AXPSM
Equity Value
Fund
2000 SEMIANNUAL REPORT
American
Express
Funds
(icon of) magnifying glass
AXP Equity Value Fund seeks to provide shareholders with growth of capital and
income.
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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 18
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(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue, accompanied by a
modest rise in long-term interest rates. But no matter what transpires, this is
a great time to take a close look at your goals and investments. We encourage
you to:
o Consult a professional investment advisor who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable
through retirement plans of your employer.
o Learn as much as you can about your current investments.
The portfolio manager's letter that follows provides a review of the Fund's
investment strategies and performance. The 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. On behalf of the Board,
Arne H. Carlson
(picture of) Keith Tufte
Keith Tufte
Portfolio manager
From the Portfolio Manager
In a turbulent six months for the stock market, value stocks held up relatively
well, allowing AXP Equity Value Fund to post a positive result. For the first
half of the fiscal year -- April through September 2000 -- the Fund's Class A
shares generated a total return (excluding the sales charge) of 0.54%.
The stock market was struggling when the period began, as higher interest rates
and concerns about the strength of future corporate profits, particularly for
technology-related companies, dampened investors' spirits. The result was two
down months for the market and the Fund. The Fund's decline was only about half
that of the market, though, thanks to its comparatively small exposure to
technology stocks.
SUMMER WARM-UP
Summer brought a renewed feeling of optimism to the market, and the market and
the Fund responded in good fashion. By the end of August, both were in positive
territory. The period ended on a down note for the market, as profit worries
resurfaced and drove down prices in September. Again, the Fund fared better, as
it essentially held its ground during the month.
The primary reason for the Fund's relative success in the period was its
fundamental focus on value stocks as opposed to growth stocks, which were
especially volatile. That focus led to a greater emphasis on financial services,
including bank and insurance stocks; energy, primarily oil-related stocks; and
utilities, including electric and natural gas stocks. Those sectors were
generally good performers, as they attracted interest from investors who were
looking for lower investment risk in a highly uncertain market environment.
Upon becoming the Fund's interim manager in May, I made only a few modest
changes to the portfolio. I trimmed holdings in telecommunications, which was a
poor-performing sector, and increased investments in financial services, which
enjoyed overall good results.
Although my tenure as manager will be brief (a permanent manager will likely be
named before the end of 2000), I'm encouraged that a greater variety of stocks
have participated in the market's upturns in recent months. This "broadening
out" of the market has worked in the Fund's favor and, I believe, could signal
further improvement in the second half of the fiscal year.
Keith Tufte
(Note to shareholders: On Nov. 6, 2000, Warren Spitz became portfolio manager of
AXP Equity Value Fund. His 17 years of investment experience includes positions
as a research analyst and a portfolio manager.)
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Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.97
March 31, 2000 $10.95
Increase $ 0.02
Distributions -- April 1, 2000 - Sept. 30, 2000
From income $ 0.04
From capital gains $ --
Total distributions $ 0.04
Total return** +0.54%
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.96
March 31, 2000 $10.94
Increase $ 0.02
Distributions -- April 1, 2000 - Sept. 30, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return** +0.21%
Class C -- June 26, 2000* - Sept. 30, 2000
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.95
June 26, 2000* $10.37
Increase $ 0.58
Distributions -- June 26, 2000* - Sept. 30, 2000
From income $ 0.01
From capital gains $ --
Total distributions $ 0.01
Total return** +5.69%***
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.99
March 31, 2000 $10.96
Increase $ 0.03
Distributions -- April 1, 2000 - Sept. 30, 2000
From income $ 0.05
From capital gains $ --
Total distributions $ 0.05
Total return** +0.70%
* Inception date.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested. Returns do not include sales load. The prospectus
discusses the effect of sales charges, if any, on the various classes.
*** The total return for Class C is not annualized.
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Sept. 30, 2000)
Citigroup 3.98% $83,256,249
Exxon Mobil 3.87 81,032,984
American Intl Group 3.74 78,224,531
Stilwell Financial 2.77 57,924,600
Wells Fargo 2.67 55,938,093
Chevron 2.67 55,838,750
Bank of America 2.66 55,685,100
Providian Financial 2.56 53,581,300
Morgan Stanley, Dean Witter,
Discover & Co 2.27 47,547,500
Marsh & McLennan 1.97 41,205,600
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 29.16% of net assets
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Financial Statements
Statement of assets and liabilities
AXP Equity Value Fund
Sept. 30, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $1,853,087,257) $2,097,892,521
Dividends and accrued interest receivable 1,839,271
U.S. government securities held as collateral (Note 4) 2,200,630
---------
Total assets 2,101,932,422
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Liabilities
Disbursements in excess of cash on demand deposit 164,647
Payable upon return of securities loaned (Note 4) 7,375,630
Accrued investment management services fee 28,030
Accrued distribution fee 35,372
Accrued service fee 3
Accrued transfer agency fee 9,319
Accrued administrative services fee 1,887
Other accrued expenses 91,648
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Total liabilities 7,706,536
---------
Net assets applicable to outstanding capital stock $2,094,225,886
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,909,590
Additional paid-in capital 1,816,860,349
Undistributed net investment income 1,311,110
Accumulated net realized gain (loss) 29,339,933
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities
in foreign currencies 244,804,904
-----------
Total -- representing net assets applicable to outstanding
capital stock $2,094,225,886
==============
Net assets applicable to outstanding shares:
Class A $1,038,273,619
Class B $1,054,834,526
Class C $ 67,997
Class Y $ 1,049,744
Net asset value per share of outstanding capital stock:
Class A shares 94,626,607 $ 10.97
Class B shares 96,230,596 $ 10.96
Class C shares 6,207 $ 10.95
Class Y shares 95,555 $ 10.99
See accompanying notes to financial statements.
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Statement of operations
AXP Equity Value Fund
Six months ended Sept. 30, 2000 (Unaudited)
Investment income
Income:
Dividends $ 16,714,957
Interest 1,639,253
Less foreign taxes withheld (83,498)
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Total income 18,270,712
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Expenses (Note 2):
Investment management services fee 5,124,631
Distribution fee
Class A 1,199,141
Class B 6,178,901
Class C 80
Transfer agency fee 1,543,214
Incremental transfer agency fee
Class A 81,267
Class B 150,073
Class C 6
Service fee - Class Y 531
Administrative services fees and expenses 373,741
Compensation of board members 6,661
Custodian fees 79,673
Printing and postage 132,303
Registration fees 63,109
Audit fees 11,500
Other 8,032
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Total expenses 14,952,863
Earnings credits on cash balances (Note 2) (114,284)
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Total net expenses 14,838,579
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Investment income (loss)-- net 3,432,133
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Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) 15,354,105
Foreign currency transactions 81,763
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Net realized gain (loss) on investments 15,435,868
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and liabilities
in foreign currencies (15,073,099)
------------
Net gain (loss) on investments and foreign currencies 362,769
Net increase (decrease) in net assets resulting from operations $ 3,794,902
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See accompanying notes to financial statements.
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Statements of changes in net assets
AXP Equity Value Fund
Sept. 30, 2000 March 31, 2000
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss)-- net $ 3,432,133 $ 10,747,990
Net realized gain (loss) on investments 15,435,868 149,017,542
Net change in unrealized appreciation
(depreciation) on investments and on
translation of assets and
liabilities in foreign currencies (15,073,099) (7,900,655)
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Net increase (decrease) in net assets
resulting from operations 3,794,902 151,864,877
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Distributions to shareholders from:
Net investment income
Class A (3,286,882) (7,352,892)
Class B (325,386) (2,006,647)
Class C (63) --
Class Y (4,601) (10,040)
Net realized gain
Class A -- (88,441,283)
Class B -- (130,770,861)
Class Y -- (91,455)
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Total distributions (3,616,932) (228,673,178)
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Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 228,261,800 237,018,566
Class B shares 34,867,846 129,732,029
Class C shares 67,312 --
Class Y shares 1,148,761 1,928,468
Reinvestment of distributions at net asset value
Class A shares 3,185,201 92,999,500
Class B shares 320,929 131,415,985
Class C shares 63 --
Class Y shares 4,601 101,495
Payments for redemptions
Class A shares (159,248,327) (237,597,022)
Class B shares (Note 2) (390,059,391) (470,361,360)
Class Y shares (1,110,073) (1,986,622)
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Increase (decrease) in net assets from capital
share transactions (282,561,278) (116,748,961)
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Total increase (decrease) in net assets (282,383,308) (193,557,262)
Net assets at beginning of period 2,376,609,194 2,570,166,456
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Net assets at end of period $2,094,225,886 $2,376,609,194
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Undistributed net investment income $ 1,311,110 $ 1,495,909
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See accompanying notes to financial statements.
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Notes to Financial Statements
AXP Equity Value Fund
(Unaudited as to Sept. 30, 2000)
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. AXP Strategy 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 invests in equity securities that
provide income, offer the opportunity for long-term capital appreciation, or
both.
Class C shares were offered to the public on June 26, 2000. Prior to this date,
American Express Financial Corporation (AEFC) purchased 190 shares of capital
stock, which represented the initial capital in Class C at $10.54 per share.
The Fund offers Class A, Class B, Class C 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 (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to a CDSC.
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.
The Fund'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 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 substantially 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,
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 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 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. 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 Equity Value Fund to the Lipper Large-Cap Value 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 adjustment decreased the fee by
$306,769 for the period.
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 $19.00
o Class B $20.00
o Class C $19.50
o Class Y $17.00
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 and Class C 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.
Sales charges received by the Distributor for distributing Fund shares were
$1,129,312 for Class A and $787,064 for Class B for the six months ended Sept.
30, 2000.
During the six months ended Sept. 30, 2000, the Fund's custodian and transfer
agency fees were reduced by $114,284 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 $592,603,591 and $766,481,182, respectively, for the six
months ended Sept. 30, 2000. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $9,909 for the
six months ended Sept. 30, 2000.
4. LENDING OF PORTFOLIO SECURITIES
As of Sept. 30, 2000, securities valued at $6,784,375 were on loan to brokers.
For collateral, the Fund received $5,175,000 in cash and U.S. government
securities valued at $2,200,630. Income from securities lending amounted to
$103,217 for the six months ended Sept. 30, 2000. 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, 2000
Class A Class B Class C* Class Y
Sold 21,265,607 3,239,002 6,201 106,145
Issued for reinvested distributions 300,873 30,784 6 435
Redeemed (14,738,410) (36,298,916) -- (102,778)
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Net increase (decrease) 6,828,070 (33,029,130) 6,207 3,802
------------------------------------------
* Inception date was June 26, 2000.
Year ended March 31, 2000
Class A Class B Class C Class Y
Sold 20,279,203 11,360,082 N/A 172,598
Issued for reinvested distributions 8,671,128 12,276,089 N/A 9,439
Redeemed (21,218,563) (41,190,787) N/A (178,621)
---------------------------------------------
Net increase (decrease) 7,731,768 (17,554,616) N/A 3,416
------------------------------------------
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 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
Sept. 30, 2000.
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 A
2000b 2000 1999 1998 1997
Net asset value, beginning of period $10.95 $11.32 $12.85 $11.62 $11.06
Income from investment operations:
Net investment income (loss) .04 .10 .17 .32 .29
Net gains (losses)
(both realized and unrealized) .02 .65 (.08) 3.30 1.70
Total from investment operations .06 .75 .09 3.62 1.99
Less distributions:
Dividends from net investment income (.04) (.09) (.17) (.30) (.31)
Distributions from realized gains -- (1.03) (1.45) (2.09) (1.12)
Total distributions (.04) (1.12) (1.62) (2.39) (1.43)
Net asset value, end of period $10.97 $10.95 $11.32 $12.85 $11.62
Ratios/supplemental data
Net assets, end of period (in millions) $1,038 $961 $906 $835 $426
Ratio of expenses to average
daily net assetsc .94%d .92% .87% .85% .89%
Ratio of net investment income (loss)
to average daily net assets .74%d .88% 1.39% 2.43% 2.60%
Portfolio turnover rate
(excluding short-term securities) 28% 59% 106% 95% 60%
Total returne .54% 6.87% 1.31% 33.62% 18.45%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Sept. 30, 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.
<PAGE>
Fiscal period ended March 31,
Per share income and capital changesa
Class B
2000b 2000 1999 1998 1997
Net asset value, beginning of period $10.94 $11.33 $12.85 $11.63 $11.07
Income from investment operations:
Net investment income (loss) -- .02 .07 .21 .21
Net gains (losses) (both realized
and unrealized) .02 .63 (.06) 3.30 1.69
Total from investment operations .02 .65 .01 3.51 1.90
Less distributions:
Dividends from net investment income -- (.01) (.08) (.20) (.22)
Distributions from realized gains -- (1.03) (1.45) (2.09) (1.12)
Total distributions -- (1.04) (1.53) (2.29) (1.34)
Net asset value, end of period $10.96 $10.94 $11.33 $12.85 $11.63
Ratios/supplemental data
Net assets, end of period (in millions) $1,055 $1,414 $1,663 $1,922 $1,509
Ratio of expenses to average daily
net assetsc 1.68%d 1.67% 1.62% 1.61% 1.64%
Ratio of net investment income (loss)
to average daily net assets (.02)%d .13% .65% 1.69% 1.83%
Portfolio turnover rate
(excluding short-term securities) 28% 59% 106% 95% 60%
Total returne .21% 6.03% .54% 32.61% 17.55%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Sept. 30, 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.
<PAGE>
Fiscal period ended March 31,
Per share income and capital changesa
Class C
2000b
Net asset value, beginning of period $10.37
Income from investment operations:
Net investment income (loss) .01
Net gains (losses) (both realized and unrealized) .58
Total from investment operations .59
Less distributions:
Dividends from net investment income (.01)
Distributions from realized gains --
Total distributions (.01)
Net asset value, end of period $10.95
Ratios/supplemental data
Net assets, end of period (in millions) $--
Ratio of expenses to average daily net assetsc 1.68%d
Ratio of net investment income (loss)
to average daily net assets (.35%)d
Portfolio turnover rate
(excluding short-term securities) 28%
Total returne 5.69%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was June 26, 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.
<PAGE>
Fiscal period ended March 31,
Per share income and capital changesa
Class Y
2000b 2000 1999 1998 1997
Net asset value, beginning of period $10.96 $11.34 $12.87 $11.64 $11.07
Income from investment operations:
Net investment income (loss) .05 .12 .18 .34 .32
Net gains (losses) (both realized
and unrealized) .03 .63 (.08) 3.29 1.70
Total from investment operations .08 .75 .10 3.63 2.02
Less distributions:
Dividends from net investment income (.05) (.10) (.18) (.31) (.33)
Distributions from realized gains -- (1.03) (1.45) (2.09) (1.12)
Total distributions (.05) (1.13) (1.63) (2.40) (1.45)
Net asset value, end of period $10.99 $10.96 $11.34 $12.87 $11.64
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $1 $--
Ratio of expenses to average daily
net assetsc .76%d .77% .78% .76% .71%
Ratio of net investment income
(loss) to average
daily net assets .88%d 1.02% 1.49% 2.10% 2.78%
Portfolio turnover rate
(excluding short-term securities) 28% 59% 106% 95% 60%
Total returne .70% 6.91% 1.40% 33.76% 18.67%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Sept. 30, 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.
<PAGE>
Investments in Securities
AXP Equity Value Fund
Sept. 30, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (99.1%)
Issuer Shares Value(a)
Aerospace & defense (1.4%)
Boeing 450,000 $28,350,000
Airlines (0.7%)
AMR 451,000(b) 14,742,063
Automotive & related (2.5%)
Delphi Automotive Systems 1,186,623 17,947,673
Ford Motor 646,824 16,372,733
TRW 457,800 18,598,124
Total 52,918,530
Banks and savings & loans (11.0%)
Bank of America 1,063,200 55,685,100
Bank of New York 710,000 39,804,375
FleetBoston Financial 1,015,100 39,588,900
Mellon Financial 845,000 39,186,875
Wells Fargo 1,217,700 55,938,093
Total 230,203,343
Beverages & tobacco (2.5%)
Anheuser-Busch 590,000 24,964,375
Philip Morris 930,000 27,376,875
Total 52,341,250
Building materials & construction (0.7%)
Martin Marietta Materials 400,000 15,312,000
Chemicals (2.2%)
Air Products & Chemicals 630,500 22,698,000
Dow Chemical 261,900 6,531,131
Du Pont (EI) de Nemours 402,500 16,678,594
Total 45,907,725
Communications equipment & services (1.1%)
Motorola 785,700 22,196,025
Computers & office equipment (4.4%)
Compaq Computer 500,000 13,790,000
Electronic Data Systems 204,000 8,466,000
Equant ADR 153,700(b,c) 5,638,869
First Data 290,000 11,328,125
Hewlett-Packard 102,000 9,894,000
Intl Business Machines 180,000 20,250,000
Solectron 510,000(b) 23,523,750
Total 92,890,744
Electronics (0.7%)
Natl Semiconductor 169,300(b) 6,814,325
Texas Instruments 160,000 7,550,000
Total 14,364,325
Energy (9.3%)
Chevron 655,000 55,838,750
Conoco Cl B 1,060,000 28,553,750
Exxon Mobil 909,206 81,032,984
Tosco 930,000 29,004,375
Total 194,429,859
Energy equipment & services (0.7%)
Halliburton 310,000 15,170,625
Financial services (12.8%)
Capital One Financial 565,000 39,585,313
Citigroup 1,540,000 83,256,249
Fannie Mae 235,000 16,802,500
Lehman Brothers Holdings 180,000 26,595,000
Morgan Stanley, Dean Witter,
Discover & Co 520,000 47,547,500
Providian Financial 421,900 53,581,300
Total 267,367,862
Food (2.6%)
General Mills 745,100 26,451,050
Hershey Foods 510,000 27,603,750
Total 54,054,800
Health care (7.2%)
American Home Products 400,000 22,625,000
Baxter Intl 308,400 24,614,175
Bristol-Myers Squibb 370,000 21,136,250
Guidant 466,200(b) 32,954,512
Pharmacia 415,000 24,977,813
Watson Pharmaceuticals 371,000(b) 24,068,625
Total 150,376,375
Household products (2.0%)
Colgate-Palmolive 434,700 20,517,840
Kimberly-Clark 390,000 21,766,875
Total 42,284,715
Industrial equipment & services (2.2%)
Illinois Tool Works 470,400 26,283,600
Parker-Hannifin 590,000 19,912,500
Total 46,196,100
Insurance (5.7%)
American Intl Group 817,500 78,224,531
Marsh & McLennan 310,400 41,205,600
Total 119,430,131
Leisure time & entertainment (1.6%)
Disney (Walt) 465,000 17,786,250
Viacom Cl B 255,000(b) 14,917,500
Total 32,703,750
Media (0.1%)
Adelphia Communications Cl A 97,000(b) 2,673,563
Miscellaneous (2.8%)
Stilwell Financial 1,331,600(b) 57,924,600
Multi-industry conglomerates (1.9%)
Minnesota Mining & Mfg 150,300 13,696,088
Tyco Intl 496,000(c) 25,730,000
Total 39,426,088
Paper & packaging (0.8%)
Intl Paper 552,900 15,861,319
Real estate investment trust (0.5%)
Pinnacle Holdings 416,400(b) 11,086,650
Retail (6.2%)
Best Buy 345,000(b) 21,950,625
Costco Wholesale 533,300(b) 18,632,169
Gap 671,650 13,516,956
Kroger 1,005,000(b) 22,675,313
Safeway 570,000(b) 26,611,875
TJX Companies 1,210,000 27,225,000
Total 130,611,938
Transportation (0.6%)
Burlington Northern Santa Fe 625,000 13,476,563
Utilities -- electric (3.5%)
Dominion Resources 325,000 18,870,313
Duke Energy 365,000 31,298,750
PPL 122,000 5,093,500
Reliant Energy 410,000 19,065,000
Total 74,327,563
Utilities -- gas (1.9%)
Coastal 354,600 26,284,725
Dynegy Cl A 240,000 13,680,000
Total 39,964,725
Utilities -- telephone (9.5%)
ALLTEL 106,700 5,568,406
AT&T 940,000 27,612,500
AT&T - Liberty Media Group Cl A 870,000(b) 15,660,000
AT&T Wireless Group 645,000(b,e) 13,464,375
BellSouth 892,400 35,919,099
Intermedia Communications 12,226(b) 360,667
NTT DoCoMo 360(c) 10,327,596
SBC Communications 389,860 19,493,000
Sprint (PCS Group) 120,000(b) 4,207,500
Telefonica de Espana ADR 73,700(b,c) 4,380,544
Telefonos de Mexico ADR Cl L 80,000(c) 4,255,000
Verizon 730,000 35,359,375
WorldCom 735,000(b) 22,325,625
Total 198,933,687
Total common stocks
(Cost: $1,822,487,784) $2,075,526,918
Preferred stocks (0.7%)
Issuer Shares Value(a)
Cox Communications
7.00% Cm Cv PRIDES 127,800(f) $6,837,300
Global Crossing
6.38% (U.S. Dollar) Cm Cv 20,900(c,d) 1,805,238
Global TeleSystems Group
7.25% Cm Cv 135,000 1,400,625
Intermedia Communications
7.00% Cm Cv Series F 228,000 5,215,500
Total preferred stocks
(Cost: $22,606,404) $15,258,663
Bond (0.1%)
Coupon Principal Value(a)
Issuer rate amount
NTL
Cv Sub Nts
12-15-09 5.75% $2,300,000(d) $1,542,886
Total bond
(Cost: $2,427,969) $1,542,886
Short-term securities (0.3%)
Annualized Amount Value(a)
yield on date payable at
Issuer of purchase maturity
U.S. government agencies
Federal Home Loan Bank Disc Nts
10-11-00 6.40% $700,000 $698,460
10-13-00 6.43 300,000 299,252
11-17-00 6.45 2,700,000 2,676,516
Federal Home Loan Mtge Corp Disc Nts
10-10-00 6.42 200,000 199,609
10-31-00 6.46 1,000,000 994,293
11-07-00 6.45 500,000 496,528
Federal Natl Mtge Assn Disc Nt
10-16-00 6.42 200,000 199,396
Total short-term securities
(Cost: $5,565,100) $5,564,054
Total investments in securities
(Cost: $1,853,087,257)(g) $2,097,892,521
See accompanying notes to investments in securities.
<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, 2000,
the value of foreign securities represented 2.49% 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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(f) 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.
(g) At Sept. 30, 2000, the cost of securities for federal income tax purposes
was approximately $1,853,087,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $408,506,000
Unrealized depreciation (163,700,000)
------------
Net unrealized appreciation $244,806,000
------------
<PAGE>
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AMERICAN EXPRESS
S-6481 G (11/00)
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.