-----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, Br29CAmHFQkgFFU/RZsmie6EDsEbauNCp1w4Hf7Xh/LV+ZnNRb6Q5vC2D/IvwS2x 8vgA0WT4wXn4V0CQG6sLog== 0000820027-98-000390.txt : 19980527 0000820027-98-000390.hdr.sgml : 19980527 ACCESSION NUMBER: 0000820027-98-000390 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980526 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: SEC FILE NUMBER: 811-00498 FILM NUMBER: 98631102 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH ST 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 1998 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. 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 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) 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 chairman If you're an experienced investor, you know that the past few years have been unusually strong in many financial markets. Perhaps just as important, history shows that bull markets don't last forever. Though they're often unpredictable, declines -- whether they're brief or long-lasting, moderate or substantial -- are always a possibility. We saw evidence of that last October, when declines in Asian markets spawned a sharp drop in several financial markets worldwide, including the U.S. The potential for such volatility reinforces the need for investors to review periodically their long-term goals and examine whether their investment program remains on track to achieving them. Your quarterly investment statements are one part of that monitoring process. The other is a meeting with your 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 An excellent environment for large-capitalization stocks resulted in a very productive six months for IDS Stock Fund. For the first half of the fiscal year -- October 1997 through March 1998 -- the Fund's Class A shares generated a total return of 13.5%. (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.) After sinking in the aftermath of last fall's financial crisis in Asia, the U.S. market spent most of the winter essentially treading water. But by February, the worst of the Asian flu seemed to have passed, and investors' optimism was renewed by continued reports of low inflation and, for the most part, solid corporate profits. That combination was enough to re-ignite the stock market, which went on a two-month tear that more than made up for the doldrums of the previous months. As had been the case since the start of the market's stunning surge that began in early 1995, large-capitalization growth stocks most often led the advance over the past six months. The trend worked partially in the Fund's favor, as it concentrates its investments in the large-cap sector. However, part of the Fund's objective is to provide an above-average dividend, which is generally not available from the high-growth stocks that have set the red-hot pace for the market. On the other hand, the Fund's comparatively substantial dividend helped cushion the net asset value during difficult periods, such as last fall's Asia-induced downturn. Strong sectors Looking at the Fund's most-productive investments, stocks in the pharmaceutical (such as Pfizer and Merck) and financial services (BankAmerica, Travelers) sectors were especially strong. Solid contributions also came from household product (Procter & Gamble, Gillette) and retailing (Dayton Hudson, Wal-Mart) stocks. The Fund's foreign holdings, which were concentrated in Europe and made up 10%-15% of assets, paid off well, too. To shore up the Fund's dividend, I maintained a healthy exposure to utility stocks, mainly telephone companies, as well as convertible preferred stocks and convertible bonds. Overall, the portfolio was little changed during the six months. I did shift more money into financial services, and brought foreign investments down a bit. As for the rest of the fiscal year, the investment environment continues to appear reasonably good, although I will be surprised if stocks don't retreat at least modestly sometime before year-end. In any event, I plan to keep the Fund concentrated in a wide range of stocks of large, high-quality companies, complemented by higher-yielding securities that contribute to the Fund's dividend. Richard H. Warden (picture of) Richard H. Warden Richard H. Warden Portfolio manager To our shareholders Class A 6-month performance (All figures per share) Net asset value (NAV) March 31, 1998 $27.06 Sept. 30, 1997 $27.44 Decrease $ 0.38 Distributions Oct. 1, 1997 - March 31, 1998 From income $ 0.50 From capital gains $ 3.13 Total distributions $ 3.63 Total return* +13.5%** Class B 6-month performance (All figures per share) Net asset value (NAV) March 31, 1998 $26.92 Sept. 30, 1997 $27.32 Decrease $ 0.40 Distributions Oct. 1, 1997 - March 31, 1998 From income $ 0.40 From capital gains $ 3.13 Total distributions $ 3.53 Total return* +13.1%** Class Y 6-month performance (All figures per share) Net asset value (NAV) March 31, 1998 $27.06 Sept. 30, 1997 $27.44 Decrease $ 0.38 Distributions Oct. 1, 1997 - March 31, 1998 From income $ 0.51 From capital gains $ 3.13 Total distributions $ 3.64 Total return* +13.6%** *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, 1998) General Electric 2.41% $112,043,750 Merck & Co 1.94 89,977,010 Colgate-Palmolive 1.87 86,625,000 Pfizer 1.72 79,750,000 EXEL 1.67 77,499,999 Safeway 1.59 73,875,000 Rite Aid 1.47 68,500,000 Mutual Risk Management 1.46 67,750,000 Schering-Plough 1.41 65,350,000 UNUM 1.40 65,038,354 3.25% Cv Preferred (icon of) pie chart The ten holdings listed here make up 16.94% of the Portfolio's net assets
Financial statements Statement of assets and liabilities IDS Stock Fund, Inc. March 31, 1998 Assets (Unaudited) Investments in Equity Portfolio (Note 1) $4,641,540,937 Liabilities Accrued distribution fee 5,312 Accrued service fee 19,596 Accrued transfer agency fee 10,439 Accrued administrative services fee 3,416 Other accrued expenses 173,584 ------- Total liabilities 212,347 ------- Net assets applicable to outstanding capital stock $4,641,328,590 ============== Represented by Capital stock-- $.01 par value (Note 1) $ 1,715,922 Additional paid-in capital 3,092,527,334 Undistributed net investment income (904,972) Accumulated net realized gain (loss) 232,305,694 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,315,684,612 ------------- Total-- representing net assets applicable to outstanding capital stock 4,641,328,590 ============= Net assets applicable to outstanding shares: Class A $3,174,174,220 Class B $ 260,780,665 Class Y $1,206,373,705 Net asset value per share of outstanding capital stock Class A shares 117,320,837 $ 27.06 Class B shares 9,688,502 $ 26.92 Class Y shares 44,582,900 $ 27.06 See accompanying notes to financial statements.
Statement of operations IDS Stock Fund, Inc. Six months ended March 31, 1998 Investment income (Unaudited) Income: Dividend $ 33,949,382 Interest 5,955,179 Less foreign taxes withheld (414,734) -------- Total income 39,489,827 Expenses (Note 2): Expenses allocated from Equity Portfolio 9,898,657 Distribution fee -- Class B 834,248 Transfer agency fee 1,861,073 Incremental transfer agency fee-- Class B 9,975 Service fee Class A 2,475,816 Class B 193,271 Class Y 559,170 Administrative services fees and expenses 592,614 Compensation of board members 7,047 Postage23,400 Registration fees 255,062 Audit fees 4,812 Other expenses 4,405 ----- Total expenses 16,719,550 Earnings credits on cash balances (Note 2) (185,466) -------- Total net expenses 16,534,084 ---------- Investment income (loss)-- net 22,955,743 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 291,485,631 Foreign currency transactions 1,120,588 --------- Net realized gain (loss) on investments 292,606,219 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 241,036,723 ----------- Net gain (loss) on investments and foreign currencies 533,642,942 ----------- Net increase (decrease) in net assets resulting from operations $556,598,685 ============ See accompanying notes to financial statements.
Financial statements Statements of changes in net assets IDS Stock Fund, Inc. Operations March 31, 1998 Sept. 30, 1997 Six months ended Year ended (Unaudited) Investment income (loss)-- net $ 22,955,743 $ 58,375,366 Net realized gain (loss) on investments 292,606,219 490,531,772 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 241,036,723 427,269,463 ----------- ----------- Net increase (decrease) in net assets resulting from operations 556,598,685 976,176,601 ----------- ----------- Distributions to shareholders from: Net investment income Class A (17,132,021) (44,462,913) Class B (527,292) (1,646,156) Class Y (6,992,874) (17,928,151) Net realized gain Class A (361,177,439) (113,973,806) Class B (27,613,854) (6,116,806) Class Y (141,133,199) (43,104,797) ------------ ----------- Total distributions (554,576,679) (227,232,629) ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 116,453,116 242,084,917 Class B shares 39,654,859 72,920,015 Class Y shares 167,576,358 252,272,494 Reinvestment of distributions at net asset value Class A shares 348,254,640 145,741,344 Class B shares 27,897,120 7,699,303 Class Y shares 130,889,602 53,455,672 Payment for redemptions Class A shares (170,666,271) (340,439,519) Class B shares (Note 2) (11,514,042) (16,926,750) Class Y shares (172,051,554) (287,081,216) ------------ ------------ Increase (decrease) in net assets from capital share transactions 476,493,828 129,726,260 ----------- ----------- Total increase (decrease) in net assets 478,515,834 878,670,232 Net assets at beginning of period 4,162,812,756 3,284,142,524 ------------- ------------- Net assets at end of period $4,641,328,590 $4,162,812,756 ============== ============== Undistributed (excess of distributions over) net investment income $ (904,972) $ 791,472 -------------- -------------- See accompanying notes to financial statements.
Notes to financial statements IDS Stock Fund, Inc. (Unaudited as to March 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 has 10 billion authorized shares of capital stock. 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 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, 1998 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 from net investment income, declared and paid each calendar quarter, 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 last income dividend of the calendar year. 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 an agreement with American Express Financial Corporation (AEFC) for providing administrative services. 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 and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $15 o Class B $16 o Class Y $15 Also effective March 20, 1995, the Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder servicing-related services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares for distribution-related services. Under a Shareholder Service Agreement, the Fund pays a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.175% of the Fund's average daily net assets attributable to Class A and Class B shares and commencing on May 9, 1997, the fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by American Express Financial Advisors Inc. for distributing Fund shares were $1,446,153 for Class A and $77,293 for Class B for the six months ended March 31, 1998. During the six months ended March 31, 1998, the Fund's transfer agency fees were reduced by $185,466 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, 1998 Class A Class B Class Y Sold 4,457,626 1,523,302 6,404,181 Issued for reinvested 14,516,447 1,170,158 5,454,441 distributions Redeemed (6,506,427) (443,656) (6,712,511) Net increase (decrease) 12,467,646 2,249,804 5,146,111 Year ended Sept. 30, 1997 Class A Class B Class Y Sold 9,885,572 3,000,534 10,328,998 Issued for reinvested 6,259,225 333,244 2,293,106 distributions Redeemed (13,870,549) (687,579) (11,846,789) Net increase (decrease) 2,274,248 2,646,199 775,315
4 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(a) Class A 1998(b) 1997 1996(c) 1995 1994 1993 1992 1991 1990 1989 1988 Net asset value, $27.44 $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43 $17.04 beginning of period Income from investment operations: Net investment income (loss) .14 .39 .43 .52 .58 .55 .64 .68 .83 .77 .56 Net gains (losses) (both 3.11 6.11 3.17 1.96 .21 2.93 1.11 4.02 (.87) 3.26 1.13 realized and unrealized) Total from investment operations 3.25 6.50 3.60 2.48 .79 3.48 1.75 4.70 (.04) 4.03 1.69 Less distributions: Dividends from net (.16) (.43) (.39) (.49) (.60) (.53) (.63) (.74) (.85) (.70) (.55) investment income Distributions from (3.47) (1.12) (.68) (1.51) (1.95) (1.76) (1.09) (1.20) (2.61) -- (.75) realized gains Total distributions (3.63) (1.55) (1.07) (2.00) (2.55) (2.29) (1.72) (1.94) (3.46) (.70) (1.30) Net asset value, $27.06 $27.44 $22.49 $19.96 $19.48 $21.24 $20.05 $20.02 $17.26 $20.76 $17.43 end of period Ratios/supplemental data Class A 1998b 1997 1996c 1995 1994 1993 1992 1991 1990 1989 1988 Net assets, end of $3,174 $2,877 $2,307 $1,984 $2,368 $2,059 $1,658 $1,513 $1,213 $1,347 $1,246 period (in millions) Ratio of expenses to .77%e .78% .80%e .79% .76% .73% .72% .65% .63% .60% .58% average daily net assetsd Ratio of net income (loss) to 1.10%e 1.58% 2.19%e 2.61% 2.99% 2.75% 3.21% 3.59% 4.32% 3.94% 3.17% average daily net assets Portfolio turnover rate 41% 82% 71% 69% 75% 76% 77% 58% 26% 54% 27% (excluding short-term securities) Total returnf 13.5% 30.2% 18.6% 14.4% 3.9% 18.8% 9.4% 29.0% (0.9%) 23.4% 10.1% Average brokerage $.0447 $.0320 $.0388 -- -- -- -- -- -- -- -- commission rateg a For a share outstanding throughout the period. Rounded to the nearest cent. b Six months ended March 31, 1998 (Unaudited). c The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996. d Effective fiscal period 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. e Adjusted to an annual basis. f Total return does not reflect payment of a sales charge. g Effective fiscal period 1996, 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.
Fiscal period ended Sept. 30, Per share income and capital changes(a) Class B Class Y 1998(b) 1997 1996(c) 1995(d) 1998(b) 1997 1996(c) 1995(d) Net asset value, $27.32 $22.42 $19.91 $18.03 $27.44 $22.49 $19.96 $18.03 beginning of period Income from investment operations: Net investment income (loss) .05 .22 .28 .27 .14 .42 .47 .29 Net gains (losses) (both realized 3.08 6.05 3.17 1.92 3.12 6.11 3.17 2.01 and unrealized) Total from investment operations 3.13 6.27 3.45 2.19 3.26 6.53 3.64 2.30 Less distributions: Dividends from net (.06) (.25) (.26) (.31) (.17) (.46) (.43) (.37) investment income Distributions from (3.47) (1.12) (.68) -- (3.47) (1.12) (.68) -- realized gains Total distributions (3.53) (1.37) (.94) (.31) (3.64) (1.58) (1.11) (.37) Net asset value, $26.92 $27.32 $22.42 $19.91 $27.06 $27.44 $22.49 $19.96 end of period Ratios/supplemental data Class B Class Y 1998b 1997 1996c 1995d 1998b 1997 1996c 1995d Net assets, end of $261 $203 $107 $29 $1,206 $1,082 $870 $738 period (in millions) Ratio of expenses to 1.53%f 1.55% 1.57%f 1.61%f .70%f .66% .63%f .64%f average daily net assets(e) Ratio of net income (loss) to .35%f .85% 1.61%f 1.37%f 1.17%f 1.71% 2.36%(f) 2.38%f average daily net assets Portfolio turnover rate 41% 82% 71% 69% 41% 82% 71% 69% (excluding short-term securities) Total return(g) 13.1% 29.2% 17.8% 12.1% 13.6% 30.4% 18.8% 12.8% Average brokerage $.0447 $.0320 $.0388 -- $.0447 $.0320 $.0388 -- commission rate(h) a For a share outstanding throughout the period. Rounded to the nearest cent. b Six months ended March 31, 1998 (Unaudited). c The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996. d Inception date was March 20, 1995. e Effective fiscal period 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. fAdjusted to an annual basis. g Total return does not reflect payment of a sales charge. h Effective fiscal period 1996, 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 Equity Portfolio March 31, 1998 Assets (Unaudited) Investments in securities, at value (Note 1): Investments in securities of unaffiliated issuers (identified cost $3,295,427,197) $4,571,456,107 Investments in securities of affiliated issuers (identified cost $40,790,575) 80,629,082 ---------- Total investments in securities (identified cost $3,336,217,772) 4,652,085,189 Cash in bank on demand deposit 612,033 Dividends and accrued interest receivable 6,229,476 Receivable for investment securities sold 25,374,094 Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 5) 7,055 U.S. government securities held as collateral (Note 4) 34,819,670 ---------- Total assets 4,719,127,517 ------------- Liabilities Payable for investment securities purchased 32,707,055 Payable upon return of securities loaned (Note 4) 43,645,870 Accrued investment management services fee 40,222 Other accrued expenses 63,192 Option contracts written, at value (premium received $266,176) (Note 6) 225,000 ------- Total liabilities 76,681,339 ---------- Net assets $4,642,446,178 ============== See accompanying notes to financial statements.
Financial statements Statement of operations Equity Portfolio Six months ended March 31, 1998 Investment income (Unaudited) Income: Dividends (including $200,000 earned from affiliates) $ 33,955,945 Interest 5,946,633 Less foreign taxes withheld (414,814) -------- Total income 39,487,764 ---------- Expenses (Note 2): Investment management services fee 9,674,266 Compensation of directors 12,083 Custodian fees 185,130 Audit fees 14,438 Other 15,473 ------ Total expenses 9,901,390 Earnings credit on cash balances (Note 2) (821) ---- Total net expenses 9,900,569 --------- Investment income (loss) -- net 29,587,195 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 291,530,307 Foreign currency transactions 1,120,772 --------- Net realized gain (loss) on investments 292,651,079 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 241,096,482 ----------- Net gain (loss) on investments and foreign currencies 533,747,561 ----------- Net increase (decrease) in net assets resulting from operations $563,334,756 ============ See accompanying notes to financial statements.
Statements of changes in net assets Equity Portfolio Operations and distributions March 31, 1998 Sept. 30, 1997 Six months ended Year ended (Unaudited) Investment income (loss)-- net $ 29,587,195 $ 69,424,362 Net realized gain (loss) on investments 292,651,079 490,586,825 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 241,096,482 427,383,679 ----------- ----------- Net increase (decrease) in net assets resulting from operations 563,334,756 987,394,866 Net contributions (withdrawals) from partners (84,689,343) (108,642,196) ----------- ------------ Total increase (decrease) in net assets 478,645,413 878,752,670 Net assets at beginning of period (Note 1) 4,163,800,765 3,285,048,095 ------------- ------------- Net assets at end of period $4,642,446,178 $4,163,800,765 ============== ============== See accompanying notes to financial statements.
Notes to financial statements Equity Portfolio (Unaudited as to March 31, 1998) 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. 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 0.53% 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 $275,747 for the six months ended March 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. During the six months ended March 31, 1998, the Portfolio's custodian fees were reduced by $821 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 $1,670,887,676 and $1,749,217,547, respectively, for the six months ended March 31, 1998. For the same period, the portfolio turnover rate was 41%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $116,703 for the six months ended March 31, 1998. 4 Lending of portfolio securities At March 31, 1998, securities valued at $43,645,870 were on loan to brokers. For collateral, the Portfolio received $8,826,200 in cash and U.S. government securities valued at $34,819,670. Income from securities lending amounted to $154,939 for the six months ended March 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 Foreign currency contracts At March 31, 1998, 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 on this contract is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contract are as follows: Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation March 25,1998 5,511,383 9,229,252 $7,055 $-- British Pound U.S. Dollar 6 Options contracts written The number of contracts and premium amounts associated with option contracts written is as follows: Six months ended March 31, 1998 Calls Contracts Premium Balance March 31, 1997 -- $ -- Opened 2,000 266,176 Balance March 31, 1998 2,000 $266,176 See "Summary of significant accounting policies." Investments in securities Equity Portfolio March 31, 1998 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks - 85.0% Issuer Shares Value(a) Aerospace & defense - 1.2% General Motors Cl H 450,000 $20,362,500 Lockheed Martin 306,084 34,434,450 Total 54,796,950 Airlines - 1.6% AMR 300,000(b) 42,956,250 Northwest Airlines Cl A 500,000(b) 30,843,750 Total 73,800,000 Automotive & related - 1.0% Ford Motor 700,000 45,368,750 Banks and savings & loans - 6.4% BankAmerica 500,000 41,312,500 BankBoston 300,000 33,075,000 First Chicago NBD 500,000 44,062,500 First Union 1,000,000 56,750,000 Norwest 800,000 33,250,000 Wachovia 620,000 52,583,750 Washington Mutual 500,000 35,859,375 Total 296,893,125 Beverages & tobacco - 1.4% Coca-Cola 525,000 40,654,687 Philip Morris 575,000 23,970,313 Total 64,625,000 Building materials & construction - 2.1% American Standard 1,000,000(b) 45,875,000 Martin Marietta Materials1,148,500 49,600,844 Total 95,475,844 Computers & office equipment - 5.6% Bay Networks 1,300,000(b) 35,262,500 Compaq Computer 1,500,000 38,812,500 Hewlett-Packard 300,000 19,012,500 Microsoft 300,000(b) 26,850,000 Network Associates 500,000(b) 33,125,000 PeopleSoft 1,000,000(b) 52,687,500 Xerox 500,000 53,218,750 Total 258,968,750 Electronics - 1.2% Harris 600,000 31,275,000 Intel 300,000 23,418,750 Total 54,693,750 Energy - 0.6% Exxon 400,000 27,050,000 Energy equipment & services - 0.4% Cooper Cameron 300,000(b) 18,112,500 Financial services - 2.1% Associates First Capital Cl A180,000 $14,220,000 CIT Group Cl A 1,000,000 32,625,000 Providian Financial 250,000 14,359,375 Travelers Group 600,000(d) 36,000,000 Total 97,204,375 Food - 2.1% Bestfoods 250,000 29,218,750 General Mills 500,000 38,000,000 Sara Lee 500,000 30,812,500 Total 98,031,250 Foreign - 12.8%(c) Bayerische Vereinsbank 300,000(b) 21,894,259 Dresdner Bank 450,000 20,483,295 Elf Aquitaine ADR 600,000(d) 38,850,000 Ericsson (LM) ADR 5,000,000 33,125,000 EXEL 1,000,000 77,499,999 General Electric 4,100,000(b) 32,484,632 Meridian Gold 3,800,000(f) 12,879,082 Mid Ocean 444,000 34,410,000 Mutual Risk Management 2,000,000(d,f) 67,750,000 Rhone-Poulenc Cl A 699,893(b) 35,563,565 Royal Dutch Petroleum 1,100,000 62,493,750 Schlumberger 525,000 39,768,750 SmithKline Beecham ADR 625,000 39,101,563 Unilever 775,000 53,184,375 Union Bank of Switzerland 15,000 24,499,836 Total 593,988,106 Furniture & appliances - 2.0% Maytag 1,000,000 47,812,500 Sunbeam 1,000,000 44,062,500 Total 91,875,000 Health care - 10.7% American Home Products 300,000 28,612,500 Baxter Intl 750,000 41,343,750 Bristol-Myers Squibb 600,000 62,587,500 Guidant 775,000 56,865,625 Johnson & Johnson 625,000 45,820,313 Medtronic 500,000 25,937,500 Merck & Co 700,892 89,977,010 Pfizer 800,000 79,750,000 Schering-Plough 800,000 65,350,000 Total 496,244,198 Health care services - 0.5% Tenet Healthcare 700,000(b) 25,418,750 Household products - 4.0% Colgate-Palmolive 1,000,000 86,625,000 Gillette 400,000 47,475,000 Procter & Gamble 600,000 50,625,000 Total 184,725,000 Industrial equipment & services - 2.4% Deere & Co 950,000 $58,840,625 Illinois Tool Works 800,000 51,800,000 Total 110,640,625 Insurance - 2.1% American Intl Group 375,000 47,226,562 Provident Cos 439,750 15,088,922 SunAmerica 750,000 35,906,250 Total 98,221,734 Leisure time & entertainment - 0.5% Disney (Walt) 200,000 21,350,000 Media - 2.5% CBS 1,000,000 33,937,500 Chancellor Media 500,000(b) 22,937,500 Clear Channel Communications 600,000(b) 58,800,000 Total 115,675,000 Metals - 1.1% Getchell Gold 1,025,000(b) 21,396,875 Stillwater Mining 1,170,000(b) 29,615,625 Total 51,012,500 Multi-industry conglomerates - 3.8% Cendant 1,000,000(b) 39,625,000 Emerson Electric 400,000 26,075,000 General Electric 1,300,000 112,043,750 Total 177,743,750 Paper & packaging - 0.5% Longview Fibre 1,636,300(g) 25,464,919 Retail - 7.7% American Stores 1,100,000 28,600,000 Dayton Hudson 500,000 44,000,000 Home Depot 600,000 40,462,500 Penney (JC) 550,000 41,628,125 Rite Aid 2,000,000 68,500,000 Safeway 2,000,000(b) 73,875,000 Wal-Mart Stores 1,200,000 60,975,000 Total 358,040,625 Utilities -- electric - 1.9% Carolina Power & Light 600,000 27,150,000 FPL Group 600,000 38,550,000 Northern States Power 400,000 23,600,000 Total 89,300,000 Utilities -- telephone - 6.8% Ameritech 800,000 $39,550,000 AT&T 700,000 45,937,500 Bell Atlantic 300,000 30,750,000 BellSouth 700,000 47,293,750 Century Telephone Enterprises 300,000 18,337,500 Cincinnati Bell 500,000 17,812,500 SBC Communications 600,000 26,175,000 Southern New England Telecommunications 250,000 18,078,125 Teleport Communications Group Cl A 425,000(b) 24,968,750 U S WEST Communications Group 900,000 49,275,000 Total 318,178,125 Total common stocks (Cost: $2,686,712,007) $3,942,898,626 Preferred stocks & other - 10.4% Issuer Shares Value(a) AirTouch Communications 4.00% Cv 525,000 $21,787,500 Altera Cv 347,826(e) 15,638,257 Cendant 7.50% Cv PRIDES 920,000(l) 47,955,000 Emerson Electric 5.00% Cv PERCS 615,380(k) 36,935,723 Finova Finance Trust 5.50% Cv 213,900 17,005,050 Gillette 3.00% Cv Series G 195,000 17,501,250 Glenborough Realty Trust 7.75% Cv Series A 402,105 10,504,993 Host Marriott Financial Trust 6.75% Cv 300,000 17,175,000 Houston Inds 7.00% Cv ACES 325,000(j) 21,064,063 Intel 5.00% Cv PERCS 206,000(k) 31,697,220 McKesson 5.00% Cv 200,000(e) 16,275,000 Medtronic 5.00% Cv 884,250 38,234,970 Newell Financial Trust 5.25% Cm Cv 250,000 14,218,750 PLC Capital 6.50% Cv PRIDES 80,000(l) 4,940,000 Premier Parks 7.50% Cv 175,000 10,150,000 Rhone-Poulenc Warrants 699,893 3,941,468 Service Corp Intl 5.00% Cv 1,100,000 $24,585,000 Sprint 8.25% Cv 154,325 9,896,091 SunAmerica $3.19 Cv PERCS 500,000(k) 24,218,750 Union Pacific Capital 6.25% Cv 465,000 23,250,000 UNUM 3.25% Cv 1,217,092(b) $65,038,354 WorldCom 8.00% Cv 73,625 10,988,531 Total preferred stocks & other (Cost: $420,529,521) $483,000,970
Bonds - 1.8% Issuer Coupon Principal Value(a) rate amount Costco Zero Coupon Cv Sub Nts 08-01-17 3.51% $21,000,000(e,h) $14,096,250 Diamond Offshore Drilling Cv Sr Sub Nts 09-15-07 3.13 7,050,000 6,944,250 Learning Cv Sr Nts 11-01-00 5.50 15,000,000 13,800,000 Network Associates Zero Coupon Cv Sub Deb 02-13-18 4.09 20,000,000(h) 9,125,000 Office Depot Zero Coupon Cv Nt 11-01-08 3.70 7,300,000(h) 5,392,875 PLATINUM Technology Cv Sub Nts 12-15-02 6.25 15,000,000(e) 15,600,000 Solectron Cv Sub Nts 03-01-06 6.00 6,700,000 9,220,875 Xilinx Cv Sub Nts 11-01-02 5.25 10,000,000 9,975,000 Total bonds (Cost: $79,299,999) $84,154,250
Options purchased - 0.0% Issuer Number of Exercise Expiration Value(a) shares price date Put S&P 500 400,000 $15 April 1998 $1,300,000 Total options purchased (Cost: $8,941,000) $1,300,000 Short-term securities - 3.0% Issuer Annualized Amount Value(a) yield on payable at date of maturity purchase U.S. government agencies - 0.5% Federal Home Loan Bank Disc Nt 04-01-98 5.46% $2,900,000 $2,900,000 Federal Home Loan Mtge Corp Disc Nt 04-23-98 5.47 600,000 598,002 Federal Natl Mtge Assn Disc Nt 04-13-98 5.54 20,000,000 19,963,132 Total 23,461,134 Commercial paper - 2.5% BOC Group 04-01-98 6.09 4,300,000(i) 4,300,000 Clorox 05-13-98 5.59 2,100,000 2,086,378 Commerzbank U.S. Finance 04-27-98 5.57 8,000,000 7,967,933 Fleet Funding 04-16-98 5.56 3,900,000(i) 3,891,014 Glaxo Wellcome 04-24-98 5.63 10,300,000(i)10,263,083 Heinz (HJ) 04-22-98 5.54 5,800,000 5,781,392 Kellogg 05-01-98 5.57 10,600,000 10,550,975 Kredietbank North America Finance 04-27-98 5.52%$15,100,000 $15,036,391 Natl Australia Funding (Delaware) 05-11-98 5.54 1,300,000 1,292,056 New Center Asset Trust 04-14-98 5.52 15,000,000 14,970,317 Novartis Finance 05-01-98 5.55 8,500,000 8,460,900 Pacific Life Insurance 04-30-98 5.57 13,900,000 13,837,855 Toyota Motor Credit 05-01-98 5.58 10,000,000 9,953,750 Westpac Capital 04-17-98 5.54 8,900,000 8,878,165 Total 117,270,209 Total short-term securities (Cost: $140,735,245) $140,731,343 Total investments in securities (Cost $3,336,217,772)(m) $4,652,085,189 See accompanying notes to investments in securities.
Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (d) Security is partially or fully on loan. See Note 4 to the financial statements. (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) Investments representing 5% or more of the outstanding voting securities of the issuer. Transactions with companies that are or were affiliates during the six months ended March 31, 1998 are as follows: Issuer Beginning Purchase Sales Ending Dividend Value(a) cost cost cost cost income Meridian Gold $14,110,518 $-- $-- $14,110,518 $ -- $12,879,082 Mutual Risk Management 26,680,057 -- -- 26,680,057 200,000 67,750,000 Total $40,790,575 $-- $-- $40,790,575 $200,000 $80,629,082 (g) At March 31, 1998, securities valued at $3,112,500 were held to cover open call options written as follows: Issuer Number of Exercise Expiration Value(a) shares price date Longview Fibre 200,000 $15 June 1998 $225,000 (h) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (i) Commercial paper sold within terms of a private placement memorandum, exempt under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (j) ACES are automatically convertible to the underlying equity securities. (k) PERCS (Preferred-Equity Redeemable Cumulative Securities) are convertible preferred securities. PERCS are like buying an underlying common stock and selling a call option against the position. (l) PRIDES (Preferred Redeemable Increased Dividend Equity Securities) are structured as convertible preferred securities. Investors receive an enhanced yield but based upon a specific formula, potential appreciation is limited. PRIDES pay dividends, have voting rights, are noncallable for three years and upon maturity, convert into shares of common stock. (m) At March 31, 1998, the cost of securities for federal income tax purposes was approximately $3,336,218,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation......................................$1,364,487,000 Unrealized depreciation.........................................(48,620,000) Net unrealized appreciation..................................$1,315,867,000
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 Stock Fund IDS Tower 10 Minneapolis, MN 55440-0010 -----END PRIVACY-ENHANCED MESSAGE-----