-----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, AnnUpBueimEFf7KeTaVbpGesdDiRco1L+rYg6WqK3iHIsFELVnNt5aa6gpm+6+oa 9A1XAHYIaYP3TD9C7Ml5Jw== 0000820027-98-000205.txt : 19980319 0000820027-98-000205.hdr.sgml : 19980319 ACCESSION NUMBER: 0000820027-98-000205 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980318 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: SEC FILE NUMBER: 811-02111 FILM NUMBER: 98567880 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 N-30D 1 1998 SEMIANNUAL REPORT IDS Growth Fund The goal of IDS Growth Fund, Inc. is long term growth of capital. AMERICAN EXPRESS Financial Advisors Distributed by American Express Financial Advisors Inc. 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 chairman 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 24 Board members and officers 27 IDS mutual funds 28 To our shareholders From the chairman If you're an experienced investor, you know that the past few years have been unusually strong in many financial markets. Perhaps just as important, 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. We saw evidence of that last October, when financial turmoil in Southeast Asia sparked a sharp decline in worldwide stock markets, including the U.S. That fact reinforces the need for investors to review periodically 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 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) William R. Pearce William R. Pearce Chairman of the board From the portfolio manager IDS Growth Fund recorded a negative performance during the past six months, as concerns arose regarding corporate earnings prospects for high-growth U.S. companies. For the first half of the fiscal year -- August 1997 through January 1998 -- the Fund's Class A shares lost 8.0%. The tremendous bull market for stocks came to a temporary halt when the period began last August, as rising interest rates took a toll on most issues. Rates came down in September, though, allowing the market to make up the lost ground. The Asian flu But the biggest problem materialized in the following month, when currencies and stock markets in Southeast Asia went into a virtual free-fall. The result was severely weakened economies in many countries that had been substantial buyers of U.S. goods, particularly technology-related products. The unstable situation immediately cast doubt on American companies' ability to sustain their earnings growth and soon spawned a wave of stock-selling. Despite the earnings concerns, the stock market managed to right itself in November, and ultimately finished the six months in positive territory. For the Fund, the situation overseas was a particular problem, given that technology stocks, including those of small and mid-size companies, constituted the largest portion of the portfolio during the six months. Some of the Fund's major holdings, which had helped power it to generous returns in the past three years, saw their prices decline as much as one-third in a matter of days. The good part of the downturn was that, in several cases, I was able to add shares of what I believe are excellent companies at bargain prices. Financial services, healthcare do well Also on the positive side, holdings among financial services stocks, including those of brokerage and insurance providers, generally performed well over the six months, thanks largely to a decline in long-term interest rates. The Fund's consumer staple stocks, including those of food/beverage and health care companies, also held up quite well. The volatility that has characterized the market during recent months will, in my view, stay with us in 1998. Nevertheless, most of the underpinnings that have supported stocks for some time are still in place: The economy continues to grow at a healthy rate; inflation remains well-behaved; and long-term interest rates are low. While upheaval in emerging foreign markets may cause some near-term concern about the prospects for corporate profits and, thus, stock prices, I think the longer- term outlook continues to be very promising. Mitzi Malevich (picutre of) Mitzi Malevich Mitzi Malevich Portfolio manager To our shareholders Class A 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1998 $ 31.67 July 31, 1997 $ 35.47 Decrease $ 3.80 Distributions Aug. 1, 1997 - Jan. 31, 1998 From income $ -- From capital gains $ .96 Total distributions $ .96 Total return* (8.0%)** Class B 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1998 $ 30.95 July 31, 1997 $ 34.82 Decrease $ 3.87 Distributions Aug. 1, 1997 - Jan. 31, 1998 From income $ -- From capital gains $ .96 Total distributions $ .96 Total return* (8.3%)** Class Y 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1998 $ 31.80 July 31, 1997 $ 35.60 Decrease $ 3.80 Distributions Aug. 1, 1997 - Jan. 31, 1998 From income $ -- From capital gains $ .96 Total distributions $ .96 Total return* (7.9%)** * 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. The Portfolio's ten largest holdings Percent Value (of Portfolio's net assets) (as of Jan. 31, 1998) Travelers Group 4.17% $178,200,000 Washington Mutual 3.75 160,625,000 Microsoft 3.14 134,268,750 Tellabs 3.11 133,087,500 Schlumberger 3.10 132,637,500 Pfizer 3.06 131,100,000 Coca-Cola 3.04 129,933,825 Merrill Lynch & Co 2.95 126,250,000 Intel 2.84 121,500,000 WorldCom 2.68 114,600,000 (icon of) pie chart The ten holdings listed here make up 31.84% of the Portfolio's net assets
Financial statements Statement of assets and liabilities IDS Growth Fund Jan. 31, 1998 Assets (Unaudited) Investment in Growth Portfolio (Note 1) $4,257,496,404 -------------- Liabilities Accrued distribution fee 16,078 Accrued service fee 19,616 Accrued transfer agency fee 12,526 Accrued administrative services fee 4,897 Other accrued expenses 345,288 Total liabilities 398,405 ------- Net assets applicable to outstanding capital stock $4,257,097,999 -------------- Represented by Capital stock-- of $.01 par value (Note 1) $ 1,349,528 Additional paid-in capital 2,723,627,091 Investment loss-- net (8,834,012) Accumulated net realized gain (loss) 99,319,561 Unrealized appreciation (depreciation) on investments 1,441,635,831 Total-- representing net assets applicable to outstanding capital stock $4,257,097,999 -------------- Net assets applicable to outstanding shares: Class A $3,108,139,950 ============== Class B $ 787,149,959 Class Y $ 361,808,090 Net asset value per share of outstanding capital stock: Class A shares 98,142,018 $ 31.67 Class B shares 25,433,676 $ 30.95 Class Y shares 11,377,091 $ 31.80 See accompanying notes to financial statements.
Statement of operations IDS Growth Fund Six months ended Jan. 31, 1998 Investment income (Unaudited) Income: Dividends $ 9,207,597 Interest 2,929,805 Less foreign taxes withheld (42,517) ------- Total income 12,094,885 ---------- Expenses (Note 2): Expenses allocated from Growth Portfolio 11,338,224 Distribution fee -- Class B 2,783,330 Transfer agency fee 2,050,641 Incremental transfer agency fee-- Class B 36,738 Service fee Class A 2,697,359 Class B 645,987 Class Y 131,183 Administrative services fees and expenses 878,956 Compensation of board members 5,701 Postage84,450 Registration fees 377,899 Reports to shareholders 50,380 Audit fees 4,125 Other 3,426 ----- Total expenses 21,088,399 Earnings credits on cash balances (Note 2) (159,502) - -------- Total net expenses 20,928,897 ---------- Investment income (loss) -- net (8,834,012) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions 173,975,089 Net change in unrealized appreciation (depreciation) on investments (506,242,592) ------------ Net gain (loss) on investments (332,267,503) ------------ Net increase (decrease) in net assets resulting from operations $(341,101,515) ============= See accompanying notes to financial statements.
Financial statements Statements of changes in net assets IDS Growth Fund Operations and distributions Jan. 31, 1998 July 31, 1997 Six months ended Year ended (Unaudited) Investment income (loss)-- net $ (8,834,012) $ (8,800,585) Net realized gain (loss) on investments 173,975,089 50,532,417 Net change in unrealized appreciation (depreciation) on investments (506,242,592) 1,352,656,496 ------------ ------------- Net increase (decrease) in net assets resulting from operations (341,101,515) 1,394,388,328 ------------ ------------- Distributions to shareholders from: Net realized gain Class A (90,597,922) (58,071,851) Class B (22,985,960) (11,182,049) Class Y (7,852,912) (1,197,889) ---------- ---------- Total distributions (121,436,794) (70,451,789) ------------ ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 651,758,505 922,677,836 Class B shares 170,896,095 269,793,922 Class Y shares 252,454,277 132,599,010 Reinvestment of distributions at net asset value Class A shares 86,655,301 56,453,549 Class B shares 22,895,435 11,143,020 Class Y shares 7,852,912 1,197,889 Payments for redemptions Class A shares (498,516,189) (708,866,842) Class B shares (Note 2) (33,844,722) (58,625,798) Class Y shares (47,832,566) (24,729,054) ----------- ----------- Increase (decrease) in net assets from capital share transactions 612,319,048 601,643,532 ----------- ----------- Total increase (decrease) in net assets 149,780,739 1,925,580,071 Net assets at beginning of period 4,107,317,260 2,181,737,189 ------------- ------------- Net assets at end of period $4,257,097,999 $4,107,317,260 ============== ============== See accompanying notes to financial statements.
Notes to financial statements IDS Growth Fund (Unaudited as to Jan. 31, 1998) 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 shares during the ninth calendar year of ownership. 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 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, 1998 was 99.52%. 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 an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.05% to 0.03% annually. Additional administrative service expenses 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 and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: oClass A $15 oClass B $16 oClass 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 and commencing on May 9, 1997, the fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by American Express Financial Advisors Inc. for distributing Fund shares were $5,642,578 for Class A and $240,004 for Class B for the six months ended Jan. 31, 1998. During the six months ended Jan. 31, 1998, the Fund's transfer agency fees were reduced by $159,502 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, 1998 Class A Class B Class Y Sold 19,599,222 5,234,324 7,550,765 Issued for reinvested 2,812,209 759,815 253,811 distributions Redeemed (14,913,032) (1,042,298) (1,448,162) ----------- ---------- ---------- Net increase (decrease) 7,498,399 4,951,841 6,356,414 --------- --------- --------- Year ended July 31, 1997 Class A Class B Class Y Sold 32,797,263 9,867,021 4,567,735 Issued for reinvested 2,071,924 414,765 43,835 distributions Redeemed (25,016,265) (2,065,084) (853,865) ----------- ---------- -------- Net increase (decrease) 9,852,922 8,216,702 3,757,705 --------- --------- ---------
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 changesa Class A 1998b 1997 1996 1995 1994 1993 1992 1991 1990 1989 Net asset value, $35.47 $23.16 $21.50 $17.39 $17.99 $18.57 $ 17.62 $24.05 $23.24 $17.17 beginning of period Income from investment operations: Net investment (.05) (.05) -- .03 .02 -- .08 .19 .34 .27 income (loss) Net gains (losses) (both (2.84) 13.04 2.81 5.63 1.24 2.40 2.66 .69 2.89 5.90 realized and unrealized) Total from investment (2.79) 12.99 2.81 5.66 1.26 2.40 2.74 .88 3.23 6.17 operations Less distributions: Dividends from net -- -- (.01) (.04) -- -- (.18) (.33) (.27) (.10) investment income Distributions from (.96) (.68) (1.14) (1.51) (1.86) (2.98) (1.61) (6.98) (2.15) -- realized gains Total distributions (.96) (.68) (1.15) (1.55) (1.86) (2.98) (1.79) (7.31) (2.42) (.10) Net asset value, $31.67 $35.47 $23.16 $21.50 $17.39 $17.99 $18.57 $17.62 $24.05 $23.24 end of period Ratios/supplemental data Class A 1998b 1997 1996 1995 1994 1993 1992 1991 1990 1989 Net assets, end of $3,108 $3,215 $1,871 $1,380 $952 $933 $863 $780 $756 $732 period (in millions) Ratio of expenses 0.89%d .97% 1.04% .93% .83% .87% .88% .87% .73% .64% to average daily net assetsc Ratio of net income (0.30%)d (.18%) --% .18% .11% --% .41% 1.36% 1.40% 1.39% (loss) to average daily net assets Portfolio turnover rate 17% 24% 22% 30% 56% 44% 83% 75% 49% 23% (excluding short-term securities) Total returne (8.0%) 57.0% 13.3% 35.2% 7.0% 13.0% 15.1% 12.4% 15.3% 36.2% Average brokerage $0.0471 $.0463 -- -- -- -- -- -- -- -- commission ratef aFor a share outstanding throughout the period. Rounded to the nearest cent. b Six months ended Jan. 31, 1998 (Unaudited). cEffective fiscal year 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. dAdjusted to an annual basis. eTotal return does not reflect payment of a sales charge. fEffective fiscal year 1997, the Fund is required to disclose an average brokerage commission rate per share for security trades on which commissions are charged. The comparability of this information may be affected by the fact that commission rates per share vary significantly among foreign countries. IDS Growth Fund
Fiscal period ended July 31, Per share income and capital changesa Class B Class Y 1998c 1997 1996 1995b 1998c 1997 1996 1995b Net asset value, $34.82 $22.92 $21.45 $17.85 $35.60 $23.21 $21.51 $17.85 beginning of period Income from investment operations: Net investment (.15) (.22) (.02) (.03) (.03) (.01) .01 .03 income (loss) Net gains (both (2.76) 12.80 2.63 3.63 (2.81) 13.08 2.85 3.63 realized and unrealized) Total from investment (2.91) 12.58 2.61 3.60 (2.84) 13.07 2.86 3.66 operations Less distributions: Dividends from net -- -- -- -- -- -- (.02) -- investment income Distributions from (.96) (.68) (1.14) -- (.96) (.68) (1.14) -- realized gains Total distributions (.96) (.68) (1.14) -- (.96) (.68) (1.16) -- Net asset value, $30.95 $34.82 $22.92 $21.45 $31.80 $35.60 $23.21 $21.51 end of period Ratios/supplemental data Class B Class Y 1998c 1997 1996 1995b 1998c 1997 1996 1995b Net assets, end of $787 $713 $281 $38 $362 $179 $29 $8 period (in millions) Ratio of expenses 1.65%e 1.74% 1.82% 1.76%e 0.82%e .85% .88% .85%e to average daily net assetsd Ratio of net income (1.05%)e (.94%) (.80%) (.70%) (0.21%)e (.07%) .13% .26%e (loss) to average daily net assets Portfolio turnover rate 17% 24% 22% 30% 17% 24% 22% 30% (excluding short-term securities) Total returnf (8.3%) 55.8% 12.4% 20.2% (7.9%) 57.2% 13.4% 20.5% Average brokerage $.0471 $.0463 -- -- $.0471 $.0463 -- -- commission rateg aFor a share outstanding throughout the period. Rounded to the nearest cent. bInception date was March 20, 1995. c Six months ended Jan. 31, 1998 (Unaudited). dEffective fiscal year 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. eAdjusted to an annual basis. fTotal return does not reflect payment of a sales charge. gEffective fiscal year 1997, the Fund is required to disclose an average brokerage commission rate per share for security trades on which commissions are charged. The comparability of this information may be affected by the fact that commission rates per share vary significantly among foreign countries.
Financial statements Statement of assets and liabilities Growth Portfolio Jan. 31, 1998 Assets (Unaudited) Investments in securities, at value (Note 1): Investment in securities of unaffiliated issuers (identified cost $2,830,645,244) $4,282,739,272 Investment in securities of affiliated issuers (identified cost $60,266,600) 57,712,500 Cash in bank on demand deposit 3,525,348 Dividends and accrued interest receivable 1,131,952 Receivable for investment securities sold 5,113,543 U.S. government securities held as collateral (Note 4) 33,671,375 Receivable from investment advisor 291,685 ------- Total assets 4,384,185,675 ------------- Liabilities Payable for investment securities purchased 13,878,961 Payable upon return of securities loaned (Note 4) 92,115,770 Accrued investment management services fee 65,557 Other accrued expenses 18,984 ------ Total liabilities 106,079,272 ----------- Net assets $4,278,106,403 ============== See accompanying notes to financial statements.
Financial statements Statement of operations Growth Portfolio Six months ended Jan. 31, 1998 Investment income (Unaudited) Income: Dividend $ 9,257,033 Interest 2,938,245 Less foreign taxes withheld (42,750) ------- Total income 12,152,528 ---------- Expenses (Note 2): Investment management services fee 11,211,172 Compensation of board members 10,434 Custodian fees 158,540 Audit fees 12,375 Other 15,875 ------ Total expenses 11,408,396 Earnings credits on cash balances (Note 2) (8,810) ------ Total net expenses 11,399,586 ---------- Investment income (loss) -- net 752,942 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (Note 3) 174,937,329 Net change in unrealized appreciation (depreciation) on investments (509,069,154) ------------ Net gain (loss) on investments (334,131,825) ------------ Net increase (decrease) in net assets resulting from operations $(333,378,883) ============= See accompanying notes to financial statements.
Statements of changes in net assets Growth Portfolio Operations Jan. 31, 1998 July 31, 1997 Six months ended Year ended (Unaudited) Investment income (loss)-- net $ 752,942 $ 5,221,628 Net realized gain (loss) on investments 174,937,329 50,423,029 Net change in unrealized appreciation (depreciation) on investments (509,069,154) 1,363,502,469 ------------ ------------- Net increase (decrease) in net assets resulting from operations (333,378,883) 1,419,147,126 Net contributions (withdrawals) from partners 480,401,563 506,769,449 ----------- ----------- Total increase (decrease) in net assets 147,022,680 1,925,916,575 Net assets at beginning of period 4,131,083,723 2,205,167,148 ------------- ------------- Net assets at end of period $4,278,106,403 $4,131,083,723 ============== ============== See accompanying notes to financial statements.
Notes to financial statements Growth Portfolio (Unaudited as to Jan. 31, 1998) 1 Summary of significant accounting policies Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Growth Portfolio invests primarily in stocks of U.S. and foreign companies that appear to offer growth opportunities. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. 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. Debt securities are generally traded in the over-the-counter market and are valued at a price deemed best to reflect fair value as quoted by dealers who make markets in these securities or by an independent pricing service. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions In order to produce incremental earnings, protect gains and facilitate buying and selling of securities for investment purposes, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where the completion of the obligation is dependent upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities and may write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity of profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss upon expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions In order to gain exposure to or protect itself from changes in the market, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement dates on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete the obligations of the contract. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. Accordingly, as a "pass-through" entity, the Portfolio does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. 2 Fees and expenses The Trust, on behalf of the Portfolio, has entered into an Investment Management Services Agreement with AEFC for managing its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.6% to 0.5% annually. The fees may be increased or decreased by a performance adjustment based on a comparison of the performance of Class A shares of 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 decreased the fee by $445,024 for the six months ended Jan. 31, 1998. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio, and any other expenses properly payable by the Trust or Portfolio and approved by the board. For the six months ended Jan. 31, 1998, the Portfolio's custodian fees were reduced by $8,810 as a result of earnings credits from overnight cash balances. Pursuant to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the units of the Trust. 3 Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,154,905,272 and $669,480,957, respectively, for the six months ended Jan. 31, 1998. For the same period, the portfolio turnover rate was 17%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $185,253 for the six months ended Jan. 31, 1998. 4 Lending of portfolio securities At Jan. 31, 1998, securities valued at $91,009,133 were on loan to brokers. For collateral, the Portfolio received $58,444,395 in cash and U.S. government securities valued at $33,671,375. Income from securities lending amounted to $327,388 for the six months ended Jan. 31, 1998. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. Investments in securities Growth Portfolio (Percentages represent Jan. 31, 1998 (Unaudited) value of investments compared to net assets) Investments in securities of unaffiliated issuers Common stocks (96.5%) Issuer Shares Value(a) Airlines (0.9%) Northwest Airlines Cl A 692,450(c)$ 39,123,425 Automotive & related (0.4%) Gentex 500,000(c) 15,625,000 Banks and savings & loans (5.4%) BankAmerica 1,000,000 71,062,500 Washington Mutual 2,500,000 160,625,000 Total 231,687,500 Beverages & tobacco (3.0%) Coca-Cola 2,006,700 129,933,825 Building materials & construction (2.1%) Tyco Intl 2,000,000 88,750,000 Chemicals (4.0%) Culligan Water Technologies600,000(c) 22,200,000 Monsanto 1,200,000 56,925,000 USA Waste Services 2,475,000(c) 90,956,250 Total 170,081,250 Communications equipment & services (7.3%) Advanced Fibre Communications 1,200,000(c) 35,700,000 Andrew Corp 2,200,000(c) 60,500,000 Northern Telecom 1,800,000 81,225,000 Tellabs 2,600,000(c) 133,087,500 Total 310,512,500 Computers & office equipment (17.4%) ABR Information Services 800,000(c) 19,700,000 Cisco Systems 1,800,000(c) 113,512,500 Compaq Computer 3,200,000(c) 96,200,000 Computer Associates Intl 800,000 42,550,000 Hewlett-Packard 1,800,000 108,000,000 IKON Office Solutions 400,000 12,600,000 Intl Business Machines 800,000 78,950,000 Keane 1,400,000(c) 56,875,000 Microsoft 900,000(c) 134,268,750 Network Associates 800,000(c) 43,200,000 Solectron 925,000(c) 40,006,250 Total 745,862,500 Electronics (8.9%) Applied Materials 3,000,000(c) 98,437,500 Intel 1,500,000 121,500,000 Maxim Integrated Products 2,400,000(c) 83,100,000 SGS-Thomson Microelectronics 500,000(b,c) 33,968,750 Texas Instruments 800,000 43,700,000 Total 380,706,250 Energy (1.8%) Anadarko Petroleum 1,300,000 76,700,000 Energy equipment & services (1.3%) Halliburton 1,200,000 53,925,000 Financial services (8.3%) First Virtual Holdings 100,000(c) 181,250 Merrill Lynch & Co 2,000,000 126,250,000 Providian Financial 1,013,550 49,537,256 Travelers Group 3,600,000 178,200,000 Total 354,168,506 Food (0.6%) Delta & Pine Land 888,975(b) 26,669,253 Furniture & appliances (0.6%) Ethan Allen Interiors 504,000 24,129,000 Health care (7.5%) Boston Scientific 900,000(b,c) 45,675,000 Gensia Sicor 161(c) 785 Johnson & Johnson 1,000,000 66,937,500 Medtronic 1,500,000 76,593,750 Pfizer 1,600,000 131,100,000 Total 320,307,035 Health care services (7.0%) First Health Group 1,000,000(c) 47,625,000 HEALTHSOUTH Rehabilitation 4,800,000(c) 107,700,000 Service Corp Intl 2,400,000 93,600,000 United Healthcare 1,000,000 51,250,000 Total 300,175,000 Industrial equipment & services (3.3%) Caterpillar 800,000 38,400,000 Deere & Co 1,200,000 63,300,000 ServiceMaster 1,500,000 41,343,750 Total 143,043,750 Insurance (1.7%) Provident Cos 2,000,000 72,750,000 Leisure time & entertainment (3.1%) Harley-Davidson 1,000,000 25,125,000 Marriott Intl 1,200,000 82,950,000 Mattel 600,000 24,300,000 Total 132,375,000 Multi-industry conglomerates (1.7%) AccuStaff 1,200,000(b,c) 30,900,000 Apollo Group Cl A 900,000(c) 40,725,000 Total 71,625,000 Restaurants & lodging (0.8%) Promus Hotel 800,000(c) 36,150,000 Retail (1.6%) Consolidated Stores 383,500(c) 15,771,438 Home Depot 900,000 54,281,250 Total 70,052,688 Textiles & apparel (0.7%) Nike Cl B 800,000(b) 32,050,000 Utilities -- telephone (2.7%) WorldCom 3,200,000(b,c)114,600,000 Foreign (4.4%) (d) Ericsson (LM) ADR 1,400,000 54,075,000 Schlumberger 1,800,000 132,637,500 Total 186,712,500 Total common stocks of unaffiliated issuers (Cost: $2,675,618,267) $4,127,714,982 Short-term securities (3.6%) Issuer Annualized Amount Value(a) yield on payable at date of maturity purchase U.S. government agencies (0.5%) Federal Home Loan Mtge Corp Disc Nt 02-09-98 5.39% $ 3,200,000 $ 3,195,704 Federal Natl Mtge Assn Disc Nts 02-17-98 5.40 5,000,000 4,987,297 02-24-98 5.45 10,000,000 9,963,800 02-27-98 5.46 5,000,000 4,979,600 Total 23,126,401 Commercial paper (3.1%) ABB Treasury Center USA 02-26-98 5.51 5,400,000(e) 5,378,589 AIG Funding 02-02-98 5.62 6,500,000 6,497,971 Albertson's 02-27-98 5.50 10,000,000 9,958,900 Ameritech 02-03-98 5.73 6,000,000 5,997,150 Ameritech Capital Funding 02-05-98 5.57 9,800,000(e) 9,792,446 ANZ (Delaware) 02-05-98 5.54% 11,000,000 10,991,567 Barclays U.S. Funding 02-02-98 5.58 3,000,000 2,999,073 02-03-98 5.54 12,200,000 12,194,382 Bell Atlantic Financial Services 02-23-98 5.49 7,700,000 7,673,091 Campbell Soup 02-23-98 5.82 7,000,000 6,971,510 Ciesco LP 02-05-98 5.54 2,300,000(e) 2,298,237 Commerzbank U.S. Finance 02-13-98 5.50 5,600,000 5,588,918 Delaware Funding 02-20-98 5.48 1,300,000(e) 1,296,057 Fleet Funding 03-13-98 5.53 9,000,000(e) 8,943,625 Morgan Stanley, Dean Witter, Discover & Co 02-19-98 5.48 5,900,000 5,882,998 NBD Bank Canada 02-09-98 5.59 19,500,000 19,472,894 Paccar Financial 02-26-98 5.50 1,800,000 1,792,876 Toyota Motor Credit 02-26-98 5.50 8,200,000 8,167,605 Total 131,897,889 Total short-term securities (Cost: $155,026,977) $ 155,024,290 Total investments in securities of unaffiliated issuers (Cost: $2,830,645,244) $4,282,739,272 Investments in securities of affiliated issuer (f) Common stock (1.3%) Issuer Shares Value(a) MasTec 1,800,000(b,c) $57,712,500 Total investments in securities of affiliated issuer (Cost: $60,266,600) $ 57,712,500 Total investments in securities (Cost: $2,890,911,844)(g) $4,340,451,772 ============== See accompanying notes to investments in securities.
Investments in securities Growth Portfolio Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Security is partially or fully on loan. See Note 4 to the financial statements. (c) Non-income producing. (d) Foreign security values are stated in U.S. dollars. (e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (f) Investments representing 5% or more of the outstanding voting securities of the issuer. Transactions with companies that are or were affiliates during the period ended Jan. 31, 1998 are as follows: Issuer Beginning Purchase Sales Ending Dividend cost cost cost cost income MasTec $45,512,990 $14,753,610 $ -- $60,266,600 $-- Risk Capital Holdings* 17,078,679 -- 17,078,679 -- -- ---------- ----------- ---------- ----------- ---- Total $62,591,669 $14,753,610 $17,078,679 $60,266,600 $-- *Issuer was not an affiliate for the entire period. (g) At Jan. 31,1998, the cost of securities for federal income tax purposes was approximately $2,890,912,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation..........................................$1,506,357,000 Unrealized depreciation.......................................... (56,817,000) ----------- Net unrealized appreciation......................................$1,449,540,000
Board members and officers Independent board members and officers Chairman William R. Pearce* of the board Chairman of the board, Board Services Corporation (provides administrative services to boards including the boards of the IDS and IDSLife funds and Master Trust portfolios). H. Brewster Atwater, Jr. Former chairman and chief executive officer, General Mills, Inc. Lynne V. Cheney Distinguished fellow, American Enterprise Institute for Public Policy Research. Heinz F. Hutter Former president and chief operating officer, Cargill, Inc. Anne P. Jones Attorney and telecommunications consultant. Alan K. Simpson Former United States senator for Wyoming. Edson W. Spencer Former chairman and chief executive officer, Honeywell, Inc. Wheelock Whitney Chairman, Whitney Management Company. C. Angus Wurtele Chairman of the board, The Valspar Corporation. Officer Vice president, Leslie L. Ogg* general counsel President of Board Services Corporation. and secretary Board members and officers associated with AEFC President John R. Thomas* Senior vice president, AEFC. William H. Dudley* Senior advisor to the chief executive officer, AEFC. David R. Hubers* President and chief executive officer, AEFC. Officers associated with AEFC Vice president Peter J. Anderson* Senior vice president, AEFC Treasurer Matthew N. Karstetter* Vice president, AEFC * Interested person as defined by the Investment Company Act of 1940. 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 with countries 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) trees 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 & 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. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. 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) gyroscope IDS Stock Fund Invests in a Portfolio comprised primarily of common stock 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 of 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 For more complete information about any of these funds, including charges and expenses, you can obtain a prospectus by contacting your financial advisor or writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it carefully before you invest or send money. Quick telephone reference American Express Redemptions and exchanges, National/Minnesota Financial Advisors dividend payments or 800-437-3133 Telephone Transaction reinvestments and automatic Service payment arrangements Mpls./St. Paul area: 671-3800 TTY Service For the hearing impaired 800-846-4852 American Express Automated account information 800-862-7919 Financial Advisors (TouchTone(R) phones only), Easy Access Line including current fund prices and performance, account values and recent account transactions AMERICAN EXPRESS Financial Advisors IDS Growth Fund IDS Tower 10 Minneapolis, MN 55440-0010 -----END PRIVACY-ENHANCED MESSAGE-----