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AXP(SM)
Mutual
1999 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
(icon of) magnifying glass
AXP Mutual seeks to provide shareholders with a balance of growth of capital and
current income.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors (logo)
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A Beneficial Balance
A balanced portfolio is one of the building blocks of investment planning. And
balance is what AXP Mutual is all about. The 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 offers
income above that of a pure stock fund, while still providing potential for
capital appreciation.
AXP MUTUAL (This annual report is not part of the prospectus.)
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Table of Contents
1999 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Managers 4
Fund Facts 6
The 10 Largest Holdings 7
Making the Most of the Fund 8
The Fund's Long-term Performance 9
Independent Auditors' Report (Fund) 10
Financial Statements (Fund) 11
Notes to Financial Statements (Fund) 14
Independent Auditors' Report (Portfolio) 18
Financial Statements (Portfolio) 19
Notes to Financial Statements (Portfolio)22
Investments in Securities 27
Federal Income Tax Information 42
1999 PROSPECTUS
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 5p
Past Performance 6p
Fees and Expenses 8p
Management 9p
Buying and Selling Shares 10p
Valuing Fund Shares 10p
Investment Options 10p
Purchasing Shares 12p
Sales Charges 15p
Exchanging/Selling Shares 19p
Distributions and Taxes 24p
Personalized Shareholder Information 25p
Master/Feeder Structure 26p
About the Company 27p
Quick Telephone Reference 29p
Financial Highlights 30p
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
American Express(R) Funds held shareholder meetings in June 1999. Shareholders
approved all of the proposals advanced by management. Among the proposals were:
o The election of Board members and the selection of KPMG LLP as independent
auditors.
o Change in the Fund name from "IDS" to "AXP."
o A new shareholder service and distribution plan.
o Changes with respect to fundamental investment policies.
No other business was presented at the meeting, which was concluded by a report
to shareholders from the Investment Department of American Express Financial
Corporation.
Thanks to all of you for your effort in reviewing the proxy material and voting
your proxies.
Arne H. Carlson
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
From the Portfolio Managers
The past 12 months was a volatile but ultimately rewarding period for financial
assets. For AXP Mutual, the result was a total return of 11.72% (Class A shares)
during the fiscal year -- October 1998 through September 1999. (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 sharp
decline in the late summer of 1998. 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 lasted through most of the winter.
AXP MUTUAL (This annual report is not part of the prospectus.)
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(picture of) Brad Stone
Brad Stone
Portfolio manager
After retreating in February, stocks made another nice advance that eventually
stalled in mid-summer. By that time, long-term interest rates were up markedly
since the start of 1999, and concern about potentially higher inflation had
re-surfaced. The result was a sustained retreat by stocks over the final three
months.
On the fixed-income side of the portfolio, a rebound by corporate bonds had a
positive effect early in the fiscal year. But for most of 1999, the
rising-interest-rate trend penalized the Fund's holdings, which also included
mortgage-backed and U.S. Treasury bonds. We emphasized higher-quality bonds
throughout the period. Among our investment strategies was the purchase of a
modest amount of derivatives, including futures and options.
As for the asset mix, we kept between 55% and 65% of the assets in stocks, with
almost all the rest in bonds. The largest sector exposure 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 portfolio to make it
less vulnerable to a potential rise in interest rates, and lowered the exposure
to mortgage-backed bonds.
As the new fiscal year begins, it's encouraging that the value stocks this Fund
focuses on made something of a comeback at times during the past 12 months. But
that doesn't alter the fact that the stock market as a whole is facing several
conflicting factors: an economy that appears to remain quite strong, the
possibility of higher inflation and higher interest rates, concerns about the
strength of corporate profits, a depreciating U.S. dollar, and the ultimate
effect of the Y2K computer situation. In light of the uncertainty, we plan to
maintain a somewhat defensive investment approach with both stocks and bonds.
Kurt Winters
Brad Stone
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Fund Facts
Class A-- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $12.94
Sept. 30, 1998 $13.29
Decrease $ 0.35
Distributions -- Oct. 1, 1998 - Sept. 30, 1999
From income $ 0.47
From capital gains $ 1.40
Total distributions $ 1.87
Total return* +11.72%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $12.86
Sept. 30, 1998 $13.21
Decrease $ 0.35
Distributions -- Oct. 1, 1998 - Sept. 30, 1999
From income $ 0.37
From capital gains $ 1.40
Total distributions $ 1.77
Total return* +10.93%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $12.95
Sept. 30, 1998 $13.29
Decrease $ 0.34
Distributions -- Oct. 1, 1998 - Sept. 30, 1999
From income $ 0.48
From capital gains $ 1.40
Total distributions $ 1.88
Total return* +11.90%**
*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.
AXP MUTUAL (This annual report is not part of the prospectus.)
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The 10 Largest Holdings
Percent Value
(of net assets) (as of Sept. 30, 1999)
Citigroup 2.17% $102,079,999
American Intl Group 1.86 87,372,187
Mobil 1.85 87,148,749
AT&T 1.74 81,997,499
Intl Business Machines 1.66 78,286,874
Chevron 1.63 76,768,750
Bank of America 1.56 73,229,062
MCI WorldCom 1.31 61,453,124
Texaco 1.22 57,443,750
Ameritech 1.19 56,101,563
Excludes U.S. Treasury and government agency holdings.
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) pie chart
The 10 holdings listed here
make up 16.19% of net assets
(This annual report is not part of the prospects.) ANNUAL REPORT - 1999
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Making the Most of the Fund
BUILD YOUR ASSETS SYSTEMATICALLY
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares fall or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Jan Feb Mar Apr May Jun
$15 $16 $18 $20
$10 $10 $12 $14
$ 5
Accumulated shares* Average market Your average
price per share cost per share
42.25 $15 $14.20
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Jan Feb Mar Apr May Jun
$15
$10 $10 $10
$ 5 $8 $5 $5 $8
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $6 $7
$ 5 $4 $4
Accumulated shares* Average market Your average
price per share cost per share
103.5 $6.50 $5.80
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$100 invested per month. Total invested: $600.
*Shares purchased is determined by dividing the amount invested per month by the
current share price.
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by the Fund
exceed losses
o you receive income when the Fund's stock dividends, interest and short-term
gains exceed its expenses.
All three make up your total return. You potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another fund.
AXP MUTUAL (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
How $10,000 has grown in AXP Mutual
$50,000
$40,000
X
$30,000 S&P 500 Index
X
$26,434
AXP Mutual
$20,000
X
Lipper Balanced
$10,000 Fund Index
$9,500
10/1/89 9/90 9/91 9/92 9/93 9/94 9/95 9/96 9/97 9/98 9/99
Average annual total return (as of Sept. 30, 1999)
1 year 5 years 10 years Since inception*
Class A +6.14% +11.76% +10.21% --%
Class B +7.04% --% --% +12.22%
Class Y +11.90% --% --% +13.51%
* Inception date was March 20, 1995.
Assumes: Holding period from 10/1/89 to 9/30/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $6,574. Also see "Past Performance"
in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Index (S&P 500
Index) and the Lipper Balanced Fund Index. In comparing AXP Mutual (Class A) to
the two indexes, you should take into account the fact that the Fund's
performance reflects the maximum sales charge of 5%, while such charges are not
reflected in the performance of the indexes.
Your investment and return values fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Average annual total return
figures reflect the impact of the applicable sales charge, up to a maximum of
5%. This was a period of widely fluctuating security prices. Past performance is
no guarantee of future results.
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P500 companies may be generally larger than those
in which the Fund invests.
Lipper Balanced Fund Index, an unmanaged index published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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The financial statements contained in Post-Effective Amendment #101 to
Registration Statement No. 2-11328 filed on or about November 24, 1999, are
incorporated herein by reference.
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Federal Income Tax Information
(Unaudited)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Class A
Income distributions taxable as dividend income, 34.61% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.21163
March 25, 1999 0.08440
June 24, 1999 0.08615
Sept. 23, 1999 0.08737
Total $0.46955
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $1.40077
Total distributions $1.87032
The distribution of $1.61240 per share, payable Dec. 22, 1998, consisted of
$0.10432 derived from net investment income, $0.10731 from net short-term
capital gains (a total of $0.21163 taxable as dividend income) and $1.40077 from
net long-term capital gains.
AXP MUTUAL (This annual report is not part of the prospectus.)
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Class B
Income distributions taxable as dividend income, 34.61% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.18679
March 25, 1999 0.05964
June 24, 1999 0.06120
Sept. 23, 1999 0.06237
Total $0.37000
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $1.40077
Total distributions $1.77077
The distribution of $1.58756 per share, payable Dec. 22, 1998, consisted of
$0.07948 derived from net investment income, $0.10731 from net short-term
capital gains (a total of $0.18679 taxable as dividend income) and $1.40077 from
net long-term capital gains.
Class Y
Income distributions taxable as dividend income, 34.61% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.21403
March 25, 1999 0.08709
June 24, 1999 0.08895
Sept. 23, 1999 0.09251
Total $0.48258
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $1.40077
Total distributions $1.88335
The distribution of $1.61480 per share, payable Dec. 22, 1998, consisted of
$0.10672 derived from net investment income, $0.10731 from net short-term
capital gains (a total of $0.21403 taxable as dividend income) and $1.40077 from
net long-term capital gains.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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S-6326P (11/99)
AXP Mutual
IDS Tower 10
Minneapolis, MN 55440-0010
AMERICAN EXPRESS Financial Advisors (logo)
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
