-----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, SHolM73zjaKZR4bmJm2lM6oZSXrwgW2sAd5JimM7mvtyapTNyJHfD+U/7iaaoi5c t0ixbW6Km3PS6mc/HbnlmA== 0000820027-97-000465.txt : 19970529 0000820027-97-000465.hdr.sgml : 19970529 ACCESSION NUMBER: 0000820027-97-000465 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970528 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS STOCK FUND INC CENTRAL INDEX KEY: 0000052423 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410839317 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00498 FILM NUMBER: 97615085 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712727 FORMER COMPANY: FORMER CONFORMED NAME: INVESTORS STOCK FUND INC DATE OF NAME CHANGE: 19831221 N-30D 1 1997 SEMIANNUAL REPORT IDS Stock Fund (icon of) building with columns The goals of IDS Stock Fund, Inc. are current income and growth of capital. American Express Financial Advisors Distributed by American Express Financial Advisors Inc., Member SIPC. Big names, big business While some investors like to strive for the potentially outstanding returns that can be generated by stocks of newer companies, others are more comfortable with the usually steadier performance provided by stocks of more established businesses. IDS Stock Fund focuses on stocks in the latter group, many of which long ago made their marks in American enterprise and, in some cases, also have a strong international business presence. These stocks offer the potential dual benefit of growth along with a steady stream of dividend income. Contents From the president 3 From the portfolio manager 3 The Portfolio's ten largest holdings 5 Financial statements (Fund) 6 Notes to financial statements (Fund) 9 Financial statements (Portfolio) 17 Notes to financial statements (Portfolio) 20 Investments in securities 29 Board members and officers 35 IDS mutual funds 36 To our shareholders From the president If you're an experienced investor, you know that the past two years have been unusually strong ones in many financial markets. Perhaps just as important, you also know that history shows that bull markets don't last forever. Though they're often unpredictable, declines -- whether they're brief or long-lasting, moderate or substantial -- are always a possibility. That fact reinforces the need for investors to periodically review their long-term goals and examine whether their investment program remains on track to achieving them. Your quarterly investment statements are one part of that monitoring process. The other is a meeting with your American Express financial advisor. That becomes even more important if there's a major change in your financial situation or in the financial markets. William R. Pearce (picture of) William R. Pearce President of the Fund From the portfolio manager IDS Stock Fund posted solid results during the first half of its fiscal year, despite considerable volatility in the stock market. For the six months -- October 1996 through March 1997 -- the total return was 7.2% for Class A shares. (This figure includes a substantial capital gain that was paid to shareholders last December and reduced the Fund's net asset value by the same amount at that time.) Thanks to ongoing low inflation, low interest rates and healthy corporate profits, the stock market was in the middle of a robust rally when the period began last fall. Although the market stumbled briefly in December, it soon regrouped to surge ahead in the first several weeks of 1997. Mood swings The mood of the market changed abruptly in mid-February, however, as investors began focusing on the possibility of too-strong economic growth fanning the fire of inflation. With long- term interest rates already on the rise, selling pressure intensified and the market declined sharply through the end of period. As for the Fund, it enjoyed its best performance last fall, owing to its emphasis on many of the large, blue-chip stocks that were powering the rally. As the period progressed, I shifted more assets into relatively defensive stocks such as those in the food/beverage and household-product sectors, as well as utilities. I also cut back on investments in technology-related stocks, many of which had been strong performers but also had reached what I believed were vulnerable price levels. This conservative strategy worked well during the market's weak periods. On the other hand, the Fund's holdings among foreign stocks (up to 19% of assets) were sluggish compared to the U.S. market and, overall, tempered Fund performance during the six months. Conservative approach My investment outlook is essentially unchanged as I prepare this report in mid-April. While market fundamentals such as inflation and corporate profits remain positive, I expect higher long-term interest rates to present a hurdle for U.S. stocks over the near term. Therefore, I am continuing to emphasize common stocks of solid, blue chip companies in more stable economic sectors, complemented by foreign stocks and high-yielding, convertible preferred stocks of U.S. companies. Richard H. Warden Richard H. Warden Portfolio manager Class A 6-month performance (All figures per share) Net asset value (NAV) March 31, 1997 $22.78 Sept. 30, 1996 $22.49 Increase $ 0.29 Distributions Oct. 1, 1996 - Mar. 31, 1997 From income $ 0.54 From capital gains $ 0.79 Total distributions $ 1.33 Total return* +7.2%** Class B 6-month performance (All figures per share) Net asset value (NAV) March 31, 1997 $22.69 Sept. 30, 1996 $22.42 Increase $ 0.27 Distributions Oct. 1, 1996 - Mar. 31, 1997 From income $ 0.46 From capital gains $ 0.79 Total distributions $ 1.25 Total return* +6.8%** Class Y 6-month performance (All figures per share) Net asset value (NAV) March 31, 1997 $22.78 Sept. 30, 1996 $22.49 Increase $ 0.29 Distributions Oct. 1, 1996 - Mar. 31, 1997 From income $ 0.56 From capital gains $ 0.79 Total distributions $ 1.35 Total return* +7.3%** *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 March 31, 1997) General Electric 1.65% $57,068,750 Intel 1.61 55,650,000 NationsBank 1.52 52,606,250 EXEL 1.46 50,277,500 Kimberly-Clark 1.37 47,203,125 Safeway 1.34 46,375,000 UNUM 1.33 46,068,750 Freeport-McMoRan Copper & Gold 1.32 45,562,500 Boeing 1.29 44,381,250 Gillette 1.26 43,575,000 (icon of) pie chart The ten holdings listed here make up 14.15% of the Portfolio's net assets
Financial statements Statement of assets and liabilities IDS Stock Fund, Inc. March 31, 1997 Assets (Unaudited) Investment in Equity Portfolio (Note 1) $3,453,892,494 -------------- Total assets 3,453,892,494 ------------- Liabilities Accrued distribution fee 12,377 Accrued service fee 50,860 Accrued transfer agency fee 17,471 Accrued administrative services fee 11,453 Other accrued expenses 1,446 ----- Total liabilities 93,607 ------ Net assets applicable to outstanding capital stock $3,453,798,887 ============== Represented by Capital stock-- authorized 10,000,000,000 shares of $.01 par value $ 1,516,349 Additional paid-in capital 2,614,668,606 Undistributed net investment income 1,351,313 Accumulated net realized gain (Note 1) 173,215,546 Unrealized appreciation of investments and on translation of assets and liabilities in foreign currencies 663,047,073 ----------- Total-- representing net assets applicable to outstanding capital stock $3,453,798,887 ============== Net assets applicable to outstanding shares: Class A $2,411,248,286 Class B $ 145,136,846 Class Y $ 897,413,755 Net asset value per share of outstanding capital stock: Class A shares 105,847,948 $ 22.78 Class B shares 6,396,021 $ 22.69 Class Y shares 39,390,900 $ 22.78 See accompanying notes to financial statements. Statement of operations IDS Stock Fund, Inc. Six months ended March 31, 1997 Investment income (Unaudited) Income: Dividends $ 32,145,048 Interest 6,233,750 --------- Total income 38,378,798 ---------- Expenses (Note 2): Expenses, including investment management services fee, allocated from Equity Portfolio 8,280,899 Distribution fee-- Class B 489,716 Transfer agency fee 1,709,930 Incremental transfer agency fee-- Class B 7,105 Service fee Class A 2,059,043 Class B 113,672 Administrative services fees and expenses 509,254 Compensation of board members 2,857 Compensation of officers 8,156 Postage 57,826 Registration fees 56,569 Reports to shareholders 46,433 Audit fees 541 Other 14,806 ------ Total expenses 13,356,807 ---------- Earnings credits on cash balances (Note 2) (69,497) Total net expenses 13,287,310 ---------- Investment income -- net 25,091,488 ---------- Realized and unrealized gain -- net Net realized gain on security and foreign currency transactions 195,746,947 Net change in unrealized appreciation or depreciation of investments and on translation of assets and liabilities in foreign currencies 15,668,647 ---------- Net gain on investments and foreign currencies 211,415,594 ----------- Net increase in net assets resulting from operations $236,507,082 ============ See accompanying notes to financial statements. Statements of changes in net assets IDS Stock Fund, Inc. Operations and distributions March 31,1997 Sept. 30, 1996 Six months ended Eleven-month (Unaudited) period ended Investment income-- net $ 25,091,488 $ 62,152,554 Net realized gain on investments and foreign currencies 195,746,947 144,560,754 Net change in unrealized appreciation or depreciation of investments and on translation of assets and liabilities in foreign currencies 15,668,647 307,696,966 ---------- ----------- Net increase in net assets resulting from operations 236,507,082 514,410,274 ----------- ----------- Distributions to shareholders from: Net investment income Class A (21,889,604) (40,068,143) Class B (761,035) (917,346) Class Y (8,986,086) (16,474,443) Net realized gain Class A (113,973,806) (66,949,954) Class B (6,116,806) (1,317,953) Class Y (43,104,797) (25,308,530) ----------- ----------- Total distributions (194,832,134) (151,036,369) ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 112,525,850 310,273,867 Class B shares 37,092,528 73,175,827 Class Y shares 137,324,699 206,212,641 Reinvestment of distributions at net asset value Class A shares 125,338,311 98,054,599 Class B shares 6,824,407 2,216,336 Class Y shares 45,590,907 36,464,463 Payments for redemptions Class A shares (164,825,448) (344,574,702) Class B shares (Note 2) (6,609,729) (5,132,861) Class Y shares (165,280,110) (207,758,852) ------------ ------------ Increase in net assets from capital share transactions 127,981,415 168,931,318 ----------- ----------- Total increase in net assets 169,656,363 532,305,223 Net assets at beginning of period 3,284,142,524 2,751,837,301 ------------- ------------- Net assets at end of period (including undistributed net investment income of $1,351,313 and $7,896,550) $3,453,798,887 $3,284,142,524 ============== ============== See accompanying notes to financial statements.
Notes to financial statements IDS Stock Fund, Inc. (Unaudited as to March 31, 1997) 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 after eight years. Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend, liquidation and other rights, and the same terms and conditions, except that the level of distribution fee, transfer agency fee and service fee (class specific expenses) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Equity Portfolio Effective May 13, 1996, the Fund began investing all of its assets in Equity Portfolio (the Portfolio), a series of Growth and Income 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. Equity Portfolio invests primarily in common stocks and securities convertible into common stocks. 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 March 31, 1997 was 99.98%. 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 Dividends declared and paid each calendar quarter from net investment income, are 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 0.04% to 0.02% annually. Additional administrative service expenses paid by the Fund are office expenses, consultants' fees and compensation of officers and employees. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees, organizational expenses, and any other expenses properly payable by the Fund approved by the board. Under a separate Transfer Agency Agreement, AEFC maintains shareholder accounts and records. The Fund pays AEFC an annual fee per shareholder account for this service as follows: o Class A $15 o Class B $16 o Class Y $15 Also effective March 20, 1995, the Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder servicing-related services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares for distribution-related services. Under a Shareholder Service Agreement, the Fund pays a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.175% of the Fund's average daily net assets attributable to Class A and Class B shares. Sales charges received by American Express Financial Advisors Inc. for distributing Fund shares were $1,266,003 for Class A and $36,853 for Class B for the six months ended March 31, 1997. The Fund also pays custodian fees to American Express Trust Company, an affiliate of AEFC. During the six months ended March 31, 1997, the Fund's transfer agency fees were reduced by $69,497 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 March 31, 1997 Class A Class B Class Y Sold 4,780,112 1,585,470 5,838,468 Issued for reinvested 5,490,483 300,190 1,996,695 distributions Redeemed (7,001,590) (282,138) (7,105,737) ---------- -------- ---------- Net increase 3,269,005 1,603,522 729,426 ========= ========= ======= Eleven months ended Sept. 30, 1996 Class A Class B Class Y Sold 14,630,112 3,448,528 9,749,258 Issued for reinvested 4,745,900 106,774 1,762,224 distributions Redeemed (16,225,558) (241,151) (9,825,574) ----------- -------- ---------- Net increase 3,150,454 3,314,151 1,685,908 ========= ========= ========= 4. Change of Fund's fiscal year The By-Laws of the Fund were amended on Jan. 10, 1996, changing it's fiscal year end from Oct. 31 to Sept. 30, effective 1996.
5. Financial highlights The tables below show certain important financial information for evaluating the Fund's results. Fiscal period ended Sept. 30, Per share income and capital changes* Class A 1997# 1996** 1995 1994 1993 1992 1991 1990 1989 1988 1987 Net asset value, $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43 $17.04 $19.26 beginning of period Income from investment operations: Net investment income .17 .43 .52 .58 .55 .64 .68 .83 .77 .56 .57 Net gains (losses) (both 1.45 3.17 1.96 .21 2.93 1.11 4.02 (.87) 3.26 1.13 1.15 realized and unrealized) Total from investment 1.62 3.60 2.48 .79 3.48 1.75 4.70 (.04) 4.03 1.69 1.72 operations Less distributions: Dividends from net (.21) (.39) (.49) (.60) (.53) (.63) (.74) (.85) (.70) (.55) (.58) investment income Distributions from (1.12) (.68) (1.51) (1.95) (1.76) (1.09) (1.20) (2.61) -- (.75) (3.36) realized gains Total distributions (1.33) (1.07) (2.00) (2.55) (2.29) (1.72) (1.94) (3.46) (.70) (1.30) (3.94) Net asset value, $22.78 $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43 $17.04 end of period Ratios/supplemental data Class A 1997# 1996** 1995 1994 1993 1992 1991 1990 1989 1988 1987 Net assets, end of $2,411 $2,307 $1,984 $2,368 $2,059 $1,658 $1,513 $1,213 $1,347 $1,246 $1,309 period (in millions) Ratio of expenses to .78%+ .80% + .79% .76% .73% .72% .65% .63% .60% .58% .57% average daily net assets++ Ratio of net income to 1.43%+ 2.19%+ 2.61% 2.99% 2.75% 3.21% 3.59% 4.32% 3.94% 3.17% 2.53% average daily net assets Portfolio turnover rate 37% 71% 69% 75% 76% 77% 58% 26% 54% 27% 42% (excluding short-term securities) for the underlying Portfolio Total return+++ 7.2% 18.6% 14.4% 3.9% 18.8% 9.4% 29.0% (0.9%) 23.4% 10.1% 8.7% Average brokerage $.0351 $.0388 -- -- -- -- -- -- -- -- -- commission rate for the underlying Portfolio*** *For a share outstanding throughout the period. Rounded to the nearest cent. **The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996. ***Effective fiscal period 1996, the Fund is required to disclose an average brokerage commission rate. The rate is calculated by dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total number of related shares purchased and sold. +Adjusted to an annual basis. ++Effective fiscal period 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. +++Total return does not reflect payment of a sales charge. #Six months ended March 31, 1997 (Unaudited). Fiscal period ended Sept. 30, Per share income and capital changes* Class B Class Y 1997# 1996** 1995## 1997# 1996** 1995## Net asset value, $22.42 $19.91 $18.03 $22.49 $19.96 $18.03 beginning of period Income from investment operations: Net investment income .09 .28 .27 .18 .47 .29 Net gains (both realized 1.43 3.17 1.92 1.46 3.17 2.01 and unrealized) Total from investment operations 1.52 3.45 2.19 1.64 3.64 2.30 Less distributions: Dividends from net (.13) (.26) (.31) (.23) (.43) (.37) investment income Distributions from (1.12) (.68) -- (1.12) (.68) -- realized gains Total distributions (1.25) (.94) (.31) (1.35) (1.11) (.37) Net asset value, $22.69 $22.42 $19.91 $22.78 $22.49 $19.96 end of period Ratios/supplemental data Class B Class Y 1997# 1996** 1995## 1997# 1996** 1995## Net assets, end of $145 $107 $29 $897 $870 $738 period (in millions) Ratio of expenses to 1.55%+ 1.57%+ 1.61%+ .61%+ .63%+ .64%+ average daily net assets++ Ratio of net income to .70%+ 1.61%+ 1.37%+ 1.59% +2.36%+ 2.38%+ average daily net assets Portfolio turnover rate 37% 71% 69% 37% 71% 69% (excluding short-term securities) for the underlying Portfolio Total return++ 6.8% 17.8% 12.1% 7.3% 18.8% 12.8% Average brokerage $.0351 $.0388 -- $.0351 $.0388 -- commission rate for the underlying Portfolio*** *For a share outstanding throughout the period. Rounded to the nearest cent. **The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996. ***Effective fiscal period 1996, the Fund is required to disclose an average brokerage commission rate. The rate is calculated by dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total number of related shares purchased and sold. +Adjusted to an annual basis ++Effective fiscal period 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. +++Total return does not reflect payment of a sales charge. +Adjusted to an annual basis. #Six months ended March 31,1997 (Unaudited). ##Inception date was March 20, 1995 for Class B and Class Y.
Financial statements Statement of assets and liabilities Equity Portfolio March 31, 1997 Assets (Unaudited) Investments in securities, at value (Note 1) Investments in securities of unaffiliated issuers (identified cost $2,914,403,825) $3,565,562,904 -------------- Investments in securities of affiliated issuers (identified cost $33,897,526) 45,858,072 Dividends and accrued interest receivable 8,265,522 Receivable for investment securities sold 66,257 U.S. government securities held as collateral (Note 4) 68,808,487 - ---------- Total assets 3,688,561,242 ------------- Liabilities Disbursements in excess of cash on demand deposit 837,609 Payable for investment securities purchased 5,986,457 Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 5) 60 Payable upon return of securities loaned (Note 4) 227,029,987 Accrued investment management services fee 156,030 Other accrued expenses 10,309 ------ Total liabilities 234,020,452 ----------- Net assets $3,454,540,790 ============== See accompanying notes to financial statements. Statement of operations Equity Portfolio Six months ended March 31, 1997 Investment income (Unaudited) Income: Dividends (net of foreign taxes withheld of $250,326) $ 32,012,885 Dividends earned from affiliates 138,000 Interest 6,218,164 --------- Total income 38,369,049 ---------- Expenses (Note 2): Investment management services fee 8,118,125 Compensation of board members 9,199 Custodian fees 114,660 Audit fees 14,000 Administrative services fees and expenses 22,804 Other 5,107 ----- Total expenses 8,283,895 Earnings credits on cash balances (Note 2) (1,501) - ------ Total net expenses 8,282,394 --------- Investment income -- net 30,086,655 ---------- Realized and unrealized gain -- net Net realized gain on security and foreign currency transactions (including loss of $444,649 from foreign currency transactions) (Note 3) 195,764,259 Net change in unrealized appreciation or depreciation of investments and on translation of assets and liabilities in foreign currencies 15,687,803 ---------- Net gain on investments and foreign currencies 211,452,062 ----------- Net increase in net assets resulting from operations $241,538,717 ============ See accompanying notes to financial statements. Statements of changes in net assets Equity Portfolio Operations Six months ended For the period from March 31, 1997 May 13, 1996* (Unaudited) to Sept. 30, 1996 Investment income-- net $ 30,086,655 $ 38,250,649 Net realized gain (loss) on investments and foreign currencies 195,764,259 (4,205,188) Net change in unrealized appreciation or depreciation of investments and on translation of assets and liabilities in foreign currencies 15,687,803 140,669,806 ---------- ----------- Net increase in net assets resulting from operations 241,538,717 174,715,267 Net contributions (withdrawals) (72,046,022) 3,110,307,828 ----------- ------------- Total increase in net assets 169,492,695 3,285,023,095 Net assets at beginning of period (Note 1) 3,285,048,095 25,000 - ------------- ------ Net assets at end of period $3,454,540,790 $3,285,048,095 ============== ==============
*Commencement of operations. See accompanying notes to financial statements. Notes to financial statements Equity Portfolio (Unaudited as to March 31, 1997) 1. Summary of significant accounting policies Equity Portfolio (the Portfolio) is a series of Growth and Income Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Equity Portfolio invests primarily in common stocks and securities convertible into common stocks. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. On April 15, 1996, American Express Financial Corporation (AEFC) contributed $25,000 to the Portfolio. Operations did not formally commence until May 13, 1996, at which time, an existing fund transferred its assets to the Portfolio in return for an ownership percentage of the Portfolio. Significant accounting policies followed by the Portfolio are summarized below: Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the period. Actual results could differ from those estimates. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price; securities for which market quotations are not readily available, including illiquid securities, are valued at fair value according to methods selected in good faith by the board. Determination of fair value involves, among other things, reference to market indexes, matrixes and data from independent brokers. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions In order to produce incremental earnings, protect gains and facilitate buying and selling of securities for investment purposes, the Portfolio may buy or write options traded on any U.S. or foreign exchange or in the over-the-counter market where the completion of the obligation is dependent upon the credit standing of the other party. The Portfolio also may buy or sell put and call options and write covered call options on portfolio securities and may write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity of profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss upon expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions In order to gain exposure to or protect itself from changes in the market, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy or write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement dates on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete the obligations of the contract. Illiquid securities At March 31, 1997, investments in securities included issues that are illiquid. The Portfolio currently limits investments in illiquid securities to 10% of the net assets, at market value, at the time of purchase. The aggregate value of such securities at March 31, 1997 was $10,633,993 representing 0.31% of the Portfolio's net assets. Pursuant to guidelines adopted by the board, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. 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 0.53% to 0.4% 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 Stock Fund to the Lipper Growth and Income Fund Index. The maximum adjustment is 0.08% of the Portfolio's average daily net assets on an annual basis. The adjustment decreased the fee by $163,261 for the six months ended March 31, 1997. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees to be paid to an affiliate of AEFC, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio, and any other expenses properly payable by the Trust or Portfolio, approved by the board. During the six months ended March 31, 1997, the Portfolio's custodian fees were reduced by $1,501 as a result of earnings credits from overnight cash balances. Pursuant to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the units of the Trust. 3. Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,242,266,176 and $1,231,057,025, respectively, for the six months ended March 31, 1997. For the same period, the portfolio turnover rate was 37%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $255,491 during this period. 4. Lending of portfolio securities At March 31, 1997, securities valued at $217,727,815 were on loan to brokers. For collateral, the Portfolio received $158,221,500 in cash and U.S. government securities valued at $68,808,487. Income from securities lending amounted to $536,634 for the six months ended March 31, 1997. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 5. Foreign currency contracts At March 31, 1997, the Portfolio had entered into a foreign currency exchange contract that obligates the Portfolio to deliver currency at a specified future date. The unrealized appreciation and/or depreciation (see Summary of significant accounting policies) on this contract is included in the accompanying financial statements. The terms of the open contract are as follows: Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation April 1, 1997 292,824 $66,197 $ -- $60 South African U.S. Dollar Commercial Rand Investments in securities Equity Portfolio March 31, 1997 (Unaudited) (Percentages represent value of investments compared to net assets) Investments in securities of unaffiliated issuers Common stocks (82.1%) Issuer Shares Value(a) Aerospace & defense (2.8%) Boeing 450,000 $ 44,381,250 General Motors Cl H 500,000 27,125,000 Lockheed Martin 306,084 25,711,056 Total 97,217,306 Airlines (0.8%) AMR 350,000(b) 28,875,000 Automotive & related (1.6%) Eaton 386,200 27,371,925 Genuine Parts 600,000 27,975,000 Total 55,346,925 Banks and savings & loans (6.0%) Barnett Banks 800,000(c) 37,200,000 First Union 450,000 36,506,250 KeyCorp 600,000 29,250,000 Morgan (JP) 200,000 19,650,000 NationsBank 950,000 52,606,250 Norwest 400,000 18,500,000 Washington Mutual 250,000 12,078,125 Total 205,790,625 Beverages & tobacco (2.4%) Anheuser-Busch 700,000 29,487,500 Coca-Cola 600,000 33,525,000 Philip Morris 200,000 22,825,000 Total 85,837,500 Chemicals (1.3%) Monsanto 600,000 22,950,000 Praxair 500,000 22,437,500 Total 45,387,500 Communications equipment & services (0.9%) Northern Telecommunications450,000 29,418,750 Computers & office equipment (4.1%) Cisco Systems 400,000(b) 19,250,000 Compaq Computer 465,000(b) 35,630,625 Computer Associates Intl 250,000 9,718,750 Hewlett-Packard 550,000 29,287,500 Oracle 750,000(b) 28,921,875 Silicon Graphics 900,000(b) 17,550,000 Total 140,358,750 Electronics (1.6%) Intel 400,000 55,650,000 Energy (1.5%) Elf Aquitaine 500,000(c) 24,625,000 Unocal 700,000 26,687,500 Total 51,312,500 Food (1.2%) ConAgra 400,000 21,700,000 CPC Intl 250,000 20,500,000 Total 42,200,000 Health care (8.6%) ALZA 400,000 11,000,000 American Home Products 600,000 36,000,000 Amgen 500,000(b) 27,937,500 Baxter Intl 800,000 34,500,000 Guidant 500,000 30,750,000 Johnson & Johnson 650,000 34,368,750 Medtronic 500,000 31,125,000 Merck 200,000 16,850,000 Pfizer 425,000 35,753,125 Schering-Plough 550,000 40,012,500 Total 298,296,875 Health care services (1.2%) Service Corp Intl 800,000 23,800,000 Tenet Healthcare 700,000 17,237,500 Total 41,037,500 Household products (3.4%) Colgate-Palmolive 400,000 39,850,000 Gillette 600,000 43,575,000 Procter & Gamble 300,000 34,500,000 Total 117,925,000 Industrial equipment & services (2.6%) AGCO 500,000 13,812,500 Deere 1,000,000 43,500,000 Illinois Tool Works 400,000 32,650,000 Total 89,962,500 Insurance (3.4%) American Intl Group 300,000 35,212,500 EXEL 1,190,000 50,277,500 Travelers/Aetna Property Casualty 1,000,000 31,750,000 Total 117,240,000 Leisure time & entertainment (0.6%) Disney (Walt) 300,000 21,900,000 Media (1.0%) Donnelley (RR) & Sons 1,000,000 34,875,000 Metals (4.6%) Freeport-McMoRan Copper & Gold 1,500,000 45,562,500 Getchell Gold 946,200 38,439,375 Martin Marietta Materials1,000,000 25,750,000 Stillwater Mining 890,000(b) 17,466,250 UCAR Intl 800,000(b) 31,700,000 Total 158,918,125 Multi-industry conglomerates (2.8%) Emerson Electric 400,000 18,000,000 General Electric 575,000 57,068,750 Westinghouse Electric 1,200,000 21,300,000 Total 96,368,750 Paper & packaging (2.3%) Crown Cork & Seal 600,000(b) 30,975,000 Kimberly-Clark 475,000 47,203,125 Total 78,178,125 Restaurants & lodging (0.6%) Hilton Hotels 800,000 19,400,000 Retail (3.4%) Federated Dept Stores 500,000(b) 16,437,500 Penney (JC) 550,000 26,193,750 Safeway 1,000,000(b,c) 46,375,000 Wal-Mart Stores 1,000,000 27,875,000 Total 116,881,250 Textiles & apparel (0.9%) Nike Cl B 500,000 31,000,000 Transportation (0.6%) Union Pacific 350,000 19,862,500 Utilities -- electric (0.8%) FPL Group 600,000 26,475,000 Utilities -- telephone (4.6%) AT&T 500,000 17,375,000 BellSouth 700,000 29,575,000 GTE500,000 23,312,500 MCI Communications 1,000,000 35,625,000 SBC Communications 500,000 26,312,500 U S West Communications 800,000 27,200,000 Total 159,400,000 Foreign (16.5%)(d) Ashanti Goldfields 500,000(c) 6,875,000 Barclays 1,443,212 24,242,294 Bre-X Minerals 1,500,000 2,914,935 British Telecommunications4,000,000 29,317,404 Cimpor Cimentos de Portuga 602,000(e) 12,558,858 Commonwealth Bank 4,041,400(c) 26,676,744 Compagnie de General 225,000(c) 30,657,227 Ericsson (LM) ADR 7,000,000 33,250,000 Euro-Nevada Mining 23,300 673,289 Euro-Nevada Mining 230,400(e) 6,657,756 Natl Mutual 16,000,000 19,578,544 Railtrack 4,000,000 29,778,060 Renaissance Energy 500,000(b) 14,213,470 Repsol ADR 650,000 26,487,500 Royal Dutch Petroleum 150,000 26,250,000 Schlumberger 350,000 37,537,500 SGL Carbon 250,000 34,322,542 SmithKline Beecham ADR 500,000 35,000,000 South African Breweries 440,200(e) 13,944,563 Telefonos de Mexico 1,000,000(c) 38,500,000 TOTAL Cl B 700,000 29,662,500 Unilever 200,000 37,250,000 Veba 500,000(c) 28,312,350 Woolworths 10,000,000(c) 26,732,720 Total 571,393,256 Total common stocks of unaffiliated issuers (Cost: $2,209,430,561) $2,836,508,737 Preferred stocks and other (9.8%) Issuer Shares Value(a) AirTouch Communications 4% 525,000 $12,140,625 Altera 8% 347,826(e) 15,086,953 Circuit City Stores 5.50% 535,715(e) 17,223,237 Citicorp 5.50% 250,000 24,718,750 ConAgra 4.50% Cv 350,000 17,762,500 Crown Cork & Seal 4.50% Cv 225,000 11,081,250 Duracell 3% 195,000 11,456,250 Finova Finance Trust 5.50% Cv 200,000 10,450,000 Hilton Hotels 8% 400,000(j) 9,350,000 Host Marriott Financial Trust 6.75% Cv 300,000(e) 16,875,000 Ikon Office Solutions 6.50% Cv 315,850 25,544,369 McKesson 4.50% Cv 200,000(f) 10,650,000 Medtronic $2.76 Cv 275,000 17,231,500 Merck 4.50% Cv 225,000 17,690,625 Merrill Lynch 6.25% Cv 515,000 19,441,250 Natl Australia Bank 7.875% 270,000 6,750,000 Station Casinos 7.00% Cv 110,000 4,743,750 SunAmerica $3.19 Cv 500,000 19,750,000 Telemex 7.75% Cv 665,000 26,101,250 UNUM $2.34 Cv 650,000 46,068,750 Total preferred stocks (Cost: $315,459,252) $340,116,059
Bonds (3.9%) Issuer Coupon Maturity Principal Value(a) rate year amount Domestic (2.8%) Adaptec Cv 4.75% 2004 $15,000,000(e) $ 14,756,250 Salomon-Applied Materials ELK Cv 8.50 1998 24,645,969(f) 24,212,725 Salomon-Emerson Electric ELK Cv 5.50 1999 30,084,390(f) 28,509,324 Federated Dept Stores 5.00 2003 5,000,000 5,800,000 Scandinavian Broadcasting Cv Sub Deb 7.25 2005 15,000,000 13,687,500 Softkey Intl Cv 5.50 2000 15,000,000(e) 11,550,000 Total 98,515,799 Foreign (1.1%) (d) BAA Plc 5.75 2006 6,000,000 10,309,215 (British Pound) Baan 4.50 2001 11,500,000(e) 13,397,500 (U.S. Dollar) Dresdner 2.25 2001 15,000,000(i) 10,633,993 (Canadian Dollar) William Resources 9.66 2002 4,500,000 3,142,808 (U.S. Dollar) Total 37,483,516 Total bonds (Cost: $136,635,502) $135,999,315
Short-term securities (7.3%) Issuer Annualized Amount Value(a) yield on payable at date of maturity purchase Certificate of deposit (0.1%) Morgan Guaranty Trust 04-28-97 5.40% $4,600,000 $ 4,579,271 Commercial paper (7.1%) American General Finance 04-24-97 5.36 12,400,000 12,357,854 Ameritech Capital Funding 04-14-97 5.34 5,400,000(g) 5,388,894 04-17-97 5.33 5,000,000(g) 4,988,222 Associates Corp North America 05-07-97 5.53 13,700,000 13,624,650 Barclays U.S. Funding 04-16-97 5.31 3,600,000 3,595,230 BellSouth Telecommunications 04-10-97 5.33 3,600,000 3,590,855 BHP Finance 04-03-97 5.27 7,000,000 6,997,958 CAFCO 04-21-97 5.37 3,800,000(g) 3,787,718 Cargill 05-08-97 5.36 3,600,000 3,577,586 Ciesco LP 04-15-97 5.34 4,600,000 4,590,501 Commercial Credit 04-22-97 5.34 7,600,000 7,576,459 04-24-97 5.35 7,600,000 7,574,217 Commerzbank U.S. Finance 05-20-97 5.48 30,100,000 29,971,560 Consolidated Natural Gas 04-30-97 5.29 1,820,000 1,811,057 Dean Witter, Discover & Co 04-15-97 5.38 600,000 598,427 05-06-97 5.36 8,200,000 8,157,588 Fleet Funding 04-07-97 5.29 7,000,000(g) 6,993,863 04-09-97 5.33 2,092,000(g) 2,089,536 04-10-97 5.29 10,000,000(g) 9,986,850 04-22-97 5.31 7,000,000(g) 6,978,481 Gateway Fuel 04-08-97 5.31 1,700,000 1,698,258 Household Finance 04-23-97 5.33 5,100,000 5,083,482 Kredietbank North America Finance 04-18-97 5.30 300,000 299,255 04-18-97 5.30 3,300,000 3,291,803 Metlife Funding 05-01-97 5.35 5,900,000 5,873,893 05-02-97 5.34 7,800,000 7,764,402 05-05-97 5.34 5,700,000 5,671,468 Mobil Australia Finance (Delaware) 04-30-97 5.35 6,500,000(g) 6,472,196 Morgan Stanley Group 05-20-97 5.34 2,500,000 2,480,281 Natl Australia Funding (Delaware) 04-28-97 5.49 17,500,000 17,428,337 Novartis Finance 04-04-97 5.32 4,400,000 4,398,057 04-21-97 5.34 4,800,000(g) 4,785,840 Pfizer 04-21-97 5.32 8,200,000(g) 8,175,901 Reed Elsevier 04-21-97 5.39 8,600,000(g) 8,572,388 St. Paul Companies 04-11-97 5.28 4,300,000(g) 4,293,729 Siemens 04-25-97 5.30 11,000,000 10,961,427 Southern California Gas 04-07-97 5.32 1,988,000(g) 1,986,244 Unilever Capital 04-07-97 5.34 3,000,000(g) 2,996,889 Total 246,471,356 Letter of credit (0.1%) Bank of America - Formosa Plastics 05-09-97 5.39 1,900,000 1,888,166 Total short-term securities (Cost: $252,878,510) $252,938,793 Total investments in securities of unaffiliated issuers (Cost: $2,914,403,825) $3,565,562,904 Investments in securities of affiliated issuers (h) Common stocks (1.3%) Issuer Shares Value(a) Meridian Gold 3,800,000 $ 9,608,072 Mutual Risk Management 1,000,000 36,250,000 Total investments in securities of affiliated issuers (Cost: $33,897,526) $ 45,858,072 Total investments in securities (Cost: $2,948,301,351)(k) $3,611,420,976 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) Security is partially or fully on loan. See Note 4 to the financial statements. (d) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (e) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the board. (f) ELKS are equity-linked securities that are structured as an interest-bearing debt security of a brokerage firm and linked to the common stock of another company. The terms of ELKS differ from those of ordinary debt securities in that the principal amount received at maturity is not fixed but is based on the price of the common stock the ELK is linked to. The principal amount disclosed equals the current estimated future value of the amount to be received upon maturity. (g) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under the guidelines established by the board. (h) Investments representing 5% or more of the outstanding voting securities of the issuer. Transactions with companies that are or were affiliated during the period ended March 31, 1997 are as follows: Beginning Purchase Sales Ending Dividend Issuer cost cost cost cost income Meridian Gold $ 6,941,711 $ 275,758 $-- $ 7,217,469 $-- Mutual Risk Management* 9,937,262 16,742,795 -- 26,680,057 138,000 --------- ---------- ---------- ------- Total $16,878,973 $17,018,553 $-- $33,897,526 $138,000 =========== =========== === =========== ======== *Issuer was not an affiliate for the entire fiscal period. (i) Identifies issues considered to be illiquid (see Note 1 to the financial statements). Information concerning such security holdings at March 31, 1997 is as follows: Security Aquisition Cost date Dresdner* 09-05-96 thru 09-11-96 $10,110,635 *Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (j) PRIDES -- Preferred Redeemed Increased Dividend Equity Securities are structured as convertible preferred securities issued by a company. Investors receive an enchanced yield but based upon a specific formula, potential appreciation is limited. PRIDES pay dividends, have voting rights, are non-callable for three years and upon maturity, convert into shares of common stock. (k) At March 31, 1997, the cost of securities for federal income tax purposes was approximately $2,948,301,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: > 33 Unrealized appreciation.........................................$731,944,000 Unrealized depreciation..........................................(68,824,000) ----------- Net unrealized appreciation.....................................$663,120,000 ============ Board members and officers of the Fund President and interested board member William R. Pearce President and director, Board Services Corporation (provides administrative services to boards including the boards of the IDS and IDSLife funds and Master Trust portfolios). Independent board members 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. Robert F. Froehlke Former president of all funds in the IDS MUTUAL FUND GROUP. Heinz F. Hutter Former president and chief operating officer, Cargill, Inc. Anne P. Jones Attorney and telecommunications consultant. Melvin R. Laird Senior counsellor for national and international affairs, The Reader's Digest Association, Inc. 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. Interested board members who are officers and/or employees of AEFC William H. Dudley Executive vice president, AEFC. David R. Hubers President and chief executive officer, AEFC. John R. Thomas Senior vice president, AEFC. Officers who also are officers and/or employees of AEFC Peter J. Anderson Senior vice president, AEFC. Vice president - Investments for the Fund. Melinda S. Urion Senior vice president and chief financial officer, AEFC. Treasurer for the Fund. Other officer Leslie L. Ogg Vice president, treasurer and corporate secretary of Board Services Corporation. Vice president, general counsel and secretary for the Fund. Refer to the SAI for the board members' and officers' biographies. IDS mutual funds Global/International funds Funds in this group seek capital growth and/or income by investing primarily in foreign securities. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. They are high risk mutual funds with a potential for high reward. IDS Emerging Markets Fund Invests in a Portfolio comprised primarily of stocks of companies in developing countries throughout the world that are believed to offer growth potential. Seeks to provide long-term growth of capital. (icon of) world globe IDS Global Growth Fund Invests in a Portfolio comprised primarily of stocks of companies throughout the world that are positioned to meet market needs in a changing world economy. These companies offer above-average potential for long-term growth. (icon of) world IDS International Fund Invests primarily in common stocks of foreign companies that offer potential for superior growth. The Fund may invest up to 20% of its assets in the U.S. market. (icon of) three flags IDS Global Balanced Fund Invests in stocks-and bonds in, for the most part, major markets throughout the world, including the U.S. Seeks to provide a balance of growth of capital and current income. (icon of) scale of globes IDS Global Bond Fund Invests in a Portfolio comprised primarily of debt securities of U.S. and foreign issuers to seek high total return through income and growth of capital. (icon of) globe Growth funds Funds in this group seek capital growth, primarily from common stocks. They are high risk mutual funds with a potential for high reward. IDS Precious Metals Fund Invests primarily in the securities of foreign or domestic companies that explore for, mine and process or distribute gold and other precious metals. A highly aggressive and speculative fund that seeks long-term growth of capital. (icon of) cart of precious gems IDS Discovery Fund Invests in small- and medium-size, growth-oriented companies emphasizing technological innovation and productivity enhancement. Buys and holds larger growth-oriented stocks. (icon of) ship IDS Small Company Index Fund Invests in all or a representative group of the equity securities comprising the S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation. (icon of) building IDS Strategy Aggressive Fund Invests primarily in common stocks of companies that are selected for their potential for above-average growth. Above-average means that their growth potential is better, in the opinion of the portfolio's investment manager, than the Standard & Poor's Corporation (S&P) 500 Stock Index. (icon of) chess piece IDS Research Opportunities Fund Invests in a Portfolio comprised primarily of equity securities of companies included in the S&P 500 Index that are believed to have strong growth potential. The Portfolio is managed using a research methodology by the Research Department of AEFC. Goal is long-term appreciation. (icon of) magnifying glass IDS Growth Fund Invests in a Portfolio comprised primarily of companies that have above-average potential for long-term growth as a result of new management, marketing opportunities or technological superiority. (icon of) flower IDS New Dimensions Fund Invests in a Portfolio comprised primarily of companies with significant growth potential due to superiority in technology, marketing or management. The Fund frequently changes its industry mix. (icon of) dimension IDS Progressive Fund Invests primarily in undervalued common stocks. The Fund holds stocks for the long term with the goal of capital growth. (icon of) shooting star Growth and income funds These funds focus on securities of medium to large, well-established companies that offer long-term growth of capital and reasonable income from dividends and interest. IDS Equity Select Fund Invests primarily in a combination of moderate growth stocks, higher-yielding equities and bonds. Seeks growth of capital and income. (icon of) three pine trees IDS Blue Chip Advantage Fund Invests in selected stocks from a major market index. Securities purchased are those recommended by our research analysts as the best from each industry represented on the index. Offers potential for long-term growth as well as dividend income. (icon of) ribbon IDS Managed Allocation Fund Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and foreign debt securities, foreign equity securities and money market instruments. The Fund provides diversification among these major investment categories and has a target mix that represents the way the Fund's investments will be allocated over the long term. Seeks maximum total return. (icon of) spinning toy IDS Stock Fund Invests in a Portfolio comprised primarily of common stocks of companies representing many sectors of the economy. Seeks current income and growth of capital. (icon of) building with columns IDS Equity Value Fund Invests primarily in undervalued common stocks that offer potential for growth of capital and income. (icon of) three growing flowers IDS Utilities Income Fund Invests primarily in the stocks of public utility companies to seek high current income and growth of income and capital with reduced volatility. (icon of) light bulb IDS Diversified Equity Income Fund Invests in a Portfolio comprised primarily in high-yielding common stocks to seek high current income and, secondarily, to benefit from the growth potential offered by stock investments. (icon of) two puzzle pieces IDS Mutual Invests in a Portfolio which seeks to balance between common stocks and senior securities (preferred stocks and bonds). Seeks a balance of growth of capital and current income. (icon of) scale of justice Income funds The funds in this group invest their assets primarily in corporate bonds or government securities to seek interest income. Secondary objective is capital growth. Risk varies by bond quality. IDS Extra Income Fund Invests in a Portfolio comprised mainly in long-term, high-yielding corporate fixed-income securities in the lower rated, higher risk bond categories to seek high current income. Secondary objective is capital growth. (icon of) two coins IDS Bond Fund Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk bond categories, or the equivalent, and in government bonds. (icon of) Greek column IDS Selective Fund Invests in a Portfolio comprised primarily of high-quality corporate bonds and other highly rated debt instruments including government securities and short-term investments. Seeks current income and preservation of capital. (icon of) skyline IDS Federal Income Fund Invests in a Portfolio comprised primarily of securities issued or guaranteed as to the timely payment of principal and interest by the U.S. government, its agencies and instrumentalities. Seeks a high level of current income and safety of principal consistent with its type of investments. (icon of) shield with eagle head Tax-exempt income funds These funds provide tax-free income by investing in municipal bonds. The income is generally free from federal income tax, but a portion of the income may be subject to state and local taxes. Risk varies by bond quality. IDS Tax-Exempt Bond Fund Invests mainly in bonds and notes of state or local government units, with at least 75% in the four highest rated, lowest risk bond categories. (icon of) shield with Greek column IDS Insured Tax-Exempt Fund Invests primarily in municipal securities that are insured as to the timely payment of principal and interest. The insurance feature minimizes credit risk of the Fund but does not guarantee the market value of the Fund's shares. (icon of) shield with star IDS State Tax-Exempt Funds (CA, MA, MI, MN, NY, OH) Invests primarily in high- and medium-grade municipal securities to provide income to residents of each respective state that is exempt from federal, state and local income taxes. (New York is the only state that is exempt at the local level.) (icon of) shield with U.S. enclosed IDS High Yield Tax-Exempt Fund Invests in a Portfolio comprised primarily of medium- and lower-quality municipal bonds and notes. Lower-quality securities generally involve greater risk of principal and income. (icon of) shield with basket of apples enclosed IDS Intermediate Tax-Exempt Fund Invests in mainly investment-grade bonds and other debt securities with intermediate-term maturities issued by state and local government units. Goal is to seek a high level of current income exempt from federal taxes. (icon of) shield with tree enclosed Money market funds These money market funds have three main goals: conservation of capital, constant liquidity and the highest possible current income consistent with these objectives. An investment in these funds is neither insured nor guaranteed by the U.S. government, and there can be no assurance that these funds will be able to maintain a stable net asset value of $1.00 per share. Very limited risk. IDS Cash Management Fund Invests in such money market securities as high quality commercial paper, bankers' acceptances, certificates of deposit (CDs) and other bank securities. (icon of) piggy bank IDS Tax-Free Money Fund Invests primarily in short-term bonds and notes issued by state and local governments to seek high current income exempt from federal income taxes. (icon of) shield with piggy bank enclosed Quick telephone reference American Express Telephone Transaction Service Redemptions and exchanges, dividend payments or reinvestments and automatic payment arrangements National/Minnesota: 800-437-3133 Mpls./St. Paul area: 671-3800 American Express Shareholder Service Fund performance, objectives and account inquiries 612-671-3733 TTY Service For the hearing impaired 800-846-4852 American Express Infoline Automated account information (TouchTone(R) phones only), including current fund prices and performance, account values and recent account transactions National/Minnesota: 800-272-4445 Mpls./St. Paul area: 671-1630 PAGE AMERICAN EXPRESS FINANCIAL ADVISORS IDS Stock Fund IDS Tower 10 Minneapolis, MN 55440-0010 -----END PRIVACY-ENHANCED MESSAGE-----