AXP(SM)
Mutual
2000 SEMIANNUAL REPORT
(icon of) magnifying glass
American Express (R) Funds
AXP Mutual seeks to provide shareholders with a balance of growth of capital and
current income.
<PAGE>
A Beneficial Balance
A balanced portfolio isone of the building blocks of investment planning. And
balance is what AXP 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
Chariman 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 this year,
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 managers' letter that follows provides a review of the Fund's
investment strategies and performance. The semiannual report contains other
valuable information as well. The Fund's prospectus describes its investment
objectives and how it intends to achieve those objectives. As experienced
investors know, information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
Sincerely,
Arne H. Carlson
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
(picture of) Brad Stone
Brad Stone
Portfolio manager
From the Portfolio Managers
Value stocks and bonds struggled for much of the past six months, tempering the
performance of AXP Mutual. Still, the Fund's Class A shares generated a positive
total return of 6.01% (excluding the sales charge) for the first half of the
fiscal year -- October 1999 through March 2000.
The period got off to a good start, as reports of still-benign inflation and
generally good corporate profits buoyed investors' spirits. The stock market
responded with a solid advance in the fall that, supported by fading concerns
about the Y2K computer bug and increasing excitement about the Internet, soon
turned into a roaring rally. The positive momentum continued through 1999 and
into the early days of January.
A STRONG FINISH
By that time, fear of potentially higher inflation and higher interest rates had
resurfaced. Stocks reacted by retreating over the next several weeks. But with
the characteristic resilience they've shown in recent years, stocks soon righted
themselves and rebounded sharply in March.
While the Fund's stock holdings roughly followed the pattern of the market,
their gains were 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
Internet-related growth stocks that powered the broad market. In addition, the
Fund had a substantial exposure to industrial stocks, which suffered from rising
commodity prices, and financial services stocks, which weakened under the weight
of rising interest rates. The Fund's energy and technology holdings, on the
other hand, performed well overall.
The rising-rate trend also made life difficult at times 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 among bonds. (Duration is a
measure of how sensitive the bonds' prices are to interest-rate changes.
Generally, the longer the duration, the greater the sensitivity.)
We maintained an asset mix of 60% to 65% stocks, 30% to 35% bonds over the
period. The only change of note consisted of lowering the exposure to financial
services and industrial stocks.
As we look toward the second half of the fiscal year, we're encouraged by the
healthy gain of the Fund's stock holdings in March. While it's too early to draw
any firm conclusions, the upturn could be an indication of a "broadening out" in
the market -- that is, better performance from a wider range of stocks,
especially value issues. On the bond side, the possibility of higher interest
rates probably will hang over the market for a time yet.
Kurt Winters
Brad Stone
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $12.62
Sept. 30, 1999 $12.94
Decrease $ 0.32
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $0.28
From capital gains $0.80
Total distributions $1.08
Total return* +6.01%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $12.53
Sept. 30, 1999 $12.86
Decrease $ 0.33
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $0.22
From capital gains $0.80
Total distributions $1.02
Total return* +5.50%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $12.62
Sept. 30, 1999 $12.95
Decrease $ 0.33
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $0.29
From capital gains $0.80
Total distributions $1.09
Total return* +6.01%**
*Returns do not include sales load. The prospectus discusses the effect of sales
charges, if any, on the various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of March 31, 2000)
Citigroup 3.32% $150,357,187
American Intl Group 2.56 116,070,000
Kansas City Southern Inds 2.01 91,186,562
Exxon Mobil 1.96 88,856,349
AT&T 1.84 83,531,249
Chevron 1.76 79,958,437
Bank of America 1.52 68,955,312
MCI WorldCom 1.28 58,113,281
Wells Fargo 1.18 53,423,437
Motorola 1.18 53,390,625
Excludes U.S. Treasury and government agency holdings.
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
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The 10 holdings listed here
make up 18.61% of net assets
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<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Mutual
March 31, 2000 (Unaudited)
Assets
<S> <C>
Investment in Balanced Portfolio (Note 1) $4,533,041,330
--------------
Liabilities
Accrued distribution fee 32,912
Accrued service fee 2,982
Accrued transfer agency fee 15,431
Accrued administrative services fee 3,914
Other accrued expenses 113,559
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Total liabilities 168,798
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Net assets applicable to outstanding capital stock $4,532,872,532
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 3,594,417
Additional paid-in capital 4,249,431,173
Undistributed net investment income 4,562,799
Accumulated net realized gain (loss) (12,899,676)
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 288,183,819
-----------
Total -- representing net assets applicable to outstanding capital stock $4,532,872,532
==============
Net assets applicable to outstanding shares: Class A $2,983,221,920
Class B $ 459,998,844
Class Y $1,089,651,768
Net asset value per share of outstanding capital stock: Class A shares 236,384,063 $ 12.62
Class B shares 36,722,360 $ 12.53
Class Y shares 86,335,290 $ 12.62
---------- --------------
See accompanying notes to financial statements.
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<CAPTION>
Statement of operations
AXP Mutual
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 24,795,595
Interest 58,174,656
Less foreign taxes withheld (21,450)
-------
Total income 82,948,801
----------
Expenses (Note 2):
Expenses allocated from Balanced Portfolio 11,260,290
Distribution fee
Class A 3,834,829
Class B 2,341,006
Transfer agency fee 2,751,588
Incremental transfer agency fee
Class A 154,213
Class B 59,213
Service fee-- Class Y 563,285
Administrative services fees and expenses 746,039
Compensation of board members 6,292
Printing and postage 48,494
Registration fees 25,095
Audit fees 5,125
Other 6,676
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Total expenses 21,802,145
Earnings credits on cash balances (Note 2) (126,804)
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Total net expenses 21,675,341
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Investment income (loss) -- net 61,273,460
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 28,074,560
Financial futures contracts 8,536,820
Foreign currency transactions 58,647
Options contracts written 1,591,275
---------
Net realized gain (loss) on investments 38,261,302
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 165,718,529
-----------
Net gain (loss) on investments and foreign currencies 203,979,831
-----------
Net increase (decrease) in net assets resulting from operations $265,253,291
============
See accompanying notes to financial statements.
</TABLE>
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<CAPTION>
Statements of changes in net assets
AXP Mutual
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 61,273,460 $ 132,955,538
Net realized gain (loss) on investments 38,261,302 275,155,428
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 165,718,529 151,627,239
----------- -----------
Net increase (decrease) in net assets resulting from operations 265,253,291 559,738,205
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (39,617,585) (85,884,466)
Class B (4,062,909) (8,498,742)
Class Y (15,752,250) (36,023,973)
Net realized gain
Class A (211,728,080) (339,669,342)
Class B (32,551,037) (42,241,506)
Class Y (80,724,160) (149,459,194)
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Total distributions (384,436,021) (661,777,223)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 91,943,076 232,550,724
Class B shares 54,919,002 140,100,650
Class Y shares 167,022,292 256,437,748
Reinvestment of distributions at net asset value
Class A shares 224,352,785 377,479,648
Class B shares 35,936,901 49,757,221
Class Y shares 96,476,410 185,483,167
Payments for redemptions
Class A shares (358,796,166) (493,616,208)
Class B shares (Note 2) (77,654,708) (78,008,197)
Class Y shares (287,146,861) (612,808,155)
------------ ------------
Increase (decrease) in net assets from capital share transactions (52,947,269) 57,376,598
----------- ----------
Total increase (decrease) in net assets (172,129,999) (44,662,420)
Net assets at beginning of period 4,705,002,531 4,749,664,951
------------- -------------
Net assets at end of period $4,532,872,532 $4,705,002,531
============== ==============
Undistributed net investment income $ 4,562,799 $ 2,722,083
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See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Mutual
(Unaudited as to March 31, 2000)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Investment Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP 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, incremental transfer agency fee and service fee (class
specific expenses) differ 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. The Portfolio invests primarily in a
combination of common stocks and senior securities (debt obligations 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, 2000 was 99.97%.
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 substantially 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 has 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. A minor portion of additional administrative service expenses
paid by the Fund are consultants' fees and fund office expenses. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19
o Class B $20
o Class Y $17
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a distribution fee at an annual rate up
to 0.25% of the Fund's average daily net assets attributable to Class A shares
and up to 1.00% for Class B shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$1,605,047 for Class A and $291,033 for Class B for the six months ended March
31, 2000.
During the six months ended March 31, 2000, the Fund's transfer agency fees were
reduced by $126,804 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, 2000
Class A Class B Class Y
Sold 7,247,065 4,344,268 12,914,482
Issued for reinvested distributions 18,010,569 2,908,687 7,753,173
Redeemed (28,467,037) (6,246,664) (22,754,549)
----------- ---------- -----------
Net increase (decrease) (3,209,403) 1,006,291 (2,086,894)
Year ended Sept. 30, 1999
Class A Class B Class Y
Sold 17,205,572 10,426,243 18,943,044
Issued for reinvested distributions 29,201,918 3,876,603 14,350,544
Redeemed (36,422,930) (5,801,641) (45,585,649)
----------- ---------- -----------
Net increase (decrease) 9,984,560 8,501,205 (12,292,061)
4. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express mutual funds, permits
borrowings up to $200 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or
the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to
90 days after such loan is executed. The Fund also pays a commitment fee equal
to its pro rata share of the amount of the credit facility at a rate of 0.05%
per annum. The Fund had no borrowings outstanding during the six months ended
March 31, 2000.
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<CAPTION>
5. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluting the
Fund's results.
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class A
2000b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.94 $13.29 $15.32 $13.51 $12.69
Income from investment operations:
Net investment income (loss) .17 .37 .48 .57 .54
Net gains (losses) (both realized and unrealized) .59 1.15 (.36) 2.61 .93
Total from investment operations .76 1.52 .12 3.18 1.47
Less distributions:
Dividends from net investment income (.17) (.36) (.48) (.53) (.52)
Distributions from realized gains (.91) (1.51) (1.67) (.84) (.13)
Total distributions (1.08) (1.87) (2.15) (1.37) (.65)
Net asset value, end of period $12.62 $12.94 $13.29 $15.32 $13.51
Ratios/supplemental data
Net assets, end of period (in millions) $2,983 $3,101 $3,051 $3,251 $2,770
Ratio of expenses to average daily net assetsc .90%d .83% .80% .83% .87%
Ratio of net investment income (loss)
to average daily net assets 2.66%d 2.68% 3.35% 4.00% 4.01%
Portfolio turnover rate
(excluding short-term securities) 58% 134% 98% 49% 45%
Total returne 6.01% 11.72% .70% 24.88% 11.84%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 2000 (Unaudited).
c Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
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<CAPTION>
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class B Class Y
2000b 1999 1998 1997 1996 2000b 1999 1998 1997 1996
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $12.86 $13.21 $15.25 $13.47 $12.66 $12.95 $13.29 $15.32 $13.51 $12.69
Income from investment operations:
Net investment
income (loss) .12 .27 .38 .46 .45 .19 .38 .49 .59 .56
Net gains (losses) (both
realized and unrealized) .57 1.15 (.37) 2.59 .93 .57 1.16 (.36) 2.61 .93
Total from investment
operations .69 1.42 .01 3.05 1.38 .76 1.54 .13 3.20 1.49
Less distributions:
Dividends from net
investment income (.11) (.26) (.38) (.43) (.44) (.18) (.37) (.49) (.55) (.54)
Distributions from
realized gains (.91) (1.51) (1.67) (.84) (.13) (.91) (1.51) (1.67) (.84) (.13)
Total distributions (1.02) (1.77) (2.05) (1.27) (.57) (1.09) (1.88) (2.16) (1.39) (.67)
Net asset value,
end of period $12.53 $12.86 $13.21 $15.25 $13.47 $12.62 $12.95 $13.29 $15.32 $13.51
Ratios/supplemental data
Net assets, end of period
(in millions) $460 $459 $360 $264 $133 $1,090 $1,145 $1,339 $1,337 $1,114
Ratio of expenses to
average daily net assetsc 1.66%d 1.53% 1.56% 1.59% 1.64% .74%d .73% .73% .70% .70%
Ratio of net investment
income (loss) to average
daily net assets 1.90%d 1.98% 2.58% 3.28% 3.32% 2.82%d 2.79% 3.42% 4.13% 4.18%
Portfolio turnover rate
(excluding short-term
securities) 58% 134% 98% 49% 45% 58% 134% 98% 49% 45%
Total returne 5.50% 10.93% (.07%) 23.93% 10.99% 6.01% 11.90% .77% 25.04% 12.02%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 2000 (Unaudited).
c Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
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<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Balanced Portfolio
March 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $4,752,343,833) $5,053,342,729
Cash in bank on demand deposit 818,788
Dividends and accrued interest receivable 20,778,898
Receivable for investment securities sold 60,588,937
U.S. government securities held as collateral (Note 6) 86,610,277
----------
Total assets 5,222,139,629
-------------
Liabilities
Payable for investment securities purchased 380,010,133
Payable upon return of securities loaned (Note 6) 307,795,277
Accrued investment management services fee 60,450
Other accrued expenses 40,215
------
Total liabilities 687,906,075
-----------
Net assets $4,534,233,554
==============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
Balanced Portfolio
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 24,802,126
Interest 58,214,532
Less foreign taxes withheld (21,455)
-------
Total income 82,995,203
----------
Expenses (Note 2):
Investment management services fee 11,054,259
Compensation of board members 8,965
Custodian fees 153,999
Audit fees 15,375
Other 32,436
------
Total expenses 11,265,034
Earnings credits on cash balances (Note 2) (1,777)
------
Total net expenses 11,263,257
----------
Investment income (loss) -- net 71,731,946
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 28,078,635
Financial futures contracts 8,539,065
Foreign currency transactions 58,659
Options contracts written (Note 4) 1,591,694
---------
Net realized gain (loss) on investments 38,268,053
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 165,762,466
-----------
Net gain (loss) on investments and foreign currencies 204,030,519
-----------
Net increase (decrease) in net assets resulting from operations $275,762,465
============
See accompanying notes to financial statements.
</TABLE>
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<CAPTION>
Statements of changes in net assets
Balanced Portfolio
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 71,731,946 $ 152,546,500
Net realized gain (loss) on investments 38,268,053 275,222,886
Net change in unrealized appreciation (depreciation) on investments
and on translations of assets and liabilities in foreign currencies 165,762,466 151,665,578
----------- -----------
Net increase (decrease) in net assets resulting from operations 275,762,465 579,434,964
Net contributions (withdrawals) from partners (447,942,347) (624,252,082)
------------ ------------
Total increase (decrease) in net assets (172,179,882) (44,817,118)
Net assets at beginning of period 4,706,413,436 4,751,230,554
------------- -------------
Net assets at end of period $4,534,233,554 $4,706,413,436
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Balanced Portfolio
(Unaudited as to March 31, 2000)
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
primarily in a combination of common stocks and senior securities (preferred
stocks and debt obligations). 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. 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 debt securities
at least equal to the amount of its commitment. As of March 31, 2000, the
Portfolio had entered into outstanding when-issued or forward-commitments of
$376,972,929.
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 an Investment Management Services
Agreement with AEFC to manage 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 fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of AXP Mutual to the Lipper Balanced Fund Index.
The maximum adjustment is 0.08% of the Portfolio's average daily net assets
after deducting 1% from the performance difference. If the performance
difference is less than 1%, the adjustment will be zero. The adjustment
decreased the fee by $328,786 for the six months ended March 31, 2000.
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.
During the six months ended March 31, 2000, the Portfolio's custodian fees were
reduced by $1,777 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
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 $2,734,044,986 and $3,115,145,573, respectively, for the
six months ended March 31, 2000. For the same period, the portfolio turnover
rate was 58%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $35,141 for the
six months ended March 31, 2000.
4. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended March 31, 2000
Puts Calls
Contracts Premium Contracts Premium
Balance Sept. 30, 1999 -- $-- 12,500 $1,822,960
Opened 260 161,460 260 206,149
Closed -- -- (12,500) (1,822,960)
Exercised (260) (161,460) -- --
Expired -- -- (260) (206,149)
--- ---- ---- --------
Balance March 31, 2000 -- $-- -- $--
See "Summary of significant accounting policies."
5. INTEREST RATE FUTURES CONTRACTS
As of March 31, 2000, investments in securities included securities valued at
$31,531,839 that were pledged as collateral to cover initial margin deposits on
700 open purchase contracts and 8,467 open sale contracts. The market value of
the open purchase contracts as of March 31, 2000 was $64,356,250 with a net
unrealized gain of $423,762. The market value of the open sale contracts as of
March 31, 2000 was $830,693,920 with a net unrealized loss of $14,416,808. See
"Summary of significant accounting policies".
6. LENDING OF PORTFOLIO SECURITIES
As of March 31, 2000, securities valued at $299,071,581 were on loan to brokers.
For collateral, the Portfolio received $221,185,000 in cash and U.S. government
securities valued at $86,610,277. Income from securities lending amounted to
$739,905 for the six months ended March 31, 2000. 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, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (64.8%)
Issuer Shares Value(a)
Aerospace & defense (1.6%)
<S> <C> <C>
Honeywell Intl 800,000 $42,150,000
Rockwell Intl 675,000 28,223,438
Total 70,373,438
Airlines (0.4%)
AMR 625,000(b) 19,921,875
Automotive & related (2.3%)
Delphi Automotive Systems 1,508,916 24,142,656
Ford Motor 515,000 23,657,813
General Motors 275,000 22,773,438
TRW 577,000 33,754,499
Total 104,328,406
Banks and savings & loans (6.5%)
Bank of America 1,315,000 68,955,312
Bank of New York 1,105,000 45,926,563
Chase Manhattan 480,000 41,850,000
FleetBoston Financial 1,035,000 37,777,500
Mellon Financial 1,110,000 32,745,000
SLM Holding 400,000 13,325,000
Wells Fargo 1,305,000 53,423,437
Total 294,002,812
Building materials & construction (1.3%)
Fluor 770,000 23,870,000
Martin Marietta Materials 710,450 33,746,375
Total 57,616,375
Chemicals (1.4%)
Air Products & Chemicals 815,000 23,176,563
Dow Chemical 120,000 13,680,000
Du Pont (EI) de Nemours 535,000 28,288,125
Total 65,144,688
Communications equipment & services (1.2%)
Motorola 375,000 53,390,625
Computers & office equipment (3.7%)
BMC Software 310,000(b) 15,306,250
Compaq Computer 635,000 16,906,875
Electronic Data Systems 243,000 15,597,563
EQUANT 216,800(b,c) 18,441,550
First Data 330,000 14,602,500
Hewlett-Packard 115,000 15,244,688
NOVA 565,000(b) 16,455,625
SABRE Holdings Cl A 246,158(b) 9,092,443
Solectron 720,000(b) 28,844,999
Unisys 630,000(b) 16,065,000
Total 166,557,493
Electronics (1.0%)
Natl Semiconductor 254,300(b) 15,416,938
Texas Instruments 175,000 28,000,000
Total 43,416,938
Energy (7.1%)
Chevron 865,000 79,958,437
Conoco Cl B 1,500,000 38,437,500
ENI 5,520,000(b,c,f) 27,631,092
Exxon Mobil 1,141,929 88,856,349
Texaco 910,000 48,798,750
Tosco 1,185,000 36,068,438
Total 319,750,566
Energy equipment & services (0.4%)
Halliburton 470,000 19,270,000
Financial services (8.3%)
Capital One Financial 865,000 41,465,938
Citigroup 2,535,000 150,357,187
Kansas City Southern Inds 1,061,080(b) 91,186,562
Morgan Stanley, Dean Witter, Discover & Co 625,000 50,976,562
Providian Financial 535,000 46,344,375
Total 380,330,624
Food (0.9%)
Bestfoods 325,000 15,214,063
General Mills 380,000 13,751,250
Sara Lee 655,000 11,790,000
Total 40,755,313
Health care (2.4%)
American Home Products 455,000 24,399,375
Baxter Intl 269,000 16,039,125
Guidant 260,000(b) 15,291,250
Mylan Laboratories 510,000 14,025,000
Pharmacia & Upjohn 320,000 18,960,000
Warner-Lambert 205,000 19,987,500
Total 108,702,250
Industrial equipment & services (1.7%)
Illinois Tool Works 655,000 36,188,750
Parker-Hannifin 1,005,000 41,519,063
Total 77,707,813
Insurance (3.7%)
American Intl Group 1,060,000 116,070,000
Aon 171,800 5,540,550
Marsh & McLennan 410,000 45,228,125
Total 166,838,675
Leisure time & entertainment (1.5%)
Disney (Walt) 985,000 40,754,375
Viacom Cl B 511,700(b) 26,992,175
Total 67,746,550
Media (0.8%)
Adelphia Communications Cl A 127,000(b) 6,223,000
MediaOne Group 375,000(b) 30,375,000
Total 36,598,000
Multi-industry conglomerates (0.8%)
Minnesota Mining & Mfg 210,000 18,598,125
Tyco Intl 340,000(c) 16,957,500
Total 35,555,625
Paper & packaging (0.7%)
Intl Paper 770,000 32,917,500
Real estate investment trust (0.5%)
Pinnacle Holdings 400,000(b) 22,100,000
Retail (4.6%)
Costco Wholesale 732,100(b) 38,481,006
Gap 925,000 46,076,562
Safeway 850,000(b) 38,462,500
Target 610,250 45,616,188
TJX Companies 1,900,000 42,156,250
Total 210,792,506
Transportation (0.5%)
Burlington Northern Santa Fe 1,110,000 24,558,750
Utilities -- electric (2.4%)
Carolina Power & Light 23 746
CMS Energy 85,000 1,540,625
Consolidated Edison 500,000 14,500,000
Dominion Resources 375,000 14,414,063
Duke Energy 556,800 29,231,999
Edison Intl 335,000 5,548,438
FPL Group 170,000 7,830,625
New Century Energies 255,000 7,665,938
Pinnacle West Capital 250,000 7,046,875
Reliant Energy 675,000 15,820,312
Texas Utilities 225,000 6,679,688
Total 110,279,309
Utilities -- gas (0.6%)
Coastal 595,000 27,370,000
Utilities -- telephone (8.4%)
ALLTEL 132,000 8,324,250
AT&T 1,485,000 83,531,249
AT&T - Liberty Media Group Cl A 560,000(b) 33,180,000
Bell Atlantic 679,800 41,552,775
BellSouth 825,000 38,775,000
Cable & Wireless 335,000(c) 6,282,907
Deutsche Telekom 100,000(c) 8,058,781
GTE 442,000 31,382,000
Intermedia Communications 6,866(b) 331,714
MCI WorldCom 1,282,500(b) 58,113,281
SBC Communications 917,360 38,529,120
Telefonica de Espana ADR 96,000(b,c,f) 7,164,000
U S WEST Communications Group 345,000 25,055,625
Total 380,280,702
Total common stocks
(Cost: $2,611,311,609) $2,936,306,833
Preferred stocks (0.7%)
Issuer Shares Value(a)
Cox Communications
7.00% Cm Cv PRIDES 225,500(k) $14,319,250
Global Crossing
6.38% Cv 25,100(c,d) 2,704,525
Global TeleSystems Group
7.25% Cm Cv 170,500 6,905,250
Intermedia Communications
7.00% Cm Cv Series F 203,000 6,724,375
Total preferred stocks
(Cost: $30,661,176) $30,653,400
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (39.8%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (20.9%)
Collateralized Mtge Obligation Trust
<S> <C> <C> <C>
12-20-14 9.95% $1,664,842 $1,722,095
Federal Home Loan Mtge Corp
10-01-03 7.00 2,104,667 2,078,359
07-01-07 6.50 149,943 148,521
07-01-08 6.75 900,782 890,505
06-01-09 5.50 2,881,588 2,707,763
01-01-11 6.50 10,540,273 10,213,200
03-01-13 5.50 12,243,435 11,303,566
11-15-13 5.50 10,500,000 9,174,060
11-01-14 7.50 50,004,985 49,997,722
04-01-15 7.50 30,000,000(g) 29,962,500
08-01-24 8.00 2,838,732 2,851,166
09-01-28 6.00 26,377,768 24,061,536
04-01-30 7.00 30,000,000(g) 28,846,875
Trust Series Z
10-15-23 6.50 30,745(j) 27,544
Federal Natl Mtge Assn
10-01-02 7.50 240,379 240,208
08-15-04 6.50 20,000,000 19,554,520
02-15-05 7.13 80,000,000(f) 80,092,560
01-01-09 5.50 4,684,267 4,363,084
09-15-09 6.63 110,000,000 105,785,350
08-01-13 6.00 25,528,630 24,018,469
12-01-13 5.50 873,221 805,159
01-01-14 5.50 6,362,363 5,866,458
02-01-14 5.50 1,743,767 1,607,852
02-01-14 7.50 875,662 870,461
04-01-14 5.50 1,048,917 967,161
06-01-14 5.50 33,382,520 30,774,680
07-01-14 5.50 8,542,274 7,866,341
09-01-14 5.50 950,096 874,917
04-01-15 7.50 80,000,000(g) 78,600,000
05-01-23 6.50 3,911,333 3,702,311
09-01-23 6.50 6,115,409 5,788,601
01-01-24 6.50 11,224,179 10,615,820
06-01-24 9.00 2,881,200 2,979,924
08-01-25 7.50 9,076,910 8,929,411
04-01-28 6.00 11,573,348 10,549,801
06-01-28 6.00 8,928,784(e) 8,139,122
06-01-28 6.00 11,274,146 10,277,061
06-01-28 7.00 21,557 20,742
07-01-28 6.00 12,953,049 11,807,481
12-01-28 6.50 11,055,240 10,374,679
09-01-29 6.50 88,139,296 82,713,441
04-01-30 7.00 30,000,000(g) 28,828,125
04-01-30 8.00 210,000,000(g) 210,393,750
04-01-30 8.50 30,000(g) 30,581
Total 941,423,482
U.S. government obligations (9.7%)
Resolution Funding Corp
10-15-19 8.13 15,000,000 17,154,060
U.S. Treasury
08-15-04 6.00 74,600,000(f) 73,634,676
11-15-05 5.88 1,800,000 1,761,650
05-15-06 6.88 25,000,000(f) 25,679,713
05-15-09 5.50 30,000,000(f) 28,528,140
11-15-15 9.88 24,000,000(f) 32,592,331
05-15-17 8.75 6,400,000 8,085,440
08-15-19 8.13 28,500,000(e) 34,633,345
11-15-21 8.00 15,600,000 18,981,160
02-15-23 7.13 12,700,000 14,205,204
08-15-29 6.13 20,000,000 20,410,000
05-15-30 6.25 85,000,000(f) 89,913,849
Zero Coupon
05-15-13 6.14 74,000,000(i) 32,761,946
11-15-13 6.16 90,000,000(i) 38,678,310
Total 437,019,824
Automotive & related (0.7%)
Ford Motor Credit
02-15-07 7.75 20,000,000 20,134,340
Lear
Company Guaranty Series B
05-15-09 8.11 15,000,000 13,697,250
Total 33,831,590
Banks and savings & loans (0.9%)
CIT Holdings LLC
(U.S. Dollar) Company Guaranty Series B
02-16-05 6.88 10,000,000(c) 9,717,030
Mellon Financial
Sub Nts
02-15-10 6.38 16,000,000 15,034,598
NationsBank
Sub Nts
05-15-10 6.60 11,825,000 11,078,766
Union Planters Capital
Company Guaranty
12-15-26 8.20 4,000,000 3,715,323
Total 39,545,717
Building materials & construction (0.2%)
Owens Corning
08-01-18 7.50 12,500,000 10,764,375
Commercial finance (0.1%)
Yale University
04-15-96 7.38 4,000,000 3,828,440
Communications equipment & services (0.4%)
KPNQwest
(U.S. Dollar) Sr Nts
06-01-09 8.13 15,000,000(c) 14,381,250
NTL
Cv Sub Nts
12-15-09 5.75 2,800,000(d) 2,866,500
Total 17,247,750
Electronics (0.2%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-04 8.25 10,000,000(c,d) 9,228,320
Energy (0.4%)
Occidental Petroleum
Medium-term Nts Series B
04-10-00 6.25 6,500,000 6,499,072
USX
03-01-08 6.85 10,000,000 9,542,302
Total 16,041,374
Financial services (0.7%)
AT&T Capital
Company Guaranty Medium-term Nts Series F
05-15-05 6.60 9,000,000 8,624,214
Bat-CRAVE-800
08-12-00 6.68 7,000,000(d) 6,992,692
Golden State Holdings
Sr Nts
08-01-03 7.00 10,000,000 9,369,705
Standard Credit Card Trust
Series A
10-07-04 5.95 8,550,000 8,219,457
Total 33,206,068
Health care services (0.1%)
Kaiser Permanente
07-15-05 9.55 6,000,000 6,457,200
Insurance (0.9%)
Nationwide CSN Trust
02-15-25 9.88 15,500,000(d) 16,706,102
New York Life Insurance
12-15-23 7.50 11,500,000(d) 10,319,157
Principal Mutual
03-01-44 8.00 7,150,000(d) 6,794,895
SAFECO Capital
Company Guaranty
07-15-37 8.07 10,000,000 8,695,330
Total 42,515,484
Media (0.5%)
Cox Communications
08-15-06 7.75 8,200,000 8,163,182
Time Warner Entertainment
Sr Nts
07-15-33 8.38 13,522,000 14,188,156
Total 22,351,338
Miscellaneous (0.1%)
DTE Burns Harbor LLC
Sr Nts
01-30-03 6.57 5,361,730(d) 5,185,115
Paper & packaging (0.2%)
Intl Paper
11-15-12 5.13 13,400,000 10,288,654
Restaurants & lodging (0.2%)
MGM Grand
02-01-05 6.95 10,000,000 9,298,622
Retail (0.2%)
Wal-Mart CRAVE Trust
07-17-06 7.00 10,946,773(d) 10,600,855
Utilities -- electric (1.5%)
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 5,400,000 5,352,325
Cleveland Electric Illuminating
07-01-00 7.19 5,000,000 4,998,236
07-01-04 7.67 10,000,000 9,851,960
CMS Energy
Sr Nts
07-01-03 8.38 20,000,000 19,336,279
Pacific Gas & Electric
1st Mtge Series 1992D
11-01-22 8.25 4,600,000 4,523,010
PSI Energy
1st Mtge Series BBB
07-15-09 8.00 8,085,000 8,172,926
Public Service Electric & Gas
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 13,000,000(h) 12,174,214
1st Mtge
05-01-23 6.38 5,000,000 4,822,450
Total 69,231,400
Utilities -- gas (0.2%)
Ras Laffan
(U.S. Dollar)
03-15-14 8.29 10,000,000(c,d) 9,690,420
Utilities -- telephone (1.7%)
Bell Telephone of Pennsylvania
03-15-33 7.38 5,000,000 4,671,216
BellSouth Capital Funding
02-15-10 7.75 11,500,000 11,677,099
GTE
11-01-21 8.75 5,000,000 5,553,362
Qwest Communications Intl
Sr Nts Series B
11-01-08 7.25 21,000,000 20,121,464
SBC Communications
10-15-34 6.63 6,100,000 5,252,725
07-15-43 7.38 7,500,000 6,983,339
U S WEST Capital Funding
Company Guaranty
07-15-28 6.88 9,000,000 7,924,849
U S WEST Communications
09-15-05 6.63 7,000,000 6,732,880
Vodafone Airtouch
Company Guaranty
05-01-08 6.65 6,950,000 6,548,512
Total 75,465,446
Total bonds
(Cost: $1,827,130,167) $1,803,221,474
Short-term securities (6.2%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (3.4%)
Federal Home Loan Bank Disc Nts
04-07-00 5.67% $26,800,000 $26,768,030
04-12-00 5.71 2,400,000 2,395,264
04-14-00 5.70 24,400,000 24,343,252
05-24-00 5.87 5,600,000 5,548,508
05-26-00 5.88 5,900,000 5,841,896
Federal Home Loan Mtge Corp Disc Nts
04-04-00 5.70 6,500,000 6,495,703
04-20-00 5.71 12,000,000 11,959,682
04-25-00 5.83 5,500,000 5,477,809
05-25-00 5.89 600,000 594,289
06-01-00 5.98 1,700,000 1,681,789
Federal Natl Mtge Assn Disc Nts
04-05-00 5.72 4,000,000 3,996,822
04-06-00 5.71 17,800,000 17,782,088
04-11-00 5.69 6,900,000 6,888,024
04-13-00 5.72 10,100,000 10,078,054
04-20-00 5.76 15,900,000 15,846,579
04-27-00 5.78 4,400,000 4,380,076
05-25-00 5.90 4,100,000 4,060,973
Total 154,138,838
Commercial paper (2.8%)
Alcoa
04-17-00 5.85 10,700,000 10,670,541
BBV Finance (Delaware)
04-28-00 5.89 11,600,000 11,544,651
Bell Atlantic Finance Services
04-26-00 5.89 20,400,000 20,313,513
Cargill Global Funding
04-27-00 5.89 15,700,000(l) 15,629,866
Clorox
04-10-00 5.83 1,700,000 1,697,252
04-25-00 5.89 15,500,000 15,436,814
Ford Motor Credit
04-13-00 5.83 4,700,000 4,689,787
Northern States Power
04-24-00 5.88 10,300,000 10,259,761
Paccar Financial
05-24-00 5.95 8,400,000 8,322,762
Preferred Receivables
04-13-00 5.87 16,800,000(l) 16,764,448
Toyota Motor Credit
05-16-00 5.98 13,800,000(l) 13,692,789
Total 129,022,184
Total short-term securities
(Cost: $283,240,881) $283,161,022
Total investments in securities
(Cost: $4,752,343,833)(m) $5,053,342,729
See accompanying notes to investment in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(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,
2000, the value of foreign securities represented 2.87% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) 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 2000, 10-year notes $70,000,000
Sale contracts
U.S. Treasury Bonds, June 2000 104,600,000
U.S. Treasury Note, June 2000, 5-year notes 160,000,000
U.S. Treasury Note, June 2000, 10-year notes 582,100,000
(f) Security is partially or fully on loan. See Note 6 to the financial
statements.
(g) At March 31, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $376,972,929.
(h) The following abbreviation is used in portfolio descriptions to identify the
insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
(i) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(j) 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.
(k) PRIDES (Preferred Redeemable Increased Dividend Equity Securities) are
structured as convertible preferred securities. Investors receive an enhanced
yield but based upon a specific formula, potential appreciation is limited.
PRIDES pay dividends, have voting rights, are noncallable for three years and
upon maturity, convert into shares of common stock.
(l) 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.
(m) At March 31, 2000, the cost of securities for federal income tax purposes
was approximately $4,789,059,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $485,849,000
Unrealized depreciation (221,565,000)
------------
Net unrealized appreciation $264,284,000
<PAGE>
PRSRT STD AUTO
U.S. POSTAGE
PAID
AMERICAN
EXPRESS
S-6335 P (5/00)
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AXP Mutual
200 AXP Financial Center
Minneapolis, MN 55474
