AXP(SM) Diversified
Equity Income
Fund
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express
Funds
(icon of) magnifying glass
AXP Diversified Equity Income Fund seeks to provide shareholders with a high
level of current income and, as a secondary goal, steady growth of capital.
(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.)
AMERICAN
EXPRESS(R)
<PAGE>
Dual-purpose Stocks
Some of the most successful investments over the years have been stocks that
reward investors in two ways -- through growth in the value of the share price
as well as through payment of regular dividend income. AXP Diversified Equity
Income sets its sights on stocks that can provide this benefit. The Fund takes
advantage of opportunities across various industries, among different types of
securities and in markets throughout the world to find investments that meet its
combination growth-and- dividend requirement.
Table of Contents
2000 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 3
From the Portfolio Manager 3
Fund Facts 5
The 10 Largest Holdings 6
Making the Most of the Fund 7
The Fund's Long-term Performance 8
Independent Auditors' Report (Fund) 10
Financial Statements (Fund) 11
Notes to Financial Statements (Fund) 14
Independent Auditors' Report
(Portfolio) 21
Financial Statements (Portfolio) 22
Notes to Financial Statements
(Portfolio) 24
Investments in Securities 27
Federal Income Tax Information 30
AXP DIVERSIFIED EQUITY INCOME FUND
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue, accompanied by a
modest rise in long-term interest rates. But no matter what transpires, this is
a great time to take a close look at your goals and investments. We encourage
you to:
o Consult a professional investment advisor 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 manager's 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.
On behalf of the Board,
Arne H. Carlson
(picture of) Keith Tufte
Keith Tufte
Portfolio manager
From the Portfolio Manager
In a highly volatile environment for the stock market, value stocks exhibited
comparatively steady, though unspectacular performance, during the past 12
months. For AXP Diversified Equity Income's Class A shares, the result was a
total return of 5.66% (excluding the sales charge) for the fiscal year --
October 1999 through September 2000.
The period got off to a strong start, as reports of still-tame inflation and
generally good corporate profits buoyed the stock market from October 1999
through early January 2000. While the Fund's value-stock orientation took a
ANNUAL REPORT - 2000
<PAGE>
back seat to the stunning performance of high-flying, technology-related growth
stocks, the Fund did register three straight months of gains.
MOOD SWINGS
From that point, the market found itself caught in a whirlwind of changing
outlooks regarding inflation, interest rates, the economy and corporate profits.
The result was substantial swings -- monthly, weekly and even daily -- for
stocks over the final nine months of the period. But after all thrashing about
was over, the market ended up at nearly the same level it was shortly after the
start of the year -- a lot of activity but essentially no progress.
For the Fund, the trip was less eventful because of its emphasis on value
stocks, which experienced less volatility (both up and down) than the overall
market. This was especially evident in comparison with technology-related growth
stocks, which were usually at the forefront of the market's surges and slumps.
Looking at the Fund's holdings, the biggest and most productive area of
investment was financial services, which includes banks and insurance companies.
Other substantial areas included energy, which, because of higher oil prices,
provided positive performance, as did utilities. Industrials and
telecommunications, on the other hand, turned out to be very poor performers.
The most notable change to the portfolio was an increase in financial services
stocks, which I made soon after becoming manager of the Fund in July. That
worked to the Fund's advantage late in the fiscal year.
As the new fiscal year begins, the stock market continues to be pushed and
pulled as investors try to sort out what will happen with economic growth,
interest rates and corporate profits. While only time will resolve those
questions, I am encouraged that value stocks showed improved performance during
the past several months. If the market continues to have trouble making headway,
I think that trend may well continue.
Keith Tufte
(Note to shareholders: On Nov. 6, 2000, Warren Spitz became portfolio manager of
AXP Diversified Equity Income Fund. His 17 years of investment experience
include positions as a research analyst and a portfolio manager.)
AXP DIVERSIFIED EQUITY INCOME FUND
<PAGE>
Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $8.96
Sept. 30, 1999 $9.40
Decrease $0.44
Distributions -- Oct. 1, 1999 - Sept. 30, 2000
From income $0.18
From capital gains $0.78
Total distributions $0.96
Total return** +5.66%
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $8.94
Sept. 30, 1999 $9.40
Decrease $0.46
Distributions -- Oct. 1, 1999 - Sept. 30, 2000
From income $0.13
From capital gains $0.78
Total distributions $0.91
Total return** +4.85%
Class C -- June 26, 2000* - Sept. 30, 2000
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $8.94
June 26, 2000* $8.66
Increase $0.28
Distributions -- June 26, 2000* - Sept. 30, 2000
From income $0.02
From capital gains $ --
Total distributions $0.02
Total return** +3.47%***
Class Y-- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $8.96
Sept. 30, 1999 $9.40
Decrease $0.44
Distributions-- Oct. 1, 1999 - Sept. 30, 2000
From income $0.19
From capital gains $0.78
Total distributions $0.97
Total return** +5.79%
* Inception date.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested. Returns do not include sales load. The
prospectus discusses the effect of sales charges, if any, on the various
classes.
*** The total return for Class C is not annualized.
ANNUAL REPORT - 2000
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Sept. 30, 2000)
Exxon Mobil 3.90% $85,846,447
Citigroup 3.89 85,689,062
American Intl Group 3.82 83,965,781
Chevron 2.82 62,061,999
Bank of America 2.74 60,199,824
Providian Financial 2.63 57,912,000
Wells Fargo 2.26 49,787,063
FleetBoston Financial 2.21 48,700,470
Morgan Stanley, Dean Witter, Discover & Co 2.20 48,461,875
Mellon Financial 2.17 47,664,225
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 28.64% of net assets
AXP DIVERSIFIED EQUITY INCOME FUND
<PAGE>
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 falls 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
-------------------------------------------------------------------------------
Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $8 $10
$ 5 $5 $5
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
$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.
ANNUAL REPORT - 2000
<PAGE>
The Fund's Long-term Performance
_______________________________________________________________________________
How $10,000 has grown in AXP Diversified Equity Income Fund
_______________________________________________________________________________
$70,000
$60,000
S&P 500 Index
$50,000
Lipper Equity Income
$40,000 Funds Index
Russell 1000(R)
$30,000 Value Index
$20,000
$36,950
AXP Diversified Equity
Income Fund
Class A
$9,425
(The printed version of this chart contains
a line graph with four lines corresponding
to the three Indexes and Fund noted above.)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00
Average Annual Total Returns (as of Sept. 30, 2000)
1 year 5 years 10 years Since inception
Class A -0.40% +11.36% --% +14.03%**
Class B +1.05% +11.71% --% +13.05%*
Class Y +5.79% +12.82% --% +14.14%*
* Inception date was March 20, 1995.
** Inception date was October 15, 1990.
Assumes: Holding period from 11/1/90 to 9/30/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $21,288. 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 three
widely cited unmanaged performance indexes, the Standard & Poor's 500 Index (S&P
500 Index), Russell 1000(R) Value Index and the Lipper Equity Income Funds
Index. In comparing AXP Diversified Equity Income Fund (Class A) to the three
indexes, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5.75%, while such charges are not reflected
in the performance of the indexes. Class C became effective June 26, 2000 and
therefore performance information is not presented.
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
5.75%. This was a period of widely fluctuating security prices. Past performance
is no guarantee of future results.
AXP DIVERSIFIED EQUITY INCOME FUND
<PAGE>
Standard & Poor's 500 Index (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&P 500 companies may
be generally larger than those in which the Fund invests.
Russell 1000(R) Value Index, an unmanaged index, measures the performance of
those Russell 1000 companies lower price-to-book ratios and lower forecasted
growth values.
Lipper Equity Income Funds Index, an unmanaged index published by Lipper Inc.,
includes the 30 largest funds that are generally similar to the Fund, although
some funds in the index may have somewhat different investment policies or
objectives.
ANNUAL REPORT - 2000
<PAGE>
The financial statements contained in Post-Effective Amendment #103 to
Registration Statement No. 2-11328 filed on or about November 27, 2000, are
incorporated by reference.
<PAGE>
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.
AXP Diversified Equity Income Fund
Fiscal year ended Sept. 30, 2000
Class A
Income distributions taxable as dividend income, 100% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.10069
March 23, 2000 0.02640
June 21, 2000 0.03213
Sept. 21, 2000 0.02397
Total $0.18319
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.77938
Total distributions $0.96257
The distribution of $0.88007 per share, payable Dec. 22, 1999, consisted of
$0.04774 derived from net investment income, $0.05295 from net short-term
capital gains (a total of $0.10069 taxable as dividend income) and $0.77938 from
net long-term capital gains.
Class B
Income distributions taxable as dividend income, 100% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.08227
March 23, 2000 0.01415
June 21, 2000 0.01531
Sept. 21, 2000 0.01970
Total $0.13143
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.77938
Total distributions $0.91081
The distribution of $0.86165 per share, payable Dec. 22, 1999, consisted of
$0.02932 derived from net investment income, $0.05295 from net short-term
capital gains (a total of $0.08227 taxable as dividend income) and $0.77938 from
net long-term capital gains.
AXP DIVERSIFIED EQUITY INCOME FUND
<PAGE>
Class C
Income distribution taxable as dividend income, 100% qualifying for deduction by
corporations.
Payable date Per share
Sept. 21, 2000 $0.02029
Total distributions $0.02029
Class Y
Income distributions taxable as dividend income, 100% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.10463
March 23, 2000 0.02912
June 21, 2000 0.03575
Sept. 21, 2000 0.02488
Total $0.19438
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.77938
Total distributions $0.97376
The distribution of $0.88401 per share, payable Dec. 22, 1999, consisted of
$0.05168 derived from net investment income, $0.05295 from net short-term
capital gains (a total of $0.10463 taxable as dividend income) and $0.77938 from
net long-term capital gains.
ANNUAL REPORT - 2000
<PAGE>
American
Express(R)
Funds
AXP Diversified Equity Income Fund
70100 AXP Financial Center
Minneapolis, MN 55474
AMERICAN
EXPRESS(R)
S-6475 T (11/00)
This report must be accompanied or preceded by the Fund's current prospectus.
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.
<PAGE>
AXP (SM)
Mutual
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
(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.)
AMERICAN
EXPRESS(R)
<PAGE>
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.
Table of Contents
2000 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 3
From the Portfolio Managers 3
Fund Facts 5
The 10 Largest Holdings 6
Making the Most of the Fund 7
The Fund's Long-term Performance 8
Independent Auditors' Report (Fund) 9
Financial Statements (Fund) 10
Notes to Financial Statements (Fund) 13
Independent Auditors' Report (Portfolio) 19
Financial Statements (Portfolio) 20
Notes to Financial Statements (Portfolio) 22
Investments in Securities 25
Federal Income Tax Information 30
AXP MUTUAL
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the market will do, 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. But no matter what transpires, 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.
Arne H. Carlson
(picture of) Michael L. Manns
Michael L. Manns
Portfolio Manager
(picture of) Brad Stone
Brad Stone
Portfolio Manager
From the Portfolio Managers
Value stocks and bonds struggled for much of the past 12 months, tempering the
performance of AXP Mutual. The Fund did finish in positive territory, though, as
its Class A shares generated a total return of 3.78% (excluding the sales
charge) for the October 1999 through September 2000 fiscal year.
The period got off to a strong start, as reports of still-benign inflation and
generally good corporate profits buoyed stock investors' spirits. But, after
rallying powerfully into early January, the stock market began meeting
resistance in the form of higher interest rates. By spring, concerns about the
strength of future corporate profits had also entered the picture, and stocks
were quickly driven into a sharp sell-off.
ANNUAL REPORT - 2000
<PAGE>
SUMMER RECOVERY
The market managed to gain back some ground during the summer, as investors took
solace in the anticipation that the Federal Reserve was approaching the end of
its interest-rate increases. But profit worries resurfaced in September, sending
stocks into another slump.
While the Fund's stock holdings roughly followed the pattern of the market,
their gains were generally less robust. The over-arching reason for the
difference was the Fund's emphasis on value stocks, which couldn't keep pace
with the high-flying, technology-related growth stocks that powered the market
in late 1999 and early 2000. In addition, the Fund had a substantial exposure to
industrial stocks, which suffered from rising commodity prices. On the other
hand, the Fund did get a good boost last summer from its financial services
stocks, which benefited from a leveling-off of long-term interest rates, and
energy stocks, which responded to higher oil prices.
The rise in interest rates early in the period made life difficult for the bond
portion of the portfolio, which included corporate, mortgage-backed and U.S.
Treasury issues. (Rising rates depress bond prices.) To mitigate the effect of
the rate rise, we maintained a relatively short duration in the portfolio.
(Duration, a function of the average maturity of the bond holdings, influences
how sensitive the bonds' prices are to interest-rate changes. Generally, the
longer the duration, the greater the sensitivity.) As the rising-rate trend
dissipated later in the period, our bond holdings enjoyed better performance.
Another part of our investment strategy was to use dollar rolls to enhance the
Fund's yield, as well as Treasury futures and options to manage fluctuations in
the Fund's net asset value. Bonds comprised between 30% to 35% of the portfolio
during the fiscal year, while stocks made up 60% to 65%.
Michael L. Manns
Brad Stone
AXP MUTUAL
<PAGE>
Fund Facts
Class A-- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $12.21
Sept. 30, 1999 $12.94
Decrease $ 0.73
Distributions -- Oct. 1, 1999 - Sept. 30, 2000
From income $ 0.40
From capital gains $ 0.82
Total distributions $ 1.22
Total return** +3.78%
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $12.12
Sept. 30, 1999 $12.86
Decrease $ 0.74
Distributions -- Oct. 1, 1999 - Sept. 30, 2000
From income $ 0.30
From capital gains $ 0.82
Total distributions $ 1.12
Total return** +2.93%
Class C -- June 26, 2000* - Sept. 30, 2000
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $12.16
June 26, 2000* $12.09
Increase $ 0.07
Distributions -- June 26, 2000* - Sept. 30, 2000
From income $ 0.06
From capital gains $ --
Total distributions $ 0.06
Total return** +1.05%***
Class Y-- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $12.21
Sept. 30, 1999 $12.95
Decrease $ 0.74
Distributions-- Oct. 1, 1999 - Sept. 30, 2000
From income $ 0.42
From capital gains $ 0.82
Total distributions $ 1.24
Total return** +3.87%
*Inception date.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested. Returns do not include sales load. The prospectus
discusses the effect of sales charges, if any, on the various classes.
***The total return for Class C is not annualized.
ANNUAL REPORT - 2000
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Sept. 30, 2000)
Cisco Systems 3.43% $137,705,099
Oracle 2.72 109,368,000
General Electric 2.63 105,700,806
Pfizer 2.57 103,145,043
Intel 2.35 94,172,399
Citigroup 2.26 90,752,881
EMC 1.96 78,804,375
Microsoft 1.93 77,523,675
Cardinal Health 1.87 74,932,919
Corning 1.81 72,765,000
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 23.53% of net assets
(icon of) pie chart
AXP MUTUAL
<PAGE>
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 falls 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
-------------------------------------------------------------------------------
Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $8 $10
$ 5 $5 $5
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
$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.How
dollar-cost averaging works Accumulated
ANNUAL REPORT - 2000
<PAGE>
The Fund's Long-term Performance
_______________________________________________________________________________
How $10,000 has grown in AXP Mutual
_______________________________________________________________________________
$70,000
$60,000
$50,000 S&P 500 Index
Lipper Balanced
$40,000 Funds Index
$30,000
$30,075
AXP Mutual Class A
$20,000
$9,425
(The printed version of this chart contains
a line graph with four lines corresponding
to the three Indexes and Fund noted above.)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00
Average Annual Total Returns (as of Sept. 30, 2000)
1 year 5 years 10 years (A) Since inception (B&Y)
Class A -2.18% +8.97% +11.64% --%
Class B -0.84% +9.30% --% +10.60%*
Class Y +3.87% +10.41% --% +11.70%*
* Inception date was March 20, 1995.
Assumes: Holding period from 10/1/90 to 9/30/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $20,151. 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 Funds 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 5.75%, while such charges are
not reflected in the performance of the indexes. Class C became effective June
26, 2000 and therefore performance information is not presented.
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 5.75%. This was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
Standard & Poor's 500 Index (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 Funds Index, an unmanaged index published by Lipper Inc.,
includes 10 funds that are generally similar to the Fund, although some funds in
the index may have somewhat different investment policies or objectives.
AXP MUTUAL
<PAGE>
The financial statements contained in Post-Effective Amendment #103 to
Registration Statement No. 2-11328 filed on or about November 27, 2000, are
incorporated 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, 37.08% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.18025
March 24, 2000 0.07529
June 22, 2000 0.08425
Sept. 22, 2000 0.06033
Total $0.40012
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.82041
Total distributions $1.22053
The distribution of $1.00066 per share, payable Dec. 22, 1999, consisted of
$0.09356 derived from net investment income, $0.08669 from net short-term
capital gains (a total of $0.18025 taxable as dividend income) and $0.82041 from
net long-term capital gains.
Class B
Income distributions taxable as dividend income, 37.08% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.14737
March 24, 2000 0.05090
June 22, 2000 0.06060
Sept. 22, 2000 0.04453
Total $0.30340
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.82041
Total distributions $1.12381
The distribution of $0.96778 per share, payable Dec. 22, 1999, consisted of
$0.06068 derived from net investment income, $0.08669 from net short-term
capital gains (a total of $0.14737 taxable as dividend income) and $0.82041 from
net long-term capital gains.
AXP MUTUAL
<PAGE>
Class C
Income distributions taxable as dividend income, 37.08% qualifying for deduction
by corporations.
Payable date Per share
Sept. 22, 2000 0.05755
Total distributions $0.05755
Class Y
Income distributions taxable as dividend income, 37.08% qualifying for deduction
by corporations.
Payable dat Per share
Dec. 22, 1999 $0.18572
March 24, 2000 0.08033
June 22, 2000 0.08928
Sept. 22, 2000 0.06555
Total $0.42088
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.82041
Total distributions $1.24129
The distribution of $1.00613 per share, payable Dec. 22, 1999, consisted of
$0.09903 derived from net investment income, $0.08669 from net short-term
capital gains (a total of $0.18572 taxable as dividend income) and $0.82041 from
net long-term capital gains.
ANNUAL REPORT - 2000
<PAGE>
American
Express(R)
Funds
AXP Mutual
70100 AXP Financial Center
Minneapolis, MN 55474
AMERICAN
EXPRESS(R)
S-6326 U (11/00)
This report must be accompanied or preceded by the Fund's current
prospectus. 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.
<PAGE>
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 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
