performance.
IDS GROWTH FUND, INC.
______________________________
Leslie L. Ogg
Vice President and General Counsel
STRATEGIST GROWTH FUND, INC.
Strategist Growth Fund
______________________________
James A. Mitchell
President
<PAGE>
PAGE 1
GROWTH TRENDS PORTFOLIO
AGREEMENT AND DECLARATION OF UNITHOLDERS
This AGREEMENT AND DECLARATION OF UNITHOLDERS is made at
Minneapolis, Minnesota, as of this 13th day of May, 1996 by the
holders of beneficial interest of Growth Trends Portfolio, a
separate series of Growth Trust.
WITNESS that
WHEREAS, the Declaration of Trust for Growth Trust provides
for no restrictions on the transfer of units therein; and
WHEREAS, the holders of units in Growth Trends Portfolio
desire to restrict the transfer of their units in Growth Trends
Portfolio;
NOW, THEREFORE, the undersigned hereby declare that they will
not transfer any units in Growth Trends Portfolio held by them
without the prior written consent of the other unitholders holding
at least two thirds of the Growth Trends Portfolio's units
outstanding (excluding the units of the holder seeking to effect
the transfer) and that any attempted transfer in violation of this
agreement shall be null and void. This agreement shall not affect
the rights of any unitholder to redeem units in Growth Trends
Portfolio as provided for in the Declaration of Trust. The
undersigned also acknowledge that the remedy of damages for the
violation of this agreement would be inadequate and therefore
further agree that this agreement shall be enforceable solely by
the remedy of specific performance.
IDS NEW DIMENSIONS FUND, INC.
______________________________
Leslie L. Ogg
Vice President and General Counsel
STRATEGIST GROWTH FUND, INC.
Strategist Growth Trends Fund
______________________________
James A. Mitchell
President
<PAGE>
PAGE 1
INDEPENDENT AUDITORS' CONSENT
____________________________________________________
The Board of directors and shareholders
Strategist Growth Fund, Inc.
Strategist Growth Fund
Strategist Growth Trends Funds
We consent to the use of our reports included or incorporated
herein by reference, and to the references to our Firm under the
heading "Financial highlights" in Part A and "INDEPENDENT AUDITORS"
in Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September __, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STRATEGIST GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 1596400239
<INVESTMENTS-AT-VALUE> 23044137
<RECEIVABLES> 3769
<ASSETS-OTHER> 13794
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23061700
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61938
<TOTAL-LIABILITIES> 61938
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25236062
<SHARES-COMMON-STOCK> 993449
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2120986)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (115314)
<NET-ASSETS> 22999762
<DIVIDEND-INCOME> 29484
<INTEREST-INCOME> 19565
<OTHER-INCOME> 0
<EXPENSES-NET> (68418)
<NET-INVESTMENT-INCOME> (19369)
<REALIZED-GAINS-CURRENT> (2120986)
<APPREC-INCREASE-CURRENT> (115314)
<NET-CHANGE-FROM-OPS> (2255669)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25205431
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22949762
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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