<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3 X
File No. 811-7395
GROWTH TRUST
(Exact Name of Registrant as Specified in Charter)
IDS Tower 10, Minneapolis, MN 55440-0010
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 612-671-2772
Eileen J. Newhouse
IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
<PAGE>
PAGE 2
PART A
Item 1-3. Responses to Items 1 through 3 have been omitted
pursuant to Paragraph 4 of Instruction F of the
General Instructions to Form N-1A.
Item 4. General Description of Registrant.
Growth Trust (the Trust) is an open-end management investment
company organized as a Massachusetts business trust on Oct. 2,
1995. The Trust consists of three series: Growth Portfolio, Growth
Trends Portfolio and Aggressive Growth Portfolio (individually, a
Portfolio or collectively the Portfolios). The Portfolios issue
units of beneficial interest without any sales charge. Units in
the Portfolios are issued solely in private placement transactions
that do not involve any public offering within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the 1933
Act). Investments in the Portfolios may be made only by investment
companies, common or commingled trust funds or similar
organizations or entities that are accredited investors within the
meaning of Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any security within the meaning of the 1933
Act. Organizations or entities that become holders of units of
beneficial interest of the Trust are referred to as unitholders.
Goals and types of Portfolio investments and their risks
Growth Portfolio seeks to provide unitholders with long-term growth
of capital. Growth Portfolio is a diversified mutual fund that
invests primarily in stocks of U.S. and foreign companies that
appear to offer growth opportunities. Growth Portfolio also may
invest in preferred stocks, convertible securities, debt
securities, derivative instruments and money market securities.
Growth Trends Portfolio seeks to provide unitholders with long-term
growth of capital. Growth Trends Portfolio is a diversified mutual
fund that invests primarily in common stocks of U.S. and foreign
companies showing potential for significant growth. These
companies usually operate in areas where dynamic economic and
technological changes are occurring. Growth Trends Portfolio also
may invest in preferred stocks, debt securities, derivative
instruments and money market instruments.
Aggressive Growth Portfolio seeks to provide unitholders with long-
term growth of capital. Aggressive Growth Portfolio is a
diversified mutual fund that invests primarily in the equity
securities of companies that comprise the Standard & Poor's 500
Composite Stock Price Index (S&P 500). Aggressive Growth Portfolio
does not seek to replicate the S&P 500. Rather, it invests in
those securities within the universe of S&P 500 stocks that
Aggressive Growth Portfolio's advisor believes are undervalued or
that offer potential for long-term capital growth. Ordinarily, at
least 65% of Aggressive Growth Portfolio will be invested in equity
<PAGE>
PAGE 3
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.
Because investments involve risk, a Portfolio cannot guarantee
achieving its goals. Some of the Portfolios' investments may be
considered speculative and involve additional investment risks.
The foregoing investment goals are fundamental policies of each
Portfolio, which may not be changed unless authorized by a majority
of the outstanding voting securities.
Investment policies and risks
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 and
money market instruments.
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.
Aggressive Growth Portfolio - Aggressive Growth Portfolio invests
primarily in equity securities of companies comprising the S&P 500
that, in the opinion of the Advisor, are undervalued in relation to
their long-term earning power or the asset value of their issuers
or that have above-average growth potential. Ordinarily, at least
65% of Aggressive Growth Portfolio's total assets will be invested
in equity securities consisting of common stocks, preferred stocks,
securities convertible into common stocks, securities having common
stock characteristics such as rights and warrants and foreign
equity securities. Other investments include convertible
securities, debt securities, derivative instruments and money
market instruments.
<PAGE>
PAGE 4
Securities may be undervalued because of several factors, including
the following: market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments affecting
the issuer of the security. Companies also may be undervalued
because they are part of an industry that is out of favor with
investors even though the individual companies may be financially
sound and have high rates of earning growth. Any or all of these
factors may provide buying opportunities at attractive prices
relevant to the long-term prospects for the companies in question.
Companies with above average growth potential generally will have
steady earnings and cash flow growth, good and/or improving balance
sheets, strong positions in their market niches and the ability to
perform well in a stagnant economy.
Aggressive Growth Portfolio may invest more than 25% of its total
assets in equity securities of companies included in the S&P 500
that are primarily engaged in either the utilities or the energy
industry. If Aggressive Growth Portfolio concentrates its
investments in one or both of these industries, the value of its
shares will be especially affected by factors peculiar to these
industries, and may fluctuate more widely than the value of shares
of a fund that invests in a broader range of industries.
Aggressive Growth Portfolio will concentrate its investments in
either of these industries only to the extent that the S&P becomes
heavily weighted in that industry. Aggressive Growth Portfolio's
concentration policy can be changed only if holders of a majority
of the outstanding voting securities agree to make the change. See
"Utilities industry" and "Energy industry" below.
Research methodology: The Advisor's Research Department has
designed a proprietary research rating system that is used as the
basis for rating securities of issuers listed on the S&P 500. The
research ratings range from a "strong buy" to "strong sell."
Aggressive Growth Portfolio will invest primarily in equity
securities that the Research Department rates highly and expects to
outperform the S&P 500. The securities in which Aggressive Growth
Portfolio invests will not correspond entirely to the S&P 500
securities recommended by the Research Department because some of
these recommendations may not be appropriate investments for the
Portfolio due to diversification, liquidity or other requirements
that apply to registered investment companies. In addition, some
of the recommendations may not be appropriate for Aggressive Growth
Portfolio under its investment objective or investment limitations.
Moreover, other Advisor clients who receive the Research
Department's recommendations may place purchase or sale orders that
make it more difficult for Aggressive Growth Portfolio to implement
its own orders to buy or sell the same securities.
The various types of investments described above that the portfolio
managers use to achieve investment performance are explained in
more detail in the next section and in Part B of this Registration
Statement.
<PAGE>
PAGE 5
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of larger, established companies that pay dividends may be
less volatile than the stock market as a whole. Stocks of
companies experiencing significant growth and operating in areas of
financial and technological change may be subject to more abrupt or
erratic price movements than stocks of larger, established
companies or the stock market as a whole. Therefore, some of the
securities in which the Portfolios invest involve substantial risk
and may be considered speculative.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Market risk: Each Portfolio is subject to market risk because it
invests primarily in common stocks. Market risk is the possibility
that common stock prices will decline over short or even extended
periods. The U.S. stock market tends to be cyclical, with periods
when stock prices generally rise and periods when stock prices
generally decline.
Utility industry: Utility stocks, including electric, gas,
telephone and other energy - related (e.g., nuclear) utilities
stocks, generally offer dividend yields that exceed those of
industrial companies and their prices tend to be less volatile than
stocks of industrial companies. However, utility stocks can still
be affected by the risks of the stock market in general, as well as
factors specific to public utilities companies. Many utility
companies, especially electric utility companies, historically have
been subject to the risk of increases in fuel and other operating
costs, changes in interest rates on borrowing for capital
improvement programs, changes in applicable laws and regulations,
and costs and operating constraints associated with compliance with
environmental regulations. In addition, because securities issued
by utility companies are particularly sensitive to movements in
interest rates, the equity securities of these companies are more
affected by movements in interest rates than the equity securities
of other companies. Each of these risks could adversely affect the
ability of public utilities companies to declare or pay dividends
and the ability of holders of common stock, such as a Portfolio, to
realize any value from the assets of the company upon liquidation
or bankruptcy.
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.<PAGE>
PAGE 6
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, convertible securities
trade more like common stock.
Debt securities: The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The price of bonds below investment grade may react
more to the ability of the issuing company to pay interest and
principal when due. These bonds have greater price fluctuations
and are more likely to experience a default.
Growth Portfolio and Aggressive Growth Portfolio invest in bonds
given the four highest ratings by Moody's Investors Service, Inc.
or by Standard & Poor's Corporation or in bonds of comparable
quality in the judgment of the investment manager. Growth Trends
Portfolio, in addition to investing in investment grade bonds, may
invest up to 5% of its net assets in bonds below investment grade.
Securities that are subsequently downgraded in quality may continue
to be held by a Portfolio and will be sold only when the investment
manager believes it is advantageous to do so.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to political
and economic risks of the countries in which the investments are
made, including the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment
of exchange controls or adoption of other restrictions that might
affect an investment adversely. If an investment is made in a
foreign market, the local currency may be purchased using a forward
contract in which the price of the foreign currency in U.S. dollars
is established on the date the trade is made, but delivery of the
currency is not made until the securities are received. As long as
a Portfolio holds foreign currencies or securities valued in
foreign currencies, the value of those assets will be affected by
changes in the value of the currencies relative to the U.S. dollar.
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<PAGE>
PAGE 7
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties and inability to close such instruments. A Portfolio will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Portfolios will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of each
Portfolio's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. This does not, however,
limit the portion of a Portfolio's assets at risk to 5%. The
Portfolios are not limited as to the percentage of their assets
that may be invested in permissible investments, including
derivatives, except as otherwise explicitly provided in Part A or
Part B of this Registration Statement. For descriptions of these
and other types of derivative instruments, see "Descriptions of
derivative instruments" and Part B of this Registration Statement.
Securities and other instruments that are illiquid: A security or
other instrument is illiquid if it cannot be sold quickly in the
normal course of business. Some investments cannot be resold to
the U.S. public because of their terms or government regulations.
All securities and other instruments, however, can be sold in
private sales, and many may be sold to other institutions and
qualified buyers or on foreign markets. Each portfolio manager
will follow guidelines established by the board and consider
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
board.
<PAGE>
PAGE 8
Lending portfolio securities: Each Portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless holders of a majority of the
outstanding voting securities approve otherwise, loans may not
exceed 30% of a Portfolio's net assets.
Portfolio turnover: Aggressive Growth Portfolio does not expect
its portfolio turnover rate to exceed 200% during its initial
fiscal period. High portfolio turnover can lead to increased
brokerage commissions and taxes.
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 Part B of this
Registration Statement.
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.
Item 5. Management of the Fund.
The Board
The Trust has a board of trustees (the Board), which has primary
responsibility for the overall management of the Trust. It elects
officers and retains service providers to carry out day-to-day
operations.<PAGE>
PAGE 9
The Advisor
American Express Financial Corporation, a provider of financial
services since 1894, has been retained to serve as the investment
manager for each Portfolio. The Advisor, located at IDS Tower 10,
Minneapolis, MN 55440-0010, is 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.
Each Portfolio pays the Advisor for managing its assets. Under the
Investment Management Services Agreement, the Advisor is paid a fee
for these services based on the average daily net assets of each
Portfolio, as follows:
Growth Portfolio
Growth Trends Portfolio Aggressive Growth Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.600% First $0.25 0.650%
Next 1.0 0.575 Next 0.25 0.625
Next 1.0 0.550 Next 0.50 0.600
Next 3.0 0.525 Next 1.0 0.575
Over 6.0 0.500 Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500
For Growth Portfolio and Growth Trends Portfolio, these fees may be
increased or decreased by a performance adjustment based on a
comparison of performance to the Lipper Growth Fund Index. The
maximum adjustment is 0.12% of each Portfolio's average daily net
assets on an annual basis.
Under the agreement, each Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses. The Portfolios may pay
brokerage commissions to broker-dealer affiliates of the Advisor.
The Advisor also has been retained to provide transfer agent
services (handling unitholder accounts) and administrative
services.
Portfolio Managers
Growth Portfolio
Mitzi Malevich joined the Advisor in 1983 and serves as vice
president and senior portfolio manager. She has managed the assets
of Growth Portfolio and its predecessor fund since 1992 after
having been a portfolio manager of pension fund accounts. She also
serves as portfolio manager of IDS Life Funds A and B.
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. <PAGE>
PAGE 10
Mr. Fines also leads the Growth Team for the Advisor and serves as
portfolio manager of IDS Life Growth Dimensions Fund.
Aggressive Growth Portfolio
Guru Baliga joined the Advisor in 1991 as a research analyst. He
became portfolio manager of Aggressive Growth Portfolio and IDS
Small Company Index Fund in August 1996. He has been portfolio
manager of IDS Blue Chip Advantage Fund since 1994. He has been
part of the portfolio management team of Total Return Portfolio and
its predecessor fund since 1995, and is a portfolio manager of IDS
Advisory Accounts that are managed similarly to the Portfolio.
Item 5A. Response to Item 5A has been omitted pursuant to
Paragraph 4 of Instruction F of the General
Instructions to Form N-1A.
Item 6. Capital Stock and Other Securities.
The Trust is an open-end, management investment company organized
as a Massachusetts business trust on Oct. 2, 1995 and is registered
under the Investment Company Act of 1940, as amended (the 1940
Act). The Trust is authorized to issue an unlimited number of
units of beneficial interest. Each unit of the Trust has one vote,
and, when issued, is fully paid, non-assessable, and redeemable.
Units have cumulative voting rights when electing trustees.
Currently, the Trust has three series of units, the "Portfolios."
The assets and liabilities of each series are separate and distinct
from any other series. Additional series may be added in the
future by the board.
A unitholder's interest in the Trust cannot be transferred, but the
unitholder may withdraw all or any portion of its investment at any
time at net asset value. Under the terms of the Declaration of
Trust on file with the Secretary of State of the Commonwealth of
Massachusetts, all persons having any claim against a Portfolio
shall look only to the assets of that Portfolio for payment and no
unitholder, trustee, officer or agent shall be personally liable
therefor.
Each Portfolio is a partnership that is not subject to any federal
income tax. However, each unitholder in a Portfolio is taxable on
its share (as determined in accordance with the governing
instruments of the Trust) of the Portfolio's ordinary income and
capital gain pursuant to the rules governing the unitholders. The
determination of each unitholder's share will be made in accordance
with the Internal Revenue Code of 1986, as amended (the Code),
regulations promulgated thereunder and the Declaration of Trust.
The Portfolios' taxable year-ends are July 31. It is intended that
the Portfolios' assets, income and distributions will be managed to
satisfy the requirements of Subchapter M of the Code assuming that
a unitholder invests all its assets in the Portfolio.
<PAGE>
PAGE 11
There are tax issues that are relevant to unitholders who purchase
units with assets rather than cash. Such purchases will not be
taxable provided certain requirements are met. Unitholders are
advised to consult their own tax advisors about the tax
consequences of investing in a Portfolio.
Item 7. Purchase of Securities Being Offered.
The Portfolios' units are not registered under the 1933 Act and may
not be sold publicly. Instead, units are offered pursuant to
exemptions from that Act in private transactions.
Units are offered only to other investment companies and certain
institutional investors. All units are sold without a sales
charge. All investments in a Portfolio are credited to the
unitholder's account in the form of full and fractional units of
the Portfolio (rounded to the nearest 1/1000 of a unit). The
Portfolios do not issue stock certificates.
The minimum initial investment is $5,000,000 with no minimum on
subsequent investments.
Net asset value (NAV) is the total value of the Portfolio's
investments and other assets less any liabilities. Each unit has a
value of $1.00. Each Portfolio is deemed to have outstanding the
number of units equal to its NAV and each unitholder is deemed to
hold the number of units equal to its proportionate investment in
the Portfolio. NAV 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).
American Express Financial Advisors Inc. (the Placement Agent), a
wholly owned subsidiary of the Advisor, serves as the Placement
Agent for the Trust. The Placement Agent is located at IDS Tower
10, Minneapolis, MN 55440-0010.
Item 8. Redemption or Repurchase.
Redemptions are processed on any date on which the Portfolio is
open for business and are effected at the Portfolio's net asset
value next determined after the Portfolio receives a redemption
request in good form.
Payment for redeemed units will be made promptly, but in no event
later than seven days after receipt of the redemption request in
good form. However, the right of redemption may be suspended or
the date of payment postponed in accordance with the rules under
the 1940 Act. Each Portfolio reserves the right upon 30-days'
written notice to redeem, at net asset value, the units of any
unitholder whose account has a value of less than $1,000,000 as a
result of voluntary redemptions. Redemptions are taxable events,
and the amount received upon redemption may be more or less than
the amount paid for the units depending upon the fluctuations in
the market value of the assets owned by the Portfolio.
Item 9. Pending Legal Proceedings.
Not Applicable.
<PAGE>
PAGE 12
PART B
Item 10: Cover Page
Not applicable.
Item 11: Table of Contents
Not applicable.
Item 12: General Information and History
Not applicable.
Item 13: Investment Objectives and Policies
Please refer to Item 4 of Part A for the objectives of each
Portfolio.
Investment Policies applicable to Growth Portfolio:
These are investment policies in addition to those presented in
Part A. The policies below are fundamental policies of the
Portfolio and may be changed only with unitholder approval. Unless
holders of a majority of the outstanding units 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.
'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.
<PAGE>
PAGE 13
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (the Advisor), to the board members and
officers of the Advisor or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the Portfolio's board is to make these loans,
either long- or short-term, to broker-dealers. In making such
loans, the Portfolio gets the market price in cash, U.S. government
securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board. If the
market price of the loaned securities goes up, the Portfolio will
get additional collateral on a daily basis. The risks are that the
borrower may not provide additional collateral when required or
return the securities when due. During the existence of the loan,
the Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in stock index futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
<PAGE>
PAGE 14
'Invest more than 10% of its assets in securities of investment
companies. Under one state's law, the Portfolio is limited to
investments in the open market where no commission or profit to a
sponsor or dealer results from the purchase other than the
customary broker's commission, or when the purchase is part of a
plan or merger, consolidation, reorganization or acquisition.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
<PAGE>
PAGE 15
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc.
(Moody's) or Standard & Poor's Corporation (S&P) or the equivalent
and may use repurchase agreements with broker-dealers registered
under the Securities Exchange Act of 1934 and with commercial
banks. A risk of a repurchase agreement is that if the seller
seeks the protection of the bankruptcy laws, the Portfolio's
ability to liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in
the form of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as
the securities into which they may be converted. ADRs are
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
Part A.
Investment Policies applicable to Growth Trends Portfolio:
These are investment policies in addition to those presented in
Part A. The policies below are fundamental policies of the
Portfolio and may be changed only with unitholder approval. Unless
holders of a majority of the outstanding units 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.
<PAGE>
PAGE 16
'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 options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to the Advisor, to the board
members and officers of the Advisor or to its own board members and
officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the Portfolio's board is to make these loans,
either long- or short-term, to broker-dealers. In making such
loans, the Portfolio gets the market price in cash, U.S. government
securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board. If the
market price of the loaned securities goes up, the Portfolio will
get additional collateral on a daily basis. The risks are that the
borrower may not provide additional collateral when required or
return the securities when due. During the existence of the loan,
the Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
<PAGE>
PAGE 17
The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in stock index futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest more than 10% of its total assets in securities of
investment companies. Under one state's law, the Portfolio is
limited to investments in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than
the customary broker's commission, or when the purchase is part of
a plan or merger, consolidation, reorganization or acquisition.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits, and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors, such as
<PAGE>
PAGE 18
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 Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as
the securities into which they may be converted. ADRs are
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
Part A.
Investment Policies applicable to Aggressive Growth Portfolio:
These are investment policies in addition to those presented in
Part A. The policies below are fundamental policies of the
Portfolio and may be changed only with unitholder approval. Unless
holders of a majority of the outstanding units agree to make the
change, the Portfolio will not:
<PAGE>
PAGE 19
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has no present intention to
borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling financial instruments
(such as options and futures contracts) or from investing in
securities or other instruments backed by, or whose value is
derived from, physical commodities.
'Make a loan of any part of its assets to the Advisor, to the board
members and officers of the Advisor or to its own board members and
officers.
'Lend Portfolio securities in excess of 30% of its net assets. In
making loans, the Portfolio receives the market price in cash, U.S.
government securities, letters of credit or such other collateral
as may be permitted by regulatory agencies and approved by the
board. If the market price of the loaned securities goes up, the
Portfolio will get additional collateral when required or return
the securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
<PAGE>
PAGE 20
'Concentrate in any industry except in either or both the energy or
utilities industries. According to the present interpretation by
the SEC, this means no more than 25% of the Portfolio's total
assets, based on current market value, can be invested in any one
industry other than the energy and/or utility industries.
The policies below are non-fundamental and may be changed without
unitholder approval. Unless changed by the board, the Portfolio
will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in options, futures contracts and
other financial instruments.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
policy, collateral arrangements for margin deposits on a futures
contract are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest more than 10% of its total assets in securities of
investment companies. Under one state's law, the Portfolio is
limited to investments in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than
the customary broker's commission, or when the purchase is part of
a plan or merger, consolidation, reorganization or acquisition.
'Invest in a company to control or manage it.
'Invest in exploration or development programs such as oil, gas or
mineral leases.
'Purchase securities of an issuer if the board members and officers
of the Portfolio and of the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Portfolio and the Advisor
who own more than 0.5% of an issuer's securities are added
together, and if in total they own more than 5%, the Portfolio will
not purchase securities of that issuer.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and other
instruments that are illiquid. For purposes of this policy
illiquid securities include some privately placed securities,
public securities and Rule 144A securities that for one reason or
another may no longer have a readily available market, repurchase
agreements with maturities greater than seven days, non-negotiable
fixed-time deposits and over-the-counter options.
<PAGE>
PAGE 21
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.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only, fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the investment manager, under
guidelines established by the board, will consider any relevant
factors including frequency of trades, the number of dealers
willing to purchase or sell the security and the nature of
marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investment in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's or S&P or the equivalent and may
use repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities included in the S&P
500 that are traded in the form of American Depository Receipts
(ADRs). ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities of
foreign issuers. Generally, ADRs, in registered form, are <PAGE>
PAGE 22
denominated in U.S. dollars and are designed for use in the U.S.
securities market. Thus, these securities are not denominated in
the same currency as the securities into which they may be
converted. ADRs are considered to be foreign investments and thus
subject to the risks and investment limitation set forth under
"Foreign investments" in Part A.
For a discussion of bond ratings, foreign currency transactions,
options and stock index futures contracts and mortgage-backed
securities, see descriptions below.
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.
<PAGE>
PAGE 23
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.
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 <PAGE>
PAGE 24
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.
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.
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.
<PAGE>
PAGE 25
A Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When a
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, a Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
A Portfolio also may enter into forward contracts when management
of a Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all securities denominated in such foreign currency. The
precise matching of forward contract amounts and the value of
securities involved generally will not be possible since the future
value of such securities in foreign currencies more than likely
will change between the date the forward contract is entered into
and the date it matures. The projection of short-term currency
market movements is extremely difficult and successful execution of
a short-term hedging strategy is highly uncertain. A Portfolio
will not enter into such forward contracts or maintain a net
exposure to such contracts when consummating the contracts
would obligate a Portfolio to deliver an amount of foreign currency
in excess of the value of securities or other assets denominated in
that currency.
A Portfolio will designate cash or securities in an amount equal to
the value of a Portfolio's total assets committed to consummating
forward contracts entered into under the second circumstance set
forth above. If the value of the securities declines, additional
cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of a
Portfolio's commitments on such contracts.
At maturity of a forward contract, a Portfolio may either sell the
security and make delivery of the foreign currency or retain the
security and terminate its contractual obligation to deliver the
foreign currency by purchasing an offsetting contract with the same
currency trader obligating it to buy, on the same maturity date,
the same amount of foreign currency.
If a Portfolio retains a security and engages in an offsetting
transaction, a Portfolio will incur a gain or a loss (as described
below) to the extent there has been movement in forward contract
prices. If a Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline between the date a
Portfolio enters into a forward contract for selling foreign
currency and the date it enters into an offsetting contract for
purchasing the foreign currency, a Portfolio will realize a gain to
the extent that the price of the currency it has agreed to sell <PAGE>
PAGE 26
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. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a
lesser rate of exchange should the Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. A Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in
the value of securities, a Portfolio may buy put options on the
foreign currency. If the value of the currency does decline, a
Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the
adverse effect on a Portfolio which otherwise would have resulted.
As in the case of other types of options, however, the benefit to a
Portfolio derived from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in <PAGE>
PAGE 27
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 a Portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting a Portfolio to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of
adverse market movements.<PAGE>
PAGE 28
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 investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect a Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of a Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of a Portfolio's
investments denominated in that currency over time.
A Portfolio will hold securities or other options or futures
positions whose values are expected to offset its obligations. A
Portfolio will not enter into an option or futures position that
exposes a Portfolio to an obligation to another party unless it
owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient
to cover its potential obligations.
<PAGE>
PAGE 29
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
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 <PAGE>
PAGE 30
purchased, a Portfolio pays a premium and a commission. It then
pays a second commission on the purchase or sale of the underlying
security when the option is exercised. For record keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment.
The risk a Portfolio assumes when it buys an option is the loss of
the premium. To be beneficial to a Portfolio, the price of the
underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the
premium paid, the commissions paid both in the acquisition of the
option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of
a put) of the underlying security. Even then the price change in
the underlying security does not ensure a profit since prices in
the option market may not reflect such a change.
Writing covered options. A Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'All options written by a Portfolio will be covered. For covered
call options if a decision is made to sell the security, a
Portfolio will attempt to terminate the option contract through a
closing purchase transaction.
'A Portfolio will deal only in standard option contracts traded on
national securities exchanges or those that may be quoted on NASDAQ
(a system of price quotations developed by the National Association
of Securities Dealers, Inc.).
'A Portfolio will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by a Portfolio, it will conform to the requirements of those
states. For example, California limits the writing of options to
50% of the assets of a Portfolio.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Internal
Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.
If a covered call option is exercised, the security is sold by a
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. A
Portfolio will recognize a capital gain or loss based upon the <PAGE>
PAGE 31
difference between the proceeds and the security's basis. Premiums
received from writing outstanding call options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
Options are valued at the close of the New York Stock Exchange. An
option listed on a national exchange, CBOE or NASDAQ will be valued
at the last-quoted sales price or, if such a price is not readily
available, at the mean of the last bid and asked prices.
STOCK INDEX FUTURES CONTRACTS. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They currently
include contracts on the Standard & Poor's 500 Stock Index (S&P 500
Index) and other broad stock market indexes such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite
Stock Index, as well as narrower sub-indexes such as the S&P 100
Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks
included in the index and the index fluctuates with the value of
the common stocks so included.
A futures contract is a legal agreement between a buyer or seller
and the clearinghouse of a futures exchange in which the parties
agree to make a cash settlement on a specified future date in an
amount determined by the stock index on the last trading day of the
contract. The amount is a specified dollar amount (usually $100 or
$500) multiplied by the difference between the index value on the
last trading day and the value on the day the contract was struck.
For example, the S&P 500 Index consists of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500). Unlike other futures contracts, a
stock index futures contract specifies that no delivery of the
actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.
For example, excluding any transaction costs, if a Portfolio enters
into one futures contract to buy the S&P 500 Index at a specified
future date at a contract value of 150 and the S&P 500 Index is at
154 on that future date, a Portfolio will gain $500 x (154-150) or
$2,000. If a Portfolio enters into one futures contract to sell
the S&P 500 Index at a specified future date at a contract value of
150 and the S&P 500 Index is at 152 on that future date, a
Portfolio will lose $500 x (152-150) or $1,000.
Unlike the purchase or sale of an equity security, no price would
be paid or received by a Portfolio upon entering into futures
contracts. However, a Portfolio would be required to deposit with
its custodian, in a segregated account in the name of the
futures broker, an amount of cash or U.S. Treasury bills equal to
approximately 5% of the contract value. This amount is known as
initial margin. The nature of initial margin in futures <PAGE>
PAGE 32
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.
Positions in stock index futures contracts may be closed only on an
exchange or board of trade providing a secondary market for such <PAGE>
PAGE 33
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 a
portfolio's 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 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 <PAGE>
PAGE 34
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>
PAGE 35
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.
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.
<PAGE>
PAGE 36
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.
Portfolio turnover rates:
For the fiscal periods 1996 and 1995, the portfolio turnover rates
were 22% and 30% for Growth Portfolio and 41% and 54% for Growth
Trends Portfolio. Aggressive Growth Portfolio does not expect its
portfolio turnover rate to exceed 200% during its initial fiscal
period. For periods prior to the commencement of operations of
Growth Portfolio and Growth Trends Portfolio, turnover rates are
based on the turnover rates of the corresponding IDS Funds, which
transferred all of their assets to the Portfolios on May 13, 1996.
A high turnover rate (in excess of 100%) results in higher fees and
expenses.
Item 14: Management of the Fund
BOARD MEMBERS AND OFFICERS
The following is a list of the Trust's board members and officers,
who, except for Mr. Dudley, are board members and officers of all
five Trusts in the Preferred Master Trust Group and all 43 funds in
the IDS MUTUAL FUND GROUP. Mr. Dudley is a board member of all
five Trusts in the Preferred Master Trust Group and the 34 publicly
offered funds in the IDS MUTUAL FUND GROUP. All units have
cumulative voting rights with respect to the election of board
members.
<PAGE>
PAGE 37
Trustees and Officers
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of the Advisor.
Robert F. Froehlke+
Born in 1922
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of the Advisor.
Previously, senior vice president, finance and chief financial
officer of the Advisor.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors).
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.<PAGE>
PAGE 38
Melvin R. Laird
Born in 1922
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
President of all Trusts in the Preferred Master Trust Group since
April 1996 and president of all funds in the IDS MUTUAL FUND GROUP
since June 1993. Former vice chairman of the board, Cargill,
Incorporated (commodity merchants and processors).
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>
PAGE 39
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
Vice president, general counsel and secretary of all Trusts in the
Preferred Master Trust Group and of all funds in the IDS MUTUAL
FUND GROUP.
Officers who also are officers and/or employees of the Advisor.
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Vice president-investments of all Trusts in the Preferred Master
Trust Group. Director and senior vice president-investments of the
Advisor.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all Trusts in the Preferred Master Trust Group.
Director, senior vice president and chief financial officer of the
Advisor. Director and executive vice president and controller of
IDS Life Insurance Company.
Members of the board who are not officers of a Portfolio or of the
Advisor receive an annual fee of $1,500 for Growth Portfolio,
$5,100 for Growth Trends Portfolio and $100 for Aggressive Growth <PAGE>
PAGE 40
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; for meetings of the Audit Committee, $25; for
traveling from out-of-state, $9; and as Chair of the Contracts
Committee, $90. Expenses for attending meetings are reimbursed.
During the fiscal period ended July 31, 1996, the members of the
board, for attending up to 5 meetings, received the following
compensation, in total, from all Portfolios in the Preferred Master
Trust Group:
<TABLE>
<CAPTION>
Compensation Table
for Growth Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $163.34 $ 0 $ 0 $69,250.06
Robert F. Froehlke 165.34 0 0 69,550.06
Anne P. Jones 163.34 0 0 70,750.06
Melvin R. Laird 175.34 0 0 72,850.06
E.W. Spencer 175.34 0 0 75,050.06
Wheelock Whitney 175.34 0 0 70,300.06
C. Angus Wurtele 143.34 0 0 66,750.06
Compensation Table
for Growth Trends Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP
Lynne V. Cheney $592.50 $ 0 $ 0 $69,250.06
Robert F. Froehlke 594.50 0 0 69,550.06
Anne P. Jones 592.50 0 0 70,750.06
Melvin R. Laird 604.50 0 0 72,850.06
E.W. Spencer 604.50 0 0 75,050.06
Wheelock Whitney 604.50 0 0 70,300.06
C. Angus Wurtele 572.50 0 0 66,750.06
</TABLE>
During the fiscal period from May 13, 1996 to July 31, 1996, no
board member or officer earned more than $60,000 from the Growth
Portfolio and Growth Trends Portfolio, respectively. All board
members and officers as a group earned $1,640 from Growth Portfolio
and $10,250 from Growth Trends Portfolio.
Item 15: Control Persons and Principal Holder of Securities
As of Aug. 31, 1996, the following entities held more than 5% of
the outstanding units of the Portfolios:
Portfolio Unitholder Percentage of ownership
Growth IDS Growth Fund 98.96%
Growth Trends IDS New Dimensions Fund 99.71
<PAGE>
PAGE 41
Item 16: Investment Advisory and Other Services
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 from the assets
of each Portfolio, based upon the following schedule:
Growth Portfolio
Growth Trends Portfolio Aggressive Growth Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.500% First $0.25 0.650%
Next 1.0 0.575 Next 0.25 0.625
Next 1.0 0.550 Next 0.50 0.600
Next 3.0 0.525 Next 1.0 0.575
Over 6.0 0.500 Next 1.0 0.550
Next 3.0 0.525
Over 6.0 0.500
On July 31, 1996, the daily rates applied to the Portfolios' net
assets on an annual basis were equal to 0.584% for Growth Portfolio
and 0.535% for Growth Trends Portfolio. The fee is calculated for
each calendar day on the basis of net assets as of 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 the Lipper Growth Fund
Index (the Index). Solely for purposes of calculating the
performance incentive adjustment, the Index is compared to the
performance of Class A shares of a 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
unit, 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
<PAGE>
PAGE 42
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's performance exceeds that of the Index,
the base fee will be increased. Where the performance of the Index
exceeds the performance of the comparison fund, the base fee will
be decreased. The maximum monthly increase or decrease will be
0.12% of average net assets on an annual basis.
The 12 month comparison period rolls over with each succeeding
month, so that it always equals 12 months, ending with the month
for which the performance adjustment is being computed. For the
fiscal period from May 13, 1996 to July 31, 1996, the adjustment
increased the fee by $330,001 for Growth Portfolio and $1,130,056
for Growth Trends Portfolio.
The management fee is paid monthly. For the fiscal period from May
13, 1996 to July 31, 1996, the total amount paid was $3,271,780 for
Growth Portfolio and $11,544,754 for Growth Trends Portfolio.
Aggressive Growth Portfolio began operations on Aug. 19, 1996.
Under the Agreement, a Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; office expenses; consultants' fees; compensation of
board members, officers and employees; corporate filing fees;
organizational expenses; expenses incurred in connection with
lending portfolio securities; and expenses properly payable by the
Portfolios, approved by the board. For the fiscal period from May
13, 1996 to July 31, 1996, the Portfolios paid nonadvisory expenses
of $48,041 for Growth Portfolio and $279,663 for Growth Trends
Portfolio. Aggressive Growth Portfolio began operations on Aug.
19, 1996.
Transfer Agency and Administration Agreement
The Trust, on behalf of each Portfolio, has a Transfer Agency and
Administration 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 unitholder
account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Portfolios'
units. The fee is determined by multiplying the number of
unitholder accounts at the end of the day by a rate of $1 per year
and dividing by the number of days in that year. For the fiscal
period from May 13, 1996 to July 31, 1996, no fees were paid for
Growth Portfolio or Growth Trends Portfolio. Aggressive Growth
Portfolio began operations on Aug. 19, 1996.
<PAGE>
PAGE 43
Placement Agency Agreement
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
Custodian
The Trust's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, through a custodian agreement. The
custodian is permitted to deposit some or all of its securities in
central depository systems as allowed by federal law. For its
services, the Portfolios pay the custodian a maintenance charge per
Portfolio and a charge per transaction in addition to reimbursing
the custodian's out-of-pocket expenses.
Item 17: Brokerage Allocations and Other Practices
SECURITY TRANSACTIONS
Subject to policies set by the board, the Advisor is authorized to
determine, consistent with each Portfolio's investment goal and
policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, the
Advisor has been directed to use its best efforts to obtain the
best available price and most favorable execution except where
otherwise authorized by the board. In selecting broker-dealers to
execute transactions, the Advisor may consider the price of the
security, including commission or mark-up, the size and difficulty
of the order, the reliability, integrity, financial soundness and
general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services
provided by the broker.
The Advisor has a strict Code of Ethics that prohibits its
affiliated personnel from engaging in personal investment
activities that compete with or attempt to take advantage of
planned portfolio transactions for any fund or trust for which it
acts as investment manager. The Advisor carefully monitors
compliance with its Code of Ethics.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has adopted a
policy authorizing the Advisor to do so to the extent authorized by
law, if the Advisor determines, in good faith, that such commission
is reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or the Advisor's overall responsibilities to
the Portfolios advised by the Advisor.
Research provided by brokers supplements the Advisor's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
<PAGE>
PAGE 44
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 the most favorable execution. In so
doing, if, in the professional opinion of the person responsible
for selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by the Advisor in providing advice to all the Trusts in
the Preferred Master Trust Group, their corresponding Funds and
other accounts advised by the Advisor, even though it is not
possible to relate the benefits to any particular fund, portfolio
or account.
<PAGE>
PAGE 45
Each investment decision made for a Portfolio is made independently
from any decision made for the other Portfolios or accounts advised
by the Advisor or any of its subsidiaries. When a Portfolio buys
or sells the same security as another Portfolio 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 the
Portfolio, the Portfolio hopes to gain an overall advantage in
execution. The Advisor has assured the Trust it will continue to
seek ways to reduce brokerage costs.
On a periodic basis, the Advisor makes a comprehensive review of
the broker-dealers and the overall reasonableness of their
commissions. The review evaluates execution, operational
efficiency and research services.
For the fiscal period from May 13, 1996, to July 31, 1996, Growth
Portfolio and Growth Trends Portfolio paid total brokerage
commissions of $230,628 and $1,488,847, respectively. Aggressive
Growth Portfolio began operations on Aug. 19, 1996. Substantially
all firms through whom transactions were executed provide research
services.
No transactions were directed to brokers because of research
services they provided to a Portfolio.
As of the fiscal period ended July 31, 1996, each Portfolio held
securities of its regular brokers or dealers or of the parents of
those brokers or dealers that derived more than 15% of gross
revenue from securities-related activities as presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Period
Growth Portfolio
Merrill Lynch $36,225,000
Morgan Stanley Group 9,964,093
Growth Trends Portfolio
Dean Witter $44,496,830
Goldman Sachs 21,494,070
Merrill Lynch 3,686,576
Morgan Stanley Group 64,243,321
NationsBank 22,999,104
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR
Affiliates of American Express Company (American Express) (of which
the Advisor is a wholly owned subsidiary) may engage in brokerage
and other securities transactions on behalf of the Portfolios
according to procedures adopted by the board and to the extent
consistent with applicable provisions of the federal securities
laws. The Advisor will use an American Express affiliate only if
(i) the Advisor determines that the Portfolio will receive prices
and executions at least as favorable as those offered by qualified <PAGE>
PAGE 46
independent brokers performing similar brokerage and other services
for the Portfolio and (ii) the affiliate charges the Portfolio
commission rates consistent with those the affiliate charges
comparable unaffiliated customers in similar transactions and if
such use is consistent with terms of the Investment Management
Services Agreement.
The Advisor may direct brokerage to compensate an affiliate. The
Advisor will receive research on South Africa from New Africa
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send
research to the Advisor and in turn the Advisor will direct trades
to a particular broker. The broker will have an agreement to pay
New Africa Advisors. All transactions will be on a best execution
basis. Compensation received will be reasonable for the services
rendered.
Information about brokerage commissions paid by Growth Portfolio
and Growth Trends Portfolio to brokers affiliated with the Advisor
for the fiscal period from May 13, 1996 to July 31, 1996 is
contained in the following table:
<TABLE>
<CAPTION>
For the Fiscal Period from May 13, 1996 to July 31, 1996,
Aggregate Percent of
Dollar Aggregate Dollar
Amount of Percent of Amount of
Nature Commissions Aggregate Transactions
of Paid to Brokerage Involving Payment
Portfolio Broker Affiliation Broker Commissions of Commissions
<S> <C> <C> <C> <C> <C>
Growth American
Enterprise (1) $189,172 16.93% N/A
Investment
Growth American
Trends Enterprise (1) 66,667 1.04 N/A
Investment
</TABLE>
(1) Wholly owned subsidiary of the Advisor.
Item 18: Capital Stock and Other Securities
The information in response to this item is provided in addition to
information provided in Item 6 of Part A.
The Declaration of Trust dated October 2, 1995, a copy of which is
on file in the office of the Secretary of the Commonwealth of
Massachusetts, authorizes the issuance of units of beneficial
interest in the Trust without par value. Each unit of a Portfolio
has one vote and shares equally in dividends and distributions,
when and if declared by the board, and in each Portfolio's net
assets upon liquidation. All units, when issued, are fully paid
and non-assessable. There are no preemptive, conversion or
exchange rights.
The board may classify or reclassify any unissued units of the
Trust into units of any series by setting or changing in any one or
more respect, from time to time, prior to the issuance of such
units, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, or qualifications, of <PAGE>
PAGE 47
such units. Any such classification or reclassification will
comply with the provisions of the Investment Company Act of 1940
(the 1940 Act).
The overall management of the business of each Portfolio is vested
with the board members. The board members approve all significant
agreements between the Portfolios and persons or companies
furnishing services to the Portfolios. The day-to-day operations
of the Portfolios are delegated to the officers of the Trust
subject to the investment objective and policies of each Portfolio,
the general supervision of the board members and the applicable
laws of The Commonwealth of Massachusetts.
Generally, there will not be annual meetings of unitholders.
Unitholders may remove board members from office by votes cast at a
meeting of unitholders or by written consent.
Under Massachusetts law, unitholders could, under certain
circumstances, be held liable for the obligations of the Trust.
However, the Declaration of Trust disclaims unitholder liability
for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust. The Declaration
of Trust provides for indemnification out of the Trust property for
all loss and expense of any unitholder of the Trust held liable on
account of being or having been a unitholder. Thus, the risk of a
unitholder incurring financial loss on account of unitholder
liability is limited to circumstances in which the Trust would be
unable to meet its obligations wherein the complaining party was
held not to be bound by the disclaimer.
The Declaration of Trust further provides that the board members
will not be liable for errors of judgment or mistakes of fact or
law. However, nothing in the Declaration of Trust protects a board
member against any liability to which the trustee would otherwise
be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involving the
conduct of his or her office. The Declaration of Trust provides
for indemnification by the Trust of the board members and officers
of the Trust except with respect to any matter as to which any such
person did not act in good faith in the reasonable belief that his
action was in or not opposed to the best interests of the Trust.
Such person may not be indemnified against any liability to the
Trust or the Trust unitholders to which he or she would otherwise
be subjected by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office. The Declaration of Trust also
authorizes the purchase of liability insurance on behalf of board
members and officers.
Item 19: Purchase, Redemption and Pricing of Securities Being
Offered
The information in response to this item is provided in addition to
information provided in Items 7 and 8 in Part A.
<PAGE>
PAGE 48
REDEEMING UNITS
Unitholders have a right to redeem units at any time. For an
explanation of redemption procedures, please see Item 8 in Part A.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of units or
suspend the duty of the Portfolios to redeem units for more than
seven days. Such emergency situations would occur if:
'The New York Stock 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 Portfolio 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 Portfolio stop selling units, the board members may make a
deduction from the value of the assets held by the Portfolio to
cover the cost of future liquidations of the assets so as to
distribute fairly these costs among all unitholders.
REDEMPTIONS BY A PORTFOLIO
A Portfolio reserves the right to redeem, involuntarily, the units
of any unitholder 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 units. Until further notice, it is the
policy of a Portfolio not to exercise this right with respect to
any unitholder whose account has a value of $1,000,000 or more. In
any event, before a Portfolio redeems such units and sends the
proceeds to the unitholder, it will notify the unitholder that the
value of the units in the account is less than the minimum amount
and allow the unitholder 30 days to make an additional investment
in an amount which will increase the value of the accounts to at
least $1,000,000.
REDEMPTIONS IN KIND
The Trust has elected to be governed by Rule 18-f-1 under the 1940
Act, which obligates each Portfolio to redeem units in cash, with
respect to any one unitholder during any 90-day period, up to the
lesser of $250,000 or 1% of the net assets of a Portfolio at the
beginning of such period. Although redemptions in excess of this
limitation would normally be paid in cash, each Portfolio 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 unitholders
of the Trust as determined by the board. In such circumstances,
the securities distributed would be valued as set forth in Item 8
of Part A. Should a Portfolio distribute securities, a unitholder
may incur brokerage fees or other transaction costs in converting
the securities to cash.
<PAGE>
PAGE 49
Despite its right to redeem units through a redemption-in-kind,
each Portfolio does not expect to exercise this option unless the
Portfolio has an unusually low level of cash to meet redemptions
and/or is experiencing unusually strong demands for cash.
VALUING PORTFOLIO INTERESTS
The number of units held by each unitholder is equal to the value
in dollars of that unitholder's interest in a Portfolio. The
dollar value of a unitholder's interest in a Portfolio is
determined by multiplying the unitholder's proportionate interest
in a Portfolio by the net asset value of that Portfolio.
On Aug. 1, 1996, the first business day following the end of the
fiscal period, the computation looked like this:
<TABLE>
<CAPTION>
Net assets before Units outstanding Net asset value
Portfolio unitholder transactions at end of previous day of one unit
<S> <C> <C> <C> <C> <C>
Growth $2,250,192,690 divided by 95,185,816 equals $23.64
Growth Trends 8,721,924,406 462,701,560 18.85
</TABLE>
In determining net assets before unitholder transactions, the
securities held by each Portfolio are valued as follows as of the
close of business of the New York Stock Exchange (the Exchange):
'Securities, except bonds other than convertibles, traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the
closing bid and asked prices, looking first to the bid and asked
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the Exchange. Foreign securities
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
<PAGE>
PAGE 50
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 Financial Advisors Inc. and each of
the Portfolios will be closed on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Item 20: Tax Status
The information in response to this item is provided in Item 6 of
Part A.
Item 21: Underwriters
The information in response to this item is provided in Item 7 of
Part A and Item 16 of Part B.
Item 22: Calculation of Performance Data
Not Applicable.
Item 23: Financial Statements
<PAGE>
PAGE 51
Independent auditors' report
The board of trustees and unitholders
Growth Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of Growth Portfolio as of July 31, 1996, and the related statements
of operations and changes in net assets for the period from May 13,
1996 (commencement of operations) to July 31, 1996. These financial
statements are the responsibility of fund management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Investment
securities held in custody are confirmed to us by the custodian. As
to securities purshased and sold but not received or delivered, and
securities on loan, we request confirmations from brokers, and
where replies are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Growth
Portfolio at July 31, 1996, and the results of its operations for
the year then ended and the changes in its net assets for the
period from May 13, 1996 (commencment of operations) to July 31,
1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 6, 1996
<PAGE>
PAGE 52
Statement of assets and liabilities
Growth Portfolio
July 31, 1996
Assets
Investments in securities, at value (Note 1)
(identified cost $1,596,400,239) $2,191,506,852
Dividends and accrued interest receivable 1,116,073
Receivable for investment securities sold 22,095,500
U.S. government securities
held as collateral (Note 4) 74,151,956
Total assets 2,288,870,381
Liabilities
Disbursements in excess
of cash on demand deposit 6,693,434
Payable upon return
of securities loaned (Note 4) 76,891,356
Accrued investment management services fee 86,777
Other accrued expenses 31,666
Total liabilities 83,703,233
Net assets $2,205,167,148
See accompany notes to financial statements.
<PAGE>
PAGE 53
Statement of operations
Growth Portfolio
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Investment income
Income:
Interest $1,881,058
Dividend 2,778,360
Total income 4,659,418
Expenses (Note 2):
Investment management services fee 3,271,780
Compensation of board members 1,640
Custodian fees 44,330
Audit fees 4,231
Administrative 185
Total expenses 3,322,166
Earning credits on cash balances (Note 2) (2,345)
Total net expenses 3,319,821
Investment income -- net 1,339,597
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions
(Note 3) 12,989,728
Net change in unrealized appreciation or
depreciation of investments (176,108,355)
Net loss on investments (163,118,627)
Net decrease in net assets
resulting from operations $(161,779,030)
See accompanying notes to financial statements.
<PAGE>
PAGE 54
Statement of changes in net assets
Growth Portfolio
For the period from May 13, 1996 to (commencement of operations)
to July 31, 1996
Operations and distributions
Investment income - - net $1,339,597
Net realized gain on investments 12,989,728
Net change in unrealized appreciation or
depreciation of investments (176,108,355)
Net decrease in net assets
resulting from operations (161,779,030)
Net contributions 2,366,946,178
Total increase in net assets 2,205,167,148
Net assets at beginning of period (Note 1) --
Net assets at end of period $2,205,167,148
See accompanying notes to financial statements.
<PAGE>
PAGE 55
Notes to financial statements
Growth Portfolio
___________________________________________________________________
1. Summary of significant accounting policies
The Growth Portfolio (Portfolio) is a series of Growth Trust
(Trust) and is registered under the Investment Company Act of 1940
(as amended) as a diversified, open-end management investment
company. Growth Portfolio seeks to provide unitholders with long-
term growth of capital by investing primarily in stocks of U.S. and
foreign companies that appear to offer growth opportunities. The
Portfolio also may invest in preferred stocks, convertible
securities, debt secutities derivative instruments and money market
instruments. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio. The Portfolio
commenced operations on May 13, 1996. At this time, an existing
fund transferred its assets to the Portfolio in return for an
ownership percentage of the Portfolio.
Significant accounting policies followed by the Portfolio are
summarized below:
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available
are valued at fair value according to methods selected in good
faith by the board. Determination of fair value involves, among
other things, reference to market indexes, matrixes and data from
independent brokers. Short-term securities maturing in more than 60
days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains and
facilitate buying and selling of securities for investment
purposes, the Portfolio may buy or write options traded on any U.S.
or foreign exchange or in the over-the-counter market where the
completion of the obligation is dependent upon the credit standing
of the other party. The Portfolio also may buy and sell put and
call options and write covered call options on portfolio securities
and may write cash-secured put options. The risk in writing a call <PAGE>
PAGE 56
option is that the Portfolio gives up the opportunity of profit if
the market price of the security increases. The risk in writing a
put option is that the Portfolio may incur a loss if the market
price of the security decreases and the option is exercised. The
risk in buying an option is that the Portfolio pays a premium
whether or not the option is exercised. The Portfolio also has the
additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Portfolio will realize a gain or loss upon expiration
or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost
for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or
paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Portfolio may buy and sell stock index futures
contracts traded on any U.S. or foreign exchange. The Portfolio
also may buy or write put and call options on these futures
contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Portfolio
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized gains
and losses. The Portfolio recognizes a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. In
the statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses
realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
<PAGE>
PAGE 57
The Portfolio may enter into forward foreign currency exchange
contracts for operational purposes and to protect against adverse
exchange rate fluctuation. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation
are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the
credit risk that the other party will not complete the obligations
of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a
partnership and each investor in the Portfolio is treated as the
owner of its proportionate share of the net assets, income,
expenses and realized and unrealized gains and losses of the
Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend
date and interest income, including level-yield amortization of
premium and discount, is accrued daily.
___________________________________________________________________
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.6% to 0.5%
annually. The fees may be increased or decreased by a performance
adjustment based on a comparison of the performance of Class A
shares of the IDS Growth Fund to the Lipper Growth Fund Index. The
maximum adjustment is 0.12% of the Portfolio's average daily net
assets on an annual basis. The adjustment increased the fee by
$330,001 for the period from May 13, 1996 to July 31, 1996.
Under the agreement, the Trust also pays taxes and nonadvisory
expenses, which include custodian fees to be paid to an affiliate
of AEFC; audit and certain legal fees; fidelity bond premiums;
registration fees for units; Portfolio office expenses;
consultants' fees; compensation of trustees; corporate filing fees;
expenses incurred in connection with lending securities of the
Portfolio;and any other expenses properly payable by the Trust or
Portfolio, approved by the board.
For the period from May 13, 1996 to July 31, 1996, the Portfolio's
custodian fees were reduced by $2,345 as a result of earnings
credits from overnight cash balances.
<PAGE>
PAGE 58
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $230,068,508 and $94,393,890
respectively, for the period from May 13, 1996 to July 31, 1996.
For the same period, the portfolio turnover rate was 5%. Realized
gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were
$189,172 for this period.
___________________________________________________________________
4. Lending of portfolio securities
At July 31, 1996, securities valued at $82,068,675 were on loan to
brokers. For collateral, the Portfolio received $2,739,400 in cash
and U.S. government securities valued at $74,151,956. Income from
securities lending amounted to $177,912 for the period ended July
31, 1996. The risks to the Portfolio of securities lending are that
the borrower may not provide additional collateral when required or
return the securities when done.
<PAGE>
PAGE 59
Investments in securities
<TABLE>
<CAPTION>
Growth Portfolio
July 31, 1996
(Percentages represent value of
investments compared to net assets)
____________________________________________________________________________________________________________________________
Common stocks (92.6%)
____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<C> <C> <C>
Airlines
(1.0%)
Northwest Airlines 600,000 (b,d) $22,050,000
_____________________________________________________________________________________________________________________________
Automotive & related (0.8%)
Gentex 400,000 (b) 7,500,000
Oxford Resources Cl A 400,000 (b) 9,500,000
___________
Total 17,000,000
_____________________________________________________________________________________________________________________________
Banks and savings & loans (1.3%)
MBNA 1,000,000 27,875,000
_____________________________________________________________________________________________________________________________
Beverages & tobacco (2.5%)
Coca-Cola 1,206,700 56,564,063
_____________________________________________________________________________________________________________________________
Building materials & construction (1.7%)
Clayton Homes 1,033,900 18,093,250
Tyco Intl 500,000 20,500,000
____________
Total 38,593,250
_____________________________________________________________________________________________________________________________
Communications equipment (15.8%)
ADC Telecom 600,000 (b) 25,350,000
Andrew 1,200,000 (b,d) 49,050,000
Cisco Systems 1,600,000 (b) 82,800,000
Ericsson (LM) Tel Cl B ADR 1,500,000 (c) 30,468,750
First Data 934,360 72,529,695
Silicon Graphics 700,000 (b) 16,450,000
Tellabs 1,200,000 (b) 71,700,000
____________
Total 348,348,445
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 60
Computers & office equipment (8.0%)
Compaq Computer 500,000 (b,d) 27,375,000
CSG Systems Intl 50,600 (b) 1,049,950
Danka Business Systems ADR 1,000,000 (c,d) 27,500,000
Gemstar Intl 150,000 (b) 3,637,500
Intuit 200,000 (b) 7,000,000
Microsoft 200,000 (b) 23,575,000
NETCOM On-Line Communication Services 400,000 (b) 7,500,000
Oracle Systems 1,350,000 (b) 52,818,750
Solectron 800,000 (b) 25,200,000
____________
Total 175,656,200
______________________________________________________________________________________________________________________________
Chemicals (1.1%)
Monsanto 750,000 23,437,500
______________________________________________________________________________________________________________________________
Electronics (7.5%)
Applied Materials 800,000 (b) 19,100,000
AVX 800,000 14,100,000
DuPont Photomasks 22,500 (b) 427,500
Harman Intl 500,000 22,437,500
Intel 500,000 37,562,500
Maxim Integrated Products 1,000,000 (b) 28,500,000
MEMC Electronic 600,000 (b) 21,225,000
SGS-Thomson Microelectronics 300,000 (b) 10,350,000
Vishay Intertechnology 630,000 11,655,000
____________
Total 165,357,500
_____________________________________________________________________________________________________________________________
Energy (1.0%)
Mobil 200,000 22,075,000
_____________________________________________________________________________________________________________________________
Energy equipment & services (3.5%)
Fluor 750,000 45,187,500
Schlumberger 400,000 (c) 32,000,000
____________
Total 77,187,500
_____________________________________________________________________________________________________________________________
Financial services (3.5%)
Green Tree 1,200,000 40,350,000
Merrill Lynch 600,000 36,225,000
____________
Total 76,575,000
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 61
Health care (10.9%)
Amgen 800,000 (b) 43,700,000
Boston Scientific 1,200,000 (b,d) 57,300,000
Gensia 161 (b) 835
IDEXX Laboratories 400,000 (b) 15,500,000
Johnson & Johnson 700,000 33,425,000
Medtronics 600,000 28,425,000
Perclose 34,800 (b) 687,300
Pfizer 800,000 55,900,000
Sola Intl 200,000 (b) 5,925,000
____________
Total 240,863,135
_____________________________________________________________________________________________________________________________
Health care services (6.3%)
HealthCare COMPARE 600,000 (b) 23,175,000
HEALTHSOUTH 2,000,000 (b) 60,750,000
Service Intl 1,000,000 (d) 55,125,000
____________
Total 139,050,000
_____________________________________________________________________________________________________________________________
Industrial equipment & services (4.5%)
Caterpillar 400,000 26,350,000
Deere 1,200,000 42,900,000
Sanifill 750,000 (b) 31,781,250
____________
Total 101,031,250
_____________________________________________________________________________________________________________________________
Industrial transportation (1.3%)
Wisconsin Central 900,000 (b) 28,125,000
_____________________________________________________________________________________________________________________________
Insurance (3.0%)
Risk Capital Holdings 883,300 (b) 15,347,337
Travelers 1,200,000 50,700,000
____________
Total 66,047,337
_____________________________________________________________________________________________________________________________
Leisure time & entertainment (5.8%)
Disney (Walt) 500,000 27,812,500
Duracell Intl 600,000 27,075,000
Harley Davidson 300,000 12,300,000
Marriott Intl 600,000 30,825,000
Mattel 1,200,000 29,700,000
____________
Total 127,712,500
_____________________________________________________________________________________________________________________________
Metals (3.6%)
Birmingham Steel 1,100,000 17,875,000
Nucor 1,200,000 56,250,000
Stillwater Mining 200,000 (b) 4,300,000
____________
Total 78,425,000
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (4.2%)
Alco Standard 1,000,000 43,750,000
Apollo Group 750,000 (b) 20,625,000
Manpower 200,000 6,800,000
Olsten 800,000 21,200,000
____________
Total 92,375,000
<PAGE>
PAGE 62
_____________________________________________________________________________________________________________________________
Textiles & apparel (2.9%)
Nike 500,000 51,437,500
St. John Knits 300,000 11,850,000
___________
Total 63,287,500
_____________________________________________________________________________________________________________________________
Utilities -- telephone (2.4%)
AirTouch Communications 900,000 (b) 24,750,000
MFS Communications 900,000 (b,d) 28,350,000
___________
Total 53,100,000
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $1,445,618,554) $2,040,736,180
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 63
<TABLE>
<CAPTION>
Short-term securities (6.8%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
<C> <C> <C> <C>
U.S. government agencies (0.3%)
Federal Home Loan Bank Disc Nt
08-01-96 5.29% $1,400,000 $ 1,400,000
Federal Home Loan Mtge Corp Disc Nt
08-29-96 5.24 2,400,000 2,390,256
Federal Natl Mtge Assn Disc Nts
08-06-96 5.24 520,000 519,622
08-20-96 5.24 2,000,000 1,994,490
____________
6,304,368
_____________________________________________________________________________________________________________________________
Certficate of deposit (0.2%)
Domestic
Harris Trust
08-09-96 5.40 5,700,000 5,700,000
_____________________________________________________________________________________________________________________________
Commercial paper (6.3%)
A.I. Credit
08-20-96 5.41 4,500,000 4,486,647
Ameritech
08-13-96 5.40 5,100,000 5,089,501
09-17-96 5.43 2,200,000 (e) 2,183,284
AT&T Capital
08-06-96 5.38 10,800,000 10,791,975
BellSouth Telephone
08-05-96 5.40 6,700,000 6,696,002
CAFCO
08-23-96 5.42 4,900,000 (e) 4,883,890
09-19-96 5.42 6,900,000 (e) 6,846,495
Cargill
08-27-96 5.31 3,600,000 3,586,246
CIT Group
08-16-96 5.41 5,900,000 5,886,774
Commercial Credit
08-08-96 5.39 8,500,000 8,491,125
Commerzbank U.S. Finance
08-26-96 5.31 5,500,000 5,479,795
Consolidated Rail
08-30-96 5.41 4,500,000 (e) 4,480,534
Metlife Funding
08-14-96 5.40 6,032,000 6,018,167
Mobil Australia Finance
08-02-96 5.35 1,800,000 (e) 1,799,574
Morgan Stanley Group
08-12-96 5.37 4,800,000 4,791,090
09-05-96 5.37 5,200,000 5,173,003
Penney (JC)
08-07-96 5.40 8,000,000 7,992,827
<PAGE>
PAGE 64
SAFECO Credit
08-23-96 5.41 4,300,000 4,285,889
St. Paul Companies
08-09-96 5.37 5,500,000 (e) 5,493,461
Sandoz
09-16-96 5.44 1,400,000 (e) 1,389,630
Smithkline Beecham
08-13-96 5.40 6,200,000 6,188,881
Societe Generale North America
08-12-96 5.39 3,700,000 3,693,952
Southwest Bell Telephone
08-05-96 5.39 9,500,000 9,494,353
Transamerica Finance
08-02-96 5.40 4,500,000 4,499,327
USAA Capital
09-06-96 5.33 2,600,000 2,586,220
09-19-96 5.39 4,200,000 4,168,941
U S WEST Communications
09-03-96 5.37 2,300,000 2,288,721
_____________
Total 138,766,304
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $150,781,685) $ 150,770,672
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,596,400,239)(f) $2,191,506,852
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Foreign security values are stated in U.S. dollars. Foreign securities represent 4.1% of the Fund's
net assets as of July 31, 1996.
(d) Security is partially or fully on loan. See Note 4 to the financial statements.
(e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program
or other "accredited investors." This security has been determined to be liquid under the guidelines
established by the board.
(f) At July 31, 1996, the cost of securities for federal income tax purposes was $1,596,400,238
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $637,012,736
Unrealized depreciation (41,906,122)
______________________________________________________________________________________________
Net unrealized appreciation $595,106,614
______________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 65
The board of trustees and unitholders
Growth Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of Growth Trends Portfolio (a series of Growth Trust) as of July
31, 1996, and the related statements of operations and changes in
net assets for the period from May 13, 1996 (commencement of
operations) to July 31, 1996. These financial statements are the
responsibility of fund management. Our responsibility is to
express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Investment
securities held in custody are confirmed to us by the custodian.
As to securities purchased and sold but not received or delivered,
and securities on loan, we request confirmations from brokers, and
where replies are not received, we carry out other appropriate
auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Growth
Trends Portfolio at July 31, 1996, and the results of its
operations and the changes in its net assets for the period from
May 13, 1996 (commencement of operations) to July 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 6, 1996
<PAGE>
PAGE 66
<TABLE>
<CAPTION>
Statement of assets and liabilities
Growth Trends Portfolio
July 31, 1996
Assets
<S> <C>
Investments in securities, at value (Note 1)
Investments in securities of unaffiliated issuers
(identified cost $6,336,887,547) $8,454,639,876
Investments in securities of affiliated issuers
(identified cost $72,334,647) 133,031,250
Cash in bank on demand deposit 3,393,915
Dividends and accrued interest receivable 7,099,993
Receivable for investment securities sold 37,289,090
U.S. government securities held as collateral (Note 4) 640,540
Total assets 8,636,094,664
Liabilities
Payable for investment securities purchased 45,520,458
Payable upon return of securities loaned (Note 4) 5,018,140
Accrued investment management services fee 561,398
Other accrued expenses 155,470
Total liabilities 51,255,466
Net assets $8,584,839,198
See accompany notes to financial statements.
<PAGE>
PAGE 67
Statement of Operations
Growth Trends Portfolio
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Investment income
Income:
Interest $ 12,099,456
Dividends (net of foreign taxes withheld of $73,091) 20,448,561
Total income 32,548,017
Expenses (Note 2):
Investment management services fee 11,544,754
Compensation of board members 10,250
Custodian fees 256,677
Audit fees 4,582
Administrative 2,892
Other 11,403
Total expenses 11,830,558
Earnings credits on cash balances (Note 2) (6,141)
Total net expenses 11,824,417
Investment income -- net 20,723,600
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions (Note 3) 44,047,563
Net change in unrealized appreciation or depreciation (147,155,473)
Net loss on investments (103,107,910)
Net decrease in net assets resulting from operations $ (82,384,310)
See accompanying notes to financial statements.
<PAGE>
PAGE 68
Statement of changes in net assets
Growth Trends Portfolio
For the period from May 13, 1996
(commencement of operations) to July 31, 1996
Operations and distributions
Investment income -- net $ 20,723,600
Net realized gain on investments 44,047,563
Net change in unrealized appreciation or depreciation (147,155,473)
Net decrease in net assets resulting from operations (103,107,910)
Net contributions 8,667,223,508
Total increase in net assets 8,584,839,198
Net assets at beginning of period (Note 1) --
Net assets at end of period $8,584,839,198
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 69
Notes to financial statements
Growth Trends Portfolio
___________________________________________________________________
1. Summary of significant accounting policies
The Growth Trends Portfolio (Portfolio) is a series of Growth Trust
(Trust) and is registered under the Investment Company Act of 1940
as a diversified, open-end management investment company. Growth
Trends Portfolio invests primarily in common stocks of companies
showing potential for significant growth and operating in areas
where economic or technological changes are occurring. The
Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio. The Portfolio commenced operations on
May 13, 1996. At this time, an existing fund transferred its assets
to the Portfolio in return for an ownership percentage of the
Portfolio.
Significant accounting polices followed by the Portfolio are
summarized below:
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available
are valued at fair value according to methods selected in good
faith by the board. Determination of fair value involves, among
other things, reference to market indexes, matrixes and data from
independent brokers. Short-term securities maturing in more than 60
days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains and
facilitate buying and selling of securities for investment
purposes, the Portfolio may buy or write options traded on any U.S.
or foreign exchange or in the over-the-counter market where the
completion of the obligation is dependent upon the credit standing
of the other party. The Portfolio also may buy and sell put and
call options and write covered call options on portfolio securities
and may write cash-secured put options. The risk in writing a call
option is that the Portfolio gives up the opportunity of profit if
the market price of the security increases. The risk in writing a
put option is that the Portfolio may incur a loss if the market <PAGE>
PAGE 70
price of the security decreases and the option is exercised. The
risk in buying an option is that the Portfolio pays a premium
whether or not the option is exercised. The Portfolio also has the
additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Portfolio will realize a gain or loss upon expiration
or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost
for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or
paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Portfolio may buy and sell stock index futures
contracts traded on any U.S. or foreign exchange. The Portfolio
also may buy or write put and call options on these futures
contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid
market and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Portfolio
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized gains
and losses. The Portfolio recognizes a realized gain or loss when
the contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. In
the statement of operations, net realized gains or losses from
foreign currency transactions may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses
realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange
contracts for operational purposes and to protect against adverse
exchange rate fluctuation. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation
<PAGE>
PAGE 71
are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the
credit risk that the other party will not complete the obligations
of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a
partnership and each investor in the Portfolio is treated as the
owner of its proportionate share of the net assets, income,
expenses and realized and unrealized gains and losses of the
Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend
date and interest income, including level-yield amortization of
premium and discount, is accrued daily.
___________________________________________________________________
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an
Investment Management Services Agreement with American Express
Financial Corporation (AEFC) for managing its portfolio. Under this
agreement, AEFC determines which securities will be purchased, held
or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.6% to 0.5%
annually. The fees may be increased or decreased by a performance
adjustment based on a comparison of the performance of Class A
shares of IDS New Dimensions Fund to the Lipper Growth Fund Index.
The maximum adjustment is 0.12% of the Portfolio's average daily
net assets on an annual basis. The adjustment increased the fee by
$1,130,056 for the period from May 13, 1996 to July 31, 1996.
Under the agreement, the Trust also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees
to be paid to an affiliate of AEFC; audit and certain legal fees;
fidelity bond premiums; registration fees for units; Portfolio
office expenses; consultants' fees; compensation of trustees;
corporate filing fees; expenses incurred in connection with lending
securities of the Portfolio; and any other expenses properly
payable by the Trust or Portfolio, approved by the board.
For the period from May 13, 1996 to July 31, 1996, the Portfolio's
custodian fees were reduced by $6,141 as a result of earnings
credits from overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express
Financial Advisors Inc. acts as placement agent of the units of the
Trust.
<PAGE>
PAGE 72
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $883,856,643 and $586,814,919,
respectively, for the period from May 13, 1996 to July 31, 1996.
For the same period, the portfolio turnover rate was 7%. Realized
gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were
$66,667 for this period.
___________________________________________________________________
4. Lending of portfolio securities
At July 31, 1996, securities valued at $4,997,200 were on loan to
brokers. For collateral, the Portfolio received $4,377,600 in
cash and U.S. government securities valued at $640,540. Income from
securities lending amounted to $86,952 for the period ended July
31, 1996. The risks to the Portfolio of securities lending are that
the borrower may not provide additional collateral when required or
return the securities when due.
<PAGE>
PAGE 73
Investments in securities
Growth Trends Portfolio (Percentages represent value of
July 31, 1996 investments compared to net assets)
Investments in securities of unaffiliated issuers
Common stocks (86.7%)
Issuer Shares Value (a)
Aerospace & defense (5.3%)
Boeing 2,100,000 $185,850,000
Lockheed Martin 1,100,000 91,162,500
Raytheon 1,700,000 82,450,000
United Technologies 860,000 96,857,500
Total 456,320,000
Airlines (0.9%)
AMR 1,000,000 (b) 78,875,000
Automotive & related (1.3%)
Chrylser 4,000,000 113,500,000
Banks and savings & loans (5.4%)
Citicorp 3,200,000 262,000,000
MBNA 1,700,000 47,387,500
Norwest 3,700,000 131,350,000
State Street Boston 500,000 25,125,000
Total 465,862,500
Beverages & tobacco (3.9%)
Anheuser-Busch 1,150,000 85,962,500
Coca-Cola 3,200,000 150,000,000
PepsiCo 3,000,000 94,875,000
Total 330,837,500
Building materials & construction (0.6%)
Tyco Intl 1,300,000 53,300,000
Chemicals (3.3%)
IMC Global 1,100,000 43,450,000
Monsanto 7,000,000 218,750,000
Praxair 620,000 23,792,500
Total 285,992,500
Communications equipment & services (1.7%)
ADC Telecommunications 1,100,000 (b) 46,475,000
Andrew 1,000,000 (b) 40,875,000
Tellabs 1,000,000 (b) 59,750,000
Total 147,100,000
<PAGE>
PAGE 74
Computers & office equipment (16.2%)
Ceridian 2,100,000 (b) 91,350,000
Cisco Systems 6,000,000 (b) 310,500,000
Computer Associates Intl 2,100,000 106,837,500
Computer Sciences 1,260,000 (b) 85,680,000
First Data 2,300,000 178,537,500
Hewlett-Packard 3,330,000 146,520,000
Microsoft 1,200,000 (b) 141,450,000
Oracle 4,000,000 (b) 156,500,000
Parametric Technology 2,500,000 (b) 104,062,500
3Com 1,850,000 (b) 72,843,750
Total 1,394,281,250
Electronics (2.6%)
Intel 3,000,000 225,375,000
Energy (2.5%)
Amoco 300,000 20,062,500
Exxon 1,000,000 82,250,000
Mobil 1,000,000 110,375,000
Total 212,687,500
Energy equipment & services (1.6%)
Fluor 1,600,000 96,400,000
Sonat Offshore Drilling 800,000 39,200,000
Total 135,600,000
Financial services (1.6%)
Dean Witter 800,000 40,700,000
Household Intl 600,000 44,700,000
Morgan Stanley 1,050,000 51,187,500
Total 136,587,500
Food (2.2%)
ConAgra 4,000,000 170,000,000
Pioneer Hi-Bred Intl 400,000 21,500,000
Total 191,500,000
Health care (9.5%)
Amgen 2,400,000 (b) 131,100,000
Boston Scientific 1,000,000 (b) 47,750,000
Guidant 800,000 40,600,000
Johnson & Johnson 3,600,000 171,900,000
Medtronic 1,700,000 80,537,500
Merck 1,600,000 102,800,000
Pfizer 3,400,000 237,575,000
Total 812,262,500
Health care services (1.3%)
Cardinal Health 472,400 32,831,800
HBO & Co 1,200,000 73,500,000
Total 106,331,800 <PAGE>
PAGE 75
Household products (3.0%)
Gillette 2,100,000 133,612,500
Procter & Gamble 1,400,000 125,125,000
Total 258,737,500
Industrial equipment & services (1.7%)
Case 600,000 26,550,000
Deere 2,500,000 89,375,000
Illinois Tool Works 400,000 25,750,000
Total 141,675,000
Insurance (2.2%)
ACE Limited 1,000,000 44,000,000
American Intl Group 1,000,000 94,125,000
UNUM 840,000 51,240,000
Total 189,365,000
Leisure time & entertainment (1.8%)
Marriott Intl 1,800,000 92,475,000
Mattel 800,000 19,800,000
Mirage Resorts 2,000,000 (b) 45,000,000
Total 157,275,000
Media (1.0%)
A.H. Belo Series A 650,000 26,162,500
Infinity Broadcasting Cl A 900,000 (b) 24,750,000
Time Warner 1,000,000 34,875,000
Total 85,787,500
Metals (1.0%)
Aluminum Co of America 1,400,000 81,200,000
Multi-industry conglomerates (5.4%)
Alco Standard 1,650,000 72,187,500
Emerson Electric 1,477,200 124,638,750
General Electric 3,200,000 263,600,000
Total 460,426,250
Restaurants & lodging (2.6%)
Hospitality Franchise System 1,700,000 (b) 102,000,000
McDonald's 2,000,000 92,750,000
Promus Hotel 1,000,000 (b) 27,250,000
Total 222,000,000
Retail (2.9%)
Albertson's 1,300,000 53,300,000
Circuit City 700,000 22,050,000
Federated Department Stores 1,400,000 (b) 42,350,000
Home Depot 1,000,000 50,500,000
Kroger 500,000 (b) 18,875,000
Safeway 1,700,000 (b) 61,200,000
<PAGE>
PAGE 76
Total 248,275,000
Textiles & apparel (0.6%)
NIKE Cl B 500,000 51,437,500
Utilities -- telephone (1.7%)
AirTouch Communications 2,000,000 (b) 55,000,000
GTE 1,700,000 70,125,000
MFS Communications 700,000 (b) 22,050,000
Total 147,175,000
Foreign (2.9%) (c)
British Airways ADR 400,000 (d) 32,600,000
Reuters Holdings ADR 700,000 43,837,500
Royal Dutch Petroleum 300,000 (d) 45,262,500
Schlumberger 700,000 56,000,000
SmithKline Beecham ADR 1,350,000 72,562,500
Total 250,262,500
Total common stocks
(Cost: $5,322,021,805) $7,440,029,300
<PAGE>
PAGE 77
Short-term securities (11.8%)
Issuer Annualized Amount Value (a)
yield on payable at
date of maturity
purchase
U.S. government agencies (0.1%)
Federal Home Loan Bank Disc Nt
08-05-96 5.32 600,000 $ 599,647
Federal Home Loan Mtge Corp Disc Nt
08-16-96 5.25 7,900,000 7,882,784
Total 8,482,431
Commercial paper (11.5%)
ABN Amro
08-27-96 5.06 15,000,000 14,937,992
10-11-96 5.52 9,000,000 8,900,100
A.I. Credit
08-20-96 5.41 10,000,000 9,970,327
09-18-96 5.37 10,235,000 10,162,263
Alabama Power
08-23-96 5.31 6,700,000 6,678,340
American General Finance
08-01-96 5.38 1,500,000 1,500,000
08-01-96 5.35 10,100,000 10,100,000
Ameritech Capital Funding
08-13-96 5.40 13,600,000 13,572,004
08-27-96 5.41 10,400,000 (f) 10,355,472
08-29-96 5.42 1,200,000 (f) 1,194,564
Associates North America
09-25-96 5.42 10,000,000 9,913,640
AVCO Financial Services
08-01-96 5.40 3,500,000 3,500,000
08-19-96 5.34 9,000,000 8,974,609
08-29-96 5.34 8,300,000 8,263,616
10-22-96 5.49 8,700,000 8,588,676
10-30-96 5.49 5,400,000 5,321,952
10-31-96 5.50 18,000,000 17,741,480
BBV Finance (Delaware)
08-01-96 5.32 9,000,000 9,000,000
08-07-96 5.33 4,400,000 4,395,729
08-07-96 5.29 10,000,000 9,990,292
Becton Dickinson
08-28-96 5.44 7,000,000 6,971,650
BellSouth
08-28-96 5.42 6,958,000 6,928,555
09-17-96 5.38 9,800,000 9,731,678
Beneficial
09-12-96 5.39 10,000,000 9,937,583
CAFCO
09-11-96 5.44 15,000,000 14,901,870
Cargill
08-14-96 5.37 7,100,000 7,086,283
10-08-96 5.53 8,000,000 7,914,900
10-23-96 5.50 17,000,000 (f) 16,779,850 <PAGE>
PAGE 78
Chevron
08-21-96 5.43 13,000,000 12,966,995
Ciesco LP
08-21-96 5.40 6,100,000 (f) 6,079,364
08-23-96 5.34 7,000,000 6,974,122
09-13-96 5.45 10,000,000 9,928,793
10-01-96 5.43 10,000,000 9,904,417
CIT Group
08-16-96 5.41 15,000,000 14,966,375
Commercial Credit
08-08-96 5.39 5,400,000 5,394,361
Commerzbank U.S. Finance
08-13-96 5.35 8,000,000 7,982,181
08-14-96 5.39 16,700,000 16,661,560
CPC Intl
09-04-96 5.44 8,300,000 (f) 8,254,972
09-16-96 5.47 11,000,000 (f) 10,919,977
09-24-96 5.37 12,000,000 (f) 11,899,533
09-26-96 5.45 20,000,000 (f) 19,824,338
10-22-96 5.49 10,300,000 (f) 10,168,203
Dean Witter
08-05-96 5.37 3,800,000 3,796,830
Ford Motor Credit
09-05-96 5.39 15,000,000 14,921,979
Gannett
10-11-96 5.54 12,400,000 (f) 12,262,360
10-15-96 5.52 5,400,000 (f) 5,376,337
10-16-96 5.54 10,700,000 (f) 10,572,982
General Electric Capital
08-14-96 5.37 12,000,000 11,971,840
08-22-96 5.43 15,000,000 14,946,404
08-28-96 5.44 10,000,000 9,954,418
08-29-96 5.32 6,500,000 6,473,206
Goldman Sachs
08-05-96 5.36 6,000,000 5,995,299
08-23-96 5.39 5,000,000 4,981,030
09-09-96 5.50 1,400,000 1,390,947
09-10-96 5.47 7,000,000 6,954,606
10-21-96 5.53 2,200,000 2,172,188
Harris Trust
08-09-96 5.37 10,400,000 10,399,592
Hewlett-Packard
08-29-96 5.42 4,500,000 4,479,153
09-17-96 5.42 2,430,000 2,411,536
Household Finance
08-26-96 5.42 10,000,000 9,958,074
09-19-96 5.44 20,000,000 19,841,873
Kredietbank North America Finance
09-03-96 5.16 10,000,000 9,945,270
Lilly (Eli) & Co.
08-09-96 5.40 11,200,000 11,186,610
Merrill Lynch
08-23-96 5.43 3,700,000 3,686,576
Metlife Funding
09-09-96 5.39 9,700,000 9,643,675
Mobil Australia Finance (Delaware)
08-15-96 5.40 8,000,000 (f) 7,980,371
08-30-96 5.41 10,000,000 (f) 9,951,305
09-18-96 5.48 8,000,000 (f) 7,937,946 <PAGE>
PAGE 79
09-18-96 5.45 9,908,000 (f) 9,831,146
10-02-96 5.49 7,000,000 (f) 6,932,012
Morgan Stanley Group
08-08-96 5.40 6,000,000 5,993,735
09-06-96 5.37 7,100,000 7,062,086
Motorola
08-28-96 5.35 13,523,000 13,469,043
Natl Australia Funding (Delaware)
08-13-96 5.39 6,700,000 6,686,316
NationsBank
08-06-96 5.37 15,000,000 14,999,931
09-04-96 5.40 8,000,000 7,999,173
Norfolk Southern
08-29-96 5.37 5,000,000 (f) 4,977,144
PACCAR
08-26-96 5.34 9,000,000 8,962,856
Penney (JC) Funding
09-17-96 5.43 9,000,000 8,932,984
Pfizer
08-02-96 5.40 20,000,000 (f) 19,997,017
Pitney Bowes Credit
08-29-96 5.42 9,000,000 8,958,859
10-09-96 5.49 3,500,000 3,452,048
10-16-96 5.51 8,800,000 8,695,537
Reed Elsevier
09-20-96 5.47 20,000,000 (f) 19,839,148
SAFECO Credit
08-05-96 5.35 8,100,000 8,093,845
08-23-96 5.41 7,500,000 7,475,387
09-23-96 5.40 1,000,000 991,768
Sandoz
08-01-96 5.38 12,000,000 (f) 12,000,000
08-06-96 5.40 8,800,000 8,793,449
08-20-96 5.35 8,000,000 7,973,647
09-10-96 5.47 7,900,000 (f) 7,847,816
Siemens
08-20-96 5.41 9,100,000 9,070,024
09-18-96 5.44 1,300,000 1,289,701
SmithKline Beecham
08-13-96 5.40 15,600,000 15,572,024
Societe Generale North America
08-12-96 5.39 21,700,000 21,664,526
Southern California Gas
09-03-96 5.03 10,269,000 (f) 10,212,059
10-29-96 5.53 5,623,000 (f) 5,546,246
Southwestern Bell Telephone
09-10-96 5.37 8,500,000 8,449,567
Transamerica Financial
08-19-96 5.37 6,000,000 5,981,152
09-23-96 5.40 3,000,000 2,975,303
USAA Capital
08-07-96 5.40 9,100,000 9,091,856
08-12-96 5.37 14,000,000 13,972,579
08-19-96 5.34 10,000,000 9,968,587
08-23-96 5.41 6,700,000 6,678,013
09-06-96 5.33 5,100,000 5,072,970
U S WEST Communications
09-17-96 5.44 9,600,000 9,525,755
09-24-96 5.40 8,600,000 8,530,856 <PAGE>
PAGE 80
10-24-96 5.49 10,000,000 9,868,958
Total 987,866,146
Letters of credit (0.2%)
First Chicago - Commed Fuel
08-15-96 5.42 9,134,000 9,112,039
09-09-96 5.35 9,203,000 9,149,960
Total 18,261,999
Total short-term securities
(Cost: $1,014,865,742) $1,014,610,576
Total investments in securities of unaffiliated issuers
(Cost: $6,336,887,547) $8,454,639,876
<PAGE>
PAGE 81
Investments in securities of affiliated issuer (e)
Common Stock (1.5%)
Issuer Shares Value (a)
Reynolds & Reynolds Cl A 2,750,000 $133,031,250
Total investments in securities of affiliated issuer
(Cost: $72,334,647) 133,031,250
Total investments in securities
(Cost: $6,409,222,194) (g) $8,587,671,126
<PAGE>
PAGE 82
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Presently non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Security is partially or fully on loan. See Note 4 to the
financial statements.
(e) Investments representing 5% or more of the outstanding voting
securities of the issuer.
(f) Commercial paper sold within terms of a private placement
memorandum, exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to dealers
in that program or other "accredited investors." This security has
been determined to be liquid under guidelines established by the
board.
(g) At July 31, 1996, the cost of securities for federal income tax
purposes was $6,409,235,783 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation 2,247,642,210
Unrealized depreciation (69,206,867)
Net unrealized appreciation 2,178,435,343
<PAGE>
PAGE 83
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Financial Statements filed as part of this Amendment:
Growth Portfolio:
Independent Auditors' Report dated September 6, 1996
Statement of assets and liabilities, July 31, 1996
Statement of operations, for the period from May 13, 1996 to
July 31, 1996
Statement of changes in net assets, for the period from May
13, 1996 to July 31, 1996
Notes to financial statements
Investments in securities, July 31, 1996
Notes to investments in securities
Growth Trends Portfolio:
Independent Auditors' Report dated September 6, 1996
Statement of assets and liabilities, July 31, 1996
Statement of operations, for the period from May 13, 1996 to
July 31, 1996
Statement of changes in net assets, for the period from May
13, 1996 to July 31, 1996
Notes to financial statements
Investments in securities, July 31, 1996
Notes to investments in securities
(b) EXHIBITS:
1. Declaration of Trust, filed electronically on or about Nov.
1, 1995 as Exhibit 1 to Registrant's initial Registration
Statement No. 811-7395, is incorporated herein by reference.
2. Form of By-laws, filed electronically on or about April 18,
1996 as Exhibit 2 to Registrant's Amendment No. 1, is
incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.
5(a). Form of Investment Management Services Agreement between
Growth Trust, on behalf of Growth Portfolio and Growth Trends
Portfolio, and American Express Financial Corporation, filed
electronically on or about April 18, 1996 as Exhibit 5 to
Registrant's Amendment No. 1, is incorporated herein by
reference.
5(b). Form of Investment Management Services Agreement between
Growth Trust, on behalf of Aggressive Growth Portfolio, and
American Express Financial Corporation, filed electronically
on or about July 31, 1996 as Exhibit 5(b) to Registrant's
Amendment No. 2, is incorporated herein by reference.
<PAGE>
PAGE 84
6. Not Applicable.
7. Not Applicable.
8(a). Form of Custodian Agreement between Registrant, on behalf of
Growth Portfolio and Growth Trends Portfolio, and American
Express Trust Company, filed electronically on or about April
18, 1996 as Exhibit 8 to Registrant's Amendment No. 1, is
incorporated herein by reference.
8(b). Form of Custodian Agreement between Growth Trust, on behalf
of Aggressive Growth Portfolio, and American Express Trust
Company, filed electronically on or about July 31, 1996 as
Exhibit 8(b) to Registant's Amendment No. 2, is incorporated
herein by reference.
8(c). Form of Custody Agreement between Morgan Stanley Trust
Company and IDS Bank and Trust dated May, 1993, filed
electronically herewith.
9(a). Form of Transfer Agency and Administration Agreement between
Growth Trust, on behalf of Growth Portfolio and Growth Trends
Portfolio, and American Express Financial Corporation, filed
electronically on or about April 18, 1996 as Exhibit 9 to
Registrant's Amendment No. 1, is incorporated herein by
reference.
9(b). Form of Transfer Agency and Administration Agreement between
Growth Trust, on behalf of Aggressive Growth Portfolio, and
American Express Financial Corporation, filed electronically
on or about July 31, 1996 as Exhibit 9(b) to Registrant's
Amendment No. 2, is incorporated herein by reference.
9(c). Form of Placement Agency Agreement between Growth Trust, on
behalf of Growth Portfolio and Growth Trends Portfolio, and
American Express Financial Advisors Inc., filed
electronically on or about April 18, 1996 as Exhibit 6 to
Registrant's Amendment No. 1, is incorporated herein by
reference.
9(d). Form of Placement Agency Agreement between Growth Trust, on
behalf of Aggressive Growth Portfolio, and American Express
Financial Advisors Inc., filed electronically on or about
July 31, 1996 as Exhibit 6(b) to Registant's Amendment No. 2,
is incorporated herein by reference.
10. Not Applicable.
11. Not Applicable.
12. Not Applicable.
13. Form of Subscription Agreement between Growth Trust and
Strategist Growth Fund, Inc., filed electronically on or
about April 18, 1996 as Exhibit 13 to Registrant's Amendment
No. 1, is incorporated herein by reference.
<PAGE>
PAGE 85
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
17. Financial data schedules are filed electronically herewith.
18. Not Applicable.
19(a) Trustees' Power of Attorney to sign Amendments to this
Registration Statement, dated April 11, 1996, filed
electronically on or about April 18, 1996 as Exhibit 19(a) to
Registrant's Amendment No. 1, is incorporated herein by
reference.
19(b) Officers' Power of Attorney to sign Amendments to this
Registration Statement, dated April 11, 1996, filed
electronically on or about April 18, 1996 as Exhibit 19(b) to
Registrant's Amendment No. 1, is incorporated herein by
reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders
Units of as of Sept. 25, 1996
Beneficial Interest
Growth Portfolio 2
Growth Trends Portfolio 2
Aggressive Growth Portfolio 2
Item 27. Indemnification
Reference is hereby made to Article 8 of Registrant's Declaration
of Trust filed electronically on or about Nov. 1, 1995 as Exhibit 1
to Registrant's initial Registration Statement No. 811-7395.
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<TABLE><CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
<S> <C> <C>
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Technology and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology and
Development
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director, Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-American
Express Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President--North
Central Region
American Express Minnesota Foundation Director
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
AMEX Assurance Co. Director and President
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
Colleen Curran, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President and Chief
Legal Counsel
Alan R. Dakay, Vice President--Institutional Products Group
American Centurion Life Assurance Co. IDS Tower 10 Director and Vice Chairman
Minneapolis, MN 55440 and President, Financial
Institutions Division
American Enterprise Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
American Express Financial Advisors Vice President -
Institutional Products
Group
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 General Counsel
American Express Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Centurion Life Assurance Co. Vice President and
Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Insurance Agency of Nevada Inc. Vice President and
Treasurer
American Express Minnesota Foundation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
American Partners Life Insurance Co. Vice President and
Treasurer
AMEX Assurance Co. Vice President and
Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Futures Corp. Director
IDS Futures III Corp. Director
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, Vice President
and Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Director, Vice President
and Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
AMEX Assurance Co. Vice President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Director and Vice
President-Investments
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Retirement Services
American Express Trust Company IDS Tower 10 Director and President
Minneapolis, MN 55440
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and Chief
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President and Chief
Compliance Officer
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and Executive Vice
President
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
AMEX Assurance Co. Director
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
James E. Kaare, Vice President--Marketing Promotions
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Promotions
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Centurion Life Assurance Co. Director
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Express Financial Advisors Senior Vice President-
Risk Management Products
American Express Insurance Agency of Nevada Inc. Director and President
American Express Service Corporation Vice President
American Partners Life Insurance Co. Director and Chairman of
the Board
AMEX Assurance Co. Director and Chairman of
the Board
IDS Certificate Company Director and Chairman of
the Board
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A and B Director and Chairman of
the Board and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty Insurance Company Director
Claire Kolmodin, Vice President--Service Quality
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
Edward Labenski, Jr., Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Centurion Life Assurance Co. Director and
Vice President-Product
Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Trust Company Director
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
Jonathan S. Linen, Director
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Executive Vice President-
Marketing and Products
American Express Service Corporation Senior Vice President
American Express Tax and Business Director
Services Inc.
AMEX Assurance Co. Director
IDS Certificate Company Director
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Pamela J. Moret, Vice President--Services
American Express Financial Advisors IDS Tower 10 Vice President-Services
Minneapolis, MN 55440
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
Mary Owens Neal, Vice President--Mature Market Segment
American Express Financial Advisors Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Segment
Robert J. Neis, Vice President--Technology Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology Services
James R. Palmer, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corp. Vice President
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
Susan B. Plimpton, Vice President--Segmentation Development and Support
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
James M. Punch, Vice President--Geographic Service Teams
American Express Financial Advisors IDS Tower 10 Vice President-Geographic
Minneapolis, MN 55440 Services Teams
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
IDS International, Inc. Director
IDS Fund Management Limited Director
Robert A. Rudell, Vice President--American Express Institutional Retirement Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
Stuart A. Sedlacek, Vice President--Assured Assets
American Centurion Life Assurance Co. Director and Chairman
and President
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
American Express Financial Advisors Vice President-
Assured Assets
American Partners Life Insurance Co. Director and President
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Director and Chairman of
the Board and President
Donald K. Shanks, Vice President--Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Express Financial Advisors Vice President-Senior
Portfolio Manager,
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
AMEX Assurance Co. Vice President
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Judy P. Skoglund, Vice President--Human Resources and Organization Development
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Melinda S. Urion, Director, Senior Vice President and Chief Financial Officer
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Trust Company Director
American Partners Life Insurance Co. Director and Vice President
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Vice Chairman
IDS International, Inc. Senior Vice President
Norman Weaver Jr., Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President--
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President-Southeast
Region
IDS Insurance Agency of Alabama Inc. Vice President-Pacific
Region
IDS Insurance Agency of Arkansas Inc. Vice President-Pacific
Region
IDS Insurance Agency of Massachusetts Inc. Vice President-Pacific
Region
IDS Insurance Agency of New Mexico Inc. Vice President-Pacific
Region
IDS Insurance Agency of North Carolina Inc. Vice President-Pacific
Region
IDS Insurance Agency of Ohio Inc. Vice President-Pacific
Region
IDS Insurance Agency of Wyoming Inc. Vice President-Pacific
Region
Michael L. Weiner, Vice President--Tax Research and Audit
American Express Financial Advisors IDS Tower 10 Vice President-Tax Research
Minneapolis, MN 55440 and Audit
American Express Service Corporation Assistant Treasurer
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS Fund Management Limited Director
IDS International, Inc. Director
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
/TABLE
<PAGE>
PAGE 18
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-
Exempt Fund, Inc.; IDS International Fund, Inc.; IDS
Investment Series, Inc.; IDS Managed Retirement Fund, Inc.;
IDS Market Advantage Series, Inc.; IDS Money Market Series,
Inc.; IDS New Dimensions Fund, Inc.; IDS Precious Metals
Fund, Inc.; IDS Progressive Fund, Inc.; IDS Selective Fund,
Inc.; IDS Special Tax-Exempt Series Trust; IDS Stock Fund,
Inc.; IDS Strategy Fund, Inc.; IDS Tax-Exempt Bond Fund,
Inc.; IDS Tax-Free Money Fund, Inc.; IDS Utilities Income
Fund, Inc. and IDS Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President--
Minneapolis, MN 55440 Investments
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 IDS Institutional
Retirement Services
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235<PAGE>
PAGE 19
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Technology and
Minneapolis, MN 55440 Development
Brent L. Bisson Group Vice President- None
Ste 900 E. Westside Twr Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President- None
Suite 200 New Jersey
3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services<PAGE>
PAGE 20
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Colleen Curran Vice President and None
IDS Tower 10 Assistant General Counsel
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
<PAGE>
PAGE 21
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive Board member
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
<PAGE>
PAGE 22
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 150 North Texas
801 E. Campbell Road
Richardson, TX 75081<PAGE>
PAGE 23
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations and
Chief Compliance Officer
David R. Hubers Chairman, Chief Board member
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Promotions
Minneapolis, MN 55440
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
<PAGE>
PAGE 24
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
David S. Kreager Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Jr. Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
<PAGE>
PAGE 25
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President-Services None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President- None
Suite 200 Central California/
3500 Market Street Western Nevada
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Mary Owens Neal Vice President- None
IDS Tower 10 Mature Market Segment
Minneapolis, MN 55440
<PAGE>
PAGE 26
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert J. Neis Vice President- None
IDS Tower 10 Technology Services
Minneapolis, MN 55440 Operations
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
<PAGE>
PAGE 27
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
ReBecca K. Roloff Vice President-Private None
IDS Tower 10 Client Group
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Retirement
Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President- None
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
<PAGE>
PAGE 28
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Group Vice President- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
466 Westdale Mall Eastern Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Bren Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Board member
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Senior Vice President Treasurer
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Tax Research and Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 30
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Thomas L. White Group Vice President- None
Suite 200 Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
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) Not Applicable.
<PAGE>
PAGE 86
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant 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 27th day of September, 1996.
GROWTH TRUST
By /s/ William R. Pearce**
William R. Pearce, President
By /s/ Melinda S. Urion**
Melinda S. Urion, Treasurer
Pursuant to the requirements of the Investment Company Act of 1940,
this Amendment to the Registration Statement has been signed below
by the following persons in the capacities indicated on the 27th
day of September, 1996.
Signatures Capacity
/s/ William R. Pearce* Trustee
William R. Pearce
/s/ Lynne V. Cheney* Trustee
Lynne V. Cheney
/s/ William H. Dudley* Trustee
William H. Dudley
/s/ Robert F. Froehlke* Trustee
Robert F. Froehlke
/s/ David R. Hubers* Trustee
David R. Hubers
/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Melvin R. Laird* Trustee
Melvin R. Laird
<PAGE>
PAGE 87
Signatures Capacity
Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
* Signed pursuant to Trustees' Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(a) to Registrant's
Amendment No. 1, by:
Leslie L. Ogg
** Signed pursuant to Officers' Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(b) to Registrant's
Amendment No. 1, by:
Leslie L. Ogg
<PAGE>
PAGE 1
GROWTH TRUST
Registration Number 811-07395
EXHIBIT INDEX
Exhibit 8(c): Custody Agreement.
Exhibit 17: Financial Data Schedules.
<PAGE>
PAGE 1
CUSTODY AGREEMENT
This Custody Agreement is dated May, 1993 between MORGAN STANLEY
TRUST COMPANY, a New York State chartered trust company (the
"Custodian"), and IDS Bank & Trust (the "Customer").
1. The Customer hereby appoints the Custodian as a custodian of
securities and other property owned or under the control of the
Customer which are delivered to the Custodian, or any Subcustodian
as appointed below, from time to time to be held in custody for the
benefit of the Customer. The Customer instructs the Custodian to
establish on the books and records of the Custodian an account (the
"Account") in the name of the Customer. The Custodian shall record
in the Account and shall have general responsibility for the
safekeeping of all securities ("Securities"), cash and other
property (all such Securities, cash and other Property being
collectively the "Property") of the Customer so delivered for
custody. It is understood that the specific procedures the
Custodian will use in carrying out its responsibilities under this
Agreement are set forth in the procedures manual (the "Procedures
Manual") prepared by the Custodian and delivered to the Customer,
as such Procedures Manual may be amended from time to time by the
Custodian by 90 days prior written notice to the Customer (unless
the Customer agrees to a shorter period). The Customer acknowledges
that the Procedures Manual constitutes an integral part of this
Agreement.
2. The Property may be held in custody and deposit accounts that
have been established by the Custodian with one or more domestic or
foreign banks, or through the facilities of one or more clearing
agencies or central securities depositories, as listed on Exhibit A
hereto (the "Subcustodians"), as such Exhibit may be amended from
time to time by the Custodian by written notice to the Customer.
The Custodian shall deliver to the Customer such information as is
necessary or appropriate for the Customer to determine that the
Customer is in compliance with Rule 17f-5 promulgated under the
Investment Company Act of 1940, as amended. The Custodian may hold
Property for all of its customers with a Subcustodian in a single
account that is identified-as belonging to the Custodian for the
benefit of its customers. Any Subcustodian may hold Property in a
securities depository and may utilize a clearing agency. The
Customer agrees that the Property may be physically held outside
the United States. The Custodian shall not be liable for any loss
resulting directly from the physical presence of any Property in a
foreign country (and not by virtue of the actions of the Custodian
or any Subcustodian) including, but not limited to, losses
resulting from nationalization, expropriation, exchange controls or
acts of war or terrorism. Except as provided in the previous
sentence, the liability of the Custodian for losses incurred by the
Customer in respect of Securities shall not be affected by the
Custodian's use of Subcustodians.
<PAGE>
PAGE 2
3. With respect to Property held by a Subcustodian pursuant to
Section 2:
(a) The Custodian will identify on its books as belonging to
the Customer any Property held by a Subcustodian for the
Custodian's account;
(b) The Custodian will hold Property through a Subcustodian
only if (i) such Subcustodian and any securities depository
or clearing agency in which such Subcustodian holds Property,
or any of their creditors, may not assert any right, charge
security interest, lien, encumbrance or other claim of any
kind to such Property except a claim of payment for its safe
custody or administration and (ii) beneficial ownership of
such Property may be freely transferred without the payment
of money or value other than for safe custody or
administration;
(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any property held by
the Subcustodian other than property of the Custodian's
customers and as held solely for the benefit of customers of
the Custodian; and
(d) In the event that the Subcustodian holds Property in a
securities depository or clearing agency, such Subcustodian
will be required by its agreement with the Custodian to
identify on its books such Property as being held for the
account of the Custodian as a custodian for its customers.
4. The Custodian shall allow the Customer's accountants reasonable
access to the Custodian's records relating to the Property held by
the Custodian as such accountants may reasonably require in
connection with their examination of the Customer's affairs. The
Custodian shall also obtain from any Subcustodian (and will require
each Subcustodian to use reasonable efforts to obtain from any
securities depository or clearing agency in which it deposits
Property) an undertaking, to the extent consistent with local
practice and the laws of the jurisdiction or jurisdictions to which
such Subcustodian, securities depository or clearing agency is
subject, to permit independent public accountants such reasonable
access to the records of such Subcustodian, securities depository
or clearing agency as may be reasonably required in connection with
the examination of the Customer's affairs or to take such other
action as the Custodian in its judgment may deem sufficient to
ensure such reasonable access.
5. The Custodian shall provide such reports and other information
to the Customer and to such persons as the Customer directs as the
Custodian and the Customer may agree from time to time, including
such reports which are described in the Procedures Manual.
<PAGE>
PAGE 3
6. The Custodian shall make or cause any Subcustodian to make
payments from monies being held in the Account only:
(a) upon the purchase of Securities and then, to the extent
consistent with practice in the jurisdiction in which
settlement occurs, upon the delivery of such Securities;
(b) for payments to be made in connection with the
conversion, exchange or surrender of Securities;
(c) upon a request of the Customer that the Custodian return
monies being held in the Account;
(d) upon a request of the Customer that monies be exchanged
for or used to purchase monies denominated in a different
currency and then only upon receipt of such exchanged or
purchased monies;
(e) as provided in Section 8 and 12 hereof;
(f) upon termination of this Custody Agreement as hereinafter
set forth; and
(g) for any other purpose upon receipt of explicit
instructions of the Customer accompanied by evidence
reasonably acceptable to the Custodian as to the
authorization of such payment.
Except as provided in the last two sentences of this Section 6 and
as provided in Section 8, all payments pursuant to this Section 6
will be made only upon receipt by the Custodian of Authorized
Instructions (as hereinafter defined) from the Customer which shall
specify the purpose for which the payment is to be made. In the
event that it is not possible to make a payment in accordance with
Authorized Instructions of the Customer, the Custodian shall
proceed in accordance with the procedures set forth in the
Procedures Manual. Any payment pursuant to subsection (f) of this
Section 6 will be made in accordance with Section 16.
7. The Custodian shall make or cause any Subcustodian to make
transfers, exchanges or deliveries of Securities only:
(a) upon sale of such Securities and then, to the extent
consistent with practice in the jurisdiction in which
settlement occurs, upon receipt of payment therefor;
(b) upon exercise of conversion, subscription, purchase,
exchange or other similar rights pertaining to such
Securities and, if applicable to such exercise and if
consistent with practice in the applicable jurisdiction, only
on receipt of substitute or additional securities to be
received upon such exercise;
(c) as provided in Section 8 hereof;
(d) upon the termination of this Custody Agreement as
hereinafter set forth; and
<PAGE>
PAGE 4
(e) for any other purpose upon receipt of explicit
instructions of the Customer accompanied by evidence
reasonably acceptable to the Custodian as to the
authorization of such transfer, exchange or delivery.
Except as provided in the last two sentences of this Section 7 and
as provided in Section 8, all transfers, exchanges or deliveries of
Securities pursuant to this Section 7 will be made only upon
receipt by the Custodian of Authorized Instructions of the Customer
which shall specify the purpose for which the transfer, exchange or
delivery is to be made. In the event that it is not possible to
transfer Securities in accordance with Authorized Instructions of
the Customer, the Custodian shall proceed in accordance with the
procedures set forth in the Procedures Manual. Any transfer or
delivery pursuant to subsection (d) of this Section 7 will be made
in accordance with Section 16.
8. In the absence of Authorized Instructions from the Customer to
the contrary, the Custodian may, and may authorize any Subcustodian
to:
(a) make payments to itself or others for expenses of
handling Property or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Customer;
(b) receive and collect all income and principal with respect
to Securities and to credit cash receipts to the Account;
(c) exchange Securities when the exchange is purely
ministerial (including, without limitation, the exchange of
interim receipts or temporary securities for securities in
definitive form and the exchange of warrants, or other
documents of entitlement to securities, for the securities
themselves);
(d) surrender Securities at maturity or when called for
redemption upon receiving payment therefor;
(e) execute in the Customer's name such ownership and other
certificates as may be required to obtain the payment of
income from Securities:
(f) pay or cause to be paid, from the Account, any and all
taxes and levies in the nature of taxes imposed on Property
by any governmental authority in connection with custody of
and transactions in such Property;
(g) endorse for collection, in the name of the Customer,
checks, drafts and other negotiable instruments; and
(h) in general, attend to all nondiscretionary details in
connection with the custody, sale, purchase, transfer and
other dealings with the Property.
<PAGE>
PAGE 5
9. "Authorized Instructions" of the Customer shall mean
instructions received by telecopy, tested telex, electronic link or
other electronic means or by such other means as may be agreed in
writing in advance between the Customer and the Custodian. The
Custodian shall be entitled to act, and shall have no liability for
acting, in accordance with the terms of this Agreement or upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by one or more persons which the Customer has
previously identified to the Custodian as authorized to act on the
Customer's behalf.
10. Securities which must be held in registered form may be
registered in the name of the Custodian's nominee or, in the case
of Securities in the custody of an entity other than the Custodian,
in the name of such entity's nominee. The Customer agrees to hold
the Custodian and Subcustodians and any such nominee harmless from
any liability arising out of any such person acting as a holder of
record of such Securities. The Custodian may without notice to the
Customer cause any Securities to cease to be registered in the name
of any such nominee and to be registered in the name of the
Customer.
11. All cash received by the Custodian for the Account shall be
held by the Custodian as a short-term credit balance in favor of
the Customer and, if the Custodian and the Customer have agreed in
writing in advance that such credit balances shall bear interest,
the Customer shall earn interest at the rates and times as agreed
between the Custodian and the Customer. The Customer understands
that any such credit balances will not be accompanied by the
benefit of any governmental insurance.
12. From time to time, the Custodian may arrange or extend short-
term credit for the Customer which is (i) necessary in connection
with payment and clearance of securities and foreign exchange
transactions or (ii) pursuant to an agreed schedule, as and if set
forth in the Procedures Manual, of credits for dividends and
interest payments on Securities. All such extensions of credit
shall be repayable by the Customer on demand. The Custodian shall
be entitled to charge the Customer interest for any such credit
extension at rates to be agreed upon from time to time. In addition
to any other remedies available, the Custodian shall be entitled to
a right of set-off against the Property to satisfy the repayment of
such credit extensions and the payment of accrued interest thereon.
The Custodian may act as the Customer's agent or act as a principal
in foreign exchange transactions at such rates as are agreed from
time to time between the Customer and the Custodian.
13. The Customer represents that (i) the execution, delivery and
performance of this Agreement (including, without limitation, the
ability to obtain the short-term extensions of credit in accordance
with Section 12) are within the Customer's power and authority and
have been duly authorized by all requisite action (corporate or
otherwise) and (ii) this Agreement and each extension of short-term
credit extended or arranged for the benefit of the Customer in
accordance with Section 12 will at all times constitute a legal,
valid and binding obligation of the Customer and be enforceable
<PAGE>
PAGE 6
against the Customer in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general and
subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
The Custodian represents that the execution, delivery and
performance of this Agreement is within the Custodian's power and
authority and has been duly authorized by all requisite action of
the Custodian. This Agreement constitutes the legal, valid and
binding obligation of the Custodian enforceable against the
Custodian in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to the
effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
14. The Custodian shall be responsible for the performance of only
such duties as are set forth in this Agreement or the Procedures
Manual or contained in Authorized Instructions given to the
Custodian which are not contrary to the provisions of any relevant
law or regulation. The Custodian shall not be liable to the
Customer or to any other person for any action taken or omitted to
be taken by it in connection with this Agreement in the absence of
negligence or willful misconduct on the part of the Custodian. Upon
Custodian, the Customer agrees to deliver to the Custodian a duly
executed power of attorney, in form and substance satisfactory to
the Custodian, authorizing the Custodian to take any action or
execute any instrument on behalf of the Customer as necessary or
advisable to accomplish the purposes of this Agreement.
15. The Customer agrees to pay to the Custodian from time to time
such compensation for its services pursuant to this Agreement as
may be mutually agreed upon from time to time and the Custodian's
out-of-pocket or incidental expenses. The Customer hereby agrees to
hold the Custodian harmless from any liability or loss resulting
from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed or assessed with respect to
the Account or any Property held therein. The Custodian is and any
Subcustodians are authorized to charge the Account for such items
and the Custodian shall have a lien, charge and security interest
on any and all Property for any amount owing to the Custodian from
time to time under this Agreement. Except as set forth in the
previous sentence, or otherwise permitted pursuant to the terms of
this agreement, the Custodian shall not pledge, assign, hypothecate
or otherwise encumber Property without Authorized Instructions; it
being understood that a Subcustodian will generally retain a lien
against securities which the Subcustodian has purchased for the
Account but for which the Customer has not yet paid. If the
Customer is a U.S. person as defined in Rule 902 promulgated by the
Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), the Customer recognizes that, in
connection with the Customer's election from time to time to
participate in distributions of securities (whether pursuant to
rights offerings, warrant subscriptions, mergers, reorganizations
or otherwise) which have not been registered pursuant to the Act,
the Custodian may inform the issuer and its agents that the acquire
<PAGE>
PAGE 7
of the securities is a U.S. person. The Custodian shall not be
responsible to the Customer for the consequences of any issuer's or
agent's refusal to permit the Customer to acquire such securities,
and the Customer shall hold the Custodian harmless from liability
to the issuer and its agents in connection with any such election
by the Customer.
16. This Agreement may be terminated by the Customer or the
Custodian by 90 days written notice to the other, sent by
registered mail. If notice of termination is given, the Customer
shall, within 60 days following the giving of such notice, deliver
to the Custodian a statement in writing specifying the successor
custodian or other person to whom the Custodian shall transfer the
Property. In either event the Custodian, subject to the
satisfaction of any lien it may have, will transfer the Property to
the person so specified. If the Custodian does not receive such
statement the Custodian, at its election, may transfer the Property
to a bank or trust company established under the laws of the United
States or any state thereof to be held and disposed of pursuant to
the provisions of this Agreement or may continue to hold the
Property until such a statement is delivered to the Custodian. In
such event the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian remains in
possession of any Property and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall
remain in full force and effect; provided, however, that the
Custodian shall no longer settle any transactions in securities for
the Account.
17. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the
Account, including in dealings with affiliates of the Custodian. In
the event the Custodian or any Subcustodian is requested or
required to disclose any confidential information concerning the
Property, the Custodian shall to the extent practicable and legally
permissible, promptly notify the Customer of such request or
requirement so that the Customer may seek a protective order or
waive the Custodian's or such Subcustodian's compliance with this
Section 17. In the absence of such a waiver, if the Custodian or
such Subcustodian is compelled, in the opinion of its counsel, to
disclose any confidential information, the Custodian or such
Subcustodian may disclose such information to such persons as, in
the opinion of counsel, is so required.
18. Any notice or other communication from the Customer to the
Custodian, unless otherwise provided by this Agreement, shall be
sent by certified or registered mail to Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York, 11201,
Attention: President, and any notice from the Custodian to the
Customer is to be mailed postage prepaid, addressed to the Customer
at the address appearing below, or as it may hereafter be changed
on the Custodian's records in accordance with notice from the
Customer.
<PAGE>
PAGE 8
19. The Custodian may assign all of its rights and obligations
hereunder to any other entity which is qualified to act as
custodian under the terms of this Agreement and majority-owned,
directly or indirectly, by Morgan Stanley Group Inc., and upon the
assumption of the rights and obligations hereunder by such entity,
such entity shall succeed to all of the rights and obligations of,
and be substituted for, the Custodian hereunder as if such entity
had been originally named as custodian herein. The Custodian shall
give prompt written notice to the Customer upon the effectiveness
of any such assignment.
This Agreement shall bind the successors and assigns of the
Customer and the Custodian and shall be governed by the laws of the
State of New York applicable to contracts executed in and to be
performed in that state.
________________________
By /s/ Mark Ellis
Name: Mark Ellis
Title: Vice President
Address for record: IDS Trust
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
________________________
Accepted:
MORGAN STANLEY TRUST COMPANY
By /s/ David P. Roccato
Authorized Signature
Roccato
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GROWTH PORTFOLIO
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 1596400239
<INVESTMENTS-AT-VALUE> 2191506852
<RECEIVABLES> 23211573
<ASSETS-OTHER> 74151956
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2288870381
<PAYABLE-FOR-SECURITIES> 78891356
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6811877
<TOTAL-LIABILITIES> 83703233
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 95312252
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2205167148
<DIVIDEND-INCOME> 2778360
<INTEREST-INCOME> 1881058
<OTHER-INCOME> 0
<EXPENSES-NET> (3319821)
<NET-INVESTMENT-INCOME> 1339597
<REALIZED-GAINS-CURRENT> 12989728
<APPREC-INCREASE-CURRENT> (176108355)
<NET-CHANGE-FROM-OPS> (161779030)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2205167148
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3271780
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3319821
<AVERAGE-NET-ASSETS> 1834084214
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 2
<NAME> GROWTH TRENDS PORTFOLIO
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
[INVESTMENTS-AT-COST] 6409222194
[INVESTMENTS-AT-VALUE] 8587671126
[RECEIVABLES] 44389083
[ASSETS-OTHER] 640540
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 8636094664
[PAYABLE-FOR-SECURITIES] 45520458
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5735008
[TOTAL-LIABILITIES] 51255466
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 463138567
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 8636094664
[DIVIDEND-INCOME] 20448561
[INTEREST-INCOME] 12099456
[OTHER-INCOME] 0
[EXPENSES-NET] (11824417)
[NET-INVESTMENT-INCOME] 20723600
[REALIZED-GAINS-CURRENT] 44047563
[APPREC-INCREASE-CURRENT] 147155473
[NET-CHANGE-FROM-OPS] (82384310)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 8584839198
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 11544754
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 11824417
[AVERAGE-NET-ASSETS] 7491510633
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
