-----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, SO4QUzdMtQE+Tm+zltC48DHixT+4/qwaY4Dh0s/fjsuYI0YkqA1zSh7kynOeFqDx 1ZpiYVZw+Y5ngdKqzmaWrQ== 0000820027-99-000408.txt : 19990519 0000820027-99-000408.hdr.sgml : 19990519 ACCESSION NUMBER: 0000820027-99-000408 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990518 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: 99629607 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 1999 SEMIANNUAL REPORT (icon of) magnifying glass The goals of IDS Stock Fund, Inc. are current income and growth of capital. 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 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 16 Notes to Financial Statements (Portfolio) 19 Investments in Securities 24 (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board From the Chairman It is an honor for me to join the IDS Mutual Fund Group as chairman of the board and chief executive officer for each of the funds. I have served for the past eight years as governor of Minnesota and also for the past 20 years as a constitutional officer responsible for the pension investments made on behalf of government employees. My responsibility in the upcoming years is to serve your interests. By law, half the members of a mutual fund board must be independent of their investment manager and distributor. I am one of those persons. I am not an employee of American Express Financial Corporation (AEFC), nor do I own stock in American Express Company. Both are fine companies, but the law clearly states that to fully represent your interests I must be independent. Having said that, I have a great deal of respect for the capabilities of AEFC and for the services it provides to investors. Your financial advisor assists you in financial planning, conducts regular investment reviews and responds to your questions and needs. This is a very personal service that makes AEFC a partner in your financial future. I know that AEFAC has an investment focus on the long-term performance of our economy and that it wants you to participate in that growth. Consistent with that, our board is here to serve you and represent your interests in a professional manner. Arne H. Carlson (picture of) Richard H. Warden Richard H. Warden Portfolio manager From the Portfolio Managers Taking advantage of a powerful rebound by the stock market, IDS Stock Fund produced a substantial gain during the first half of the fiscal year. For the period -- October 1998 through March 1999 -- the Fund's Class A shares generated a total return of 20.98%. (A portion of the return came in the form of a capital gain, which was paid to shareholders in December 1998 and reduced the Fund's net asset value by the same amount at that time.) (picture of) Michael Kennedy Michael Kennedy Portfolio manager At the outset of the six months, stocks were trying to regroup from a steep, late-summer decline that drove down the broad market by nearly 20% and cut prices on certain stocks roughly in half. But with the remarkable resilience that has been its hallmark in recent years, the market gathered itself and began to move forward. Supported by three reductions in short-term interest rates by the Federal Reserve Board during the fall, stocks quickly turned a tentative advance into a roaring rally that, by late March, propelled the market to an all-time high. Of the six months, every one but February, when long-term interest rates rose rather sharply, showed a solid gain. Consistent with the trend of recent years, the market's resurgence was driven by large-capitalization stocks. Because of its emphasis on large-cap issues, that worked to the advantage of the Fund. BIG HOLDINGS DO WELL More specifically, the Fund's largest areas of investment were technology, financial services, retailing, utilities, consumer products and health care, all of which made positive contributions to performance. Looking at individual stocks, several of the Fund's largest holdings were also among its best performers. They included General Electric, Providian Financial, Wal-Mart, Microsoft, American International Group and MCI WorldCom. As for changes to the portfolio, we added to the technology exposure about mid-period and reduced the level of cash reserves (from about 14% last fall to about 5% at period-end). The higher-than-usual cash level came about from the sale of a number of stocks to reduce the capital gain that had built up and was due to be paid to shareholders as a taxable distribution last December. As it turned out, the cash reduction enhanced performance because more money was to put work in stocks, especially technology issues, which provided a better return than cash. Looking to the second half of the fiscal year, inflation remains remarkably low, long-term interest rates have yet to experience a sustained increase and the economy continues to chug along. At this point (mid-April), the biggest potential hurdle for the stock market is the strength of corporate profits in 1999. In any event, though, large-cap stocks appear to still be in favor and should do well if the market manages to advance in the months ahead. Richard H. Warden G. Michael Kennedy Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 1999 $26.98 Sept. 30, 1998 $24.18 Increase $ 2.80 Distributions -- Oct. 1, 1998 - March 31, 1999 From income $ 0.17 From capital gains $ 2.00 Total distributions $ 2.17 Total return* +20.98%** Class B -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 1999 $26.81 Sept. 30, 1998 $24.05 Increase $ 2.76 Distributions -- Oct. 1, 1998 - March 31, 1999 From income $ 0.08 From capital gains $ 2.00 Total distributions $ 2.08 Total return* +20.52%** Class Y -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 1999 $26.98 Sept. 30, 1998 $24.18 Increase $ 2.80 Distributions -- Oct. 1, 1998 - March 31, 1999 From income $ 0.18 From capital gains $ 2.00 Total distributions $ 2.18 Total return* +21.02%** *The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested. The 10 Largest Holdings Percent Value (of net assets) (as of March 31, 1999) Microsoft 3.78% $179,249,999 General Electric 3.50 165,937,500 Providian Financial 2.78 132,000,000 America Online 2.46 116,800,000 Wal-Mart Stores 2.33 110,624,999 American Intl Group 2.30 109,105,313 AT&T 1.94 91,846,229 Safeway 1.89 89,796,875 Intl Business Machines 1.87 88,625,000 Clear Channel Communications 1.70 80,475,000 For further detail about these holdings, please refer to the section entitled "Investments in Securities" herein. The 10 holdings listed here make up 24.55% of net assets
Financial Statements Statement of assets and liabilities IDS Stock Fund, Inc. March 31, 1999 (Unaudited) Assets Investments in Equity Portfolio (Note 1) $4,742,345,896 -------------- Liabilities Accrued distribution fee 7,027 Accrued service fee 20,608 Accrued transfer agency fee 12,119 Accrued administrative services fee 3,518 Other accrued expenses 112,497 ------- Total liabilities 155,769 ------- Net assets applicable to outstanding capital stock $4,742,190,127 ============== Represented by Capital stock-- $.01 par value (Note 1) $ 1,758,696 Additional paid-in capital 3,198,908,631 Undistributed net investment income 1,073,177 Accumulated net realized gain (loss) 91,082,709 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,449,366,914 ------------- Total-- representing net assets applicable to outstanding capital stock $4,742,190,127 ============== Net assets applicable to outstanding shares: Class A $3,264,815,492 Class B $ 338,631,943 Class Y $1,138,742,692 Net asset value per share of outstanding capital stock: Class A shares 121,030,205 $ 26.98 Class B shares 12,630,916 $ 26.81 Class Y shares 42,208,436 $ 26.98 See accompanying notes to financial statements.
Statement of operations IDS Stock Fund, Inc. Six months ended March 31, 1999 (Unaudited) Investment income Income: Dividends $ 30,121,485 Interest 10,967,916 Less foreign taxes withheld (263,834) -------- Total income 40,825,567 ---------- Expenses (Note 2): Expenses allocated from Equity Portfolio 11,475,660 Distribution fee-- Class B 1,136,117 Transfer agency fee 1,891,261 Incremental transfer agency fee Class A 75,444 Class B 29,727 Service fee Class A 2,648,808 Class B 263,764 Class Y 556,012 Administrative services fees and expenses 623,581 Compensation of board members 7,151 Postage 325,900 Registration fees 123,679 Reports to shareholders 56,523 Audit fees 4,938 Other 13,486 ------ Total expenses 19,232,051 Earnings credits on cash balances (Note 2) (69,562) ------- Total net expenses 19,162,489 ---------- Investment income (loss) -- net 21,663,078 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 91,368,461 Foreign currency transactions (595) ---- Net realized gain (loss) on investments 91,367,866 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 731,624,858 ----------- Net gain (loss) on investments and foreign currencies 822,992,724 ----------- Net increase (decrease) in net assets resulting from operations $844,655,802 ============ See accompanying notes to financial statements.
Statements of changes in net assets IDS Stock Fund, Inc. March 31, 1999 Sept. 30, 1998 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss)-- net $ 21,663,078 $ 49,153,951 Net realized gain (loss) on investments 91,367,866 401,321,846 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 731,624,858 (356,905,833) ----------- ------------ Net increase (decrease) in net assets resulting from operations 844,655,802 93,569,964 ----------- ---------- Distributions to shareholders from: Net investment income Class A (16,034,059) (34,053,523) Class B (521,177) (1,035,340) Class Y (6,226,765) (13,773,535) Net realized gain Class A (231,636,045) (361,177,439) Class B (22,611,501) (27,613,854) Class Y (85,949,857) (141,133,199) ----------- ------------ Total distributions (362,979,404) (578,786,890) ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 91,459,456 209,142,594 Class B shares 48,592,005 83,702,125 Class Y shares 129,768,334 287,113,337 Reinvestment of distributions at net asset value Class A shares 227,238,082 363,515,355 Class B shares 22,916,860 28,398,853 Class Y shares 82,426,830 136,978,202 Payment for redemptions Class A shares (167,157,289) (337,312,915) Class B shares (Note 2) (21,708,354) (29,364,342) Class Y shares (221,014,708) (351,776,526) ------------ ------------ Increase (decrease) in net assets from capital share transactions 192,521,216 390,396,683 ----------- ----------- Total increase (decrease) in net assets 674,197,614 (94,820,243) Net assets at beginning of period 4,067,992,513 4,162,812,756 ------------- ------------- Net assets at end of period $4,742,190,127 $4,067,992,513 ============== ============== Undistributed net investment income $ 1,073,177 $ 2,192,100 -------------- -------------- See accompanying notes to financial statements.
Notes to Financial Statements IDS Stock Fund, Inc. (Unaudited as to March 31, 1999) 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. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge and automatically convert to Class A shares during the ninth calendar year of ownership. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fee and service fee (class specific expenses) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Equity Portfolio The Fund invests all of its assets in Equity Portfolio (the Portfolio), a series of Growth and Income Trust (the 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. The 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 Portfolio's net assets. The percentage of the Portfolio owned by the Fund at March 31, 1999 was 99.98%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to generally accepted accounting principles requires management to make estimates (e.g., on assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. Dividends to shareholders 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: The Fund entered into an agreement with American Express Financial Corporation (AEFC) to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.04% 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 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 $19 o Class B $20 o Class Y $15 Under terms of a prior agreement that ended Jan. 31, 1999, the Fund paid a transfer agency fee at an annual rate per shareholder account of $15 for Class A and $16 for Class B. Effective April 1, 1999, the annual rate per shareholder account will change to $17 for Class Y. The Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares for distribution services. Under a Shareholder Service Agreement, the Fund pays a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.175% of the Fund's average daily net assets attributable to Class A and Class B shares and 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by American Express Financial Advisors Inc. for distributing Fund shares were $1,438,819 for Class A and $122,644 for Class B for the six months ended March 31, 1999. During the six months ended March 31, 1999, the Fund's transfer agency fees were reduced by $69,562 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, 1999 Class A Class B Class Y Sold 3,468,385 1,860,499 4,936,987 Issued for reinvested distributions 8,803,397 893,794 3,192,647 Redeemed (6,352,613) (832,363) (8,398,239) ---------- -------- ---------- Net increase (decrease) 5,919,169 1,921,930 (268,605) --------- --------- -------- Year ended Sept. 30, 1998 Class A Class B Class Y Sold 7,948,725 3,199,817 10,902,147 Issued for reinvested distributions 15,104,728 1,189,453 5,689,092 Redeemed (12,795,608) (1,118,982) (13,550,987) ----------- ---------- ----------- Net increase (decrease) 10,257,845 3,270,288 3,040,252 ---------- --------- ---------
4. BANK BORROWINGS The Fund entered into a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other IDS Funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had no borrowings outstanding during the six months ended March 31, 1999.
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 changesa Class A 1999b 1998 1997 1996c 1995 Net asset value, beginning of period $24.18 $27.44 $22.49 $19.96 $19.48 Income from investment operations: Net investment income (loss) .13 .29 .39 .43 .52 Net gains (losses) (both realized and unrealized) 4.84 .22 6.11 3.17 1.96 Total from investment operations 4.97 .51 6.50 3.60 2.48 Less distributions: Dividends from net investment income (.14) (.30) (.43) (.39) (.49) Distributions from realized gains (2.03) (3.47) (1.12) (.68) (1.51) Total distributions (2.17) (3.77) (1.55) (1.07) (2.00) Net asset value, end of period $26.98 $24.18 $27.44 $22.49 $19.96 Ratios/supplemental data Class A 1999b 1998 1997 1996c 1995 Net assets, end of period (in millions) $3,265 $2,783 $2,877 $2,307 $1,984 Ratio of expenses to average daily net assetsd .82%e .77% .78% .80%e .79% Ratio of net investment income (loss) to average daily net assets .99%e 1.14% 1.58% 2.19%e 2.61% Portfolio turnover rate (excluding short-term securities) 31% 79% 82% 71% 69% Total returnf 20.98% 2.04% 30.22% 18.60% 14.44% a For a share outstanding throughout the period. Rounded to the nearest cent. b Six months ended March 31, 1999 (Unaudited). c The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996. d Effective fiscal year 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.
Fiscal period ended Sept. 30, Per share income and capital changesa Class B Class Y 1999b 1998 1997 1996c 1995d 1999b 1998 1997 1996c 1995d Net asset value, beginning of period $24.05 $27.32 $22.42 $19.91 $18.03 $24.18 $27.44 $22.49 $19.96 $18.03 Income from investment operations: Net investment income (loss) .04 .10 .22 .28 .27 .14 .31 .42 .47 .29 Net gains (losses) (both realized and unrealized) 4.80 .21 6.05 3.17 1.92 4.84 .22 6.11 3.17 2.01 Total from investment operations 4.84 .31 6.27 3.45 2.19 4.98 .53 6.53 3.64 2.30 Less distributions: Dividends from net investment income (.05) (.11) (.25) (.26) (.31) (.15) (.32) (.46) (.43) (.37) Distributions from realized gains (2.03) (3.47) (1.12) (.68) -- (2.03) (3.47) (1.12) (.68) -- Total distributions (2.08) (3.58) (1.37) (.94) (.31) (2.18) (3.79) (1.58) (1.11) (.37) Net asset value, end of period $26.81 $24.05 $27.32 $22.42 $19.91 $26.98 $24.18 $27.44 $22.49 $19.96 Ratios/supplemental data Class B Class Y 1999b 1998 1997 1996c 1995d 1999b 1998 1997 1996c 1995d Net assets, end of period (in millions) $339 $258 $203 $107 $29 $1,139 $1,027 $1,082 $870 $738 Ratio of expenses to average daily net assetse 1.59%f 1.53% 1.55% 1.57%f 1.61%f .74%f .70% .66% .63%f .64%f Ratio of net investment income (loss) to average daily net assets .22%f .39% .85% 1.61%f 1.37%f 1.07%f 1.21% 1.71% 2.36%f 2.38%f Portfolio turnover rate (excluding short-term securities) 31% 79% 82% 71% 69% 31% 79% 82% 71% 69% Total returng 20.52% 1.27% 29.23% 17.78% 12.10% 21.02% 2.12% 30.38% 18.79% 12.80% a For a share outstanding throughout the period. Rounded to the nearest cent. b Six months ended March 31, 1999 (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 year 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. f Adjusted to an annual basis. g Total return does not reflect payment of a sales charge.
Financial Statements Statement of assets and liabilities Equity Portfolio March 31, 1999 (Unaudited) Assets Investments in securities, at value (Note 1): Investments in securities of unaffiliated issuers (identified cost $3,266,002,145) $4,688,886,704 Investments in securities of affiliated issuers (identified cost $27,605,473) 54,398,438 ---------- Total investments in securities (identified cost $3,293,607,618) 4,743,285,142 Dividends and accrued interest receivable 5,562,029 Receivable for investment securities sold 59,338,078 U.S. government securities held as collateral (Note 4) 9,918,396 --------- Total assets 4,818,103,645 ------------- Liabilities Disbursements in excess of cash on demand deposit 1,342,514 Payable for investment securities purchased 35,345,889 Payable upon return of securities loaned (Note 4) 37,709,296 Accrued investment management services fee 60,975 Other accrued expenses 156,494 ------- Total liabilities 74,615,168 ---------- Net assets $4,743,488,477 ============== See accompanying notes to financial statements.
Statement of operations Equity Portfolio Six months ended March 31, 1999 (Unaudited) Investment income Income: Dividends $ 30,128,564 Interest 10,943,262 Less foreign taxes withheld (263,895) -------- Total income 40,807,931 ---------- Expenses (Note 2): Investment management services fee 11,209,160 Compensation of board members 11,076 Custodian fees 202,915 Audit fees 14,813 Other 45,244 ------ Total expenses 11,483,208 Earnings credit on cash balances (Note 2) (4,848) ------ Total net expenses 11,478,360 ---------- Investment income (loss) -- net 29,329,571 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 91,380,320 Foreign currency transactions (595) ---- Net realized gain (loss) on investments 91,379,725 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 731,805,357 ----------- Net gain (loss) on investments and foreign currencies 823,185,082 ----------- Net increase (decrease) in net assets resulting from operations $852,514,653 ============ See accompanying notes to financial statements.
Statements of changes in net assets Equity Portfolio March 31, 1999 Sept. 30, 1998 Six months ended Year ended (Unaudited) Operations Investment income (loss)-- net $ 29,329,571 $ 62,955,925 Net realized gain (loss) on investments 91,379,725 401,372,703 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 731,805,357 (356,961,919) ----------- ------------ Net increase (decrease) in net assets resulting from operations 852,514,653 107,366,709 Net contributions (withdrawals) from partners (178,179,100) (202,014,550) ------------ ------------ Total increase (decrease) in net assets 674,335,553 (94,647,841) Net assets at beginning of period 4,069,152,924 4,163,800,765 ------------- ------------- Net assets at end of period $4,743,488,477 $4,069,152,924 ============== ============== See accompanying notes to financial statements.
Notes to Financial Statements Equity Portfolio (Unaudited as to March 31, 1999) 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. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to generally accepted accounting principles requires management to make estimates (e.g., on assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers 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 To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has entered into an Investment Management Services Agreement with AEFC for managing its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the portfolio's average daily net assets in reducing percentages from 0.53% 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 increased the fee by $698,688 for the six months ended March 31, 1999. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. The Portfolio also pays custodian fees to American Express Trust Company, an affiliate of AEFC. During the six months ended March 31, 1999, the Portfolio's custodian fees were reduced by $4,848 as a result of earnings credits from overnight cash balances. According to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,306,780,251 and $1,400,098,654, respectively, for the six months ended March 31, 1999. For the same period, the portfolio turnover rate was 31%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $60,296 for the six months ended March 31, 1999. 4. LENDING OF PORTFOLIO SECURITIES As of March 31, 1999, securities valued at $36,132,475 were on loan to brokers. For collateral, the Portfolio received $27,790,900 in cash and U.S. government securities valued at $9,918,396. Income from securities lending amounted to $82,608 for the six months ended March 31, 1999. 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. OPTIONS CONTRACTS WRITTEN Contracts and premium amounts associated with options contracts written are as follows: Six months ended March 31, 1999 Calls Contracts Premium Balance Sept. 30, 1998 -- $ -- Opened 1,000 162,690 Closed (1,000) (162,690) Balance March 31, 1999 -- $ -- See "Summary of significant accounting policies."
Investments in Securities Equity Portfolio March 31, 1999 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (82.9%) Issuer Shares Value(a) Aerospace & defense (1.8%) Gulfstream Aerospace 847,900(b) $36,777,663 Raytheon Cl B 800,000 46,900,000 Total 83,677,663 Airlines (0.6%) Southwest Airlines 1,000,000 30,250,000 Automotive & related (1.3%) Delphi Automotive Systems 889,200(b) 15,783,300 Federal-Mogul 385,000 16,555,000 Ford Motor 500,000 28,375,000 Total 60,713,300 Banks and savings & loans (4.3%) Bank One 810,000 44,600,625 BankAmerica 700,000 49,437,500 Wachovia 620,000 50,336,250 Washington Mutual 750,000 30,656,250 Wells Fargo 800,000 28,050,000 Total 203,080,625 Beverages & tobacco (1.0%) Coca-Cola 800,000 49,100,000 Building materials & construction (1.4%) Martin Marietta Materials 1,200,000 68,475,000 Chemicals (0.5%) Waste Management 547,375 24,289,766 Communications equipment & services (1.2%) Nokia Oyj ADR Cl A 250,000(c) 38,937,500 Tellabs 200,000(b) 19,550,000 Total 58,487,500 Computers & office equipment (13.7%) 3Com 600,000(b) 13,987,500 America Online 800,000 116,800,000 Ascend Communications 650,000(b) 54,396,875 Cisco Systems 600,000(b) 65,737,500 Compaq Computer 1,500,000 47,531,250 Equant 400,000(b,c,d) 30,100,000 Gateway 2000 450,000(b) 30,853,125 Intl Business Machines 500,000 88,625,000 Microsoft 2,000,000(b) 179,249,999 Solectron 396,449(b) 19,252,555 Total 646,533,804 Electronics (2.7%) Altera 347,826(b) 20,695,647 Intel 500,000 59,562,500 Texas Instruments 500,000 49,625,000 Total 129,883,147 Energy (2.4%) Conoco Cl A 1,267,100 31,123,144 Exxon 600,000 42,337,500 Mobil 450,000 39,600,000 Total 113,060,644 Energy equipment & services (0.7%) Schlumberger 525,000(c) 31,598,438 Financial services (4.5%) Associates First Capital Cl A 566,120 25,475,400 Mutual Risk Management 1,525,000(c,d) 58,331,250 Providian Financial 1,200,000 132,000,000 Total 215,806,650 Food (1.8%) General Mills 500,000 37,781,250 Sara Lee 2,000,000 49,500,000 Total 87,281,250 Health care (10.0%) American Home Products 700,000 45,675,000 Amgen 500,000(b) 37,437,500 Baxter Intl 750,000 49,500,000 Bristol-Myers Squibb 1,000,000 64,312,500 Guidant 1,150,000 69,575,000 Medtronic 400,000 28,700,000 Pfizer 400,000 55,500,000 Schering-Plough 1,300,000 71,906,249 Warner-Lambert 750,000 49,640,625 Total 472,246,874 Household products (2.7%) Gillette 500,000 29,718,750 Procter & Gamble 600,000 58,762,500 Unilever 600,000(c) 39,862,500 Total 128,343,750 Industrial equipment & services (1.0%) Illinois Tool Works 800,000 49,500,000 Insurance (3.6%) ACE 750,000(c) 23,390,625 American Intl Group 904,500 109,105,313 XL Capital Cl A 650,000 39,487,500 Total 171,983,438 Media (3.7%) Clear Channel Communications 1,200,000(b) 80,475,000 Infinity Broadcasting Cl A 1,317,000(b) 33,912,750 MediaOne Group 500,000(b) 31,750,000 USA Networks 800,000(b) 28,650,000 Total 174,787,750 Metals (1.1%) Stillwater Mining 2,062,500(b,e) 54,398,438 Multi-industry conglomerates (4.2%) Emerson Electric 615,380 32,576,679 General Electric 1,500,000 165,937,500 Total 198,514,179 Paper & packaging (0.9%) Intl Paper 1,000,000 42,187,500 Retail (9.5%) American Stores 700,000 23,100,000 Circuit City Stores 450,000 34,481,250 Dayton Hudson 1,100,000 73,287,500 Home Depot 1,200,000 74,700,000 Rite Aid 1,795,000 44,875,000 Safeway 1,750,000(b) 89,796,875 Wal-Mart Stores 1,200,000 110,624,999 Total 450,865,624 Utilities -- electric (1.5%) Carolina Power & Light 350,000 13,234,375 CMS Energy 300,000 12,018,750 Duke Energy 200,000 10,925,000 New Century Energies 150,000 5,109,375 Texas Utilities 350,000 14,590,625 Unicom 400,000 14,625,000 Total 70,503,125 Utilities -- telephone (6.7%) Ameritech 800,000 46,300,000 AT&T 1,150,775 91,846,229 BellSouth 750,000 30,046,875 MCI WorldCom 875,422(b) 77,529,561 SBC Communications 439,200 20,697,300 U S WEST Communications Group 900,000 49,556,250 Total 315,976,215 Total common stocks (Cost: $2,532,012,453) $3,931,544,680 Preferred stocks (8.3%) Issuer Shares Value(a) BS-Medtronic 5.00% Cv 884,250 $41,913,450 BS-Service Corp Intl 5.00% 1,100,000 16,346,000 CVS 6.00% Cv ACES 200,000(f) 17,100,000 Federal-Mogul Finance Trust 7.00% Cm Cv 270,000 14,478,750 Finova Finance Trust 5.50% Cv 325,000 22,750,000 Glenborough Realty Trust 7.75% Cv Series A 402,105 6,735,259 Host Marriott Finance Trust 6.75% Cv 300,000 11,812,500 Houston Inds 7.00% Cv ACES 325,000(f) 39,162,500 Ingersoll-Rand 6.75% Cv PRIDES 800,000(g) 20,200,000 McKesson 5.00% Cv 200,000(h) 18,050,000 MediaOne Group 6.25% Cv 569,500 47,126,125 MS-Applied Material 6.00% Cv 180,000 8,460,000 MS-Gillette Cv 186,795 21,714,919 MS-UNUM 3.25% Cv 1,217,092 56,290,505 Newell Finance Trust 5.25% Cm Cv 250,000(h) 13,812,500 PLC Capital Trust II 6.50% Cv PRIDES 85,600(g) 5,333,950 SBH-Cincinnati Bell 6.25% 216,200 15,323,175 Sprint 8.25% Cv 206,925 15,105,525 Total preferred stocks (Cost: $355,366,716) $391,715,158
Bonds (2.4%) Issuer Coupon Principal Value(a) rate amount AirTours (British Pound) Cv Sub Nts 01-05-04 5.75% 8,216,000(c,h) $15,254,437 Colt Telecom Group (European Monetary Unit) Cv 08-06-05 1.12 25,000,000(c) 17,057,989 Costco Zero Coupon Cv Sub Nts 08-01-17 3.51 21,000,000(h,i) 22,470,000 Exodus Communications Cv Sub Nts 03-15-06 5.00 6,000,000(h) 9,552,300 Network Associates Zero Coupon Cv Sub Debs 02-13-18 4.09 20,000,000(h,i) 7,200,000 Office Depot Zero Coupon Cv Nts 11-01-08 3.70 7,300,000(i) 6,332,750 Pennzenergy Cv 08-15-08 4.90 15,000,000 15,000,000 Telewest Communication (British Pound) Cv 02-19-07 5.25 12,240,000(c,h) 19,761,474 Total bonds (Cost: $98,828,610) $112,628,950
Short-term securities (6.5%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (2.1%) Federal Home Loan Bank Disc Nt 05-21-99 4.77% $21,600,000 $21,457,800 Federal Home Loan Mtge Corp Disc Nts 04-08-99 4.82 600,000 599,440 04-14-99 4.78 19,400,000 19,366,724 04-23-99 4.80 24,800,000 24,727,556 05-12-99 4.80 8,100,000 8,055,997 05-17-99 4.77 25,000,000 24,848,582 Total 99,056,099 Commercial paper (4.2%) Albertson's 04-12-99 4.87 2,100,000(j) 2,096,888 BBV Finance (Delaware) 04-14-99 4.87 10,000,000 9,980,804 05-19-99 4.86 8,200,000 8,146,312 Becton Dickinson 05-10-99 4.86 1,600,000 1,591,611 BMW US Capital 04-22-99 4.86 18,900,000 18,846,639 Ciesco LP 04-12-99 4.85 7,400,000 7,388,334 05-04-99 4.87 5,400,000 5,376,042 05-06-99 4.87 8,200,000 8,161,334 Daimler/Chrysler 04-15-99 4.88 12,700,000 12,675,997 Delaware Funding 04-23-99 4.89 2,000,000(j) 1,994,060 Dresdner US Finance 04-13-99 4.88 18,700,000 18,669,706 Fleet Funding 04-16-99 4.88 10,000,000(j) 9,979,750 04-21-99 4.88 11,200,000(j) 11,169,760 Goldman Sachs Group 04-01-99 4.87 10,000,000 10,000,000 GTE Funding 04-05-99 4.90 1,400,000 1,399,241 Household Finance 05-03-99 4.87 6,100,000 6,073,756 Morgan Stanley, Dean Witter, Discover & Co 04-05-99 4.89 7,100,000 7,096,158 04-13-99 4.89 10,000,000 9,983,767 Natl Australia Funding (Delaware) 04-13-99 4.87 9,500,000 9,484,578 Paccar Financial 04-20-99 4.85 9,800,000 9,775,018 Societe Generale North America 04-07-99 4.90 9,300,000 9,292,436 UBS Finance (Delaware) 04-16-99 4.87 11,300,000 11,277,165 Variable Funding Capital 04-05-99 4.87 10,900,000(j) 10,894,102 Total 201,353,458 Letter of credit (0.2%) Bank of America- AES Hawaii 04-15-99 4.88 7,000,000 6,986,797 Total short-term securities (Cost: $307,399,839) $307,396,354 Total investments in securities (Cost: $3,293,607,618)(k) $4,743,285,142
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. As of March 31, 1999, the value of foreign securities represented 5.78% of net assets. (d) Security is partially or fully on loan. See Note 4 to the financial statements. (e) 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, 1999 are as follows: Issuer Beginning Purchase Sales Ending Dividend Value(a) cost cost cost cost income Stillwater Mining $24,603,388 $3,002,085 $-- $27,605,473 $-- $54,398,438 (f) ACES (Automatically Convertible Equity Securities) are structured as convertible preferred securities. Investors receive an enhanced yield but based upon a specific formula, potential appreciation is limited. ACES pay dividends, have voting rights, are noncallable for at least three years and upon maturity, convert into shares of common stock. (g) 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. (h) 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. (i) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (j) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (k) At March 31, 1999, the cost of securities for federal income tax purposes was approximately $3,293,608,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $1,526,462,000 Unrealized depreciation (76,785,000) ----------- Net unrealized appreciation $1,449,677,000
Quick telephone reference American Express Financial Advisors Telephone Transaction Service Sales and exchanges, dividend payments or reinvestments and automatic payment arrangements: 800-437-3133 American Express Client Service Corporation Fund performance, Fund prices, account values, recent account transactions and account inquiries: 800-862-7919 TTY Service For the hearing impaired: 800-846-4852 Ticker Symbol Class A: INSTX Class B: IDSBX Class Y: IDSYX S-6365 N (5/99) BULK RATE U.S. POSTAGE PAID PERMIT NO. 85 SPENCER, IA IDS Stock Fund IDS Tower 10 Minneapolis, MN 55440-0010 -----END PRIVACY-ENHANCED MESSAGE-----