AXP (SM) Managed
Allocation
Fund
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express (R)
Funds
(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.)
AMERICAN
EXPRESS
(R) (logo)
<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. 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.
Table of Contents
2000 ANNUAL REPORT
The purpose of this annual report is to tell
investors how the Fund performed.
From the Chairman 3
From the Portfolio Manager 3
Fund Facts 5
The 10 Largest Holdings 6
Making the Most of the Fund 7
The Fund's Long-term Performance 8
Independent Auditors' Report (Fund) 9
Financial Statements (Fund) 10
Notes to Financial Statements (Fund) 13
Independent Auditors' Report
(Portfolio) 20
Financial Statements (Portfolio) 21
Notes to Financial Statements
(Portfolio) 24
Investments in Securities 28
Federal Income Tax Information 43
AXP MANAGED ALLOCATION FUND
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue, accompanied by a
modest rise in long-term interest rates. But no matter what transpires, this is
a great time to take a close look at your goals and investments. We encourage
you to:
o Consult a professional investment advisor who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable
through retirement plans of your employer.
o Learn as much as you can about your current investments.
The portfolio manager's letter that follows provides a review of the Fund's
investment strategies and performance. The 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.
On behalf of the Board,
Arne H. Carlson
(picture of) James M. Johnson, Jr.
James M. Johnson, Jr.
Portfolio Manager
From the Portfolio Manager
Aided mainly by an overall positive period for the U.S. stock market, AXP
Managed Allocation Fund generated a double-digit total return for the fiscal
year. For the October 1999 through September 2000 period, the Fund's Class A
shares returned 10.54% (excluding the sales charge).
Buoyed by reports of still-low inflation, robust economic growth and mostly
healthy corporate profits, the stock market began advancing shortly after the
outset of the period. Soon, investor enthusiasm for "new-economy" stocks began
adding fuel to the fire, powering the stock market to a series of new highs
through 1999 and into early January.
ANNUAL REPORT - 2000
<PAGE>
SPRING SLUMP
By spring, though, investors turned negative under the pressure of higher
interest rates, and stocks were driven into retreat. Although the market did
manage during the summer to regain much of the lost ground, concerns about the
strength of future corporate profits brought the period to a close with a sharp
decline in September.
For the bond market, the situation was basically reversed. During the first half
of the period, bond prices suffered as interest rates rose on the threat of
potentially higher inflation. Later in the period, though, the inflation concern
began to dissipate, allowing bonds to perform better. Holdings were spread among
U.S. Treasury, corporate and mortgage-backed bonds, which as a group provided
overall positive performance.
For most of the period, the Fund's asset allocation was about 60% stocks and 25%
bonds, with the rest in convertible securities and cash reserves. On the stock
side, the biggest investment was in large-capitalization issues, followed by
small-caps, which provided the best performance of the two. As for stock
sectors, financial services, health care, industrials and utilities generated
the bulk of the Fund's gains. The largest investment sector was actually
technology, which was highly volatile and produced only modestly positive
results. The great majority of the stock investments were in the U.S.,
complemented by a small amount in Europe and Japan.
Looking at notable changes to the portfolio, I reduced investments in consumer
stocks, while adding to holdings in the industrial and energy sectors. As the
new fiscal year begins, I plan to increase the level of stock investments to
take advantage of what I expect to be a better near-term environment for the
market.
James M. Johnson, Jr.
AXP MANAGED ALLOCATION FUND
<PAGE>
Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.52
Sept. 30, 1999 $10.49
Increase $ 0.03
Distributions -- Oct. 1, 1999 - Sept. 30, 2000
From income $ 0.45
From capital gains $ 0.60
Total distributions $ 1.05
Total return** +10.54%
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.44
Sept. 30, 1999 $10.43
Increase $ 0.01
Distributions -- Oct. 1, 1999 - Sept. 30, 2000
From income $ 0.37
From capital gains $ 0.60
Total distributions $ 0.97
Total return** +9.72%
Class C -- June 26, 2000* - Sept. 30, 2000
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.47
June 26, 2000* $10.46
Increase $ 0.01
Distributions -- June 26, 2000* - Sept. 30, 2000
From income $ 0.05
From capital gains $ --
Total distributions $ 0.05
Total return** +0.60%***
Class Y-- 12-month performance
(All figures per share)
Net asset value (NAV)
Sept. 30, 2000 $10.52
Sept. 30, 1999 $10.50
Increase $ 0.02
Distributions-- Oct. 1, 1999 - Sept. 30, 2000
From income $ 0.47
From capital gains $ 0.60
Total distributions $ 1.07
Total return** +10.70%
* Inception date.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested. Returns do not include sales load. The prospectus
discusses the effect of sales charges, if any, on the various classes.
*** The total return for Class C is not annualized.
ANNUAL REPORT - 2000
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Sept. 30, 2000)
General Electric 2.00% $38,477,562
Exxon Mobil 1.73 33,285,958
Cisco Systems 1.61 31,072,599
Pfizer 1.43 27,539,362
Citigroup 1.24 23,971,312
Microsoft 1.15 22,181,038
Intel 1.08 20,908,237
EMC 1.06 20,409,837
Intl Business Machines .95 18,269,999
Oracle .92 17,640,000
Excludes U.S. Treasury and government agency holdings.
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The 10 holdings listed here make up 13.17% of net assets
(icon of) piechart
AXP MANAGED ALLOCATION FUND
<PAGE>
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 falls 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
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
$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.
ANNUAL REPORT - 2000
<PAGE>
The Fund's Long-term Performance
How your $10,000 has grown in AXP Managed Allocation Fund
$70,000
$60,000
S&P 500 Index X
$50,000
$40,000 Lipper Flexible
Portfolio Index
X
$30,000 X
$32,302 AXP Managed
Allocation Fund Class A
$20,000
$9,425 (The printed version of this chart contains a line graph with
three lines corresponding to the two Indexes and Fund listed
above.)
10/1/90 9/91 9/92 9/93 9/94 9/95 9/96 9/97 9/98 9/99 9/00
Average Annual Total Returns (as of Sept. 30, 2000)
Since
1 year 5 years 10 years (A) inception (B & Y)
Class A +4.18% +8.56% +12.44% --%
Class B +5.72% +8.90% --% +11.03%*
Class Y +10.70% +9.99% --% +12.14%*
* Inception date was March 20, 1995.
Assumes: Holding period from 10/1/90 to 9/30/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $22,336. 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 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 5.75%, while such
charges are not reflected in the performance of the indexes. Class C became
effective June 26, 2000 and therefore performance information is not presented.
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 5.75%. 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 Index, an unmanaged index published by Lipper
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.
AXP MANAGED ALLOCATION FUND
<PAGE>
The financial statements contained in Post-Effective Amendment #32 to
Registration Statement No. 2-93801 filed on or about November 22, 2000, are
incorporated herein by reference.
<PAGE>
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 Managed Allocation Fund
Fiscal year ended Sept. 30, 2000
Class A
Income distribution taxable as dividend income, 13.74% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.27547
March 24, 2000 0.04965
June 22, 2000 0.06013
Sept. 22, 2000 0.06226
Total $0.44751
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.60497
Total distributions $1.05248
The distribution of $0.88044 per share, payable Dec. 22, 1999, consisted of
$0.08158 derived from net investment income, $0.19389 from net short-term
capital gains (a total of $0.27547 taxable as dividend income) and $0.60497 from
net long-term capital gains.
Class B
Income distribution taxable as dividend income, 13.74% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.25496
March 24, 2000 0.02903
June 22, 2000 0.04028
Sept. 22, 2000 0.04161
Total $0.36588
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.60497
Total distributions $0.97085
The distributions of $0.85993 per share, payable Dec. 22, 1999, consisted of
$0.06107 derived from net investment income, $0.19389 from net short-term
capital gains (a total of $0.25496 taxable as dividend income) and $0.60497 from
net long-term capital gains.
ANNUAL REPORT - 2000
<PAGE>
Class C
Income distribution taxable as dividend income, 13.74% qualifying for deduction
by corporations.
Payable date Per share
Sept. 22, 2000 $0.05270
Total distributions $0.05270
Class Y
Income distribution taxable as dividend income, 13.74% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.27991
March 24, 2000 0.05385
June 22, 2000 0.06433
Sept. 22, 2000 0.06673
Total $0.46482
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.60497
Total distributions $1.06979
The distribution of $0.88488 per share, payable Dec. 22, 1999, consisted of
$0.08602 derived from net investment income, $0.19389 from net short-term
capital gains (a total of $0.27991 taxable as dividend income) and $0.60497 from
net long-term capital gains.
AXP MANAGED ALLOCATION FUND
<PAGE>
This page left blank intentionally
<PAGE>
This page left blank intentionally
<PAGE>
This page left blank intentionally
<PAGE>
AMERICAN
EXPRESS(R)
FUNDS
AXP Managed Allocation Fund
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
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.
AMERICAN
EXPRESS
(R) (logo)
S-6141 U (11/00)
<PAGE>
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.
