IDS Managed
Allocation
Fund
1999 SEMIANNUAL REPORT
(icon of) magnifying glass
The goal of IDS Managed Allocation Fund, a part of IDS Managed Retirement Fund,
Inc., is to maximize total return through a combination of growth of capital and
current income.
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
<PAGE>
Going Where the Action Is
Today's investment marketplace is changing faster than ever. The key is to be in
the right place at the right time. Managed Allocation Fund has that potential
because it has the flexibility to make sweeping shifts in its asset mix to take
advantage of expected trends in financial markets. While the focus historically
has been on U.S. stocks, the Portfolio can also hold foreign stocks, as well as
domestic and foreign bonds, plus cash-equivalent investments. For investors,
such flexibility can mean opportunity.
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
From the Chairman
It is an honor for me to join the IDS Mutual Fund Group as chairman of the board
and chief executive officer for each of the funds. I have served for the past
eight years as governor of Minnesota and also for the past 20 years as a
constitutional officer responsible for the pension investments made on behalf of
government employees. My responsibility in the upcoming years is to serve your
interests.
By law, half the members of a mutual fund board must be independent of their
investment manager and distributor. I am one of those persons. I am not an
employee of American Express Financial Corporation (AEFC), nor do I own stock in
American Express Company. Both are fine companies, but the law clearly states
that to fully represent your interests I must be independent.
Having said that, I have a great deal of respect for the capabilities of AEFC
and for the services it provides to investors. Your financial advisor assists
you in financial planning, conducts regular investment reviews and responds to
your questions and needs. This is a very personal service that makes AEFC a
partner in your financial future. I know that AEFC has an investment focus on
the long-term performance of our economy and that it wants you to participate in
that growth. Consistent with that, our board is here to serve you and represent
your interests in a professional manner.
Arne H. Carlson
(picture of) Steven Merrell
Steven Merrell
Portfolio manager
From the Portfolio Manager
Strong recoveries by U.S. stocks, as well as high-yield and emerging-market
bonds, led to a productive six months for IDS Managed Allocation Fund. For the
first half of the fiscal year -- October 1998 through March 1999 -- the Fund's
Class A shares generated a total return of 13.82%. (A portion of the return came
in the form of a capital gain that was paid to shareholders in December 1998 and
reduced the Fund's net asset value by the same amount at that time.)
The period began with U.S. stocks trying to shake off the effects of a
late-summer decline that drove the market down by nearly 20%. But soon, in
another display of the remarkable resilience it has shown in recent years, the
market was on its way to making up the lost ground. Supported by three
reductions in short-term interest rates by the Federal Reserve and ongoing
strength of the economy, the advance turned into a spectacular rally that sent
the market to an all-time high by late March. The run-up was led by
large-capitalization stocks, which worked to the Fund's benefit as the major
portion of its investments (more than 50% by period-end) was in that sector.
BONDS MAKE SOLID CONTRIBUTION
On the bond side, an increase in long-term interest rates hindered the
performance of U.S. Treasury bonds. But corporate bonds, especially high-yield
issues, and emerging-market bonds, especially Russian issues, rebounded sharply
during the final three months of the period. Although they made up a relatively
small portion of the Fund's total investments (about 12%), high-yield and
emerging-market bonds' strong performance had a distinctly positive effect on
the Fund's return.
Looking more closely at the asset allocation, we modestly increased the exposure
to stocks (from about 60% to 65%) late in 1998. The shift included the addition
of some small-capitalization issues, whose low prices offered good investment
value. We also brought the level of cash reserves down during the six months
(from about 10% to less than 4%), as we believed the investment environment,
especially for U.S. stocks, was improving. Stock investments in major foreign
markets stayed in the 7% to 10% range.
As for what the second half of the fiscal year might hold, at this point
(mid-April), the global investment environment appears more healthy than it was
several months ago, thanks to the abatement of financial crises in several
smaller economies. In the U.S., the favorable factors of low inflation,
relatively stable long-term interest rates and a still-growing economy remain in
place. While that certainly doesn't guarantee positive results from financial
assets, the view of our portfolio management team is that U.S. stocks and bonds
are still the best places to be, and we continue to position the portfolio
accordingly.
Steven Merrell
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $10.54
Sept. 30, 1998 $10.34
Increase $ 0.20
Distributions -- Oct. 1, 1998 - March 31, 1999
From income $ 0.31
From capital gains $ 0.89
Total distribution $ 1.20
Total return* +13.82%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $10.47
Sept. 30, 1998 $10.29
Increase $ 0.18
Distributions -- Oct. 1, 1998 - March 31, 1999
From income $ 0.27
From capital gains $ 0.89
Total distribution $ 1.16
Total return* +13.38%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 1999 $10.53
Sept. 30, 1998 $10.34
Increase $ 0.19
Distributions -- Oct. 1, 1998 - March 31, 1999
From income $ 0.32
From capital gains $ 0.89
Total distribution $ 1.21
Total return* +13.86%**
*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, 1999)
U.S. Treasury 1.99% $51,966,239
6.13% 2027
Microsoft 1.82 47,375,774
Intl Business Machines 1.58 41,157,449
General Electric 1.39 36,113,326
U.S. Treasury 1.25 32,610,345
6.75% 2000
Wal-Mart Stores 1.19 31,011,874
Intel 1.14 29,674,037
General Motors 1.06 27,513,312
AT&T 0.99 25,819,343
Bank One 0.97 25,326,657
For further detail about these holdings, please refer to the section entitled
"Investments in Securities" herein.
(picture of) pie chart
The 10 holdings listed here
make up 13.38% of net assets
<PAGE>
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<CAPTION>
Financial Statements
Statement of assets and liabilities
IDS Managed Allocation Fund
March 31, 1999 (Unaudited)
Assets
<S> <C>
Investment in Total Return Portfolio (Note 1) $2,605,961,093
--------------
Liabilities
Accrued distribution fee 5,421
Accrued service fee 12,397
Accrued transfer agency fee 9,830
Accrued administrative services fee 2,281
Other accrued expenses 63,916
------
Total liabilities 93,845
------
Net assets applicable to outstanding capital stock $2,605,867,248
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,475,005
Additional paid-in capital 2,407,318,895
Undistributed net investment income 3,901,197
Accumulated net realized gain (loss) 6,919,881
Unrealized appreciation (depreciation) on investments 185,252,270
-----------
Total -- representing net assets applicable to outstanding capital stock $2,605,867,248
==============
Net assets applicable to outstanding shares: Class A $2,240,833,942
Class B $ 261,370,042
Class Y $ 103,663,264
Net asset value per share of outstanding capital stock:Class A shares 212,696,719 $ 10.54
Class B shares 24,963,653 $ 10.47
Class Y shares 9,840,158 $ 10.53
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Managed Allocation Fund
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 8,327,863
Interest 44,282,349
Less foreign taxes withheld (67,133)
-------
Total income 52,543,079
----------
Expenses (Note 2):
Expenses allocated from Total Return Portfolio 6,032,224
Distribution fee-- Class B 989,015
Transfer agency fee 1,498,698
Incremental transfer agency fee
Class A 98,972
Class B 30,856
Service fee
Class A 1,983,787
Class B 229,122
Class Y 50,340
Administrative services fees and expenses 426,424
Compensation of board members 6,739
Postage 280,621
Registration fees 67,300
Reports to shareholders 47,830
Audit fees 4,875
Other 9,275
-----
Total expenses 11,756,078
Earnings credits on cash balances (Note 2) (70,443)
-------
Total net expenses 11,685,635
----------
Investment income (loss) -- net 40,857,444
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 18,824,310
Financial futures contracts 10,923,669
Foreign currency transactions (2,890,473)
Options contracts written (13,936,490)
-----------
Net realized gain (loss) on investments 12,921,016
Net change in unrealized appreciation (depreciation) on investments
and on translations of assets and liabilities in foregn currencies 290,319,475
-----------
Net gain (loss) on investments and foreign currencies 303,240,491
-----------
Net increase (decrease) in net assets resulting from operations $344,097,935
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Managed Allocation Fund
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 40,857,444 $ 90,130,092
Net realized gain (loss) on investments 12,921,016 266,056,396
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 290,319,475 (447,425,901)
----------- ------------
Net increase (decrease) in net assets resulting from operations 344,097,935 (91,239,413)
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (34,666,408) (79,898,680)
Class B (3,027,764) (6,541,547)
Class Y (1,599,103) (3,760,874)
Net realized gain
Class A (213,025,397) (314,653,758)
Class B (24,584,424) (30,968,697)
Class Y (9,468,549) (14,757,922)
Excess distributions of net investment income
Class A -- (124,284)
Class B -- (14,043)
Class Y -- (5,293)
---- ------
Total distributions (286,371,645) (450,725,098)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 46,244,113 140,890,845
Class B shares 18,301,451 64,808,657
Class Y shares 10,601,765 26,541,231
Reinvestment of distributions at net asset value
Class A shares 244,174,264 390,187,799
Class B shares 27,429,806 37,296,108
Class Y shares 11,067,652 18,087,773
Payments for redemptions
Class A shares (332,962,020) (466,079,730)
Class B shares (Note 2) (40,680,273) (42,813,659)
Class Y shares (15,054,793) (46,229,433)
----------- -----------
Increase (decrease) in net assets from capital share transactions (30,878,035) 122,689,591
----------- -----------
Total increase (decrease) in net assets 26,848,255 (419,274,920)
Net assets at beginning of period 2,579,018,993 2,998,293,913
------------- -------------
Net assets at end of period $2,605,867,248 $2,579,018,993
============== ==============
Undistributed net investment income $ 3,901,197 $ 2,337,028
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
IDS Managed Allocation Fund
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of IDS Managed Retirement Fund, 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 that can be allocated among the separate series as designated by
the board.
The Fund offers Class A, Class B and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, 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.
Investment in Total Return Portfolio
The Fund invests all of its assets in Total Return 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. This was accomplished by transferring
the Fund's assets to the Portfolio in return for a proportionate ownership
interest in the Portfolio. Total Return Portfolio seeks to provide shareholders
maximum total return through a combination of growth of capital and current
income.
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, 1999 was 99.97%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolio's "Notes to financial statements" (included elsewhere in this report).
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to the shareholders. No provision for income or excise taxes is
thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar quarter,
are reinvested in additional shares of the Fund at net asset value or payable in
cash. Capital gains, when available, are distributed along with the last income
dividend of the calendar year.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund entered into 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. 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 $15
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. Effective April 1, 1999, the annual rate per shareholder
account will change to $17 for Class Y.
The Fund entered into agreements with American Express Financial Advisors Inc.
for distribution and shareholder services. Under a Plan and Agreement of
Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the
Fund's average daily net assets attributable to Class B shares for distribution
services.
Under a Shareholder Service Agreement, the Fund pays a fee for service provided
to shareholders by financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of the Fund's average daily net assets
attributable to Class A and Class B shares and 0.10% of the Fund's average daily
net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $1,118,177 for Class A and $133,493 for Class B
for the six months ended March 31, 1999.
During the six months ended March 31, 1999, the Fund's transfer agency fees were
reduced by $70,443 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, 1999
Class A Class B Class Y
Sold 4,351,988 1,732,396 998,091
Issued for reinvested distributions 23,749,337 2,685,462 1,076,495
Redeemed (31,247,337) (3,841,969) (1,427,477)
----------- ---------- ----------
Net increase (decrease) (3,146,012) 575,889 647,109
Year ended Sept. 30, 1998
Class A Class B Class Y
Sold 12,019,432 5,553,683 2,273,079
Issued for reinvested distributions 35,728,238 3,440,868 1,698,051
Redeemed (39,972,980) (3,711,733) (4,098,272)
----------- ---------- ----------
Net increase (decrease) 7,774,690 5,282,818 (127,142)
4. BANK BORROWINGS
The Fund entered into 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 IDS 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, 1999.
<PAGE>
<TABLE>
<CAPTION>
5. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class A
1999b 1998 1997 1996c 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.34 $12.68 $12.20 $12.19 $11.29
Income from investment operations:
Net investment income (loss) .17 .37 .32 .24 .21
Net gains (losses) (both realized and unrealized) 1.23 (.79) 1.97 .58 1.65
Total from investment operations 1.40 (.42) 2.29 .82 1.86
Less distributions:
Dividends from net investment income (.17) (.37) (.32) (.23) (.16)
Distributions from realized gains (1.03) (1.55) (1.49) (.58) (.80)
Total distributions (1.20) (1.92) (1.81) (.81) (.96)
Net asset value, end of period $10.54 $10.34 $12.68 $12.20 $12.19
Ratios/supplemental data
Class A
1999b 1998 1997 1996c 1995
Net assets, end of period (in millions) $2,241 $2,233 $2,639 $2,523 $2,602
Ratio of expenses to average daily net assetsd .81%e .80% .84% .80%e .83%
Ratio of net investment income (loss)
to average daily net assets 3.14%e 3.13% 2.55% 2.29%e 1.85%
Portfolio turnover rate
(excluding short-term securities) 43% 122% 99% 142% 90%
Total returnf 13.82% (3.73%) 20.79% 7.13% 17.97%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31 ,1999 (Unaudited).
c The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
d Effective fiscal year 1996, 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>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Sept. 30,
Per share income and capital changesa
Class B Class Y
1999b 1998 1997 1996c 1995d 1999b 1998 1997 1996c 1995d
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $10.29 $12.63 $12.15 $12.16 $10.41 $10.34 $12.68 $12.20 $12.19 $10.41
Income from investment operations:
Net investment
income (loss) .13 .29 .23 .15 .11 .18 .38 .33 .26 .16
Net gains (losses)
(both realized and
unrealized) 1.21 (.79) 1.97 .57 1.74 1.22 (.79) 1.97 .58 1.76
Total from investment
operations 1.34 (.50) 2.20 .72 1.85 1.40 (.41) 2.30 .84 1.92
Less distributions:
Dividends from net
investment income (.13) (.29) (.23) (.15) (.10) (.18) (.38) (.33) (.25) (.14)
Distributions from
realized gains (1.03) (1.55) (1.49) (.58) -- (1.03) (1.55) (1.49) (.58) --
Total distributions (1.16) (1.84) (1.72) (.73) (.10) (1.21) (1.93) (1.82) (.83) (.14)
Net asset value, end
of period $10.47 $10.29 $12.63 $12.15 $12.16 $10.53 $10.34 $12.68 $12.20 $12.19
Ratios/supplemental data
Class B Class Y
1999b 1998 1997 1996c 1995d 1999b 1998 1997 1996c 1995d
Net assets, end of
period (in millions) $261 $251 $241 $163 $75 $104 $95 $118 $113 $115
Ratio of expenses to
average daily
net assetse 1.58%f 1.56% 1.60% 1.57%f 1.58%f .73%f .72% .71% .63%f .65%f
Ratio of net investment
income (loss) to average
daily net assets 2.38%f 2.40% 1.82% 1.61%f .94%f 3.22%f 3.20% 2.69% 2.45%f 1.95%f
Portfolio turnover rate
(excluding short-term
securities) 43% 122% 99% 142% 90% 43% 122% 99% 142% 90%
Total returng 13.38% (4.46%) 19.87% 6.45% 17.70% 13.86% (3.65%) 20.94% 7.28% 18.40%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 1999 (Unaudited).
c The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
d Inception date was March 20, 1995.
e Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
f Adjusted to an annual basis.
g Total return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Total Return Portfolio
March 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1):
Investment in securities of unaffiliated issuers (identified cost
<S> <C>
$2,439,266,507) $2,624,362,328
Investment in securities of affiliated issuers
(identified cost $1,086,453) 1,271,338
---------- ---------
Total investments in securities (identified cost $2,440,352,960) 2,625,633,666
Dividends and accrued interest receivable 19,777,328
Receivable for investment securities sold 15,674,825
U. S. government securities held as collateral for securities loaned (Note 5) 13,033,920
----------
Total assets 2,674,119,739
-------------
Liabilities
Disbursements in excess of cash on demand deposit 2,711,710
Payable upon return of securities loaned (Note 5) 54,023,620
Payable for investment securities purchased 10,466,532
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 1,976
Accrued investment management services fee 35,212
Other accrued expenses 129,700
-------
Total liabilities 67,368,750
----------
Net assets $2,606,750,989
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Total Return Portfolio
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 8,330,258
Interest 44,295,322
Less foreign taxes withheld (67,153)
-------
Total income 52,558,427
----------
Expenses (Note 2):
Investment management services fee 5,575,723
Compensation of board members 8,598
Custodian fees 404,440
Audit fees 14,625
Other 35,823
------
Total expenses 6,039,209
Earnings credits on cash balances (Note 2) (5,261)
------
Total net expenses 6,033,948
---------
Investment income (loss) -- net 46,524,479
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (including $13,217,642 realized loss on investments
of affiliated issuers) (Note 3) 18,828,980
Financial futures contracts 10,926,690
----------
Foreign currency tranactions (2,891,333)
Options contracts written (13,940,329)
-----------
Net realized gain (loss) on investments 12,924,008
Net change in unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 290,401,443
-----------
Net gain (loss) on investments 303,325,451
-----------
Net increase (decrease) in net assets resulting from operations $349,849,930
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Total Return Portfolio
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 46,524,479 $ 101,362,151
Net realized gain (loss) on investments 12,924,008 266,111,907
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 290,401,443 (447,531,928)
----------- ------------
Net increase (decrease) in net assets resulting from operations 349,849,930 (80,057,870)
Net contributions (withdrawals) from partners (322,910,696) (339,337,021)
------------ ------------
Total increase (decrease) in net assets 26,939,234 (419,394,891)
Net assets at beginning of period 2,579,811,755 2,999,206,646
------------- -------------
Net assets at end of period $2,606,750,989 $2,579,811,755
============== ==============
See accompanying notes to financial statements.
</TABLE>
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Notes to Financial Statements
Total Return Portfolio
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Total Return 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. Total Return
Portfolio seeks to provide maximum total return through a combination of growth
of capital and current income by investing in U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. 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.
Illiquid securities
As of March 31, 1999, investments in securities included issues that are
illiquid. The Portfolio currently limits investments in illiquid securities to
10% of net assets, at market value, at the time of purchase. The aggregate value
of such securities as of March 31, 1999 was $3,543,750 representing 0.14% of net
assets. Pursuant to guidelines adopted by the board, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
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 entered into an Investment Management
Services Agreement with AEFC for managing 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 0.40% annually. The fees may be increased or decreased
by a performance adjustment based on a comparison of the performance of Class A
shares of IDS Managed Allocation Fund to the Lipper Flexible Portfolio Fund
Index. The maximum adjustment is 0.08% of the Portfolio's average daily net
assets on an annual basis. The adjustment decreased the fee by $919,386 for the
six months ended March 31, 1999.
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, 1999, the Portfolio's custodian fees were
reduced by $5,261 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 $1,099,336,800 and $1,032,553,618, respectively, for the
six months ended March 31, 1999. For the same period, the portfolio turnover
rate was 43%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $62,721 for the
six months ended March 31, 1999.
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4. FOREIGN CURRENCY CONTRACTS
As of March 31, 1999, the Portfolio had entered into foreign currency exchange
contracts that obligate it to deliver currencies at specified future dates. The
unrealized appreciation and/or depreciation on these contracts is included in
the accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
<S> <C> <C> <C> <C>
April 1, 1999 246,804 265,438 $-- $1,296
European Monetary Unit U.S. Dollar
April 7, 1999 572,143 923,181 -- 544
British Pound U.S. Dollar
April 8, 1999 257,417 415,464 -- 136
British Pound U.S. Dollar
Total $-- $1,976
5. LENDING OF PORTFOLIO SECURITIES
As of March 31, 1999, securities valued at $52,456,563 were on loan to brokers.
For collateral, the Portfolio received $40,989,700 in cash and U.S. government
securities valued at $13,033,920. Income from securities lending amounted to
$152,993 for the six months ended March 31, 1999. 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.
6. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended March 31, 1999
Puts
Contracts Premium
Balance Sept. 30, 1998 1,750 $6,263,389
Closed (1,750) (6,263,389)
------ ----------
Balance March 31, 1999 -- $ --
See "Summary of significant accounting policies."
7. STOCK INDEX FUTURES CONTRACTS
Investments in securities as of March 31, 1999, included securities valued at
$15,152,987 that were pledged as collateral to cover initial margin deposits on
204 open purchase contracts. The market value of the open purchase contracts as
of March 31, 1999 was $65,958,300 with a net unrealized gain of $53,551. See
"Summary of significant accounting policies."
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Investments in Securities
Total Return Portfolio
March 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (63.8%)
Issuer Shares Value(a)
Aerospace & defense (0.4%)
<S> <C> <C>
Alliant Techsystems 13,500(b) $1,048,781
AlliedSignal 79,900 3,930,081
Goodrich (BF) 149,200 5,119,426
Total 10,098,288
Airlines (0.3%)
America West Holdings Cl B 22,000(b) 419,375
Amtran 24,400(b) 463,600
Comair Holdings 18,300 432,338
Qantas Airways 341,529(c) 902,490
SkyWest 18,200 525,525
Southwest Airlines 157,550 4,765,887
Total 7,509,215
Automotive & related (2.5%)
Dana 226,200 8,595,600
Ford Motor 394,500 22,387,874
General Motors 316,700 27,513,312
Gentex 64,300(b) 1,386,469
Myers Inds 39,000 838,500
Smith (AO) 38,200 725,800
Standard Motor Products 16,400 339,275
Tower Automotive 46,900(b) 873,513
Toyota Motor 65,000(c) 1,882,784
Total 64,543,127
Banks and savings & loans (5.5%)
Advest Group 27,800 514,300
Anchor Bancorp Wisconsin 30,000 461,250
Banca Intesa 921,116(b,c) 5,435,413
Bank of New York 169,200 6,080,625
Bank One 459,962 25,326,657
BankAmerica 317,465 22,420,965
Banque Natl de Paris 55,616(b,c) 4,844,626
Bayerische Vereinsbank 2,261(b,c) 135,374
Chase Manhattan 100,100 8,139,381
Credito Italiano 1,197,661(b,c) 6,471,921
Cullen/Frost Bankers 29,000 1,390,188
Dime Community Bancshares 27,300 626,194
First Financial Holdings 20,300 365,400
FirstMerit 57,100 1,470,325
Flagstar Bancorp 19,400 514,100
Gold Banc 29,800 443,275
HUBCO 25,200 845,775
Instituto Bancario San Paolo di Torino 386,885(c,h) 6,292,801
MAF Bancorp 26,700 594,075
NBT Bancorp 18,200 379,925
Nordbanken Holding 479,889(b,c) 2,746,213
Oversea-Chinese Banking 378,000(b,c) 2,561,593
Overseas Union Bank 713,000(b,c) 2,519,172
Provident Bankshares 14,700 384,038
Queens County Bancorp 30,800 831,600
Reliance Bancorp 19,700 566,375
Republic Bancorp 47,500 617,500
Southwest Bancorp of Texas 42,700(b) 525,744
State Street 72,300 5,942,156
Sterling Bancshares 62,700 650,513
Thai Farmers Bank 170,000(b,c,j) 343,213
Toronto-Dominion Bank 30,457(c) 1,395,158
U.S. Trust 18,100 1,342,794
UBS 17,922(c) 5,644,437
UST 29,100 635,653
Wachovia 91,300 7,412,419
Walter Inds 47,400(b) 533,250
Washington Mutual 112,200 4,586,175
Webster Financial 37,200 1,074,150
Wells Fargo 286,200 10,034,887
Total 143,099,610
Beverages & tobacco (1.1%)
Anheuser-Busch 73,500 5,599,781
Beringer Wine Estates Holdings Cl B 15,900(b) 578,363
Canandaigua Wine Cl A 10,500(b) 528,938
Coca-Cola 338,600 20,781,574
Fomento Economico Mexicano ADR 30,000(j) 928,125
Total 28,416,781
Building materials & construction (0.3%)
Dycom Inds 22,200(b) 965,700
Florida Rock Inds 14,000 477,750
Granite Construction 23,100 539,963
Horton (DR) 80,400 1,346,700
Insituform Technologies Cl A 56,000(b) 980,000
Lone Star Inds 26,000 806,000
NCI Building Systems 29,000(b) 681,500
Pulte 26,400 549,450
Ryland Group 49,700 1,258,031
Tredegar Inds 16,700 516,656
URS 29,400 531,038
Total 8,652,788
Chemicals (1.0%)
Air Products & Chemicals 183,600 6,288,299
Dexter 22,800 718,200
Du Pont (EI) de Nemours 80,700 4,685,644
Geon 30,300 689,325
Henkel KgaA 98,886(c,h) 7,267,230
MacDermid 17,800 604,088
Tetra Tech 32,700(b) 688,744
Waste Management 108,265 4,804,259
Total 25,745,789
Communications equipment & services (1.5%)
ANTEC 21,000(b) 451,500
CommScope 27,000(b) 565,313
Ericsson (LM) Cl B 205,986(b,c) 5,016,089
Lucent Technologies 187,600 20,213,899
Newbridge Networks 58,800(b,c) 1,831,412
Northern Telecom 83,220(c) 5,170,042
Oak Inds 16,300(b) 517,525
Orbital Sciences 21,400(b) 605,888
SymmetriCom 86,400(b) 545,400
Tellabs 36,300(b) 3,548,325
Total 38,465,393
Computers & office equipment (9.4%)
3Com 149,300(b) 3,480,556
Acxiom 22,600(b) 598,900
America Online 85,100(b) 12,424,600
American Management Systems 22,400(b) 764,400
Apple Computer 97,300(h) 3,496,719
Avid Technology 15,400(b) 268,538
BISYS Group 12,800(b) 720,000
BMC Software 104,500(b) 3,873,031
Ciber 32,500(b) 623,594
Cisco Systems 205,000(b) 22,460,312
Cognex 27,900(b) 660,881
Compaq Computer 254,100 8,051,794
Complete Business Solutions 21,700(b) 425,863
Computer Sciences 243,500 13,438,156
Computer Task Group 22,800 487,350
Electronic Data Systems 314,600 15,317,087
EMC 83,600(b) 10,679,900
FactSet Research Systems 21,300 921,225
Fair Isaac & Co 8,200 303,913
First Data 375,400 16,048,349
Gateway 2000 93,000(b) 6,376,313
Great Plains Software 12,700(b) 491,331
Hadco 27,800(b) 875,700
Henry (Jack) & Associates 24,100 885,675
Hewlett-Packard 84,100 5,703,031
HNC Software 24,700(b) 808,925
Hutchinson Technology 24,100(b) 599,488
Insight Enterprises 14,400(b) 356,400
Inter-Tel 20,000 311,250
Intl Business Machines 232,200 41,157,449
Komag 70,000(b) 306,250
Macromedia 43,600(b) 1,975,625
MedQuist 31,200(b) 936,000
Mercury Interactive 22,400(b) 798,000
Microsoft 528,600(b) 47,375,774
MindSpring Enterprises 3,600(b) 309,825
Natl Data 9,800 411,600
New Era of Networks 9,900(b) 670,725
Novell 158,000(b) 3,979,625
Paymentech 20,000(b) 472,500
Profit Recovery Group Intl 19,600(b) 774,200
Progress Software 17,800(b) 607,425
Read-Rite 28,200(b) 185,944
Sanmina 38,000(b) 2,422,500
Unisys 452,500 12,528,594
Whittman-Hart 12,200(b) 262,300
Xircom 22,200(b) 557,775
Xylan 11,400(b) 419,663
Total 247,605,055
Electronics (2.5%)
Actel 38,400(b) 631,200
AFC Cable Systems 17,200(b) 511,700
Applied Materials 60,700(b) 3,744,431
C-Cube Microsystems 21,800(b) 431,913
Celestica 42,800 1,403,976
CTS 16,700 825,606
Dallas Semiconductor 13,300 513,713
Dionex 29,600(b) 1,117,400
Electro Scientific Inds 20,000(b) 930,000
Etec Systems 14,200(b) 418,013
Helix Technology 37,000 568,875
Intel 249,100 29,674,037
Jabil Circuit 16,800(b) 680,400
Kulicke & Soffa Inds 28,200(b) 712,050
Lattice Semiconductor 24,900(b) 1,134,506
Level One Communications 7,850(b) 381,706
Matsushita Communication Industrial 60,000 4,058,610
Micrel 13,000(b) 650,813
Novellus Systems 22,200(b) 1,223,775
Park Electrochemical 19,400 455,900
Plexus 17,400(b) 485,025
QLogic 9,000(b) 604,125
Sawtek 25,900(b) 874,125
SGS-Thomson Microelectronics 59,010(b) 5,864,119
TDK 20,000 1,619,728
Texas Instruments 48,800 4,843,400
Unitrode 42,700(b) 605,806
Vitesse Semiconductor 11,600(b) 587,250
Total 65,552,202
Energy (3.5%)
Arch Coal 48,500 642,625
Chevron 208,700 18,456,906
Devon Energy 39,700 1,094,231
Exxon 124,800 8,806,200
FirstEnergy 57,300 1,600,819
Forest Oil 47,500 356,250
Mobil 174,600 15,364,800
Petro-Canada 337,300 3,945,225
Royal Dutch Petroleum 448,100(c) 23,301,200
Santa Fe Energy Resources 138,400(b) 1,012,050
Sunoco 77,500 2,794,844
Texaco 137,600 7,808,800
Total Petroleum Cl B 46,294(b) 5,708,680
Vintage Petroleum 23,000 207,000
Total 91,099,630
Energy equipment & services (0.1%)
Marine Drilling 97,200(b) 1,069,200
Pride Intl 118,800(b) 980,100
Total 2,049,300
Financial services (3.4%)
Associates First Capital Cl A 87,400 3,933,000
Capital One Financial 23,000 3,473,000
Citigroup 149,800 9,568,475
CMAC Investment 17,400 678,600
Countrywide Credit Inds 53,500 2,006,250
Delphi Financial Group Cl A 23,800 806,225
Fannie Mae 124,200 8,600,850
Financial Federal 26,800 509,200
Jefferies Group 25,700 1,219,144
Lehman Brothers Holdings 167,600 10,014,100
MBNA 175,100 4,180,513
Merrill Lynch & Co 97,500 8,622,656
Morgan Keegan 32,900 544,906
Morgan Stanley, Dean Witter, Discover & Co 189,600 18,948,150
Mutual Risk Management 19,800(c) 757,350
Providian Financial 67,100 7,381,000
Raymond James Financial 23,800 470,050
Schwab (Charles) 53,250 5,118,656
SEI Investments 5,400 499,500
Total 87,331,625
Food (2.2%)
Bestfoods 234,500 11,021,500
Corn Products Intl 36,000 861,750
Earthgrains 49,100 1,089,406
General Mills 326,500 24,671,156
Performance Food Group 26,600(b) 698,250
Pilgrim's Pride Cl B 32,400 532,575
Ralcorp Holdings 34,700(b) 659,300
Sara Lee 420,500 10,407,375
Smithfield Foods 40,600(b) 921,113
Sysco 248,000 6,525,500
United Natural Foods 27,100(b) 633,463
Total 58,021,388
Furniture & appliances (0.2%)
Briggs & Stratton 17,400 858,038
Ethan Allen Interiors 16,800 698,250
La-Z-Boy 72,300 1,373,700
Mohawk Inds 56,000(b) 1,680,000
Total 4,609,988
Health care (6.8%)
Alpharma Cl A 13,600 533,800
ALZA 60,400(b) 2,310,300
American Home Products 128,600 8,391,150
Amgen 148,200(b) 11,096,475
Barr Laboratories 11,300(b) 344,650
Baxter Intl 164,100 10,830,600
Bio-Technology General 98,800(b) 589,713
Boston Scientific 152,000(b) 6,165,500
Bristol-Myers Squibb 363,400 23,371,162
Guidant 117,200(b) 7,090,600
IDEC Pharmaceuticals 12,800(b) 657,600
IDEXX Laboratories 38,200(b) 914,413
Incyte Pharmaceuticals 11,300(b) 226,706
Johnson & Johnson 85,500 8,010,281
Jones Medical Inds 28,700 997,325
Lilly (Eli) 49,300 4,184,338
Maxxim Medical 19,000(b) 358,625
MedImmune 33,300(b) 1,970,944
Medtronic 121,000 8,681,750
Merck & Co 82,000 6,575,375
Millennium Pharmaceuticals 24,500(b) 765,625
Novartis 872(b) 1,418,045
Pfizer 143,500(k) 19,910,624
Pharmacia & Upjohn 108,400 6,761,450
Priority Healthcare Cl B 18,100(b) 819,025
Quest Diagnostics 34,400(b) 765,400
Safeskin 28,500(b) 211,969
Schering-Plough 325,800 18,020,812
Takeda Chemical Inds 38,000 1,472,956
Techne 14,200(b) 410,025
VISX 17,400(b) 1,871,588
Warner-Lambert 309,200 20,465,174
Total 176,194,000
Health care services (0.7%)
AmeriSource Health Cl A 10,400(b) 355,550
Apria Healthcare Group 85,900(b) 1,020,063
Cardinal Health 33,500 2,211,000
Express Scripts Cl A 18,100(b) 1,555,469
Hanger Orthopedic Group 13,300(b) 179,550
McKesson HBOC 67,200 4,435,199
Orthodontic Centers of America 38,600(b) 607,950
Owens & Minor 41,300 418,163
Patterson Dental 26,200(b) 1,133,150
Pediatrix Medical Group 24,300(b,h) 683,438
Renal Care Group 22,400(b) 439,600
Sierra Health Services 46,600(b) 605,800
Universal Health Services Cl B 32,100(b) 1,388,325
Yamanouchi Pharmaceutical 120,000 3,800,195
Total 18,833,452
Household products (0.4%)
Chattem 17,400 543,750
Procter & Gamble 66,500(k) 6,512,844
Unilever 274,469(b) 2,563,513
Total 9,620,107
Industrial equipment & services (0.8%)
Applied Power Cl A 35,600 970,100
G & K Services Cl A 13,100 605,056
Gardner Denver 60,000(b) 952,500
Gleason 45,900 777,431
Ingersoll-Rand 87,000 4,317,375
JLG Inds 39,300 535,463
Mannesmann 55,373(b,c) 7,079,593
Nordson 12,500 696,875
Philips Electronics 55,286(b) 4,508,164
Regal Beloit 31,500 568,969
Varlen 19,600 431,200
Total 21,442,726
Insurance (2.0%)
Allied Zurich 190,107 2,562,851
American Bankers Insurance Group 14,900 774,800
American General 137,100 9,665,550
American Intl Group 128,250 15,470,157
Aon 38,600 2,441,450
Chartwell Re 30,100 519,225
Enhance Financial Services Group 41,200 937,300
Fidelity Natl Financial 39,800 597,000
First American Financial 62,500 988,281
Gallagher (Arthur J) 26,100 1,200,600
Hooper Holmes 31,400 490,625
LandAmerica Financial Group 15,700 455,300
Lincoln Natl 150,400 14,870,800
NAC Re 10,700 574,456
Reinsurance Group of America 20,100 855,506
Total 52,403,901
Leisure time & entertainment (1.5%)
Anchor Gaming 5,700(b) 249,375
Aztar 134,800(b) 648,725
Disney (Walt) 465,900 14,501,137
Hasbro 148,050 4,284,197
Time Warner 222,600 15,818,512
Viacom Cl B 47,800(b) 4,012,213
Total 39,514,159
Media (0.6%)
British Sky Broadcasting Group 556,752 4,804,491
Catalina Marketing 5,200(b) 446,550
CBS 88,700 3,631,156
Consolidated Graphics 12,400(b) 716,100
Houghton Mifflin 14,400 675,000
McClatchy Newspapers 19,800 664,538
MediaOne Group 35,300(b) 2,241,550
Metro Networks 4,000(b) 220,000
Scholastic 5,800(b) 283,475
Valassis Communications 18,200(b) 941,850
Westwood One 21,300(b) 607,050
World Color Press 41,500(b) 881,875
Total 16,113,635
Metals (0.4%)
AK Steel Holding 39,100 882,194
ALCOA 125,204 5,156,839
Cleveland-Cliffs 23,800 810,688
Material Sciences 44,600(b) 284,325
Mueller Inds 22,800(b) 510,150
Ryerson Tull 41,200 605,125
Steel Technologies 79,200 623,700
Stillwater Mining 34,200(b) 902,025
Total 9,775,046
Multi-industry conglomerates (3.5%)
Bell & Howell 24,000(b) 703,500
Bombardier Cl B 260,000(b) 3,420,146
Brady (WH) Cl A 30,100 630,219
Cendant 105,600(b) 1,663,200
Danaher 143,700 7,508,325
DeVry 26,200(b) 759,800
Eastman Kodak 69,600 4,445,700
Education Management 28,200(b) 867,150
Electronics for Imaging 22,700(b) 885,300
General Electric 823,312(b) 7,483,577
General Electric 258,800 28,629,749
Labor Ready 12,700(b) 330,994
Lason 9,000(b) 506,250
Mettler-Toledo Intl 29,500(b) 730,125
NCO Group 15,300(b) 566,100
Pre-Paid Legal Services 15,000(b) 367,500
Sylvan Learning Systems 23,600(b) 646,050
Tyco Intl 335,700(c) 24,086,475
Williams 1,012,850 6,536,934
Total 90,767,094
Paper & packaging (0.6%)
AptarGroup 21,600 561,600
Ball 17,600 826,100
Caraustar Inds 28,600 657,800
Fort James 87,400 2,769,488
Intl Paper 145,000 6,117,187
Owens-Illinois 111,700(b) 2,792,500
Tenneco 103,700 2,897,119
Total 16,621,794
Restaurants & lodging (0.7%)
Bob Evans Farms 38,600 772,000
CEC Entertainment 14,400(b) 516,600
CKE Restaurants 22,500 444,375
Darden Restaurants 198,000 4,083,750
Foodmaker 21,700(b) 553,350
Marriott Intl Cl A 72,900 2,451,263
Ruby Tuesday 29,900 519,513
Ryan's Family Steak Houses 89,600(b) 1,080,800
Taco Cabana Cl A 72,700(b) 640,669
Tricorn Global Restaurants 97,500(b) 6,849,374
Total 17,911,694
Retail (4.4%)
Albertson's 142,000(h) 7,712,375
American Stores 198,500 6,550,500
Ames Dept Stores 23,900(b) 887,288
AnnTaylor Stores 39,600(b) 1,749,825
Bindley Western Inds 35,800 1,022,538
Cost Plus 32,100(b) 942,938
CVS 204,700 9,723,249
Dept 56 12,300(b) 374,381
Eagle Hardware & Garden 17,800(b) 679,738
Fossil 10,400(b) 310,050
Great Universal Stores 439,055(b) 4,795,403
Haverty Furniture Companies 18,400 466,900
Home Depot 84,700 5,272,575
Kroger 206,500(b) 12,364,187
Linens `N Things 22,600(b) 1,025,475
Men's Wearhouse 43,200(b) 1,247,400
Pier 1 Imports 68,600 557,375
Regis 35,250 938,531
Rite Aid 170,300 4,257,500
Safeway 154,700(b) 7,938,044
ShopKo Stores 42,600(b) 1,272,675
TJX Companies 72,100 2,451,400
Trans World Entertainment 39,000(b) 429,000
Wal-Mart Stores 336,400 31,011,874
Walgreen 329,400 9,305,550
Wet Seal Cl A 9,300(b) 342,938
Williams-Sonoma 15,500(b) 437,875
Zale 46,900(b) 1,603,394
Total 115,670,978
Textiles & apparel (0.1%)
Angelica 48,200 674,800
Authentic Fitness 33,300 514,069
Brown Group 62,900 829,494
Dixie Group 90,000 641,250
K-Swiss Cl A 14,200 358,550
Oshkosh B'Gosh Cl A 48,800 863,150
Total 3,881,313
Transportation (0.3%)
Atlas Air 17,850(b) 514,303
Burlington Northern Santa Fe 167,000 5,490,125
Expeditors Intl of Washington 10,800 583,200
Landstar System 25,300(b) 838,063
Offshore Logistics 62,800(b) 730,050
USFreightways 22,400 736,400
Total 8,892,141
Utilities -- electric (1.0%)
Carolina Power & Light 93,400 3,531,688
Cinergy 66,000 1,815,000
Cleco 20,400 601,800
DTE Energy 57,200 2,198,625
Edison Intl 162,000 3,604,500
El Paso Electric 88,100 671,763
Iberdrola 146,687(b,c) 2,175,060
PECO Energy 98,900 4,574,125
Public Service Co of New Mexico 25,200 428,400
Sierra Pacific Resources 19,000 668,563
Suez Lyonnaise des Eaux 26,464 4,902,206
TNP Enterprises 25,400 730,250
United Illuminating 20,100 842,944
Total 26,744,924
Utilities -- gas (0.2%)
Equitable Resources 44,400 1,157,175
New Jersey Resources 14,000 497,875
ONEOK 22,300 551,925
Piedmont Natural Gas 37,200 1,302,000
Southwestern Energy 71,300 503,556
Total 4,012,531
Utilities -- telephone (5.9%)
AirTouch Communications 49,900(b) 4,821,588
Ameritech 212,300 12,286,863
AT&T 323,500 25,819,343
Bell Atlantic 124,800 6,450,600
BellSouth 275,000 11,017,188
Brightpoint 33,400(b) 197,269
Equant 30,647 2,331,771
GTE 85,500 5,172,750
MCI WorldCom 204,175(b) 18,082,247
Nippon Telegraph & Telephone 566(b,c) 5,544,568
NTT Mobile Communication Network 780 3,853,397
Orange 328,223 4,615,570
Philippine Long Distance Telephone 45,000(c) 1,184,517
SBC Communications 256,300 12,078,138
Telecom Corp of New Zealand 190,000(c) 926,782
Telecom Italia 920,921(b) 5,474,047
Telecom Italia 764,904(h) 8,134,448
Telefonica de Espana 38,948 1,653,837
U S WEST Communications Group 253,500 13,958,343
Vodafone 498,642 9,314,533
Total 152,917,799
Total common stocks
(Cost: $1,426,540,121) $1,664,117,473
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Preferred stocks & other (0.5%)
Issuer Shares Value(a)
Banca Intesa
<S> <C> <C>
Warrants 1,156,727 $1,450,189
Bar Technologies
Warrants 3,000(d) 165,000
Bell Technology
Warrants 3,410 204,600
KMC Telecom Holdings
Warrants 3,000 7,500
Nakornthai Strip Mill
Warrants 2,722,298 3
Paxson Communications
12.50% Pay-in-kind Exchangeable 25,300(i) 2,327,600
Poland Telecom
Warrants 8,500 193,100
Republic of Argentina
Warrants 4,500(c) 11,250
Telehub Communications
Warrants 2,500 25,000
Unifi Communications
Warrants 3,000 30
Versatel
Warrants 5,500 418,000
Total preferred stocks & other
(Cost: $3,401,209) $4,802,272
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (32.9%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (9.5%)
Govt of Russia
(Russian Ruble)
<S> <C> <C> <C>
09-27-00 14.00% 19,002,914(b,c) $21,431
12-15-20 6.63 16,000,000(b,c) 1,040,000
(Russian Ruble) Zero Coupon
05-05-99 -- 28,554,000(b,c,f,m) --
(U.S. Dollar)
12-29-49 6.63 14,885,700(b,c) 1,153,642
Republic of Argentina
(Argentine Peso)
07-10-02 8.75 5,000,000(c) 4,252,998
07-10-02 8.75 7,900,000(c,d) 6,719,737
02-12-07 11.75 7,500,000(c) 6,754,688
(U.S. Dollar)
04-07-09 11.75 4,500,000(c) 4,378,500
Republic of Korea
(U.S. Dollar)
04-15-08 8.88 8,950,000(c) 9,576,751
Republic of Panama
(U.S. Dollar)
02-13-02 7.88 1,000,000(c,d) 972,500
U.S. Treasury
11-30-99 5.63 3,500,000 3,520,241
04-30-00 6.75 32,000,000 32,610,345
06-30-02 6.25 8,000,000(k) 8,261,798
03-31-03 5.50 1,500,000 1,517,129
08-15-04 7.25 20,000,000 21,850,780
08-15-05 6.50 12,500,000 13,273,894
05-15-08 5.63 12,500,000(h) 12,726,656
08-15-23 6.25 9,700,000 10,130,680
08-15-27 6.38 20,000,000 21,414,640
11-15-27 6.13 50,000,000 51,966,239
United Mexican States
(U.S. Dollar)
03-12-08 8.63 1,700,000(c,h) 1,598,000
12-31-19 6.25 29,500,000(c) 23,102,188
05-15-26 11.50 6,750,000(c,h) 7,492,500
Total 244,335,337
Mortgage-backed securities (3.3%)
Federal Home Loan Mtge Corp
03-01-13 5.50 10,115,973 9,862,926
12-01-25 7.50 15,179,398 15,617,778
07-01-28 6.00 9,744,346 9,479,007
09-01-28 6.00 9,610,077 9,351,257
Federal Natl Mtge Assn
05-01-24 7.50 10,559,545 10,861,126
09-01-28 6.50 9,711,635 9,670,167
10-01-28 6.00 9,797,354 9,523,028
Federal Natl Mtge Assn
Collateralized Mtge Obligation
05-18-26 5.00 9,593,000 8,881,167
Total 83,246,456
Aerospace & defense (0.3%)
L-3 Communications
Sr Sub Nts Series B
05-01-07 10.38 1,035,000 1,138,500
Newport News Shipbuilding
Sr Nts
12-01-06 8.63 800,000 860,000
Northrop-Grumman
03-01-16 7.75 5,000,000 5,235,831
Total 7,234,331
Automotive & related (0.1%)
MSX Intl
Company Guaranty
01-15-08 11.38 2,450,000 2,450,000
Banks and savings & loans (0.9%)
Corp Andina de Fomento
(U.S. Dollar)
02-01-03 7.10 6,500,000(c) 6,467,026
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 2,500,000(c,d) 2,140,000
Greenpoint Capital
Company Guaranty
06-01-27 9.10 1,300,000 1,395,910
Union Planters Bank
Sub Nts
03-15-18 6.50 10,000,000 9,807,431
US Capital
02-01-27 8.41 1,500,000(d) 1,558,281
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 1,500,000(d) 1,639,569
Wilshire Financial Services
Series B
08-15-04 13.00 4,000,000(b) 640,000
Total 23,648,217
Building materials & construction (0.1%)
Southdown
Sr Sub Nts Series B
03-01-06 10.00 2,350,000 2,596,750
Chemicals (0.3%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 3,550,000 3,470,125
Polymer Group
Company Guaranty Series B
03-01-08 8.75 4,000,000 4,040,000
Total 7,510,125
Commercial finance (0.2%)
Netia Holdings
(U.S. Dollar) Company Guaranty Series B
11-01-07 10.25 6,000,000(c) 5,670,000
Communications equipment & services (1.2%)
IXC Communications
Sr Sub Nts
04-15-08 9.00 2,000,000 2,065,000
KMC Telecom Holdings
Zero Coupon Sr Disc Nts
02-15-03 12.68 3,000,000(g) 1,657,500
MJD Communications
Sr Sub Nts Series B
05-01-08 9.50 1,000,000 1,010,000
NTL
Zero Coupon Sr Nts
10-01-03 7.87 9,625,000(g) 6,593,125
Poland Telecom
(U.S. Dollar) Company Guaranty
06-01-04 14.00 3,000,000(c) 1,800,000
TCI Telecommunications
Sr Nts
02-15-28 7.13 1,400,000 1,469,671
Telehub Communications
Zero Coupon Company Guaranty
07-31-01 13.88 2,500,000(g) 1,528,125
US West Capital Funding
Company Guaranty
07-15-28 6.88 9,250,000 9,301,091
Versatel Telecom
(U.S. Dollar) Sr Nts
05-15-08 13.25 5,500,000(c) 5,775,000
Total 31,199,512
Computers & office equipment (0.3%)
Concentric Network
Sr Nts
12-15-07 12.75 3,800,000 4,341,500
Globix
Sr Nts
05-01-05 13.00 3,410,000 3,546,400
PSINet
Sr Nts Series B
02-15-05 10.00 1,005,000 1,070,325
Total 8,958,225
Electronics (0.3%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 4,500,000(c,d) 3,699,169
Thomas & Betts
01-15-06 6.50 4,500,000 4,538,596
Total 8,237,765
Energy (1.0%)
Lodestar Holdings
Company Guaranty
05-15-05 11.50 5,000,000 4,050,000
R & B Falcon
04-15-08 6.95 5,000,000 3,688,324
Roil
(U.S. Dollar)
12-05-02 12.78 8,299,800(c,d) 1,742,958
Union Pacific Resources
05-15-28 7.15 7,500,000 6,542,699
USX
03-01-08 6.85 10,000,000 9,803,968
Total 25,827,949
Energy equipment & services (0.0%)
DI Inds
Sr Nts
07-01-07 8.88 1,500,000 1,177,500
Financial services (1.3%)
Airplanes GPA Cl D
(U.S. Dollar) Series 1
03-15-19 10.88 2,750,000(c) 2,737,323
Arcadia Financial
Sr Nts
03-15-07 11.50 1,825,000 1,478,250
Beneficial
Medium-term Nts
02-18-13 6.25 10,000,000 10,087,666
Providian Natl Bank
Sr Nts
03-15-03 6.70 10,000,000 10,050,821
SASCO
02-25-28 6.76 2,500,000 2,513,050
Tjiwi Kimia Finance Mauritius
(U.S. Dollar) Company Guaranty
08-01-04 10.00 2,900,000(c) 1,551,500
Wilmington Trust
05-01-08 6.63 6,300,000 6,293,229
Total 34,711,839
Food (0.1%)
Ameriserve Food Distributions
Company Guaranty
07-15-07 10.13 1,750,000 1,242,500
Daya Guna
(U.S. Dollar) Company Guaranty
06-01-07 10.00 2,400,000(c,d) 1,548,000
Total 2,790,500
Furniture & appliances (0.2%)
Interface
Sr Sub Nts Series B
11-15-05 9.50 2,500,000 2,646,875
Lifestyle Furnishings
Company Guaranty
08-01-06 10.88 3,250,000 3,664,375
Total 6,311,250
Health care (0.6%)
Baxter Intl
02-15-28 6.63 10,000,000 9,596,338
Lilly (Eli)
01-01-36 6.77 5,000,000 5,067,540
Total 14,663,878
Health care services (1.1%)
Abbey Healthcare Group
Sr Sub Nts
11-01-02 9.50 250,000 248,750
Fountain View
Company Guaranty Series B
04-15-08 11.25 2,150,000 1,892,000
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 2,500,000 2,156,250
Manor Care
Sr Nts
06-15-06 7.50 7,000,000 7,286,155
Owens & Minor
Company Guaranty Sr Sub Nts
06-01-06 10.88 3,200,000 3,488,000
Oxford Health Plans
Sr Nts
05-15-05 11.00 1,125,000(d) 1,153,125
Service Corp Intl
03-15-20 6.30 11,850,000 11,687,525
Total 27,911,805
Household products (0.3%)
Chattem
Company Guaranty Series B
04-01-08 8.88 2,200,000 2,211,000
Revlon Consumer Products
Sr Nts
02-01-06 8.13 5,000,000 4,825,000
Total 7,036,000
Industrial equipment & services (--%)
AGCO
Sr Sub Nts
03-15-06 8.50 1,025,000 960,938
Insurance (1.0%)
American United Life Insurance
03-30-26 7.75 5,000,000(d) 5,091,165
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.68 1,500,000 1,610,229
Metropolitan Life Insurance
11-01-25 7.80 4,800,000(d) 5,276,760
Minnesota Mutual Life
09-15-25 8.25 4,500,000(d) 5,095,665
Nationwide CSN Trust
02-15-25 9.88 5,000,000(d) 5,856,033
Veritas Holdings
(U.S. Dollar) Sr Nts
12-15-03 9.63 1,273,000(c) 1,298,460
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 1,875,000(c,d) 2,003,257
Total 26,231,569
Leisure time & entertainment (1.5%)
Loews Cineplex Entertainment
Sr Sub Nts
08-01-08 8.88 4,500,000 4,494,375
Mirage Resorts
02-01-08 6.75 8,750,000 8,441,738
Speedway Motorsports
08-15-07 8.50 2,000,000 2,105,000
Time Warner
02-01-24 7.57 11,875,000 12,723,496
Sr Nts
01-15-28 6.95 5,000,000 5,024,115
Venetian Casino/LV Sands
Company Guaranty
11-15-04 12.25 3,940,000(h) 4,077,900
11-15-05 10.00 1,500,000 1,440,000
Total 38,306,624
Media (1.0%)
Australis Media
(U.S. Dollar)
11-01-00 14.00 196,641(b,c) 161,484
05-15-03 15.75 40,885(b,c) 4
(U.S. Dollar) Zero Coupon
05-15-00 15.75 5,000,000(b,c,g) 500
CSC Holdings
Sr Sub Debs
05-15-16 10.50 3,000,000 3,555,000
Globo Communicacoes Participacoes
(U.S. Dollar) Sr Nts
12-05-08 10.63 3,500,000(c,d) 2,292,500
Heritage Media
Sr Sub Nts
02-15-06 8.75 5,000,000 5,381,250
Lamar Advertising
Company Guaranty
12-01-06 9.63 800,000 868,000
MDC Communications
(U.S. Dollar) Sr Sub Nts
12-01-06 10.50 1,000,000(c) 1,012,500
News America Holdings
10-15-12 10.13 2,175,000 2,494,155
Regional Independent Medical
(U.S. Dollar) Sr Nts
07-01-08 10.50 4,000,000(c) 4,150,000
TCI Communications
08-01-15 8.75 1,700,000 2,079,048
Veninfotel
(U.S. Dollar) Cv Pay-in-kind
03-01-02 10.00 2,362,500(c,d,i,n) 3,543,750
Total 25,538,191
Metals (0.4%)
Bar Technologies
Company Guaranty
04-01-01 13.50 3,000,000(d) 3,150,000
EnviroSource
Sr Nts
06-15-03 9.75 530,000 451,163
Sr Nts Series B
06-15-03 9.75 1,300,000 1,106,625
Grupo Minero Mexico
(U.S. Dollar) Company Guaranty Series A
04-01-08 8.25 2,600,000(c) 2,171,000
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 2,639,406(c,d) 2,388,662
Southern Peru Copper
(U.S. Dollar)
05-30-07 7.90 1,000,000(c) 904,146
Total 10,171,596
Miscellaneous (1.7%)
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 3,900,000 4,260,750
Alliance Imaging
Sr Sub Nts
12-15-05 9.63 5,000,000 4,937,500
CTI Holdings
(U.S. Dollar) Zero Coupon Sr Nts
04-15-03 11.50 3,800,000(c,g) 2,071,000
Delphes 2
(U.S. Dollar)
05-05-09 7.75 3,700,000(c) 3,667,440
FCB/NC Capital
Company Guaranty
03-01-28 8.05 4,625,000 4,593,644
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 2,500,000(c,d) 2,450,000
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.88 2,200,000(c,d) 704,000
Jasmine Submarine Telecom
(U.S. Dollar) Sr Nts
05-30-11 8.48 609,765(c,d) 496,553
Jorgensen (Earle M)
Sr Nts
04-01-05 9.50 1,225,000 1,114,750
NSM Steel
Company Guaranty
02-01-06 12.00 2,775,000(b) 555,000
02-01-08 12.25 4,300,000(b) 387,000
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,075,000 1,064,250
Pindo Deli Finance Mauritius
(U.S. Dollar) Company Guaranty
10-01-07 10.75 1,300,000(c) 715,000
Poland Telecom Finance
(U.S. Dollar) Company Guaranty Series B
12-01-07 14.00 5,500,000(c) 5,032,500
Provident Companies
03-15-38 7.41 11,000,000 10,854,147
PTC Intl Finance
(U.S. Dollar) Zero Coupon Company Guaranty
07-01-02 10.75 2,000,000(c,g) 1,452,500
Transamerica Energy
06-15-02 11.50 600,000 108,000
Zero Coupon
06-15-99 13.00 1,300,000(g) 260,000
Total 44,724,034
Multi-industry conglomerates (0.5%)
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 1,650,000(c,d) 1,419,664
(U.S. Dollar) Company Guaranty Series B
08-01-17 7.45 1,000,000(c,d) 889,660
Packaged Ice
Company Guaranty Series B
02-01-05 9.75 6,475,000 6,636,875
Pierce Leahy
Sr Sub Nts
07-15-06 11.13 488,000(d) 544,120
Prime Succession
Sr Sub Nts
08-15-04 10.75 980,000 706,825
USI American Holdings
Sr Nts Series B
12-01-06 7.25 3,000,000 3,052,331
Total 13,249,475
Paper & packaging (0.6%)
Doman Inds
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 2,300,000(c) 1,451,875
Gaylord Container
Sr Nts
06-15-07 9.75 1,300,000 1,257,750
Sr Nts Series B
06-15-07 9.38 9,000,000 8,617,500
Owens-Illinois
Sr Nts
05-15-04 7.85 2,000,000 2,057,948
Silgan Holdings
06-01-09 9.00 2,050,000 2,111,500
Total 15,496,573
Restaurants & lodging (0.6%)
Domino's
Sr Sub Nts
01-15-09 10.38 3,275,000(d) 3,389,625
Extended Stay America
Sr Sub Nts
03-15-08 9.15 4,750,000 4,631,250
MGM Grand
02-06-08 6.88 10,000,000 8,821,963
Total 16,842,838
Retail (1.1%)
Amazon.com
Zero Coupon Sr Disc Nts
05-01-03 10.00 4,850,000(g) 3,298,000
Dayton Hudson
12-01-22 8.50 2,500,000 2,724,702
Great Atlantic & Pacific Tea
04-15-07 7.75 10,000,000 9,946,778
Kroger
Sr Nts
07-15-06 8.15 5,000,000 5,550,907
Wal-Mart CRAVE Trust
07-17-06 7.00 8,158,282(d) 8,289,059
Total 29,809,446
Textiles & apparel (0.2%)
Pillowtex
Company Guaranty Sr Sub Nts Series B
12-15-07 9.00 1,875,000 1,898,438
Texon Intl
(European Monetary Unit) Sr Nts
02-01-08 3.11 4,000,000(c) 2,022,438
Total 3,920,876
Transportation (0.6%)
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000(d) 9,979,000
Company Guaranty Medium-term Nts
01-15-06 6.95 3,000,000(d) 3,012,210
Greater Beijing
(U.S. Dollar) Sr Nts
06-15-04 9.25 275,000(c) 148,500
06-15-07 9.50 1,200,000(c) 630,000
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 12.00 5,000,000(c,d) 2,500,000
Total 16,269,710
Utilities -- electric (1.0%)
Cleveland Electric Illuminating
07-01-00 7.19% $3,000,000 $3,044,029
CMS Energy
Sr Nts
05-15-02 8.13 2,900,000 2,995,092
El Paso Electric
1st Mtge Series B
05-01-01 7.75 5,000,000 5,141,194
Korea Electric Power
(U.S. Dollar)
02-01-27 7.00 9,100,000(c) 8,511,988
Public Service Electric & Gas
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 7,365,000(l) 7,467,451
Total 27,159,754
Utilities -- gas (0.2%)
Columbia Gas System
Series E
11-28-10 7.32 5,043,000 5,202,410
Utilities -- telephone (1.3%)
Covad Communications Group
Sr Nts
02-15-09 12.50 2,000,000(d) 2,010,000
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 2,485,000(b) 3,106
Grupo Iusacell
(U.S. Dollar)
07-15-04 10.00 1,000,000(c) 957,500
Intermedia Communications
Sr Nts
03-01-09 9.50 3,000,000(d) 3,157,500
Sr Nts Series B
11-01-07 8.88 1,600,000 1,628,000
06-01-08 8.60 5,000,000(d) 5,000,000
McLeod USA
Sr Nts
03-15-08 8.38 2,300,000 2,328,750
MetroNet Communications
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 9.95 3,800,000(c,g) 2,945,000
Omnipoint Communications
Sr Nts
08-15-06 11.63 5,000,000 4,362,500
Philippine Long Distance Telephone
(U.S. Dollar) Medium-term Nts Series E
03-06-07 7.85 250,000(c) 221,166
03-06-17 8.35 1,000,000(c,d) 814,156
Qwest Communications Intl
11-01-08 7.50 4,550,000(d) 4,749,063
Sr Nts
11-01-08 7.25 450,000(d) 460,125
Rogers Cantel
(U.S. Dollar)
06-01-08 9.38 2,800,000(c) 3,094,000
WorldCom
04-01-07 7.75 3,000,000 3,293,345
Total 35,024,211
Municipal bond (0.1%)
New Jersey Economic Development Authority
State Pension Funding Revenue Bond (MBIA Insured)
02-15-29 7.43 3,000,000(l) 3,324,780
Total bonds
(Cost: $911,443,240) $857,750,464
See accompanying notes to investments in securites.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (3.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (2.3%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
04-14-99 4.78% $25,200,000 $25,156,774
04-14-99 4.80 4,600,000 4,592,085
05-12-99 4.79 21,800,000 21,681,572
05-12-99 4.81 9,200,000 9,145,209
Total 60,575,640
Commercial paper (1.5%)
BBV Finance (Delaware)
05-19-99 4.86 2,100,000 2,086,251
Clorox
04-27-99 4.85 6,400,000 6,377,675
Dresdner US Finance
04-13-99 4.88 8,900,000 8,885,581
Duke Energy
04-20-99 4.86 5,600,000 5,585,695
Fleet Funding
04-21-99 4.88 1,900,000(e) 1,894,870
Glaxo Wellcome
04-12-99 4.88 2,200,000(e) 2,196,733
Goldman Sachs Group
04-21-99 4.90 2,300,000 2,293,777
05-11-99 4.87 5,700,000 5,669,347
Societe Generale North America
04-07-99 4.90 1,000,000 999,187
Variable Funding Capital
04-05-99 4.87 2,400,000(e) 2,398,701
Total 38,387,817
Total short-term securities
(Cost: $98,968,390) $98,963,457
Total investments in securities
(Cost: $2,440,352,960)(o) $2,625,633,666
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, items identified are in
default as to payment of interest and/or principal.
(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,
1999, the value of foreign securities represented 11.04% 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) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(h) Security is partially or fully on loan. See Note 5 to the financial
statements.
(i) Pay-in-kind securities are securities in which the issuer makes interest or
dividend payments in cash or in additional securities. The securities usually
have the same terms as the original holdings.
(j) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
six months ended March 31, 1999 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
<S> <C> <C> <C> <C> <C> <C>
China North Ind $13,079,176 $10,604,176 $23,683,352 $-- $-- $--
Fomento Economico
Mexicano ADR 10,019,149 792,894 10,019,149 792,894 -- 928,125
Thai Farmers Bank 1,670,797 293,559 1,670,797 293,559 -- 343,213
Total $24,769,122 $11,690,629 $35,373,298 $1,086,453 $-- $1,271,338
(k) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 7 to the financial statements):
Type of security Contracts
S&P 500 Index, June 1999 204
(l) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
MBIA -- Municipal Bond Investors Assurance
(m) Negligible market value.
(n) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at March 31, 1999, is as follows:
Security Acquisition Cost
dates
Veninfotel
(U.S. Dollar) 10.00% Cv Pay-in-kind 2002 03-05-97 thru 09-01-98 $2,362,500
(o) At March 31, 1999, the cost of securities for federal income tax purposes
was approximately $2,440,353,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $313,894,000
Unrealized depreciation (128,613,000)
------------
Net unrealized appreciation $185,281,000
</TABLE>
<PAGE>
Quick telephone reference
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Sales and exchanges, dividend payments or reinvestments and automatic payment
arrangements: 800-437-3133
AMERICAN EXPRESS CLIENT SERVICE CORPORATION
Fund performance, fund prices, account values, recent account transactions and
account inquiries: 800-862-7919
TTY SERVICE
For the hearing impaired: 800-846-4852
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