-----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, M8ddJMVvF4GTZyH/mKGSMmD/0Kkgb7yjEBt/yjZewFHrKmYeqfno++xesPWPowpp 0YYVKka2W01c+Ux1obvzKg== 0000820027-99-000208.txt : 19990325 0000820027-99-000208.hdr.sgml : 19990325 ACCESSION NUMBER: 0000820027-99-000208 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990324 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: 99571117 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 N-30D 1 IDS Research Opportunities Fund 1999 SEMIANNUAL REPORT (icon of) ruler The goal of IDS Research Opportunities Fund, a part of IDS Growth Fund, Inc., is long-term growth of capital. Distributed by American Express Financial Advisors Inc. AMERICAN EXPRESS Financial Advisors The Rewards of Research Behind every decision to buy or sell a stock is information -- in most cases, informationgathered by a research analyst. IDSResearch 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 Chairman 3 From the Portfolio Manager 3 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 15 Notes to Financial Statements (Portfolio)18 Investments in Securities 22 From the Chairman (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board It is an honor for me to join the IDSMutual Fund Group as chairman of the board and chief executive officer for each of the funds. I have served for the past eight years as governor of Minnesota and also for the past 20 years as a constitutional officer responsible for the pension investments made on behalf of governmental employees. My responsibility in the coming years is to serve your interests. By law, half the members of a mutual fund board must be independent of their investment manager and distributor. I am one of those persons. I am not an employee of American Express Financial Corporation, nor do I own stock in American Express Company. Both are fine companies, but the law clearly states that to fully represent your interests I must be independent. Having said that, I have a great deal of respect for the capabilities of American Express Financial Corporation and for the services it provides investors. Your financial advisor assists you in financial planning, conducts regular investment reviews, and responds to your questions and needs. This is a very personal service that makes AEFCa partner in your financial future. I know that AEFC has an investment focus on the long-term performance of our economy. AEFC wants you to participate in that growth. Our board is here to serve you and to represent your interests in a professional manner. Arne H. Carlson From the Portfolio Manager (picture of) Keith Tufte Keith Tufte Portfolio Manager IDS Research Opportunities Fund recovered from a bad start to finish the first half of the fiscal year with a substantial gain. For the six months -- August 1998 through January 1999 -- the total return from the Fund's Class A shares was 16.33%. (Part of the return was in the form of a capital gain, which was paid to shareholders last December and reduced the Fund's net asset value by the same amount at that time.) The stock market was in rapid retreat when the period began, as worries about a possible slump in corporate profits fueled widespread stock-selling. Most of the damage was done by the end of August, but by that time the Fund had lost more than 15% of its value. Investors' moods brightened in the fall, though, as three reductions in short-term interest rates by the Federal Reserve restored some calm to the financial markets. Stocks wasted little time in responding, as they began a resolute advance that not only made up for the late-summer swoon but took the market to an all-time high in early January. The Fund largely kept up with the powerful pace of the market, gaining more than 30% from September through the end of the period in January. Large-caps lead again As has been the case in recent years, large-capitalization growth stocks most often led the way during the market's advances. That worked to the advantage of the Fund, as it confines its investments to stocks of companies in the Standard & Poor's 500, the most representative unmanaged index of large-cap stocks. Among the Fund's biggest holdings for the period were: General Electric, Warner Lambert, Coca-Cola, Bristol Myers Squibb, Intel, MCI Worldcom and U.S. West. On a stock sector basis, the largest investment (about one-fourth of assets) was in consumer non-cyclical stocks, which include the food, beverage and pharmaceutical areas. The rest of the portfolio was largely made up of technology (including computers, telecommunications), financial services (insurance, brokerage), consumer cyclical (retailing, housing) and utilities (electricity, telephone service), each of which accounted for roughly 15% to 20% of assets. As for the second half of the fiscal year, the investment environment is little changed from several months ago: inflation remains low, economic growth is still solid, and interest rates have yet to experience a meaningful increase. The biggest question to be answered in the months ahead is how strong corporate earnings will be. As always, the Fund's investments continue to be concentrated in those companies that our securities analysts believe have the best earnings prospects and, as a result, the best chance to outperform the stock market as a whole. Keith Tufte Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1999 $7.75 July 31, 1998 $6.98 Increase $0.77 Distributions -- Aug. 1, 1998 - Jan. 31, 1999 From income $0.32 From capital gains $0.03 Total distributions $0.35 Total return* +16.33%** Class B -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1999 $7.60 July 31, 1998 $6.88 Increase $0.72 Distributions -- Aug. 1, 1998 - Jan. 31, 1999 From income $0.32 From capital gains $0.03 Total distributions $0.35 Total return* +15.89%** Class Y -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1999 $7.77 July 31, 1998 $7.01 Increase $0.76 Distributions -- Aug. 1, 1998 - Jan. 31, 1999 From income $0.34 From capital gains $0.03 Total distributions $0.37 Total return* +16.39%** *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. The 10 Largest Holdings Percent Value (of net assets) (as of Jan. 31, 1999) Intel 3.44% $21,943,969 General Electric 3.06 19,538,213 MCI WorldCom 3.05 19,433,879 Bristol-Myers Squibb 2.90 18,471,818 Ameritech 2.75 17,570,725 Intl Business Machines 2.62 16,712,399 Pfizer 2.49 15,859,462 AT&T 2.46 15,663,450 Warner-Lambert 2.45 15,635,812 Wal-Mart Stores 2.40 15,325,199 For further detail about these holdings, please refer to the section entitled "Investments in Securities" herein. (icon of) pie chart The 10 holdings listed here make up 27.62% of net assets
Financial Statements Statement of assets and liabilities IDS Research Opportunities Fund Jan. 31, 1999 (Unaudited) Assets Investment in Aggressive Growth Portfolio (Note 1) $636,019,388 ------------ Liabilities Accrued distribution fee 4,575 Accrued service fee 2,948 Accrued transfer agency fee 1,109 Accrued administrative services fee 945 Other accrued expenses 25,425 ------ Total liabilities 35,002 ------ Net assets applicable to outstanding capital stock $635,984,386 ============ Represented by Capital stock-- $.01 par value (Note 1) $ 826,353 Additional paid-in capital 504,265,292 Net operating loss (388,125) Accumulated net realized gain (loss) 6,579,636 Unrealized appreciation (depreciation) on investments 124,701,230 ----------- Total -- representing net assets applicable to outstanding capital stock $635,984,386 ============ Net assets applicable to outstanding shares: Class A $405,322,577 Class B $230,289,545 Class Y $ 372,264 Net asset value per share of outstanding capital stock: Class A shares 52,287,661 $ 7.75 Class B shares 30,299,714 $ 7.60 Class Y shares 47,923 $ 7.77 See accompanying notes to the financial statements.
Statement of operations IDS Research Opportunities Fund Six months ended Jan. 31, 1999 (Unaudited) Investment income Income: Dividends $ 2,998,471 Interest 225,655 Less foreign taxes withheld (19,023) ------- Total income 3,205,103 --------- Expenses (Note 2): Expenses allocated from Aggressive Growth Portfolio 1,708,074 Distribution fee-- Class B 703,912 Transfer agency fee 465,285 Incremental transfer agency fee-- Class B 11,859 Service fee Class A 293,453 Class B 163,571 Administrative services fees and expenses 150,794 Compensation of board members 4,127 Postage 34,768 Registration fees 46,548 Reports to shareholders 15,135 Audit fees 2,500 Other 1,316 ----- Total expenses 3,601,342 Earnings credits on cash balances (Note 2) (9,175) - ------ Total net expenses 3,592,167 --------- Investment income (loss) -- net (387,064) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 5,171,331 Financial futures contracts 1,804,809 --------- Net realized gain (loss) on investments 6,976,140 Net change in unrealized appreciation (depreciation) on investments 81,915,890 ---------- Net gain (loss) on investments 88,892,030 ---------- Net increase (decrease) in net assets resulting from operations $88,504,966 =========== See accompanying notes to financial statements.
Statements of changes in net assets IDS Research Opportunities Fund Jan. 31, 1999 July 31, 1998 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ (387,064) $ 166,575 Net realized gain (loss) on investments 6,976,140 38,530,756 Net change in unrealized appreciation (depreciation) on investments 81,915,890 8,223,315 ---------- --------- Net increase (decrease) in net assets resulting from operations 88,504,966 46,920,646 ---------- ---------- Distributions to shareholders from: Net investment income Class A (166,906) -- Class B -- -- Class Y (840) -- Net realized gain Class A (17,205,662) (20,657,813) Class B (9,873,913) (10,689,824) Class Y (15,203) (109) ------- ---- Total distributions (27,262,524) (31,347,746) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 45,444,159 142,356,044 Class B shares 27,882,684 86,426,593 Class Y shares 321,504 -- Reinvestment of distributions at net asset value Class A shares 16,504,029 19,606,825 Class B shares 9,814,371 10,635,286 Class Y shares 16,043 109 Payments for redemptions Class A shares (33,372,022) (39,846,496) Class B shares (Note 2) (13,064,240) (14,553,014) Class Y shares (32,977) -- ------- ----- Increase (decrease) in net assets from capital share transactions 53,513,551 204,625,347 ---------- ----------- Total increase (decrease) in net assets 114,755,993 220,198,247 Net assets at beginning of period 521,228,393 301,030,146 ----------- ----------- Net assets at end of period $635,984,386 $521,228,393 ============ ============ Undistributed (excess of distributions over) net investment income $ (388,125) $ 166,685 ------------ ------------ See accompanying notes to financial statements.
Notes to Financial Statements IDS Research Opportunities Fund (Unaudited as to Jan. 31, 1999) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of IDS Growth Fund, Inc. and 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. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge and automatically convert to Class A shares during the ninth calendar year of ownership. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The 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 The Fund invests 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. The 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 the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund at Jan. 31, 1999, was 99.72%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to generally accepted accounting principles requires management to make estimates (e.g., on assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred 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 from net investment income, declared and paid at the end of the calendar year, when available, 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 an agreement with American Express Financial Corporation (AEFC) to provide administrative services. 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 0.06% 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 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: o Class A $15 o Class B $16 o Class Y $15 The Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder 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 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 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 $768,616 for Class A and $95,923 for Class B for the six months ended Jan. 31, 1999. During the six months ended Jan. 31, 1999, the Fund's transfer agency fees were reduced by $9,175 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, 1999 Class A Class B Class Y Sold 6,637,484 4,170,006 50,440 Issued for reinvested distributions 2,251,879 1,364,778 2,185 Redeemed (4,913,776) (1,970,303) (4,920) Net increase (decrease) 3,975,587 3,564,481 47,705 Year ended July 31, 1998 Class A Class B Class Y Sold 21,213,882 13,008,512 -- Issued for reinvested distributions 3,188,620 1,748,937 18 Redeemed (5,883,949) (2,177,029) -- Net increase (decrease) 18,518,553 12,580,420 18 4. BANK BORROWINGS The Fund entered into a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other IDS Funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had no borrowings outstanding during the six months ended Jan. 31, 1999.
5. 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 changesa Class A Class B Class Y 1999c 1998 1997b 1999c 1998 1997b 1999c 1998 1997b Net asset value, beginning of period $6.98 $6.86 $5.00 $6.88 $6.82 $5.00 $7.01 $6.88 $5.00 Income from investment operations: Net investment income (loss) .01 .02 .01 (.02) (.02) (.02) .03 .03 .01 Net gains (losses) (both realized and unrealized) 1.11 .65 1.86 1.09 .63 1.85 1.10 .65 1.88 Total from investment operations 1.12 .67 1.87 1.07 .61 1.83 1.13 .68 1.89 Less distributions: Dividends from net investment income -- -- -- -- -- -- (.02) -- -- Distributions from realized gains (.35) (.55) (.01) (.35) (.55) (.01) (.35) (.55) (.01) Total distributions (.35) (.55) (.01) (.35) (.55) (.01) (.37) (.55) (.01) Net asset value, end of period $7.75 $6.98 $6.86 $7.60 $6.88 $6.82 $7.77 $7.01 $6.88 Ratios/supplemental data Class A Class B Class Y 1999c 1998 1997b 1999c 1998 1997b 1999c 1998 1997b Net assets, end of period (in millions)$405 $337 $205 $230 $184 $96 $-- $-- $-- Ratio of expenses to average daily net assetsd 1.10%e 1.12% 1.52%e 1.86%e 1.88% 2.25%e 1.04%e .87% 1.45%e Ratio of net investment income (loss) to average daily net assets .13%e .30% .20%e (.64%)e(.46%)(.53%)e .17%e .40% .33%e Portfolio turnover rate (excluding short-term securities) 56% 148% 171% 56% 148% 171% 56% 148% 171% Total returnf 16.33% 10.76% 37.44% 15.89% 9.92% 36.48% 16.39% 10.93% 37.66% a For a share outstanding throughout the period. Rounded to the nearest cent. b Inception date. Period from Aug. 19, 1996 to July 31, 1997. c Six months ended Jan. 31, 1999 (Unaudited). d Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. e Adjusted to an annual basis. f Total return does not reflect payment of a sales charge.
Financial Statements Statement of assets and liabilities Aggressive Growth Portfolio Jan. 31, 1999 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $508,248,308) $633,030,092 Cash in bank on demand deposit 711,530 Dividends and accrued interest receivable 573,114 Receivable for investment securities sold 7,438,864 --------- Total assets 641,753,600 ----------- Liabilities Payable for investment securities purchased 3,947,156 Accrued investment management services fee 10,657 Other accrued expenses 10,887 ------ Total liabilities 3,968,700 --------- Net assets $637,784,900 ============ See accompanying notes to financial statements.
Statement of operations Aggressive Growth Portfolio Six months ended Jan. 31, 1999 (Unaudited) Investment income Income: Dividends $ 3,007,773 Interest 225,196 Less foreign taxes withheld (19,088) ------- Total income 3,213,881 --------- Expenses (Note 2): Investment management services fee 1,673,343 Compensation of board members 4,197 Custodian fees 33,620 Audit fees 7,500 Other 3,571 ----- Total expenses 1,722,231 Earnings credits on cash balances (Note 2) (8,904) ------ Total net expenses 1,713,327 Investment income (loss) -- net 1,500,554 Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 5,186,669 Financial futures contracts 1,810,607 --------- Net realized gain (loss) on investments 6,997,276 Net change in unrealized appreciation (depreciation) on investments 82,119,769 ---------- Net gain (loss) on investments 89,117,045 ---------- Net increase (decrease) in net assets resulting from operations $90,617,599 =========== See accompanying notes to financial statements.
Statements of changes in net assets Aggressive Growth Portfolio Jan. 31, 1999 July 31, 1998 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 1,500,554 $ 3,194,481 Net realized gain (loss) on investments 6,997,276 38,876,071 Net change in unrealized appreciation (depreciation) on investments 82,119,769 8,046,666 ---------- --------- Net increase (decrease) in net assets resulting from operations 90,617,599 50,117,218 ---------- ---------- Net contributions (withdrawals) from partners 24,053,444 170,560,308 ---------- ----------- Total increase (decrease) in net assets 114,671,043 220,677,526 Net assets at beginning of period 523,113,857 302,436,331 ----------- ----------- Net assets at end of period $637,784,900 $523,113,857 ============ ============ See accompanying notes to financial statements.
Notes to Financial Statements Aggressive Growth Portfolio (Unaudited as to Jan. 31, 1999) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Aggressive Growth Portfolio invests primarily in equity securities of companies that comprise the S&P 500. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to generally accepted accounting principles requires management to make estimates (e.g., on assets and liabilities) that could differ from actual results. 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 that reflects fair value as quoted by dealers who make markets in these securities or by 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 To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends 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 as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for 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 being unable 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 when the option transaction expires or closes. 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 To gain exposure to or protect itself from market changes, 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 of 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, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date 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 its contract obligations. 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. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has entered into an Investment Management Services Agreement with AEFC for managing its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.65% to 0.5% annually. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. The Portfolio also pays custodian fees to American Express Trust Company, an affiliate of AEFC. During the six months ended Jan. 31, 1999, the Portfolio's custodian fees were reduced by $8,904 as a result of earnings credits from overnight cash balances. According to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $312,571,664 and $294,073,427, respectively, for the six months ended Jan. 31, 1999. For the same period, the portfolio turnover rate was 56%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $13,941 for the six months ended Jan. 31, 1999. 4. STOCK INDEX FUTURES CONTRACTS Investments in securities at Jan. 31, 1999, included securities valued at $2,875,000 that were pledged as collateral to cover initial margin deposits on 27 open purchase contracts. The market value of the open purchase contracts at Jan. 31, 1999, was $8,650,125 with a net unrealized gain of $280,455.
Investments in Securities Aggressive Growth Portfolio Jan. 31, 1999 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (97.9%) Issuer Shares Value(a) Aerospace & defense (0.3%) AlliedSignal 4,700 $183,300 Goodrich (BF) 14,000 476,000 Rockwell Intl 27,800 1,207,563 Total 1,866,863 Airlines (0.4%) Southwest Airlines 97,900 2,631,063 Automotive & related (2.8%) Dana 72,900 2,998,013 Danaher 32,900 1,760,150 Ford Motor 104,100 6,395,644 General Motors 73,900 6,632,524 Total 17,786,331 Banks and savings & loans (7.2%) Bank One 153,112 8,019,241 BankAmerica 123,151 8,235,723 State Street 123,100 8,801,650 Wachovia 70,200 6,221,475 Washington Mutual 186,700 7,841,400 Wells Fargo 200,000 6,987,500 Total 46,106,989 Beverages & tobacco (1.8%) Coca-Cola 171,400 11,215,988 Chemicals (0.5%) Waste Management 63,248 3,158,447 Communications equipment & services (2.8%) Lucent Technologies 91,900 10,344,493 Tellabs 88,450(b) 7,584,588 Total 17,929,081 Computers & office equipment (16.5%) 3Com 149,300(b) 7,017,100 America Online 39,400(b) 6,922,088 Cisco Systems 125,200(b) 13,967,624 Compaq Computer 265,000 12,620,625 Computer Sciences 19,600 1,343,825 Electronic Data Systems 116,800 6,124,700 EMC 124,200(b) 13,522,275 First Data 248,700 9,528,319 Gateway 2000 26,100(b) 2,016,225 Intl Business Machines 91,200 16,712,399 Novell 244,200 4,975,575 Parametric Technology 92,500(b) 1,208,281 Unisys 131,900 4,369,188 Xerox 33,200 4,116,800 Total 104,445,024 Electronics (3.8%) Applied Materials 26,700(b) 1,687,106 Intel 155,700 21,943,969 LSI Logic 20,800(b) 579,800 Total 24,210,875 Energy (3.5%) Anadarko Petroleum 49,000 1,326,063 Chevron 63,200 4,724,200 Mobil 69,500 6,094,281 Royal Dutch Petroleum 155,000(c) 6,209,687 Texaco 87,500 4,145,313 Total 22,499,544 Financial services (3.6%) Associates First Capital Cl A 153,626 6,231,455 Household Intl 178,100 7,825,269 MBNA 240,700 6,724,556 Providian Financial 21,200 2,137,225 Total 22,918,505 Food (2.5%) Bestfoods 82,400 4,145,750 General Mills 55,000 4,616,563 Sara Lee 150,000 3,825,000 Sysco 111,600 3,041,100 Total 15,628,413 Health care (15.4%) ALZA 35,700(b) 1,805,081 American Home Products 29,300 1,719,544 Amgen 94,400(b) 12,065,499 Baxter Intl 96,200 6,824,188 Boston Scientific 86,200(b) 2,106,513 Bristol-Myers Squibb 144,100 18,471,818 Guidant 118,200 6,966,413 Medtronic 83,000 6,614,063 Pfizer 123,300 15,859,462 Schering-Plough 190,700 10,393,150 Warner-Lambert 216,600 15,635,812 Total 98,461,543 Health care services (0.4%) Tenet Healthcare 53,000(b) 1,099,750 United Healthcare 33,000 1,476,750 Total 2,576,500 Household products (1.3%) Procter & Gamble 87,900 7,987,913 Industrial equipment & services (0.2%) Browning-Ferris Inds 42,400 1,166,000 Insurance (2.6%) American General 108,850 7,762,366 Lincoln Natl 107,350 8,943,597 Total 16,705,963 Leisure time & entertainment (1.3%) Disney (Walt) 247,000 8,151,000 Media (0.7%) Tele-Communications Cl A 67,600 4,634,825 Multi-industry conglomerates (4.6%) General Electric 186,300 19,538,213 Tyco Intl 130,950(c) 10,091,334 Total 29,629,547 Paper & packaging (0.6%) Intl Paper 68,000 2,690,250 Owens-Illinois 40,400(b) 1,181,700 Total 3,871,950 Restaurants & lodging (0.6%) Wendy's Intl 170,100 4,050,506 Retail (13.1%) Albertson's 77,700 4,739,700 American Stores 86,400 3,132,000 Circuit City Stores 72,000 3,978,000 Costco Companies 92,000(b) 7,624,500 CVS 129,300 7,079,175 Dayton Hudson 123,500 7,873,124 Home Depot 135,900 8,204,962 Kroger 77,900(b) 4,946,650 Meyer (Fred) 63,200(b) 3,950,000 Rite Aid 56,500 2,775,563 Safeway 108,100(b) 6,067,113 TJX Companies 130,700 3,863,819 Wal-Mart Stores 178,200 15,325,199 Walgreen 67,200(d) 4,200,000 Total 83,759,805 Transportation (0.7%) Burlington Northern Santa Fe 137,500 4,760,938 Utilities -- gas (0.5%) Enron 49,000 3,234,000 Utilities -- telephone (10.2%) Ameritech 269,800 17,570,725 AT&T 172,600 15,663,450 MCI WorldCom 243,685(b) 19,433,879 U S WEST Communications Group 199,500 12,306,656 Total 64,974,710 Total common stocks (Cost: $499,580,539) $624,362,323
Short-term securities (1.4%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Home Loan Bank Disc Nt 03-19-99 4.75% $1,700,000 $1,689,302 Federal Home Loan Mtge Corp Disc Nts 02-02-99 5.05 1,500,000 1,499,371 02-10-99 5.04 700,000 698,928 02-12-99 5.06 500,000 499,092 02-16-99 5.07 700,000 698,337 03-08-99 4.80 700,000 696,568 03-08-99 4.81 1,500,000 1,492,631 03-12-99 4.81 500,000 497,278 03-17-99 4.74 400,000 397,593 Federal Natl Mtge Assn Disc Nt 02-19-99 4.81 500,000 498,669 Total short-term securities (Cost: $8,667,769) $8,667,769 Total investments in securities (Cost: $508,248,308)(e) $633,030,092 See accompanying notes to investments in securities.
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. As of Jan. 31, 1999, the value of foreign securities represented 2.55% of net assets. (d) Partially pledged as initial margin deposit on the following open stock index futures purchase contracts (see Note 4 to the financial statements): Type of security Contracts S&P 500 Index, March 1999 27 (e) At Jan. 31, 1999, the cost of securities for federal income tax purpose was approximately $508,248,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $138,614,000 Unrealized depreciation (13,832,000) Net unrealized appreciation $124,782,000
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