<PAGE>
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. 5 (File No. 33-63905)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 (File No. 811-7401)
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. 29, 1997 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) 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 year ended July 31, 1997
will be filed on or about Sept. 29, 1997.
Growth Trust has also executed this Amendment to the Registration Statement.
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Cross reference sheet showing the location in the prospectus and Statement of
Additional Information of the information called for by items enumerated in
Parts A and B of Form N-1A.
Negative answers omitted are so indicated.
PART A
Item No. Section in Prospectus
1 Cover page of prospectus
2 (a) Fund expenses
(b) The Funds in brief
(c) The Funds in brief
3 (a) Financial highlights
(b) NA
(c) Performance
(d) Financial highlights
4 (a) The Funds in brief; Investment policies and risks;
How the Funds and Portfolios are organized
(b) Investment policies and risks
(c) Investment policies and risks
5 (a) Board members and officers
(b)(i) Investment manager; About the Advisor
(b)(ii) Investment manager; Administrator and transfer agent
(b)(iii) Investment manager
(c) Portfolio managers
(d) Administrator and transfer agent
(e) Administrator and transfer agent
(f) Investment manager; Administrator and transfer agent; Distributor
(g) About the Advisor
5A(a) *
(b) *
6 (a) Shares; Voting rights
(b) NA
(c) NA
(d) NA
(e) Cover page; Special shareholder services
(f) Dividend and capital gain distributions; Reinvestments
(g) Taxes
(h) Special considerations regarding master/feeder structure
7 (a) Distributor
(b) Valuing Fund shares
(c) NA
(d) How to purchase shares
(e) NA
(f) Distributor
(g) NA
8 (a) How to redeem shares
(b) NA
(c) How to purchase, exchange or redeem shares: Other important
information
(d) How to purchase, exchange or redeem shares: How to redeem shares
9 None
PART B
Item No. Section in Statement of Additional Information
10 Cover page of SAI
11 Table of Contents
12 NA
13(a) Additional Investment Policies; all appendices except
Dollar-Cost Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Security Transactions
14(a) Board Members and Officers
(b) Board Members and Officers
(c) Board Members and Officers
15(a) NA
(b) Principal Holders of Securities, if applicable
(c) Board Members and Officers
16(a)(i) How the Funds and Portfolios are organized; About the Advisor**
(a)(ii) Agreements: Investment Management Services Agreement, Plan and
Agreement of Distribution / Distribution Agreement
(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) Agreements: Administrative Services Agreement
(e) NA
(f) Agreements: Plan and Agreement of Distribution / Distribution
Agreement
(g) NA
(h) Custodian Agreement; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian Agreement
17(a) Security Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with the Advisor
(c) Security Transactions
(d) Security Transactions
(e) Security Transactions
18(a) Shares; Voting rights**
(b) NA
19(a) Investing in the Funds
(b) Valuing Fund Shares; Investing in the Funds
(c) Redeeming Shares
20 Taxes
21(a) Agreements: Distribution Agreement
(b) NA
(c) NA
22(a) NA
(b) Performance Information
23 Financial Statements
* Designates information is located in annual report.
** Designates location in prospectus.
<PAGE>
Strategist Growth Fund, Inc.
Prospectus
Sept. 29, 1997
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 Fund 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 managed by American Express
Financial Corporation and has the same goal as the corresponding 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 is incorporated by reference. For a free copy,
contact American Express Financial Direct.
Like all mutual funds, 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.
Please note that these Funds:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed to achieve their goals
American Express Financial Direct
P.O. Box 59196
Minneapolis, MN
55459-0196
800-AXP-SERV
TTY: 800-710-5260
Web site address: http://www.americanexpress.com/direct
<PAGE>
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
Methods of exchanging or redeeming 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
<PAGE>
About the Advisor
Appendix
Descriptions of derivative instruments
<PAGE>
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) (collectively referred to as 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 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
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 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. Aggressive Growth Portfolio also may invest in
convertible securities, debt securities, derivative instruments and money market
instruments.
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.
<PAGE>
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 the Fund (the feeder fund) invests all of its assets in the Portfolio (the
master fund). The Portfolio 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 American Express Financial Corporation (the
Advisor), a provider of financial services since 1894. The Advisor currently
manages more than $170 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.
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
<PAGE>
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.
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 and serves as senior portfolio manager.
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 a member of the portfolio management team
of Total Return Portfolio and its predecessor fund since 1995, and is a
portfolio manager of American Express Asset Management Group 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 each 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(a)
Maximum sales charge on purchases(b)
(as a percentage of offering price)
Growth Special
Growth Fund Trends Fund Growth Fund
0% 0% 0%
<PAGE>
Annual Fund and allocated Portfolio operating expenses (as a percentage of
average daily net assets):
Growth Special
Growth Fund Trends Fund Growth Fund(c)
Management fee(d) 0.61% 0.57% 0.65%
12b-1 fee 0.25% 0.25% 0.25%
Other expenses(e) 0.17% 0.28% 0.46%
Total 1.03% 1.10% 1.36%
(a)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. (b)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. (c)Expenses for Special
Growth Fund are based on the fiscal period from Aug. 19, 1996 (commencement of
operations) to July 31, 1997 after reimbursement. (d)The management fee is paid
by the Trust on behalf of the Portfolios. For Growth and Growth Trends
Portfolios, it includes the impact of a performance fee that increased the
management fee by 0.04% for both Portfolios in the fiscal year ended July 31,
1997. (e)Other expenses include an administrative services fee, a transfer
agency fee and other nonadvisory expenses.
The Advisor and the Distributor have agreed to waive certain fees and to absorb
certain other Fund expenses until Dec. 31, 1998. Under this agreement, a Fund's
total expenses will not exceed 1.30% for Growth Fund and Growth Trends Fund, and
1.40% for Special Growth Fund. Without this agreement, the ratio of expenses to
average daily net assets would have been 3.17% for Special Growth Fund. The
agreement had no impact for Growth Fund and Growth Trends Fund for the fiscal
year ended July 31, 1997.
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 Trends Special Growth
Growth Fund Fund Fund*
1 year $11 $11 $14
3 years $33 $35 $43
5 years $57 $61 $75
10 years $126 $134 $164
*Total expenses are based on the fiscal period from Aug. 19, 1996 to
July 31, 1997.
<PAGE>
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, 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
<TABLE>
<CAPTION>
Financial highlights
Growth Growth Special
Fund Trends Fund Growth Fund
Fiscal period ended July 31, 1997 1996(b) 1997 1996(b) 1997(c)
Per share income and capital changes(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.15 $25.43 $18.52 $19.00 $5.00
Income from investment operations:
Net investment income (loss) (.08) (.02) .16 .01 .04
Net gains (losses)
(both realized and unrealized) 13.29 (2.26) 7.93 (.49) 1.88
Total from investment operations 13.21 (2.28) 8.09 (.48) 1.92
Less distributions:
Distributions from net investment income -- -- (.06) -- (.01)
Distributions from realized gains -- -- -- -- (.01)
Total distributions -- -- (.06) -- (.02)
Net asset value, end of period $36.36 $23.15 $26.55 $18.52 $6.90
Ratios/supplemental data
Net assets, end of period (in millions) $23 $23 $21 $25 $1
Ratio of expenses to
average daily net assets(e) 1.01% 1.30%(d) 1.06% 1.30%(d) 1.36%(d)
Ratio of net income (loss) to
average daily net assets (.20%) (.37%)(d) .58% .39%(d) .26%(d)
Portfolio turnover rate (excluding
short-term securities) 24% 5% 32% 7% 171%
Total return 57.1% (9.0%) 43.7% (2.5%) 38.4%
Average brokerage commission rate(f) $.0463 $-- $.0511 $-- $.0405
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was May 13, 1996.
(c) Inception date was Aug. 19, 1996.
(d) Adjusted to an annual basis.
(e) The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets
would have been 1.03% and 1.86% for Growth Fund and 1.10% and 1.76% for
Growth Trends Fund for the periods ended 1997 and 1996, respectively; and
3.17% for Special Growth Fund for the period ended July 31, 1997.
(f) Effective fiscal year 1997, each Fund is required to disclose an average
brokerage commission rate per share for security trades on which
commissions are charged. The comparability of this information may be
affected by the fact that commission rates per share vary significantly
among foreign countries.
</TABLE>
<PAGE>
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 the Funds are contained in the Funds'
annual report which, if not included with this prospectus, may be obtained
without charge.
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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.
Average annual total returns as of July 31, 1997
<TABLE>
<CAPTION>
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
<S> <C> <C> <C> <C>
Growth Fund(a) +57.06% --% +23.19% +15.70%
Growth Trends Fund(a) +43.74% --% +20.19% +16.52%
Lipper Growth Fund Index +43.76% --% +18.31% +13.28%
Special Growth Fund(b) --% +38.37% --% --%
S&P 500 +52.10% +48.97% (c) +20.61% +14.94%
Cumulative total returns as of July 31, 1997
Purchase 1 year Since 5 years 10 years
made ago inception ago ago
Growth Fund(a) +57.06% --% +183.69% +329.94%
Growth Trends Fund(a) +43.74% --% +150.79% +361.39%
Lipper Growth Fund Index +43.76% --% +131.82% +248.09%
Special Growth Fund(b) --% +38.37% --% --%
S&P 500 +52.10% +48.97% (c) +155.27% +302.43%
</TABLE>
(a) 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, other than the 1 year return,
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.
<PAGE>
(b) Inception date was Aug. 19, 1996. The Advisor also manages a group of
accounts known as the American Express Asset Management Group Accounts (Asset
Management Accounts). The Advisor employs the same strategy used to manage
Special Growth Fund. The combined average annual total returns of the Asset
Management Accounts as of July 31, 1997 were +50.17% for 1 year, +23.32% for 5
years and +22.60% since inception, Oct. 11, 1988. Cumulative total returns as of
July 31, 1997 were +50.17% for 1 year, +185.20% for 5 years and +501.61% since
inception. The Asset Management Accounts' performance reflects reinvestment of
dividends and is calculated net of brokerage commissions and management fees. At
July 31, 1997, the composite included 26 fully discretionary, equity Asset
Management Accounts under management using this strategy with total assets of
$1.1 billion, which is 3% of total assets under management by American Express
Asset Management Group. Terminated accounts are not purged from the composite.
Expenses and fees associated with registering a mutual fund have not been
deducted from these returns. Returns shown should not be considered a
representation of Special Growth Fund's future performance.
(c) Measurement period started Sept. 1, 1996.
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 American Express Asset Management Group 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.
<PAGE>
Investment policies and risks
The policies described below apply both to the Fund and the corresponding
Portfolio.
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.
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 the 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.
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. 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.
<PAGE>
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 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. The Portfolio will concentrate its investments in
either of these industries only to the extent that the S&P becomes heavily
weighted in that industry. The 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.
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.
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 smaller companies or 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. Also, small companies
often have limited product lines, smaller markets or fewer financial resources.
Therefore, 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.
Utilities industry: Utility stocks, including electric, gas, telephone and other
energy-related (e.g., nuclear) utilities generally offer dividend yields that
exceed those of industrial companies and their prices tend to be less volatile
than stocks of industrial
<PAGE>
companies. However, utility companies are often highly-leveraged and utility
stocks can 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.
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.
Technology sector: Stocks of companies that have, or are likely to develop,
products, processes or services that will provide or benefit significantly from
technological advances and improvements are subject to volatility and price
fluctuations as the technology market sector increases or decreases in favor
with the investing public. Technology-based issues are exposed to risks
associated with economic conditions in that market sector. Due to competition, a
less diversified product line and other factors, companies that develop and/or
rely on technology could become increasingly sensitive to down swings in the
economy.
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.
<PAGE>
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. 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
<PAGE>
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. Securities and 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 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.
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).
<PAGE>
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
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 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
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".
<PAGE>
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 800-AXP-SERV.
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 on any other fund, read that fund's prospectus
carefully. 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
<PAGE>
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.
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 800-AXP-SERV. 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
<PAGE>
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.
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 800-AXP-SERV. 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):
<PAGE>
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 authorizations: If you elect to use this option to make your
automatic investments, money is transferred from your bank checking or
savings account into your IMA account and is then used to make
automatic investments.
If you elect to use bank authorizations for your automatic investments, you will
select a transfer date (when the money is transferred into your IMA account).
If you change your bank authorization date, it may also be necessary to change
your automatic investment date to coincide with the new transfer date.
Investment frequency: You can select the frequency of your automatic investments
(example: twice monthly, monthly or quarterly). 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 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
Terminating your SPP. If you wish to terminate your SPP, you may call
800-AXP-SERV, or send written instructions to American Express Financial Direct,
P.O. Box 59196, Minneapolis, MN 55459-0196.
Terminating bank authorizations. If you wish to terminate your bank
authorizations, you may do so at any time by notifying American Express
Financial Direct in writing or by calling 800-AXP-SERV. Your bank authorization
will not automatically terminate when you cancel your SPP.
IMPORTANT: If you are canceling your bank authorizations and you wish to cancel
your SPP, you must also provide instructions stating that the Distributor should
cancel
<PAGE>
your SPP. You may notify the Distributor by sending written instructions to the
address above or telephoning 800-AXP-SERV. 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.
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>
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
800-AXP-SERV
TTY Service
For the hearing impaired
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 that you should know about.
Dividend and capital gain distributions
A Portfolio allocates investment income from dividends and interest and net
realized capital gains or losses, if any, to a Fund. A Fund deducts direct and
allocated expenses from the investment income. A Fund's net investment income is
distributed to you by the end of the calendar year as dividends. Short-term
capital gains 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. Net realized long-term capital gains, if
any, are distributed at the end of the calendar year as capital gain
distributions. Before they are distributed, both net investment income and net
long-term capital gains are included in the value of each share. After they are
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.)
<PAGE>
If you choose cash distributions, you will receive only those declared after
your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash distributions,
we will reinvest the checks into your account at the then-current net asset
value and make future distributions in the form of additional shares. Prior to
reinvestment, no interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
The 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.
Distributions are subject to federal income tax and also may be subject to state
and local taxes. Distributions are taxable in the year the respective 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
<PAGE>
You also could be subject to backup withholding because you failed to report
interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number of:
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
For details on TIN requirements, call 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.
<PAGE>
How the Funds and Portfolios are organized
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.
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 respective Portfolio invests in and manages its portfolio of securities. 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 the respective 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 corresponding 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.
<PAGE>
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 800-437-3133.
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, that
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 corresponding 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:
<PAGE>
Growth Portfolio and
Growth Trends Portfolio
Assets Annual rate at
(billions) each asset level
First $ 1.0 0.600%
Next 1.0 0.575
Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500
Aggressive Growth Portfolio
Assets Annual rate at
(billions) each asset level
First $ 0.25 0.650%
Next 0.25 0.625
Next 0.50 0.600
Next 1.0 0.575
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.
For the fiscal year ended July 31, 1997, Growth Portfolio and Growth Trends
Portfolio paid the Advisor total investment management fees of 0.61% of average
daily net assets for Growth Portfolio and 0.57% for Growth Trends Portfolio. For
the fiscal period from Aug. 19, 1996 (commencement of operations) to July 31,
1997, Aggressive Growth Portfolio paid total investment management fees of
0.65%. 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.
<PAGE>
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. Under a Plan and Agreement of Distribution, each Fund pays a
distribution fee at an annual rate of 0.25% of that Fund's average daily net
assets for distribution-related services.
This fee will not cover all of the costs incurred by the Distributor.
Total expenses paid for Growth Fund and Growth Trends Fund for the fiscal year
ended July 31, 1997 were 1.01% and 1.06% of average daily net assets,
respectively. Total expenses paid for Special Growth Fund for the fiscal period
from Aug. 19, 1996 to July 31, 1997 were 1.36%.
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>
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>
STATEMENT OF ADDITIONAL INFORMATION
FOR
STRATEGIST GROWTH FUND, INC.
Sept. 29, 1997
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, 800-AXP-SERV (TTY: 800-710-5260) or by writing to P.O. Box 59196,
Minneapolis, MN 55459-0196.
This SAI is dated Sept. 29, 1997, and it is to be used with the Funds'
prospectus dated Sept. 29, 1997, and the Annual Report for the fiscal
year ended July 31, 1997.
<PAGE>
TABLE OF CONTENTS
Goals and Investment Policies....................................See Prospectus
Additional Investment Policies.............................................p. 3
Security Transactions......................................................p. 13
Brokerage Commissions Paid to Brokers Affiliated with the Advisor..........p. 16
Performance Information....................................................p. 17
Valuing Fund Shares........................................................p. 19
Investing in the Funds.....................................................p. 20
Redeeming Shares...........................................................p. 21
Capital Loss Carryover.....................................................p. 22
Taxes......................................................................p. 22
Agreements.................................................................p. 23
Organizational Information.................................................p. 27
Board Members and Officers.................................................p. 27
Principal Holders of Securities............................................p. 35
Independent Auditors.......................................................p. 35
Financial Statements...........................................See Annual Report
Prospectus.................................................................p. 36
Appendix A: Description of Bond Ratings...................................p. 37
Appendix B: Foreign Currency Transactions.................................p. 40
Appendix C: Options and Stock Index Futures Contracts.....................p. 45
Appendix D: Mortgage-Backed Securities....................................p. 52
Appendix E: Dollar-Cost Averaging.........................................p. 53
<PAGE>
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, respectively, 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 Funds' other investment policies, each Fund may
invest its assets in an open-end management investment company having the same
investment objectives, policies and restrictions as that Fund for the purpose of
having those assets managed as part of a combined pool.
Investment Policies applicable to Growth Fund/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>
'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 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 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 Portfolio's board is to make these loans, either long- or
short-term, to broker-dealers. 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 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.
<PAGE>
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, except the Portfolio 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 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.
'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.
'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.
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.
<PAGE>
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 Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.
Investment Policies applicable to Growth Trends Fund/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:
<PAGE>
'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.
'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.
'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.
<PAGE>
'Lend Portfolio securities in excess of 30% of its net assets. The current
policy of the Portfolio's board is to make these loans, either long- or
short-term, to broker-dealers. 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 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, except the Portfolio 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 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.
'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.
'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.
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
<PAGE>
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.
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 Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
<PAGE>
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.
Investment Policies applicable to Special Growth Fund/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 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.
'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 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.
<PAGE>
'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. The current
policy of the Portfolio's board is to make these loans, either long- or
short-term, to broker-dealers. 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 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.
'Concentrate in any one 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 at time of purchase, 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, except the Portfolio may make margin payments in
connection with transactions in options, futures contracts and other financial
instruments.
'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.
'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 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
<PAGE>
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.
'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.
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 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 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.
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-
<PAGE>
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, or which
will be included in the S&P 500 in the near future, that are traded in the form
of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.
For a description 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 Fund's and 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
<PAGE>
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 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 most favorable execution. In so doing, if, in the
professional opinion of the person
<PAGE>
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 other 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 sold
by a Portfolio, a 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 year ended July 31, 1997, Growth Portfolio and Growth Trends
Portfolio paid total brokerage commissions of $1,548,321 and $7,124,866,
respectively. For the fiscal period from Aug. 19, 1996 (commencement of
operations) to July 31, 1997, Aggressive Growth Portfolio paid total brokerage
commissions of $532,703. For the fiscal period from May 13, 1996 (commencement
of operations) to July 31, 1996, Growth Portfolio and Growth Trends Portfolio
paid total brokerage commissions of $230,628 and $1,488,847, respectively.
Substantially all firms through whom transactions were executed provide research
services.
Transactions amounting to $768,200,000, on which $41,592 in commissions were
imputed or paid, were specifically directed to firms in exchange for research
services for Growth Trends Portfolio. No transactions were directed to brokers
because of research services they provided to Growth Portfolio or Aggressive
Growth Portfolio, except for the affiliates as noted below.
As of the fiscal year ended July 31, 1997, the Portfolios listed 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:
<PAGE>
Name of Issuer Value of Securities Owned
at End of Fiscal Year
Growth Portfolio
Bank of America $ 6, 385,099
Goldman Sachs 6,979,533
Merrill Lynch 112,700,000
Morgan Stanley 15,642,433
Travelers Group 143,875,000
Growth Trends Portfolio
Bank of America $ 86,960,956
Goldman Sachs 51,879,886
Merrill Lynch 31,910,183
Morgan Stanley 174,412,200
Travelers Group 206,460,625
Aggressive Growth Portfolio
Bank of America $ 2,492,389
Morgan Stanley 3,387,533
For the fiscal periods ended 1997 and 1996, the portfolio turnover rates were
24% and 22% for Growth Portfolio, and 32% and 41% for Growth Trends Portfolio.
For the fiscal period ended 1997, the portfolio turnover rate was 171% for
Aggressive Growth Portfolio. Higher turnover rates may result in higher
brokerage expenses.
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.
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 a Portfolio 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 a Portfolio will receive prices and executions at
least as favorable as those offered by qualified independent brokers performing
similar brokerage and other services for a Portfolio and (ii) the affiliate
charges a 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.
<PAGE>
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 each Portfolio to brokers
affiliated with the Advisor for the fiscal year ended July 31, 1997 and fiscal
period from May 13, 1996 (commencement of operations) to July 31, 1996 for
Growth Portfolio and Growth Trends Portfolio is contained in the following
table:
<TABLE>
<CAPTION>
Fiscal
Period
Fiscal Year ended 1997 ended 1996
Percent of Aggregate
Aggregate Dollar Percent of Dollar Amount of Aggregate Dollar
Amount of Aggregate Transactions Amount of
Nature of Commissions Paid Brokerage Involving Payment Commissions Paid
Portfolio Broker Affiliation to Broker Commissions of Commissions to Broker
- -------------- ------------- ---------- ----------------- ----------------- -------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Growth American (1) $ 193,510 12.50% 21.24% $ 189,172
Enterprise
Investment
Services
Inc.
Growth Trends American (1) 494,119 6.94 12.53 66,667
Enterprise
Investment
Services
Inc.
Aggressive American (1) 33,072 6.21 8.83 N/A
Growth Enterprise
Investment
Services
Inc.
(1) Wholly-owned subsidiary of the Advisor.
</TABLE>
PERFORMANCE INFORMATION
The Funds 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.
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:
<PAGE>
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, Morningstar, 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% sales charge, a 0.175% service fee
and no 12b-1 fee. Performance quoted by Growth Fund and Growth Trends Fund,
prior to commencement of operations,
<PAGE>
is based on performance 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, 1997, the first business day following the end of the fiscal year,
the computations looked like this:
<TABLE>
<CAPTION>
Net assets before Shares
shareholder outstanding at Net asset value
Fund transactions the end of of one share
previous day
- ------------------ ----------------- ------------- ----------------- ------------ --------------
<S> <C> <C> <C>
Growth $23,380,583 divided by 643,082 equals $36.36
Growth Trends 20,626,338 776,768 26.55
Special Growth 1,273,618 184,624 6.90
</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.
<PAGE>
'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 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 (the Distributor) and each of
the Funds will be closed on the following holidays: New Year's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
INVESTING IN THE FUNDS
Each 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>
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
(or a Fund) 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
Each 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 each 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, IRAs 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
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 each 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 that Fund at the beginning of such period. Although redemptions in
excess of this limitation would normally be paid in cash, each 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 the Fund as
<PAGE>
determined by the board. In such circumstances, the securities distributed 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.
CAPITAL LOSS CARRYOVER
For federal income tax purposes, Growth Fund and Growth Trends Fund had total
capital loss carryovers of $2,230,374 and $790,530, respectively, at July 31,
1997, that if not offset by subsequent capital gains will expire as set out
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund 2004 2005 2006
- --------------------------- -------------------------- -------------------------- --------------------------
Growth $ 2,120,986 $50,571 $58,817
Growth Trends $ 790,530 -- --
</TABLE>
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 a Fund's dividend that is attributable to dividends the
Fund has received from domestic (U.S.) securities. For the fiscal year ended
July 31, 1997, 100% of Growth Trends Fund's net investment income dividends
qualified for the corporate deduction. For the fiscal period from Aug. 19, 1996
(commencement of operations) to July 31, 1997, 25.66% of Special Growth Fund's
net investment income dividends qualified for the corporate deduction. For the
fiscal year ended July 31, 1997, no dividends were paid for Growth 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.
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
<PAGE>
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 managing the assets of the Portfolios, the
Advisor is paid a fee based upon the following schedule. Each Fund pays its
proportionate share of the fee.
<PAGE>
Growth Portfolio and Aggressive Growth Portfolio
Growth Trends 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, 1997, the daily rates applied to the Portfolios' net assets on an
annual basis were equal to 0.561% for Growth Portfolio, 0.521% for Growth Trends
Portfolio and 0.646% for Aggressive Growth 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.
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 Lipper Growth Fund Index (the Index). Solely for purposes of
calculating the
<PAGE>
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 year ended July 31, 1997, the
adjustment increased the fee by $1,133,081 for Growth Portfolio and by
$3,913,141 for Growth Trends Portfolio.
The management fee is paid monthly. For the fiscal year ended July 31, 1997, the
total amount paid was $18,360,421 for Growth Portfolio and $61,899,356 for
Growth Trends Portfolio. For the fiscal period from Aug. 19, 1996 (commencement
of operations) to July 31, 1997, the total amount paid was $905,559 for
Aggressive Growth Portfolio. For the fiscal period from May 13, 1996
(commencement of operations) to July 31, 1996, the total amount paid was
$3,271,780 for Growth Portfolio and $11,544,754 for Growth Trends Portfolio. The
amounts are allocated among the Funds investing in the Portfolios.
Under the Agreement, each 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; organizational expenses; expenses incurred in connection
with lending portfolio
<PAGE>
securities; and expenses properly payable by the Portfolios, approved by the
board. For the fiscal year ended July 31, 1997, Growth Portfolio and Growth Fund
paid nonadvisory expenses of $286,102, and Growth Trends Portfolio and Growth
Trends Fund paid nonadvisory expenses of $641,525. For the fiscal period from
Aug. 19, 1996 (commencement of operations) to July 31, 1997, Aggressive Growth
Portfolio and Special Growth Fund paid nonadvisory expenses of $99,772. For the
fiscal period from May 13, 1996 (commencement of operations) to July 31, 1996,
Growth Portfolio and Growth Fund paid nonadvisory expenses of $116,459, and
Growth Trends Portfolio and Growth Trends Fund paid nonadvisory expenses of
$350,475.
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 and Special Growth Fund
Growth Trends 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, 1997, the daily rates applied to the Funds' net assets on an annual
basis were equal to 0.050% for Growth Fund, 0.050% for Growth Trends Fund and
0.060% for Special Growth 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 year ended July 31,
1997, the Funds paid fees of $12,775 for Growth Fund and $12,524 for Growth
Trends Fund. For the fiscal period from Aug. 19, 1996 (commencement of
operations) to July 31, 1997, Special Growth Fund paid fees of $1,429.
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.
<PAGE>
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 changed from time to time upon agreement of the parties
without shareholder approval. For the fiscal year ended July 31, 1997, the Funds
paid fees of $7,219 for Growth Fund and $4,672 for Growth Trends Fund. For the
fiscal period from Aug. 19, 1996 (commencement of operations) to July 31, 1997,
Special Growth Fund paid fees of $1,152.
Plan and Agreement of Distribution/Distribution Agreement
To help American Express Service Corporation (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 shares of the Funds. Under the Plan, the Distributor is
paid a fee at an annual rate of 0.25% of each 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 the 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, 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
disinterested board members is the responsibility of other 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 year ended July 31, 1997, the Funds paid fees of
$63,877 for Growth Fund and $62,793 for Growth Trends Fund. For the fiscal
period from Aug. 19, 1996 (commencement of operations) to July 31, 1997, Special
Growth Fund paid fees of $5,954.
<PAGE>
Custodian Agreement
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 Trust pays the custodian a maintenance charge per Portfolio and a
charge per transaction in addition to reimbursing the custodian's out-of-pocket
expenses.
Total fees and expenses
For the fiscal year ended July 31, 1997, the Funds paid total fees and
nonadvisory expenses, net of reimbursement and earnings credits, of $258,487 for
Growth Fund and $265,202 for Growth Trends Fund. For the fiscal period from Aug.
19, 1996 (commencement of operations) to July 31, 1997, Special Growth Fund paid
total fees and nonadvisory expenses of $32,317. The Advisor and the Distributor
have agreed to waive certain fees and to absorb certain other Fund expenses
until Dec. 31, 1998. Under this agreement, Growth and Growth Trends Funds' total
expenses will not exceed 1.30% and Special Growth Fund's total expenses will not
exceed 1.40%.
ORGANIZATIONAL INFORMATION
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.
BOARD MEMBERS AND OFFICERS
Directors of Strategist Fund Group
The following is a list of the Company's board members who are board members of
all 15 funds in the Strategist Fund Group. All shares of the Funds have
cumulative voting rights with respect to the election of board members.
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.
<PAGE>
Jean B. Keffeler
Born in 1945
3424 Zenith Avenue South
Minneapolis, MN
Business and management consultant. Director, National Computer Systems,
American Paging Systems, Inc.
Thomas R. McBurney
Born in 1938
McBurney Management Advisors
1710 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, 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.
<PAGE>
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.
Compensation for the Fund Board Members
Once the assets of a Fund reach $20 million, members of that Fund's board who
are not officers of the Advisor or an affiliate receive an annual fee of $1,000.
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 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 year ended July 31, 1997, the members of the board for Growth
Fund and Growth Trends Fund, for attending up to 4 meetings, received the
following compensation:
<TABLE>
<CAPTION>
Compensation Table
for Growth Fund
Pensions or Total cash
Aggregate Retirement Estimated compensation from
compensation benefits accrued annual the Strategist
Board Member from the Fund as Fund expenses benefit upon Fund
retirement Group
- ----------------------- ----------------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>
Rodney P. Burwell $4,000 $0 $0 $8,000
Jean B. Keffeler 4,000 0 0 8,000
Thomas R. McBurney 4,000 0 0 8,000
Compensation Table
for Growth Trends Fund
Pensions or Total cash
Aggregate Retirement Estimated annual compensation from
compensation benefits benefit upon the Strategist Fund
Board Member from the Fund accrued retirement Group
as Fund
expenses
- ----------------------- ----------------- ---------------- ----------------- --------------------
Rodney P. Burwell $4,000 $0 $0 $8,000
Jean B. Keffeler 4,000 0 0 8,000
Thomas R. McBurney 4,000 0 0 8,000
</TABLE>
During the fiscal period from Aug. 19, 1996 (commencement of operations) to July
31, 1997, the members of the board for Special Growth Fund received no
compensation. On July 31, 1997, the Funds' board members and officers as a group
owned less than 1% of the outstanding shares of a Fund.
<PAGE>
Trustees of the Preferred Master Trust Group
The following is a list of the Trust's board members. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley who does
not serve the nine IDS Life funds). All units have cumulative voting rights with
respect to the election of board members.
H. Brewster Atwater, Jr.
Born in 1941
4900 IDS Tower
Minneapolis, MN
Former Chairman and chief executive officer, General Mills, Inc. Director, Merck
& Co., Inc. and Darden Restaurants, Inc.
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, Union Pacific
Resources and FPL Group, Inc. (holding company for Florida Power and Light).
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Senior advisor to the chief executive officer 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>
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President and chief executive officer of the Advisor since August 1993 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 counselor for national and international affairs, The Reader's Digest
Association, Inc. Former nine-term U.S. Congressman, U.S. Secretary of Defense
and Presidential Counselor. Director, 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).
<PAGE>
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
Chairman of the board, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Former vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
Alan K. Simpson'
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former Assistant Republican
Leader, U.S. Senate. Director, PacifiCorp (electric power).
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 Council 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).
<PAGE>
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.
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
President, treasurer and corporate secretary of Board Services Corporation. Vice
president, general counsel and secretary for the Trust.
Officers who are also officers and/or employees of the Advisor:
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of the Advisor. Vice
president-investments for the Trust.
<PAGE>
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Director, senior vice president and chief financial officer of the Advisor.
Director, executive vice president and controller of IDS Life Insurance Company.
Treasurer for the Trust.
Compensation for the Portfolio Board Members
Once the assets of a Portfolio reach $20 million, members of that Portfolio's
board who are not officers of a Portfolio or of the Advisor receive an annual
fee of $1,500 for Growth Portfolio, $5,300 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, $15 for Growth Portfolio,
$53 for Growth Trends Portfolio and $1 for Aggressive Growth Portfolio; and as
Chair of the Contracts Committee, $86. Expenses for attending meetings are
reimbursed.
During the fiscal year ended July 31, 1997, the members of the board for Growth
Portfolio and Growth Trends Portfolio, for attending up to 32 meetings, received
the following compensation:
<TABLE>
<CAPTION>
Compensation Table
for Growth Portfolio
Pensions or Total cash
Aggregate Retirement Estimated annual compensation from the
compensation benefits accrued benefit upon Preferred Master Trust
Board Member from the as Portfolio retirement Group and IDS MUTUAL
Portfolio expenses FUND GROUP
- --------------------------- ---------------- ------------------ ------------------ ------------------------
<S> <C> <C> <C> <C>
H. Brewster Atwater, Jr. $1,840 $0 $0 $78,900
(part of year)
Lynne V. Cheney 2,201 0 0 97,400
Robert F. Froehlke 2,298 0 0 104,600
Heinz F. Hutter 2,333 0 0 106,300
Anne P. Jones 2,455 0 0 111,600
Melvin R. Laird 2,217 0 0 98,600
Alan K. Simpson 1,399 0 0 58,200
(part of year)
Edson W. Spencer 2,694 0 0 127,800
Wheelock Whitney 2,383 0 0 109,500
C. Angus Wurtele 2,408 0 0 110,700
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
for Growth Trends Portfolio
Aggregate Pensions or Total cash
compensation Retirement Estimated compensation from the
from the benefits accrued annual benefit Preferred Master Trust
Board Member Portfolio as Portfolio upon retirement Group and IDS MUTUAL
expenses FUND GROUP
- --------------------------- ------------- ------------------ ---------------- ------------------------
<S> <C> <C> <C> <C>
H. Brewster Atwater, Jr. $4,694 $0 $0 $78,900
(part of year)
Lynne V. Cheney 5,935 0 0 97,400
Robert F. Froehlke 5,882 0 0 104,600
Heinz F. Hutter 5,917 0 0 106,300
Anne P. Jones 6,265 0 0 111,600
Melvin R. Laird 5,951 0 0 98,600
Alan K. Simpson 3,805 0 0 58,200
(part of year)
Edson W. Spencer 6,278 0 0 127,800
Wheelock Whitney 5,967 0 0 109,500
C. Angus Wurtele 5,992 0 0 110,700
</TABLE>
During the fiscal period from Aug. 19, 1996 (commencement of operations) to July
31, 1997, the members of the board for Aggressive Growth Portfolio, for
attending up to 32 meetings, received the following compensation:
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
for Aggressive Growth Portfolio
Aggregate Pensions or Total cash
compensation Retirement Estimated compensation from the
from the benefits accrued annual benefit Preferred Master Trust
Board Member Portfolio as Portfolio upon retirement Group and IDS MUTUAL
expenses FUND GROUP
- ---------------------------- ------------- ------------------- ---------------- ------------------------
<S> <C> <C> <C> <C>
H. Brewster Atwater, Jr. $776 $0 $0 $78,900
(part of year)
Lynne V. Cheney 831 0 0 97,400
Robert F. Froehlke 984 0 0 104,600
Heinz F. Hutter 1,009 0 0 106,300
Anne P. Jones 1,058 0 0 111,600
Melvin R. Laird 847 0 0 98,600
Alan K. Simpson 513 0 0 58,200
(part of year)
Edson W. Spencer 1,371 0 0 127,800
Wheelock Whitney 1,059 0 0 109,500
C. Angus Wurtele 1,084 0 0 110,700
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 1997, George L. Farr held 20.61% of Special Growth Fund shares.
Additional information on principal holders of securities may be obtained by
writing to American Express Financial Direct, P.O.
Box 59196, Minneapolis, MN 55459-0196.
INDEPENDENT AUDITORS
The Funds' and corresponding Portfolios' financial statements contained in the
Annual Report to shareholders for the fiscal year ended July 31, 1997 for Growth
Fund and Growth Trends Fund and the fiscal period from Aug. 19, 1996
(commencement of operations) to July 31, 1997 for Special Growth Fund were
audited by independent
<PAGE>
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 1997 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. 29, 1997 is hereby incorporated in this SAI by
reference.
<PAGE>
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>
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>
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>
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 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 excess of the value of securities or other assets
denominated in that currency.
<PAGE>
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.
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.
<PAGE>
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 the 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 its 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.
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 its 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.
<PAGE>
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 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
<PAGE>
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>
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
market. It is anticipated the trading technique will be utilized only to effect
a transaction when the price of the security plus
<PAGE>
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.
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.
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
<PAGE>
security. A Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the Portfolio's basis in that security.
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 contracts. However, a
Portfolio would be required to deposit with its custodian, in a segregated
account in the name of the futures broker, an
<PAGE>
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 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.
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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>
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. On
an IO, if prepayments of principal are greater than anticipated, an investor may
incur substantial losses. 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>
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 technique 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 on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, 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>
Independent auditors' report
The board and shareholders
Strategist Growth Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of
Strategist Growth Fund, Strategist Growth Trends Fund and Strategist Special
Growth Fund (series within Strategist Growth Fund, Inc.) as of July 31, 1997,
and the related statements of operations for the year then ended and the
statements of changes in net assets and the financial highlights for the year
ended July 31, 1997, and for the period from May 13, 1996 (commencement of
operations), to July 31, 1996 of Strategist Growth Fund and Strategist Growth
Trends Fund; and the related statement of operations, statement of changes in
net assets and the financial highlights for the period from August 19, 1996
(commencement of operations), to July 31, 1997 of Strategist Special Growth
Fund. 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 audits.
We conducted our audits 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 audits provide 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,
Strategist Growth Trends Fund and Strategist Special Growth Fund at July 31,
1997, and the results of their operations, the changes in their net assets and
the financial highlights for the periods stated in the first paragraph above, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 5, 1997
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of assets and liabilities
Strategist Growth Fund, Inc.
July 31, 1997
Strategist Strategist Strategist
Growth Growth Special
Fund Trends Fund Growth Fund
Assets
<S> <C> <C> <C>
Investment in corresponding
Portfolio (Note 1) $23,408,618 $20,682,838 $1,295,378
Expense receivable from AEFC -- -- 82
Organizational costs (Note 1) 1,969 1,969 98
----- ----- --
Total assets 23,410,587 20,684,807 1,295,558
---------- ---------- ---------
Liabilities
Accrued distribution fee 158 140 9
Accrued transfer agency fee 32 21 5
Accrued administrative services fees 32 28 2
Other accrued expenses 29,782 58,280 21,924
------ ------ ------
Total liabilities 30,004 58,469 21,940
------ ------ ------
Net assets applicable to
outstanding capital stock $23,380,583 $20,626,338 $1,273,618
=========== =========== ==========
Represented by
Capital stock-- $.01 par value $ 6,431 $ 7,768 $ 1,846
Additional paid-in capital 14,873,867 12,778,655 827,961
Undistributed (excess of distributions over)
net investment income -- 110,178 4,886
Accumulated net realized gain (loss) (Note 1)(2,230,374) (797,076) 105,146
Unrealized appreciation (depreciation)
on investments 10,730,659 8,526,813 333,779
---------- --------- -------
Total -- representing net assets applicable
to outstanding capital stock $23,380,583 $20,626,338 $1,273,618
----------- ----------- ----------
Shares outstanding 643,082 776,768 184,624
======= ======= =======
Net asset value per share of
outstanding capital stock $ 36.36 $ 26.55 $ 6.90
======= ======= ========
See accompanying notes to financial statements.
<PAGE>
Statements of operations
Strategist Growth Fund, Inc.
Year ended July 31, 1997
Strategist Strategist Strategist
Growth Growth Special
Fund Trends Fund Growth Fund*
Investment income
Income:
Dividends $ 140,359 $ 260,654 $ 26,122
Interest 67,008 151,068 12,498
Less: Foreign taxes withheld (364) (1,209) --
---- ------ ------
Total income 207,003 410,513 38,620
------- ------- ------
Expenses (Note 2):
Expenses, including investment management
services fee, allocated from
corresponding Portfolio 158,183 144,893 16,794
Distribution fee 63,877 62,793 5,954
Transfer agency fee 7,219 4,672 1,152
Administrative services fees and expenses 12,775 12,524 1,429
Compensation of board members 13,250 12,349 --
Postage 117 4,276 5,395
Registration fees 3,274 24,243 32,949
Reports to shareholders 18 2,454 3,644
Audit fees 6,000 6,000 3,000
Other -- 1,768 5,311
----- ----- -----
Total expenses 264,713 275,972 75,628
Less expenses reimbursed by AEFC (6,226) (10,770) (43,311)
------ ------- -------
Total net expenses 258,487 265,202 32,317
------- ------- ------
Investment income (loss)-- net (51,484) 145,311 6,303
======= ======= =====
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (109,388) 598,086 77,565
Financial futures contracts -- -- 28,581
------ ------- ------
Net realized gain (loss) on investments (109,388) 598,086 106,146
Net change in unrealized appreciation
(depreciation) on investments 10,845,973 7,790,733 333,779
---------- --------- -------
Net gain (loss) on investments 10,736,585 8,388,819 439,925
---------- --------- -------
Net increase (decrease) in net assets
resulting from operations $10,685,101 $8,534,130 $446,228
=========== ========== ========
*For the period from Aug. 19, 1996 (commencement of operations) to July 31, 1997.
See accompanying notes to financial statements.
<PAGE>
Statements of changes in net assets
Strategist Growth Fund, Inc.
Strategist Growth Fund
Year ended For the period
July 31, 1997 from May 13, 1996*
to July 31, 1996
Operations
Investment income (loss)-- net $ (51,484) $ (19,369)
Net realized gain (loss) on investments (109,388) (2,120,986)
Net change in unrealized appreciation
(depreciation) on investments 10,845,973 (115,314)
---------- --------
Net increase (decrease) in net assets
resulting from operations 10,685,101 (2,255,669)
---------- ----------
Capital share transactions (Note 3)
Proceeds from sales 3,196,032 25,205,431
Payments for redemptions (13,500,312) --
----------- ----------
Increase (decrease) in net assets from
capital share transactions (10,304,280) 25,205,431
----------- ----------
Total increase (decrease) in net assets 380,821 22,949,762
Net assets at beginning of period (Note 1) 22,999,762 50,000
---------- ------
Net assets at end of period $23,380,583 $22,999,762
=========== ===========
*Commencement of operations.
See accompanying notes to financial statements.
<PAGE>
Statements of changes in net assets
Strategist Growth Fund, Inc.
Strategist Growth Trends Fund
Year ended For the period
July 31, 1997 from May 13, 1996*
to July 31, 1996
Operations and distributions
Investment income (loss)-- net $ 145,311 $ 21,361
Net realized gain (loss) on investments 598,086 (1,395,162)
Net change in unrealized appreciation
(depreciation) on investments 7,790,733 736,080
--------- -------
Net increase (decrease) in net assets
resulting from operations 8,534,130 (637,721)
--------- --------
Distributions to shareholders from:
Net investment income (72,259) --
======= =======
Capital share transactions (Note 3)
Proceeds from sales 1,812,239 25,146,624
Reinvestment of distributions at net asset value 72,259 --
Payments for redemptions (14,278,934) --
----------- ----------
Increase (decrease) in net assets from
capital share transactions (12,394,436) 25,146,624
----------- ----------
Total increase (decrease) in net assets (3,932,565) 24,508,903
Net assets at beginning of period (Note 1) 24,558,903 50,000
---------- ------
Net assets at end of period $20,626,338 $24,558,903
----------- -----------
Undistributed (excess of distributions over)
net investment income $ 110,178 $ 21,361
========== =========
*Commencement of operations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Statement of changes in net assets
Strategist Growth Fund, Inc.
Strategist Special Growth Fund
For the period from
Aug. 19, 1996*
to July 31, 1997
Operations and distributions
Investment income (loss)-- net $ 6,303
Net realized gain (loss) on investments 106,146
Net change in unrealized appreciation
(depreciation) on investments 333,779
-------
Net increase (decrease) in net assets resulting from operations 446,228
-------
Distributions to shareholders from:
Net investment income (1,417)
Net realized gain (1,000)
------
Total distributions (2,417)
======
Capital share transactions (Note 3)
Proceeds from sales 8,268,135
Reinvestment of distributions at net asset value 2,417
Payments for redemptions (7,441,745)
----------
Increase (decrease) in net assets from capital share transactions 828,807
-------
Total increase (decrease) in net assets 1,272,618
Net assets at beginning of period (Note 1) 1,000
-----
Net assets at end of period $1,273,618
----------
Undistributed (excess of distributions over)
net investment income $ 4,886
=========
*Commencement of operations.
See accompanying notes to financial statements.
<PAGE>
Notes to financial statements
Strategist Growth Fund, Inc.
1. Summary of significant accounting policies
Strategist Growth Fund (Growth Fund), Strategist Growth Trends Fund (Growth
Trends Fund) and Strategist Special Growth Fund (Special Growth 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. Strategist Growth Fund, Inc. has 3 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the board. On April 15, 1996, American Express Financial
Corporation (AEFC) invested $50,000 in Growth Fund and Growth Trends Fund, which
represented 1,966 and 2,632 shares, respectively. Operations did not formally
commence until May 13, 1996. On Aug. 16, 1996, AEFC invested $1,000 in Special
Growth Fund that represented 200 shares. Operations commenced on Aug. 19, 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 Growth 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 Growth Trends Portfolio, an
open-end investment company that has the same objectives as the Fund. Growth
Trends Portfolio invests primarily in common stocks of U.S. and foreign
companies showing potential for significant growth and operating in areas where
economic or technological changes are occurring.
Special Growth Fund invests all of its assets in Aggressive Growth Portfolio, an
open-end investment company that has the same objectives as the Fund. Aggressive
Growth Portfolio invests primarily in equity securities of companies that
comprise the S&P 500.
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, 1997, the percentages of the corresponding Portfolio
owned by Growth Fund, Growth Trends Fund and Special Growth Fund were 0.57%,
0.15% and 0.43%, respectively. Valuation of securities held by the Portfolios is
discussed in Note 1 of the Portfolios' "Notes to financial statements," which
are included elsewhere in this report.
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 (decreased),
resulting in net reclassification adjustments to additional paid-in capital by
the following:
Growth Special
Growth Trends Growth
Fund Fund Fund
Undistributed net investment income $ 51,484 $ 15,765 $--
Additional paid-in capital
increase (decrease) $(51,484) $(15,765) $--
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, 1997, AEFC owned 1,966 shares of Growth Fund, 2,639 shares of Growth
Trends Fund and 100,067 shares of Special Growth Fund. At July 31, 1997,
American Express Company (the parent company of AEFC) owned 533,410 shares of
Growth Fund and 695,804 shares of 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 a fee 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% (0.06% to 0.03% for Special Growth Fund) 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 and 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 Corporation (the Distributor) a distribution fee at an annual rate of
0.25% of the Fund's average daily net assets for distribution related services.
AEFC and the Distributor agreed to waive certain fees and to absorb certain
other Fund expenses through July 31, 1997. Under this agreement, each Fund's
total expenses would not exceed 1.30% (1.40% for Special Growth Fund) of each of
the Fund's average daily net assets.
3. Capital share transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Period ended July 31, 1997
Growth Special
Growth Trends Growth
Fund Fund Fund*
Sold 113,943 85,325 1,430,220
Issued for reinvested distribution -- 3,331 439
Redeemed (464,310) (637,972) (1,246,235)
-------- -------- ----------
Net increase (decrease) (350,367) (549,316) 184,424
-------- -------- -------
*Inception date was Aug. 19, 1996.
Period ended July 31, 1996*
Growth Fund Growth Trends Fund
Sold 991,483 1,323,452
------- ---------
Net increase (decrease) 991,483 1,323,452
------- ---------
*Inception date was May 13, 1996.
4. Capital loss carryover
For federal income tax purposes, Growth Fund and Growth Trends Fund had capital
loss carryovers at July 31, 1997 of $2,230,374 and $790,530, respectively, that
will expire in 2004 through 2006 for Growth Fund and 2004 for Growth Trends Fund
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 its
available capital loss carryover has been offset or expires.
<PAGE>
<TABLE>
<CAPTION>
5. Financial highlights
The table below shows certain important information for evaluating each Fund's
results.
Growth Growth Special
Fund Trends Fund Growth Fund
Fiscal period ended July 31, 1997 1996(b) 1997 1996(b) 1997(c)
Per share income and capital changes(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.15 $25.43 $18.52 $19.00 $5.00
Income from investment operations:
Net investment income (loss) (.08) (.02) .16 .01 .04
Net gains (losses)
(both realized and unrealized) 13.29 (2.26) 7.93 (.49) 1.88
Total from investment operations 13.21 (2.28) 8.09 (.48) 1.92
Less distributions:
Distributions from net investment income -- -- (.06) -- (.01)
Distributions from realized gains -- -- -- -- (.01)
Total distributions -- -- (.06) -- (.02)
Net asset value, end of period $36.36 $23.15 $26.55 $18.52 $6.90
Ratios/supplemental data
Net assets, end of period (in millions) $23 $23 $21 $25 $1
Ratio of expenses to
average daily net assets(e) 1.01% 1.30%(d) 1.06% 1.30%(d) 1.36%(d)
Ratio of net income (loss) to
average daily net assets (.20%) (.37%)(d) .58% .39%(d) .26%(d)
Portfolio turnover rate (excluding
short-term securities) 24% 5% 32% 7% 171%
Total return 57.1% (9.0%) 43.7% (2.5%) 38.4%
Average brokerage commission rate(f) $.0463 $-- $.0511 $-- $.0405
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was May 13, 1996.
(c) Inception date was Aug. 19, 1996.
(d) Adjusted to an annual basis.
(e) The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets would
have been 1.03% and 1.86% for Growth Fund and 1.10% and 1.76% for Growth Trends
Fund for the periods ended 1997 and 1996, respectively; and 3.17% for Special
Growth Fund for the period ended July 31, 1997.
(f) Effective fiscal year 1997, each Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions are
charged. The comparability of this information may be affected by the fact that
commission rates per share vary significantly among foreign countries.
</TABLE>
<PAGE>
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 (a series of
Growth Trust) as of July 31, 1997, the related statement of operations for the
year then ended, and the statements of changes in net assets for the year ended
July 31, 1997 and for the period from May 13, 1996 (commencement of operations)
to July 31, 1996. These financial statements are the responsibility of portfolio
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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
audits provide 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,
1997, and the results of its operations and the changes in its net assets for
the periods stated in the first paragraph above, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 5, 1997
<PAGE>
Financial statements
Statement of assets and liabilities
Growth Portfolio
July 31, 1997
Assets
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated issuers
(identified cost $2,234,095,174) $4,155,884,138
Investments in securities of affiliated issuers
(identified cost $62,591,669) 99,411,787
Cash in bank on demand deposit 332,514
Dividends and accrued interest receivable 1,318,328
Receivable for investment securities sold 1,905,876
U.S. government securities held as collateral (Note 4) 35,670,022
----------
Total assets 4,294,522,665
=============
Liabilities
Payable for investment securities purchased 12,331,722
Payable upon return of securities loaned (Note 4) 150,698,918
Accrued investment management services fee 364,097
Other accrued expenses 44,205
------
Total liabilities 163,438,942
-----------
Net assets $4,131,083,723
==============
See accompanying notes to financial statements.
<PAGE>
Statement of operations
Growth Portfolio
Year ended July 31, 1997
Investment income
Income:
Dividends $ 16,430,188
Interest 7,469,380
Less: Foreign taxes withheld (47,850)
-------
Total income 23,851,718
----------
Expenses (Note 2):
Investment management services fee 18,360,421
Compensation of board members 20,381
Compensation of officers 799
Custodian fees 155,081
Registration fees 125
Audit fees 24,750
Other 77,122
------
Total expenses 18,638,679
Earnings credits on cash balances (Note 2) (8,589)
------
Total net expenses 18,630,090
----------
Investment income (loss) -- net 5,221,628
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions
(including loss of $1,772,787 on sale of
affiliated issuers) (Note 3) 50,423,029
Net change in unrealized appreciation (depreciation)
on investments 1,363,502,469
-------------
Net gain (loss) on investments 1,413,925,498
-------------
Net increase (decrease) in net assets resulting from
operations $1,419,147,126
==============
See accompanying notes to financial statements.
<PAGE>
Statements of changes in net assets
Growth Portfolio
Year ended For the period
July 31, 1997 from May 13, 1996*
to July 31, 1996
Operations
Investment income (loss)-- net $ 5,221,628 $ 1,339,597
Net realized gain (loss) on investments 50,423,029 12,989,728
Net change in unrealized appreciation
(depreciation) on investments 1,363,502,469 (176,108,355)
------------- ------------
Net increase (decrease) in net assets
resulting from operations 1,419,147,126 (161,779,030)
Net contributions 506,769,449 2,366,896,178
----------- -------------
Total increase (decrease) in net assets 1,925,916,575 2,205,117,148
Net assets at beginning of period (Note 1) 2,205,167,148 50,000
------------- ------
Net assets at end of period $4,131,083,723 $2,205,167,148
============== ==============
*Commencement of operations.
See accompanying notes to financial statements.
<PAGE>
Notes to financial statements
Growth Portfolio
1. Summary of significant accounting policies
Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is
registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. Growth Portfolio invests
primarily in stocks of U.S. and foreign companies that appear to offer growth
opportunities. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio. On April 15, 1996, American Express
Financial Corporation (AEFC) contributed $50,000 to the Portfolio. Operations
did not formally commence until May 13, 1996, at which 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 and
write options traded on any U.S. or foreign exchange or in the over-the-counter
market where the completion of the obligation is dependent upon the credit
standing of the other party. The Portfolio also may buy and sell put and call
options and write covered call options on portfolio securities and may write
cash-secured put options. The risk in writing a call option is that the
Portfolio gives up the opportunity of profit if the market price of the security
increases. The risk in writing a put option is that the Portfolio may incur a
loss if the market price of the security decreases and the option is exercised.
The risk in buying an option is that the Portfolio pays a premium whether or not
the option is exercised. The Portfolio also has the additional risk of not being
able to enter into a closing transaction if a liquid secondary market does not
exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market, the
Portfolio may buy and sell financial futures contracts traded on any U.S. or
foreign exchange. The Portfolio also may buy 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 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 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 $1,133,081 for the year ended July
31, 1997.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio, and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the year ended July 31, 1997, the Portfolio's custodian fees were reduced
by $8,589 as a result of earnings credits from overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the units of the Trust.
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $1,278,817,933 and $699,343,849, respectively, for the
year ended July 31, 1997. For the same year, the portfolio turnover rate was
24%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $193,510 for the
year ended July 31, 1997.
4. Lending of portfolio securities
At July 31, 1997, securities valued at $148,891,085 were on loan to brokers.
For collateral, the Portfolio received $115,028,896 in cash and U.S. government
securities valued at $35,670,022. Income from securities lending amounted to
$677,468 for the year ended July 31, 1997. 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>
<TABLE>
<CAPTION>
Investments in securities
Growth Portfolio
July 31, 1997
(Percentages represent value of investments compared to net assets)
Investments in securities of unaffiliated issuers
Common stocks (95.2%)
Issuer Shares Value(a)
<S> <C> <C>
Airlines (0.6%)
Northwest Airlines 600,000(c) $ 24,675,000
Automotive & related (0.3%)
Gentex 500,000(c) 11,312,500
Banks and savings & loans (3.3%)
Washington Mutual 2,000,000 138,250,000
Beverages & tobacco (2.5%)
Coca-Cola 1,506,700 104,338,975
Building materials & construction (2.0%)
Tyco Intl 1,000,000 81,000,000
Chemicals (4.1%)
Culligan Water Technology 400,000(c) 16,900,000
Monsanto 1,500,000 74,718,750
USA Waste Service 1,975,000(c) 79,617,187
----------
Total 171,235,937
Communications equipment & services (6.1%)
ADC Telecommunications 1,200,000(c) 48,450,000
Advanced Fibre Communications 250,000(b,c) 17,468,750
Andrew 1,600,000(c) 41,700,000
Tellabs 2,400,000(c) 143,700,000
----------
Total 251,318,750
Computers & office equipment (18.4%)
ABR Information Services 800,000(c) 21,800,000
Cisco Systems 1,600,000(c) 127,300,000
Compaq Computer 2,000,000(b,c) 114,250,000
First Data 1,568,720 68,435,410
Hewlett-Packard 1,800,000 126,112,500
Ikon Office Solutions 1,000,000 29,187,500
Keane 600,000(c) 36,675,000
Microsoft 400,000(c) 56,600,000
Oracle 1,350,000(c) 73,490,625
Silicon Graphics 1,000,000(c) 25,000,000
Solectron 1,025,000(c) 80,846,875
----------
Total 759,697,910
Electronics (8.4%)
Applied Materials 1,200,000(c) 110,250,000
Intel 1,000,000 91,812,500
Maxim Intergrated Products 1,200,000(c) 82,950,000
Texas Instruments 400,000 46,000,000
Vishay Intertechnology 661,500 17,695,125
----------
Total 348,707,625
Energy equipment & services (2.6%)
Schlumberger 1,400,000 106,925,000
Financial services (9.0%)
First Virtual Holding 100,000(c) 462,500
Green Tree Financial 351,400 16,559,725
MBNA 1,500,000 67,500,000
Merrill Lynch 1,600,000 112,700,000
Providian Financial 813,550 31,880,991
Travelers Group 2,000,000 143,875,000
----------
Total 372,978,216
Food (0.6%)
Delta & Pine Land 666,733(b) 25,335,854
Furniture & appliances (0.3%)
Ethan Allen Interiors 252,000 13,356,000
Health care (8.5%)
Amgen 1,200,000(c) 70,575,000
Boston Scientific 1,200,000(b,c) 86,100,000
Gensia 161(c) 745
Johnson & Johnson 700,000 43,618,750
Medtronic 600,000 52,350,000
Pfizer 1,600,000 95,400,000
Physio-Control Intl 296,700(c) 4,302,150
----------
Total 352,346,645
Health care services (7.8%)
HealthCare COMPARE 1,000,000(c) 57,000,000
HEALTHSOUTH 4,800,000(c) 127,200,000
Service Corp Intl 2,400,000 81,600,000
United Healthcare 1,000,000 57,000,000
----------
Total 322,800,000
Industrial equipment & services (2.7%)
Caterpillar 800,000 44,800,000
Deere & Co 1,200,000 68,250,000
----------
Total 113,050,000
Insurance (0.6%)
Provident Companies 383,600 24,310,650
Leisure time & entertainment (2.6%)
Harley-Davidson 300,000 15,975,000
Marriot Intl 1,000,000 68,750,000
Mattel 600,000 20,850,000
----------
Total 105,575,000
Metals (0.6%)
Nucor 300,000 18,618,750
Stillwater Mining 400,000(c) 8,300,000
----------
Total 26,918,750
Multi-industry conglomerates (1.6%)
AccuStaff 1,200,000(b) 32,700,000
Apollo Group 900,000(c) 33,412,500
------------
Total 66,112,500
Retail (1.5%)
Consoliated Stores 383,500(c) 15,435,875
Home Depot 900,000 44,887,500
------------
Total 60,323,375
Textiles & apparel (1.2%)
Nike Cl B 800,000 49,850,000
Transportation (0.6%)
Wisconsin Central 750,000(c) 23,484,375
Utilities -- telephone (2.2%)
WorldCom 2,550,400(c) 89,104,600
Foreign (7.1%) (d)
Ericsson (LM) ADR 1,500,000 67,875,000
Northern Telecommunications 1,000,000 104,562,500
Danka Business Systems ADR 1,500,000(b) 73,593,750
SGS-THOMSON Microelectronics 500,000(c) 45,687,500
------------
Total 291,718,750
Total common stocks of unaffiliated issuers
(Cost: $2,012,933,778) $3,934,726,412
<PAGE>
<CAPTION>
Short-term securities (5.4%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
<S> <C> <C> <C>
U.S. government agency (0.2%)
Federal Home Loan Mtge Corp Disc Nts
08-07-97 5.39% $ 4,800,000 $ 4,795,704
08-15-97 5.37 1,060,000 1,057,795
08-28-97 5.44 3,000,000 2,987,805
Total 8,841,304
Commercial paper (4.9%)
Alabama Power
08-19-97 5.59 6,300,000 6,281,714
BBV Finance (Delware)
08-22-97 5.52 4,600,000 4,585,242
09-04-97 5.52 16,200,000 16,115,850
Beneficial
08-01-97 5.58 6,900,000 6,900,000
BOC Group
08-04-97 5.59 2,200,000 2,198,983
CAFCO
08-18-97 5.60 3,800,000(e) 3,790,041
Ciesco LP
09-12-97 5.56 11,600,000 11,525,431
CIT Group Holdings
09-03-97 5.52 11,400,000 11,342,525
Commercial Credit
09-18-97 5.52 1,600,000 1,588,309
Commerzbank U.S. Finance
08-26-97 5.51 6,000,000 5,977,125
General Electric Capital Services
08-06-97 5.58 10,500,000 10,491,921
Goldman Sachs Group
08-20-97 5.57 7,000,000 6,979,533
Kredietbank North America Finance
09-02-97 5.62 6,900,000 6,863,547
May Department Stores
08-29-97 5.52 7,600,000 7,567,487
Metlife Funding
08-25-97 5.52 6,200,000 6,177,308
Morgan Stanley Group
08-25-97 5.53 15,700,000 15,642,433
NBD Bank Canada
08-22-97 5.53 4,100,000 4,086,822
New Center Asset Trust
09-04-97 5.50 10,000,000 9,948,339
Paccar Financial
08-04-97 5.57 9,200,000 9,195,745
08-27-97 5.50 8,400,000 8,366,755
Pfizer
09-08-97 5.51 8,500,000(e) 8,450,832
Reed Elsevier
08-05-97 5.62 4,400,000(e) 4,396,733
St. Paul Companies
08-26-97 5.52 10,500,000(e) 10,459,969
08-28-97 5.50 2,700,000(e) 2,688,923
Societe Generale North America
09-09-97 5.55 13,500,000 13,419,416
UBS Finance (Delaware)
08-08-97 5.52 6,500,000 6,493,049
Total 201,534,032
Letters of credit (0.3%)
Bank of America-
AES Barber Point
08-07-97 5.58 6,391,000 6,385,099
Federal Home Loan Bank-
Downey Savings & Loan
08-05-97 5.58 4,400,000 4,397,291
Total 10,782,390
Total short-term securities
(Cost: $221,161,396) $ 221,157,726
Total investments in securities of unaffiliated issuers
(Cost: $2,234,095,174) $4,155,884,138
<PAGE>
<CAPTION>
Investments in securities of affiliated issuers (f)
Common stocks (2.4%)
Issuer Shares Value(a)
<S> <C> <C>
Mastec 1,500,000(b,c) $ 80,531,250
Risk Capital Holdings 883,300(c) 18,880,537
Total investments in securities of affiliated issuers
(Cost: $62,591,669) $ 99,411,787
Total investments in securities
(Cost: $2,296,686,843)(g) $4,255,295,925
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Security is partially or fully on loan. See Note 4 to the financial
statements.
(c) Non-income producing.
(d) Foreign security values are stated in U.S. dollars.
(e) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid
under guidelines established by the board.
(f) Investments representing 5% or more of the outstanding voting securities
of the issuer.
Transactions with companies that are or were affiliates during the year
ended July 31, 1997 are as follows:
Beginning Purchase Sales Ending Dividend
Issuer cost cost cost cost income
Mastec $ -- $45,512,990 $ -- $45,512,990 $ --
Oxford Resources* 10,236,220 -- 10,236,220 -- --
Physio Control* -- 18,484,561 14,878,336 3,606,225 --
Risk Capital Holdings* 17,078,679 -- -- 17,078,679 --
Total $27,314,899 $63,997,551 $25,114,556 $66,197,894 $ --
*Issuer was not an affiliate for the entire year.
(g) At July 31,1997, the cost of securities for federal income tax purposes was
$2,296,686,842 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $1,966,352,053
Unrealized depreciation (7,742,970)
----------
Net unrealized appreciation $1,958,609,083
==============
<PAGE>
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 Trends Portfolio (a series
of Growth Trust) as of July 31, 1997, and the related statement of operations
for the year then ended, and the statements of changes in net assets for the
year ended July 31, 1997 and for the period from May 13, 1996 (commencement of
operations) to July 31, 1996. These financial statements are the responsibility
of portfolio management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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
audits provide 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, 1997, and the results of its operations and the changes in its net assets
for the periods stated in the first
paragraph above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 5, 1997
<PAGE>
Financial statements
Statement of assets and liabilities
Growth Trends Portfolio
July 31, 1997
Assets
Investments in securities, at value (Note 1)
(identified cost $8,372,207,444) $13,978,299,604
Cash in bank on demand deposit 2,840,701
Dividends and accrued interest receivable 11,815,908
Receivable for investment securities sold 99,709,242
U.S. government securities held as collateral (Note 4) 104,156,922
-----------
Total assets 14,196,822,377
==============
Liabilities
Payable for investment securities purchased 62,091,859
Payable upon return of securities loaned (Note 4) 152,302,522
Accrued investment management services fee 197,825
Other accrued expenses 100,818
-------
Total liabilities 214,693,024
-----------
Net assets $13,982,129,353
===============
See accompanying notes to financial statements.
<PAGE>
Statement of operations
Growth Trends Portfolio
Year ended July 31, 1997
Investment income
Income:
Dividend (including $1,712,000 from affiliates) $ 114,463,383
Interest 66,416,365
Less: Foreign taxes withheld (646,420)
--------
Total income 180,233,328
-----------
Expenses (Note 2):
Investment management services fee 61,899,356
Compensation of board members 54,226
Custodian fees 412,768
Audit fees 30,750
Other 120,194
-------
Total expenses 62,517,294
Earnings credits on cash balances (Note 2) (16,733)
-------
Total net expenses 62,500,561
----------
Investment income (loss) -- net 117,732,767
-----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions
(including gain of $27,777,394 on
sale of affiliated issuers) (Note 3) 559,194,834
Net change in unrealized appreciation
(depreciation) on investments 3,427,643,228
-------------
Net gain (loss) on investments 3,986,838,062
-------------
Net increase (decrease) in net assets resulting from operations $4,104,570,829
==============
See accompanying notes to financial statements.
<PAGE>
Statements of changes in net assets
Growth Trends Portfolio
Year ended For the period
July 31, 1997 from May 13, 1996*
to July 31, 1996
Operations
Investment income (loss)-- net $ 117,732,767 $ 20,723,600
Net realized gain (loss) on investments 559,194,834 44,047,563
Net change in unrealized appreciation
(depreciation) on investments 3,427,643,228 (147,155,473)
------------- ------------
Net increase (decrease) in net assets
resulting from operations 4,104,570,829 (82,384,310)
Net contributions 1,292,719,326 8,667,173,508
------------- -------------
Total increase (decrease) in net assets 5,397,290,155 8,584,789,198
Net assets at beginning of period (Note 1) 8,584,839,198 50,000
------------- ------
Net assets at end of period $13,982,129,353 $8,584,839,198
=============== ==============
*Commencement of operations.
See accompanying notes to financial statements.
<PAGE>
Notes to financial statements
Growth Trends Portfolio
1. Summary of significant accounting policies
Growth Trends Portfolio (the Portfolio) is a series of Growth Trust (the Trust)
and is registered under the Investment Company Act of 1940 (as amended) 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. On April 15, 1996, American Express
Financial Corporation (AEFC) contributed $50,000 to the Portfolio. Operations
did not formally commence until May 13, 1996, at which 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 and
write options traded on any U.S. or foreign exchange or in the over-the-counter
market where the completion of the obligation is dependent upon the credit
standing of the other party. The Portfolio also may buy and sell put and call
options and write covered call options on portfolio securities and may write
cash-secured put options. The risk in writing a call option is that the
Portfolio gives up the opportunity of profit if the market price of the security
increases. The risk in writing a put option is that the Portfolio may incur a
loss if the market price of the security decreases and the option is exercised.
The risk in buying an option is that the Portfolio pays a premium whether or not
the option is exercised. The Portfolio also has the additional risk of not being
able to enter into a closing transaction if a liquid secondary market does not
exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market, the
Portfolio may buy and sell financial futures contracts traded on any U.S. or
foreign exchange. The Portfolio also may buy and write put and call options on
these futures contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate with changes in
the value of the underlying securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions
may arise from sales of foreign currency, closed forward contracts, exchange
gains or losses realized between the trade date and settlement dates on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete the obligations of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.6% 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 $3,913,141 for the year ended July
31, 1997.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio, and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the year ended July 31, 1997, the Portfolio's custodian fees were reduced
by $16,733 as a result of earnings credits from overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the units of the Trust.
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $4,130,798,686 and $3,133,785,763, respectively, for the
year ended July 31, 1997. For the same year, the portfolio turnover rate was
32%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $494,119 for
this period.
4. Lending of portfolio securities
At July 31, 1997, securities valued at $151,536,023 were on loan to brokers.
For collateral, the Portfolio received $48,145,600 in cash and U.S. government
securities valued at $104,156,922. Income from securities lending amounted to
$1,653,692 for the year ended July 31, 1997. 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>
<TABLE>
<CAPTION>
Investments in securities
Growth Trends Portfolio
July 31, 1997
(Percentages represent value of investments compared to net assets)
Common stocks (90.0%)
Issuer Shares Value(a)
Aerospace & defense (3.6%)
<S> <C> <C>
Boeing 4,800,000 $ 282,300,000
Rockwell Intl 900,000 59,062,500
United Technologies 2,000,000 169,125,000
------------
Total 510,487,500
Airlines (1.5%)
AMR 1,950,000(b) 209,746,875
Automotive & related (0.4%)
Chrysler 1,400,000 51,975,000
Banks and savings & loans (7.7%)
BankAmerica 1,000,000 75,500,000
Barnett Banks 1,400,000(e) 79,712,500
Citicorp 3,000,000 407,250,000
Norwest 5,000,000 315,312,500
State Street 3,660,000 205,188,750
------------
Total 1,082,963,750
Beverages & tobacco (1.6%)
Coca-Cola 3,200,000 221,600,000
Building materials & construction (1.2%)
Tyco Intl 2,100,000 170,100,000
Chemicals (3.2%)
Monsanto 6,000,000 298,875,000
Praxair 1,300,000 71,662,500
USA Waste Service 2,000,000(b) 80,625,000
------------
Total 451,162,500
Communications equipment & services (1.8%)
ADC Telecommunications 2,200,000(b) 88,825,000
Motorola 500,000 40,156,250
Tellabs 2,000,000(b) 119,750,000
------------
Total 248,731,250
Computers & office equipment (12.1%)
Cisco Systems 3,800,000(b) 302,337,500
Compaq Computer 5,500,000(b) 314,187,500
Computer Associates Intl 1,350,000 91,884,375
Computer Sciences 1,000,000(b) 81,437,500
First Data 1,700,000 74,162,500
Hewlett-Packard 3,400,000 238,212,500
Microsoft 2,200,000(b) 311,300,000
Oracle 3,000,000(b) 163,312,500
Parametric Technology 1,600,000(b) 78,400,000
Western Digital 1,000,000(b) 38,500,000
------------
Total 1,693,734,375
Electronics (3.5%)
AMP 140,000 7,315,000
Intel 4,800,000 440,700,000
Texas Instruments 400,000 46,000,000
------------
Total 494,015,000
Energy (2.3%)
Exxon 2,000,000 128,500,000
Mobil 2,000,000 153,000,000
Unocal 1,148,600 45,944,000
------------
Total 327,444,000
Energy equipment & services (0.8%)
Schlumberger 1,400,000 106,925,000
Financial services (4.4%)
Associates First Capital Cl A 600,000 39,562,500
Household Intl 400,000 51,800,000
MBNA 3,600,000 162,000,000
Morgan Stanley, Dean Witter, Discover & Co 2,900,000 151,706,250
Travelers Group 2,870,000 206,460,625
------------
Total 611,529,375
Food (2.4%)
ConAgra 4,200,000 295,312,500
Pioneer Hi-Bred Intl 500,000 37,000,000
------------
Total 332,312,500
Health care (8.9%)
Amgen 2,000,000(b) 117,625,000
Boston Scientific 1,150,000(b) 82,512,500
Johnson & Johnson 3,800,000 236,787,500
Lilly (Eli) 620,000 70,060,000
Medtronic 1,750,000 152,687,500
Merck & Co 2,000,000 207,875,000
Pfizer 6,300,000 375,637,500
------------
Total 1,243,185,000
Health care services (2.6%)
Cardinal Health 1,700,000 105,825,000
HBO & Co 1,200,000 92,850,000
HEALTHSOUTH 2,200,000(b) 58,300,000
Service Corp Intl 1,000,000 34,000,000
United Healthcare 1,400,000 79,800,000
------------
Total 370,775,000
Household products (3.1%)
Gillette 2,300,000 227,700,000
Procter & Gamble 1,400,000 212,975,000
------------
Total 440,675,000
Industrial equipment & services (2.7%)
Deere & Co 5,200,000 $295,750,000
Illinois Tool Works 1,500,000 77,812,500
------------
Total 373,562,500
Insurance (1.9%)
American Intl Group 1,500,000 159,750,000
SunAmerica 817,050 49,431,525
UNUM 1,200,000 53,400,000
------------
Total 262,581,525
Leisure time & entertainment (1.7%)
Marriot Intl 2,600,000 178,750,000
Mirage Resorts 2,000,000(b) 53,500,000
------------
Total 232,250,000
Media (0.4%)
Belo (AH) Cl A 390,000 17,355,000
Gannett 350,000 34,759,375
------------
Total 52,114,375
Metals (1.3%)
Aluminum Co of America 2,000,000 177,000,000
Multi-industry conglomerates (6.7%)
AccuStaff 157,400(b) 4,289,150
Emerson Electric 3,800,000 224,200,000
General Electric 7,600,000 533,425,000
Minnesota Mining & Mfg 1,400,000 132,650,000
Westinghouse Electric 1,600,000 38,500,000
------------
Total 933,064,150
Restaurants & lodging (0.8%)
HFS 1,000,000(b) 58,250,000
Promus Hotel 1,300,000(b) 51,106,250
------------
Total 109,356,250
Retail (2.2%)
CUC Intl 1,400,000(b) 34,475,000
CVS 950,000 54,031,250
Kroger 1,200,000(b) 35,475,000
Safeway 3,400,000(b) 182,325,000
------------
Total 306,306,250
Utilities -- electric (0.7%)
CMS Energy 2,800,000 103,600,000
Utilities -- gas (0.4%)
El Paso Natural Gas 960,000 55,500,000
Utilities -- telephone (2.1%)
AirTouch Communications 1,000,000(b) 32,937,500
BellSouth 3,900,000 184,762,500
WorldCom 2,200,000(b) 76,862,500
------------
Total 294,562,500
Foreign (8.0%)(c)
ACE 2,000,000 164,000,000
British Telecommunications ADR 900,000(e) 63,731,250
Elan ADR 800,000(b,e) 38,000,000
Ericsson (LM) ADR 4,300,000 194,575,000
Northern Telecommunications 2,000,000 209,125,000
Royal Dutch Petroleum 4,000,000 223,750,000
SmithKline Beecham ADR 2,250,000 218,812,500
------------
Total 1,111,993,750
Total common stocks
(Cost: $6,972,852,850) $12,579,253,425
<PAGE>
<CAPTION>
Short-term securities (10.0%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (0.1%)
Federal Natl Mtge Assn Disc Nt
<S> <C> <C> <C>
08-04-97 5.37% $10,000,000 $ 9,995,542
Certificate of deposit (0.1%)
Harris Trust
08-04-97 5.55 15,400,000 15,400,000
Commercial paper (9.7%)
ABB Treasury Center USA
09-04-97 5.62 8,500,000(d) 8,451,772
ABN Amro North American Finance
11-10-97 5.62 10,000,000 9,839,350
A. I. Credit
08-05-97 5.69 15,000,000 14,990,257
10-21-97 5.55 12,000,000 11,845,020
AIG Funding
08-20-97 5.75 15,000,000 14,953,962
American General
08-05-97 5.58 7,000,000(d) 6,995,683
09-03-97 5.54 8,400,000(d) 8,357,650
Ameritech Capital Funding
08-18-97 5.57 18,000,000(d) 17,950,742
10-20-97 5.65 15,000,000 14,808,637
Associates Corp North America
08-04-97 5.57 10,200,000 10,195,291
08-04-97 5.63 11,300,000 11,293,965
09-18-97 5.62 10,000,000 9,923,633
10-02-97 5.55 13,500,000 13,366,046
Avco Financial Services
08-05-97 5.69 9,500,000 9,493,168
08-06-97 5.72 16,900,000 16,884,942
08-29-97 5.66 8,700,000 8,658,666
09-04-97 5.65 10,000,000 9,943,261
09-08-97 5.56 1,900,000 1,888,480
09-11-97 5.64 11,300,000 11,226,028
09-29-97 5.64 10,300,000 10,203,207
BBV Finance (Delaware)
08-04-97 5.52 12,000,000 11,993,707
BellSouth Capital Funding
08-01-97 5.57 5,900,000 5,900,000
Beneficial
08-14-97 5.63 20,000,000 19,956,914
08-19-97 5.58 10,200,000 10,171,746
09-25-97 5.55 6,900,000 6,839,944
BHP Finance
09-17-97 5.56 26,600,000 26,400,870
BOC Group
08-11-97 5.60 3,000,000 2,995,375
09-08-97 5.55 10,000,000 9,941,839
CAFCO
09-15-97 5.54 8,500,000(d) 8,441,456
09-16-97 5.52 10,100,000(d) 10,029,277
Cargill
08-15-97 5.52 4,000,000 3,991,444
09-12-97 5.61 7,600,000 7,548,199
10-14-97 5.66 10,000,000 9,881,875
Cargill Global Funding
09-09-97 5.54 22,100,000(d) 21,968,321
11-18-97 5.49 13,200,000(d) 12,971,310
11-24-97 5.66 10,000,000(d) 9,817,300
Ciesco LP
08-13-97 5.63 12,800,000 12,773,619
08-25-97 5.59 11,400,000(d) 11,353,782
10-10-97 5.55 8,000,000(d) 7,910,540
Coca-Cola
09-03-97 5.58 9,300,000(d) 9,249,594
Colgate-Palmolive
09-05-97 5.53 8,000,000(d) 7,957,222
Commercial Credit
09-12-97 5.52 15,000,000 14,904,100
Commerzbank U.S. Finance
08-26-97 5.51 9,000,000 8,965,687
CPC Intl
08-07-97 5.72 10,000,000(d) 9,989,996
08-19-97 5.70 20,000,000(d) 19,940,566
10-20-97 5.56 12,300,000(d) 12,143,083
10-27-97 5.55 4,500,000(d) 4,437,630
Fleet Funding
08-08-97 5.59 6,000,000(d) 5,993,513
09-11-97 5.53 7,900,000(d) 7,850,515
Ford Motor Credit
08-01-97 5.57 12,000,000 12,000,000
08-27-97 5.52 46,500,000 46,315,291
Gannett
08-21-97 5.51 8,500,000(d) 8,474,075
General Electric Capital
09-19-97 5.64 15,000,000 14,881,142
Goldman Sachs Group
08-13-97 5.60 5,400,000 5,389,974
08-21-97 5.60 23,000,000 22,929,083
09-03-97 5.64 10,000,000 9,945,627
09-08-97 5.64 13,700,000 13,615,202
Household Finance
08-29-97 5.53 7,800,000 7,766,633
Kredietbank North America Finance
08-07-97 5.62 10,000,000 9,989,787
08-27-97 5.50 10,000,000 9,960,422
09-02-97 5.61 14,900,000 14,821,283
Lincoln Natl
09-05-97 5.63 7,000,000(d) 6,958,346
09-12-97 5.55 5,500,000(d) 5,461,791
09-25-97 5.53 8,100,000(d) 8,032,061
10-01-97 5.54 7,300,000(d) 7,228,715
May Department Stores
08-11-97 5.60 13,210,000 13,185,081
MCI Communications
09-12-97 5.62 9,000,000(d) 8,937,476
09-18-97 5.62 10,000,000(d) 9,923,633
09-22-97 5.73 8,300,000(d) 8,231,133
09-23-97 5.63 10,000,000(d) 9,915,882
10-14-97 5.58 6,000,000(d) 5,929,125
10-31-97 5.56 3,200,000(d) 3,153,632
11-05-97 5.77 15,000,000(d) 14,770,838
11-17-97 5.64 7,900,000(d) 7,764,377
11-20-97 5.70 17,800,000(d) 17,486,008
Merrill Lynch
08-12-97 5.71 25,000,000 24,947,954
09-05-97 5.60 7,000,000 6,962,229
Metlife Funding
08-08-97 5.60 12,000,000 11,984,644
09-10-97 5.54 18,500,000 18,386,944
Mobil Australia Finance (Delaware)
08-11-97 5.69 8,200,000(d) 8,185,197
08-22-97 5.41 15,000,000(d) 14,945,487
08-22-97 5.49 10,000,000(d) 9,963,658
10-17-97 5.92 15,346,000(d) 15,157,474
Morgan Stanley Group
08-28-97 5.53 22,800,000 22,705,950
Natl Australia Funding (Delaware)
08-08-97 5.52 8,500,000 8,490,910
09-15-97 5.61 12,600,000 12,508,373
09-22-97 5.52 9,600,000 9,524,149
New Center Asset Trust
09-04-97 5.50 20,000,000 19,896,678
Northern States Power
09-22-97 5.63 12,000,000 11,900,434
Paccar Financial
08-04-97 5.57 3,100,000 3,098,566
08-08-97 5.69 9,000,000 8,988,234
Pfizer
08-01-97 5.53 8,000,000(d) 8,000,000
09-08-97 5.51 12,000,000(d) 11,930,587
Pitney Bowes Credit
10-16-97 5.65 10,000,000 9,878,725
10-20-97 5.75 10,000,000 9,872,425
Reed Elsevier
08-25-97 5.52 9,300,000(d) 9,265,900
08-28-97 5.49 7,100,000(d) 7,070,872
09-24-97 5.52 15,000,000(d) 14,871,671
10-07-97 5.57 13,100,000(d) 12,959,699
SAFECO Credit
08-05-97 5.70 6,000,000 5,995,401
08-11-97 5.69 3,400,000 3,393,862
St. Paul Companies
08-26-97 5.52 11,500,000(d) 11,456,156
09-11-97 5.50 7,100,000(d) 7,055,850
SBC Communications Capital
08-08-97 5.52 6,500,000(d) 6,493,049
09-04-97 5.57 3,300,000(d) 3,281,844
10-09-97 5.57 20,000,000(d) 19,779,500
12-10-97 5.59 12,000,000(d) 11,750,520
Societe Generale North America
9-05-97 5.57 10,000,000 9,946,333
09-08-97 5.65 15,000,000 14,907,155
Southern California Gas
08-20-97 5.66 6,786,000(d) 6,763,566
Toyota Motor Credit
08-01-97 5.60 15,400,000 15,400,000
UBS Finance (Delaware)
08-08-97 5.52 8,900,000 8,890,482
United Parcel Services
08-29-97 5.49 18,000,000 17,923,420
USAA Capital
08-04-97 5.71 10,000,000 9,994,109
08-07-97 5.71 12,000,000 11,986,340
08-15-97 5.59 25,100,000 25,035,807
08-26-97 5.39 7,900,000 7,866,632
08-26-97 5.59 8,900,000 8,862,502
11-17-97 5.60 10,000,000 9,828,325
Wachovia Bank
08-18-97 5.59 10,000,000 10,000,000
Total 1,354,763,414
Letters of credit (0.1%)
Bank of America- 5.70 10,000,000 9,965,760
Formosa Plastics
08-21-97
Bank of America- 5.52 1,500,000 1,495,196
AES Barbers Point
08-22-97
Bank of New York- 5.58 7,500,000(d) 7,426,267
River Fuel Trust
10-03-97
Total 18,887,223
Total short-term securities
(Cost: $1,399,354,594) $ 1,399,046,179
Total investment in securities
(Cost: $8,372,207,444)(g) $13,978,299,604
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid
under guidelines established by the board.
(e) Security is partially or fully on loan. See Note 4 to the financial
statements.
(f ) Transactions with companies that were affiliates during the year ended
July 31, 1997 are as follows:
Beginning Purchase Sales Ending Dividend
Issuer cost cost cost cost income
Reynolds & Reynolds Cl A $72,334,648 $10,169,540 $82,504,188 $ -- $1,712,000
(g) At July 31, 1997, the cost of securities for federal income tax purposes
was $8,373,026,872 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $5,614,342,905
Unrealized depreciation (9,070,173)
----------
Net unrealized appreciation $5,605,272,732
==============
<PAGE>
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 Aggressive Growth
Portfolio (a series of Growth Trust) as of July 31, 1997, and the related
statements of operations and changes in net assets for the period from August
19, 1996 (commencement of operations) to July 31, 1997. These financial
statements are the responsibility of portfolio 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, 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 Aggressive Growth Portfolio at
July 31, 1997, and the results of its operations and the changes in its net
assets for the period stated in the first
paragraph above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 5, 1997
<PAGE>
Financial statements
Statement of assets and liabilities
Aggressive Growth Portfolio
July 31, 1997
Assets
Investments in securities, at value (Note 1)
(identified cost $270,427,626) $304,868,777
Cash in bank on demand deposit 721,496
Dividends receivable 225,251
Receivable for investment securities sold 1,048,418
---------
Total assets 306,863,942
===========
Liabilities
Payable for investment securities purchased 4,390,966
Accrued investment management services fee 5,268
Other accrued expenses 31,377
------
Total liabilities 4,427,611
---------
Net assets $302,436,331
============
See accompanying notes to financial statements.
<PAGE>
Statement of operations
Aggressive Growth Portfolio
For the period from Aug. 19, 1996
(commencement of operations) to July 31, 1997
Investment income
Income:
Dividend $ 1,844,896
Interest 577,626
Less: Foreign taxes withheld (30,682)
-------
Total income 2,391,840
---------
Expenses (Note 2):
Investment management services fee 905,559
Compensation of board members 9,760
Custodian fees 88,152
Audit fees 12,750
Other 6,406
-----
Total expenses 1,022,627
Earnings credits on cash balances (Note 2) (24,284)
-------
Total net expenses 998,343
-------
Investment income (loss) -- net 1,393,497
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 17,371,616
Financial futures contracts 2,393,158
---------
Net realized gain (loss) on investments 19,764,774
Net change in unrealized appreciation
(depreciation) on investments 34,895,804
----------
Net gain (loss) on investments 54,660,578
----------
Net increase (decrease) in net assets resulting from operations $56,054,075
===========
See accompanying notes to financial statements.
<PAGE>
Statement of changes in net assets
Aggressive Growth Portfolio
For the period from Aug. 19, 1996
(commencement of operations) to July 31, 1997
Operations
Investment income (loss)-- net $ 1,393,497
Net realized gain (loss) on investments 19,764,774
Net change in unrealized appreciation
(depreciation) on investments 34,895,804
----------
Net increase (decrease) in net assets resulting from operations 56,054,075
Net contributions 246,378,256
-----------
Total increase (decrease) in net assets 302,432,331
Net assets at beginning of period (Note 1) 4,000
-----
Net assets at end of period $302,436,331
============
See accompanying notes to financial statements.
<PAGE>
Notes to financial statements
Aggressive Growth Portfolio
1. Summary of significant accounting policies
Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. Aggressive Growth
Portfolio invests primarily in equity securities of companies that comprise the
S&P 500. The Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio. On Aug. 16, 1996, American Express Financial
Corporation (AEFC) contributed $4,000 to the Portfolio. Operations commenced on
Aug. 19, 1996.
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 and
write options traded on any U.S. or foreign exchange where the completion of the
obligation is dependent upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities and may write cash-secured put options. The risk
in writing a call option is that the Portfolio gives up the opportunity of
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market, the
Portfolio may buy and sell financial futures contracts traded on any U.S. or
foreign exchange. The Portfolio also may buy and write put and call options on
these futures contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate with changes in
the value of the underlying securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions
may arise from sales of foreign currency, closed forward contracts, exchange
gains or losses realized between the trade date and settlement dates on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete the obligations of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.65% to 0.5% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio, and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the period ended July 31, 1997, the Portfolio's custodian fees were
reduced by $24,284 as a result of earnings credits from overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the units of the Trust.
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $481,850,091 and $245,257,282, respectively, for the
period ended July 31, 1997. For the same period, the portfolio turnover rate was
171%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $33,072 for this
period.
4. Stock index futures contracts
Investments in securities at July 31, 1997, included securities valued at
$3,144,063 that were pledged as collateral to cover initial margin deposits on
21 purchase contracts. The market value of the open contracts at July 31, 1997,
was $10,058,475 with a net unrealized gain of $454,653.
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
Aggressive Growth Portfolio
July 31, 1997
(Percentages represent value of investments compared to net assets)
Common stocks (95.4%)
Issuer Shares Value(a)
Aerospace & defense (4.6%)
<S> <C> <C>
Boeing 34,400 $ 2,023,150
Lockheed Martin 20,000 2,130,000
Northrop Grumman 21,700 2,498,213
Rockwell Intl 111,300 7,304,062
------------
Total 13,955,425
Airlines (0.4%)
AMR 10,800(b) 1,161,675
Automotive & related (1.3%)
Chrysler 53,800 1,997,325
Ford Motor 50,000(c) 2,043,750
------------
Total 4,041,075
Banks and savings & loans (8.8%)
BankBoston 79,000 6,710,063
KeyCorp 117,400 7,300,812
NationsBank 99,100 7,054,681
Washington Mutual 82,000 5,668,250
------------
Total 26,733,806
Beverages & tobacco (6.2%)
Coca-Cola 165,200 11,440,100
Philip Morris 160,000 7,220,000
------------
Total 18,660,100
Building materials & construction (2.1%)
Tyco Intl 80,300 6,504,300
Communications equipment & services (2.8%)
Motorola 105,000 8,432,812
Computers & office equipment (7.2%)
Compaq Computer 75,750(b) 4,327,219
Computer Associates Intl 89,100 6,064,369
First Data 135,000 5,889,375
Oracle 103,000(b) 5,607,062
------------
Total 21,888,025
Electronics (4.2%)
Intel 60,600 5,563,838
Thomas & Betts 127,200 7,266,300
------------
Total 12,830,138
Financial services (3.6%)
Providian Financial 274,100(b) 10,741,294
Food (4.0%)
CPC Intl 56,500 5,420,469
Quaker Oats 132,800 6,797,700
------------
Total 12,218,169
Health care (17.7%)
ALZA 116,800(b) 3,774,100
Amgen 52,300(b) 3,075,894
Baxter Intl 26,700 1,543,594
Boston Scientific 18,500(b) 1,327,375
Bristol-Myers Squibb 129,200 10,134,125
Guidant 40,000 3,650,000
Johnson & Johnson 135,000 8,412,187
Lilly (Eli) 33,000 3,729,000
Medtronic 12,400 1,081,900
Merck & Co 30,000 3,118,125
Pfizer 84,000 5,008,500
Schering-Plough 61,200 3,339,225
Service Corp Intl 40,000 1,360,000
Tenet Healthcare 78,000(b) 2,335,125
United Healthcare 28,000 1,596,000
------------
Total 53,485,150
Household products (4.1%)
Gillette 125,000 12,375,000
Industrial equipment & services (2.2%)
Deere & Co 52,200 2,968,875
Parker-Hannifin 55,000 3,540,625
------------
Total 6,509,500
Insurance (5.8%)
SunAmerica 163,720 9,905,060
UNUM 172,000 7,654,000
------------
Total 17,559,060
Leisure time & entertainment (1.8%)
ITT 85,000(b) 5,434,687
Metals (1.6%)
Aluminum Co of America 54,300 4,805,550
Multi-industry conglomerates (3.1%)
Emerson Electric 73,600 4,342,400
General Signal 102,100 5,022,044
------------
Total 9,364,444
Paper & packaging (1.5%)
Bemis 16,000 735,000
Crown Cork & Seal 17,300 874,731
Tenneco 61,000 2,844,125
------------
Total 4,453,856
Restaurants & lodging (0.6%)
Hilton Hotels 60,900(c) 1,914,544
Retail (4.2%)
American Stores 44,200 1,116,050
AutoZone 77,300(b) 2,212,713
Circuit City Stores 30,000 1,087,500
CVS 15,000 853,125
Jostens 70,000 1,806,875
Kroger 29,600(b) 875,050
Rite Aid 20,000 1,038,750
Wal Mart Stores 100,800 3,786,300
------------
Total 12,776,363
Transportation (1.1%)
Caliber System 83,100 3,235,706
Utilities -- gas (1.1%)
Sonat 64,400 3,211,950
Utilities -- telephone (2.3%)
MCI Communications 195,000 6,885,937
Foreign (3.1%) (d)
Northern Telecommunications 88,250 9,227,641
Total common stocks
(Cost: $253,965,056) $288,406,207
<PAGE>
<CAPTION>
Short-term securities (5.4%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (0.1%)
Federal Home Loan Mtge Assn Disc Nt
<S> <C> <C> <C>
08-15-97 5.39% $ 200,000 $ 199,582
Commercial paper (4.5%)
Ciesco LP
08-18-97 5.52 600,000 598,442
Morgan Stanley Group
08-25-97 5.53 3,400,000 3,387,533
Natl Australia Funding (Delaware)
08-19-97 5.52 2,800,000 2,792,307
Paccar Financial
08-04-97 5.57 400,000 399,815
08-06-97 5.48 3,900,000 3,897,037
08-07-97 5.53 1,800,000 1,798,347
Siemens
08-22-97 5.51 900,000 897,118
------------
Total 13,770,599
Letter of credit (0.8%)
Bank of America-
Barbers Point
08-21-97 5.50 2,500,000 2,492,389
Total short-term securities
(Cost: $16,462,570) $ 16,462,570
Total investments in securities
(Cost: $270,427,626)(e) $304,868,777
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Partially pledged as initial deposit on the following stock index futures
purchase contracts. (See Note 4 to the financial statements):
Type of securities Notional amount
S&P 500, Sept. 1997 $2,100,000
(d) Foreign security values are stated in U.S. dollars.
(e) At July 31,1997, the cost of securities for federal income tax purposes
was $270,578,612 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $35,446,732
Unrealized depreciation (1,156,567)
----------
Net unrealized appreciation $34,290,165
<PAGE>
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 5, 1997
Statement of assets and liabilities, July 31, 1997
Statement of operations, year ended July 31, 1997
Statements of changes in net assets, for the years ended July 31, 1997
and July 31, 1996
Notes to financial statements
Growth Portfolio:
Independent auditors' report dated September 5, 1997
Statement of assets and liabilities, July 31, 1997
Statement of operations, year ended July 31, 1997
Statements of changes in net assets, for the year ended July 31, 1997
and period from May 13, 1996 to July 31, 1996
Notes to financial statements
Investments in securities, July 31, 1997
Notes to investments in securities
Growth Trends Portfolio:
Independent auditors' report dated September 5, 1997
Statement of assets and liabilities, July 31, 1997
Statement of operations, year ended July 31, 1997
Statements of changes in net assets, for the year ended July 31, 1997
and period from May 13, 1996 to July 31, 1996
Notes to financial statements
Investments in securities, July 31, 1997
Notes to investments in securities
Aggressive Growth Portfolio:
Independent auditors' report dated September 5, 1997
Statement of assets and liabilities, July 31, 1997
Statement of operations, year ended July 31, 1997
Statements of changes in net assets, for the year ended July 31, 1997
and period from May 13, 1996 to July 31, 1996
Notes to financial statements
Investments in securities, July 31, 1997
Notes to investments in securities
(b) EXHIBITS:
1.(a) Articles of Incorporation, dated Sept. 1, 1995, filed electronically
as Exhibit 1 to Registrant's initial Registration Statement, are
incorporated herein by reference.
<PAGE>
1.(b) Articles of Amendment of Express Direct Growth Fund, Inc., filed
electronically as Exhibit 1(b) to Registrant's Pre-Effective Amendment
No. 1 to Registration Statement No. 33-63905, are incorporated herein
by reference.
2. Form of By-laws, filed electronically as Exhibit 2 to Registrant's
Pre-Effective Amendment No. 1 to Registration Statement No. 33-63905,
are incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6.(a) Copy 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 as
Exhibit 6(a) to Registrant's Post-Effective Amendment No. 4 to
Registration Statement No. 33-63905, is incorporated herein by
reference.
6.(b) Copy of Distribution Agreement between Strategist Growth Fund, Inc., on
behalf of Strategist Special Growth Fund, and American Express Service
Corporation, filed electronically as Exhibit 6(b) to Registrant's
Post-Effective Amendment No. 4 to Registration Statement No. 33-63905,
is incorporated herein by reference.
7. Not Applicable.
8.(a) Copy 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 as Exhibit
8(a) to Registrant's Post-Effective Amendment No. 4 to Registration
Statement No. 33-63905, is incorporated herein by reference.
8.(b) Copy 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, filed electronically as Exhibit 8(b) to Registrant's
Post-Effective Amendment No. 4 to Registration Statement No. 33-63905,
is incorporated herein by reference.
8.(c) Copy of Custodian Agreement between Strategist Growth Fund, Inc., on
behalf of Strategist Special Growth Fund, and American Express Trust
Company, filed electronically as Exhibit 8(c) to Registrant's
Post-Effective Amendment No. 4 to Registration Statement No. 33-63905,
is incorporated herein by reference.
8.(d) Copy 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 as Exhibit 8(d) to Registrant's Post-Effective Amendment
No. 4 to Registration Statement No. 33-63905, is incorporated herein by
reference.
<PAGE>
9.(a) Copy 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 as
Exhibit 9(a) to Registrant's Post-Effective Amendment No. 4 to
Registration Statement No. 33-63905, is incorporated herein by
reference.
9.(b) Copy of Transfer Agency Agreement between Strategist Growth Fund, Inc.,
on behalf of Strategist Special Growth Fund, and American Express
Financial Corporation, filed electronically as Exhibit 9(b) to
Registrant's Post-Effective Amendment No. 4 to Registration Statement
No. 33-63905, is incorporated herein by reference.
9.(c) Copy 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 as Exhibit 9(c) to Registrant's Post-Effective
Amendment No. 4 to Registration Statement No. 33-63905, is
incorporated herein by reference.
9.(d) Copy of Administrative Services Agreement between Strategist Growth
Fund, Inc., on behalf of Strategist Special Growth Fund, and American
Express Financial Corporation, filed electronically as Exhibit 9(d) to
Registrant's Post-Effective Amendment No. 4 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, filed electronically as
Exhibit 9(e) to Registrant's Post-Effective Amendment No. 4 to
Registration Statement No. 33-63905, is incorporated herein by
reference.
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, filed electronically as Exhibit 9(f) to
Registrant's Post-Effective Amendment No. 4 to Registration Statement
No. 33-63905, is incorporated herein by reference.
9.(g) Copy 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 Special Growth
Fund, filed electronically as Exhibit 9(g) to Registrant's
Post-Effective Amendment No. 4 to Registration Statement No. 33-63905,
is incorporated 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.
<PAGE>
13. Copy of Share Purchase Agreement between Strategist Growth Fund, Inc.
and American Express Financial Corporation filed electronically 1996
as Exhibit 13 to Registrant's Pre-Effective Amendment No. 1 to
Registration Statement No. 33-63905, is incorporated herein by
reference.
14. Not Applicable.
15.(a) Copy 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 as Exhibit 15(a) to Registrant's Post-Effective
Amendment No. 4 to Registration Statement No. 33-63905, is incorporated
herein by reference.
15.(b) Copy of Plan and Agreement of Distribution between Strategist
Growth Fund, Inc., on behalf of Strategist Special Growth Fund,
and American Express Service Corporation filed electronically as
Exhibit 15(b) to Registrant's Post-Effective Amendment No. 4 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 electronically 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 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 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 January 8, 1997, filed
electronically as Exhibit 19(c) to Registrant's Post-Effective
Amendment No. 4 to Registration Statement No. 33-63905, is
incorporated herein by reference.
19.(d) Officers' Power of Attorney to sign Amendments to this
Registration Statement, dated April 11, 1996, filed
electronically as Exhibit 19(b) to Registrant's Pre-Effective
Amendment No. 1 to Registration Statement No. 33-63905, is
incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
<PAGE>
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Sept. 11, 1997
Common Stock
Strategist Growth Fund 599
Strategist Growth Trends Fund 404
Strategist Special Growth Fund 100
Item 27. Indemnification
The Articles of Incorporation of the Registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expenses, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the Registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<PAGE>
<PAGE>
PAGE 1
<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>
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 25th day of September, 1997.
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 25th day of September, 1997.
Signature Title
By /s/ Rodney P. Burwell** Director
Rodney P. Burwell
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
<PAGE>
* 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
** 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>
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 25th
day of September, 1997.
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 25th day of September, 1997.
Signatures Capacity
/s/ William R. Pearce* Trustee
William R. Pearce
/s/ H. Brewster Atwater, Jr.* Trustee
H. Brewster Atwater, Jr.
/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
<PAGE>
Signatures Capacity
/s/ Melvin R. Laird* Trustee
Melvin R. Laird
/s/ Alan K. Simpson* Trustee
Alan K. Simpson
/s/ Edson W. Spencer* Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
/s/ Wheelock Whitney* Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
* Signed pursuant to Trustees' Power of Attorney dated January 8, 1997, filed
electronically as Exhibit 19(c) to Registrant's Post-Effective
Amendment No. 4, by:
_____________________________
William R. Pearce
** 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:
_______________________________
William R. Pearce
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 5 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>
Strategist Growth Fund, Inc.
File No. 33-63905/811-07401
EXHIBIT INDEX
Exhibit 11: Independent Auditors' Consent
Exhibit 17: Financial Data Schedules
<PAGE>
________________________________________________________________________________
Independent auditors' consent The board and shareholders Strategist Growth Fund,
Inc.:
Strategist Growth Fund
Strategist Growth Trends Fund
Strategist Special Growth Fund
The board of trustees and unitholders Growth Trust:
Growth Portfolio
Growth Trends Portfolio
Aggressive Growth Portfolio
We consent to the use of our reports incorporated herein by reference and to the
references to our Firm under the headings "Financial highlights" in Part A and
"INDEPENDENT AUDITORS" in Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 26, 1997
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<PERIOD-END> JUL-31-1997
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<ASSETS-OTHER> 23,410,587
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<DISTRIBUTIONS-OF-INCOME> 72259
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<ACCUMULATED-NII-PRIOR> 21361
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<DISTRIBUTIONS-OF-GAINS> 1000
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