-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WYXAeKe+j/e2h0m88iwvgaP3ImvCxMbmrLuM4j4Jri97RggRXkEfjD9yFPDR9xp7 C4T8odirSG4KXrbI0dCSjg== 0000820027-97-000309.txt : 19970329 0000820027-97-000309.hdr.sgml : 19970329 ACCESSION NUMBER: 0000820027-97-000309 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS GROWTH FUND INC CENTRAL INDEX KEY: 0000049702 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410329910 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02111 FILM NUMBER: 97566175 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 N-30D 1 1997 semiannual report IDS Growth Fund (picture of icon: growing trees) The goal of IDS Growth Fund, Inc. is long term growth of capital. American Express Financial Advisors Distributed by American Express Financial Advisors Inc. (picture of icon : growing trees) Going for growth In the long run, a company's stock price usually reflects its business fortunes. Therefore, if a company thrives, its stock tends to follow suit. That's why many long-term investors, including Growth Fund, focus on growth stocks -- those of companies that enjoy rising sales and profits. While there will be interruptions along the way, patient investors look forward to sharing in that same prosperity. Contents From the president 3 From the portfolio manager 3 The Portfolio's ten largest holdings 5 Financial statements (Fund) 6 Notes to financial statements (Fund) 9 Financial statements (Portfolio) 15 Notes to financial statements (Portfolio) 18 Investments in securities 23 Board members and officers 27 IDS mutual funds 28 To our shareholders From the president If you're an experienced investor, you know that the past two years have been unusually strong ones in many financial markets. Perhaps just as important, you also know that history shows that bull markets don't last forever. Though they're often unpredictable, declines -- whether they're brief or long-lasting, moderate or substantial -- are always a possibility. That fact reinforces the need for investors to periodically review their long-term goals and examine whether their investment program remains on track to achieving them. Your quarterly investment statements are one part of that monitoring process. The other is a meeting with your American Express financial advisor. That becomes even more important if there's a major change in your financial situation or in the financial markets. William R. Pearce From the portfolio manager Taking advantage of a surging stock market, IDS Growth Fund generated an extraordinarily strong gain during the first half of its fiscal year. The Fund's total return for the period -- August 1996 through January 1997 -- was 28.8% for Class A shares. (That figure includes a substantial capital gain, which was paid to shareholders last December and reduced the Fund's net asset value by a like amount at that time.) The power of persistence in investing was made explicitly clear during the past six months. The period began with stocks, particularly growth stocks, licking their wounds from a mid-summer slump. But just when some investment professionals were declaring that the bull market had finally come to a close, stocks started edging higher on the news that inflation remained tame and corporate profits were still reasonably strong, even robust in some cases. The ultimate result was a remarkable run-up that, aside from a few brief dips, lasted from late last summer through the end of the period. To put the rally's strength in perspective, the Fund gained more than 9% in September alone. The only down month for the Fund was December, when it lost approximately 2%. Tech, consumer stocks strong For the most part, the market's advance was led by stocks of larger, rapidly growing companies, a trend that plays directly into this Fund's bedrock investment strategy. To the Fund's further benefit, stocks of technology (such as computer hardware and software) and consumer (such as health care and food/beverage) companies registered many of the biggest gains during the six months. As they have for some time, those two sectors comprised more than half of the Fund's investments, with Microsoft, Coca-Cola, Tellabs and Healthsouth proving to be among the best individual performers. Consistent with my management style, the Fund held few cash reserves during the period. While this "fully invested" approach turned out to be rewarding, it does make the Fund more vulnerable to market downturns. In the long run, however, I believe that keeping the Fund almost entirely invested in stocks leads to a higher overall return. Long-term outlook remains favorable After an exhilarating period such as the one completed in January, it's possible for investors, professionals included, to get a bit complacent about stocks' positive performance in recent years. Therefore, it's a good time to remember that stock market history also includes periodic corrections, or downturns, that can sorely test an investor's patience. That said, at this point (early February) I continue to believe that the positives will outweigh the potential negatives for stocks over the next few years. I also expect many of the best investment opportunities will again be found among technology- and consumer-related companies, and I'm maintaining an emphasis on such stocks in the Fund. Six months from now, I'll update you on the Fund's progress. Mitzi Malevich (picture of William R. Pearce) William R. Pearce President of the Fund (picture of Mitzi Malevich) Mitzi Malevich Portfolio Manager Class A 6-month performance (all figures per share) Net asset value (NAV) Jan. 31, 1997 $29.09 July 31, 1996 $23.16 Increase $ 5.93 Distributions Aug. 1, 1996 - Jan. 31, 1997 From income $ -- From capital gains $ .68 Total distributions $ .68 Total return* +28.8%** Class B 6-month performance (all figures per share) Net asset value (NAV) Jan. 31, 1997 $28.67 July 31, 1996 $22.92 Increase $ 5.75 Distributions Aug. 1. 1996 - Jan. 31, 1997 From income $ -- From capital gains $ .68 Total distributions $ .68 Total return* +28.3%** Class Y 6-month performance (all figures per share) Net asset value (NAV) Jan. 31, 1997 $29.18 July 31, 1996 $23.21 Increase $ 5.97 Distributions Aug. 1, 1996 - Jan. 31, 1997 From income $ -- From capital gains $ .68 Total distributions $ .68 Total return* +28.9%** * The prospectus discusses the effect of sales charge, if any on the various classes. ** The total return is a hypothetical investment in the Fund with all distributions reinvested. IDS Growth Portfolio The Portfolio's ten largest holdings (Picture of: Pie Chart) Pie Chart: The ten holdings listed here make up 27.07% of the Portfolio's net assets - -------------------------------------------------------------------- Percent Value (of Portfolio's net assets) (as Jan. 31, 1997) - -------------------------------------------------------------------- Cisco Systems 3.53% $111,600,000 A leader in the "router" segment of the networks industry. Cisco routers allow interconnection of PC's, minicomputers and mainframe to local and global networks. HEALTHSOUTH 3.31 104,700,000 A fast-growing chain of hospitals and outpatient centers. The company specializes in patient rehabilitation that enables patients to return to a normal lifestyle as soon as possible after accidents, surgery or illness. Tellabs 3.12 98,850,000 Designer, manufacturer and marketer of a broad range of products and equipment for use by telephone companies, the Bell System, specialized common carriers and other providers of telecommunication services. Travelers Group 2.65 83,800,000 Among the world's largest multi-line financial services companies, focusing on insurance, managed health care and investments. Boston Scientific 2.59 81,900,000 Developer, manufacturer and marketer of medical devices. The company's products are used in a broad range of medical specialties, including cardiology, vascular surgery, urology, gastroenterology and radiology. Intel 2.57 81,125,000 The world's number one semiconductor manufacturer, Intel produces microcomputer components, modules and systems. Schlumberger 2.46 77,787,500 A holding company, that, through its subsidiaries, is engaged in the production and sale of wine, champagne and other alcoholic and non-alcoholic beverages, as well as food and non-food products. Pfizer 2.35 74,300,000 A leading producer of pharmaceutical, hospital products, animal health items, non-prescription medications and specialty chemicals. USA Waste Service 2.28 72,087,500 Provides integrated solid waste management services to municipal, commercial, industrial and residential customers. Coca-Cola 2.21 69,837,762 The world's largest producer and distributor of soft drinks, concentrates and syrups. Financial statements Statement of assets and liabilities IDS Growth Fund Jan. 31, 1997 Assets (Unaudited) Investment in Growth Portfolio (Note 1) $ 3,133,193,199 ------------------ Total assets 3,133,193,199 ------------------ Liabilities Accrued distribution fee 10,051 Accrued service fee 14,315 Accrued transfer agency fee 8,797 Accrued administrative services fees 3,753 Other accrued expenses 157,377 ------------------ Total liabilities 194,293 ------------------ Net assets applicable to outstanding capital stock $ 3,132,998,906 ================== Represented by Capital stock -- $.01 par value $ 1,079,324 Additional paid-in capital 1,880,326,403 Investment loss -- net (3,599,816) Accumulated net realized gain (Note 1) 29,676,295 Unrealized appreciation 1,225,516,700 ================== Total -- representing net assets applicable to outstanding capital stock $ 3,132,998,906 ================== Net assets applicable to outstanding shares: Class A $ 2,557,735,694 Class B $ 502,890,182 Class Y $ 72,373,030 Net asset value per share of outstanding capital stock: Class A shares 87,910,890 $ 29.09 Class B shares 17,541,538 $ 28.67 Class Y shares 2,479,947 $ 29.18 See accompanying notes to financial statements. Financial statements Statement of operations IDS Growth Fund Six months ended Jan. 31, 1997 Investment income (Unaudited) Income: Dividends (net of foreign taxes withheld of $9,657) $ 6,868,775 Interest 4,306,373 ------------------ Total income 11,175,148 ------------------ Expenses (Note 2): Expenses, including investment management services fees allocated from Growth Portfolio 8,591,471 Distribution fee -- Class B 1,484,336 Transfer agency fee 1,540,163 Incremental transfer agency fee -- Class B 24,926 Service fee Class A 1,940,501 Class B 345,298 Administrative services fees and expenses 614,854 Compensation of board members 3,776 Compensation of officers 8,077 Postage 84,650 Registration fees 121,457 Reports to shareholders 22,636 Audit fees 6,000 Administrative 9,305 Other 1,558 ------------------ Total expenses 14,799,008 Earnings credits on cash balances (Note 2) (31,423) ------------------ Total net expenses 14,767,585 ------------------ Investment loss -- net (3,592,437) ------------------ Realized and unrealized gain -- net Net realized gain on security transactions 33,410,554 Net change in unrealized appreciation or depreciation 630,294,773 ------------------ Net gain on investments 663,705,327 ------------------ Net increase in net assets resulting from operations $ 660,112,890 ================== See accompanying notes to financial statements. Financial statements Statement of changes in net assets IDS Growth Fund Operations and distributions Jan. 31, 1997 July 31, 1996 Six months ended Year ended (Unaudited) Investment loss -- net $ (3,592,437) $ (1,105,179) Net realized gain on investments 33,410,554 111,623,533 Net change in unrealized appreciation or depreciation 630,294,773 76,579,003 ------------------ ------------------ Net increase in net assets resulting from operations 660,112,890 187,097,357 ------------------ ------------------ Distributions to shareholders from: Net investment income Class A -- (745,861) Class Y -- (10,284) Net realized gain Class A (58,065,667) (76,543,593) Class B (11,178,720) (5,509,162) Class Y (1,197,889) (639,403) ------------------ ------------------ Total distributions (70,442,276) (83,448,303) ------------------ ------------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 446,159,558 705,002,561 Class B shares 145,766,476 251,558,924 Class Y shares 37,285,474 25,249,056 Reinvestment of distributions at net asset value Class A shares 56,449,178 75,873,952 Class B shares 11,139,690 5,493,274 Class Y shares 1,197,889 649,686 Payments for redemptions Class A shares (312,961,504) (394,806,319) Class B shares (Note 2) (18,020,806) (12,785,969) Class Y shares (5,424,852) (5,236,466) ------------------ ------------------ Increase in net assets from capital share transactions 361,591,103 650,998,699 ------------------ ------------------ Total increase in net assets 951,261,717 754,647,753 Net assets at beginning of period 2,181,737,189 1,427,089,436 ------------------ ------------------ Net assets at end of period $ 3,132,998,906 $ 2,181,737,189 ================== ================== See accompanying notes to financial statements. Notes to financial statements IDS Growth Fund (Unaudited as to Jan. 31, 1997) - -------------------------------------------------------------------------------- 1. Summary of significant accounting policies IDS Growth Fund (a series of IDS Growth Fund, Inc.) is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. IDS Growth Fund, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B and Class Y shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge and such shares automatically convert to Class A after eight years. Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend, liquidation and other rights, and the same terms and conditions, except that the level of distribution fee, transfer agency fee and service fee (class specific expenses) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Growth Portfolio Effective May 13, 1996, the Fund began investing all of its assets in the Growth Portfolio (the Portfolio), a series of Growth Trust, an open-end investment company that has the same objectives as the Fund. This was accomplished by transferring the Fund's assets to the Portfolio in return for a proportionate ownership interest in the Portfolio. Growth Portfolio invests primarily in stocks of U.S. and foreign companies that appear to offer growth opportunities. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the net assets of the Portfolio. The percentage of the Portfolio owned by the Fund at Jan. 31, 1997 was 99.09%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements," which are included elsewhere in this report. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the period. Actual results could differ from those estimates. Federal taxes Since the Fund's policy is to comply with all sections of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to the shareholders, no provision for income or excise taxes is required. Net investment income (loss) and net realized gains (losses) allocated from the Portfolio may differ for financial statement and tax purposes primarily because of the deferral of losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. Dividends to shareholders An annual dividend declared and paid at the end of the calendar year from net investment income is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. - -------------------------------------------------------------------------------- 2. Expenses and sales charges In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: Effective March 20, 1995, the Fund entered into agreements with American Express Financial Corporation (AEFC) for providing administrative services and serving as transfer agent. Under its Administrative Services Agreement, the Fund pays AEFC for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.05% to 0.03% annually. Additional administrative services paid by the Fund are office expenses, consultant's fees and compensation of officers and employees. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees, organizational expenses, and any other expenses properly payable by the Fund approved by the board. Under a separate Transfer Agency Agreement, AEFC maintains shareholder accounts and records. The Fund pays AEFC an annual fee per shareholder account for this service as follows: Class A $15 Class B $16 Class Y $15 Also effective March 20, 1995, the Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder servicing-related services . Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares for distribution-related services. Under a Shareholder Service Agreement, the Fund pays a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.175% of the Fund's average daily net assets attributable to Class A and Class B shares. Sales charges received by American Express Financial Advisors, Inc. for distributing Fund shares were $4,210,473 for Class A and $132,459 for Class B for the period ended Jan. 31, 1997. During the six months ended Jan. 31, 1997, the Fund's transfer agency fees were reduced by $31,423 as a result of earnings credits from overnight cash balances. - -------------------------------------------------------------------------------- 3. Capital share transactions Transactions in shares of capital stock for the periods indicated are as follows: Six months ended Jan. 31, 1997 Class A Class B Class Y - ------------------------------------------------------------------------ Sold 16,684,563 5,534,252 1,369,073 Issued for reinvested 2,071,763 414,638 43,835 distributions Redeemed (11,636,133) (672,485) (195,933) - ------------------------------------------------------------------------ Net increase 7,120,193 5,276,405 1,216,975 - ------------------------------------------------------------------------ Year ended July 31, 1996 Class A Class B Class Y - ------------------------------------------------------------------------ Sold 30,026,905 10,775,556 1,074,249 Issued for reinvested 3,405,937 248,093 29,133 distributions Redeemed (16,841,935) (550,504) (222,683) - ------------------------------------------------------------------------ Net increase 16,590,907 10,473,145 880,699 - ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- 4. Financial highlights The tables below show certain important financial information for evaluating the Fund's results.
Fiscal period ended July 31, Per share income and capital changes* Class A 1997** 1996 1995 1994 1993 1992 1991 1990 1989 1988 Net asset value, $23.16 $21.50 $17.39 $17.99 $18.57 $17.62 $24.05 $23.24 $17.17 $25.88 beginning of period Income from investment operations: Net investment (.02) -- .03 .02 -- .08 .19 .34 .27 .23 income (loss) Net gains (both 6.63 2.81 5.63 1.24 2.40 2.66 .69 2.89 5.90 (6.87) realized and unrealized) Total from investment 6.61 2.81 5.66 1.26 2.40 2.74 .88 3.23 6.17 (6.64) operations Less distributions: Dividends from net -- (.01) (.04) -- -- (.18) (.33) (.27) (.10) (.23) investment income Distributions from (.68) (1.14) (1.51) (1.86) (2.98) (1.61) (6.98) (2.15) -- (1.84) realized gains Total distributions (.68) (1.15) (1.55) (1.86) (2.98) (1.79) (7.31) (2.42) (.10) (2.07) Net asset value, $29.09 $23.16 $21.50 $17.39 $17.99 $18.57 $17.62 $24.05 $23.24 $17.17 end of period Ratios/supplemental data Class A 1997** 1996 1995 1994 1993 1992 1991 1990 1989 1988 Net assets, end of $2,558 $1,871 $1,380 $952 $933 $863 $780 $756 $732 $633 period (in millions) Ratio of expenses .98%+ 1.04% .93% .83% .87% .88% .87% .73% .64% .66% to average daily net assets# Ratio of net income (.16%)+ -- .18% .11% -- .41% 1.36% 1.40% 1.39% 1.17% to average daily net assets Total return++ 28.8% 13.3% 35.2% 7.0% 13.0% 15.1% 12.4% 15.3% 36.2% (25.4%) Portfolio turnover rate 10% 22% 30% 56% 44% 83% 75% 49% 23% 28% (excluding short-term securities) for the underlying Portfolio Average brokerage $0.0521 -- -- -- -- -- -- -- -- -- commission rate for the underlying Portfolio## * For a share outstanding throughout the period. Rounded to the nearest cent. ** Six months ended Jan. 31, 1997 (Unaudited). + Adjusted to an annual basis. ++ Total return does not reflect payment of a sales charge. # Effective fiscal year 1996, expense ratio is based on total expense of the Fund before applying earnings credits on cash balances. ## Effective fiscal year 1997, the Fund is required to disclose an average brokerage commission rate. The rate is calculated by dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total number of related shares purchased and sold.
Fiscal period ended July 31, Per share income and capital changes* Class B Class Y 1997*** 1996 1995** 1997*** 1996 1995** Net asset value, $22.92 $21.45 $17.85 $23.21 $21.51 $17.85 beginning of period Income from investment operations: Net investment (.10) (.02) (.03) -- .01 .03 income (loss) Net gains (both 6.53 2.63 3.63 6.65 2.85 3.63 realized and unrealized) Total from investment 6.43 2.61 3.60 6.65 2.86 3.66 operations Less distributions: Dividends from net -- -- -- -- (.02) -- investment income Distributions from (.68) (1.14) -- (.68) (1.14) -- realized gains Total distributions (.68) (1.14) -- (.68) (1.16) -- Net asset value, $28.67 $22.92 $21.45 $29.18 $23.21 $21.51 end of period Ratios/supplemental data Class B Class Y 1997*** 1996 1995** 1997*** 1996 1995** Net assets, end of $503 $281 $38 $72 $29 $8 period (in millions) Ratio of expenses 1.75%+ 1.82% 1.76%+ .82%+ .88% .85%+ to average daily net assets# Ratio of net income (.93%)+ (.80%) (.70%)+ (.01%)+ .13% .26%+ to average daily net assets Total return++ 28.3% 12.4% 20.2% 28.9% 13.4% 20.5% Portfolio turnover rate 10% 22% 30% 10% 22% 30% (excluding short-term securities) for the underlying Portfolio Average brokerage $0.0521 -- -- $0.0521 -- -- commission rate for the underlying Portfolio## * For a share outstanding throughout the period. Rounded to the nearest cent. ** Inception date was March 20, 1995 for Class B and Class Y. *** Six months ended Jan. 31, 1997 (Unaudited). + Adjusted to an annual basis. ++ Total return does not reflect payment of a sales charge. # Effective fiscal year 1996, expense ratio is based on total expense of the Fund before applying earnings credits on cash balances. ## Effective fiscal year 1997, the Fund is required to disclose an average brokerage commission rate. The rate is calculated by dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total number of related shares purchased and sold.
Financial statements Statement of assets and liabilities Growth Portfolio Jan. 31, 1997 Assets (Unaudited) Investments in securities, at value (Note 1) Investments in securities of unaffiliated issuers (identified cost $1,982,642,905) $ 3,216,982,635 Investments is securities of affiliated issuer (identified cost $17,078,680) 14,684,863 Cash in bank on demand deposit 4,013,130 Dividends and accrued interest receivable 777,028 U.S. government securities held as collateral (Note 4) 59,810,952 -------------------- Total assets 3,296,268,608 -------------------- Liabilities Payable upon return of securities loaned (Note 4) 134,046,052 Accrued investment management services fee 221,059 Other accrued expenses 39,160 -------------------- Total liabilities 134,306,271 -------------------- Net assets $ 3,161,962,337 ==================== See accompanying notes to financial statements. Financial statements Statement of operations Growth Portfolio Six months ended Jan. 31, 1997 Investment income (Unaudited) Income: Interest $ 4,340,323 Dividends (net of foreign taxes withheld of $9,750) 6,936,756 -------------------- Total income 11,277,079 -------------------- Expenses (Note 2): Investment management services fee 8,571,306 Compensation of board members 4,878 Compensation of officers 799 Custodian fees 48,786 Registration fees 125 Audit fees 29,674 Administrative 10,240 Other 13,086 -------------------- Total expenses 8,678,894 Earnings credits on cash balances (Note 2) (2,824) -------------------- Total net expenses 8,676,070 -------------------- Investment income -- net 2,601,009 -------------------- Realized and unrealized gain -- net Net realized gain on security transactions (Note 3) 33,474,978 Net change in unrealized appreciation or depreciation 636,839,300 -------------------- Net gain on investments 670,314,278 ==================== Net increase in net assets resulting from operations $ 672,915,287 ==================== See accompanying notes to financial statements.
Statements of changes in net assets Growth Portfolio Operations Six months ended For the period from Jan. 31, 1997 May 13, 1996* to (Unaudited) July 31, 1996 Investment income - - net $ 2,601,009 $ 1,339,597 Net realized gain on investments 33,474,978 12,989,728 Net change in unrealized appreciation or depreciation 636,839,300 (176,108,355) ------------------- ------------------ Net increase (decrease) in net assets resulting from operations 672,915,287 (161,779,030) Net contributions 283,879,902 2,366,896,178 -------------------- ----------------- Total increase in net assets 956,795,189 2,205,117,148 Net assets at beginning of period (Note 1) 2,205,167,148 50,000 ===================== ================ Net assets at end of period $ 3,161,962,337 $ 2,205,167,148 ===================== ================ *Commencement of operations. See accompanying notes to financial statements.
Notes to financial statements Growth Portfolio (Unaudited as to Jan. 31, 1997) - -------------------------------------------------------------------------------- 1. Summary of significant accounting policies The Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Growth Portfolio invests primarily in stocks of U.S. and foreign companies that appear to offer growth opportunities. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. On April 15, 1996, American Express Financial Corporation (AEFC ) contributed $50,000 to the Portfolio. Operations did not formally commence until May 13, 1996, at which time, an existing fund transferred its assets to the Portfolio in return for an ownership percentage of the Portfolio. Significant accounting policies followed by the Portfolio are summarized below: Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the period. Actual results could differ from those estimates. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price; securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Determination of fair value involves, among other things, reference to market indexes, matrixes and data from independent brokers. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions In order to produce incremental earnings, protect gains and facilitate buying and selling of securities for investment purposes, the Portfolio may buy 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 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 are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete the obligations of the contract. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. Accordingly, as a "pass-through" entity, the Portfolio does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. - -------------------------------------------------------------------------------- 2. Fees and expenses The Trust, on behalf of the Portfolio, has entered into an Investment Management Services Agreement with AEFC for managing its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.6% to 0.5% annually. The fees may be increased or decreased by a performance adjustment based on a comparison of the performance of Class A shares of the IDS Growth Fund to the Lipper Growth Fund Index. The maximum adjustment is 0.12% of the Portfolio's average daily net assets on an annual basis. The adjustment increased the fee by $707,530 for the six months ended Jan. 31, 1997. 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 six months ended Jan. 31, 1997, the Portfolio's custodian fees were reduced by $2,824 as a result of earnings credits from overnight cash balances. Pursuant to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the units of the Trust. - -------------------------------------------------------------------------------- 3. Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $564,456,392 and $248,431,803, respectively, for the six months ended Jan. 31, 1997. For the same period, the portfolio turnover rate was 10%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $63,250 for this period. - -------------------------------------------------------------------------------- 4. Lending of portfolio securities At Jan. 31, 1997, securities valued at $137,345,962 were on loan to brokers. For collateral, the Portfolio received $74,235,100 in cash and U.S. government securities valued at $59,810,952. Income from securities lending amounted to $198,876 for the six months ended Jan. 31, 1997. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due.
Growth Portfolio (Percentages represent value of Jan. 31, 1997 (Unaudited) investments compared to net assets) Investments in securities of unaffiliated issuers - -------------------------------------------------------------------------------------------------------------- Common stocks (95.3%) - -------------------------------------------------------------------------------------------------------------- Issuer Shares Value (a) - -------------------------------------------------------------------------------------------------------------- Airlines (0.7%) Northwest Airlines 600,000 (b) $20,400,000 - -------------------------------------------------------------------------------------------------------------- Automotive & related (0.3%) Gentex 500,000 (b) 10,000,000 - -------------------------------------------------------------------------------------------------------------- Banks and savings & loans (1.6%) MBNA 1,500,000 51,750,000 - -------------------------------------------------------------------------------------------------------------- Beverages & tobacco (2.2%) Coca-Cola 1,206,700 69,837,762 - -------------------------------------------------------------------------------------------------------------- Building materials & construction (1.8%) Tyco Intl 1,000,000 57,125,000 - -------------------------------------------------------------------------------------------------------------- Chemicals (4.5%) Culligan Water Technology 400,000 (b) 13,300,000 Monsanto 1,500,000 56,812,500 USA Waste Service 1,975,000 (b) 72,087,500 -------------------- Total 142,200,000 - -------------------------------------------------------------------------------------------------------------- Communications equipment & services (8.1%) ADC Telecommunications 1,200,000 (b) 43,050,000 Advanced Fibre Communications 11,400 (b) 544,350 Andrew 1,200,000 (b) 68,925,000 Mastec 700,000 (b,d) 44,625,000 Tellabs 2,400,000 (b) 98,850,000 -------------------- Total 255,994,350 - -------------------------------------------------------------------------------------------------------------- Computers & office equipment (16.2%) ABR Information Services 400,000 (b) 17,550,000 Cisco Systems 1,600,000 (b) 111,600,000 Compaq Computer 700,000 (b) 60,812,500 CSG Systems Intl 50,600 (b) 948,750 First Data 1,868,720 (d) 67,273,920 Gemstar Intl 150,000 (b) 2,700,000 Ikon Office Solutions 1,200,000 52,950,000 Intuit 200,000 (b) 5,850,000 Keane 400,000 (b) 12,450,000 Microsoft 400,000 (b) 40,800,000 NETCOM On-Line Communication Services 400,000 (b) 5,350,000 Oracle 1,350,000 (b) 52,481,250 Silicon Graphics 1,600,000 (b) 43,800,000 Solectron 625,000 (b) 37,656,250 -------------------- Total 512,222,670 - -------------------------------------------------------------------------------------------------------------- Electronics (7.6%) Applied Materials 800,000 39,500,000 DuPont Photomasks 22,500 (b) 1,226,250 Harman Intl 500,000 23,187,500 Intel 500,000 81,125,000 Maxim Intergrated Products 1,000,000 (b) 56,250,000 Texas Instruments 300,000 23,512,500 Vishay Intertechnology 630,000 (b) 15,198,750 -------------------- Total 240,000,000 - -------------------------------------------------------------------------------------------------------------- Energy (0.8%) Mobil 200,000 26,250,000 - -------------------------------------------------------------------------------------------------------------- Energy equipment & services (1.7%) Fluor 750,000 53,343,750 - -------------------------------------------------------------------------------------------------------------- Financial services (6.3%) First Virtual Holding 100,000 (b) 900,000 Green Tree Financial 1,200,000 46,650,000 Merrill Lynch 800,000 67,400,000 Travelers Group 1,600,000 83,800,000 -------------------- Total 198,750,000 - -------------------------------------------------------------------------------------------------------------- Food (0.5%) Delta & Pine Land 428,250 (d) 16,005,844 - -------------------------------------------------------------------------------------------------------------- Health care (10.2%) Amgen 800,000 (b) 45,100,000 Boston Scientific 1,200,000 (b) 81,900,000 Gensia 161 674 IDEXX Laboratories 500,000 (b) 16,750,000 Johnson & Johnson 700,000 40,337,500 Medtronic 600,000 41,100,000 Perclose 34,800 (b) 787,350 Pfizer 800,000 74,300,000 Physio-Control Intl 700,000 (b) 15,225,000 Sola Intl 200,000 7,375,000 -------------------- Total 322,875,524 - -------------------------------------------------------------------------------------------------------------- Healthcare services (6.9 %) HealthCare COMPARE 1,000,000 (b) 42,625,000 HEALTHSOUTH 2,400,000 (b) 104,700,000 Service Corp Intl 2,400,000 69,600,000 -------------------- Total 216,925,000 - -------------------------------------------------------------------------------------------------------------- Industrial equipment & services (2.6%) Caterpillar 400,000 31,050,000 Deere & Co 1,200,000 51,300,000 -------------------- Total 82,350,000 - -------------------------------------------------------------------------------------------------------------- Industrial transportation (1.2%) Wisconsin Central 1,000,000 (b) 37,125,000 - -------------------------------------------------------------------------------------------------------------- Leisure time & entertainment (3.4%) Harley-Davidson 300,000 13,275,000 Marriot Intl 1,000,000 53,125,000 Mattel 1,500,000 42,187,500 -------------------- Total 108,587,500 - -------------------------------------------------------------------------------------------------------------- Metals (2.9%) Birmingham Steel 1,100,000 21,862,500 Nucor 1,200,000 62,400,000 Stillwater Mining 400,000 (b) 7,100,000 -------------------- Total 91,362,500 - -------------------------------------------------------------------------------------------------------------- Multi-industry conglomerates (1.5%) AccuStaff 600,000 (b) 12,975,000 Apollo Group 800,000 (b) 26,600,000 Manpower 200,000 6,400,000 -------------------- Total 45,975,000 - -------------------------------------------------------------------------------------------------------------- Paper & packaging (0.4%) Unisource Worldwide 600,000 13,050,000 - -------------------------------------------------------------------------------------------------------------- Textiles & apparel (2.6%) Nike Cl B 1,000,000 67,875,000 St. John Knits 300,000 13,650,000 -------------------- Total 81,525,000 - -------------------------------------------------------------------------------------------------------------- Utilities -- telephone (2.6%) AirTouch Communications 900,000 (b) 23,287,500 WorldCom 2,400,000 (b) 60,300,000 -------------------- Total 83,587,500 - -------------------------------------------------------------------------------------------------------------- Foreign (8.7%) (c) Danka Business Systems ADR 1,500,000 (d) 66,750,000 Ericsson (LM) ADR 1,500,000 50,507,812 Northern Telecom 800,000 (b,d) 58,900,000 SGS-THOMSON Microelectronics 300,000 (b) 21,225,000 Schlumberger 700,000 77,787,500 -------------------- Total 275,170,312 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Total common stocks (Cost: $1,795,118,333) $3,012,412,712 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Short-term securities (6.5%) - -------------------------------------------------------------------------------------------------------------- Issuer Annualized Amount Value (a) yield on payable at date of maturity purchase - -------------------------------------------------------------------------------------------------------------- U.S. government agency (0.1%) Federal Home Loan Mtge Corp Disc Nt 02-26-97 5.48% $3,300,000 $3,286,462 - -------------------------------------------------------------------------------------------------------------- Banker's acceptance (0.2 %) First Union 02-04-97 5.36 5,000,000 4,997,775 - -------------------------------------------------------------------------------------------------------------- Commercial paper (6.0%) ABB Treasury 03-12-97 5.37 1,800,000 (e) 1,788,938 Albertson's 02-28-97 5.31 6,750,000 6,723,219 American General Capital 03-12-97 5.40 5,000,000 (e) 4,969,271 American General Finance 02-12-97 5.38 5,500,000 5,491,009 Aon 02-03-97 5.36 3,700,000 3,698,816 BellSouth Capital 02-27-97 5.33 6,500,000 6,475,072 BHP Finance 02-06-97 5.35 4,600,000 4,596,588 CAFCO 03-25-97 5.38 6,300,000 (e) 6,248,846 Cargill 03-10-97 5.34 5,000,000 4,972,310 04-07-97 5.40 4,800,000 4,751,424 Ciesco LP 02-11-97 5.44 4,500,000 4,493,250 02-19-97 5.33 3,200,000 3,191,520 02-25-97 5.39 7,100,000 7,074,677 Commercial Credit 02-20-97 5.33 5,300,000 5,285,175 Dean Witter Discover & Co 03-27-97 5.35 7,200,000 7,142,652 Deutsche Finance 02-10-97 5.41 7,500,000 7,489,922 Ford Motor Credit 03-05-97 5.33 3,500,000 3,483,511 Household Finance 03-06-97 5.32 5,900,000 5,871,336 03-11-97 5.34 4,700,000 4,673,656 04-09-97 5.42 5,000,000 4,947,867 Merrill Lynch 03-03-97 5.34 4,600,000 4,579,645 03-17-97 5.40 6,900,000 6,851,462 Metlife Funding 02-12-97 5.37 5,600,000 5,589,637 02-18-97 5.37 5,000,000 4,985,829 02-27-97 5.30 4,000,000 3,984,776 Natl Australia Funding (Delaware) 02-04-97 5.36 1,100,000 1,099,511 Novartis Finance 03-07-97 5.32 2,300,000 (e) 2,288,487 Reed Elsevier 02-14-97 5.34 4,600,000 (e) 4,591,163 SAFECO Credit 03-28-97 5.37 3,500,000 3,471,499 SBC Communications 02-11-97 5.39 4,600,000 (e) 4,593,164 02-18-97 5.44 3,600,000 (e) 3,589,880 Sysco 02-25-97 5.38 7,500,000 (e) 7,468,779 Toyota Motor Credit 02-07-97 5.35 1,800,000 1,798,042 02-14-97 5.40 3,000,000 2,993,424 03-07-97 5.37 7,800,000 7,760,736 Transamerica Financial 04-28-97 5.40 5,600,000 5,525,296 USAA Capital 02-13-97 5.41 3,700,000 3,693,377 02-24-97 5.45 5,000,000 4,980,877 U S WEST Communications 02-21-97 5.40 6,500,000 6,477,082 -------------------- Total 189,691,725 - -------------------------------------------------------------------------------------------------------------- Letter of credit (0.2%) Bank of America - AES Barber Point 02-07-97 5.53 6,600,000 6,593,961 - -------------------------------------------------------------------------------------------------------------- Total short-term securities (Cost: $204,603,252) $ 204,569,923 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Total investments in securities of unaffiliated issuers (Cost: $1,982,642,905) $3,216,982,635 - -------------------------------------------------------------------------------------------------------------- Investments in securities of affiliated issuers (f ) - -------------------------------------------------------------------------------------------------------------- Common stocks (0.4%) - -------------------------------------------------------------------------------------------------------------- Issuer Shares Value (a) - -------------------------------------------------------------------------------------------------------------- Risk Capital Holdings 883,300 $ 14,684,863 - -------------------------------------------------------------------------------------------------------------- Total investments in securities of affiliated issuer (Cost: $17,078,680) $ 14,684,863 - -------------------------------------------------------------------------------------------------------------- Total investments in securities (Cost: $1,999,721,585) (g) $3,231,667,498 - -------------------------------------------------------------------------------------------------------------- Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) 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 under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (f) Investment representing 5% or more of the outstanding voting securities of the issuer. Transactions with companies that are or were affiliates during the six months ended Jan. 31, 1997 are as follows: Affiliates Beginning Purchase Sales Ending Dividend cost cost cost cost income - -------------------------------------------------------------------------------------------------------------- Risk Capital Holdings* $17,078,680 $ -- $ -- $17,078,680 $ -- Oxford Resources Cl A* 10,236,220 -- 10,236,220 -- -- - -------------------------------------------------------------------------------------------------------------- Total $27,314,900 $ -- $10,236,220 $17,078,680 $ -- - -------------------------------------------------------------------------------------------------------------- *Issuer was not an affiliate for the entire period. (g) At Jan. 31, 1997, the cost of securities for federal income tax purposes was approximately $1,999,722,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $1,257,909,000 Unrealized depreciation (25,964,000) -------------------- Net unrealized appreciation $1,231,945,000 --------------------
IDS mutual funds Global/International funds Funds in this group seek capital growth and/or income by investing primarily in foreign securities. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. They are high risk mutual funds with a potential for high reward. IDS Emerging Markets Fund Invests in a Portfolio comprised primarily of stocks of companies in developing countries throughout the world that are believed to offer growth potential. Seeks to provide long-term growth of capital. (icon of) world globe IDS Global Growth Fund Invests in a Portfolio comprised primarily of stocks of companies throughout the world that are positioned to meet market needs in a changing world economy. These companies offer above-average potential for long-term growth. (icon of) world IDS International Fund Invests primarily in common stocks of foreign companies that offer potential for superior growth. The Fund may invest up to 20% of its assets in the U.S. market. (icon of) three flags IDS Global Balanced Fund Invests in stocks-and bonds in, for the most part, major markets throughout the world, including the U.S. Seeks to provide a balance of growth of capital and current income. (icon of) scale of globes IDS Global Bond Fund Invests in a Portfolio comprised primarily of debt securities of U.S. and foreign issuers to seek high total return through income and growth of capital. (icon of) globe Growth funds Funds in this group seek capital growth, primarily from common stocks. They are high risk mutual funds with a potential for high reward. IDS Precious Metals Fund Invests primarily in the securities of foreign or domestic companies that explore for, mine and process or distribute gold and other precious metals. A highly aggressive and speculative fund that seeks long-term growth of capital. (icon of) cart of precious gems IDS Discovery Fund Invests in small- and medium-size, growth-oriented companies emphasizing technological innovation and productivity enhancement. Buys and holds larger growth-oriented stocks. (icon of) ship IDS Small Company Index Fund Invests in all or a representative group of the equity securities comprising the S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation. (icon of) building IDS Strategy Aggressive Fund Invests primarily in common stocks of companies that are selected for their potential for above-average growth. Above-average means that their growth potential is better, in the opinion of the portfolio's investment manager, than the Standard & Poor's Corporation (S&P) 500 Stock Index. (icon of) chess piece IDS Research Opportunities Fund Invests in a Portfolio comprised primarily of equity securities of companies included in the S&P 500 Index that are believed to have strong growth potential. The Portfolio is managed using a research methodology by the Research Department of AEFC. Goal is long-term appreciation. (icon of) magnifying glass IDS Growth Fund Invests in a Portfolio comprised primarily of companies that have above-average potential for long-term growth as a result of new management, marketing opportunities or technological superiority. (icon of) flower IDS New Dimensions Fund Invests in a Portfolio comprised primarily of companies with significant growth potential due to superiority in technology, marketing or management. The Fund frequently changes its industry mix. (icon of) dimension IDS Progressive Fund Invests primarily in undervalued common stocks. The Fund holds stocks for the long term with the goal of capital growth. (icon of) shooting star Growth and income funds These funds focus on securities of medium to large, well-established companies that offer long-term growth of capital and reasonable income from dividends and interest. IDS Equity Select Fund Invests primarily in a combination of moderate growth stocks, higher-yielding equities and bonds. Seeks growth of capital and income. (icon of) three pine trees IDS Blue Chip Advantage Fund Invests in selected stocks from a major market index. Securities purchased are those recommended by our research analysts as the best from each industry represented on the index. Offers potential for long-term growth as well as dividend income. (icon of) ribbon IDS Managed Allocation Fund Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and foreign debt securities, foreign equity securities and money market instruments. The Fund provides diversification among these major investment categories and has a target mix that represents the way the Fund's investments will be allocated over the long term. Seeks maximum total return. (icon of) spinning toy IDS Stock Fund Invests in a Portfolio comprised primarily of common stocks of companies representing many sectors of the economy. Seeks current income and growth of capital. (icon of) building with columns IDS Equity Value Fund Invests primarily in undervalued common stocks that offer potential for growth of capital and income. (icon of) three growing flowers IDS Utilities Income Fund Invests primarily in the stocks of public utility companies to seek high current income and growth of income and capital with reduced volatility. (icon of) light bulb IDS Diversified Equity Income Fund Invests in a Portfolio comprised primarily in high-yielding common stocks to seek high current income and, secondarily, to benefit from the growth potential offered by stock investments. (icon of) two puzzle pieces IDS Mutual Invests in a Portfolio which seeks to balance between common stocks and senior securities (preferred stocks and bonds). Seeks a balance of growth of capital and current income. (icon of) scale of justice Income funds The funds in this group invest their assets primarily in corporate bonds or government securities to seek interest income. Secondary objective is capital growth. Risk varies by bond quality. IDS Extra Income Fund Invests in a Portfolio comprised mainly in long-term, high-yielding corporate fixed-income securities in the lower rated, higher risk bond categories to seek high current income. Secondary objective is capital growth. (icon of) two coins IDS Bond Fund Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk bond categories, or the equivalent, and in government bonds. (icon of) Greek column IDS Selective Fund Invests in a Portfolio comprised primarily of high-quality corporate bonds and other highly rated debt instruments including government securities and short-term investments. Seeks current income and preservation of capital. (icon of) skyline IDS Federal Income Fund Invests in a Portfolio comprised primarily of securities issued or guaranteed as to the timely payment of principal and interest by the U.S. government, its agencies and instrumentalities. Seeks a high level of current income and safety of principal consistent with its type of investments. (icon of) shield with eagle head Tax-exempt income funds These funds provide tax-free income by investing in municipal bonds. The income is generally free from federal income tax, but a portion of the income may be subject to state and local taxes. Risk varies by bond quality. IDS Tax-Exempt Bond Fund Invests mainly in bonds and notes of state or local government units, with at least 75% in the four highest rated, lowest risk bond categories. (icon of) shield with Greek column IDS Insured Tax-Exempt Fund Invests primarily in municipal securities that are insured as to the timely payment of principal and interest. The insurance feature minimizes credit risk of the Fund but does not guarantee the market value of the Fund's shares. (icon of) shield with star IDS State Tax-Exempt Funds (CA, MA, MI, MN, NY, OH) Invests primarily in high- and medium-grade municipal securities to provide income to residents of each respective state that is exempt from federal, state and local income taxes. (New York is the only state that is exempt at the local level.) (icon of) shield with U.S. enclosed IDS High Yield Tax-Exempt Fund Invests in a Portfolio comprised primarily of medium- and lower-quality municipal bonds and notes. Lower-quality securities generally involve greater risk of principal and income. (icon of) shield with basket of apples enclosed IDS Intermediate Tax-Exempt Fund Invests in mainly investment-grade bonds and other debt securities with intermediate-term maturities issued by state and local government units. Goal is to seek a high level of current income exempt from federal taxes. (icon of) shield with tree enclosed Money market funds These money market funds have three main goals: conservation of capital, constant liquidity and the highest possible current income consistent with these objectives. An investment in these funds is neither insured nor guaranteed by the U.S. government, and there can be no assurance that these funds will be able to maintain a stable net asset value of $1.00 per share. Very limited risk. IDS Cash Management Fund Invests in such money market securities as high quality commercial paper, bankers' acceptances, certificates of deposit (CDs) and other bank securities. (icon of) piggy bank IDS Tax-Free Money Fund Invests primarily in short-term bonds and notes issued by state and local governments to seek high current income exempt from federal income taxes. (icon of) shield with piggy bank enclosed Quick telephone reference American Express Telephone Transaction Service Redemptions and exchanges, dividend payments or reinvestments and automatic payment arrangements National/Minnesota: 800-437-3133 Mpls./St. Paul area: 671-3800 American Express Shareholder Service Fund performance, objectives and account inquiries 612-671-3733 TTY Service For the hearing impaired 800-846-4852 American Express Infoline Automated account information (TouchTone(R) phones only), including current fund prices and performance, account values and recent account transactions National/Minnesota: 800-272-4445 Mpls./St. Paul area: 671-1630 PAGE AMERICAN EXPRESS FINANCIAL ADVISORS IDS Growth Fund Fund IDS Tower 10 Minneapolis, MN 55440-0010 1997 semiannual report IDS Research Opportunities American Express Financial Advisors (icon of magnifying glass) The goal of IDS Research Opportunities Fund, a part of IDS Growth Fund, Inc., is long-term growth of capital. The Portfolio will be managed using a research methodology developed by American Express Financial Corporation, which is designed to give investors the opportunity to achieve a return in excess of the Standard & Poor's 500 Composite Stock Price Index (S&P 500). The rewards of research Behind every decision to buy or sell a stock is information -- in most cases, information gathered by a research analyst. IDS Research Opportunities Fund is designed to make the most of that research by investing only in Standard & Poor's 500 stocks that carry our analysts' highest rating. The intention is to construct a portfolio that has the potential to outperform the stock market as a whole. Contents From the president 3 From the portfolio manager 3 Ten largest holdings 5 Financial statements (Fund) 6 Notes to financial statements (Fund) 9 Financial statements (Portfolio) 16 Notes to financial statements (Portfolio) 19 Investments in securities 24 Board members and officers 27 IDS mutual funds 28 To our shareholders (picture of William R. Pearce) William R. Pearce President of the Fund From the president If you're an experienced investor, you know that the past two years have been unusually strong ones in many financial markets. Perhaps just as important, you also know that history shows that bull markets don't last forever. Though they're often unpredictable, declines -- whether they're brief or long-lasting, moderate or substantial -- are always a possibility. That fact reinforces the need for investors to periodically review their long-term goals and examine whether their investment program remains on track to achieving them. Your quarterly investment statements are one part of that monitoring process. The other is a meeting with your American Express financial advisor. That becomes even more important if there's a major change in your financial situation or in the financial markets. William R. Pearce (picture of Guru Baliga) Guru Baliga Portfolio manager From the portfolio manager Solid securities selection and a soaring stock market combined to generate a healthy gain for IDS Research Opportunities Fund in its initial reporting period. From Aug. 19, 1996 (the Fund's inception date) through January 1997, investors in Class A shares realized a total return of 13.6%. Although accidental, the timing of the Fund's introduction date coincided with a remarkable rally by the stock market. After suffering through a mid-summer slump, stocks started moving higher last August, and aside from a handful of modest setbacks along the way, kept climbing until they reached a record high in mid-January. Although unable to match the broad market's overall gain, the Fund's performance roughly tracked its pattern. We start with the S&P The stock selections for the Fund's portfolio are taken from the Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of mostly large, blue chip stocks commonly used as a proxy for the stock market as a whole. Our research analysts assign a numerical rating to each of the 500 stocks, and only those with the highest ratings are included in the Fund's portfolio. By the end of the period in January, just under 50 stocks were owned in the portfolio. Among the best performers during the past several months were Boston Scientific, Norwest Bank, Silicon Graphics, Medtronic, Kroger, Johnson & Johnson, Alcoa, Tyco Labs, Northern Telecom, NationsBank, General Signal and Emerson Electric. Two other holdings, Oracle and Computer Associates, also had been strong performers until late December, when they experienced sharp declines. Because they represented major positions in the portfolio, their downturns had a substantial impact on Fund performance during the past period. Also tempering the Fund's gain somewhat was a lack of holdings among energy-related stocks, whose analyst ratings were not high enough to warrant being added to the portfolio, but nevertheless proved to be outstanding performers during the fall and winter. Little change in fundamentals At this point (mid-February), while the chances of the stock market managing a repeat of its powerful performance in each of the past two years would seem remote, the underlying fundamentals that have been supporting stocks -- namely, low inflation, generally reasonable valuations and substantial cash flows into stock mutual funds -- remain in place. But the investment environment doesn't mark time forever. Should the market as a whole find the going tougher in 1997, I suspect that sharp stock-picking will play a more important role than it has in recent years. If that proves true, I think the ability of our research analysts could come to the forefront and give the Fund an advantage over the broad market in the months ahead. Guru Baliga Class A Aug. 19, 1996* - Jan. 31, 1997 (All figures per share) Net asset value (NAV) - --------------------------------------------- Jan. 31, 1997 $ 5.67 - --------------------------------------------- Aug. 19, 1996* $ 5.00 - --------------------------------------------- Increase $ 0.67 - --------------------------------------------- Distributions Aug. 19, 1996* - Jan. 31. 1997 - --------------------------------------------- From income $ -- - --------------------------------------------- From capital gains $ 0.01 - --------------------------------------------- Total distributions $ 0.01 - --------------------------------------------- Total return** +13.6*** - --------------------------------------------- Class B Aug. 19, 1996* - Jan. 31, 1997 (All figures per share) Net asset value (NAV) - --------------------------------------------- Jan. 31, 1997 $ 5.66 - --------------------------------------------- Aug. 19, 1996* $ 5.00 - --------------------------------------------- Increase $ 0.66 - --------------------------------------------- Distributions Aug. 19, 1996* - Jan. 31, 1997 - --------------------------------------------- From income $ -- - --------------------------------------------- From capital gains $ 0.01 - --------------------------------------------- Total distributions $ 0.01 - --------------------------------------------- Total return** +13.2*** - --------------------------------------------- Class Y Aug. 19, 1996* - Jan. 31, 1997 (All figures per share) Net asset value (NAV) - --------------------------------------------- Jan. 31, 1997 $ 5.67 - --------------------------------------------- Aug. 19, 1996* $ 5.00 - --------------------------------------------- Increase $ 0.67 - --------------------------------------------- Distributions Aug. 19, 1996* - Jan. 31, 1997 - --------------------------------------------- From income $ -- - --------------------------------------------- From capital gains $ 0.01 - --------------------------------------------- Total distributions $ 0.01 - --------------------------------------------- Total return** +13.7*** - --------------------------------------------- * Inception date. ** The prospectus discusses the effect of sales charges, if any, on the various classes. *** The total return is a hypothetical investment in the Fund with all distributions reinvested. Aggressive Growth Portfolio The Portfolio's ten largest holdings (Pie chart) The ten holdings listed here make up 38.60% of the Portfolio's net assets Percent Value (of Portfolio's net assets) (as of Jan. 31, 1997) NationsBank 4.42% $6,566,400 A bank holding company with a strong presence in North Carolina, South Carolina, Texas, Virginia, Florida and Georgia. Bank of Boston 4.29 6,369,750 A multi bank holding company which, through its subsidiaries both nationally and internationally, provides a wide range of financial services to corporate and institutional customers, governments, individuals and other financial institutions. Coca-Cola 4.22 6,273,650 The world's largest producer and distributor of soft drinks, concentrates and syrups. Johnson & Johnson 3.99 5,929,613 A major producer of health-care products, including consumer products, medical and dental devices and products and a wide variety of ethical and over-the-counter drugs. MCI Communications 3.95 5,869,387 The second largest nationwide carrier of long-distance telecommunications services and the third largest carrier of international long-distance telecommunications services in the world. MCI provides a wide spectrum of domestic and international voice and data services, which include long-distance telephone service, data communications services and electronic messaging services. American Home Products 3.80 5,646,713 This company is engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in three business segments; health care products, agricultural products and food products. Emerson Electric 3.74 5,549,750 A diversified manufacturer of electrical and electronic products for use in commercial and industrial products, appliances and construction-related components. General Signal 3.73 5,538,600 A manufacturer of equipment for the Process Controls, Electrical Controls and Industrial Technology industries. Silicon Graphics 3.66 5,442,150 This company provides computing solutions that range from cost-effective high perfromance desktop workstations to database and computer servers to Cray Research supercomputers. Company's systems enhance the productivity of organizations engaged in technical, scientific, corporate and entertainment applications acrosss a wide range of industries. Raytheon 2.80 4,151,687 Designs, manufactures and sells electronic devices, equipment and systems for government and commercial use. About two-thirds of sales are to the military (missiles and electronics).
Financial statements Statement of assets and liabilities IDS Research Opportunities Fund Jan. 31, 1997 Assets (Unaudited) Investment in Aggressive Growth Portfolio (Note 1) $147,555,259 Organizational cost $ 110 -------------- Total assets 147,555,369 -------------- Liabilities Accrued distribution fee 851 Accrued service fee 686 Accrued transfer agency fee 938 Accrued administrative services fee 235 Other accrued expenses 38,395 -------------- Total liabilities 41,105 -------------- -------------- Net assets applicable to outstanding capital stock $147,514,264 ============== Represented by Capital stock -- authorized 10,000,000,000 shares of $.01 par value $ 260,276 Additional paid-in-capital 139,551,088 Investment income -- loss (263,596) Accumulated net realized gain (Note 1) 4,931,153 Unrealized appreciation of investments 3,035,343 ============== Total - representing net assets applicable to outstanding capital stock $147,514,264 ============== Net assets applicable to outstanding shares: Class A $104,727,151 Class B $ 42,785,980 Class Y $ 1,133 Net asset value per share of outstanding capital stock: Class A shares 18,461,325 $ 5.67 Class B shares 7,566,044 $ 5.66 Class Y shares 200 $ 5.67 See accompanying notes to financial statements. Statement of operations IDS Research Opportunities Fund For the period from Aug. 19, 1996 (commencement of operations) to Jan. 31, 1997 Investment income (Unaudited) Income: Interest $ 401,925 Dividends 121,719 -------------- Total income 523,644 -------------- Expenses (Note 2): Expenses, including investment management services fee allocated from Aggressive Growth Portfolio 244,264 Distribution fee -- Class B 66,087 Transfer agency fee 77,671 Incremental transfer agency fee -- Class B 1,572 Service fee Class A 42,565 Class B 15,420 Administrative services fees and expenses 19,881 Compensation of board members 3,950 Compensation of officers 263 Custodian fees 3,536 Postage 14,660 Registration fees 288,963 Reports to shareholders 6,664 Audit fees 785 Administrative 916 Other 90 -------------- Total expenses 787,287 Earnings credits on cash balances (Note 5) (47) -------------- Total net expenses 787,240 -------------- Investment loss -- net (263,596) -------------- Realized and unrealized gain -- net Net realized gain on security transactions 4,728,378 Net realized gain on financial futures contracts 319,347 -------------- Net realized gain on investments 5,047,725 Net change in unrealized appreciation or depreciation 3,035,343 -------------- Net gain on investments 8,083,068 -------------- Net increase in net assets resulting from operations $ 7,819,472 ============== See accompanying notes to financial statements. Statement of changes in net assets IDS Research Opportunities Fund For the period from Aug. 19, 1996 (commencement of operations) to Jan. 31, 1997 Operations and distributions (Unaudited) Investment loss - net $ (263,596) Net realized gain on investments 5,047,725 Net change in unrealized appreciation or depreciation 3,035,343 -------------- Net increase in net assets resulting from operations 7,819,472 -------------- Distributions to shareholders from: Net realized gain Class A (83,545) Class B (33,026) Class Y (1) -------------- Total distributions (116,572) -------------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 103,384,574 Class B shares 41,539,910 Reinvestment of distributions at net asset value Class A shares 80,739 Class B shares 33,011 Class Y shares 1 Payments for redemptions Class A shares (4,450,610) Class B shares (Note 2) (779,261) -------------- Increase in net assets from capital share transactions 139,808,364 -------------- Total increase in net assets 147,511,264 Net assets at beginning of period 3,000 -------------- Net assets at end of period $147,514,264 ==============
See accompanying notes to financial statements. Notes to financial statements IDS Research Opportunities Fund _______________________________________________________________________ 1. Summary of significant accounting policies IDS Research Opportunities Fund (a series of IDS Growth Fund, Inc.) is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. IDS Growth Fund, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. On Aug. 16, 1996, American Express Financial Corporation (AEFC) invested $3,000 in the Fund which represented 200 shares for Class A, Class B and Class Y. Operations commenced on Aug. 19, 1996. The Fund offers Class A, Class B and Class Y shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge and such shares automatically convert to Class A after eight years. Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend, liquidation and other rights, and the same terms and conditions, except that the level of distribution fee, transfer agency fee and service fee (class specific expenses) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Aggressive Growth Portfolio Effective Aug. 19, 1996, the Fund began investing all of its assets in the Aggressive Growth Portfolio (the Portfolio), a series of Growth Trust, an open-end investment company that has the same objectives as the Fund. Aggressive Growth Portfolio invests primarily in equity securities of companies that comprise the S&P 500. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at value which is equal to the Fund's proportionate ownership interest in the net assets of the Portfolio. The percentage of the Portfolio owned by the Fund at Jan. 31, 1997 was 99.31%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements," which are included elsewhere in this report. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the period. Actual results could differ from those estimates. Federal taxes Since the Fund's policy is to comply with all sections of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to the shareholders, no provision for income or excise taxes is required. Net investment income (loss) and net realized gains (losses) allocated from the Portfolio may differ for financial statement and tax purposes primarily because of the deferral of losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. Dividends to shareholders An annual dividend declared and paid at the end of the calendar year from net investment income is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. _______________________________________________________________________ 2. Expenses and sales charges In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund entered into agreements with American Express Financial Corporation (AEFC) for providing administrative services and serving as transfer agent. Under its Administrative Services Agreement, the Fund pays AEFC for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.06% to 0.03% annually. Additional administrative services paid by the Fund are office expenses, consultants' fees and compensation of officers and employees. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees, organizational expenses, and any other expenses properly payable by the Fund approved by the board. Under a separate Transfer Agency Agreement, AEFC maintains shareholder accounts and records. The Fund pays AEFC an annual fee per shareholder account for this service as follows: o Class A $15 o Class B $16 o Class Y $15 Also effective Aug. 19, 1996, the Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder servicing-related services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares for distribution-related services. Under a Shareholder Service Agreement, the Fund pays a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.175% of the Fund's average daily net assets attributable to Class A and Class B shares. Sales charges received by American Express Financial Advisors for distributing Fund shares were $1,308,659 for Class A and $3,142 for Class B for the period ended Jan. 31, 1997. _______________________________________________________________________ 3. Capital share transactions Transactions in shares of capital stock for the period indicated is as follows: Period ended Jan. 31, 1997* Class A Class B Class Y _______________________________________________________________________ Sold 19,252,187 7,699,944 -- Issued for reinvested 14,715 6,032 -- distributions Redeemed (805,777) (140,132) -- _______________________________________________________________________ Net increase 18,461,125 7,565,844 -- _______________________________________________________________________ * Inception date was Aug. 19, 1996. 4. Financial highlights The table below shows certain important financial information for evaluating the Fund's results. Fiscal period ended July 31, Per share income and capital changes* Class A Class B Class Y 1997** 1997** 1997** Net asset value, $5.00 $5.00 $5.00 beginning of period Income from investment operations: Net investment loss (.01) (.02) (.01) Net gains .69 .69 .69 (both realized and unrealized) Total from investment .68 .67 .68 operations Less distributions: Distributions from (.01) (.01) (.01) realized gains Net asset value, $5.67 $5.66 $5.67 end of period Ratios/supplemental data Class A Class B Class Y 1997** 1997** 1997** Net assets, end of $105 $43 $ -- period (in millions) Ratio of expenses to 2.18%+ 2.91%+ 2.18%+ average daily net assets# Ratio of net loss (.59%)+ (1.36%)+ (.26%)+ to average daily net assets Total return ++ 13.6% 13.2% 13.7% Portfolio turnover rate 82% 82% 82% (excluding short-term securities) for the underlying Portfolio Average brokerage $0.0358 $0.0358 $0.0358 commission rate for the underlying Portfolio## *For a share outstanding throughout the period. Rounded to the nearest cent. **Inception date. Period from Aug. 19, 1996 to Jan. 31, 1997 (Unaudited). +Adjusted to an annual basis. ++Total return does not reflect payment of a sales charge. #Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. ##The Fund is required to disclose an average brokerage commission rate. The rate is calculated by dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total number of related shares purchased and sold. Financial statements Statement of assets and liabilities Aggressive Growth Portfolio Jan. 31, 1997 Assets Investments in securities, at value (Note 1) (Unaudited) (identified cost $141,659,156) $144,580,923 Cash in bank on demand deposit 1,227,491 Dividends and accrued interest receivable 93,922 Receivable for investment securities sold 6,906,566 ---------------- Total assets 152,808,902 ---------------- Liabilities Payable for investment securities purchased 4,236,765 Accrued investment management services fee 2,568 Other accrued expenses 19,444 ---------------- Total liabilities 4,258,777 ---------------- Net assets $148,550,125 ================ See accompanying notes to financial statements. Financial statements Statement of operations Aggressive Growth Portfolio For the period from Aug. 19, 1996 (commencement of operations) to Jan. 31, 1997 Investment income Income: (Unaudited) Dividends (net of foreign taxes withheld of $390) $ 405,901 Interest 123,990 ---------------- Total income 529,891 ---------------- Expenses (Note 2): Investment management services fee 217,645 Compensation of board members 2,813 Custodian fees 18,546 Audit fees 6,135 Administrative 803 Other 1,319 ---------------- Total expenses 247,261 Earnings credits on cash balances (Note 2) (343) ---------------- Total net expenses 246,918 ---------------- Investment income -- net 282,973 ---------------- Realized and unrealized gain -- net Net realized gain on security transactions (Note 3) 4,798,167 Net realized gain on financial futures contracts 321,957 ---------------- Net realized gain on investments 5,120,124 Net change in unrealized appreciation or depreciation 3,056,467 ---------------- Net gain on investments 8,176,591 ================ Net increase in net assets resulting from operations $8,459,564 ================ See accompanying notes to financial statements. Statement of changes in net assets Aggressive Growth Portfolio For the period from Aug. 19, 1996 (commencement of operations) to Jan. 31, 1997 Operations (Unaudited) Investment income -- net $ 282,973 Net realized gain on investments 5,120,124 Net change in unrealized appreciation or depreciation 3,056,467 ----------------- Net increase in net assets resulting from operations 8,459,564 Net contributions 140,086,561 ----------------- Total increase in net assets 148,546,125 Net assets at beginning of period (Note 1) 4,000 ================= Net assets at end of period $148,550,125 ================= See accompanying notes to financial statements. Notes to financial statements Aggressive Growth Portfolio (Unaudited as to Jan. 31, 1997) - ---------------------------------------------------------------------- 1. Summary of significant accounting policies The Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Aggressive Growth Portfolio invests primarily in equity securities of companies that comprise the S&P 500. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. On Aug. 16, 1996, American Express Financial Corporation (AEFC) contributed $4,000 to the Portfolio. Operations commenced on Aug. 19, 1996. Significant accounting polices followed by the Portfolio are summarized below: Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the period. Actual results could differ from those estimates. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price, securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Determination of fair value involves, among other things, reference to market indexes, matrixes and data from independent brokers. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates, those maturing in 60 days or less are valued at amortized cost. Option transactions In order to produce incremental earnings, protect gains and facilitate buying and selling of securities for investment purposes, the Portfolio may buy and write options traded on any U.S. or foreign exchange where the completion of the obligation is dependent upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities and may write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity of profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss upon expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions In order to gain exposure to or protect itself from changes in the market, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy or write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement dates on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete the obligations of the contract. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. Accordingly, as a "pass-through" entity, the Portfolio does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. - ----------------------------------------------------------------------- 2. Fees and expenses The Trust, on behalf of the Portfolio, has entered into an Investment Management Services Agreement with AEFC for managing its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.65% to 0.5% annually. 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, 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 ended Jan. 31, 1997, the Portfolio's custodian fees were reduced by $343 as a result of earnings credits from overnight cash balances. Pursuant to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the units of the Trust. - ----------------------------------------------------------------------- 3. Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $188,503,109 and $61,527,341, respectively, for the period ended Jan. 31,1997. For the same period, the portfolio turnover rate was 82%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $1,425 for this period. - --------------------------------------------------------------------- 4. Stock index futures contracts Investments in securities at Jan. 31, 1997, included securities valued at $997,500 that were pledged as collateral to cover initial margin deposits on 32 purchase contracts. The market value of the open contracts at Jan. 31, 1997, was $12,718,400 with a net unrealized gain of $134,700.
Investments in securities Aggressive Growth Portfolio (Percentages represent value of Jan. 31, 1997 (Unaudited) investments compared to net assets) - -------------------------------------------------------------------------------------------------------------------- Common stocks (90.7%) - -------------------------------------------------------------------------------------------------------------------- Issuer Shares Value (a) - -------------------------------------------------------------------------------------------------------------------- Aerospace & defense (2.8%) Raytheon 90,500 $ 4,151,688 - -------------------------------------------------------------------------------------------------------------------- Airlines (0.5%) AMR 8,900 (b) 716,450 - -------------------------------------------------------------------------------------------------------------------- Automotive & related (3.1%) Chrysler 67,200 2,343,600 General Motors 39,400 2,324,600 ------------------- Total 4,668,200 - -------------------------------------------------------------------------------------------------------------------- Banks and savings & loans (8.7%) Bank of Boston 89,400 6,369,750 NationsBank 60,800 6,566,400 ------------------- Total 12,936,150 - -------------------------------------------------------------------------------------------------------------------- Beverages & tobacco (5.4%) Anheuser-Busch 41,500 1,763,750 Coca-Cola 108,400 6,273,650 ------------------- Total 8,037,400 - -------------------------------------------------------------------------------------------------------------------- Building materials & construction (2.2%) Tyco Intl 57,400 3,278,975 - -------------------------------------------------------------------------------------------------------------------- Computers & office equipment (11.3%) Computer Associates Intl 71,700 3,253,387 First Data 75,000 2,700,000 Ikon Office Solutions 14,400 635,400 Oracle 74,600 (b) 2,900,075 Silicon Graphics 198,800 (b) 5,442,150 See accompanying notes to investments in securities. 3Com 28,200 (b) 1,892,925 ------------------- Total 16,823,937 - -------------------------------------------------------------------------------------------------------------------- Food (4.8%) CPC Intl 39,500 3,036,563 Quaker Oats 106,800 4,098,450 ------------------- Total 7,135,013 - -------------------------------------------------------------------------------------------------------------------- Health care (17.5%) ALZA 107,200 (b) 3,095,400 American Home Products 89,100 5,646,712 Amgen 55,700 (b) 3,140,088 Baxter Intl 16,600 765,675 Boston Scientific 10,300 (b) 702,975 Guidant 50,700 2,826,525 Johnson & Johnson 102,900 5,929,613 Medtronic 8,800 602,800 Schering-Plough 43,600 3,297,250 ------------------- Total 26,007,038 - -------------------------------------------------------------------------------------------------------------------- Health care services (2.5%) Service Corp Intl 33,900 983,100 Tenet Healthcare 43,700 (b) 1,179,900 United Healthcare 30,200 1,472,250 ------------------- Total 3,635,250 - -------------------------------------------------------------------------------------------------------------------- Industrial equipment & services (2.7%) Deere & Co 38,300 1,637,325 Illinois Tool Works 28,800 2,350,800 ------------------- Total 3,988,125 - -------------------------------------------------------------------------------------------------------------------- Media (1.4%) Time Warner 53,700 2,067,450 - -------------------------------------------------------------------------------------------------------------------- Metals (1.8%) Aluminum Co of America 38,500 2,656,500 - -------------------------------------------------------------------------------------------------------------------- Multi-industry conglomerates (7.5%) Emerson Electric 56,200 5,549,750 General Signal 122,400 5,538,600 ------------------- Total 11,088,350 - -------------------------------------------------------------------------------------------------------------------- Paper & packaging (0.5%) Crown Cork & Seal 13,800 793,500 - -------------------------------------------------------------------------------------------------------------------- Restaurants & lodging (0.7%) Hilton Hotels 36,500 (c) 1,040,250 - -------------------------------------------------------------------------------------------------------------------- Retail (7.4%) American Stores 15,200 638,400 Autozone 56,000 (b) 1,211,000 CUC Intl 47,100 (b) 1,165,725 Federated Dept Stores 61,200 (b) 2,011,950 Kroger 10,900 (b) 520,475 Lowe's 39,600 1,311,750 Rite Aid 15,100 604,000 Wal Mart Stores 149,600 3,553,000 ------------------- Total 11,016,300 - -------------------------------------------------------------------------------------------------------------------- Utilities -- electric (2.0%) General Public Utilities 86,600 2,901,100 - -------------------------------------------------------------------------------------------------------------------- Utilities -- telephone (5.9%) AirTouch Communications 110,200 (b) 2,851,425 MCI Communications 167,100 5,869,387 ------------------- Total 8,720,812 - -------------------------------------------------------------------------------------------------------------------- Foreign (2.0%) (d) Northern Telecom 41,200 3,033,350 - -------------------------------------------------------------------------------------------------------------------- Total common stocks (Cost: $131,774,071) $ 134,695,838 - -------------------------------------------------------------------------------------------------------------------- Short-term securities (6.6%) - -------------------------------------------------------------------------------------------------------------------- Issuer Annualized Amount Value (a) yield on payable at date of maturity purchase - -------------------------------------------------------------------------------------------------------------------- Government agency (0.8%) Federal Home Loan Mtge Assn Disc Nt 02-13-97 5.24% $1,200,000 $ 1,197,908 - -------------------------------------------------------------------------------------------------------------------- Commercial paper (4.5%) Bell Atlantic 02-06-97 5.31 2,500,000 2,498,160 Consolidated Natural Gas 02-20-97 5.31 700,000 698,042 Ford Motor Credit 03-10-97 5.35 1,000,000 994,532 Sara Lee 02-05-97 5.28 1,300,000 1,299,237 02-10-97 5.35 1,200,000 1,198,395 ------------------- Total 6,688,366 - -------------------------------------------------------------------------------------------------------------------- Letter of credit (1.3%) Federal Home Loan Bank 02-05-97 5.35 2,000,000 1,998,811 - -------------------------------------------------------------------------------------------------------------------- Total short-term securities (Cost: $9,885,085) $ 9,885,085 - -------------------------------------------------------------------------------------------------------------------- Total investment in securities (Cost: $141,659,156)(e) $ 144,580,923 - -------------------------------------------------------------------------------------------------------------------- Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Partially pledged as initial deposit on the following stock index futures purchase contracts. (See Note 4 to the financial statements): Type of security contracts - ---------------------------------------------------------------------- S&P 500, June 1997 32 (d) Foreign security values are stated in U.S. dollars. (e) At Jan. 31, 1997, the cost of securities for federal income tax purposes was approximately $141,659,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $6,523,000 Unrealized depreciation (3,601,000) - ------------------------------------------------------------------------------------- Net unrealized appreciation $2,922,000 - -------------------------------------------------------------------------------------
IDS mutual funds Global/International funds Funds in this group seek capital growth and/or income by investing primarily in foreign securities. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. They are high risk mutual funds with a potential for high reward. IDS Emerging Markets Fund Invests in a Portfolio comprised primarily of stocks of companies in developing countries throughout the world that are believed to offer growth potential. Seeks to provide long-term growth of capital. (icon of) world globe IDS Global Growth Fund Invests in a Portfolio comprised primarily of stocks of companies throughout the world that are positioned to meet market needs in a changing world economy. These companies offer above-average potential for long-term growth. (icon of) world IDS International Fund Invests primarily in common stocks of foreign companies that offer potential for superior growth. The Fund may invest up to 20% of its assets in the U.S. market. (icon of) three flags IDS Global Balanced Fund Invests in stocks-and bonds in, for the most part, major markets throughout the world, including the U.S. Seeks to provide a balance of growth of capital and current income. (icon of) scale of globes IDS Global Bond Fund Invests in a Portfolio comprised primarily of debt securities of U.S. and foreign issuers to seek high total return through income and growth of capital. (icon of) globe Growth funds Funds in this group seek capital growth, primarily from common stocks. They are high risk mutual funds with a potential for high reward. IDS Precious Metals Fund Invests primarily in the securities of foreign or domestic companies that explore for, mine and process or distribute gold and other precious metals. A highly aggressive and speculative fund that seeks long-term growth of capital. (icon of) cart of precious gems IDS Discovery Fund Invests in small- and medium-size, growth-oriented companies emphasizing technological innovation and productivity enhancement. Buys and holds larger growth-oriented stocks. (icon of) ship IDS Small Company Index Fund Invests in all or a representative group of the equity securities comprising the S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation. (icon of) building IDS Strategy Aggressive Fund Invests primarily in common stocks of companies that are selected for their potential for above-average growth. Above-average means that their growth potential is better, in the opinion of the portfolio's investment manager, than the Standard & Poor's Corporation (S&P) 500 Stock Index. (icon of) chess piece IDS Research Opportunities Fund Invests in a Portfolio comprised primarily of equity securities of companies included in the S&P 500 Index that are believed to have strong growth potential. The Portfolio is managed using a research methodology by the Research Department of AEFC. Goal is long-term appreciation. (icon of) magnifying glass IDS Growth Fund Invests in a Portfolio comprised primarily of companies that have above-average potential for long-term growth as a result of new management, marketing opportunities or technological superiority. (icon of) flower IDS New Dimensions Fund Invests in a Portfolio comprised primarily of companies with significant growth potential due to superiority in technology, marketing or management. The Fund frequently changes its industry mix. (icon of) dimension IDS Progressive Fund Invests primarily in undervalued common stocks. The Fund holds stocks for the long term with the goal of capital growth. (icon of) shooting star Growth and income funds These funds focus on securities of medium to large, well-established companies that offer long-term growth of capital and reasonable income from dividends and interest. IDS Equity Select Fund Invests primarily in a combination of moderate growth stocks, higher-yielding equities and bonds. Seeks growth of capital and income. (icon of) three pine trees IDS Blue Chip Advantage Fund Invests in selected stocks from a major market index. Securities purchased are those recommended by our research analysts as the best from each industry represented on the index. Offers potential for long-term growth as well as dividend income. (icon of) ribbon IDS Managed Allocation Fund Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and foreign debt securities, foreign equity securities and money market instruments. The Fund provides diversification among these major investment categories and has a target mix that represents the way the Fund's investments will be allocated over the long term. Seeks maximum total return. (icon of) spinning toy IDS Stock Fund Invests in a Portfolio comprised primarily of common stocks of companies representing many sectors of the economy. Seeks current income and growth of capital. (icon of) building with columns IDS Equity Value Fund Invests primarily in undervalued common stocks that offer potential for growth of capital and income. (icon of) three growing flowers IDS Utilities Income Fund Invests primarily in the stocks of public utility companies to seek high current income and growth of income and capital with reduced volatility. (icon of) light bulb IDS Diversified Equity Income Fund Invests in a Portfolio comprised primarily in high-yielding common stocks to seek high current income and, secondarily, to benefit from the growth potential offered by stock investments. (icon of) two puzzle pieces IDS Mutual Invests in a Portfolio which seeks to balance between common stocks and senior securities (preferred stocks and bonds). Seeks a balance of growth of capital and current income. (icon of) scale of justice Income funds The funds in this group invest their assets primarily in corporate bonds or government securities to seek interest income. Secondary objective is capital growth. Risk varies by bond quality. IDS Extra Income Fund Invests in a Portfolio comprised mainly in long-term, high-yielding corporate fixed-income securities in the lower rated, higher risk bond categories to seek high current income. Secondary objective is capital growth. (icon of) two coins IDS Bond Fund Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk bond categories, or the equivalent, and in government bonds. (icon of) Greek column IDS Selective Fund Invests in a Portfolio comprised primarily of high-quality corporate bonds and other highly rated debt instruments including government securities and short-term investments. Seeks current income and preservation of capital. (icon of) skyline IDS Federal Income Fund Invests in a Portfolio comprised primarily of securities issued or guaranteed as to the timely payment of principal and interest by the U.S. government, its agencies and instrumentalities. Seeks a high level of current income and safety of principal consistent with its type of investments. (icon of) shield with eagle head Tax-exempt income funds These funds provide tax-free income by investing in municipal bonds. The income is generally free from federal income tax, but a portion of the income may be subject to state and local taxes. Risk varies by bond quality. IDS Tax-Exempt Bond Fund Invests mainly in bonds and notes of state or local government units, with at least 75% in the four highest rated, lowest risk bond categories. (icon of) shield with Greek column IDS Insured Tax-Exempt Fund Invests primarily in municipal securities that are insured as to the timely payment of principal and interest. The insurance feature minimizes credit risk of the Fund but does not guarantee the market value of the Fund's shares. (icon of) shield with star IDS State Tax-Exempt Funds (CA, MA, MI, MN, NY, OH) Invests primarily in high- and medium-grade municipal securities to provide income to residents of each respective state that is exempt from federal, state and local income taxes. (New York is the only state that is exempt at the local level.) (icon of) shield with U.S. enclosed IDS High Yield Tax-Exempt Fund Invests in a Portfolio comprised primarily of medium- and lower-quality municipal bonds and notes. Lower-quality securities generally involve greater risk of principal and income. (icon of) shield with basket of apples enclosed IDS Intermediate Tax-Exempt Fund Invests in mainly investment-grade bonds and other debt securities with intermediate-term maturities issued by state and local government units. Goal is to seek a high level of current income exempt from federal taxes. (icon of) shield with tree enclosed Money market funds These money market funds have three main goals: conservation of capital, constant liquidity and the highest possible current income consistent with these objectives. An investment in these funds is neither insured nor guaranteed by the U.S. government, and there can be no assurance that these funds will be able to maintain a stable net asset value of $1.00 per share. Very limited risk. IDS Cash Management Fund Invests in such money market securities as high quality commercial paper, bankers' acceptances, certificates of deposit (CDs) and other bank securities. (icon of) piggy bank IDS Tax-Free Money Fund Invests primarily in short-term bonds and notes issued by state and local governments to seek high current income exempt from federal income taxes. (icon of) shield with piggy bank enclosed Quick telephone reference American Express Telephone Transaction Service Redemptions and exchanges, dividend payments or reinvestments and automatic payment arrangements National/Minnesota: 800-437-3133 Mpls./St. Paul area: 671-3800 American Express Shareholder Service Fund performance, objectives and account inquiries 612-671-3733 TTY Service For the hearing impaired 800-846-4852 American Express Infoline Automated account information (TouchTone(R) phones only), including current fund prices and performance, account values and recent account transactions National/Minnesota: 800-272-4445 Mpls./St. Paul area: 671-1630 PAGE AMERICAN EXPRESS FINANCIAL ADVISORS IDS Reserch Opportunities Fund IDS Tower 10 Minneapolis, MN 55440-0010
Financial statements Statement of assets and liabilities IDS Research Opportunities Fund Feb. 28, 1997 Assets (Unaudited) Investment in Aggressive Growth Portfolio $165,219,077 Organizational cost 110 -------------- Total assets 165,219,187 -------------- Liabilities Disbursements in excess of cash on demand deposit 3,694 Accrued distribution fee 1,010 Accrued service fee 794 Accrued transfer agency fee 1,060 Accrued administrative services fee 272 Other accrued expenses 56,283 -------------- Total liabilities 63,113 -------------- -------------- Net assets applicable to outstanding capital stock $165,156,074 ============== Represented by Capital stock -- $.01 par value $ 288,973 Additional paid-in capital 156,037,856 Investment loss -- net (253,983) Accumulated net realized gain 8,200,779 Unrealized appreciation 882,449 ============== Total -- representing net assets applicable to outstanding capital stock $165,156,074 ============== Net assets applicable to outstanding shares: Class A $115,952,194 Class B $ 49,202,736 Class Y $ 1,144 Net asset value per share of outstanding capital stock: Class A shares 20,265,513 $ 5.72 Class B shares 8,631,568 $ 5.70 Class Y shares 200 $ 5.72 Statement of operations IDS Research Opportunities Fund For the one month ended Feb. 28, 1997 Investment income (Unaudited) Income: Interest $ 70,330 Dividends 129,866 -------------- Total income 200,196 -------------- Expenses: Expenses, including investment management services fee allocated from Aggressive Growth Portfolio 80,198 Distribution fee -- Class B 26,213 Transfer agency fee 27,378 Incremental transfer agency fee -- Class B 601 Service fee Class A 14,804 Class B 6,117 Administrative services fees and expenses 7,173 Custodian fees 600 Postage 2,488 Registration fees 23,339 Reports to shareholders 1,131 Audit fees 134 Administrative 400 Other 7 -------------- Total expenses 190,583 -------------- Investment income -- net 9,613 -------------- Realized and unrealized gain (loss) -- net Net realized gain on security transactions 3,191,494 Net realized gain on financial futures contracts 78,132 -------------- Net realized gain on investments 3,269,626 Net change in unrealized appreciation or depreciation (2,152,894) -------------- Net gain on investments 1,116,732 -------------- Net increase in net assets resulting from operations $ 1,126,345 ============== Statement of changes in net assets IDS Research Opportunities Fund For the one month ended Feb. 28, 1997 Operations (Unaudited) Investment income -- net $ 9,613 Net realized gain on investments 3,269,626 Net change in unrealized appreciation or depreciation (2,152,894) -------------- Net increase in net assets resulting from operations 1,126,345 -------------- Capital share transactions Proceeds from sales Class A shares 12,814,246 Class B shares 6,409,983 Class Y shares 1,000 Payments for redemptions Class A shares (2,426,992) Class B shares (282,772) -------------- Increase in net assets from capital share transactions 16,515,465 -------------- Total increase in net assets 17,641,810 Net assets at beginning of period 147,514,264 -------------- Net assets at end of period $165,156,074 ==============
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