AXPSM
Equity Value
Fund
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
(icon of) magnifying glass
AXP Equity Value Fund seeks to provide shareholders with growth of capital and
income.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
AMERICAN
EXPRESS (logo)
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Stocks for the
Bargain-hunter
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.
AXP EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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Table of Contents
2000 ANNUAL REPORT
The purpose of this annual report is to tell
investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
The 10 Largest Holdings 7
Making the Most of the Fund 8
The Fund's Long-term Performance 9
Independent Auditors' Report 10
Financial Statements 11
Notes to Financial Statements 14
Investments in Securities 20
Federal Income Tax Information 27
2000 PROSPECTUS
The prospectus, which is bound into the
middle of this annual report, describes the
Fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 5p
Past Performance 6p
Fees and Expenses 8p
Management 9p
Buying and Selling Shares 9p
Valuing Fund Shares 9p
Investment Options 10p
Purchasing Shares 11p
Transactions through Third Parties 14p
Sales Charges 14p
Exchanging/Selling Shares 18p
Distributions and Taxes 23p
Other Information 25p
Financial Highlights 26p
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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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 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 annual report contains other valuable
information as well. The Fund's prospectus describes its investment objectives
and how it intends to achieve those objectives. As experienced investors know,
information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
Arne H. Carlson
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
From the Portfolio Manager
Value stocks remained largely out of favor with investors during the past 12
months, tempering the performance of AXP Equity Value Fund. Still, the Fund
produced a positive result for the fiscal year -- April 1999 through March 2000
-- as its Class A shares generated a total return (excluding the sales charge)
of 6.87%.
AXP EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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(A portion of the Fund's 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.)
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. But by the third quarter of 1999, with long-term
interest rates up substantially and fear of potentially higher inflation in the
air, growth stocks began markedly outperforming value issues.
TECH LEADS TURNAROUND
By mid-fall, reports of still-tame inflation and good corporate profits had
calmed investors' nerves, and growth stocks were still moving forward. The
advance soon gained additional support from excitement about the potential of
the Internet, which sent growth stocks soaring through the end of 1999 and into
early January. At that point, renewed concerns about interest rates caused
stocks to retreat for several weeks, before rebounding in March.
While the Fund did participate in the market's upturns during the 12 months, it
was restrained by investors' ongoing preference for growth stocks, particularly
high-flying technology-related issues -- quite the opposite of the value
emphasis of the Fund.
Looking at the Fund's holdings, the biggest areas of investment were financial
services (including banks and insurance companies), utilities and industrials.
Concerns about rising interest rates (the Fed increased rates four times during
the fiscal year) put pressure on financials and utilities for much of the
period. Industrials experienced mixed results. Overall, the brightest spots for
the Fund were energy, which benefited from higher oil prices, and technology.
As the new fiscal year begins, I think it's worth noting that value stocks
rebounded nicely in March, when the Fund was up close to 10%. While it's far too
early to say that the nature of the market has changed, the March upturn could
indicate the market is beginning to broaden out -- that is, to focus on sectors
other than a relatively small group of Internet-related, momentum-driven stocks.
If so, the Fund would likely enjoy improved performance in the months ahead.
Kurt Winters
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $10.95
March 31, 1999 $11.32
Decrease $ 0.37
Distributions -- April 1, 1999 - March 31, 2000
From income $ 0.38
From capital gains $ 0.74
Total distributions $ 1.12
Total return* +6.87%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $10.94
March 31, 1999 $11.33
Decrease $ 0.39
Distributions -- April 1, 1999 - March 31, 2000
From income $ 0.30
From capital gains $ 0.74
Total distributions $ 1.04
Total return* +6.03%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $10.96
March 31, 1999 $11.34
Decrease $ 0.38
Distributions -- April 1, 1999 - March 31, 2000
From income $ 0.39
From capital gains $ 0.74
Total distributions $ 1.13
Total return* +6.91%**
*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.
AXP EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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The 10 Largest Holdings
Percent Value
(of net assets) (as of March 31, 2000)
Citigroup 4.65% $110,463,599
American Intl Group 3.84 91,344,900
Exxon Mobil 2.98 70,747,591
Kansas City Southern Inds 2.91 69,110,938
Chevron 2.70 64,105,406
AT&T 2.42 57,560,624
Bank of America 2.27 53,916,238
Wells Fargo 1.80 42,685,531
Morgan Stanley, Dean Witter, Discover & Co 1.78 42,412,500
BellSouth 1.76 41,942,799
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 27.11% of net assets
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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Making the Most of the Fund
BUILD YOUR ASSETS SYSTEMATICALLY
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares fall or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Jan Feb Mar Apr May Jun
$15 $16 $18 $20
$10 $10 $12 $14
$ 5
Accumulated shares* Average market Your average
price per share cost per share
42.25 $15 $14.20
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $8 $10
$ 5 $5 $5
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $6 $7
$ 5 $4 $4
Accumulated shares* Average market Your average
price per share cost per share
103.5 $6.50 $5.80
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$100 invested per month. Total invested: $600
*Shares purchased is determined by dividing the amount invested per month by the
current share price.
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by the Fund
exceed losses
o you receive income when the Fund's stock dividends, interest and short-term
gains exceed its expenses.
All three make up your total return. You potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another fund.
AXP EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
How $10,000 has growth in AXP Equity Value Fund
S&P 500 Index X
$50,000
Russell 1000 Value Index
X
$40,000
X
Lipper Large-Cap Value Index X
$30,000 $34,756
AXP Equity
Value Fund
$20,000 Class B
(The printed version of this chart contains a line graph
with four lines corresponding to the three Indexes and
Fund noted above.)
$10,000
4/1/90 3/91 3/92 3/93 3/94 3/95 3/96 3/97 3/98 3/99 3/00
Average annual total returns (as of March 31, 2000)
1 year Since inception (A &Y) 5 years 10 years (B)
Class A +0.72% +15.60%* +15.31% --%
Class B +2.17% --% +15.68% +13.27%
Class Y +6.91% +17.12%* 16.82% --%
*Inception date was March 20, 1995.
Assumes: Holding period from 4/1/90 to 3/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $20,941. Also see "Past Performance"
in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to three
widely cited performance indexes, the Standard & Poor's 500 Index (S&P 500
Index), the Russell 1000(R) Value Index, and the Lipper Large-Cap Value Index.
Sales charges are not reflected in the performance of the indexes.
Your investment and return values fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Average annual total return
figures reflect the impact of the applicable sales charge up to a maximum of
5.75%. This was a period of widely fluctuating security prices. Past performance
is no guarantee of future results.
Standard & Poor's 500 Index, an unmanaged list of common stocks, is frequently
used as a general measure of market performance. The index reflects reinvestment
of all distributions and changes in market prices, but excludes brokerage
commissions or other fees. However, the S&P500 companies may be generally larger
than those in which the Fund invests.
Russell 1000 Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
Lipper Large-Cap Value Index, an unmanaged index published by Lipper Inc.,
includes the 30 largest funds that are generally similar to the Fund, although
some funds in the index may have somewhat different investment policies or
objectives.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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The financial statements contained in Post-Effective Amendment #37 to
Registration Statement No. 2-89288 filed on or about May 16, 2000, are
incorporated herein by reference.
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Federal Income Tax Information
(Unaudited)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Equity Value Fund, Inc.
Fiscal year ended March 31, 2000
Class A
Income distributions taxable as dividend income, 100% qualifying for deduction
by corporations.
Payable date Per share
June 24, 1999 $0.03173
Sept. 23, 1999 0.01922
Dec. 22, 1999 0.31521
March 24, 2000 0.00889
Total $0.37505
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.74169
Total distributions $1.11674
The distribution of $1.05690 per share, payable Dec. 22, 1999, consisted of
$0.02771 from net investment income, $0.28750 from net short-term capital gains
(a total of $0.31521 taxable as dividend income) and $0.74169 from net long-term
capital gains.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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Class B
Income distributions taxable as dividend income, 100% qualifying for deductions
by corporations.
Payable date Per share
June 24, 1999 $0.00890
Dec. 22, 1999 0.29330
Total $0.30220
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.74169
Total distributions $1.04389
The distribution of $1.03499 per share, payable Dec. 22, 1999, consisted of
$0.00580 from net investment income, $0.28750 from net short-term capital gains
(a total of $0.29330 taxable as dividend income) and $0.74169 from net long-term
capital gains.
Class Y
Income distributions taxable as dividend income, 100% qualifying for deduction
by corporations.
Payable date Per share
June 24, 1999 $0.03471
Sept. 23, 1999 0.02378
Dec. 22, 1999 0.32006
March 24, 2000 0.01336
Total $0.39191
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.74169
Total distributions $1.13360
The distribution of $1.06175 per share, payable Dec. 22, 1999, consisted of
$0.03256 from net investment income, $0.28750 from net short-term capital gains
(a total of $0.32006 taxable as dividend income) and $0.74169 from net long-term
capital gains.
AXP EQUITY VALUE FUND (This annual report is not part of the prospectus.)
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American
Express(R)
Funds
AXP Equity Value Fund
200 AXP Financial Center
Minneapolis, MN 55474
AMERICAN
EXPRESS (logo)
S-6382 J (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.
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) There are pictures, icons 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
