-----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, GG9NradsJyXpNXzMz4WsKCdJxNDdQNmXLObcKdsXfXxmUC6GBSJUDfFYpnElDO83 gzInPnbxs37SESZNxJ40uw== 0000820027-98-000713.txt : 19981208 0000820027-98-000713.hdr.sgml : 19981208 ACCESSION NUMBER: 0000820027-98-000713 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981207 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: 98764738 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 IDS STOCK FUND, INC. 1998 annual report IDS Stock Fund (prospectus enclosed) (icon of) building with columns The goals of IDS Stock Fund, Inc. are current income and growth of capital. (This annual report includes a prospectus that describes in detail the Fund's objective, investment policies, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) American Express Financial Advisors Distributed by American Express Financial Advisors Inc. (icon of) building with columns Big names, big business These are the names you know. They are the movers and shakers of today's business world. Whether representing established U.S. firms or companies that have made their mark over-seas, the securities found in Stock Fund make up a veritable who's who in the financial market. These stocks offer a dual benefit of ongoing growth potential along with a steady stream of dividend income. And as we move toward a more global economy, these blue chip, multi-national companies are well-positioned to prosper in the 21st century. Contents 1998 annual report From the chairman 4 From the portfolio managers 4 The Portfolio's ten largest holdings 6 Making the most of the Fund 7 The Fund's long-term performance 8 Independent auditors' report (Fund) 9 Financial statements (Fund) 10 Notes to financial statements (Fund) 13 Independent auditors' report (Portfolio) 19 Financial statements (Portfolio) 20 Notes to financial statements (Portfolio) 23 Investments in securities 29 IDS mutual funds 34 Federal income tax information 38 1998 prospectus The Fund in brief 3p Goals 3p Investment policies and risks 3p Structure of the Fund 4p Manager and distributor 4p Portfolio managers 4p Alternative purchase arrangements 4p Sales charge and Fund expenses 5p Performance 7p Financial highlights 7p Total returns 9p Investment policies and risks 12p Facts about investments and their risks 12p Valuing Fund shares 18p How to purchase, exchange or redeem shares 19p Alternative purchase arrangements 19p How to purchase shares 21p How to exchange shares 24p How to redeem shares 25p Reductions and waivers of the sales charge 30p Special shareholder services 37p Services 37p Quick telephone reference 37p Distributions and taxes 38p Dividend and capital gain distributions 38p Reinvestments 39p Taxes 40p How to determine the correct TIN 42p How the Fund and Portfolio are organized 43p Shares 43p Voting rights 43p Shareholder meetings 43p Special considerations regarding master/feeder structure 44p Board members and officers 47p Investment manager 49p Administrator and transfer agent 50p Distributor 50p About American Express Financial Corporation 52p General information 52p Year 2000 53p Appendix 54p Descriptions of derivative instruments 54p The purpose of this annual report is to tell investors how the Fund performed. (icon of) one open book inside of another The prospectus, which is bound into the middle of this annual report, describes the Fund in detail. (This annual report is not part of the prospectus.) To our shareholders (picture of) William R. Pearce William R. Pearce Chairman of the board (picture of) Richard H. Warden Richard H. Warden Portfolio manager (picture of) G. Michael Kennedy G. Michael Kennedy Portfolio manager From the chairman If you're an experienced investor, you know that the past 12 months was a highly volatile period in many financial markets. But history tells us that substantial market moves are nothing new. Though they're often unpredictable, declines -- whether they're brief or long-lasting, moderate or substantial -- are always a possibility. 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. Before closing, I want to introduce a new portfolio manager for the Fund -- Michael Kennedy. Formerly director of research and a member of this company's investment department, he will split management duties with longtime manager Richard Warden. (signature of) William R. Pearce William R. Pearce From the portfolio managers A very productive period was quickly turned into a modestly positive one by a sharp decline in the U.S. stock market late in the fiscal year. In the end, IDS Stock Fund's Class A shares recorded a total return of 2.0% for the 12 months -- October 1997 through September 1998. After sinking in the aftermath of the Asian financial crisis in the fall of 1997, the U.S. market spent most of last winter trying to hold its ground. But by February, the worst of the "Asian flu" seemed to have passed, and investors' optimism was renewed by ongoing reports of low inflation and, for the most part, solid corporate profits. That combination was enough to spark a two-month market surge that more than made up for the earlier weakness. Conditions remained relatively stable until late summer, when financial turmoil resurfaced overseas, this time in Russia and Latin America. With Asian economies already in shambles, this latest development cast a dark cloud over the outlook for American companies' profits and forced stocks into rapid retreat until the final few weeks of the period. Stocks of financial services companies, a relatively large area of investment for the Fund, were particularly weak. Big-cap trend continues As had been the case in recent years, large-capitalization growth stocks most often led the market's upturns over the 12 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 usually set the pace for the market. To shore up the Fund's dividend, we maintained a healthy exposure to utility stocks, including providers of electricity and telephone service, as well as convertible preferred stocks and convertible bonds. As for changes to the portfolio, to reduce a large capital gain that shareholders would have received in the form of a taxable distribution, we sold several stocks for losses. To lessen the exposure to potential problems overseas, we also reduced holdings in Europe somewhat. Looking to the current fiscal year, the portfolio is more defensively positioned than it was some months ago. This is reflected in a higher level of cash reserves and an increased concentration in stocks of well-known companies that often hold dominant positions in their industries. Should earnings growth become tougher to maintain in the year ahead, we think such companies will fare relatively well. (signature of) Richard H. Warden Richard H. Warden (signature of) G. Michael Kennedy G. Michael Kennedy (This annual report is not part of the prospectus.) Class A 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 1998 $ 24.18 Sept. 30, 1997 $ 27.44 Decrease $ 3.26 Distributions Oct. 1, 1997 - Sept. 30, 1998 From income $ 0.65 From capital gains $ 3.12 Total distributions $ 3.77 Total return* +2.0%** Class B 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 1998 $24.05 Sept. 30, 1997 $27.32 Decrease $ 3.27 Distributions Oct. 1, 1997 - Sept. 30, 1998 From income $ 0.46 From capital gains $ 3.12 Total distributions $ 3.58 Total return* +1.3%** Class Y 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 1998 $24.18 Sept. 30, 1997 $27.44 Decrease $ 3.26 Distributions Oct. 1, 1997 - Sept. 30, 1998 From income $ 0.67 From capital gains $ 3.12 Total distributions $ 3.79 Total return* +2.1%** *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. (This annual report is not part of the prospectus.) The Portfolio's ten largest holdings Percent Value (of Portfolio's net assets) (as of Sept. 30, 1998) General Electric 2.93% $119,343,750 Safeway 2.28 92,750,000 Schering-Plough 2.04 82,850,000 Rite Aid 1.74 71,000,000 AT&T 1.65 67,248,414 Wal-Mart Stores 1.61 65,550,000 Pfizer 1.56 63,562,500 MS-UNUM 1.45 59,028,961 3.25% Cv Preferred Microsoft 1.42 57,782,813 Guidant 1.41 57,543,750 For further information about these holdings, please refer to the section entitled "Investments in securities" herein. (icon of) pie chart The ten holdings listed here make up 18.09% of the Portfolio's net assets (This annual report is not part of the prospectus.) Making the most of the Fund Build your assets systematically One of the best ways to invest in the Fund is by dollar-cost averaging -- a time-tested strategy that can make market fluctuations work for you. To dollar-cost average, simply invest a fixed amount of money regularly. You'll automatically buy more shares when the Fund's share price is low, fewer shares when it is high. Using this strategy does not ensure a profit or avoid a loss if the market declines, and requires that you be able to keep on investing on a regular basis, even when the price of your shares falls or the market declines. Investing in this manner can be an effective way to accumulate shares to meet your long-term goals. How dollar cost averaging works Month Amount Per-share Number of shares purchased invested market price Jan $100 $20 5.00 XXXXX Feb 100 18 5.56 XXXXXx March 100 17 5.88 XXXXXx April 100 15 6.67 XXXXXXx May 100 16 6.25 XXXXXXx June 100 18 5.56 XXXXXx July 100 17 5.88 XXXXXx Aug 100 19 5.26 XXXXXx Sept 100 21 4.76 XXXXx Oct 100 20 5.00 XXXXX (footnote to table) By investing an equal number of dollars each month.... (arrow in table pointing to April) you automatically buy more shares when the per share market price is low.... (arrow pointing to Sept) and fewer shares when the per share market price is high. You have paid an average price of only $17.91 per share over the 10 months, while the average market price actually was $18.10. Three ways to benefit from a mutual fund: o your shares increase in value when the Fund's investments do well o you receive capital gains when the gains on investments sold by the Fund exceed losses o you receive income when the Fund's stock dividends, interest and short-term gains exceed its expenses. All three make up your total return. And you potentially can increase your investment if, like most investors, you reinvest your dividends and capital gain distributions to buy additional shares of the Fund or another fund. (This annual report is not part of the prospectus.) The Fund's long-term performance How $10,000 has grown in IDS Stock Fund $50,000 S&P 500 Stock Index $40,000 $37,326 $30,000 Lipper Growth & Stock Fund Income Fund Index Class A $20,000 $10,000 $ 9,500 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Assumes: oHolding period from 10/1/88 to 9/30/98. oReturns do not reflect taxes payable on distributions. oReinvestment of all income and capital gain distributions for the Fund, with a value of $24,495. Also see "Performance" in the Fund's current prospectus. The Standard & Poor's 500 Stock Index, an unmanaged list of common stocks, is frequently used as a general measure of market performance. Lipper Growth and Income Fund Index, an unmanaged index published by Lipper Analytical Services, Inc., includes 30 funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Average annual total return (as of Sept. 30, 1998) Since 1 year inception 5 years 10 years Class A -3.06% --% 12.76% 14.08% Class B* -2.25% 16.20%* --% --% Class Y* 2.12% 17.82%* --% --% *Inception date was March 20, 1995. On the graph above you can see how the Fund's total return compared to two widely cited unmanaged performance indexes, the S&P 500 Stock Index and the Lipper Growth & Income Fund Index. In comparing IDS Stock Fund (Class A) to the two indexes, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the indexes. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. (This annual report is not part of the prospectus.) The financial statements contained in Post-Effective Amendment #97 to Registration Statement No. 2-11358 filed on or about November 25, 1998, are incorporated herein by reference. 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 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 Stock 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 (This annual report is not part of the prospectus.) 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 that generaly pay dividends 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 that 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 (This annual report is not part of the prospectus.) 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 (This annual report is not part of the prospectus.) 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. (This annual report is not part of the prospectus.) Federal income tax information IDS Stock Fund, Inc. The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. Some of the dividends listed below were reported to you on Form 1099-DIV, Dividends and Distributions, last January. Dividends paid to you since the end of last year will be reported to you on a tax statement sent next January. Shareholders should consult a tax advisor on how to report distributions for state and local purposes. IDS Stock Fund, Inc. Fiscal year ended Sept. 30, 1998 Class A Income distributions taxable as dividend income, 100% qualifying for deduction by corporations. Payable date Per share Dec. 29, 1997 $0.43228 March 27, 1998 0.06940 June 26, 1998 0.08062 Sept. 25, 1998 0.06584 Total $0.64814 Capital gain distribution taxable for long-term capital gain. Payable date Per share Dec. 29, 1997 $3.12588 Total distributions $3.77402 The distribution of $3.55816 per share, payable Dec. 29, 1997, consisted of $0.08649 derived from net investment income, $0.34579 from net short-term capital gains (a total of $0.43228 taxable as dividend income) and $3.12588 from net long-term capital gains. The long-term gains distribution is divided into two rate categories: 28% - $1.81832 and 20% - $1.30756. (This annual report is not part of the prospectus.) Class B Income distributions taxable as dividend income, 100% qualifying for deduction by corporations. Payable date Per share Dec. 29, 1997 $0.38084 March 27, 1998 0.02525 June 26, 1998 0.03119 Sept. 25, 1998 0.01802 Total $0.45530 Capital gain distribution taxable for long-term capital gain. Payable date Per share Dec. 29, 1997 $3.12588 Total distributions $3.58118 The distribution of $3.50672 per share, payable Dec. 29, 1997, consisted of $0.03505 derived from net investment income, $0.34579 from net short-term capital gains (a total of $0.38084 taxable as dividend income) and $3.12588 from net long-term capital gains. The long-term gains distribution is divided into two rate categories: 28% - $1.81832 and 20% - $1.30756. Class Y Income distributions taxable as dividend income, 100% qualifying for deduction by corporations. Payable date Per share Dec. 29, 1997 $0.43738 March 27, 1998 0.07359 June 26, 1998 0.08534 Sept. 25, 1998 0.07049 Total $0.66680 Capital gain distribution taxable for long-term capital gain. Payable date Per share Dec. 29, 1997 $3.12588 Total distributions $3.79268 The distribution of $3.56326 per share, payable Dec. 29, 1997, consisted of $0.09159 derived from net investment income, $0.34579 from net short-term capital gains (a total of $0.43738 taxable as dividend income) and $3.12588 from net long-term capital gains. The long-term gains distribution is divided into two rate categories: 28% - $1.81832 and 20% - $1.30756. (This annual report is not part of the prospectus.) 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: 612-671-3800 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 *You may experience delays when call volumes are high. AMERICAN EXPRESS Financial Advisors IDS Stock Fund IDS Tower 10 Minneapolis, MN 55440-0010 STATEMENT OF DIFFERENCES Difference Description 1) The layout is different 1) Some of the layout in the throughout the annual report. annual report to shareholders is in two columns. 2) Headings. 2) The headings in the annual report are placed in a blue strip at the top of the page. 3) There are pictures, icons 3) Each picture, icon and and graphs throughout the graph is described in annual report. parentheses. 4) Footnotes for charts and 4) The footnotes for each graphs are described at chart or graph are typed the left margin. below the description of the chart or graph. -----END PRIVACY-ENHANCED MESSAGE-----