AXP(SM)
Bond
Fund
2000 SEMIANNUAL REPORT
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AXP Bond Fund seeks to provide
shareholders with a high level of
current income while attempting
to conserve the value of the investment
and to continue a high level of income
for the longest period of time.
Distributed by American Express Financial Advisors Inc.
AMERICAN
EXPRESS
<PAGE>
Striking a Balance
Among Bonds
A bond is like an I.O.U. But with a bond, it's a corporation or the government
- -- the bond issuer -- that promises to pay the money back. In return for lending
money to the issuer, bond investors get paid interest.
AXP Bond Fund invests mainly in bonds issued by U.S. corporations, but it also
holds some U.S. government bonds, as well as foreign bonds. The portfolio
manager shifts this mix as investment conditions dictate. In doing so, the Fund
seeks to provide long-term return potential for investors.
CONTENTS
From the Chairman 3
From the Portfolio Managers 4
Fund Facts 6
The 10 Largest Holdings 7
Financial Statements 8
Notes to Financial Statements 11
Investments in Securities 20
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
We are in an extraordinary period for investing in financial assets, with many
financial markets at their all-time highs. Looking at year 2000, American
Express Financial Corporation, the Fund's investment manager, expects the
economy to continue to grow and long-term interest rates to rise only slightly.
This is a great time to take a close look at your goals and investments. We
encourage you to:
o Consult a professional investment adviser who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through retirement
plans of your employer.
o Learn as much as you can about your current investments.
The portfolio managers' letter that follows provides a review of the Fund's
investment strategies and performance. The annual report contains other valuable
information as well. The Fund's prospectus describes its investment objectives
and how it intends to achieve those objectives. As experienced investors know,
information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
Sincerely,
Arne H. Carlson
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(picture of) Fred Quirsfeld
Fred Quirsfeld
(picture of) Steven Merrell
Steven Merrell
Portfolio Managers
From the Portfolio Managers
Concerns about higher interest rates and potentially higher inflation made for
an often-difficult environment for bonds during the past six months. Still, AXP
Bond Fund's Class A shares did produce a positive total return of 1.88%
(excluding the sales charge) for the first half of the fiscal year -- September
1999 through February 2000.
Although the data had yet to show it, higher inflation was on the minds of
investors throughout the period. (A rise in inflation is negative for bonds
because it usually is accompanied by a rise in interest rates, which depresses
bond values.) The reason for the concern was the remarkably robust economy,
which, in the final three months of 1999, surged to its strongest quarterly
growth in several years.
But even before that, the Federal Reserve Board (the Fed) had already given
notice that it was concerned that the red-hot economy could cause an inflation
spike when it raised short-term interest rates twice in the summer of 1999. The
Fed then reinforced its intentions by an additional rate hike in November and
another in February. The ultimate result was that long-term interest rates
drifted higher from the outset of the period in September until late January.
The Fund was somewhat shielded from the negative effect of the interest-rate
rise by its relatively defensive portfolio structure, which centered on a
shorter-than-average duration. (Duration, a function of the average maturity of
the portfolio's holdings, influences the sensitivity of the Fund's net asset
value to interest-rate swings. The longer the duration, the greater the
sensitivity.) However, when long-term rates came down in February, the benefit
to the Fund was muted because of its duration. Nevertheless, it was encouraging
to end the period on a solidly positive note.
SOME BRIGHT SPOTS
Looking at the major areas of investments, for the six months as a whole
mortgage-backed securities performed best for the Fund, followed by U.S.
Treasury bonds and corporate bonds, including investment-grade and high-yield
issues. (Investment-grade bonds comprised about Fred Quirsfeld Portfolio
managerSteven Merrell Portfolio managerAXP BOND FUND30% of portfolio assets,
while high-yield bonds made up between 20% and 25%.) Although they accounted for
less than 10% of the portfolio, convertible and emerging-market bonds enjoyed
the greatest gains and clearly enhanced Fund performance.
As for changes to the portfolio, late in the period we increased the overall
credit quality by reducing corporate bond holdings in favor of U.S. Treasury
issues. Also, in anticipation of an improving bond environment, we slightly
increased the duration.
Given that the economy has yet to show little sign of losing steam, we think
it's likely that the Fed will push short-term interest rates somewhat higher in
the months ahead. However, in our view, longer-term rates may well have seen
their peak and, as the year progresses, could eventually undergo a gradual
decline. If that proves true, the bond market and the Fund would likely enjoy
improving performance.
Fred Quirsfeld
Steven Merrell
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Feb. 29, 2000 $4.73
Aug. 31, 1999 $4.82
Decrease $0.09
Distributions -- Sept. 1, 1999 - Feb. 29, 2000
From income $0.18
From capital gains $ --
Total distribution $0.18
Total return* +1.88%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Feb. 29, 2000 $4.73
Aug. 31, 1999 $4.82
Decrease $0.09
Distributions -- Sept. 1, 1999 - Feb. 29, 2000
From income $0.16
From capital gains $ --
Total distribution $0.16
Total return* +1.49%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
Feb. 29, 2000 $4.73
Aug. 31, 1999 $4.82
Decrease $0.09
Distributions -- Sept. 1, 1999 - Feb. 29, 2000
From income $0.18
From capital gains $ --
Total distribution $0.18
Total return* +1.96%**
*Returns do not include sales load, 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.
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<CAPTION>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Feb. 29, 2000)
<S> <C> <C>
Cleveland Electric Illuminating .88% $32,586,787
6.86% 2008
Qwest Communications Intl .84 31,217,201
7.50% 2008
Bistro Trust .82 30,516,450
9.50% 2002
New York Telephone .80 29,494,047
9.38% 2031
Connecticut Light & Power .77 28,622,675
7.75% 2002
Petroleos Mexicanos .74 27,438,749
9.50% 2027
BellSouth Capital Funding .65 23,929,992
7.88% 2030
Tenet Healthcare .56 20,770,500
8.13% 2008
Ford Capital .55 20,368,185
9.50% 2010
USX-Marathon Group .53 19,485,690
9.38% 2022
Excludes U.S. Treasury and government agency holdings.
For further detail about these holdings, please refer to the section
entitled "Investments in Securities."
The 10 holdings listed here make up 7.14% of
net assets
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<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Bond Fund, Inc.
Feb. 29, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C> <C>
(identified cost $3,842,780,297) $3,675,882,904
Cash in bank on demand deposit 19,624
Dividends and accrued interest receivable 56,003,283
Receivable for investment securities sold 1,488,428
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 630,362
-------
Total assets 3,734,024,601
-------------
Liabilities
Payable for investment securities purchased 28,926,337
Dividends payable to shareholders 3,795,316
Accrued investment management services fee 49,246
Accrued distribution fee 43,986
Accrued service fee 860
Accrued transfer agency fee 13,789
Accrued administrative services fee 4,371
Other accrued expenses 531,998
-------
Total liabilities 33,365,903
----------
Net assets applicable to outstanding capital stock $3,700,658,698
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 7,818,685
Additional paid-in capital 3,916,276,592
Excess of distributions over net investment income (303,915)
Accumulated net realized gain (loss) (56,904,727)
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies (Notes 4 and 5) (166,227,937)
------------
Total-- representing net assets applicable to outstanding capital stock $3,700,658,698
==============
Net assets applicable to outstanding shares: Class A $2,374,202,175
Class B $1,009,110,395
Class Y $ 317,346,128
Net asset value per share of outstanding capital stock: Class A shares 501,637,162 $ 4.73
Class B shares 213,196,424 $ 4.73
Class Y shares 67,034,882 $ 4.73
---------------
See accompanying notes to financial statements.
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<CAPTION>
Statement of operations
AXP Bond Fund, Inc.
Six months ended Feb. 29, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 2,630,437
Interest 157,920,956
-----------
Total income 160,551,393
-----------
Expenses (Note 2):
Investment management services fee 9,316,242
Distribution fee
Class A 3,112,376
Class B 5,281,446
Transfer agency fee 2,332,959
Incremental transfer agency fee
Class A 144,268
Class B 114,873
Service fee-- Class Y 132,892
Administrative services fees and expenses 870,087
Compensation of board members 9,929
Custodian fees 95,879
Printing and postage 281,516
Registration fees 83,189
Audit fees 20,375
Other 189,277
-------
Total expenses 21,985,308
Earnings credits on cash balances (Note 2) (76,999)
-------
Total net expenses 21,908,309
----------
Investment income (loss) -- net 138,643,084
-----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) (32,474,099)
Financial futures contracts 2,628,316
Foreign currency transactions 4,831
-----
Net realized gain (loss) on investments (29,840,952)
Net change in unrealized appreciation (depreciation) on investments and on translation
of assets and liablities in foreign currencies (38,302,577)
-----------
Net gain (loss) on investments and foreign currencies (68,143,529)
-----------
Net increase (decrease) in net assets resulting from operations $ 70,499,555
============
See accompanying notes to financial statements.
</TABLE>
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<CAPTION>
Statements of changes in net assets
AXP Bond Fund, Inc.
Feb. 29, 2000 Aug. 31, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 138,643,084 $ 260,737,839
Net realized gain (loss) on investments (29,840,952) (26,782,405)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liablities in foreign currencies (38,302,577) (175,555,752)
----------- ------------
Net increase (decrease) in net assets resulting from operations 70,499,555 58,399,682
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (91,614,809) (180,224,001)
Class B (34,853,102) (66,095,361)
Class Y (11,472,901) (17,993,622)
Net realized gain
Class A -- (23,801,353)
Class B -- (9,728,585)
Class Y -- (2,147,339)
---------- ----------
Total distributions (137,940,812) (299,990,261)
------------ ------------
Capital share transactions (Note 6)
Proceeds from sales
Class A shares (Note 2) 162,970,814 486,607,499
Class B shares 122,954,901 393,448,790
Class Y shares 83,453,290 186,308,891
Reinvestment of distributions at net asset value
Class A shares 63,743,971 143,693,080
Class B shares 30,208,321 66,190,749
Class Y shares 11,491,034 20,004,671
Payments for redemptions
Class A shares (400,060,294) (590,886,686)
Class B shares (Note 2) (218,642,739) (356,605,921)
Class Y shares (68,309,293) (117,913,430)
----------- ------------
Increase (decrease) in net assets from capital share transactions (212,189,995) 230,847,643
------------ -----------
Total increase (decrease) in net assets (279,631,252) (10,742,936)
Net assets at beginning of period 3,980,289,950 3,991,032,886
------------- -------------
Net assets at end of period $3,700,658,698 $3,980,289,950
============== ==============
See accompanying notes to financial statements.
</TABLE>
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Notes to Financial Statements
AXP Bond Fund, Inc.
(Unaudited as to Feb. 29, 2000)
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 invests
primarily in corporate bonds and other debt securities.
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, incremental 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.
The Fund'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 Fund 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 Fund 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 Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund 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
Fund pays a premium whether or not the option is exercised. The Fund 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 Fund will
realize a gain or loss when the option transaction expires or closes. When
options on debt securities or futures are exercised, the Fund will realize a
gain or loss. When other options are 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 Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund 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 Fund 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 Fund 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 Fund 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. 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 Fund 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 Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Illiquid securities
As of Feb. 29, 2000, investments in securities included issues that are
illiquid. The Fund currently limits investments in illiquid securities to 10% of
net assets, at market value, at the time of purchase. The aggregate value of
such securities as of Feb. 29, 2000 was $17,122,647 representing 0.46% of net
assets. According to board guidelines, certain unregistered securities are
determined to be liquid and are not included within the 10% limitation specified
above.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Fund on a
forward-commitment or when-issued basis can take place one month or more after
the transaction date. During this period, such securities are subject to market
fluctuation, and they may affect the Fund's net assets the same as owned
securities. The Fund designates cash or liquid high-grade short-term debt
securities at least equal to the amount of its commitment. As of Feb. 29, 2000,
the Fund has entered into outstanding when-issued or forward commitments of
$20,113,542.
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 substantially all
of its taxable income to 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 the 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, when available, declared daily and payable
monthly, 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.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including level-yield amortization of premium and discount, is accrued
daily.
2. EXPENSES AND SALES CHARGES
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. Under an Investment
Management Services Agreement, AEFC determines which securities will be
purchased, held or sold. The management fee is a percentage of the Fund's
average daily net assets in reducing percentages from 0.52% to 0.395% annually.
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 0.05% to 0.025% annually. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. 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 $19.50
o Class B $20.50
o Class Y $17.50
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a distribution fee at an annual rate up
to 0.25% of the Fund's average daily net assets attributable to Class A shares
and up to 1.00% for Class B shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee for
service provided to shareholders by financial advisors and other servicing
agents. 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 the Distributor for distributing Fund shares were
$2,810,006 for Class A and $574,485 for Class B for the six months ended Feb.
29, 2000.
During the six months ended Feb. 29, 2000, the Fund's custodian and transfer
agency fees were reduced by $76,999 as a result of earnings credits from
overnight cash balances.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $1,482,918,283 and $1,560,844,679,
respectively, for the six months ended Feb. 29, 2000. Realized gains and losses
are determined on an identified cost basis.
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<CAPTION>
4. FOREIGN CURRENCY CONTRACTS
As of Feb. 29, 2000, the Fund has foreign currency exchange contracts that
obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
<S> <C> <C> <C> <C> <C> <C>
June 27, 2000 8,586,000 85,153 $5,426 $--
Japanese Yen U.S. Dollar
Dec. 27, 2000 8,586,000 87,639 5,245 --
Japanese Yen U.S. Dollar
June 27, 2001 8,586,000 90,123 4,995 --
Japanese Yen U.S. Dollar
Dec. 27, 2001 1,068,586,000 11,564,784 614,696 --
Japanese Yen U.S. Dollar
Total $630,362 $--
5. INTEREST RATE FUTURES CONTRACTS
As of Feb. 29, 2000, investments insecurities included securities valued at
$2,638,930 that were pledged as collateral to cover initial margin deposits on
1,320 open sale contracts. The market value of the open sale contracts
as of Feb. 29, 2000 was $128,377,345 with a net unrealized gain of $42,116.
"See summary of significant accounting policies."
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<CAPTION>
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Feb. 29, 2000
Class A Class B Class Y
<S> <C> <C> <C>
Sold 34,172,552 25,782,197 17,516,680
Issued for reinvested distributions 13,383,910 6,343,750 2,414,167
Redeemed (84,010,231) (45,911,554) (14,350,252)
----------- ----------- -----------
Net increase (decrease) (36,453,769) (13,785,607) 5,580,595
Year ended Aug. 31, 1999
Class A Class B Class Y
Sold 96,802,341 78,138,304 36,976,262
Issued for reinvested distributions 28,560,973 13,159,410 3,985,248
Redeemed (117,777,601) (71,354,718) (23,444,183)
------------ ----------- -----------
Net increase (decrease) 7,585,713 19,942,996 17,517,327
7. BANK BORROWINGS
The Fund has 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 American Express mutual 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
Feb. 29, 2000.
8. CAPITAL LOSS CARRYOVER
For federal income tax purposes, the Fund has a capital loss carryover of
$27,306,547 as of Aug. 31, 1999, that will expire in 2007 and 2008 if not offset
by capital gains. It is unlikely the board will authorize a distribution of any
net realized capital gains until the available capital loss carryover has been
offset or expires.
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<CAPTION>
9. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended Aug. 31,
Per share income and capital changesa
Class A
2000b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $4.82 $5.11 $5.22 $4.99 $5.05
Income from investment operations:
Net investment income (loss) .18 .33 .36 .35 .36
Net gains (losses) (both realized and unrealized) (.09) (.25) (.03) .23 (.07)
Total from investment operations .09 .08 .33 .58 .29
Less distributions:
Dividends from net investment income (.18) (.33) (.36) (.35) (.35)
Distributions from realized gains -- (.04) (.08) -- --
Total distributions (.18) (.37) (.44) (.35) (.35)
Net asset value, end of period $4.73 $4.82 $5.11 $5.22 $4.99
Ratios/supplemental data
Net assets, end of period (in millions) $2,374 $2,591 $2,709 $2,646 $2,563
Ratio of expenses to average daily net assetsc .94%d .86% .83% .84% .84%
Ratio of net investment income (loss)
to average daily net assets 7.39%d 6.56% 6.79% 6.86% 7.01%
Portfolio turnover rate
(excluding short-term securities) 40% 57% 43% 50% 45%
Total returne 1.88% 1.64% 6.30% 12.06% 5.77%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Feb. 29, 2000 (Unaudited).
c Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
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<CAPTION>
Fiscal period ended Aug. 31,
Per share income and capital changesa
Class B Class Y
2000b 1999 1998 1997 1996 2000b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $4.82 $5.11 $5.22 $4.99 $5.05 $4.82 $5.11 $5.22 $4.99 $5.05
Income from investment operations:
Net investment income (loss) .16 .29 .32 .31 .32 .18 .33 .36 .36 .37
Net gains (losses) (both
realized and unrealized) (.09) (.24) (.03) .23 (.07) (.09) (.24) (.03) .23 (.07)
Total from investment operations .07 .05 .29 .54 .25 .09 .09 .33 .59 .30
Less distributions:
Dividends from net investment income (.16) (.30) (.32) (.31) (.31) (.18) (.34) (.36) (.36) (.36)
Distributions from realized gains -- (.04) (.08) -- -- -- (.04) (.08) -- --
Total distributions (.16) (.34) (.40) (.31) (.31) (.18) (.38) (.44) (.36) (.36)
Net asset value, end of period $4.73 $4.82 $5.11 $5.22 $4.99 $4.73 $4.82 $5.11 $5.22 $4.99
Ratios/supplemental data
Net assets, end of period
(in millions) $1,009 $1,093 $1,057 $913 $848 $317 $296 $224 $116 $88
Ratio of expenses to
average daily net assetsc 1.70%d 1.63% 1.59% 1.60% 1.60% .79%d .77% .76% .70% .67%
Ratio of net investment
income (loss) to average
daily net assets 6.63%d 5.79% 6.03% 6.10% 6.24% 7.52%d 6.67% 6.90% 7.01% 7.19%
Portfolio turnover rate
(excluding short-term securities) 40% 57% 43% 50% 45% 40% 57% 43% 50% 45%
Total returne 1.49% .87% 5.50% 11.21% 4.96% 1.96% 1.71% 6.40% 12.21% 5.90%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Feb. 29, 2000 (Unaudited).
c Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances. d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
AXP Bond Fund, Inc.
Feb. 29, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Bonds (96.2%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (9.6%)
Govt of Algeria
(U.S. Dollar)
<S> <C> <C> <C> <C> <C>
03-04-00 7.06% $545,455(c) $544,829
Govt Trust Certs Israel
11-15-01 9.25 4,192,376 4,263,314
People's Republic of China
(U.S. Dollar)
01-15-96 9.00 10,000,000(c) 9,431,990
U.S. Treasury
06-30-00 5.38 26,500,000 26,452,830
11-15-01 7.50 64,900,000 65,881,054
08-15-02 6.38 17,300,000(m) 17,227,731
05-15-04 7.25 44,150,000 45,118,037
05-15-08 5.63 32,300,000 30,305,956
05-15-17 8.75 8,000,000 9,846,640
08-15-17 8.88 13,000,000 16,194,463
02-15-19 8.88 7,150,000 9,003,473
08-15-27 6.38 80,600,000 81,002,999
TIPS
01-15-07 3.38 5,900,000(j) 5,923,600
01-15-08 3.63 20,000,000(j) 19,894,170
United Mexican States
(U.S. Dollar)
02-01-10 9.88 5,000,000(c) 5,287,500
09-15-16 11.38 5,500,000(c) 6,510,625
Total 352,889,211
Mortgage-backed securities (25.2%)
Federal Home Loan Mtge Corp
07-01-07 6.50 163,746 161,776
11-01-10 6.00 8,145,218 7,786,465
03-01-13 5.50 9,788,496 8,996,903
03-01-15 7.50 20,000,000(n) 20,006,250
04-01-17 8.00 332,635 334,195
08-01-24 8.00 4,688,359 4,701,534
12-01-27 6.00 9,675,209 8,796,464
10-01-28 7.00 33,619,832 32,264,532
10-01-29 7.00 9,862,986 9,453,080
01-01-30 7.00 19,980,412 19,165,620
Collateralized Mtge Obligation
03-15-22 7.00 10,000,000 9,578,304
07-15-22 7.00 12,000,000 11,313,120
Federal Natl Mtge Assn
02-15-08 5.75 22,365,000 20,346,223
07-01-08 6.50 7,157,527 6,975,036
01-01-09 5.50 6,408,556 5,969,611
11-01-09 9.00 1,355 1,391
06-01-10 6.50 15,507,780 15,112,387
08-01-11 8.50 17,558,135 18,049,447
04-01-13 6.00 12,471,091 11,711,161
05-01-13 6.50 33,063,661 31,786,372
08-01-13 6.00 29,702,302 27,892,384
11-01-13 6.00 34,504,056 32,401,542
03-01-14 5.50 31,750,783 29,121,508
04-01-14 6.50 36,338,873 34,935,057
04-01-23 8.50 5,891,229 6,053,882
05-01-23 6.50 27,461,619 25,891,089
08-01-23 6.50 1,911,315 1,802,007
09-01-23 6.50 3,555,675 3,352,327
11-01-23 6.50 6,307,175 5,946,468
01-01-24 6.50 42,277,327 39,911,647
02-01-24 6.50 5,868,055 5,532,461
05-01-24 6.00 45,860,900 41,991,156
06-01-24 9.00 4,651,576 4,828,531
02-01-25 8.00 2,615,218 2,618,487
09-01-25 6.50 18,858,653 17,697,715
09-01-25 8.00 5,326,509 5,333,167
01-01-26 6.00 18,576,719 16,962,774
02-01-26 7.00 25,812,100 24,771,613
06-01-28 6.00 27,909,770 25,319,464
08-01-28 6.50 21,660,746 20,246,083
10-01-28 6.00 18,801,913 17,056,908
11-01-28 6.50 10,948,737 10,233,675
12-01-28 6.00 21,590,616 19,586,791
12-01-28 6.50 4,912,612 4,591,770
01-01-29 6.50 33,001,818 30,846,469
03-01-29 6.50 19,221,633 17,967,510
06-01-29 7.00 34,252,102 32,860,780
07-01-29 7.00 32,315,522 30,952,130
09-01-29 7.00 97,232,037 93,206,191
12-01-29 7.00 4,960,350 4,754,969
Collateralized Mtge Obligation
05-18-26 5.00 15,000,000 12,348,344
Trust Series Z
02-25-24 6.00 7,124,598(e) 5,907,788
Govt Natl Mtge Assn
12-01-08 7.00 20,677,266 20,386,544
02-15-24 8.00 2,049,274 2,058,250
02-15-25 9.00 823,771 855,437
06-15-26 8.00 3,153,069 3,162,907
08-15-26 8.00 5,332,466 5,349,103
Merrill Lynch Mtge Investors
06-15-21 7.88 3,135,197 2,867,726
Prudential Bache
Collateralized Mtge Obligation
04-01-19 7.97 4,405,861 4,440,227
Total 934,552,752
Aerospace & defense (1.0%)
Compass Aerospace
Company Guaranty Series B
04-15-05 10.13 3,750,000 1,687,500
Goodrich (BF)
07-01-01 9.63 10,000,000 10,284,735
L-3 Communications
Sr Sub Nts Series B
05-01-07 10.38 5,000,000 5,075,000
McDonnell Douglas Finance
Medium-term Sr Nts
01-27-10 7.22 10,000,000 9,710,875
United Technologies
11-15-19 8.88 10,000,000 11,223,390
Total 37,981,500
Airlines (1.0%)
Continental Airlines
Series 1996A
04-15-15 6.94 13,308,291 12,494,622
Series 1996B
04-15-15 7.82 4,436,096 4,254,083
Delta Air Lines
05-15-10 10.13 10,000,000 11,156,614
Qantas Airways
06-15-09 7.75 10,000,000(d) 9,635,820
Total 37,541,139
Automotive & related (1.7%)
Arvin Capital
Company Guaranty
02-01-27 9.50 10,000,000 9,710,030
Exide
Cv Sr Sub Nts
12-15-05 2.90 3,980,000(d) 2,060,924
Ford Motor Credit
06-15-07 7.20 5,500,000 5,380,753
Hayes Lemmerz Intl
Company Guaranty Series B
07-15-07 9.13 10,750,000 9,997,500
Lear
Company Guaranty Series B
05-15-09 8.11 15,000,000 13,954,500
Mascotech
Cv Sub Deb
12-15-03 4.50 2,875,000 2,152,656
MSX Intl
Company Guaranty
01-15-08 11.38 7,700,000 7,161,000
Venture Holdings Trust
Sr Nts Series B
07-01-05 9.50 15,000,000 13,650,000
Total 64,067,363
Banks and savings & loans (2.4%)
ABN-Amro Bank
(U.S. Dollar) Sub Nts Series B
05-15-23 7.75 9,000,000(c) 8,809,053
Central Fidelity Capital
Company Guaranty Series A
04-15-27 7.04 16,500,000(p) 16,594,710
Comerica Bank
Sub Nts
10-01-08 6.00 9,780,000 8,614,821
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 12,000,000(c,d) 11,488,128
FleetBoston Financial
Sub Nts
05-15-08 6.38 4,000,000 3,634,065
Long Term Credit Bank Japan
(Japanese Yen)
12-27-01 1.80 1,060,000,000(c) 9,649,890
Meridian Bancorp
Sub Deb
07-15-02 7.88 10,400,000 10,530,906
Newcourt Credit Group
(U.S. Dollar) Company Guaranty Series B
02-16-05 6.88 10,000,000(c) 9,627,480
Union Planters Capital
Company Guaranty
12-15-26 8.20 4,000,000 3,628,946
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 5,800,000 5,574,236
Total 88,152,235
Building materials & construction (0.6%)
Foster Wheeler
11-15-05 6.75 11,000,000 9,193,305
Nortek
Sr Nts Series B
08-01-08 8.88 7,500,000 6,881,250
Pulte
Sr Nts
12-15-03 7.00 7,700,000 7,284,165
Total 23,358,720
Chemicals (1.6%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 10,625,000 8,951,563
IMC Global
10-15-01 6.63 10,000,000 9,826,720
Waste Management
Company Guaranty
05-15-09 6.88 20,000,000 17,187,000
Sr Nts
10-01-07 7.13 15,000,000 12,987,846
07-15-28 7.00 12,500,000 9,832,325
Total 58,785,454
Commercial finance (0.2%)
Yale University
04-15-96 7.38 6,000,000 5,613,000
Communications equipment & services (3.4%)
American Tower
Cv
02-15-10 5.00 1,730,000(d) 1,866,238
Aspect Communications
Zero Coupon Cv Sub Deb
08-10-18 6.00 4,100,000(f) 2,460,000
Caprock Communications
Sr Nts
05-01-09 11.50 4,000,000 4,080,000
Sr Nts Series B
07-15-08 12.00 5,650,000 5,777,125
Celcaribe
Sr Nts
03-15-04 13.50 6,120,000 5,278,500
Commscope
Cv Sub Nts
12-15-06 4.00 1,550,000(d) 1,685,625
Corning
Cv Sub Nts
03-01-08 4.88 405,000 1,632,656
DLJ Secured Loan Trust
Sr Secured Ctfs
07-07-07 10.13 5,500,000 5,500,000
Dobson/Sygnet Communications
Sr Nts
12-15-08 12.25 4,000,000 4,280,000
EchoStar Communications
Cv Sub Nts
01-01-07 4.88 1,725,000(d) 2,391,281
EchoStar DBS
Sr Nts
02-01-09 9.38 8,200,000 8,015,500
GT Group Telecom
(U.S. Dollar) Zero Coupon
02-01-05 13.25 6,850,000(c,g) 4,110,000
GTE California
09-01-09 6.70 10,000,000 9,392,559
Mannesman
(U.S. Dollar) Sr Nts
08-01-08 8.00 5,000,000(c) 5,050,000
06-01-09 9.00 5,000,000(c) 5,100,000
NTL
Cv Sub Nts
12-15-09 5.75 1,670,000(d) 1,703,400
Zero Coupon Sr Nts Series B
04-01-03 9.78 15,125,000(g) 10,095,937
NTL Communications
Zero Coupon Sr Nts Series B
10-01-03 12.38 10,000,000(g) 6,850,000
Price Communications Wireless
Company Guaranty Series B
12-15-06 9.13 10,000,000 10,000,000
Versatel Telecom
(European Monetary Unit)
12-17-04 4.00 3,750,000(c,d) 5,569,121
(U.S. Dollar) Sr Nts
05-15-08 13.25 3,500,000(c) 3,710,000
07-15-09 11.88 5,000,000(c) 5,175,000
Voicestream Wireless
Sr Nts
11-15-09 10.38 9,200,000(h) 9,510,500
Sr Nts Series A
08-15-06 11.63 7,500,000 8,025,000
Williams Communication Group
Sr Nts
10-01-09 10.88 7,500,000 7,650,000
Total 134,908,442
Computers & office equipment (0.7%)
ASM Lithography Holdings
(U.S. Dollar) Cv
11-30-04 4.25 1,700,000(c,d) 2,208,980
Cooperative Computing
Sr Sub Nts
02-01-08 9.00 7,000,000 2,668,750
Globix
Sr Nts
02-01-10 12.50 10,000,000(d) 9,950,000
Hewlett-Packard
Zero Coupon Sub Nts
10-14-17 3.13 2,600,000(f) 2,044,250
Internet Capital Group
Cv Sub Nts
12-21-04 5.50 540,000 534,600
PSINet
Sr Nts
12-01-06 10.50 4,400,000(d) 4,323,000
11-01-08 11.50 3,000,000 3,045,000
Silicon Graphics
Cv Sr Nts
09-01-04 5.25 2,250,000 1,676,250
Solectron
Zero Coupon Cv
01-27-19 4.00 1,350,000(f) 779,625
Total 27,230,455
Electronics (0.7%)
Conexant Systems
Cv Sub Nts
02-01-07 4.00 710,000(d) 782,775
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 10,000,000(c,d) 8,946,051
Intel
Cv Sub Nts
09-01-04 4.00 465,000 1,695,506
Photronics
Cv Sub Nts
06-04-04 6.00 50,000 1,156,875
Reliance Electric
04-15-03 6.80 6,000,000 5,918,680
Thomas & Betts
01-15-06 6.50 9,200,000 8,625,285
Total 27,125,172
Energy (3.0%)
Devon Energy
Cv Deb
08-15-08 4.90 1,567,000 1,398,548
Enron Oil & Gas
11-15-06 6.70 5,000,000 4,696,597
Lodestar Holdings
Company Guaranty
05-15-05 11.50 7,500,000 2,250,000
Ocean Energy
Company Guaranty Series B
07-01-05 7.63 10,000,000 9,370,142
Oryx Energy
04-01-01 10.00 9,650,000 9,872,220
Parker & Parsley Petroleum
Sr Nts
08-15-07 8.25 9,500,000 8,612,583
PDV America
Sr Nts
08-01-03 7.88 15,000,000 14,001,780
Petroleos Mexicanos
(U.S. Dollar) Series P
09-15-27 9.50 27,000,000(c) 27,438,749
Roil
(U.S. Dollar)
12-05-02 12.78 1,686,400(c,d) 1,484,032
Texaco Capital
04-01-32 8.63 10,000,000 10,789,400
Gtd Deb
03-01-43 7.50 3,000,000 2,829,207
USX-Marathon Group
05-15-22 9.38 17,500,000 19,485,690
Total
112,228,948
Energy equipment & services (--%)
Seacor Holdings
Cv Sub Nts
11-15-06 5.38 1,210,000 1,122,275
Financial services (4.4%)
Airplanes GPA Cl D
(U.S. Dollar) Series 1
03-15-19 10.88 5,941,200(c) 5,097,906
Arcadia Financial
Sr Nts
03-15-07 11.50 5,000,000 5,200,000
Barclays North America Capital
05-15-21 9.75 13,600,000 14,510,141
Bat-CRAVE-800
08-12-00 6.68 10,100,000(d) 10,095,455
08-12-00 6.86 7,000,000 7,002,280
Countrywide Home Loan
Company Guaranty
06-15-04 6.85 12,000,000 11,643,720
First Union-
Lehman Brothers Cl A3
Series 1997-C2
11-18-29 6.65 20,000,000 18,648,782
Ford Capital
(U.S. Dollar)
06-01-10 9.50 18,350,000(c) 20,368,185
GenAmerica Capital
Company Guaranty
06-30-27 8.52 8,000,000 7,930,608
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 3,385,000(c) 2,301,800
LaBranche
03-01-07 12.00 9,000,000(d) 8,955,000
Merrill Lynch
02-12-03 6.00 4,150,000 3,998,667
Merrill Lynch Mtge Investors Cl D
Series 1996-C2
12-21-28 6.96 7,515,000 6,908,540
Ohio Savings Capital
Company Guaranty
06-03-27 9.50 9,500,000(d) 9,497,382
Osprey Trust/Osprey 1
01-15-03 8.31 10,000,000(d) 9,990,834
Salomon
Medium-term Nts
11-30-00 6.63 6,700,000 6,701,586
Salomon Smith Barney Holdings
01-15-03 6.13 15,000,000 14,497,454
Total 163,348,340
Food (0.4%)
Supervalu
08-01-09 7.88 15,000,000 14,623,995
Health care (0.4%)
Alaris Medical Systems
Company Guaranty
12-01-06 9.75 10,250,000 8,507,500
Alkermes
Cv Sub Nts
02-15-07 3.75 820,000(d) 1,192,075
Alpharma
Cv Sr Sub Nts
06-01-06 3.00 2,190,000(h) 2,644,425
Centocor
Cv Sub Deb
02-15-05 4.75 1,425,000 1,585,313
Inhale Theraptic Systems
Cv Sub Nts
02-08-07 5.00 1,640,000(d) 2,300,100
Phoenix Shannon
(U.S. Dollar) Cv Sr Sub Nts
11-01-00 9.50 2,000,000(b,c,d) 20,000
Total 16,249,413
Health care services (1.0%)
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 10,000,000 8,150,000
Paracelsus Healthcare
Sr Sub Nts
08-15-06 10.00 13,100,000 5,895,000
Sunrise Assisted Living
Cv Sub Nts
06-15-02 5.50 3,100,000 2,352,125
Tenet Healthcare
Sr Sub Nts Series B
12-01-08 8.13 22,700,000 20,770,500
Total 37,167,625
Industrial equipment & services (0.7%)
AMETEK
Sr Nts
07-15-08 7.20 10,000,000 8,839,300
Laidlaw
(U.S. Dollar)
05-15-06 7.65 20,000,000(c) 15,950,780
Total 24,790,080
Insurance (2.9%)
American General Institute Capital
Company Guaranty Series A
12-01-45 7.57 10,000,000(d) 9,133,380
Americo Life
Sr Sub Nts
06-01-05 9.25 9,400,000 9,364,750
Arkwright CSN Trust
08-15-26 9.63 5,000,000(d) 5,140,435
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.68 11,500,000 11,402,664
Florida Windstorm
(MBIA Insured)
02-25-19 7.13 10,000,000(d,k) 9,271,841
Sr Nts (MBIA Insured)
08-25-07 6.85 15,000,000(k) 13,973,910
Lincoln Natl
05-15-05 7.25 7,000,000 6,727,539
Nationwide CSN Trust
02-15-25 9.88 11,500,000(d) 12,210,861
New York Life Insurance
12-15-23 7.50 6,000,000(d) 5,358,768
Principal Mutual
03-01-44 8.00 10,000,000(d) 9,208,060
SAFECO Capital
Company Guaranty
07-15-37 8.07 10,000,000 8,903,480
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 7,500,000(c,d) 7,186,208
Total 107,881,896
Leisure time & entertainment (1.3%)
Activision
Cv Sub Nts
01-01-05 6.75 850,000 755,438
AMC Entertainment
Sr Sub Nts
02-01-11 9.50 10,000,000 7,550,000
Horseshoe Gaming Holding
Company Guaranty
05-15-09 8.63 10,000,000 9,199,999
Mirage Resorts
02-01-08 6.75 8,850,000 7,771,982
Regal Cinemas
Sr Sub Nts
12-15-10 8.88 2,500,000 1,550,000
Time Warner
02-01-24 7.57 5,875,000 5,589,037
Trump Atlantic City Assn/Funding
1st Mtge Company Guaranty
05-01-06 11.25 9,000,000 6,210,000
United Artists Theatres
Series 1995A
07-01-15 9.30 12,682,150 8,896,909
Sr Sub Nts Series B
04-15-08 9.75 10,000,000 600,000
Total 48,123,365
Media (3.5%)
Comcast Cable Communications
11-15-08 6.20 5,500,000 4,931,591
Cox Enterprises
06-14-02 6.63 10,000,000(d) 9,797,799
CSC Holdings
Series B
08-15-09 8.13 5,000,000 4,937,500
Sr Nts
07-15-08 7.25 14,000,000 13,155,827
Interpublic Group
Cv Sub Nts
06-01-06 1.87 2,060,000 1,890,050
Lamar Media
Company Guaranty
09-15-07 8.63 9,000,000 8,617,500
News Corp
06-24-10 10.15 3,526,096(h) 3,892,073
Outdoor Systems
Company Guaranty
06-15-07 8.88 15,000,000 15,300,000
Paxson Communications
Sr Sub Nts
10-01-02 11.63 7,500,000 7,734,375
Rogers Cablesystems
(Canadian Dollar)
01-15-14 9.65 3,700,000(c) 2,692,347
Telewest Communication
(British Pound) Cv
02-19-07 5.25 975,000(c,d) 2,218,251
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-04 9.25 10,000,000(c,d,g) 6,000,000
Time Warner Entertainment
03-15-23 8.38 17,000,000 17,388,960
Turner Broadcasting
07-01-13 8.38 10,000,000 10,376,981
02-01-24 8.40 19,500,000 19,234,780
Total 128,168,034
Metals (1.0%)
EnviroSource
Sr Nts
06-15-03 9.75 4,576,000 3,111,680
Sr Nts Series B
06-15-03 9.75 5,893,000 4,007,240
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 5,628,964(c,d) 5,403,805
Inco
(U.S. Dollar) Cv
03-15-16 7.75 6,990,000(c) 5,731,800
Ormet
Company Guaranty
08-15-08 11.00 8,600,000(d) 8,084,000
WMC Finance USA
(U.S. Dollar)
11-15-13 7.25 10,000,000(c) 9,285,350
Total 35,623,875
Miscellaneous (3.6%)
Bistro Trust
Sub Nts
12-31-02 9.50 32,750,000(d) 30,516,450
Centaur Mining & Exploration
(U.S. Dollar) Company Guaranty
12-01-07 11.00 5,500,000(c) 5,280,000
Charter Communications Holdings LLC
Sr Nts
04-01-09 8.63 10,000,000 9,075,000
Comforce Operating
Sr Nts Series B
12-01-07 12.00 2,400,000 1,368,000
Continucare
Cv Sr Sub Nts
10-31-02 8.00 2,500,000 312,500
Delphes 2
(U.S. Dollar)
05-05-09 7.75 6,100,000(c,d) 5,692,093
ECM Funding LP
06-10-02 11.92 1,078,345(h) 1,075,649
Equinix
12-01-07 13.00 5,000,000(d) 5,150,000
FCB/NC Capital
Company Guaranty
03-01-28 8.05 9,250,000 8,377,337
First Empire Capital
Company Guaranty
02-01-27 8.23 10,450,000 9,863,153
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 6,000,000(c) 5,430,000
Hyder PLC
(U.S. Dollar)
12-15-17 7.25 8,000,000(c,d) 7,094,640
ISG Resources
04-15-08 10.00 8,280,000 7,389,900
Network Associates
Zero Coupon Cv Sub Deb
02-13-18 3.24 8,050,000(f) 2,998,625
Norcal Waste Systems
Company Guaranty Series B
11-15-05 13.50 7,500,000 8,015,625
NSM Steel
Company Guaranty
02-01-06 12.00 5,165,773(b,d) 309,946
Penn-American Water
1st Mtge Medium-term Nts
11-01-17 7.08 13,000,000 11,771,890
Pierce Leahy Command
Company Guaranty
05-15-08 8.13 5,500,000 4,798,750
Stellex Inds
Sr Sub Nts Series B
11-01-07 9.50 6,100,000 4,148,000
Teleglobe
(U.S. Dollar) Company Guaranty
07-20-29 7.70 6,500,000(c) 6,299,800
Total 134,967,358
Multi-industry conglomerates (1.3%)
Coltec Inds
Company Guaranty
04-15-08 7.50 11,750,000 11,191,875
Jordan Inds
Sr Nts Series D
08-01-07 10.38 6,945,000 6,875,550
Prime Succession
Sr Sub Nts
08-15-04 10.75 3,260,000(b) 815,000
US Inds/USI America Holding
Company Guaranty
10-15-03 7.13 10,000,000 9,662,330
USI American Holdings
Sr Nts Series B
12-01-06 7.25 10,920,000 10,252,526
Westinghouse Electric
06-01-01 8.88 10,000,000 10,119,527
Total 48,916,808
Paper & packaging (2.3%)
Carter Holt Harvey
(U.S. Dollar)
12-01-04 8.88 10,500,000(c) 10,788,189
Crown Paper
Sr Sub Nts
09-01-05 11.00 6,950,000 3,266,500
Doman Inds
(U.S. Dollar)
03-15-04 8.75 4,000,000(c) 3,485,000
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 3,500,000(c) 2,905,000
Gaylord Container
Sr Nts
06-15-07 9.75 5,650,000 5,113,250
Sr Nts Series B
06-15-07 9.38 5,350,000 4,801,625
Graham Packaging/GPC Capital
Company Guaranty Series B
01-15-08 8.75 5,000,000 4,475,000
Intl Paper
11-15-12 5.13 9,000,000 6,794,640
MacMillan Bloe Delaware
(U.S. Dollar)
01-15-04 8.50 3,000,000(c) 3,032,760
Owens-Illinois
Sr Nts
05-15-08 7.35 15,000,000 13,518,936
Packaging Corp of America
Company Guaranty
04-01-09 9.63 7,000,000 7,017,500
Pactiv
06-15-17 8.13 5,000,000 4,747,400
Quno Corp
(U.S. Dollar) Sr Nts
05-15-05 9.13 7,000,000(c) 7,350,000
Repap New Brunswick
(U.S. Dollar) Sr Nts
06-01-04 9.00 8,900,000(c) 8,599,625
Total 85,895,425
Restaurants & lodging (0.4%)
Domino's
Company Guaranty Series B
01-15-09 10.38 6,525,000 6,133,500
MGM Grand
02-01-05 6.95 10,000,000 9,195,649
Total 15,329,149
Retail (1.2%)
Costco Companies
Zero Coupon Cv Sub Nts
08-19-17 3.50 965,000(f) 1,096,481
Dairy Mart Convenience Stores
Sr Sub Nts
03-15-04 10.25 5,925,000 4,858,500
Kroger
Sr Nts
07-15-06 8.15 13,000,000 13,203,499
Meyer (Fred)
Company Guaranty
03-01-08 7.45 10,000,000 9,708,221
Wal-Mart CRAVE Trust
07-17-06 7.00 13,136,128(d) 12,591,635
Wal-Mart Stores
06-29-11 8.88 3,500,000 3,634,198
Total 45,092,534
Textiles & apparel (0.4%)
Galey & Lord
Company Guaranty
03-01-08 9.13 11,500,000 3,565,000
Westpoint Stevens
Sr Nts
06-15-08 7.88 13,000,000 11,050,000
Total 14,615,000
Transportation (1.2%)
American Architectural
Company Guaranty
12-01-07 11.75 7,500,000 1,518,750
CSX
05-01-27 7.25 9,700,000 9,523,545
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000(d) 9,227,400
Enterprises Shipholding
(U.S. Dollar) Sr Nts
05-01-08 8.88 4,830,000(c) 2,946,300
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-07 9.50 3,640,000(c) 1,164,800
Hermes Europe RailTel
(U.S. Dollar) Sr Nts
01-15-09 10.38 7,500,000(c) 7,012,500
Norfolk Southern Corp
05-15-07 7.35 10,000,000 9,813,004
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 11.50 4,140,000(c,d) 1,573,200
Total 42,779,499
Utilities-- electric (8.6%)
AEP Generating
Series F
12-07-22 9.82 4,967,068 5,410,131
Appalachian Power
1st Mtge Medium-term Nts
12-01-22 8.50 5,000,000 5,026,500
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 12,556,000 12,180,794
Cleveland Electric Illuminating
07-01-00 7.19 8,000,000 8,002,648
1st Mtge
10-01-08 6.86 35,500,000 32,586,787
1st Mtge Series B
05-15-05 9.50 18,790,000 19,279,773
CMS Energy
Sr Nts
05-15-02 8.13 10,000,000 9,904,546
07-01-03 8.38 15,000,000 14,627,670
11-15-04 7.63 12,000,000 11,486,406
Connecticut Light & Power
1st Mtge Series A
06-01-01 7.88 3,500,000 3,504,033
1st Mtge Series C
06-01-02 7.75 28,750,000 28,622,675
Edison Mission Energy
Sr Nts
06-15-09 7.73 13,300,000(d) 13,109,251
EIP Funding-PNM
10-01-12 10.25 6,393,000 7,141,472
El Paso Electric
1st Mtge Series E
05-01-11 9.40 10,000,000 10,675,000
Indiana & Michigan Power
Sale Lease-backed Obligation Series F
12-07-22 9.82 4,967,063 5,410,125
Midland Cogeneration
Series 1991-C
07-23-02 10.33 3,799,965 3,943,984
Midland Funding
Series 1994-C
07-23-02 10.33 2,045,869 2,123,407
Series A
07-23-05 11.75 14,900,000 16,306,307
Niagara Mohawk Power
1st Mtge
05-15-06 7.75 13,900,000 13,866,584
NRG Northeast Generating
12-15-04 8.06 3,000,000(d) 3,012,930
06-15-15 8.84 2,000,000(d) 2,017,940
Ohio Edison
1st Mtge
04-01-23 7.88 6,000,000 5,655,720
PSI Energy
08-01-05 6.50 10,000,000 9,374,200
Salton Sea Funding
Series C
05-30-10 7.84 10,000,000 9,558,500
Sithe Independence Funding
Series A
06-30-07 8.50 7,500,000 7,422,419
12-30-13 9.00 4,700,000 4,785,174
Texas Utilities Electric
01-01-05 9.45 3,110,000 3,202,128
07-01-25 7.63 10,000,000 9,541,882
10-01-25 7.38 3,000,000 2,796,857
Texas-New Mexico Power
09-15-03 10.75 5,000,000 5,077,650
1st Mtge Series U
09-15-00 9.25 6,000,000 6,051,720
Tucson Electric Power
10-01-09 8.50 3,250,000 3,314,513
TXU Electric Capital
Company Guaranty
01-30-37 8.18 10,000,000 9,634,112
Western Massachusetts Electric
1st Mtge Series B
07-01-01 7.38 12,000,000 11,975,065
Total 316,628,903
Utilities-- gas (1.6%)
Coastal
Sr Deb
02-15-37 7.42 6,000,000 5,458,165
Columbia Gas System
Series C
11-28-05 6.80 18,157,000 17,183,044
El Paso Energy
Sr Nts
05-16-09 6.75 4,900,000 4,562,849
Sr Nts Series B
07-15-01 6.63 8,675,000 8,549,299
Questar Pipeline
06-01-21 9.38 8,000,000 8,318,702
Southern California Gas
1st Mtge Series BB
03-01-23 7.38 6,900,000 6,449,658
Southwest Gas
Series F
06-15-02 9.75 7,900,000 8,224,803
Total 58,746,520
Utilities -- telephone (8.0%)
360 Communications
03-01-06 7.50 17,470,000 17,092,594
Airtouch Communications
05-01-08 6.65 10,600,000 9,957,686
AT&T Canada
(U.S. Dollar) Sr Nts
11-01-08 10.63 4,800,000(c) 5,376,000
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 9.95 12,225,000(c,g) 9,657,750
Bell Atlantic Financial Services
Cv
09-15-05 4.25 1,403,000(d) 2,053,136
BellSouth Capital Funding
02-15-30 7.88 24,000,000 23,929,992
COLT Telecom Group
(European Monetary Unit)
03-29-06 2.00 660,000(c,d) 1,764,616
France Telecom
(European Monetary Unit) Cv
11-29-04 4.13 1,960,000(c,d) 2,253,975
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 4,135,000(b) 5,169
Global Crossing Holdings
Sr Nts
11-15-09 9.50 3,335,000(d) 3,226,613
Indiana Bell Telephone
08-15-26 7.30 4,000,000 3,777,222
Intermedia Communications
Sr Nts Series B
11-01-07 8.88 8,550,000 7,994,250
Zero Coupon Sr Disc Nts Series B
07-15-02 7.50 17,000,000(g) 13,600,000
ITC Deltacom
Sr Nts
03-01-08 8.88 8,000,000 7,520,000
Level 3 Communications
03-15-08 11.00 6,000,000(d) 6,015,000
03-15-10 6.00 1,640,000 1,689,200
McLeod USA
Sr Nts
03-15-08 8.38 2,750,000 2,523,125
02-15-09 8.13 4,250,000 3,814,375
New York Telephone
07-15-31 9.38 27,200,000 29,494,047
Nextel Communications
11-15-09 9.38 10,000,000 9,637,500
Cv Sr Nts
01-15-10 5.25 1,650,000(d) 1,835,625
Primus Telecomm Group
02-15-07 5.75 2,620,000(d) 2,724,800
Sr Nts
01-15-09 11.25 3,000,000 2,850,000
Sr Nts Series B
05-15-08 9.88 7,000,000 6,300,000
Qwest Communications Intl
Sr Nts Series B
11-01-08 7.50 32,175,000 31,217,201
Rhythms NetConnections
Sr Nts
02-15-10 14.00 5,000,000(d) 4,950,000
Rogers Cantel
(U.S. Dollar)
06-01-08 9.38 9,300,000(c) 9,509,250
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-06 12.25 3,350,000(c) 3,249,500
11-15-09 9.88 500,000(c) 417,500
SBC Communications
10-15-34 6.63 10,000,000 8,495,349
07-15-43 7.38 10,000,000 9,299,932
U S WEST Communications
11-10-26 7.20 14,000,000 12,421,819
United Pan-Europe Communications
(U.S. Dollar) Sr Nts
02-01-10 11.25 6,900,000(c,d) 6,951,750
02-01-10 11.50 4,100,000(c,d) 4,120,500
Verio
Sr Nts
11-15-09 10.63 9,500,000(d) 9,476,250
Vodafone AirTouch
(U.S. Dollar)
02-15-10 7.75 12,700,000(c,d) 12,631,166
Total 287,832,892
Municipal bonds (0.7%)
Atlanta Downtown Development Authority
Lease Revenue Taxable Bonds
Atlanta Federal Center
02-01-09 6.25 10,050,000 9,539,360
Denver City & County School District 1
Taxable-Pension-School
Facilities Lease (AMBAC Insured)
12-15-12 6.94 7,700,000(k) 7,245,700
New Jersey Economic Development
Authority State Pension Funding
Revenue Bond (MBIA Insured)
02-15-29 7.43 4,600,000(k) 4,502,066
St. Paul Sales Tax Revenue Bonds
RiverCentre Arena (FSA Insured)
11-01-19 6.94 5,000,000(k) 4,607,050
Total 25,894,176
Total bonds
(Cost: $3,721,016,579) $3,558,231,553
Common stocks (0.1%)
Issuer Shares Value(a)
Celcaribe 995,112(b,d) $1,990,224
Intermedia Communications 5,624(b) 356,070
PhoneTel Technologies 418,000(b) 705,375
Total common stocks
(Cost: $6,819,065) $3,051,669
Preferred stocks & other (1.5%)
Issuer Shares Value(a)
Adelphia Communications
5.50% Cv Series D 8,400 $1,394,400
APP Finance II Mauritius Cl B
12.00% 2,020 1,232,200
Calpine Capital Trust
5.75% Cv 22,300(c) 1,917,800
Coastal
Cv PRIDES 72,700(q) $1,853,850
Coltec Capital
5.25% Cv 23,900(d) 791,688
Cox Communications
Cm Cv PRIDES 26,500(q) 1,641,344
CVS
6.00% Cv ACES 23,800(l) 1,547,000
Dairy Mart
Warrants 51,666 18,083
Dobson Communications
13.00% Pay-in-kind 1,550(o) 1,681,750
Emmis Communications
6.25% Series A 27,200 1,499,400
Enron
7.00% Cv 40,200 658,275
Georgia-Pacific Group
7.50% Cv 30,650 1,189,603
Global Crossing
6.38% Cv 14,450(d) 1,705,100
Global TeleSystems Group
7.25% Cm Cv 21,040 915,240
7.25% Cm Cv 12,700(d) 552,450
HF Holdings
Warrants 14,178 1
Ingersoll-Rand
6.75% Cv PRIDES 62,275(q) 1,198,794
Intermedia Communications
7.00% Cm Cv Series F 16,649 661,805
7.00% Cv Series F 77,350 3,074,643
13.50% Pay-in-kind Series B 6,000(o) 5,970,000
Kerr-McGee
5.50% Cv 22,200 796,425
Lincoln Natl
7.75% Cm Cv 62,950 1,038,675
McKesson Financing Trust
5.00% Cv 41,200(b) 1,416,250
Nextel Communications
13.00% Pay-in-kind Series D 5,162(o) $5,523,340
PSINet
Cv Series C 15,900 1,272,994
Salomon Income Financing Trust
9.50% 400,000 10,300,000
Sovereign Bancorp
7.50% Cv 33,700(b) 1,617,600
Suiza Capital
5.50% Cv 45,600(d) 1,624,500
Wendys Financing
5.00% Cm Cv Series A 25,650 1,042,031
Total preferred stocks & other
(Cost: $54,467,974) $54,135,241
Short-term securities (1.6%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (1.2%)
Federal Home Loan Bank Disc Nts
03-29-00 5.66% $9,300,000 $9,255,647
04-14-00 5.73 10,500,000 10,425,317
Federal Home Loan Mtge Corp Disc Nts
03-09-00 5.59 8,200,000 8,188,561
03-09-00 5.70 4,200,000 4,193,842
03-14-00 5.69 8,200,000 8,181,887
03-23-00 5.77 800,000 796,977
04-04-00 5.75 4,900,000 4,872,750
Federal Natl Mtge Assn Disc Nt
04-11-00 5.72 600,000 596,024
Total 46,511,005
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
Commercial paper (0.4%)
Bayer
03-22-00 5.71% $600,000(i) $597,866
Bell Atlantic Network Funding
03-13-00 5.74 3,000,000 2,993,792
Corporate Receivables
04-26-00 5.94 1,700,000(i) 1,684,012
Fleet Funding
03-16-00 5.76 8,700,000(i) 8,677,766
Total 13,953,436
Total short-term securities
(Cost: $60,476,679) $60,464,441
Total investments in securities
(Cost: $3,842,780,297)(r) $3,675,882,904
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of Feb. 29,
2000, the value of foreign securities represented 9.43% of net assets.
(d) 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.
(e) This security is a collateralized mortgage obligation that pays no interest
or principal during its initial accrual period until previous series within the
trust have been paid off. Interest is accrued at an effective yield; similar to
a zero coupon bond.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(h) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at Feb. 29, 2000, is as follows:
Security Acquisition Cost
dates
Alpharma*
3.00% Cv Sr Sub Nts 2006 10-15-99 thru 02-25-00 $1,767,278
ECM Funding LP
11.92% 2002 04-13-92 thru 02-09-00 1,078,345
News Corp*
10.15% 2010 01-29-93 thru 01-21-00 3,613,139
Voicestream Wireless*
10.38% Sr Nts 2009 11-05-99 thru 01-21-00 9,252,500
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(i) 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.
(j) U.S. Treasury inflation-protection securities (TIPS) are
securities in which the principal amount is adjusted for inflation and the
semiannual interest payments equal a fixed percentage of the inflation-adjusted
principal amount.
(k) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(l) 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.
(m) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
Type of security Notional amount
Sale contracts
U.S. Treasury Bonds, Feb. 2000 $115,000,000
U.S. Treasury Bonds, June 2000 17,000,000
(n) At Feb. 29, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $20,113,542.
(o) Pay-in-kind securities are securities in which the issuer makes interest or
dividend payments in cash or in additional securities. The securities usually
have the same terms as the original holdings.
(p) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Feb. 29, 2000.
(q) 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.
(r) At Feb. 29, 2000, the cost of securities for federal income tax purposes was
approximately $3,841,984,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $42,180,000
Unrealized depreciation (208,281,000)
------------
Net unrealized depreciation $(166,101,000)
<PAGE>
AMERICAN
EXPRESS
FUNDS
AXP Bond Fund
200 AXP Financial Center
Minneapolis, MN 55474
TICKER SYMBOL
Class A: INBNX Class B: ININX Class C: IDBYX
PRSRT STD AUTO
U.S POSTAGE
PAID
SPENCER, IA PERMIT NO. 85
S-6490 N (4/00)
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
