AXP(SM)
Equity Value
Fund
1999 SEMIANNUAL REPORT
(icon of) magnifying glass
AXP Equity Value Fund seeks to provide shareholders with growth of capital and
income.
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
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Stocks for the Bargain-hunter
Just like almost everything else, prices of companies that are believed to be
sound sometimes are reduced. That is, for any of a variety of reasons, they fall
out of favor with investors and their stock prices decline. These so-called
"value" stocks represent a classic opportunity to buy low in the market, which
is what AXP Equity Value Fund seeks to do. Should investors rediscover the
potential of such companies, the stocks may well recover and benefit
shareholders accordingly.
CONTENTS
From the Chairman.........................3
From the Portfolio Manager................3
Fund Facts................................5
The 10 Largest Holdings...................6
Financial Statements......................7
Notes to Financial Statements............10
Investments in Securities................19
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(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
American Express(R) Funds held shareholder meetings in June 1999. Shareholders
approved all of the proposals advanced by management. Among the proposals were:
o The election of Board members and the selection of KPMG LLP as independent
auditors.
o Change in the Fund name from "IDS" to "AXP."
o A new shareholder service and distribution plan.
o A change in the investment management services agreement.
o Changes with respect to fundamental investment policies.
No other business was presented at the meeting, which was concluded by a report
to shareholders from the Investment Department of American Express Financial
Corporation.
Thanks to all of you for your effort in reviewing the proxy material and voting
your proxies.
Arne H. Carlson
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
From the Portfolio Manager
The stock market followed a strong start with a weak finish, leaving AXP Equity
Value Fund with a small loss in the first half of the fiscal year. For the six
months -- April through September 1999 -- the total return for the Fund's Class
A shares was -1.06%. (The Fund's net asset value also was reduced by a capital
gain, which was paid to shareholders in December 1998.)
With the economy still humming along, inflation remaining under control and
corporations reporting generally healthy profits, stocks had good reason to
advance when the period began last spring. The Fund took advantage of the
positive environment, sprinting to a gain of nearly 10% by the end of June.
Especially encouraging was the fact that value stocks -- the Fund's investment
focus -- responded particularly well, as investors apparently were attracted to
their relatively low valuations when measured against the high-flying growth
stocks that had long been leading the market.
MID-SUMMER HIGH
But no sooner did the market reach an all-time peak in July than it began to
look for a reason to retreat. By that time, long-term interest rates were up
substantially since the beginning of 1999 and fear of higher inflation ahead was
in the air. Although the inflation data remained largely unthreatening in the
ensuing weeks, stocks backtracked for most of the final three months of the
period, eroding the Fund's gain in the process.
Looking at the Fund's portfolio, financial services stocks made up the biggest
exposure and provided mixed results as they struggled in the face of rising
interest rates. Technology stocks, another substantial area of investment, were
highly volatile but overall made a positive contribution to performance. Utility
stocks were hindered by the interest-rate rise as well, but finished in the plus
column for the period as a whole. Although they comprised a comparatively modest
exposure, energy-related stocks produced the sharpest gain as they benefited
from a run-up in the price of oil. Changes to the portfolio were minor, the most
notable being an increase in the amount of utility stocks as the period
progressed.
As we begin the second half of the fiscal year, the favorable factors of a
growing economy and subdued inflation remain in place. On the other hand, the
concerns about potentially higher inflation and higher interest rates are still
with us, while the ultimate impact of the Y2K situation is impossible to gauge
at this point (mid-October). In light of those factors, I plan to maintain a
somewhat defensive approach with the Fund.
Kurt Winters
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $11.15
March 31, 1999 $11.32
Decrease $ 0.17
Distributions -- April 1, 1999 - Sept. 30, 1999
From income $ 0.05
From capital gains $ --
Total distributions $ 0.05
Total return* -1.06%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Sept 30, 1999 $11.16
March 31, 1999 $11.33
Decrease $ 0.17
Distributions -- April 1, 1999 - Sept 30, 1999
From income $ 0.01
From capital gains $ --
Total distributions $ 0.01
Total return* -1.38%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $11.17
March 31, 1999 $11.34
Decrease $ 0.17
Distributions -- April 1, 1999 - Sept 30, 1999
From income $ 0.06
From capital gains $ --
Total distributions $ 0.06
Total return* -1.00%**
*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 Sept. 30, 1999)
Citigroup 3.37% $82,136,999
Mobil 2.93 71,532,499
American Intl Group 2.85 69,658,672
Chevron 2.60 63,456,250
Bank of America 2.42 59,028,749
Intl Business Machines 2.34 57,046,249
AT&T 2.09 51,112,499
Texaco 1.84 44,818,750
MCI WorldCom 1.83 44,562,500
Dayton Hudson 1.76 42,944,687
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) pie chart
The 10 holdings listed here
make up 24.03% of net assets
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<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Equity Value Fund
Six months ended Sept. 30, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $2,321,124,662) $2,452,702,695
Dividends and accrued interest receivable 3,022,326
Receivable for investment securities sold 9,554,882
U.S. goverment securities held as collateral (Note 4) 1,704,760
---------
Total assets 2,466,984,663
-------------
Liabilities
Disbursements in excess of cash on demand deposit 490,392
Payable for investment securities purchased 24,696,078
Payable upon return of securities loaned (Note 4) 1,704,760
Accrued investment management services fee 32,640
Accrued distribution fee 46,308
Accrued service fee 3
Accrued transfer agency fee 9,980
Accrued administrative services fee 2,141
Other accrued expenses 21,658
------
Total liabilities 27,003,960
----------
Net assets applicable to outstanding capital stock $2,439,980,703
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,187,469
Additional paid-in capital 2,117,341,227
Undistributed net investment income 221,696
Accumulated net realized gain (loss) 188,655,812
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 131,574,499
-----------
Total -- representing net assets applicable to outstanding capital stock $2,439,980,703
==============
Net assets applicable to outstanding shares: Class A $ 985,460,943
Class B $1,453,455,281
Class Y $ 1,064,479
Net asset value per share of outstanding capital stock: Class A shares 88,372,442 $ 11.15
Class B shares 130,279,120 $ 11.16
Class Y shares 95,318 $ 11.17
------ --------------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
AXP Equity Value Fund
Six months ended Sept. 30, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 20,688,627
Interest 2,912,090
Less foreign taxes withheld (10,479)
-------
Total income 23,590,238
----------
Expenses (Note 2):
Investment management services fee 6,487,522
Distribution fee
Class A 668,617
Class B 7,175,562
Transfer agency fee 1,762,562
Incremental transfer agency fee
Class A 84,967
Class B 183,267
Service fee
Class A 403,662
Class B 745,094
Class Y 589
Administrative services fees and expenses 437,580
Compensation of board members 8,350
Custodian fees 54,900
Printing and postage 25,755
Registration fees 18,300
Audit fees 11,250
Other 3,265
-----
Total expenses 18,071,242
Earnings credits on cash balances (Note 2) (60,468)
-------
Total net expenses 18,010,774
----------
Investment income (loss) -- net 5,579,464
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 103,496,765
Financial futures contacts 981,033
Foreign currency transactions (24,336)
-------
Net realized gain (loss) on investments 104,453,462
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (136,204,159)
------------
Net gain (loss) on investments and foreign currencies (31,750,697)
-----------
Net increase (decrease) in net assets resulting from operations $ (26,171,233)
=============
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Equity Value Fund
Sept. 30, 1999 March 31, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 5,579,464 $ 23,327,505
Net realized gain (loss) on investments 104,453,462 191,657,125
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreigh currencies (136,204,159) (204,057,052)
------------ ------------
Net increase (decrease) in net assets resulting from operations (26,171,233) 10,927,578
----------- ----------
Distributions to shareholders from:
Net investment income
Class A (4,189,561) (12,310,555)
Class B (1,267,591) (11,307,259)
Class Y (5,886) (15,124)
Net realized gain
Class A -- (107,623,088)
Class B -- (198,266,117)
Class Y -- (111,691)
------ --------
Total distributions (5,463,038) (329,633,834)
---------- ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 183,894,266 248,611,084
Class B shares 68,630,096 168,801,454
Class Y shares 856,156 720,248
Reinvestment of distributions at net asset value
Class A shares 4,045,591 116,065,296
Class B shares 1,251,113 207,563,067
Class Y shares 5,886 126,815
Payments for redemptions
Class A shares (88,483,444) (185,591,426)
Class B shares (Note 2) (267,976,633) (424,291,934)
Class Y shares (774,513) (764,363)
-------- --------
Increase (decrease) in net assets from capital share transactions (98,551,482) 131,240,241
----------- -----------
Total increase (decrease) in net assets (130,185,753) (187,466,015)
Net assets at beginning of period 2,570,166,456 2,757,632,471
------------- -------------
Net assets at end of period $2,439,980,703 $2,570,166,456
============== ==============
Undistributed net investment income $ 221,696 $ 105,270
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Equity Value Fund
(Unaudited as to Sept. 30, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Strategy Series, Inc. and 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 invests primarily in common stocks that are selected for
their above-average growth potential.
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) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
The Fund'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 Fund 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 Fund 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 Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund 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
Fund pays a premium whether or not the option is exercised. The Fund 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 Fund 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 Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to 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 income
dividend.
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. EXPENSES AND SALES CHARGES
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. Under an Investment
Management Services Agreement, AEFC determines which securities will be
purchased, held or sold. The management fee is a percentage of the Fund's
average daily net assets in reducing percentages from 0.53% to 0.4% annually.
Effective with the new Investment Management Services Agreement, the fee will be
adjusted upward or downward by a performance incentive adjustment based on the
Fund's average daily net assets over a rolling 12-month period as measured
against the change in the Lipper Growth and Income Fund Index. The maximum
adjustment is 0.08% of the Fund'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 first adjustment will be made on Jan. 1, 2000
and will cover the six-month period beginning July 1, 1999.
Under an Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.04% to 0.02% annually.
Additional administrative service expenses paid by the Fund are office expenses,
consultants' fees and compensation of officers and employees. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19
o Class B $20
o Class Y $17
Under terms of a prior agreement that ended Jan. 31, 1999, the Fund paid a
transfer agency fee at an annual rate per shareholder account of $15 for Class A
and $16 for Class B. Under terms of a prior agreement that ended March 31, 1999,
the Fund paid a transfer agency fee at an annual rate per shareholder account of
$15 for Class Y.
The Fund has agreements with American Express Financial Advisors Inc. for
distribution and shareholder services. Under a Plan and Agreement of
Distribution (the Plan), 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. The Plan went into effect July 1, 1999.
Under terms of a prior Plan and Agreement of Distribution (the Prior Plan) that
ended June 30, 1999, the Fund paid a distribution fee for Class B shares at an
annual rate up to 0.75% of average daily net assets. The Prior Plan was not
effective with respect to Class A 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. Under terms of a prior agreement that
ended June 30, 1999, the Fund paid a shareholder service fee for Class A and
Class B shares at a rate of 0.175% of average daily net assets. Effective July
1, 1999, the agreement for Class A and Class B shares was converted to the Plan
and Agreement of Distribution discussed above.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $850,542 for Class A and $380,432 for Class B for
the six months ended Sept. 30, 1999.
During the six months ended Sept. 30, 1999, the Fund's custodian and transfer
agency fees were reduced by $60,468 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $913,046,903 and $932,297,676, respectively, for the six
months ended Sept. 30, 1999. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $36,471 for the
six months ended Sept. 30, 1999.
4. LENDING OF PORTFOLIO SECURITIES
As of Sept. 30, 1999, securities valued at $1,123,400 were on loan to brokers.
For collateral, the Fund received U.S. government securities valued at
$1,704,760. Income from securities lending amounted to $125,745 for the six
months ended Sept. 30, 1999. The risks to the Fund of securities lending are
that the borrower may not provide additional collateral when required or return
the securities when due.
5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Sept. 30, 1999
Class A Class B Class Y
Sold 15,347,576 5,732,038 71,291
Issued for reinvested distributions 348,752 104,473 506
Redeemed (7,390,655) (22,371,733) (64,816)
---------- ----------- -------
Net increase (decrease) 8,305,673 (16,535,222) 6,981
Year ended March 31, 1999
Class A Class B Class Y
Sold 20,474,893 14,222,376 60,749
Issued for reinvested distributions 10,613,636 19,001,797 11,558
Redeemed (15,998,122) (35,900,422) (66,377)
----------- ----------- -------
Net increase (decrease) 15,090,407 (2,676,249) 5,930
6. 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 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 Sept.
30, 1999.
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<TABLE>
<CAPTION>
7. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended March 31,
Per share income and capital changesa
Class B
1999b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.33 $12.85 $11.63 $11.07 $9.21
Income from investment operations:
Net investment income (loss) .01 .07 .21 .21 .18
Net gains (losses) (both realized and unrealized) (.17) (.06) 3.30 1.69 2.12
Total from investment operations (.16) .01 3.51 1.90 2.30
Less distributions:
Dividends from net investment income (.01) (.08) (.20) (.22) (.16)
Distributions from realized gains -- (1.45) (2.09) (1.12) (.28)
Total distributions (.01) (1.53) (2.29) (1.34) (.44)
Net asset value, end of period $11.16 $11.33 $12.85 $11.63 $11.07
Ratios/supplemental data
Net assets, end of period (in millions) $1,453 $1,663 $1,922 $1,509 $1,296
Ratio of expenses to average daily net assetsc 1.64%d 1.62% 1.61% 1.64% 1.69%
Ratio of net investment income (loss)
to average daily net assets .13%d .65% 1.69% 1.83% 1.71%
Portfolio turnover rate
(excluding short-term securities) 36% 106% 95% 60% 54%
Total returne (1.38%) .54% 32.61% 17.55% 25.20%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Sept. 30, 1999 (Unaudited).
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
</TABLE>
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<CAPTION>
Fiscal period ended March 31,
Per share income and capital changesa
Class A Class Y
1999b 1999 1998 1997 1996 1999b 1999 1998 1997 1996
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $11.32 $12.85 $11.62 $11.06 $9.21 $11.34 $12.87 $11.64 $11.07 $9.21
Income from investment operations:
Net investment income (loss) .05 .17 .32 .29 .21 .06 .18 .34 .32 .26
Net gains (losses)
(both realized and unrealized) (.17) (.08) 3.30 1.70 2.16 (.17) (.08) 3.29 1.70 2.14
Total from investment operations (.12) .09 3.62 1.99 2.37 (.11) .10 3.63 2.02 2.40
Less distributions:
Dividends from net
investment income (.05) (.17) (.30) (.31) (.24) (.06) (.18) (.31) (.33) (.26)
Distributions from realized gains -- (1.45) (2.09) (1.12) (.28) -- (1.45) (2.09) (1.12) (.28)
Total distributions (.05) (1.62) (2.39) (1.43) (.52) (.06) (1.63) (2.40) (1.45) (.54)
Net asset value, end of period $11.15 $11.32 $12.85 $11.62 $11.06 $11.17 $11.34 $12.87 $11.64 $11.07
Ratios/supplemental data
Net assets, end of period
(in millions) $985 $906 $835 $426 $332 $1 $1 $1 $-- $--
Ratio of expenses to
average daily net assetsc .89%d .87% .85% .89% .90% .76%d .78% .76% .71% .75%
Ratio of net investment income
(loss) to average daily
net assets .89%d 1.39% 2.43% 2.60% 2.74% 1.02%d 1.49% 2.10% 2.78% 2.73%
Portfolio turnover rate
(excluding short-term securities) 36% 106% 95% 60% 54% 36% 106% 95% 60% 54%
Total returne (1.06%) 1.31% 33.62% 18.45% 26.10% (1.00%) 1.40% 33.76% 18.67% 26.40%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Sept. 30, 1999 (Unaudited).
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
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<TABLE>
<CAPTION>
Investments in Securities
AXP Equity Value Fund
Sept. 30, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (97.5%)
Issuer Shares Value(a)
Aerospace & defense (3.0%)
<S> <C> <C>
AlliedSignal 690,000 $41,356,875
Rockwell Intl 590,000 30,975,000
Total 72,331,875
Airlines (1.0%)
AMR 465,000(b) 25,342,500
Automotive & related (3.8%)
Delphi Automotive Systems 1,426,023 22,905,494
Ford Motor 510,000 25,595,625
General Motors 345,000 21,713,438
TRW 472,000 23,482,000
Total 93,696,557
Banks and savings & loans (9.8%)
Bank of America 1,060,000 59,028,749
Bank of New York 895,000 29,926,563
Chase Manhattan 405,000 30,526,875
Fleet Financial Group 830,000(b) 30,398,750
Mellon Bank 745,000 25,143,750
Washington Mutual 735,000 21,498,750
Wells Fargo 1,075,000 42,596,875
Total 239,120,312
Building materials & construction (1.4%)
American Standard 715,000(b) 27,438,125
Martin Marietta Materials 145,000 5,790,938
Total 33,229,063
Chemicals (2.7%)
Air Products & Chemicals 650,000 18,890,625
Dow Chemical 130,000 14,771,250
Du Pont (EI) de Nemours 510,661 31,086,488
Total 64,748,363
Communications equipment & services (1.5%)
Motorola 410,000 36,080,000
Computers & office equipment (7.2%)
BMC Software 230,000(b) 16,459,375
Electronic Data Systems 215,000 11,381,563
Equant 158,500(b,c) 12,897,938
First Data 265,300 11,640,038
Hewlett-Packard 185,000 17,020,000
Intl Business Machines 470,000 57,046,249
NOVA 1,007,900 25,197,500
Solectron 340,000(b) 24,416,250
Total 176,058,913
Electronics (1.1%)
Texas Instruments 315,000 25,908,750
Energy (10.0%)
Chevron 715,000 63,456,250
Conoco Cl B 175,050 4,791,994
ENI 5,160,000(b,c) 32,340,563
Mobil 710,000 71,532,499
Texaco 710,000 44,818,750
Tosco 1,035,000 26,133,750
Total 243,073,806
Financial services (9.2%)
Associates First Capital Cl A 810,000 29,160,000
Capital One Financial 660,000 25,740,000
Citigroup 1,866,750 82,136,999
Kansas City Southern Inds 464,700 21,579,506
Morgan Stanley, Dean Witter, Discover & Co 455,000 40,580,313
Providian Financial 305,200 24,168,025
Total 223,364,843
Food (2.1%)
Bestfoods 355,000 17,217,500
General Mills 225,000 18,253,125
Sara Lee 710,000 16,640,625
Total 52,111,250
Health care (2.8%)
American Home Products 270,000 11,205,000
Baxter Intl 255,000 15,363,750
Guidant 345,000 18,500,625
Mylan Laboratories 615,000 11,300,625
Pharmacia & Upjohn 255,000 12,654,375
Total 69,024,375
Health care services (1.1%)
Cardinal Health 230,000 12,535,000
Columbia/HCA Healthcare 710,000 15,043,125
Total 27,578,125
Industrial equipment & services (2.8%)
Illinois Tool Works 485,000 36,162,813
Parker-Hannifin 720,000 32,265,000
Total 68,427,813
Insurance (6.5%)
Allstate 163,500 4,077,281
American General 630,000 39,808,125
American Intl Group 801,250 69,658,672
Lincoln Natl 685,000 25,730,313
Marsh & McLennan 265,000 18,152,500
Total 157,426,891
Leisure time & entertainment (2.4%)
Disney (Walt) 1,350,000 34,931,250
Viacom Cl B 580,000(b) 24,505,000
Total 59,436,250
Media (0.8%)
MediaOne Group 285,000(b) 19,469,063
Multi-industry conglomerates (2.1%)
Emerson Electric 260,000 16,428,750
Minnesota Mining & Mfg 155,000 14,889,688
Tyco Intl 200,000(c) 20,650,000
Total 51,968,438
Paper & packaging (1.1%)
Intl Paper 570,000 27,395,625
Retail (6.0%)
Costco Wholesale 525,000(b) 37,800,000
Dayton Hudson 715,000 42,944,687
Gap 770,000 24,640,000
TJX Companies 1,435,000 40,269,688
Total 145,654,375
Transportation (1.0%)
Burlington Northern Santa Fe 880,000 24,200,000
Utilities -- electric (5.1%)
Carolina Power & Light 335,000 11,850,625
CMS Energy 620,000 21,041,250
Duke Energy 457,000 25,192,125
Edison Intl 690,000 16,775,625
FPL Group 190,000 9,571,250
New Century Energies 590,000 19,728,125
Pinnacle West Capital 205,000 7,456,875
Texas Utilities 340,000 12,686,250
Total 124,302,125
Utilities -- gas (1.6%)
Coastal 950,000 38,890,625
Utilities -- telephone (11.4%)
Ameritech 610,000 40,984,375
AT&T 1,175,000 51,112,499
Bell Atlantic 500,000 33,656,250
BellSouth 920,000 41,400,000
GTE 255,000 19,603,125
MCI WorldCom 620,000(b) 44,562,500
SBC Communications 460,000 23,488,750
U S WEST Communications Group 430,000 24,536,875
Total 279,344,374
Total common stocks
(Cost: $2,245,170,330) $2,378,184,311
Preferred stocks (0.3%)
Issuer Shares Value(a)
Global TeleSystems Group
Cm Cv 80,000(b,e) $3,280,000
Intermedia Communications
7.00% Cm Cv Series F 228,000(b) 4,360,500
Total preferred stocks
(Cost: $9,064,467) $7,640,500
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (2.7%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (0.9%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
10-05-99 5.24% $1,200,000 $1,199,127
10-12-99 5.18 6,300,000 6,289,143
10-15-99 5.19 1,700,000 1,696,331
Federal Natl Mtge Assn Disc Nts
10-25-99 5.25 1,300,000 1,295,278
11-04-99 5.26 11,200,000 11,143,051
Total 21,622,930
Commercial paper (1.8%)
Alcoa
11-12-99 5.35 4,700,000 4,668,575
Barlcays U.S. Funding
10-26-99 5.32 600,000 597,703
BellSouth Capital Funding
11-16-99 5.33 600,000(d) 595,770
Ciesco LP
10-08-99 5.19 6,600,000(d) 6,592,032
Daimler/Chrysler
10-29-99 5.32 12,600,000 12,546,204
Glaxo Wellcome
10-04-99 5.28 3,200,000(d) 3,198,123
Pfizer
10-19-99 5.29 14,000,000(d) 13,960,985
USAA Capital
10-06-99 5.18 2,500,000 2,497,808
10-25-99 5.20 600,000 597,754
Total 45,254,954
Total short-term securities
(Cost: $66,889,865) $66,877,884
Total investments in securities
(Cost: $2,321,124,662)(f) $2,452,702,695
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. As of Sept. 30, 1999,
the value of foreign securities represented 2.7% of net assets.
(d) 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.
(e) Security is partially or fully on loan. See Note 4 to the financial
statements.
(f) At Sept. 30, 1999, the cost of securities for federal income tax purposes
was approximately $2,321,125,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $261,865,000
Unrealized depreciation (130,287,000)
------------
Net unrealized appreciation $131,578,000
<PAGE>
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