-----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, KnnhaXdzyzii6tYZK1Hwyh+wZke//BetiLN5NSHSdHMcjkMEMXGw+2B/wRVs0dI0 SCn8bUMrBo2P3sUlbvoSVQ== 0000820027-98-000201.txt : 19980317 0000820027-98-000201.hdr.sgml : 19980317 ACCESSION NUMBER: 0000820027-98-000201 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980130 FILED AS OF DATE: 19980313 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS NEW DIMENSIONS FUND INC CENTRAL INDEX KEY: 0000049717 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410940846 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01629 FILM NUMBER: 98564972 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123722772 N-30D 1 1998 SEMIANNUAL REPORT IDS New Dimensions Fund (icon of) dimension The goal of New Dimensions Fund, Inc. is long-term growth of capital. The Fund invests primarily in common stocks of companies showing potential for significant growth and operating in areas where economic or technological changes are occurring. AMERICAN EXPRESS Financial Advisors Distributed by American Express Financial Advisors Inc. (icon of) dimension Fast-track stocks What type of stock has been the driving force behind the dramatic increases posted by U.S. and foreign stock markets in recent years? The answer is growth stocks -- that is stocks of companies that have a track record of increasing their business and profits at a rapid pace. These companies, some large and well-known, others smaller and newly discovered, form the foundation of IDSNew Dimensions Fund. The Fund looks for companies from around the world that not only have a history of continuous growth, but are poised to continue growing due to their superior management, marketing innovation and/or technological advances. 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) 19 Notes to financial statements (Portfolio) 22 Investments in securities 30 Board members and officers 35 IDS mutual funds 36 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, 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. 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 an investor 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 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) William R. Pearce William R. Pearce Chairman of the board From the portfolio manager The past six months was a highly volatile period for stocks, especially the growth sector. In the end, though, IDS New Dimensions Fund generated positive results for the first half of the fiscal year -- August 1997 through January 1998. For the Fund's Class A shares, the total return was 1.3%. (A portion of the return came in the form of a capital gain, which was paid to shareholders last December and reduced the Fund's net asset by a like amount.) After racking up spectacular gains in the preceding months, the stock market was kept off balance much of the past six months. The initial problem was a rise in long-term interest rates, which caused stocks to stumble last August. After a rebound in September, stocks then were confronted with the far-reaching effect of financial turmoil in Asia. This new phenomenon immediately raised concern that profits of American companies -- particularly those in technology-related businesses, for which Asia is an important market -- might soon erode. The result was a sharp decline for stocks in late October. Although the `Asian flu' lingered over the winter, stocks, thanks to support provided by ongoing low inflation, a decline in long-term interest rates and solid economic growth, experienced a fairly speedy recovery. By the end of the period, the market had managed to climb out of last fall's nose dive and finish the six months in positive territory. Core investments little changed The Fund's performance pattern generally followed that of the broad market, although its fluctuations were somewhat more dramatic. For the most part, that stemmed from the Fund's substantial holdings among technology stocks, which were whipsawed by the Asian storm. The Fund's other major areas of exposure -- health care and financial/business services stocks -- fared considerably better, as their profit prospects appeared more stable. I made only modest changes to the portfolio during the six months, the two most notable being a reduction in technology stocks and in increase in mid-cap (or medium-size) stocks, both occurring last fall. Still, the core of the Fund's investments remained in large-cap stocks, which have most often led the market's advance in recent years. Cash reserves made up about 12% of portfolio assets during the past period. As I write this in mid-February, 1998 has gotten off to an uncertain start. While the economy remains in good shape and inflation continues to be well-behaved, the future strength of corporate earnings is still in some doubt. I expect that to foster ongoing market volatility and, perhaps, bring a temporary halt to the unusually generous returns stocks have provided in recent years. Gordon Fines (picture of) Gordon Fines Gordon Fines Portfolio manager To our shareholders Class A 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1998 $ 24.07 July 31, 1997 $ 25.69 Decrease $ 1.62 Distributions Aug. 1, 1997 - Jan. 31, 1998 From income $ 0.17 From capital gains $ 1.73 Total distributions $ 1.90 Total return* +1.3%** Class B 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1998 $ 23.80 July 31, 1997 $ 25.38 Decrease $ 1.58 Distributions Aug. 1, 1997 - Jan. 31, 1998 From income $ 0.03 From capital gains $ 1.73 Total distributions $ 1.76 Total return* +1.2%** Class Y 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 1998 $ 24.08 July 31, 1997 $ 25.72 Decrease $ 1.64 Distributions Aug. 1, 1997 - Jan. 31, 1998 From income $ 0.20 From capital gains $ 1.73 Total distributions $ 1.93 Total return* +1.4%** *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 Portfolio's ten largest holdings Percent Value (of Portfolio's net assets) (as of Jan. 31, 1998) General Electric 3.97% $589,000,000 Pfizer 2.87 426,075,000 Norwest 2.70 401,500,000 Cisco Systems 2.34 346,843,749 Deere & Co 2.10 311,225,000 Intel 2.07 307,800,000 Compaq Computer 2.03 300,625,000 Travelers Group 2.00 297,000,000 SmithKline Beecham ADR 1.95 290,087,500 BellSouth 1.88 278,587,500 (picture of) pie chart The ten holdings listed here make up 23.91% of the Portfolio's net assets
Financial statements Statement of assets and liabilities IDS New Dimensions Fund, Inc. Jan. 31, 1998 Assets (Unaudited) Investment in Growth Trends Portfolio (Note 1) $14,823,445,839 --------------- Liabilities Disbursements in excess of cash on demand deposit 19,262 Accrued distribution fee 38,503 Accrued service fee 62,715 Accrued transfer agency fee 39,170 Accrued administrative services fee 13,411 Other accrued expenses 679,053 Total liabilities 852,114 ------- Net assets applicable to outstanding capital stock $14,822,593,725 --------------- Represented by Capital stock-- $.01 par value (Note 1) $ 6,166,860 Additional paid-in capital 9,544,554,322 Undistributed net investment income 7,939,765 Accumulated net realized gain (loss) 393,372,437 Unrealized appreciation (depreciation) on investments 4,870,560,341 Total-- representing net assets applicable to outstanding capital stock $14,822,593,725 --------------- Net assets applicable to outstanding shares: Class A $ 9,021,547,330 =============== Class B $ 1,886,156,854 Class Y $ 3,914,889,541 Net asset value per share of outstanding capital stock: Class A shares 374,869,866 $ 24.07 Class B shares 79,249,816 $ 23.80 Class Y shares 162,566,297 $ 24.08 See accompanying notes to financial statements.
Statement of operations IDS New Dimensions Fund, Inc. Six months ended Jan. 31, 1998 Investment income (Unaudited) Income: Dividends $ 67,228,345 Interest 41,373,135 Less foreign taxes withheld (486,427) -------- Total income 108,115,053 ----------- Expenses (Note 2): Expenses allocated from Growth Trends Portfolio 35,181,736 Distribution fee -- Class B 6,323,576 Transfer agency fee 6,768,781 Incremental transfer agency fee-- Class B 84,951 Service fee Class A 7,483,813 Class B 1,466,779 Class Y 1,894,708 Administrative services fees and expenses 2,412,635 Compensation of board members 13,041 Postage 218,081 Registration fees 554,096 Reports to shareholders 100,002 Audit fees 5,125 Other 4,517 ----- Total expenses 62,511,841 Earnings credits on cash balances (Note 2) (586,575) -------- Total net expenses 61,925,266 Investment income (loss) -- net 46,189,787 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions 883,506,272 Net change in unrealized appreciation (depreciation) on investments (727,005,006) ------------ Net gain (loss) on investments 156,501,266 ----------- Net increase (decrease) in net assets resulting from operations $202,691,053 ============ See accompanying notes to financial statements.
Financial statements Statements of changes in net assets IDS New Dimensions Fund, Inc. Operations and distributions Jan. 31, 1998 July 31, 1997 Six months ended Year ended (Unaudited) Investment income (loss)-- net $ 46,189,787 $ 77,245,186 Net realized gain (loss) on investments 883,506,272 558,596,748 Net change in unrealized appreciation (depreciation) on investments (727,005,006) 3,419,852,495 ------------ ------------- Net increase (decrease) in net assets resulting from operations 202,691,053 4,055,694,429 ----------- ------------- Distributions to shareholders from: Net investment income Class A (58,194,887) (39,669,181) Class B (1,969,568) (1,734,180) Class Y (29,211,427) (20,903,051) Net realized gain Class A (598,215,942) (211,691,845) Class B (123,782,372) (30,220,222) Class Y (262,398,412) (89,184,320) ------------ ----------- Total distributions (1,073,772,608) (393,402,799) -------------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 1,041,745,976 1,503,550,276 Class B shares 387,139,303 685,227,207 Class Y shares 636,698,483 1,132,923,031 Reinvestment of distributions at net asset value Class A shares 631,280,177 245,314,571 Class B shares 125,170,979 31,850,456 Class Y shares 291,609,838 110,087,371 Payments for redemptions Class A shares (781,801,947) (1,035,073,877) Class B shares (Note 2) (75,958,960) (105,961,908) Class Y shares (522,385,130) (829,208,400) ------------ ------------ Increase (decrease) in net assets from capital share transactions 1,733,498,719 1,738,708,727 ------------- ------------- Total increase (decrease) in net assets 862,417,164 5,401,000,357 Net assets at beginning of period 13,960,176,561 8,559,176,204 -------------- ------------- Net assets at end of period $14,822,593,725 $13,960,176,561 =============== =============== Undistributed net investment income $ 7,939,765 $ 51,125,860 --------------- --------------- See accompanying notes to financial statements.
Notes to financial statements IDS New Dimensions Fund, Inc. (Unaudited as to Jan. 31, 1998) 1 Summary of significant accounting policies The Fund is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. 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 Trends Portfolio Effective May 13, 1996, the Fund began investing all of its assets in the Growth Trends 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 Trends Portfolio invests primarily in common stocks of companies showing potential for significant growth and operating in areas where economic or technological changes are occuring. 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 99.87%. 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 from net investment income, declared and paid at the end of the calendar year, 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 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 0.025% annually. Additional administrative service expenses 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 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 for distributing Fund shares were $13,730,395 for Class A and $625,401 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 $586,575 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 41,963,122 15,762,298 25,492,189 Issued for reinvested 27,068,061 5,423,366 12,496,136 distributions Redeemed (31,391,153) (3,097,294) (21,033,728) ----------- ---------- ----------- Net increase (decrease) 37,640,030 18,088,370 16,954,597 Year ended July 31, 1997 Class A Class B Class Y Sold 69,802,144 32,213,213 52,586,867 Issued for reinvested 11,712,924 1,532,597 5,254,015 distributions Redeemed (47,748,549) (4,867,366) (38,295,346) ----------- ---------- ----------- Net increase (decrease) 33,766,519 28,878,444 19,545,536
IDS New Dimensions Fund, Inc. 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 1996c 1995 1994 1993 1992 1991 1990 1989 1988 Net asset value, $25.69 $18.54 $17.24 $14.06 $14.87 $12.57 $12.01 $9.45 $10.45 $7.94 $9.84 beginning of period Income from investment operations: Net investment .09 .15 .17 .16 .09 .06 .06 .15 .24 .16 .14 income (loss) Net gains (losses) .19 .78 .18 .36 (.18) .30 .11 .35 (.52) .23 (.11) (both realized and unrealized) Total from investment .28 .79 .20 .38 (.09) .30 .11 .37 (.28) .25 (.98) operations Less distributions: Dividends from net (.17) (.13) (.15) (.12) (.07) (.04) (.14) (.22) (.19) (.04) (.12) investment income Distribution from (.17) (.67) (.60) (.50) (.65) (.73) (.49) (.96) (.53) -- (.80) realized gains Total distributions (.19) (.80) (.75) (.62) (.72) (.77) (.63) (.11) (.72) (.04) (.92) Net asset value, $24.07 $25.69 $18.54 $17.24 $14.06 $14.87 $12.57 $12.01 $9.45 $10.45 $7.94 end of perod Ratios/supplemental data Class A 1998b 1997 1996c 1995 1994 1993 1992 1991 1990 1989 1988 Net assets, end of $9,022 $8,663 $5,626 $4,575 $4,296 $3,544 $2,253 $1,553 $815 $762 $636 period (in millions) Ratio of expenses to .81%d .91% .94%d .90% .90% .92% .95% .90% .88% .82% .87% average daily net assetse Ratio of net income .72%d .73% .78%d 1.07% .75% .51% .57% 1.65% 2.43% 1.70% 1.65% (loss) to average daily net assets Portfolio turnover rate 19% 32% 41% 54% 48% 60% 75% 81% 91% 67% 119% (excluding short-term securities) Total returnf 1.3% .4% .1% .2% (.7%) .2% .9% .4% (.2%) .3% (.9%) Average brokerage $.0474 $.0511 -- -- -- -- -- -- -- -- -- commission rateg aFor a share outstanding throughout the period. Rounded to the nearest cent. bSix months ended Jan. 31, 1998 (Unaudited). cThe Fund's fiscal year-end was changed from Sept 30 to July 31, effective 1996. dAdjusted to an annual basis. e Effective fiscal year 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. fTotal return does not reflect payment of a sales charge. reduction of earnings credits on cash balances. 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.
IDS New Dimensions Fund, Inc. Fiscal period ended July 31, Per share income and capital changesa Class B Class Y 1998b 1997 1996c 1995d 1998b 1997 1996c 1995d Net asset value, $25.38 $18.38 $17.18 $14.21 $25.72 $18.56 $17.26 $14.21 beginning of period of period Income from investment operations: Net investment .01 (.02) .03 .02 .09 .18 .19 .10 income (loss) Net gains (losses) .17 7.73 .18 .29 .20 .78 .18 .29 (both realized and unrealized) Total from investment .18 7.71 .19 .29 .29 .79 .20 .30 operations Less distributions: Dividends from net (.03) (.04) (.11) -- (.20) (.16) (.17) -- investment income Distribution from (.17) (.67) (.60) -- (.17) (.67) (.60) -- realized gains Total distributions (.17) (.71) (.71) -- (.19) (.83) (.77) -- Net asset value, $23.80 $25.38 $18.38 $17.18 $24.08 $25.72 $18.56 $17.26 end of period Ratios/supplemental data Class B Class Y 1998b 1997 1996c 1995d 1998b 1997 1996c 1995d Net assets, end of $1,886 $1,552 $593 $150 $3,915 $3,745 $2,340 $1,792 period (in millions) Ratio of expenses to 1.57%e 1.67% 1.71%e 1.72%e .74%e .76% .77%e .76%e average daily net assetsf Ratio of income (loss) (.04%)e (.02%) .01%e .33%e .80%e .88% .95%e 1.26%e to average daily net assets Portfolio turnover rate 19% 32% 41% 54% 19% 32% 41% 54% (excluding short-term securities) Total returng 1.2% 42.7% 11.5% 20.9% 1.4% 44.0% 12.3% 21.5% Average brokerage $.0474 $.0511 -- -- $.0474 $.0511 -- -- commission rateh aFor a share outstanding throughout the period. Rounded to the nearest cent. bSix months ended Jan. 31, 1998 (Unaudited). cThe Fund's fiscal year-end was changed from Sept. 30 to July 31, effective 1996. dInception date was March 20, 1995. eAdjusted to an annual basis. fEffective fiscal year 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. gTotal return does not reflect payment of a sales charge. hEffective 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 Trends Portfolio Jan. 31, 1998 Assets (Unaudited) Investments in securities, at value (Note 1) (identified cost $10,066,650,897) $14,944,487,759 Cash in bank on demand deposit 20,895,546 Dividends and accrued interest receivable 11,011,868 Receivable for investment securities sold 30,140,482 Receivable from investment advisor 295,453 ------- Total assets 15,006,831,108 -------------- Liabilities Payable for investment securities purchased 135,657,850 Payable upon return of securities loaned (Note 4) 26,490,000 Accrued investment management services fee 210,262 Option contracts written, at value (premium received $1,547,025) (Note 5) 1,465,312 Other accrued expenses 22,728 ------ Total liabilities 163,846,152 ----------- Net assets $14,842,984,956 =============== See accompanying notes to financial statements.
Financial statements Statement of operations Growth Trends Portfolio Six months ended Jan. 31, 1998 Investment income (Unaudited) Income: Dividend $ 67,326,260 Interest 41,560,090 Less foreign taxes withheld (487,152) -------- Total income 108,399,198 ----------- Expenses (Note 2): Investment management services fee 34,824,337 Compensation of board members 28,010 Custodian fees 306,520 Audit fees 15,375 Other 58,595 ------ Total expenses 35,232,837 ---------- Investment income (loss) -- net 73,166,361 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (Note 3) 884,860,115 Net change in unrealized appreciation (depreciation) on investments (728,173,585) ------------ Net gain (loss) on investments 156,686,530 ----------- Net increase (decrease) in net assets resulting from operations $229,852,891 ============ See accompanying notes to financial statements.
Statements of changes in net assets Growth Trends Portfolio Operations Jan. 31, 1998 July 31, 1997 Six months ended Year ended (Unaudited) Investment income (loss)-- net $ 73,166,361 $ 117,732,767 Net realized gain (loss) on investments 884,860,115 559,194,834 Net change in unrealized appreciation (depreciation) on investments (728,173,585) 3,427,643,228 ------------ ------------- Net increase (decrease) in net assets resulting from operations 229,852,891 4,104,570,829 Net contributions (withdrawals) from partners 631,002,712 1,292,719,326 ----------- ------------- Total increase (decrease) in net assets 860,855,603 5,397,290,155 Net assets at beginning of period 13,982,129,353 8,584,839,198 -------------- ------------- Net assets at end of period $14,842,984,956 $13,982,129,353 =============== =============== See accompanying notes to financial statements.
Notes to financial statements Growth Trends Portfolio (Unaudited as to Jan. 31, 1998) 1 Summary of significant accounting policies Growth Trends Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Growth Trends Portfolio invests primarily in common stocks of companies showing potential for significant growth and operating in areas where economic or technological changes are occurring. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. 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 0.49% annually. The fees may be increased or decreased by a performance adjustment based on a comparison of the performance of Class A shares of IDS New Dimensions Fund to the Lipper Growth Fund Index. The maximum adjustment is 0.12% of the Portfolio's average daily net assets on an annual basis. The adjustment decreased the fee by $2,051,975 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. 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 $3,357,164,429 and $2,565,360,443, respectively, for the six months ended Jan. 31, 1998. For the same period, the portfolio turnover rate was 19%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $835,690 for the six months ended Jan. 31, 1998. 4 Lending of portfolio securities At Jan. 31, 1998, securities valued at $25,964,842 were on loan to brokers. For collateral, the Portfolio received $26,490,000 in cash. Income from securities lending amounted to $355,559 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. 5 Option contracts written The number of contracts and premium amounts associated with options contracts written is as follows: Six months ended Jan. 31, 1998 Calls Contracts Premium Balance July 31, 1997 -- $ -- Opened 15,630 1,547,025 Balance Jan. 31, 1998 15,630 $1,547,025 See summary of significant accounting policies. Investments in securities Growth Trends Portfolio (Percentages represent Jan. 31, 1998 (Unaudited) value of investments compared to net assets) Common stocks (91.1%) Issuer Shares Value(a) Aerospace & defense (1.4%) Boeing 1,000,000 $ 47,562,500 United Technologies 2,000,000 163,250,000 Total 210,812,500 Airlines (1.7%) AMR2,000,000(b) 252,500,000 Banks and savings & loans (6.9%) BankAmerica 1,300,000 92,381,250 Citicorp 2,000,000 238,000,000 Norwest 11,000,000 401,500,000 State Street 3,900,000 218,400,000 Wachovia 1,000,000 77,750,000 Total 1,028,031,250 Beverages & tobacco (1.3%) Coca-Cola 2,500,000 161,875,000 Fortune Brands 955,200 36,536,400 Total 198,411,400 Building materials & construction (1.2%) Tyco Intl 4,000,000 177,500,000 Chemicals (2.1%) Air Products & Chemicals 800,000 64,050,000 Monsanto 2,000,000 94,875,000 USA Waste Services 4,000,000(b) 147,000,000 Total 305,925,000 Communications equipment & services (1.9%) ADC Telecommunications 2,000,000(b) 38,000,000 Lucent Technologies 1,100,000 97,350,000 Motorola 500,000 29,718,750 Tellabs 2,200,000(b) 112,612,500 Total 277,681,250 Computers & office equipment (11.9%) Automatic Data Processing 525,400 31,425,488 BMC Software 1,000,000(b) 67,750,000 Cisco Systems 5,500,000(b) 346,843,749 Compaq Computer 10,000,000(f) 300,625,000 Computer Associates Intl 3,500,000 186,156,250 Computer Sciences 500,000(b) 42,437,500 Hewlett-Packard 3,400,000 204,000,000 Intl Business Machines 2,000,000 197,375,000 Microsoft 1,700,000(b) 253,618,750 Oracle 700,000(b) 16,275,000 PeopleSoft 1,000,000(b) 35,000,000 Xerox 1,000,000 80,375,000 Total 1,761,881,737 Electronics (2.8%) AMP 864,950 34,598,000 Applied Materials 1,000,000(b) 32,812,500 Intel 3,800,000 307,800,000 Texas Instruments 800,000 43,700,000 Total 418,910,500 Energy (1.8%) Exxon 2,300,000 136,418,750 Mobil 2,000,000 136,250,000 Total 272,668,750 Energy equipment & services (0.5%) Baker Hughes 2,000,000 77,125,000 Financial services (5.1%) Associates First Capital Cl A 1,000,000 68,000,000 Fannie Mae 334,900 20,680,075 MBNA 5,000,000 155,312,500 Morgan Stanley, Dean 3,000,000 175,125,000 Witter, Discover & Co Paychex 800,000 38,250,000 Travelers Group 6,000,000 297,000,000 Total 754,367,575 Food (2.1%) ConAgra 8,600,000 271,975,000 General Mills 500,000 37,218,750 Total 309,193,750 Health care (9.0%) Bristol-Myers Squibb 1,900,000 189,406,250 Genentech 26,500(b) 1,722,500 Johnson & Johnson 3,000,000 200,812,500 Lilly (Eli) 1,600,000 108,000,000 Medtronic 3,500,000 178,718,750 Merck & Co 2,000,000 234,500,000 Pfizer 5,200,000 426,075,000 Total 1,339,235,000 Health care services (3.3%) Cardinal Health 1,700,000 131,643,750 HBO & Co 2,800,000 146,475,000 HEALTHSOUTH Rehabilitation 2,700,000(b) 60,581,250 Service Corp Intl 2,000,000 78,000,000 United Healthcare 1,400,000 71,750,000 Total 488,450,000 Household products (2.3%) Gillette 1,800,000 177,750,000 Procter & Gamble 2,000,000 156,750,000 Total 334,500,000 Industrial equipment & services (2.7%) Deere & Co 5,900,000 311,225,000 Illinois Tool Works 1,500,000 83,531,250 Total 394,756,250 Insurance (1.7%) American Intl Group 1,500,000 165,468,750 SunAmerica 215,700 8,668,444 UNUM 1,500,000 72,937,500 Total 247,074,694 Leisure time & entertainment (1.6%) Marriot Intl 3,000,000 207,375,000 Mirage Resorts 1,600,000(b) 36,900,000 Total 244,275,000 Media (2.3%) CBS 4,600,000 137,712,500 Clear Channel Communications 600,000(b) 46,200,000 Gannett 2,600,000 157,300,000 Total 341,212,500 Metals (0.6%) Aluminum Co of America 1,100,000 84,012,500 Multi-industry conglomerates (6.6%) AccuStaff 2,400,000(b) 61,800,000 Emerson Electric 3,700,000 223,850,000 General Electric 7,600,000 589,000,000 Minnesota Mining & Mfg 1,200,000 100,200,000 Total 974,850,000 Restaurants & lodging (0.5%) Promus Hotel 1,700,000(b) 76,818,750 Retail (5.4%) Cendant 3,800,000 128,725,000 CVS 1,800,000 118,012,500 Dayton Hudson 1,500,000 107,906,250 Kroger 1,200,000(b) 46,950,000 Safeway 3,800,000 252,462,500 Wal-Mart Stores 3,800,000 151,525,000 Total 805,581,250 Transportation (0.4%) CNF Transportation 1,200,000 54,825,000 Utilities -- electric (0.9%) CMS Energy 3,000,000 127,687,500 Utilities -- gas (0.9%) El Paso Natural Gas 2,200,000 140,662,500 Utilities -- telephone (5.0%) AirTouch Communications 2,000,000(b) 87,750,000 Ameritech 1,000,000 42,937,500 AT&T 1,400,000 87,675,000 BellSouth 4,600,000 278,587,500 Cincinnati Bell 1,900,000 68,162,500 US WEST Communications Group 2,000,000 96,250,000 WorldCom 2,200,000(b,e) 78,787,500 Total 740,150,000 Foreign (7.3%)(c) ACE 2,300,000 214,043,750 Elan ADR 1,450,000(b,e) 75,309,375 Northern Telecom 2,500,000 112,812,500 Royal Dutch Petroleum 4,000,000 205,000,000 Schlumberger 2,600,000 191,587,500 SmithKline Beecham ADR 4,600,000 290,087,500 Total 1,088,840,625 Total common stocks (Cost: $8,649,514,794) $13,527,940,281 Short-term securities (9.6%) 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 02-09-98 5.39% $10,000,000 $ 9,986,575 Banker's acceptance (0.1%) First Bank Natl 02-05-98 5.55 10,000,000 9,992,319 Certificate of deposit (0.1%) US Bank Minneapolis 04-28-98 5.54 15,000,000 14,794,667 Commercial paper (9.1%) Abbott Laboratories 02-13-98 5.51 2,500,000 2,495,035 Alabama Power 02-12-98 5.48 22,470,000 22,429,030 American General 02-19-98 5.50 7,200,000 7,179,214 03-13-98 5.50 6,300,000 6,260,824 American General Finance 03-11-98 5.53 11,500,000 11,431,479 Ameritech Capital Funding 02-03-98 5.73 16,700,000 16,692,068 Associates Corp North America 02-18-98 5.49 10,000,000 9,972,650 03-03-98 5.50 12,000,000 11,943,477 03-12-98 5.54 20,000,000 19,877,555 Avco Financial Services 03-02-98 5.52 5,000,000 4,977,083 Barclays U.S. Funding 02-11-98 5.50 14,300,000 14,276,055 BBV Finance (Delaware) 04-08-98 5.49 8,200,000 8,113,262 Bell Atlantic Financial Services 02-10-98 5.47 16,400,000 16,375,172 02-25-98 5.49 12,400,000 12,352,897 Beneficial 03-02-98 5.49 15,000,000 14,931,750 03-04-98 5.50 15,000,000 14,927,067 03-05-98 5.50 19,000,000 18,904,731 03-06-98 5.51 15,000,000 14,922,367 03-11-98 5.51 15,000,000 14,910,950 03-26-98 5.55 10,000,000 9,917,350 BHP Finance 02-24-98 5.84 7,500,000 7,465,165 02-25-98 5.49 16,000,000 15,939,222 03-18-98 5.61 14,500,000 14,393,782 BOC Group 02-17-98 5.81 5,100,000 5,085,676 03-16-98 5.50 30,000,000 29,799,800 03-23-98 5.51 10,000,000 9,922,508 CAFCO 02-03-98 5.91 7,700,000(d) 7,696,233 02-24-98 5.85 600,000(d) 599,733 03-19-98 5.50 11,000,000(d) 10,921,588 03-23-98 5.52 18,100,000(d) 17,929,662 04-01-98 5.49 8,000,000(d) 7,924,089 Ciesco LP 02-25-98 5.48 10,200,000 10,161,396 03-12-98 5.50 17,900,000(d) 17,791,407 CIT Group Holdings 02-05-98 5.88 7,800,000 7,793,663 Colgate-Palmolive 02-24-98 5.82 10,000,000(d) 9,957,184 Commercial Credit 03-13-98 5.51 10,000,000 9,933,101 03-18-98 5.51 21,100,000 20,952,523 Commerzbank U.S. Finance 02-13-98 5.50 5,500,000 5,489,116 02-18-98 5.48 8,500,000 8,476,795 02-20-98 5.49 17,100,000 17,048,035 Daimler-Benz 02-11-98 5.82 15,000,000 14,968,611 02-11-98 5.56 2,900,000 2,895,082 02-24-98 5.49 9,500,000 9,465,357 03-19-98 5.77 2,600,000 2,580,535 Delaware Funding 02-10-98 5.50 5,949,000(d) 5,939,944 02-11-98 5.50 22,819,000(d) 22,780,791 02-18-98 5.50 19,428,000(d) 19,374,767 02-20-98 5.48 15,924,000(d) 15,875,697 Deutsche Bank Financial 02-02-98 5.54 14,100,000 14,095,672 02-17-98 5.48 17,500,000 17,454,920 02-18-98 5.49 10,000,000 9,972,675 Fleet Funding 02-26-98 5.49 10,600,000(d) 10,558,201 03-10-98 5.51 6,400,000(d) 6,362,980 Ford Motor Credit 02-23-98 5.50 15,000,000 14,947,483 02-26-98 5.48 25,000,000 24,901,596 03-06-98 5.52 7,500,000 7,461,113 04-02-98 5.51 10,000,000 9,874,347 Gannett 02-24-98 5.48 9,600,000(d) 9,565,120 02-26-98 5.48 17,400,000(d) 17,331,512 Gateway Fuel 02-26-98 5.50 5,630,000 5,607,718 03-05-98 5.51 6,955,000 6,920,063 03-10-98 5.50 6,680,000 6,641,430 Goldman Sachs Group 02-04-98 5.77 10,000,000 9,991,626 04-06-98 5.53 20,700,000 20,426,864 05-12-98 5.52 10,000,000 9,841,900 05-13-98 5.52 10,000,000 9,840,350 05-14-98 5.50 20,000,000 19,645,344 Heinz (HJ) 02-06-98 5.82 4,700,000 4,695,472 02-17-98 5.80 25,000,000 24,918,236 03-17-98 5.50 13,500,000 13,407,863 Harris Trust 02-04-98 5.55 14,900,000 14,900,000 03-05-98 5.50 15,000,000 15,000,000 Household Finance 02-27-98 5.48 25,000,000 24,897,811 03-10-98 5.53 20,000,000 19,883,889 03-11-98 5.51 15,800,000 15,706,201 03-12-98 5.51 20,000,000 19,878,222 Intl Lease Finance 03-03-98 5.50 9,800,000 9,753,839 Merrill Lynch 03-16-98 5.52 11,800,000 11,720,966 03-17-98 5.50 16,200,000 16,089,435 Metlife Funding 02-05-98 5.80 13,105,000 13,094,534 02-18-98 5.83 9,874,000 9,839,395 Morgan Stanley, Dean Witter, Discover & Co 03-02-98 5.50 10,000,000 9,954,417 03-05-98 5.50 18,800,000 18,705,734 03-06-98 5.50 18,700,000 18,603,394 Natl Australia Funding (Delaware) 04-15-98 5.50 35,000,000 34,556,517 04-21-98 5.52 3,160,000 3,120,184 NBD Bank Canada 02-09-98 5.58 14,100,000 14,080,401 New Center Asset Trust 02-19-98 5.50 14,600,000 14,557,851 03-04-98 5.50 25,000,000 24,878,443 03-11-98 5.53 10,000,000 9,940,417 04-13-98 5.50 20,500,000 20,230,989 Novartis Finance 02-03-98 5.47 8,305,000(d) 8,301,221 03-09-98 5.52 15,000,000 14,915,363 Pacific Life Insurance 02-20-98 5.48 10,700,000 10,667,543 02-26-98 5.50 15,264,000 15,203,588 Reed Elsevier 03-06-98 5.53 12,100,000(d) 12,037,147 Societe Generale North America 03-16-98 5.48 15,400,000 15,288,421 03-17-98 5.50 15,000,000 14,890,081 03-23-98 5.49 15,900,000 15,760,680 Toyota Motor Credit 02-26-98 5.50 20,900,000 20,817,433 UBS Finance (Delaware) 02-02-98 5.63 20,400,000 20,393,619 Xerox Credit 02-24-98 5.82 9,200,000 9,158,848 Total 1,353,340,546 Letters of credit (0.2%) Bank of America- AES Barbers Point 03-20-98 5.50% $10,000,000 $ 9,925,016 First Bank- Midwest 02-26-98 5.66 10,000,000 9,959,410 First Chicago- Commed Fuel 03-11-98 5.51 8,600,000 8,548,945 Total 28,433,371 Total short-term securities (Cost: $1,417,136,103) $ 1,416,547,478 Total investment in securities (Cost: $10,066,650,897)(g) $14,944,487,759 See accompanying notes to investments in securities. Investments in securities Growth Trends Portfolio Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (e) Security is partially or fully on loan. See Note 4 to the financial statements. (f) At Jan. 31, 1998, securities valued at $46,987,688 were held to cover open call options written as follows: Issuer Shares Exercise Expiration Value(a) price date Compaq 1,563,000 $35 April 1998 $1,465,312 Computer (g) At Jan. 31, 1998, the cost of securities for federal income tax purposes was approximately $10,066,651,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation.......................................$4,958,979,000 Unrealized depreciation....................................... (81,142,000) ----------- Net unrealized appreciation...................................$4,877,837,000 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, treasurer and corporate secretary of Board Services and secretary Corporation. 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 New Dimensions Fund IDS Tower 10 Minneapolis, MN 55440-0010 -----END PRIVACY-ENHANCED MESSAGE-----