AXP (SM)
Stock Fund
2000 SEMIANNUAL REPORT
American
Express (R)
Fund
(icon of) magnifying glass
AXP Stock Fund seeks to provide shareholders
with current income and growth of capital.
AMERICAN
EXPRESS
(R)
<PAGE>
Big Names, Big Business
While some investors like to strive for the potentially outstanding returns that
can be generated by stocks of newer companies, others are more comfortable with
the usually steadier performance provided by stocks of more established
businesses. AXP Stock Fund focuses on stocks in the latter group, many of which
long ago made their marks in American enterprise and, in some cases, also have a
strong international business presence. These stocks offer the potential dual
benefit of growth along with a steady stream of dividend income.
CONTENTS
From the Chairman 3
From the Portfolio Manager 3
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements (Fund) 7
Notes to Financial Statements (Fund) 10
Financial Statements (Portfolio) 16
Notes to Financial Statements (Portfolio) 19
Investments in Securities 24
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
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 manager's 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
<PAGE>
(picture of) G. Michael Kennedy
G. Michael Kennedy
Portfolio Manager
From the Portfolio Manager
AXP Stock Fund was well positioned to take advantage of an overall strong period
for stocks, ultimately generating a total of return of 22.85% (excluding the
sales charge) for the first half of the fiscal year -- October 1999 through
March 2000. (A portion of the return came in the form of a capital gain, which
was paid to shareholders in December 1999 and reduced the Fund's net asset value
by the same amount at that time.)
The stock market was coming off a late-summer slump when the period began. But
soon, thanks to fresh reports of still-tame inflation and generally healthy
corporate profits, the market started to advance. Gaining additional support
from vanishing concerns about the Y2K computer bug and increasing excitement
about the development of the Internet, stocks continued to gather momentum
through the end of 1999 and into early January.
A FAST FINISH
By that time, worries about higher interest rates and potentially higher
inflation had intensified, which drove the market into retreat for several
weeks. But once again the market dug in and made a comeback, rallying strongly
to reach an all-time high in late March.
The Fund's performance followed a similar but somewhat more consistent pattern,
as it registered gains in five of the six months. The biggest contribution came
from technology-related stocks, which comprised the largest area of investment.
Within that sector, telecommunications, semiconductor and business-to-business
Internet stocks were especially strong. Also providing good performance were
holdings in the capital goods, contract manufacturing, consumer cyclical,
financial services and utilities areas. Weak performers, on the other hand,
included transportation, basic materials and consumer staple stocks.
Looking at changes to the portfolio, I pared down the number of holdings from
more than 100 to 85. In conjunction with that, I increased the portfolio's
diversification by adding to investments in capital goods, energy and foreign
stocks, as well as convertible bonds. Concurrently, I reduced the exposure to
technology, financial services and retailing stocks.
With the second half of the fiscal year underway, it appears that the stock
market will continue to experience considerable volatility as investors try to
sort out a variety of conflicting factors, especially inflation and the
direction of interest rates. For the Fund, I think the biggest questions are
whether the market will continue to "broaden out" -- that is, allow a greater
variety of stocks to fully participate in possible upturns -- and whether the
valuation gap between growth stocks and value stocks narrows. If so, the Fund's
broadly diversified, comparatively conservative group of holdings should respond
relatively well.
G. Michael Kennedy
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $28.69
Sept. 30, 1999 $26.14
Increase $ 2.55
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $ 0.08
From capital gains $ 3.13
Total distributions $ 3.21
Total return* +22.85%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $28.45
Sept. 30, 1999 $25.97
Increase $ 2.48
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $ --
From capital gains $ 3.13
Total distributions $ 3.13
Total return* +22.39%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $28.69
Sept. 30, 1999 $26.14
Increase $ 2.55
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $ 0.10
From capital gains $ 3.13
Total distributions $ 3.23
Total return* +22.93%**
*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)
Microsoft 4.52% $233,749,999
General Electric 3.60 186,225,000
Cisco Systems 3.59 185,550,000
Corning 3.38 174,600,000
Texas Instruments 3.10 160,000,000
Intel 2.81 145,131,250
American Intl Group 2.40 123,803,438
Oracle 2.27 117,093,750
Nokia ADR Cl A 2.10 108,625,000
Wal-Mart Stores 1.93 99,900,000
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The 10 holdings listed here make up 29.70% of net assets
(icon of) pie chart
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<CAPTION>
Financial Statements
Statement of assets and liabilities AXP Stock Fund, Inc.
March 31, 2000 (Unaudited)
Assets
<S> <C> <C>
Investments in Equity Portfolio (Note 1) $5,166,834,031
Liabilities
Accrued distribution fee 37,398
Accrued service fee 2,990
Accrued transfer agency fee 11,627
Accrued administrative services fee 3,746
Other accrued expenses 352,641
-------
Total liabilities 408,402
-------
Net assets applicable to outstanding capital stock $5,166,425,629
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,802,097
Additional paid-in capital 3,301,790,303
Undistributed net investment income 906,223
Accumulated net realized gain (loss) 259,348,272
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 1,602,578,734
-------------
Total -- representing net assets applicable to outstanding capital stock $5,166,425,629
==============
Net assets applicable to outstanding shares: Class A $3,644,064,164
Class B $ 441,734,589
Class Y $1,080,626,876
Net asset value per share of outstanding capital stock:
Class A shares 127,019,504 $ 28.69
Class B shares 15,529,337 $ 28.45
Class Y shares 37,660,877 $ 28.69
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
AXP Stock Fund, Inc.
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 28,296,259
Interest 5,822,091
Less foreign taxes withheld (50,843)
-------
Total income 34,067,507
----------
Expenses (Note 2):
Expenses allocated from Equity Portfolio 11,862,546
Distribution fee
Class A 4,262,807
Class B 1,981,917
Transfer agency fee 2,018,950
Incremental transfer agency fee
Class A 117,469
Class B 44,302
Service fee-- Class Y 527,844
Administrative services fees and expenses 656,404
Compensation of board members 6,292
Printing and postage 117,135
Registration fees 75,414
Audit fees 5,125
Other 11,983
------
Total expenses 21,688,188
Earnings credits on cash balances (Note 2) (148,358)
--------
Total net expenses 21,539,830
----------
Investment income (loss) -- net 12,527,677
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions 270,180,760
Foreign currency transactions (29,794)
-------
Net realized gain (loss) on investments 270,150,966
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 715,188,233
-----------
Net gain (loss) on investments and foreign currencies 985,339,199
-----------
Net increase (decrease) in net assets resulting from operations $997,866,876
============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Stock Fund, Inc.
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 12,527,677 $ 40,255,995
Net realized gain (loss) on investments 270,150,966 510,453,388
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 715,188,233 169,648,445
----------- -----------
Net increase (decrease) in net assets resulting from operations 997,866,876 720,357,828
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (9,412,003) (28,984,586)
Class B -- (727,808)
Class Y (3,616,311) (11,296,077)
Net realized gain
Class A (366,196,061) (231,636,044)
Class B (42,601,015) (22,611,501)
Class Y (112,206,614) (85,949,857)
------------ -----------
Total distributions (534,032,004) (381,205,873)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 96,781,491 185,607,226
Class B shares 49,299,274 97,231,333
Class Y shares 123,839,599 228,149,726
Reinvestment of distributions at net asset value
Class A shares 344,079,242 238,871,722
Class B shares 42,094,054 23,120,523
Class Y shares 103,757,569 87,032,183
Payments for redemptions
Class A shares (223,698,481) (334,985,548)
Class B shares (Note 2) (34,882,044) (48,879,891)
Class Y shares (315,609,496) (366,362,193)
------------ ------------
Increase (decrease) in net assets from capital share transactions 185,661,208 109,785,081
----------- -----------
Total increase (decrease) in net assets 649,496,080 448,937,036
Net assets at beginning of period 4,516,929,549 4,067,992,513
------------- -------------
Net assets at end of period $5,166,425,629 $4,516,929,549
============== ==============
Undistributed net investment income $ 906,223 $ 1,406,860
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Stock Fund, Inc.
(Unaudited as to March 31, 2000)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 (as amended) as
a diversified, open-end management investment company. The Fund has 10 billion
authorized shares of capital stock.
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 Equity Portfolio
The Fund invests all of its assets in Equity 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 common
stocks and securities convertible into common 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 accounting principles generally
accepted in the United States of America 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,
when available, 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
$1,271,974 for Class A and $185,620 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 $148,358 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 3,546,640 1,807,666 4,509,030
Issued for reinvested distributions 12,742,589 1,573,849 3,845,511
Redeemed (8,058,175) (1,276,588) (11,379,124)
---------- ---------- -----------
Net increase (decrease) 8,231,054 2,104,927 (3,024,583)
Year ended Sept. 30, 1999
Class A Class B Class Y
Sold 6,892,360 3,642,250 8,518,604
Issued for reinvested distributions 9,237,814 901,335 3,365,176
Redeemed (12,452,760) (1,828,161) (13,675,361)
----------- ---------- -----------
Net increase (decrease) 3,677,414 2,715,424 (1,791,581)
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 finanicial information for evaluating
the Fund's results.
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class A
<S> <C> <C> <C> <C> <C>
2000b 1999 1998 1997 1996c
Net asset value, beginning of period $26.14 $24.18 $27.44 $22.49 $19.96
Income from investment operations:
Net investment income (loss) .07 .24 .29 .39 .43
Net gains (losses) (both realized and unrealized) 5.69 4.00 .22 6.11 3.17
Total from investment operations 5.76 4.24 .51 6.50 3.60
Less distributions:
Dividends from net investment income (.08) (.24) (.30) (.43) (.39)
Distributions from realized gains (3.13) (2.04) (3.47) (1.12) (.68)
Total distributions (3.21) (2.28) (3.77) (1.55) (1.07)
Net asset value, end of period $28.69 $26.14 $24.18 $27.44 $22.49
Ratios/supplemental data
Net assets, end of period (in millions) $3,644 $3,105 $2,783 $2,877 $2,307
Ratio of expenses to average daily net assetsd .86%e .82% .77% .78% .80%e
Ratio of net investment income (loss)
to average daily net assets .54%e .90% 1.14% 1.58% 2.19%e
Portfolio turnover rate
(excluding short-term securities) 22% 76% 79% 82% 71%
Total returnf 22.85% 17.71% 2.04% 30.22% 18.60%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 2000 (Unaudited).
c The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996.
d Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class B Class Y
2000b 1999 1998 1997 1996c 2000b 1999 1998 1997 1996c
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $25.97 $24.05 $27.32 $22.42 $19.91 $26.14 $24.18 $27.44 $22.49 $19.96
Income from investment operations:
Net investment income (loss) -- .06 .10 .22 .28 .10 .27 .31 .42 .47
Net gains (losses) (both
realized and unrealized) 5.61 3.96 .21 6.05 3.17 5.68 4.00 .22 6.11 3.17
Total from investment operations 5.61 4.02 .31 6.27 3.45 5.78 4.27 .53 6.53 3.64
Less distributions:
Dividends from net investment income -- (.06) (.11) (.25) (.26) (.10) (.27) (.32) (.46) (.43)
Distributions from realized gains (3.13) (2.04) (3.47) (1.12) (.68) (3.13) (2.04) (3.47) (1.12) (.68)
Total distributions (3.13) (2.10) (3.58) (1.37) (.94) (3.23) (2.31) (3.79) (1.58) (1.11)
Net asset value, end of period $28.45 $25.97 $24.05 $27.32 $22.42 $28.69 $26.14 $24.18 $27.44 $22.49
Ratios/supplemental data
Net assets, end of period (in millions) $442 $349 $258 $203 $107 $1,081 $1,063 $1,027 $1,082 $870
Ratio of expenses to
average daily net assetsd 1.63%e 1.59% 1.53% 1.55% 1.57%e .71%e .72% .70% .66% .63%e
Ratio of net investment income (loss)
to average daily net assets (.22%)e .12% .39% .85% 1.61%e .70%e 1.00% 1.21% 1.71% 2.36%e
Portfolio turnover rate
(excluding short-term securities) 22% 76% 79% 82% 71% 22% 76% 79% 82% 71%
Total returnf 22.39% 16.81% 1.27% 29.23% 17.78% 22.93% 17.81% 2.12% 30.38% 18.79%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 2000 (Unaudited).
c The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996.
d Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Equity Portfolio
March 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1):
<S> <C> <C>
(identified cost, $3,657,834,553) $5,260,809,568
Cash in bank on demand deposit 750,186
Dividends and accrued interest receivable 5,391,705
Receivable for investment securities sold 14,149,127
U.S. government securities held as collateral (Note 4) 25,337,034
----------
Total assets 5,306,437,620
-------------
Liabilities
Payable for investment securities purchased 45,381,820
Payable upon return of securities loaned (Note 4) 92,633,834
Accrued investment management services fee 65,928
Other accrued expenses 167,518
-------
Total liabilities 138,249,100
-----------
Net assets $5,168,188,520
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Equity Portfolio
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 28,303,600
Interest 5,809,984
Less foreign taxes withheld (50,856)
-------
Total income 34,062,728
----------
Expenses (Note 2):
Investment management services fee 11,692,038
Compensation of board members 8,784
Custodian fees 127,571
Audit fees 15,375
Other 28,046
------
Total expenses 11,871,814
Earnings credits on cash balances (Note 2) (6,188)
------
Total net expenses 11,865,626
----------
Investment income (loss) -- net 22,197,102
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (including $9,055,252 realized
gain on sales of affiliated issuers) (Note 3) 270,235,459
Foreign currency transactions (29,802)
-------
Net realized gain (loss) on investments 270,205,657
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 715,386,759
-----------
Net gain (loss) on investments and foreign currencies 985,592,416
-----------
Net increase (decrease) in net assets resulting from operations $1,007,789,518
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets Equity Portfolio
March 31, 2000 Sept. 30, 1999
Six month ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 22,197,102 $ 56,845,389
Net realized gain (loss) on security transactions 270,205,657 510,544,619
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies 715,386,759 169,713,139
----------- -----------
Net increase (decrease) in net assets resulting
from operations 1,007,789,518 737,103,147
Net contributions (withdrawals) from partners (359,365,303) (286,491,766)
------------ ------------
Total increase (decrease) in net assets 648,424,215 450,611,381
Net assets at beginning of period 4,519,764,305 4,069,152,924
------------- -------------
Net assets at end of period $5,168,188,520 $4,519,764,305
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Equity Portfolio
(Unaudited as to March 31, 2000)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity 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. Equity Portfolio
invests primarily in common stocks and securities convertible into common
stocks. 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 accounting principles generally
accepted in the United States of America 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
$5,646,000.
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 0.4% 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 Stock Fund to the Lipper Large-Cap Core
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 increased
the fee by $390,439 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 $6,188 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 $1,043,869,884 and $1,244,589,231, respectively, for the
six months ended March 31, 2000. For the same period, the portfolio turnover
rate was 22%.
Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $191,700 for the
six months ended March 31, 2000.
4. LENDING OF PORTFOLIO SECURITIES
As of March 31, 2000, securities valued at $95,597,326 were on loan to brokers.
For collateral, the Portfolio received $67,296,800 in cash and U.S. government
securities valued at $25,337,034. As of March 31, 2000, due to fluctuating
market conditions, the Fund requested additional collateral which was received
on April 3, 2000. Income from securities lending amounted to $157,030 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
Equity Portfolio
March. 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (87.6%)
Issuer Shares Value(a)
Airlines (0.6%)
<S> <C> <C>
Southwest Airlines 1,500,000 $31,218,750
Automotive & related (1.1%)
Ford Motor 1,200,000 55,125,000
Banks and savings & loans (2.8%)
Bank of America 500,000 26,218,750
Bank of New York 875,000 36,367,188
First Union 1,000,000 37,250,000
Wells Fargo 1,100,000 45,031,250
Total 144,867,188
Chemicals (0.7%)
Dow Chemical 300,000 34,200,000
Communications equipment & services (5.2%)
CIENA 500,000(b) 63,062,500
Motorola 500,000 71,187,500
Nokia ADR Cl A 500,000(c) 108,625,000
Tellabs 400,000(b) 25,193,750
Total 268,068,750
Computers & office equipment (19.2%)
BMC Software 500,000(b) 24,687,500
Cisco Systems 2,400,000(b) 185,550,000
Compaq Computer 1,400,000 37,275,000
Electronic Arts 200,000(b) 14,237,500
EMC 400,000(b) 50,000,000
EQUANT 400,000(b,c) 34,025,000
First Data 900,000 39,825,000
Intl Business Machines 700,000 82,600,000
Lexmark Intl Group Cl A 300,000(b) 31,725,000
Microsoft 2,200,000(b) 233,749,999
Oracle 1,500,000(b) 117,093,750
SAP ADR 500,000(c,f) 29,875,000
Solectron 1,992,898(b) 79,840,476
Unisys 1,200,000(b) 30,600,000
Total 991,084,225
Electronics (11.0%)
Corning 900,000 174,600,000
Flextronics Intl 1,200,000(b,c,f) 84,525,000
Intel 1,100,000 145,131,250
Texas Instruments 1,000,000 160,000,000
Total 564,256,250
Energy (4.8%)
BP Amoco ADR 800,000(c) 42,450,000
Chevron 400,000 36,975,000
Conoco Cl A 1,700,000 41,862,500
Exxon Mobil 1,194,067 92,913,338
Kerr-McGee 600,000 34,650,000
Total 248,850,838
Energy equipment & services (1.8%)
Halliburton 1,300,000 53,300,000
Schlumberger 525,000 40,162,500
Total 93,462,500
Financial services (2.3%)
Citigroup 1,350,000 80,071,875
Morgan Stanley, Dean Witter, Discover & Co 500,000 40,781,250
Total 120,853,125
Food (2.0%)
Bestfoods 1,200,000 56,175,000
ConAgra 700,000 12,687,500
Ralston-Ralston Purina Group 1,800,000(b,h) 35,775,000
Total 104,637,500
Health care (8.0%)
Amgen 1,000,000(b) 61,375,000
Baxter Intl 700,000 41,737,500
Bristol-Myers Squibb 800,000 46,200,000
Guidant 500,000(b) 29,406,250
Medtronic 800,000 41,150,000
Merck & Co 300,000 18,637,500
Mylan Laboratories 1,300,000 35,750,000
Pfizer 1,200,000 43,875,000
Pharmacia & Upjohn 800,000 47,400,000
Schering-Plough 500,000 18,375,000
Warner-Lambert 300,000 29,250,000
Total 413,156,250
Household products (0.9%)
Colgate-Palmolive 850,000 47,918,750
Industrial equipment & services (1.2%)
Deere & Co 600,000 22,800,000
Illinois Tool Works 700,000 38,675,000
Total 61,475,000
Insurance (2.4%)
American Intl Group 1,130,625 123,803,438
Leisure time & entertainment (0.5%)
Royal Caribbean Cruises 1,000,000 28,000,000
Media (3.3%)
Hispanic Broadcasting 300,000(b) 33,975,000
Infinity Broadcasting Cl A 1,317,000(b) 42,637,875
MediaOne Group 500,000(b) 40,500,000
USA Networks 2,400,000(b) 54,150,000
Total 171,262,875
Metals (0.8%)
Alcoa 600,000 42,150,000
Multi-industry conglomerates (5.6%)
General Electric 1,200,000 186,225,000
Grainger (WW) 800,000 43,400,000
Minnesota Mining & Mfg 400,000 35,425,000
Tyco Intl 500,000(c) 24,937,500
Total 289,987,500
Paper & packaging (0.8%)
Intl Paper 1,000,000 42,750,000
Retail (4.5%)
Circuit City Stores-Circuit City Group 887,400 54,020,475
Home Depot 750,000 48,375,000
Target 400,000 29,900,000
Wal-Mart Stores 1,800,000 99,900,000
Total 232,195,475
Transportation (0.3%)
Burlington Northern Santa Fe 700,000 15,487,500
Utilities -- electric (1.4%)
Carolina Power & Light 350,000 11,353,125
Duke Energy 200,000 10,500,000
New Century Energies 900,000(f) 27,056,250
Texas Utilities 350,000 10,390,625
Unicom 400,000 14,600,000
Total 73,900,000
Utilities -- gas (2.5%)
Coastal 1,000,000 46,000,000
Enron 1,100,000 82,362,500
Total 128,362,500
Utilities -- telephone (3.9%)
AT&T 1,050,000 59,062,528
BellSouth 500,000 23,500,000
Global TeleSystems Group 900,000(b) 18,450,000
MCI WorldCom 500,000(b) 22,656,250
SBC Communications 492,000 20,664,000
U S WEST Communications Group 800,000 58,100,000
Total 202,432,778
Total common stocks
(Cost: $2,994,165,467) $4,529,506,192
Preferred stocks (5.4%)
Issuer Shares Value(a)
Adelphia Communications
5.50% Cv Series D 73,500 $11,263,875
CVS
6.00% Cv ACES 200,000(i) 13,512,500
Enron
7.00% Cv 745,000 16,436,563
Finova Finance Trust
5.50% Cv 325,000 10,725,000
Georgia-Pacific Group
7.50% Cv 625,000 26,796,875
Global Crossing
6.38% Cv 250,000(c,d) 26,937,499
Global TeleSystems Group
7.25% Cm Cv 300,000(d) 12,150,000
Ingersoll-Rand
6.75% Cv PRIDES 800,000(j) 18,800,000
Kerr-McGee
5.50% Cv 600,000 26,925,000
MediaOne Group
7.00% Cv 675,000 35,100,000
MS-Applied Material
6.00% Cv 180,000 12,487,500
MS-Gillette
5.25% Cv 186,795 14,464,938
SBH-Cincinnati Bell
6.25% 216,200 25,727,800
Sprint
8.25% Cv 206,925 $13,398,394
Wendys Financing
5.00% Cm Cv Series A 340,000 15,980,000
Total preferred stocks
(Cost: $280,384,316) $280,705,944
Bonds (4.2%)
Issuer Coupon Principal Value(a)
rate amount
COLT Telecom Group
(European Monetary Unit) Cv
08-06-05 2.00% 25,000,000(c) $43,858,658
Costco
Zero Coupon Cv Sub Nts
08-19-17 3.50 21,000,000(d,g) 24,990,000
Devon Energy
Cv Deb
08-15-08 4.90 15,000,000 15,018,750
Exodus Communications
07-15-08 4.75 25,100,000(d) 51,611,875
Internet Capital Group
Cv Sub Nts
12-21-04 5.50 15,000,000 13,200,000
Level 3 Communications
03-15-10 6.00 10,446,000 10,250,138
Network Associates
Zero Coupon Cv Sub Deb
02-13-18 4.09 20,000,000(g) 7,600,000
NTL
Cv Sub Nts
12-15-09 5.75 18,000,000(d) 18,427,500
Telewest Communication
(British Pound) Cv
02-19-07 5.25 12,240,000(c,d) 30,741,234
Total bonds
(Cost: $148,303,592) $215,698,155
Short-term securities (4.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (2.9%)
Federal Home Loan Bank Disc Nts
05-02-00 5.86% $6,800,000 $6,764,760
05-19-00 5.92 29,100,000 28,859,877
05-24-00 5.94 13,400,000 13,276,786
Federal Home Loan Mtge Corp Disc Nts
05-09-00 5.90 4,200,000 4,173,337
05-16-00 5.97 26,100,000 25,902,568
06-01-00 5.98 18,800,000 18,598,610
06-15-00 6.06 700,000 690,808
Federal Natl Mtge Assn Disc Nts
04-06-00 5.71 18,500,000 18,481,384
04-11-00 5.69 10,700,000 10,681,429
04-13-00 5.72 4,800,000 4,789,570
06-15-00 6.08 18,600,000 18,355,761
Total 150,574,890
Commercial paper (1.3%)
Barclays U.S. Funding
05-12-00 6.04 5,700,000 5,660,099
Bell Atlantic Finance Services
05-31-00 6.06 9,100,000 9,004,091
Bell Atlantic Network Funding
05-10-00 5.95 3,200,000 3,178,986
Ciesco LP
04-27-00 5.91 3,900,000 3,882,340
Clorox
04-25-00 5.89 500,000 497,962
Fleet Funding
04-18-00 5.87 2,500,000(e) 2,492,600
Ford Motor Credit
04-13-00 5.83 7,900,000 7,882,835
06-02-00 6.10 7,900,000 7,816,497
Intl Lease Finance
04-25-00 5.84 10,000,000 9,958,750
05-30-00 6.08 4,300,000 4,255,710
Northern States Power
06-19-00 6.18 10,200,000 10,059,013
Toyota Motor Credit
05-11-00 6.00 4,700,000(e) 4,668,097
Total 69,356,980
Letter of credit (0.3%)
Bank of America-
AES Hawaii
04-13-00 5.83 15,000,000 14,967,407
Total short-term securities
(Cost: $234,981,178) $234,899,277
Total investments in securities
(Cost: $3,657,834,553)(k) $5,260,809,568
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(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 8.24% 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) 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.
(f) Security is partially or fully on loan. See Note 4 to the financial
statements.
(g) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(h) At March 31, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $5,646,000.
(i) ACES (Automatically Convertible Equity Securities) are structured as
convertible preferred securities. Investors receive an enhanced yield but based
upon a specific formula, potential appreciation is limited. ACES pay dividends,
have voting rights, are noncallable for at least three years and upon maturity,
convert into shares of common stock.
(j) 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.
(k) At March 31, 2000, the cost of securities for federal income tax purposes
was approximately $3,657,835,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $1,755,062,000
Unrealized depreciation (152,087,000)
------------
Net unrealized appreciation $1,602,975,000
<PAGE>
American
Express(R)
Funds
AXP Stock Fund
200 AXP Financial Center
Minneapolis, MN 55474
TICKER SYMBOL
Class A: INSTX Class B: IDSBX Class Y: IDSYX
PRSRT STD AUTO
U.S. POSTAGE
PAID
AMERICAN
EXPRESS
AMERICAN
EXPRESS
(R)
S-6365 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.
