IDS
Mutual
1999 SEMIANNUAL REPORT
(icon of) magnifying glass
The goal of IDS Mutual is to provide
a balance of growth of capital and
current income.
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
<PAGE>
A Beneficial Balance
A balanced portfolio isone of the building blocks of investment planning. And
balance is what IDS Mutual is all about. This Fund starts with a focus on
stocks, many of which are part of the who's who of corporate America. To help
balance the fluctuations inherent in stocks, as well as provide greater income
to investors, bonds are added to the portfolio. The result: a fund that strives
to provide income above that of a pure stock fund, while still providing
potential for capital appreciation.
CONTENTS
From the Chairman 3
From the Portfolio Managers 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
<PAGE>
(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 AEFC 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) Kurt Winters
Kurt Winter
Portfolio manager
From the Portfolio Managers
IDS Mutual enjoyed a very productive six months, thanks largely to a rebound in
the U.S. stock market. For the first half of the fiscal year -- October 1998
through March 1999 -- the Fund's total return for Class A shares was 12.38%. (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.)
The period began with U.S. stocks trying to shake off the effects of a
late-summer decline that drove the market down by nearly 20%. But, in another
display of the remarkable resilience it has shown in recent years, the market
was soon on its way to making up the lost ground. Supported by three reductions
in short-term interest rates by the Federal Reserve, the tentative advance
quickly turned into a roaring rally that culminated in an all-time high for the
market in late March.
(picture of) Brad Stone
Brad Stone
Portfolio manager
CORPORATE BONDS PERFORM WELL
On the bond side, an increase in long-term interest rates hindered the
performance of U.S. Treasury bonds. But corporate issues, buoyed by an economy
that continued to grow at a healthy rate, and mortgage-backed bonds performed
relatively well. We emphasized higher-quality bonds throughout the period.
As for the asset mix, we kept between 60% and 65% of the assets in stocks and
32% to 39% in bonds, with the bond component rising somewhat as the period
progressed. The largest exposure (up to 29% of assets) was to financial services
issues, including those of banks and insurance companies. Technology and
utilities securities made up the next two largest weightings. Although a
comparatively small area of investment, energy-related stocks enjoyed a strong
comeback and made a solid contribution to performance.
Changes to the portfolio were relatively modest. We lowered the technology
exposure somewhat and increased the financial services holdings during the
period. We also reduced the duration of the bond side of the portfolio to make
it less vulnerable to a potential rise in interest rates.
Looking to the rest of the fiscal year, it appears that the U.S. stock market
may be "broadening out" -- that is, a wider range of stocks may be gaining
support from investors. That would be good for the Fund, as its more
conservative portfolio has been at a disadvantage in a market that has been led
by a relatively small number of glamorous growth stocks. As for bonds, we plan
to maintain an emphasis on corporate and mortgage-backed issues, which should do
well assuming the economy stays strong.
Kurt Winters
Brad Stone
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $13.19
Sept. 30, 1998 $13.29
Decrease $ 0.10
Distributions -- Oct. 1, 1998 - March 31, 1999
From income $ 0.30
From capital gains $ 1.40
Total distributions $ 1.70
Total return* +12.38%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $13.10
Sept. 30, 1998 $13.21
Decrease $ 0.11
Distributions -- Oct. 1, 1998 - March 31, 1999
From income $ 0.25
From capital gains $ 1.40
Total distributions $ 1.65
Total return* +11.94%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31,1999 $13.19
Sept. 30, 1998 $13.29
Decrease $ 0.10
Distributions -- Oct. 1, 1998 - March 31, 1999
From income $ 0.30
From capital gains $ 1.40
Total distributions $ 1.70
Total return* +12.42%**
*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.
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of March 31, 1999)
Citigroup 2.05% $101,561,249
BankAmerica 1.99 98,874,999
American Intl Group 1.89 93,635,156
Dayton Hudson 1.60 79,283,749
Mobil 1.47 73,039,999
American Stores 1.46 72,600,000
Bank One 1.41 69,929,374
Houston Inds 1.38 68,323,500
7.00% Cv Preferred
Chevron 1.34 66,770,312
Texaco 1.27 62,992,500
Excludes U.S. Treasury and government agency holdings.
For further detail about these holdings, please refer to the section entitled
"Investments in Securities" herein.
(picture of) pie chart
The 10 holdings listed here
make up 15.86% of net assets
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
IDS Mutual
March 31, 1999 (Unaudited)
Assets
<S> <C>
Investment in Balanced Portfolio (Note 1) $4,963,827,790
--------------
Liabilities
Accrued distribution fees 8,978
Accrued service fee 21,536
Accrued transfer agency fee 16,633
Accrued administrative services fee 4,298
Other accrued expenses 246,815
-------
Total liabilities 298,260
-------
Net assets applicable to outstanding capital stock $4,963,529,530
==============
Represented by
Capital stock -- of $.01 par value (Note 1) $ 3,765,506
Additional paid-in capital 4,478,644,620
Undistributed net investment income 4,421,413
Accumulated net realized gain (loss) (Note 1) 95,196,627
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 381,501,364
-----------
Total -- representing net assets applicable to outstanding capital stock $4,963,529,530
==============
Net assets applicable to outstanding shares: Class A $3,245,625,779
Class B $ 432,174,321
Class Y $1,285,729,430
Net asset value per share of outstanding capital stock: Class A shares 246,088,948 $ 13.19
Class B shares 32,987,511 $ 13.10
Class Y shares 97,474,158 $ 13.19
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Mutual
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 31,046,779
Interest 59,340,674
Less foreign taxes withheld (32,615)
-------
Total income 90,354,838
----------
Expenses (Note 2):
Expenses allocated from Balanced Portfolio 11,284,267
Distribution fee-- Class B 1,504,599
Transfer agency fee 2,670,506
Incremental transfer agency fee
Class A 103,458
Class B 41,526
Service fee
Class A 2,748,456
Class B 349,427
Class Y 689,472
Administrative services fees and expenses 785,396
Compensation of board members 8,184
Postage 448,893
Registration fees 126,661
Reports to shareholders 57,776
Audit fees 5,063
Other 11,063
------
Total expenses 20,834,747
Earnings credits on cash balances (Note 2) (81,382)
-------
Total net expenses 20,753,365
----------
Investment income (loss) -- net 69,601,473
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 70,090,145
Financial futures contracts 9,704,176
Options contracts written 19,163,558
----------
Net realized gain (loss) on investments 98,957,879
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 410,663,313
-----------
Net gain (loss) on investments and foreign currencies 509,621,192
-----------
Net increase (decrease) in net assets resulting from operations $579,222,665
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Mutual
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 69,601,473 $ 168,120,630
Net realized gain (loss) on investments 98,957,879 536,817,331
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 410,663,313 (663,214,406)
----------- ------------
Net increase (decrease) in net assets resulting from operations 579,222,665 41,723,555
----------- ----------
Distributions to shareholders from:
Net investment income
Class A (44,278,483) (108,346,778)
Class B (4,187,680) (8,816,146)
Class Y (19,335,746) (49,253,663)
Net realized gain
Class A (339,669,342) (351,321,509)
Class B (42,241,506) (31,416,863)
Class Y (149,459,194) (151,670,487)
------------ ------------
Total distributions (599,171,951) (700,825,446)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 116,870,906 257,299,934
Class B shares 67,564,686 145,988,341
Class Y shares 140,895,537 458,580,183
Reinvestment of distributions at net asset value
Class A shares 341,468,403 406,345,457
Class B shares 45,557,631 39,425,789
Class Y shares 168,794,940 200,924,150
Payments for redemptions
Class A shares (252,083,648) (434,254,951)
Class B shares (Note 2) (38,048,725) (44,948,636)
Class Y shares (357,205,865) (472,541,514)
------------ ------------
Increase (decrease) in net assets from capital share transactions 233,813,865 556,818,753
----------- -----------
Total increase (decrease) in net assets 213,864,579 (102,283,138)
Net assets at beginning of period 4,749,664,951 4,851,948,089
------------- -------------
Net assets at end of period $4,963,529,530 $4,749,664,951
============== ==============
Undistributed net investment income $ 4,421,413 $ 2,621,849
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
IDS Mutual
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of IDS Investment Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. IDS Investment Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the board.
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 Balanced Portfolio
The Fund invests all of its assets in Balanced 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 divides its investments between common
stocks and senior securities (bonds and preferred 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 as of 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 $2,412,695 for Class A and $175,741 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 $81,382 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 8,711,824 5,060,629 10,483,221
Issued for reinvested distributions 26,478,085 3,556,443 13,086,954
Redeemed (18,709,867) (2,844,425) (26,810,262)
----------- ---------- -----------
Net increase (decrease) 16,480,042 5,772,647 (3,240,087)
Year ended Sept. 30, 1998
Class A Class B Class Y
Sold 17,836,543 10,193,781 31,856,564
Issued for reinvested distributions 29,658,735 2,893,659 14,655,420
Redeemed (30,130,218) (3,155,238) (33,071,646)
----------- ---------- -----------
Net increase (decrease) 17,365,060 9,932,202 13,440,338
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.
<PAGE>
<TABLE>
<CAPTION>
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 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.29 $15.32 $13.51 $12.69 $11.89
Income from investment operations:
Net investment income (loss) .19 .48 .57 .54 .58
Net gains (losses) (both realized and unrealized) 1.41 (.36) 2.61 .93 1.27
Total from investment operations 1.60 .12 3.18 1.47 1.85
Less distributions:
Dividends from net investment income (.19) (.48) (.53) (.52) (.54)
Distributions from realized gains (1.51) (1.67) (.84) (.13) (.51)
Total distributions (1.70) (2.15) (1.37) (.65) (1.05)
Net asset value, end of period $13.19 $13.29 $15.32 $13.51 $12.69
Ratios/supplemental data
Class A
1999b 1998 1997 1996 1995
Net assets, end of period (in millions) $3,246 $3,051 $3,251 $2,770 $2,596
Ratio of expenses to average daily net assetsc .80%d .80% .83% .87% .83%
Ratio of net investment income (loss)
to average daily net assets 2.83%d 3.35% 4.00% 4.01% 4.58%
Portfolio turnover rate
(excluding short-term securities) 62% 98% 49% 45% 38%
Total returne 12.38% .70% 24.88% 11.84% 16.81%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 1999 (Unaudited).
c Effective fiscal year 1996, 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>
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class B Class Y
1999c 1998 1997 1996 1995b 1999c 1998 1997 1996 1995b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $13.21 $15.25 $13.47 $12.66 $11.67 $13.29 $15.32 $13.51 $12.69 $11.67
Income from investment operations:
Net investment
income (loss) .14 .38 .46 .45 .25 .20 .49 .59 .56 .32
Net gains (losses) (both
realized and unrealized) 1.40 (.37) 2.59 .93 1.11 1.40 (.36) 2.61 .93 1.11
Total from investment
operations 1.54 .01 3.05 1.38 1.36 1.60 .13 3.20 1.49 1.43
Less distributions:
Dividends from net
investment income (.14) (.38) (.43) (.44) (.37) (.19) (.49) (.55) (.54) (.41)
Distributions from
realized gains (1.51) (1.67) (.84) (.13) -- (1.51) (1.67) (.84) (.13) --
Total distributions (1.65) (2.05) (1.27) (.57) (.37) (1.70) (2.16) (1.39) (.67) (.41)
Net asset value,
end of period $13.10 $13.21 $15.25 $13.47 $12.66 $13.19 $13.29 $15.32 $13.51 $12.69
Ratios/supplemental data
Class B Class Y
1999c 1998 1997 1996 1995b 1999c 1998 1997 1996 1995b
Net assets, end of
period (in millions) $432 $360 $264 $133 $33 $1,286 $1,339 $1,337 $1,114 $876
Ratio of expenses to
average daily net assetsd 1.56%e 1.56% 1.59% 1.64% 1.65%e .72%e .73% .70% .70% .70%e
Ratio of net investment
income (loss) to average
daily net assets 2.06%e 2.58% 3.28% 3.32% 3.94%e 2.91%e 3.42% 4.13% 4.18% 4.58%e
Portfolio turnover rate
(excluding short-term
securities) 62% 98% 49% 45% 38% 62% 98% 49% 45% 38%
Total returnf 11.94% (.07%) 23.93% 10.99% 11.70% 12.42% .77% 25.04% 12.02% 12.20%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Six months ended March 31, 1999 (Unaudited).
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.
</TABLE>
<PAGE>
Financial Statements
Statement of assets and liabilities
Balanced Portfolio
March 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $5,070,520,471) $5,446,852,182
Dividends and accrued interest receivable 26,154,406
Receivable for investment securities sold 485,688,612
U.S. government securities held as collateral (Note 6) 10,774,493
----------
Total assets 5,969,469,693
-------------
Liabilities
Disbursements in excess of cash on demand deposit 53,061,090
Payable for investment securities purchased 912,551,736
Payable upon return of securities loaned (Note 6) 32,279,493
Options contracts written, at value
(premium received $7,429,836) (Note 4) 6,418,735
Other accrued expenses 87,750
------
Total liabilities 1,004,398,804
-------------
Net assets $4,965,070,889
==============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Balanced Portfolio
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 31,054,309
Interest 59,285,038
Less foreign taxes withheld (32,623)
-------
Total income 90,306,724
----------
Expenses (Note 2):
Investment management services fee 11,032,878
Compensation of board members 11,902
Custodian fees 191,239
Audit fees 15,188
Other 41,722
------
Total expenses 11,292,929
Earnings credits on cash balances (Note 2) (5,922)
------
Total net expenses 11,287,007
----------
Investment income (loss) -- net 79,019,717
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 70,106,445
Financial futures contracts (Note 5) 9,706,537
---------
Options contracts written (Note 4) 19,168,145
----------
Net realized gain (loss) on investments 98,981,127
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 410,763,116
-----------
Net gain (loss) on investments and foreign currencies 509,744,243
-----------
Net increase (decrease) in net assets resulting from operations $588,763,960
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Balanced Portfolio
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss) -- net $ 79,019,717 $ 185,535,190
Net realized gain (loss) on investments 98,981,127 536,885,565
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 410,763,116 (663,319,521)
----------- ------------
Net increase (decrease) in net assets resulting from operations 588,763,960 59,101,234
Net contributions (withdrawals) from partners (374,923,625) (161,190,578)
------------ ------------
Total increase (decrease) in net assets 213,840,335 (102,089,344)
Net assets at beginning of period 4,751,230,554 4,853,319,898
------------- -------------
Net assets at end of period $4,965,070,889 $4,751,230,554
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Balanced Portfolio
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Balanced 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. Balanced Portfolio
seeks to provide a balance of growth of capital and current income by investing
in common stocks and senior securities (preferred stocks and debt securities)
issued by U.S. and foreign companies. The Portfolio also may invest in
derivative instruments and money market instruments. 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.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Portfolio 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
fluctuations, and they may affect the Portfolio's net assets the same as owned
securities. The Portfolio designates cash or liquid high-grade short-term debt
securities at least equal to the amount of its commitment. As of March 31, 1999,
the Portfolio had entered into outstanding when-issued or forward-commitments of
$631,357,248.
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 0.43% 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 Mutual to the Lipper Balanced Fund Index. The maximum adjustment
is 0.08% of the Portfolio's average daily net assets on an annual basis. The
adjustment decreased the fee by $1,068,395 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 $5,922 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 $3,256,606,437 and $3,049,918,502, respectively, for the
six months ended March 31, 1999. For the same period, the portfolio turnover
rate was 62%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $51,096 for the
six months ended March 31, 1999.
4. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended March 31, 1999
Puts Calls
Contracts Premium Contracts Premium
Balance Sept. 30, 1998 2,400 $ 4,153,631 2,750 $ 4,469,066
Opened 10,455 14,769,177 13,251 19,605,833
Exercised (4,200) (5,948,536) (3,836) (5,001,552)
Closed (6,275) (10,047,691) (9,305) (14,570,092)
Balance March 31, 1999 2,380 2,926,581 2,860 4,503,255
See "Summary of significant accounting policies."
5. FINANCIAL FUTURES CONTRACTS
As of March 31, 1999, investments in securities included securities valued at
$31,724,401 that were pledged as collateral to cover initial margin deposits on
568 open purchased contracts and 5,578 open sale contracts. The market value of
the open purchase contracts as of March 31, 1999 was $100,193,600 with net
unrealized loss of $1,001,360. The market value of the open sale contracts as of
March 31, 1999 was $665,197,625 with a net unrealized gain of $5,250,533. See
"Summary of significant accounting policies."
6. LENDING OF PORTFOLIO SECURITIES
As of March 31, 1999, securities valued at $31,200,360 were on loan to brokers.
For collateral, the Portfolio received $21,505,000 in cash and U.S. government
securities valued at $10,774,493. Income from securities lending amounted to
$63,961 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.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Balanced Portfolio
March 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (62.6%)
Issuer Shares Value(a)
Aerospace & defense (1.5%)
<S> <C> <C>
AlliedSignal 800,000 $39,350,000
Rockwell Intl 770,000(e,f) 32,676,875
Total 72,026,875
Automotive & related (3.3%)
Delphi Automotive Systems 1,925,000(b) 34,168,750
Ford Motor 989,500 56,154,125
General Motors 545,000 47,346,875
TRW 577,000 26,253,500
Total 163,923,250
Banks and savings & loans (8.0%)
Bank of New York 1,185,000 42,585,938
Bank One 1,270,000 69,929,374
BankAmerica 1,400,000 98,874,999
Chase Manhattan 590,000 47,974,375
Fleet Financial Group 765,000 28,783,125
Mellon Bank 370,000 26,038,750
Washington Mutual 930,000 38,013,750
Wells Fargo 1,355,000 47,509,688
Total 399,709,999
Building materials & construction (0.6%)
American Standard 800,000(b) 27,500,000
Chemicals (2.1%)
Air Products & Chemicals 965,000 33,051,250
Dow Chemical 170,000 15,841,875
Du Pont (EI) de Nemours 940,000 54,578,750
Total 103,471,875
Communications equipment & services (0.9%)
Northern Telecom 710,400(c) 44,133,600
Computers & office equipment (4.7%)
3Com 1,177,200(b,e,f) 27,443,475
BMC Software 505,000(b) 18,716,563
Compaq Computer 1,030,000 32,638,125
Electronic Data Systems 510,000 24,830,625
First Data 615,500 26,312,625
Hewlett-Packard 250,000 16,953,125
Intl Business Machines 350,000 62,037,499
Wang Laboratories 1,166,500(b) 22,892,563
Total 231,824,600
Electronics (1.1%)
Applied Materials 495,000(b) 30,535,313
Texas Instruments 260,000 25,805,000
Total 56,340,313
Energy (6.4%)
Chevron 755,000 66,770,312
Mobil 830,000 73,039,999
Royal Dutch Petroleum 745,000(c) 38,740,000
Texaco 1,110,000(e,f) 62,992,500
Tosco 1,755,000 43,545,938
Unocal 1,040,000 38,285,000
Total 323,373,749
Financial services (4.8%)
Associates First Capital Cl A 840,000 37,800,000
Citigroup 1,590,000 101,561,249
Fannie Mae 325,000 22,506,250
Franchise Finance Corp of America 117,500 2,474,844
MBNA 1,300,000 31,037,500
Morgan Stanley, Dean Witter, Discover & Co 410,000 40,974,375
Total 236,354,218
Food (1.4%)
Bestfoods 470,000 22,090,000
General Mills 310,000 23,424,375
Sara Lee 900,000(e,f) 22,275,000
Total 67,789,375
Health care (2.7%)
American Home Products 350,000 22,837,500
Amgen 455,000(b) 34,068,124
Baxter Intl 350,000 23,100,000
Boston Scientific 815,000(b) 33,058,438
Warner-Lambert 345,000 22,834,688
Total 135,898,750
Health care services (0.5%)
McKesson HBOC 355,000 23,430,000
Household products (0.9%)
Procter & Gamble 450,000 44,071,875
Industrial equipment & services (2.3%)
Browning-Ferris Inds 1,015,000 39,140,938
Illinois Tool Works 655,000 40,528,125
Parker-Hannifin 1,005,000 34,421,250
Total 114,090,313
Insurance (4.3%)
American General 530,900 37,428,450
American Intl Group 776,250 93,635,156
Lincoln Natl 500,000 49,437,500
Marsh & McLennan 465,000 34,497,188
Total 214,998,294
Leisure time & entertainment (0.9%)
Disney (Walt) 1,090,000 33,926,250
Mattel 343,200 8,537,100
Total 42,463,350
Multi-industry conglomerates (0.7%)
Emerson Electric 335,000 17,734,063
Xerox 325,000 17,346,875
Total 35,080,938
Paper & packaging (1.2%)
Intl Paper 770,000 32,484,375
Tenneco 1,022,000 28,552,125
Total 61,036,500
Retail (4.9%)
American Stores 2,200,000 72,600,000
Costco Companies 600,000(b) 54,937,500
Dayton Hudson 1,190,000 79,283,749
TJX Companies 1,225,000 41,650,000
Total 248,471,249
Transportation (1.6%)
Burlington Northern Santa Fe 1,260,000 41,422,500
Union Pacific 747,000 39,917,813
Total 81,340,313
Utilities -- electric (3.9%)
Carolina Power & Light 585,000 22,120,313
CMS Energy 775,000 31,048,438
Duke Energy 601,800 32,873,325
Edison Intl 885,000 19,691,250
New Century Energies 755,000 25,717,188
Northern States Power 330,000 7,651,875
PECO Energy 720,000 33,299,999
Texas Utilities 480,000 20,010,000
Total 192,412,388
Utilities -- gas (0.7%)
Coastal 1,035,000 34,155,000
Utilities -- telephone (3.1%)
Ameritech 835,000 48,325,625
AT&T 250,000 19,953,125
BellSouth 680,000 27,242,500
SBC Communications 590,000 27,803,750
U S WEST Communications Group 545,000 30,009,063
Total 153,334,063
Total common stocks
(Cost: $2,778,603,102) $3,107,230,887
Preferred stock (1.4%)
Issuer Shares Value(a)
Houston Inds
7.00% Cv ACES 567,000(j) $68,323,500
Total preferred stock
(Cost: $44,211,203) $68,323,500
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (39.7%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (14.8%)
Collateralized Mtge Obligation Trust
<S> <C> <C> <C>
12-20-14 9.95% $2,414,526 $2,559,036
Federal Home Loan Mtge Corp
10-01-03 7.00 3,017,218 3,085,799
07-01-07 6.50 290,596 290,808
07-01-08 6.75 1,382,898 1,392,329
06-01-09 5.50 3,687,449 3,619,342
01-01-11 6.50 12,978,702 13,130,942
03-01-13 5.50 13,794,509 13,449,445
08-01-24 8.00 3,812,864 3,970,717
03-01-26 7.00 7,521,224 7,632,463
09-01-28 6.00 27,501,807 26,752,933
Collateralized Mtge Obligation
01-15-03 7.50 6,176,839 6,338,116
04-15-22 8.50 7,000,000 7,347,130
Trust Series Z
10-15-23 6.50 2,696,047(m) 2,480,283
Federal Natl Mtge Assn
10-01-02 7.50 427,808 440,009
01-01-09 5.50 5,550,675 5,434,277
03-01-10 5.50 30,000,000(k) 29,203,125
03-01-10 6.00 30,000,000(k) 29,765,625
03-01-10 6.50 100,000,000(k) 100,875,000
07-01-13 6.50 15,368,922 15,511,865
08-01-13 6.00 28,345,695 28,132,436
02-01-14 7.50 1,204,900 1,231,962
05-01-23 6.50 4,456,996 4,442,154
09-01-23 6.50 6,926,931 6,903,865
01-01-24 6.50 12,763,606 12,721,103
06-01-24 9.00 3,976,858 4,254,562
03-01-25 6.50 90,000,000(k) 89,550,000
03-01-25 7.00 30,000,000(k) 30,403,125
08-01-25 7.50 11,702,408 12,033,001
06-01-26 8.50 41,469 43,574
03-01-28 6.00 82,400,743 80,103,381
04-01-28 6.00 26,800,437 26,051,772
04-01-28 6.00 2,248,425(d,e,f) 2,185,738
06-01-28 6.00 11,683,940 11,356,790
06-01-28 6.00 9,326,412(d,e,f) 9,065,272
06-01-28 7.00 24,041,293 24,384,633
07-01-28 6.00 13,671,727 13,288,919
08-01-28 7.00 36,618,384 37,141,341
09-01-28 6.50 48,514,121 48,297,985
12-01-28 6.50 11,858,619 11,807,982
Collateralized Mtge Obligation
Trust Series Z
12-25-06 8.00 11,217,885(m) 11,689,261
10-25-16 7.00 629,069(m) 626,993
Total 738,995,093
U.S. government obligations (9.9%)
Resolution Funding Corp
10-15-19 8.13 50,000,000 61,561,820
Zero Coupon
01-15-19 6.50 53,000,000(n) 15,589,367
10-15-19 6.32 50,000,000(n) 13,985,685
10-15-20 5.69 99,400,000(n) 26,131,346
U.S. Treasury
02-15-16 9.25 90,000,000 122,499,899
05-15-17 8.75 50,000,000 65,793,140
08-15-19 8.13 65,000,000(d,e,f) 81,918,778
11-15-21 8.00 16,000,000 20,117,802
02-15-23 7.13 12,700,000 14,659,483
08-15-23 6.25 25,000,000(d,e,f) 26,110,000
11-15-27 6.13 10,000,000(g) 10,393,248
02-15-29 5.25 22,300,000(g) 21,090,894
TIPS
01-15-09 3.88 6,500,000(h) 6,479,688
Zero Coupon
11-15-04 4.89 7,500,000(d,e,f,n) 5,558,693
Total 491,889,843
Aerospace & defense (0.2%)
United Technologies
11-15-19 8.88 9,500,000 11,901,900
Automotive & related (0.2%)
Ford Motor Credit
08-15-08 6.75 10,000,000 10,313,810
Banks and savings & loans (2.3%)
BankAmerica
Sr Nts
02-15-09 5.88 10,000,000 9,697,599
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 10,000,000(c,i) 8,560,000
Fleet Financial Group
Sub Nts
05-15-08 6.38 10,000,000 10,002,564
Mellon Financial
Sub Nts
02-15-10 6.38 16,000,000 16,229,941
Morgan (JP)
Sr Sub Medium-term Nts Series A
02-15-12 4.00 15,000,000 13,270,950
NationsBank
Sub Nts
05-15-10 6.60 11,825,000 11,972,441
Swiss Bank
Sub Deb
07-15-25 7.50 4,700,000 5,021,295
09-01-26 7.75 11,000,000 11,970,037
Union Planters Capital
Company Guaranty
12-15-26 8.20 10,000,000 9,987,179
US Capital
02-01-27 8.41 10,000,000(i) 10,388,541
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 5,800,000 6,339,669
Total 113,440,216
Building materials & construction (0.2%)
Tyco Intl Group
(U.S. Dollar) Company Guaranty
06-15-28 7.00 9,100,000(c) 9,109,971
Chemicals (0.2%)
IMC Global
10-15-01 6.63 10,000,000 9,999,520
Commercial finance -- personal loans (0.1%)
Yale University
04-15-96 7.38 4,000,000 4,356,782
Communications equipment & services (0.2%)
U S West Capital Funding
Company Guaranty
07-15-28 6.88 9,000,000 9,049,711
Electronics (0.3%)
Harris
12-01-18 10.38 4,000,000 4,217,524
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-04 8.25 10,000,000(c,i) 8,599,444
Total 12,816,968
Energy (1.0%)
Occidental Petroleum
Medium-term Nts Series B
04-10-00 6.25 6,500,000 6,479,272
Petronas
(U.S. Dollar)
08-15-15 7.75 10,000,000(c,i) 8,876,195
R & B Falcon
Sr Nts Series B
04-15-05 6.75 10,000,000 8,000,000
Union Pacific Resources
05-15-28 7.15 10,000,000 8,723,599
USX
03-01-08 6.85 10,000,000 9,803,968
Woodside Petroleum
(U.S. Dollar)
04-15-08 6.60 10,000,000(c,i) 9,208,171
Total 51,091,205
Energy equipment & services (0.4%)
Global Marine
09-01-07 7.13 10,000,000 9,939,937
Pioneer Natural Resource
01-15-08 6.50 10,350,000 8,479,068
Total 18,419,005
Financial services (1.5%)
AT&T Capital
Company Guaranty Medium-term Nts Series F
05-15-05 6.60 9,000,000 9,002,556
Bat-CRAVE-800
08-12-00 6.68 7,000,000(i) 7,072,767
Citibank Credit Card Master Trust
Series A
10-07-04 5.95 8,550,000 8,609,850
Equitable Life Assurance Society US Cl B1
Collateralized Mtge Obligation
05-15-09 7.33 5,500,000(i) 5,770,160
Golden State Holdings
Sr Nts
08-01-03 7.00 10,000,000 9,806,127
Household Finance
Medium-term Nts Series E
06-17-08 6.40 8,020,000 8,024,548
Liberty Mutual Insurance
10-15-97 7.70 10,000,000 9,792,370
Railcar Leasing
(U.S. Dollar)
01-15-13 7.13 15,000,000(c,i) 15,890,571
Total 73,968,949
Health care services (0.4%)
Kaiser Permanente
07-15-05 9.55 6,000,000 6,983,359
Service Corp Intl
03-15-08 6.50 2,000,000 1,921,440
04-15-09 7.70 10,000,000 10,410,316
Total 19,315,115
Insurance (1.8%)
American General Institute Capital
Company Guaranty Series A
12-01-45 7.57 15,000,000(i) 15,615,348
American United Life Insurance
03-30-26 7.75 10,375,000(i) 10,564,167
Nationwide CSN Trust
02-15-25 9.88 15,500,000(i) 18,153,703
New York Life Insurance
12-15-23 7.50 11,500,000(i) 11,245,611
Principal Mutual
03-01-44 8.00 7,150,000(i) 7,560,044
SAFECO Capital
Company Guaranty
07-15-37 8.07 10,000,000 10,012,193
SunAmerica
04-28-23 8.13 5,150,000 5,945,554
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 7,500,000(c,i) 8,013,028
Total 87,109,648
Media (0.5%)
Belo (AH)
Sr Nts
06-01-07 7.13 15,000,000 15,215,181
Time Warner Entertainment
Sr Nts
07-15-33 8.38 10,000,000 11,836,406
Total 27,051,587
Miscellaneous (0.4%)
DTE Burns Harbor LLC
Sr Nts
01-30-03 6.57 7,119,480(i) 7,026,856
Florida Windstorm
(MBIA Insured)
02-25-19 7.13 15,000,000(i,l) 15,085,755
Total 22,112,611
Paper & packaging (0.2%)
Intl Paper
11-15-12 5.13 13,400,000 11,437,565
Real estate investment trust (0.1%)
Property Trust of America
02-15-14 7.50 5,000,000 5,021,544
Restaurants & lodging (0.2%)
MGM Grand
02-01-05 6.95 10,000,000 9,450,985
Retail (0.3%)
Wal-Mart CRAVE Trust
07-17-06 7.00 12,237,423(i) 12,433,589
Transportation (1.2%)
Atlas Air Series C
01-02-10 8.01 14,165,941 14,192,857
Burlington Northern Santa Fe
12-15-25 7.00 10,200,000 10,384,931
Canadian Natl Railroad
(U.S. Dollar)
05-15-23 7.63 6,000,000(c) 6,499,477
CSX
05-01-27 7.25 10,000,000 10,596,233
Mass Transit Railway
(U.S. Dollar)
02-04-09 7.50 16,375,000(c) 16,749,078
Total 58,422,576
Utilities -- electric (1.9%)
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 5,400,000 5,946,727
Cleveland Electric Illuminating
07-01-00 7.19 5,000,000 5,073,382
07-01-04 7.67 10,000,000 10,508,950
Entergy Louisiana
1st Mtge
03-01-08 6.50 5,535,000 5,582,883
Israel Electric
(U.S. Dollar) Sr Nts
12-15-06 7.25 10,000,000(c) 9,942,500
Pacific Gas & Electric
1st Mtge Series 1992D
11-01-22 8.25 4,600,000 4,893,632
Public Service Electric & Gas
1st Mtge
05-01-23 6.38 13,325,000 13,326,918
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 13,000,000(l) 13,180,837
TU Electric Capital
Company Guaranty
01-30-37 8.18 10,000,000 10,502,960
Wisconsin Electric Power
01-15-23 7.75 5,500,000 5,706,657
12-01-95 6.88 8,000,000 8,016,481
Total 92,681,927
Utilities -- gas (0.2%)
Ras Laffan
(U.S. Dollar)
03-15-14 8.29 10,000,000(c,i) 9,401,806
Utilities -- telephone (1.2%)
Airtouch Communications
05-01-08 6.65 6,950,000 7,164,072
Bell Telephone of Pennsylvania
03-15-33 7.38 5,000,000 5,071,825
GTE
11-01-21 8.75 5,000,000 6,143,190
Qwest Communications Intl
Sr Nts
11-01-08 7.25 21,000,000(i) 21,472,499
SBC Communications
10-15-34 6.63 6,100,000 5,870,766
07-15-43 7.38 7,500,000 7,870,850
U S WEST Communications
09-15-05 6.63 7,000,000(d,e,f) 7,204,250
Total 60,797,452
Total bonds
(Cost: $1,946,834,037) $1,970,589,378
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Options purchased (--%)
Issuer Shares Exercise Expiration Value(a)
price date
Puts
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures, June 1999 320,000 $106 May 1999 $49,984
U.S. Treasury Note Futures, June 1999, 10-year notes 100,000 111 May 1999 109,370
Total options purchased
(Cost: $323,066) $159,354
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (6.1%)(d)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (1.5%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
04-06-99 4.82% $26,600,000 $26,582,266
04-19-99 4.80 25,000,000 24,940,250
05-14-99 4.80 25,000,000 24,857,563
Total 76,380,079
Commercial paper (4.6%)
BBV Finance (Delaware)
04-19-99 4.87 19,500,000 19,452,711
BMW US Capital
05-13-99 4.87 3,000,000 2,983,060
Ciesco LP
04-13-99 4.89 17,800,000 17,771,105
Commerzbank U.S. Finance
04-07-99 4.90 15,000,000 14,987,800
Delaware Funding
04-23-99 4.89 11,500,000(o) 11,465,845
Fleet Funding
04-21-99 4.88 13,700,000(o) 13,663,010
04-29-99 4.87 4,000,000(o) 3,984,911
Ford Motor Credit
04-08-99 4.90 10,000,000 9,990,511
04-16-99 4.90 10,000,000 9,979,667
Glaxo Wellcome
04-12-99 4.88 9,700,000(o) 9,685,596
GMAC
04-22-99 4.90 10,000,000 9,971,592
Goldman Sachs Group
04-01-99 4.87 11,000,000 11,000,000
GTE Funding
04-06-99 4.89 19,342,000 19,328,917
Heinz (HJ)
05-03-99 4.86 8,300,000 8,264,365
Household Finance
04-01-99 4.87 11,500,000 11,500,000
Merrill Lynch
04-08-99 4.90 7,200,000 7,193,140
Morgan Stanley, Dean Witter, Discover & Co
04-05-99 4.89 10,000,000 9,994,589
Novartis Finance
04-08-99 4.86 4,100,000(o) 4,096,133
Paccar Financial
04-20-99 4.85 12,400,000 12,368,390
Societe Generale North America
04-07-99 4.90 12,600,000 12,589,752
Variable Funding Capital
04-05-99 4.87 3,900,000(o) 3,897,890
Total 224,168,984
Total short-term securities
(Cost: $300,549,063) $300,549,063
Total investments in securities
(Cost: $5,070,520,471)(p) $5,446,852,182
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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 3.90% of net assets.
(d) At March 31, 1999, securities valued at $31,724,401 were held to cover open
call options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures, June 1999 84,000 $120 May 1999 $1,548,750
U.S. Treasury Bond Futures, June 1999 144,000 122 May 1999 1,372,493
U.S. Treasury Bond Futures, June 1999 34,000 124 May 1999 143,435
U.S. Treasury Note Futures, June 1999,
10-year notes 24,000 116 May 1999 101,249
Total $3,165,927
At March 31, 1999, cash or short-term securities were designated to cover open
put options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
U.S. Treasury Bond Futures, June 1999 54,000 $118 May 1999 $337,500
U.S. Treasury Bond Futures, June 1999 94,000 120 May 1999 1,204,375
U.S. Treasury Bond Futures, June 1999 40,000 124 May 1999 1,531,248
U.S. Treasury Note Futures, June 1999,
10-year notes 50,000 113 May 1999 179,685
Total $3,252,808
(e) 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
Purchase contracts
U.S. Treasury Note, June 1999, 10-year notes $400,000
Sale contracts
U.S. Treasury Bond, June 1999 4,778,000
U.S. Treasury Note, June 1999, 5-year notes 800,000
(f) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 5 to the financial statements):
Type of security Contracts
S&P 500 Index, June 1999 168
(g) Security is partially or fully on loan. See Note 6 to the financial
statements.
(h) 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.
(i) 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.
(j) 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.
(k) At March 31, 1999, the cost of securities purchased, including interest
purchased, on a when-issued basis was $631,357,248.
(l) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
MBIA -- Municipal Bond Investors Assurance
(m) 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.
(n) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(o) 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.
(p) At March 31, 1999, the cost of securities for federal income tax purposes
was approximately $5,070,512,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $508,254,000
Unrealized depreciation (131,914,000)
------------
Net unrealized appreciation $376,340,000
</TABLE>
<PAGE>
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