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AXP(SM) Managed
Allocation
Fund
1999 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
(icon of) magnifying glass
AXP Managed Allocation Fund seeks to provide shareholders maximum total return
through a combination of growth of capital and current 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.)
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors (logo)
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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. AXP 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 Fund can also hold foreign stocks, as
well as domestic and foreign bonds, plus cash-equivalent investments. For
investors, such flexibility can mean opportunity.
AXP MANAGED ALLOCATION FUND (This annual report is not part of the prospectus.)
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Table of Contents
1999 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 (Fund) 10
Financial Statements (Fund) 11
Notes to Financial Statements (Fund) 14
Independent Auditors' Report (Portfolio) 19
Financial Statements (Portfolio) 20
Notes to Financial Statements (Portfolio)23
Investments in Securities 28
Federal Income Tax Information 56
1999 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 6p
Past Performance 9p
Fees and Expenses 11p
Management 12p
Buying and Selling Shares 13p
Valuing Fund Shares 13p
Investment Options 14p
Purchasing Shares 15p
Sales Charges 18p
Exchanging/Selling Shares 22p
Distributions and Taxes 27p
Personalized Shareholder
Information 29p
Master/Feeder Structure 30p
About the Company 31p
Quick Telephone Reference 33p
Financial Highlights 34p
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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(picture of) Arne H. Carlson
Arne H. Carlson
Chariman of the board
From the Chairman
American Express(R) Funds held shareholder meetings in June 1999. Shareholders
approved all of the proposals advanced by management. Among the proposals were:
o The election of Board members and the selection of KPMG LLP as independent
auditors.
o Change in the Fund name from "IDS" to "AXP."
o A new shareholder service and distribution plan.
o Changes with respect to fundamental investment policies.
o A new subadvisory agreement.
No other business was presented at the meeting, which was concluded by a report
to shareholders from the Investment Department of American Express Financial
Corporation.
Thanks to all of you for your effort in reviewing the proxy material and voting
your proxies.
Arne H. Carlson
(picture of) Steven Merrell
Steven Merrell
Portfolio manager
From the Portfolio Manager
It was a volatile 12 months for financial assets, but in the end it proved to be
an overall productive period for AXP Managed Allocation Fund. For the fiscal
year -- October 1998 through September 1999 -- the Fund's Class A shares
generated a total return of 14.78%. (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 sharp
decline in the late summer of 1998. 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 powerful rally that sent the market to an all-time high by the
middle of the summer. Over the final three months, though, stocks lost ground
under pressure from a rise in long-term interest rates and concern about
potentially higher inflation.
AXP MANAGED ALLOCATION FUND (This annual report is not part of the prospectus.)
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On the fixed-income side, a sharp rebound in U.S. corporate and emerging-market
bonds had a positive effect early in the fiscal year. But from that point, a
steady rise in interest rates here at home took a toll on the portfolio's
holdings among U.S. Treasury and corporate issues. To provide a buffer against
that trend, we increased cash reserves during the second half of the period.
BIG U.S. STOCKS ARE HIGHEST EXPOSURE
Looking at the composition of the portfolio, U.S. stocks made up about 59% of
assets, the bulk of that in large-capitalization stocks. Most of the remainder
was allocated to bonds, chiefly U.S. corporate, Treasury and mortgage-backed
issues. Foreign holdings, including major- and emerging-market securities,
comprised less than 10% during the year.
We made a few asset shifts of note over the period. We brought the level of cash
reserves down from about 10% to 1% in the opening months, moving most of that
money into U.S. stocks. Late in the period, we reversed that process, bringing
the cash up to about 11% (excluding cash used to cover open futures contracts).
Also, about mid-period, we reduced the foreign exposure to about 4%, virtually
eliminating holdings in emerging markets. At period-end, the overall portfolio
mix was 90% investment-grade securities, 10% below investment grade.
As we enter the new fiscal year, the higher cash level in the portfolio reflects
our view that greater uncertainty among investors could make it difficult for
stocks and bonds to make meaningful headway over the near term. Therefore, we
plan to stick with a somewhat defensive structure until we see indications,
particularly on the interest-rate front, that the investment environment is
turning more positive.
Steven Merrell
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $10.49
Sept. 30, 1998 $10.34
Increase $ 0.15
Distributions -- Oct. 1, 1998 - Sept. 30, 1999
From income $ 0.44
From capital gains $ 0.89
Total distributions $ 1.33
Total return* +14.78%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $10.43
Sept. 30, 1998 $10.29
Increase $ 0.14
Distributions -- Oct. 1, 1998 - Sept. 30, 1999
From income $ 0.36
From capital gains $ 0.89
Total distributions $ 1.25
Total return* +13.90%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 1999 $10.50
Sept. 30, 1998 $10.34
Increase $ 0.16
Distributions -- Oct. 1, 1998 - Sept. 30, 1999
From income $ 0.45
From capital gains $ 0.89
Total distributions $ 1.34
Total return* +14.92%**
*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 MANAGED ALLOCATION 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 Sept. 30, 1999)
Bristol-Myers Squibb 1.94% $44,023,499
Microsoft 1.83 41,586,299
Intl Business Machines 1.78 40,381,462
General Electric 1.71 38,817,362
U.S. Treasury 1.42 32,269,503
6.75% 2000
Chevron 1.17 26,633,874
Cisco Systems 1.12 25,518,962
Wal-Mart Stores 1.12 25,369,837
Mobil 1.11 25,278,174
Tyco Intl 1.03 23,458,399
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 14.23% of net assets
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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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 $10
$ 5 $8 $5 $5 $8
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 MANAGED ALLOCATION FUND (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
How $10,000 has grown in AXP Managed Allocation Fund
$50,000
$40,000
$30,000 X S&P 500 Index
X
$20,000 $28,344
AXP Managed
X Allocation Fund
$10,000 Lipper Flexible
Portfolio Fund Index
$9,500
10/1/89 9/90 9/91 9/92 9/93 9/94 9/95 9/96 9/97 9/98 9/99
Average annual total return (as of Sept. 30, 1999)
Since
1 year 5 years 10 years inception*
Class A +9.04% +8.89% +10.98% --%
Class B +9.90% --% --% +11.16%
Class Y +14.92% --% --% +12.46%
*Inception date was March 20, 1995.
Assumes:Holding period from 10/1/89 to 9/30/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $4,095. 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 two
widely cited performance indexes, Standard & Poor's 500 Index (S&P 500 Index)
and the Lipper Flexible Portfolio Fund Index. In comparing AXP Managed
Allocation Fund (Class A) to the two indexes, you should take into account the
fact that the Fund's performance reflects the maximum sales charge of 5%, while
such 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 returns
reflect the impact of the applicable sales charge up to a maximum of 5%. This
was a period of widely fluctuating security prices. Past performance is no
guarantee of future results.
S&P 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&P 500 companies may be generally larger than those
in which the Fund invests.
Lipper Flexible Portfolio Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 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 - 1999
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The financial statements contained in Post-Effective Amendment #30 to
Registration Statement No. 2-93801 filed on or about November 23, 1999, 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.
Class A
Income distribution taxable as dividend income, 17.64% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 0.25275
March 25 1999 0.06141
June 24, 1999 0.05806
Sept. 23, 1999 0.07205
Total $0.44427
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.88695
Total distributions $1.33122
The distribution of $1.13970 per share, payable Dec. 22, 1998, consisted of
$0.10491 derived from net investment income, $0.14784 from net short-term
capital gains (a total of $0.25275 taxable as dividend income) and $0.88695 from
net long-term capital gains.
AXP MANAGED ALLOCATION FUND (This annual report is not part of the prospectus.)
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Class B
Income distribution taxable as dividend income, 17.64% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.23278
March 25, 1999 0.04039
June 24, 1999 0.03714
Sept. 23, 1999 0.05106
Total $0.36137
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.88695
Total distributions $1.24832
The distributions of $1.11973 per share, payable Dec. 22, 1998, consisted of
$0.08494 derived from net investment income, $0.14784 from net short-term
capital gains (a total of $0.23278 taxable as dividend income) and $0.88695 from
net long-term capital gains.
Class Y
Income distribution taxable as dividend income, 17.64% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.25475
March 25, 1999 0.06394
June 24, 1999 0.06012
Sept. 23, 1999 0.07632
Total $0.45513
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.88695
Total distributions $1.34208
The distribution of $1.14170 per share, payable Dec. 22, 1998, consisted of
$0.10691 derived from net investment income, $0.14784 from net short-term
capital gains (a total of $0.25475 taxable as dividend income) and $0.88695 from
net long-term capital gains.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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S-6141 P (11/99)
AXP Managed Allocation Fund
IDS Tower 10
Minneapolis, MN 55440-0010
AMERICAN EXPRESS Financial Advisors (logo)
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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 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
