AXP(SM) Managed
Allocation
Fund
2000 SEMIANNUAL REPORT
(icon of) magnifying glass
American Express (R) Funds
AXP Managed Allocation Fund seeks to provide shareholders maximum total return
through a combination of growth of capital and current income.
<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
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue this year,
accompanied by a modest rise in long-term interest rates. But no matter what
transpires, this is a great time to take a close look at your goals and
investments. We encourage you to:
o Consult a professional investment advisor who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through retirement
plans of your employer.
o Learn as much as you can about your current investments.
The portfolio manager's letter that follows provides a review of the Fund's
investment strategies and performance. The annual report contains other valuable
information as well. The Fund's prospectus describes its investment objectives
and how it intends to achieve those objectives. As experienced investors know,
information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
Sincerely,
Arne H. Carlson
(picture of) James M. Johnson, Jr.
James M. Johnson, Jr.
Portfolio manager
From the Portfolio Manager
Powered by a generally strong U.S. stock market, AXP Managed Allocation Fund
generated a double-digit total return for the first half of the fiscal year. For
the October 1999 through March 2000 period, the Fund's Class A shares returned
11.34% (excluding the sales charge).
Buoyed by reports of still-low inflation, robust economic growth and mostly
healthy corporate profits, the stock market began advancing Arne H. Carlson
Chairman of the boardJames M. Johnson, Jr. Portfolio managerSEMIANNUAL REPORT --
2000shortly after the outset of the period. Soon, with additional support from
dissipating concerns about the Y2K computer bug and increasing excitement about
the Internet, the market shifted into high gear. The positive momentum continued
through the end of 1999 and into early January, before renewed worries about
potentially higher inflation and rising interest rates drove the market into a
several-week retreat. But, in another example of the resilience it has showed in
recent years, the market rebounded to an all-time high in late March.
The U.S. bond market found the going more difficult for much of the six months,
as the threat of potentially higher inflation drove interest rates up and prices
down during the last three months of 1999. U.S. Treasury bonds rallied strongly
in the following quarter as long-term rates came down, but corporate and
mortgage-backed issues, which made up the bulk of the Fund's bond holdings,
realized only modest gains.
TECH FARES BEST
I maintained roughly a two-to-one ratio of stocks to bonds (60%-65% stocks,
25-30% bonds) in the portfolio over the six months. Large-capitalization U.S.
stocks easily comprised the largest area of investment, followed by small-cap
U.S. stocks and foreign stocks. Looking at business sectors, the greatest
emphasis was on technology-related stocks, which were by far the strongest
performers during the period. Holdings among health care and specialty retailers
also provided above-average gains.
Looking at changes to the portfolio, about mid-period I increased the overall
stock exposure, which included establishing a relatively small position in
foreign stocks (mainly in Japan), and lowered the bond exposure somewhat. Also,
in February I reduced holdings among small-cap stocks. In addition, as the
period progressed, I reduced the level of cash reserves, with most of that money
going into stocks.
As the second half of the fiscal year begins, I am sticking with the emphasis on
large-cap U.S. stocks, especially technology-related issues. Despite the
substantial price swings that have become commonplace in the stock market, I
think that the fundamentals, particularly the earnings growth potential, for
such stocks remain quite strong. At the same time, I want to avoid stocks whose
prices have risen beyond reasonable investment value and therefore are highly
vulnerable to downturns. The Fund's bond component also should continue to help
moderate the Fund's overall volatility.
James M. Johnson, Jr.
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $10.72
Sept. 30, 1999 $10.49
Increase $ 0.23
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $ 0.33
From capital gains $ 0.60
Total distributions $ 0.93
Total return* +11.34%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $10.65
Sept. 30, 1999 $10.43
Increase $ 0.22
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $ 0.29
From capital gains $ 0.60
Total distributions $ 0.89
Total return* +10.95%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
March 31, 2000 $10.72
Sept. 30, 1999 $10.50
Increase $ 0.22
Distributions -- Oct. 1, 1999 - March 31, 2000
From income $ 0.34
From capital gains $ 0.60
Total distributions $ 0.94
Total return* +11.42%**
*Returns do not include sales load. The prospectus discusses the effect of sales
charges, if any, on the various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of March 31, 2000)
General Electric 2.53% $55,743,349
Microsoft 2.46 54,086,562
Cisco Systems 2.33 51,389,618
Intel 1.98 43,572,358
Exxon Mobil 1.21 26,648,835
Citigroup 1.09 23,905,902
Oracle 1.07 23,606,099
Wal-Mart Stores 1.02 22,402,574
Pfizer 0.96 21,096,562
AT&T 0.93 20,463,749
Excludes U.S. Treasury and government agency holdings.
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 15.58% of net assets
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Managed Allocation Fund
March 31, 2000 (Unaudited)
Assets
<S> <C>
Investment in Total Return Portfolio (Note 1) $2,200,066,772
--------------
Liabilities
Accrued distribution fee 19,706
Accrued service fee 11,084
Accrued transfer agency fee 7,699
Accrued administrative services fee 1,991
Other accrued expenses 28,009
------
Total liabilities 68,489
------
Net assets applicable to outstanding capital stock $2,199,998,283
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,052,988
Additional paid-in capital 1,950,089,032
Undistributed net investment income 720,428
Accumulated net realized gain (loss) 48,345,651
Unrealized appreciation (depreciation) on investments and
on translation of assets and liabilities in foreign currencies 198,790,184
-----------
Total -- representing net assets applicable to outstanding capital stock $2,199,998,283
==============
Net assets applicable to outstanding shares: Class A $1,914,290,462
Class B $ 237,868,898
Class Y $ 47,838,923
Net asset value per share of outstanding capital stock: Class A shares 178,504,302 $ 10.72
Class B shares 22,333,046 $ 10.65
Class Y shares 4,461,489 $ 10.72
--------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
AXP Managed Allocation Fund
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 7,541,994
Interest 29,241,345
Less foreign taxes withheld (32,970)
-------
Total income 36,750,369
----------
Expenses (Note 2):
Expenses allocated from Total Return Portfolio 6,251,648
Distribution fee
Class A 2,459,711
Class B 1,201,758
Transfer agency fee 1,347,828
Incremental transfer agency fee
Class A 129,793
Class B 34,778
Service fee-- Class Y 27,264
Administrative services fees and expenses 373,954
Compensation of board members 5,049
Printing and postage 51,820
Registration fees 19,863
Audit fees 5,000
Other 8,134
-----
Total expenses 11,916,600
Earnings credits on cash balances (Note 2) (73,436)
-------
Total net expenses 11,843,164
----------
Investment income (loss) -- net 24,907,205
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 84,010,656
Financial futures contracts (18,321,055)
Foreign currency transactions 256,365
-------
Net realized gain (loss) on investments 65,945,966
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 151,531,636
-----------
Net gain (loss) on investments and foreign currencies 217,477,602
-----------
Net increase (decrease) in net assets resulting from operations $242,384,807
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Managed Allocation Fund
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 24,907,205 $ 71,750,349
Net realized gain (loss) on investments 65,945,966 148,548,816
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilites in foreign currencies 151,531,636 152,325,753
----------- -----------
Net increase (decrease) in net assets resulting from operations 242,384,807 372,624,918
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (23,504,627) (59,764,982)
Class B (1,996,914) (5,070,750)
Class Y (677,309) (2,600,055)
Net realized gain
Class A (143,121,801) (213,025,397)
Class B (17,618,754) (24,584,424)
Class Y (4,066,958) (9,468,549)
---------- ----------
Total distributions (190,986,363) (314,514,157)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 40,420,958 81,611,960
Class B shares 15,872,316 34,306,652
Class Y shares 4,764,854 18,212,314
Reinvestment of distributions at net asset value
Class A shares 164,092,629 268,805,672
Class B shares 19,463,633 29,452,905
Class Y shares 4,744,267 12,068,604
Payments for redemptions
Class A shares (314,405,813) (654,795,821)
Class B shares (Note 2) (39,389,851) (83,238,755)
Class Y shares (18,864,089) (71,652,350)
----------- -----------
Increase (decrease) in net assets from capital share transactions (123,301,096) (365,228,819)
------------ ------------
Total increase (decrease) in net assets (71,902,652) (307,118,058)
Net assets at beginning of period 2,271,900,935 2,579,018,993
------------- -------------
Net assets at end of period $2,199,998,283 $2,271,900,935
============== ==============
Undistributed net investment income $ 720,428 $ 1,992,073
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Managed Allocation Fund
(Unaudited as to March 31, 2000)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Managed Series, 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, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
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. 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, 2000 was 99.96%.
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 accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to 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 has 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. A minor portion of additional administrative service expenses
paid by the Fund are consultants' fees and fund office expenses. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
AEFC has a Sub-investment Advisory Agreement with Kenwood Capital Management
LLC, an indirect subsidiary of AEFC.
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 $17
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a distribution fee at an annual rate up
to 0.25% of the Fund's average daily net assets attributable to Class A shares
and up to 1.00% for Class B shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$747,778 for Class A and $112,044 for Class B for the six months ended March 31,
2000.
During the six months ended March 31, 2000, the Fund's transfer agency fees were
reduced by $73,436 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, 2000
Class A Class B Class Y
Sold 3,833,497 1,517,555 453,124
Issued for reinvested distributions 15,794,232 1,887,899 457,279
Redeemed (29,745,020) (3,761,509) (1,783,712)
----------- ---------- ----------
Net increase (decrease) (10,117,291) (356,055) (873,309)
Year ended Sept. 30, 1999
Class A Class B Class Y
Sold 7,621,749 3,221,089 1,700,619
Issued for reinvested distributions 26,079,903 2,878,182 1,171,183
Redeemed (60,922,790) (7,797,934) (6,730,053)
----------- ---------- ----------
Net increase (decrease) (27,221,138) (1,698,663) (3,858,251)
4. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express mutual funds, permits
borrowings up to $200 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or
the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to
90 days after such loan is executed. The Fund also pays a commitment fee equal
to its pro rata share of the amount of the credit facility at a rate of 0.05%
per annum. The Fund had no borrowings outstanding during the six months ended
March 31, 2000.
<PAGE>
<TABLE>
<CAPTION>
5. FINANCIALHIGHLIGHTS
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
2000b 1999 1998 1997 1996c
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.49 $10.34 $12.68 $12.20 $12.19
Income from investment operations:
Net investment income (loss) .13 .32 .37 .32 .24
Net gains (losses) (both realized and unrealized) 1.03 1.16 (.79) 1.97 .58
Total from investment operations 1.16 1.48 (.42) 2.29 .82
Less distributions:
Dividends from net investment income (.13) (.30) (.37) (.32) (.23)
Distributions from realized gains (.80) (1.03) (1.55) (1.49) (.58)
Total distributions (.93) (1.33) (1.92) (1.81) (.81)
Net asset value, end of period $10.72 $10.49 $10.34 $12.68 $12.20
Ratios/supplemental data
Net assets, end of period (in millions) $1,914 $1,979 $2,233 $2,639 $2,523
Ratio of expenses to average daily net assetsd .97%e .82% .80% .84% .80%e
Ratio of net investment income (loss)
to average daily net assets 2.28%e 2.85% 3.13% 2.55% 2.29%e
Portfolio turnover rate
(excluding short-term securities) 54% 81% 122% 99% 142%
Total returnf 11.34% 14.78% (3.73%) 20.79% 7.13%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 2000 (Unaudited).
c The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
d 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
2000b 1999 1998 1997 1996c 2000b 1999 1998 1997 1996c
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period $10.43 $10.29 $12.63 $12.15 $12.16 $10.50 $10.34 $12.68 $12.20 $12.19
Income from investment operations:
Net investment income (loss) .09 .23 .29 .23 .15 .13 .33 .38 .33 .26
Net gains (losses) (both realized
and unrealized) 1.02 1.16 (.79) 1.97 .57 1.03 1.17 (.79) 1.97 .58
Total from investment operations 1.11 1.39 (.50) 2.20 .72 1.16 1.50 (.41) 2.30 .84
Less distributions:
Dividends from net
investment income (.09) (.22) (.29) (.23) (.15) (.14) (.31) (.38) (.33) (.25)
Distributions from realized gains (.80) (1.03) (1.55) (1.49) (.58) (.80) (1.03) (1.55) (1.49) (.58)
Total distributions (.89) (1.25) (1.84) (1.72) (.73) (.94) (1.34) (1.93) (1.82) (.83)
Net asset value, end of period $10.65 $10.43 $10.29 $12.63 $12.15 $10.72 $10.50 $10.34 $12.68 $12.20
Ratios/supplemental data
Net assets, end of period
(in millions) $238 $237 $251 $241 $163 $48 $56 $95 $118 $113
Ratio of expenses to average
daily net assetsd 1.74%e 1.59% 1.56% 1.60% 1.57%e .81%e .72% .72% .71% .63%e
Ratio of net investment
income (loss) to average
daily net assets 1.51%e 2.08% 2.40% 1.82% 1.61%e 2.43%e 2.95% 3.20% 2.69% 2.45%e
Portfolio turnover rate
(excluding short-term securities) 54% 81% 122% 99% 142% 54% 81% 122% 99% 142%
Total returnf 10.95% 13.90% (4.46%) 19.87% 6.45% 11.42% 14.92% (3.65%) 20.94% 7.28%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended March 31, 2000 (Unaudited).
c The Fund's fiscal year-end was changed from Nov. 30 to Sept. 30, effective
1996.
d 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>
Financial Statements
Statement of assets and liabilities
Total Return Portfolio
March 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $1,990,014,840) $2,182,218,406
Cash in bank on demand deposit 336,532
Dividends and accrued interest receivable 10,467,417
Receivable for investment securities sold 21,396,157
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 32,188
U.S. government securities held as collateral (Note 5) 26,408,250
----------
Total assets 2,240,858,950
-------------
Liabilities
Payable for investment securities purchased 8,279,057
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 5,309
Payable upon return of securities loaned (Note 5) 31,411,550
Accrued investment management services fee 29,947
Other accrued expenses 153,979
-------
Total liabilities 39,879,842
----------
Net assets $2,200,979,108
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Total Return Portfolio
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 7,544,898
Interest 29,255,299
Less foreign taxes withheld (32,983)
-------
Total income 36,767,214
----------
Expenses (Note 2):
Investment management services fee 6,163,797
Compensation of board members 6,292
Custodian fees 43,400
Audit fees 15,000
Other 30,060
------
Total expenses 6,258,549
Earnings credits on cash balances (Note 2) (4,488)
------
Total net expenses 6,254,061
---------
Investment income (loss) -- net 30,513,153
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 84,035,147
Financial futures contracts (18,328,652)
Foreign currency transactions 256,372
-------
Net realized gain (loss) on investments 65,962,867
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 151,598,657
-----------
Net gain (loss) on investments and foreign currencies 217,561,524
-----------
Net increase (decrease) in net assets resulting from operations $248,074,677
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Total Return Portfolio
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 30,513,153 $ 83,132,960
Net realized gain (loss) on investments 65,962,867 148,588,089
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 151,598,657 152,366,575
----------- -----------
Net increase (decrease) in net assets resulting from operations 248,074,677 384,087,624
Net contributions (withdrawals) from partners (319,908,321) (691,086,627)
------------ ------------
Total increase (decrease) in net assets (71,833,644) (306,999,003)
Net assets at beginning of period 2,272,812,752 2,579,811,755
------------- -------------
Net assets at end of period $2,200,979,108 $2,272,812,752
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Total Return Portfolio
(Unaudited as to March 31, 2000)
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 accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the 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. 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, 2000, investments in securities included issues that are
illiquid which the Portfolio currently limits to 10% of net assets, at market
value, at the time of purchase. The aggregate value of such securities as of
March 31, 2000 was $4,839,658 representing 0.22% of net assets. According to
board guidelines, 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 an Investment Management Services
Agreement with American Express Financial Corporation (AEFC) to manage 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 fee may be adjusted upward or downward by a performance incentive adjustment
based on a comparison of the performance of Class A shares of AXP Managed
Allocation Fund to the Lipper Flexible Portfolio Fund Index. The maximum
adjustment is 0.08% of the Portfolio's average daily net assets after deducting
1% from the performance difference. If the performance difference is less than
1%, the adjustment will be zero. The adjustment increased the fee by $565,613
for the six months ended March 31, 2000.
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, 2000, the Portfolio's custodian fees were
reduced by $4,488 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 $1,109,996,687 and $1,162,940,538 respectively, for the
six months ended March 31, 2000. For the same period, the portfolio turnover
rate was 54%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $65,322 for the
six months ended March 31, 2000.
4. FOREIGN CURRENCY CONTRACTS
As of March 31, 2000, the Portfolio has 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
April 3, 2000 17,213,240 162,339 $-- $5,309
Japanese Yen U.S. Dollar
April 3, 2000 1,096,883 115,927,407 32,188 --
U.S. Dollar Japanese Yen
Total $32,188 $5,309
5. LENDING OF PORTFOLIO SECURITIES
As of March 31, 2000, securities valued at $29,953,300 were on loan to brokers.
For collateral, the Portfolio received $5,003,300 in cash and U.S. government
securities valued at $26,408,250. Income from securities lending amounted to
$26,737 for the six months ended March 31, 2000. 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. FUTURES CONTRACTS
As of March 31, 2000, investments in securities included securities valued at
$11,720,080 that were pledged as collateral to cover initial margin deposits on
230 open sale interest rate contracts and 590 open sale stock index contracts.
The market value of the open sale interest rate contracts as of March 31, 2000
was $22,621,250 with a net unrealized loss of $399,006. The market value of the
open sale stock index contracts as of March 31, 2000 was $181,046,750 with a net
unrealized gain of $6,996,084. See "Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Total Return Portfolio
March 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (71.7%)
Issuer Shares Value(a)
Aerospace & defense (0.7%)
<S> <C> <C>
Boeing 74,000 $2,807,375
Goodrich (BF) 46,050 1,321,059
Honeywell Intl 145,050 7,642,322
United Technologies 71,550 4,521,066
Total 16,291,822
Airlines (0.2%)
America West Holdings Cl B 42,000(b) 651,000
Amtran 27,300(b) 487,988
SkyWest 43,100 1,686,288
Southwest Airlines 106,075 2,207,685
Total 5,032,961
Automotive & related (1.4%)
Bridgestone 44,000(c) 970,636
Delphi Automotive Systems 191,024 3,056,384
DollarThrifty Automotive Group 49,200(b) 845,625
Ford Motor 204,900 9,412,593
General Motors 115,750 9,585,546
Gentex 75,800(b) 2,809,338
Smith (AO) 37,300 671,400
Tower Automotive 68,000(b) 1,113,500
Toyota Motor 46,000(c) 2,405,844
Total 30,870,866
Banks and savings & loans (3.3%)
Bank of America 224,665 11,780,871
Bank of New York 153,550 6,381,922
Banque Natl de Paris 7,276(c) 574,518
Cullen/Frost Bankers 64,700 1,710,506
Deutsche Bank 22,151(c) 1,472,390
Dime Community Bancshares 30,400 480,700
First Midwest Bancorp 26,850 651,113
Firstar 170,100 3,901,669
Flagstar Bancorp 47,400 616,200
FleetBoston Financial 274,421 10,016,367
Garanti Banking 41,045,286(b,c) 522,715
Hamilton Bancorp 38,000(b) 593,750
Hudson United Bancorp 14,111 306,032
Instituto Bancario San Paolo di Torino 138,996(c) 1,903,703
MAF Bancorp 29,700 480,769
Mellon Financial 72,700 2,144,650
NBT Bancorp 20,685 299,933
Overseas Union Bank 157,000(c) 706,216
Provident Bankshares 17,235 271,451
Queens County Bancorp 34,200 617,738
Republic Bancorp 58,410 545,768
Silicon Valley Bancshares 12,700(b) 912,813
SLM Holding 13,250 441,391
Southtrust 81,500 2,073,156
U.S. Trust 11,400 2,154,600
Uniao de Bancos Brasileiros GDR 22,000(c) 698,500
Wachovia 70,550 4,766,534
Webster Financial 22,000 506,000
Wells Fargo 324,450 13,282,171
Wilshire Financial Services Group 411,726(b) 334,527
Yapi Kredit Finance 19,050,000 509,466
Total 71,658,139
Beverages & tobacco (1.1%)
Anheuser-Busch 80,150 4,989,338
Beringer Wine Estates Holdings Cl B 22,900(b) 821,538
Canandaigua Wine Cl A 31,400(b) 1,601,400
Coca-Cola 262,300 12,311,705
Fomento Economico Mexicano ADR 14,000(c) 630,000
PepsiCo 129,800 4,486,213
Total 24,840,194
Building materials & construction (0.8%)
Dycom Inds 53,800(b) 2,622,750
Elcor 33,200 1,145,400
Florida Rock Inds 28,600 800,800
Horton (DR) 89,600 1,170,400
Insituform Technologies Cl A 39,100(b) 1,197,438
NCI Building Systems 32,400(b) 609,525
Pulte 29,400 613,725
Ryland Group 43,100 808,125
URS 50,800(b) 666,750
Weyerhaeuser 121,850 6,945,450
Total 16,580,363
Chemicals (0.7%)
Air Products & Chemicals 33,000 938,438
Asahi Chemical Inds 220,000(c) 1,403,458
Dow Chemical 48,400 5,517,599
Du Pont (EI) de Nemours 100,850 5,332,444
Engelhard 102,850 1,555,606
Geon 33,700 724,550
Total 15,472,095
Communications equipment & services (4.1%)
Adaptive Broadband 16,400(b) 877,400
Advanced Fibre Communications 7,400(b) 463,888
Aspect Communications 35,000(b) 1,297,188
C-COR Electronics 15,500(b) 759,500
China Telecom 144,000(b,c) 1,262,176
Com21 12,800(b) 601,600
CommScope 55,900(b) 2,550,438
Corsair Communications 12,000(b) 229,500
Digital Microwave 53,100(b) 1,798,763
Ericsson (LM) Cl B 55,000(c) 4,838,878
Glenayre Technologies 29,000(b) 509,313
Harmonic Lightwaves 3,000(b) 249,750
InterVoice 22,000(b) 635,250
Leap Wireless Intl 9,100(b) 898,056
Lucent Technologies 278,700(c) 16,931,024
Marconi 158,632 1,891,660
Motorola 90,650 12,906,293
Net2000 Communications 24,200(b) 574,750
Nokia 20,700(c) 4,378,445
Nortel Networks 120,600(c) 15,195,599
P-COM 68,600(b) 1,269,100
Proxim 9,700(b) 1,160,969
QUALCOMM 42,950(b) 6,412,972
Scientific-Atlanta 60,600 3,844,313
Sonera 38,416(c) 2,621,555
Spectrian 55,900(b) 1,257,750
Tellabs 75,800(b) 4,774,216
Total 90,190,346
Computers & office equipment (15.2%)
3Com 38,450(b) 2,138,781
About.com 13,400(b) 1,180,875
Acxiom 25,300(b) 841,225
ADAC Laboratories 32,800(b) 451,000
Allaire 9,800(b) 741,125
America Online 177,100(b) 11,909,974
American Management Systems 29,500(b) 1,292,469
Aspect Development 6,800(b) 437,750
Aspen Technology 24,000(b) 969,000
Automatic Data Processing 66,800 3,223,100
BindView Development 14,400(b) 447,300
BISYS Group 5,900(b) 392,350
Black Box 6,700(b) 463,870
Cabletron Systems 75,900(b) 2,224,819
Canon 36,000(c) 1,560,263
Cap Gemini 17,200(c) 4,658,780
Cisco Systems 664,700(b) 51,389,618
Citrix Systems 34,400(b) 2,279,000
Cognex 27,400(b) 1,580,638
Compaq Computer 190,450 5,070,731
Computer Associates Intl 76,850 4,548,559
Computer Sciences 58,500(b) 4,628,813
Dell Computer 246,600(b) 13,300,987
Dendrite Intl 20,800(b) 435,500
Diamond Technology Partners 9,600(b) 631,200
Electronic Data Systems 135,000 8,665,313
EMC 134,300(b) 16,787,499
Emulex 3,300(b) 360,113
Eprise 24,300(b) 382,725
FactSet Research Systems 23,200 627,850
First Data 222,300 9,836,774
Fujitsu 87,000(c) 2,669,102
go2net 3,100(b) 249,744
Hadco 17,100(b) 1,105,088
Harbinger 19,000(b) 553,375
HearMe 19,600(b) 494,900
Hewlett-Packard 127,200 16,861,949
Hitachi Software Engineering 8,000(c) 982,518
HNC Software 10,100(b) 727,831
Hyperion Solutions 27,900(b) 906,750
Informatica 6,100(b) 468,556
Insight Enterprises 15,800(b) 575,713
Intl Business Machines 119,600 14,112,799
IntraNet Solutions 20,700(b) 952,200
ISS Group 3,800(b) 442,700
Kronos 12,000(b) 355,500
Level 8 Systems 15,400(b) 719,950
Lexmark Intl Group Cl A 41,900(b) 4,430,925
Macromedia 18,200(b) 1,643,688
MarchFirst 24,800(b) 885,050
Maxtor 29,700(b) 384,244
MedQuist 43,000(b) 1,169,063
Mercury Interactive 33,900(b) 2,686,575
Micromuse 3,200(b) 444,200
MICROS Systems 10,000(b) 629,375
Microsoft 509,050(b) 54,086,562
Natl Computer Systems 20,200 1,025,150
Natl Instruments 29,000(b) 1,361,188
Netopia 7,000(b) 503,563
Network Appliance 41,700 3,450,675
New Era of Networks 5,800(b) 227,650
Novell 48,200(b) 1,379,725
NVIDIA 6,200(b) 523,803
Oracle 302,400(b) 23,606,099
OTG Software 5,400(b) 217,688
Peregrine Systems 11,000(b) 737,688
Pinnacle Systems 28,000(b) 931,000
Project Software & Development 6,400(b) 361,600
Proxicom 15,800(b) 700,138
Rare Medium Group 15,600(b) 688,350
Razorfish Cl A 8,300(b) 228,250
Remedy 28,000(b) 1,179,500
RSA Security 18,000(b) 932,625
S1 5,200(b) 445,575
Sagent Technology 15,800(b) 455,238
SanDisk 6,400(b) 784,000
SAP 2,846(c) 2,049,740
SERENA Software 25,050(b) 798,469
Solectron 155,850(b) 6,243,741
Sun Microsystems 94,700(b) 8,873,686
THQ 20,000(b) 357,500
Unisys 130,900(b) 3,337,950
Verity 24,200(b) 986,150
Xircom 10,600(b) 392,200
Yahoo! 57,450(b) 9,845,493
Zixit 4,300(b) 313,094
Total 334,933,886
Electronics (6.3%)
Alpha Inds 16,300(b) 1,548,500
Alps Electric 41,000(c) 559,844
Amkor Technology 11,900(b) 631,444
ANADIGICS 2,550(b) 168,300
Analog Devices 40,200(b) 3,238,613
Applied Materials 122,388(b) 11,535,030
Audiovox Cl A 4,900(b) 213,763
Brooks Automation 7,000(b) 437,500
Burr-Brown 17,250(b) 937,969
C&D Technologies 17,000 1,003,000
C-Cube Microsystems 18,600(b) 1,354,313
Conexant Systems 19,300(b) 1,370,300
Corning 44,270 8,588,379
Credence Systems 750(b) 93,844
CTS 14,100 803,700
Cypress Semiconductor 11,900(b) 586,819
Dallas Semiconductor 13,400 470,675
Electro Scientific Inds 27,800(b) 1,612,400
Exar 16,650(b) 1,191,516
Harman Intl Inds 23,600 1,416,000
Helix Technology 21,600 1,297,350
Hitachi 183,000(c) 2,172,652
Integrated Device Technology 10,000(b) 396,250
Intel 330,250 43,572,358
Intl Rectifier 31,300(b) 1,193,313
KEMET 18,300(b) 1,157,475
KLA-Tencor 29,200(b) 2,460,100
Kulicke & Soffa Inds 24,400(b) 1,563,125
Kyocera 8,000 1,337,034
Lam Research 11,700(b) 527,231
Lattice Semiconductor 29,200(b) 1,976,475
LSI Logic 59,100(b) 4,292,138
Matsushita Communication Industrial 10,000(c) 1,840,760
Micrel 20,000(b) 1,920,000
MRV Communications 2,000(b) 183,250
Natl Semiconductor 53,650(b) 3,252,531
Nintendo 7,000(c) 1,230,582
Photronics 6,000(b) 211,875
Power Integrations 18,200(b) 455,000
Powerwave Technologies 14,300(b) 1,787,500
Rohm 4,600(c) 1,599,416
S3 40,000(b) 840,000
Sensormatic Electronics 45,000(b) 1,009,688
Siliconix 2,000(b) 190,125
Teradyne 33,200(b) 2,730,700
Texas Instruments 90,750 14,519,999
Three-Five Systems 20,000(b) 1,200,000
TranSwitch 5,800(b) 557,525
Trimble Navigation 47,600(b) 1,225,700
TriQuint Semiconductor 4,400(b) 323,400
Varian Medical Systems 50,100(b) 2,285,813
Vicor 28,800(b) 518,400
Total 137,589,674
Energy (3.5%)
Anadarko Petroleum 51,400 1,988,538
Apache 97,400 4,845,650
Barrett Resources 43,400(b) 1,293,863
Chevron 184,600 17,063,963
Conoco Cl B 129,800 3,326,125
Exxon Mobil 342,475 26,648,835
HS Resources 45,100(b) 952,738
Newfield Exploration 34,300(b) 1,209,075
Petro-Canada 37,000(c) 615,096
Repsol-YPF 144,200(c) 3,161,896
Royal Dutch Petroleum 43,300(c) 2,492,456
Texaco 156,450 8,389,631
Tosco 65,100 1,981,481
Total Petroleum Cl B 13,952 2,089,816
Total 76,059,163
Energy equipment & services (0.3%)
Halliburton 25,400 1,041,400
Louis Dreyfus Natural Gas 30,400(b) 1,033,600
Marine Drilling 46,400(b) 1,273,100
Patterson Energy 13,800(b) 438,150
Pride Intl 97,900(b) 2,233,344
Tuboscope 61,500(b) 1,045,500
UTI Energy 14,900(b) 562,475
Total 7,627,569
Financial services (3.8%)
AmeriCredit 66,800(b) 1,089,675
Capital One Financial 93,250 4,470,172
Citigroup 403,050 23,905,902
Delphi Financial Group Cl A 27,515(b) 835,768
Fannie Mae 183,200 10,339,349
Financial Federal 43,700(b) 794,794
Jefferies Group 28,600 654,225
Kansas City Southern Inds 97,250(b) 8,357,422
Lehman Brothers Holdings 64,250 6,232,250
MBNA 316,850 8,079,675
Metris Companies 33,200 1,290,650
Morgan Stanley, Dean Witter, Discover & Co 66,050 5,387,203
Nikko Securities 92,000(c) 1,392,432
Paychex 42,900 2,246,888
Providian Financial 55,500 4,807,688
Radian Group 37,300 1,776,413
Raymond James Financial 21,900 454,425
SEI Investments 4,200 476,438
Total 82,591,369
Food (1.2%)
Bestfoods 162,050 7,585,965
Earthgrains 58,000 862,750
General Mills 106,100 3,839,494
Performance Food Group 29,600(b) 647,500
Sara Lee 337,650 6,077,700
Smithfield Foods 62,100(b) 1,242,000
Suiza Foods 16,000(b) 644,000
SUPERVALU 283,600 5,370,675
Total 26,270,084
Furniture & appliances (0.2%)
Briggs & Stratton 15,800 649,775
Furniture Brands Intl 32,000(b) 602,000
La-Z-Boy 62,900 967,088
Matsushita Electric Industrial 53,000 1,584,709
Salton 20,000(b) 867,500
Total 4,671,072
Health care (6.2%)
Abbott Laboratories 138,900 4,887,544
Affymetrix 3,100(b) 460,156
Alkermes 2,300(b) 212,750
Alpharma Cl A 32,100 1,179,675
American Home Products 100,450 5,386,631
Amgen 112,200(b) 6,886,274
Baxter Intl 119,300 7,478,618
Bio-Technology General 23,100(b) 358,050
Biomet 60,000 2,182,500
Bristol-Myers Squibb 327,400 18,907,349
Celgene 2,100(b) 209,081
Cephalon 20,000(b) 750,000
Coherent 30,600(b) 1,591,200
COR Therapeutics 8,400(b) 553,744
Diversa 8,300(b) 390,100
Enzo Biochem 14,000(b) 987,000
ENZON 5,900(b) 222,356
Gilead Sciences 3,300(b) 209,138
Glaxo Wellcome ADR 160,816(c) 4,595,833
Guidant 61,350(b) 3,608,147
Human Genome Sciences 4,000(b) 332,250
IDEC Pharmaceuticals 13,700(b) 1,346,025
Immune Response 32,800(b,h) 377,200
Incyte Pharmaceuticals 15,100(b) 1,313,700
Jones Pharma 39,900 1,211,963
Laboratory 175,000(b) 754,688
Liposome 30,500(b) 532,797
Medtronic 127,800 6,573,713
Merck & Co 77,750 4,830,219
Pfizer 577,000 21,096,562
Pharmacia & Upjohn 71,750 4,251,188
Priority Healthcare Cl B 30,650(b) 1,540,163
Protein Design Labs 10,100(b) 802,950
Quest Diagnostics 47,500(b) 1,888,125
Regeneron Pharmaceuticals 5,500(b) 162,594
Sankyo 47,000(c) 1,183,297
Schering-Plough 245,030 9,004,852
Sequenom 9,700(b) 381,938
SmithKline Beecham 152,870(c) 2,015,223
Techne 18,900(b) 1,304,100
Vertex Pharmaceuticals 18,300(b) 856,669
Warner-Lambert 138,850 13,537,874
Wesley Jessen VisionCare 23,400(b) 840,938
Total 137,195,174
Health care services (0.3%)
Abgenix 3,700(b) 511,063
Apria Healthcare Group 49,000(b) 707,438
Biopure 13,700(b) 456,381
Cerner 30,000(b) 810,000
Columbia/HCA Healthcare 83,300 2,108,531
Cytyc 18,000(b) 868,500
IntraBiotics Pharmaceuticals 16,900(b) 253,500
Patterson Dental 30,700(b) 1,174,275
Total 6,889,688
Household products (0.7%)
Colgate-Palmolive 51,500 2,903,313
Kimberly-Clark 148,450 8,313,199
Procter & Gamble 52,650 2,961,563
Valence Technology 19,700(b) 464,181
Total 14,642,256
Industrial equipment & services (0.9%)
Amada 118,000(c) 953,884
Castorama Dubois 9,500(c) 2,040,346
Deere & Co 74,700 2,838,600
Illinois Tool Works 63,650 3,516,662
Ingersoll-Rand 26,500 1,172,625
Kennametal 39,000 1,172,438
Manitowoc 32,200 871,413
Parker-Hannifin 125,950 5,203,308
Roper Inds 30,400 1,031,700
Total 18,800,976
Insurance (1.5%)
American Intl Group 173,137 18,958,501
CIGNA 46,350 3,511,012
Fidelity Natl Financial 49,200 679,575
First American Financial 34,600 490,888
Fortis 112,100(c) 2,870,031
Gallagher (Arthur J) 42,600 1,384,500
Hooper Holmes 53,000 1,818,563
LandAmerica Financial Group 17,500 339,063
Prudential 112,346(c) 1,692,968
Reinsurance Group of America 18,300 435,769
Total 32,180,870
Leisure time & entertainment (0.9%)
Aztar 150,300(b) 1,427,850
Disney (Walt) 213,900 8,850,112
EMI Group ADR 330,200(c) 3,658,953
Viacom Cl B 103,450(b) 5,456,988
Total 19,393,903
Media (1.5%)
Catalina Marketing 15,900(b) 1,609,875
CBS 134,600(b) 7,621,724
Comcast Special Cl A 131,250 5,692,969
Emmis Communications Cl A 13,100(b) 609,150
McClatchy Newspapers 23,200 759,800
MediaOne Group 72,150(b) 5,844,150
Modem Media Poppe Tyson 3,800(b) 123,025
New York Times Cl A 38,750 1,663,828
News 66,000(c) 921,543
Price Communications 37,400(b) 860,200
Radio One Cl A 5,950(b) 396,419
Scholastic 20,800(b) 1,121,900
Snyder Communications 36,900(b) 830,250
Sony 21,000(c) 2,965,668
True North Communications 24,200 951,363
Valassis Communications 49,000(b) 1,632,313
Total 33,604,177
Metals (0.5%)
Alcoa 26,900 1,889,725
Broken Hill Proprietary 68,000(c) 735,900
Mueller Inds 43,700(b) 1,327,388
Nippon Steel 577,000(c) 1,376,820
Nucor 54,150 2,707,499
Ryerson Tull 49,100 761,050
Steel Technologies 88,200 700,088
Stillwater Mining 23,600(b) 944,000
WMC 175,000(c) 683,794
Total 11,126,264
Miscellaneous (0.3%)
Apex 9,400(b) 348,975
Beasley Broadcast Group Cl A 45,900(b) 424,575
eLoyalty 25,500(b) 608,813
Epcos 3,314(b,c) 437,712
Intraware 20,400(b) 842,775
PFF Bancorp 42,000 651,000
Philadelphia Suburban 29,700 538,313
Quintus 8,000(b) 237,500
TSI Intl Software 2,400(b) 199,350
United Pan-Europe Communications 55,200(b,c) 2,579,782
ValueClick 32,700(b) 684,656
Total 7,553,451
Multi-industry conglomerates (3.7%)
Agribrands Intl 19,100(b) 750,869
Bell & Howell 18,700(b) 584,375
Bombardier Cl B 27,000(c) 677,463
Brady (WH) Cl A 52,100 1,624,869
Danaher 106,200 5,416,200
Emerson Electric 18,800 994,050
General Electric 359,200 55,743,349
Hutchison Whampoa 79,000(c) 1,425,471
NCO Group 22,450(b) 716,997
Secom 11,000(c) 942,781
Sylvan Learning Systems 45,400(b) 723,563
Tyco Intl 246,600(c) 12,299,174
Zebra Technologies Cl A 11,300(b) 565,000
Total 82,464,161
Paper & packaging (0.5%)
AptarGroup 42,800 1,142,225
Ball 11,400 394,013
Champion Intl 40,800 2,172,600
Intl Paper 128,600 5,497,649
Pope & Talbot 61,700 1,133,738
Silgan Holdings 31,600(b) 383,150
Total 10,723,375
Restaurants & lodging (0.5%)
Applebee's Intl 18,100 509,063
CEC Entertainment 38,100(b) 1,033,463
Cheesecake Factory (The) 23,600(b) 982,350
Darden Restaurants 220,200 3,922,312
Jack in the Box 24,400(b) 520,025
Ruby Tuesday 51,700 904,750
Ryan's Family Steak Houses 99,900(b) 955,294
Taco Cabana Cl A 122,300(b) 726,156
Wendy's Intl 116,550 2,352,853
Total 11,906,266
Retail (4.6%)
Ames Dept Stores 26,600(b) 653,363
AnnTaylor Stores 14,500(b) 333,500
Bed Bath & Beyond 62,950(b) 2,478,656
Best Buy 37,350(b) 3,212,100
Circuit City Stores-Circuit City Group 70,050 4,264,294
Copart 11,000(b) 192,500
Costco Wholesale 62,050(b) 3,261,503
CVS 70,250 2,638,766
FamilyMart 27,300(c) 1,350,709
Fossil 63,400(b) 1,485,938
Gap 91,300 4,547,881
Home Depot 206,700 13,332,149
Kroger 225,300(b) 3,956,831
Linens `N Things 37,400(b) 1,280,950
Lowe's Companies 70,750 4,130,031
Men's Wearhouse 59,300(b) 1,756,763
NBTY 76,600(b) 1,048,463
Pacific Sunwear of California 30,150(b) 1,160,775
Regis 44,450 658,416
Safeway 102,850(b) 4,653,962
ShopKo Stores 50,300(b) 892,825
Tandy 36,250 1,839,688
Target 67,900 5,075,524
Tesco 713,189(c) 2,370,291
TJX Companies 137,500 3,050,781
United Stationers 44,000(b) 1,570,250
Wal-Mart Stores 403,650 22,402,574
Walgreen 116,200 2,992,150
Whole Foods Market 32,000(b) 1,326,000
World Online Intl 6,198(b,c) 138,515
Zale 53,700(b) 2,533,969
Total 100,590,117
Textiles & apparel (0.1%)
Asahi Glass 89,000(c) 759,328
Brown Shoe 77,100 925,199
Dixie Group 65,400(b) 290,213
Total 1,974,740
Transportation (0.5%)
Atlas Air 30,150(b) 825,356
Burlington Northern Santa Fe 83,500 1,847,437
EGL 13,100(b) 306,213
Expeditors Intl of Washington 14,600 580,350
Landstar System 28,200(b) 1,543,950
Offshore Logistics 70,000(b) 971,250
Union Pacific 34,100 1,334,163
USFreightways 44,800 1,677,200
Werner Enterprises 53,800 914,600
Total 10,000,519
Utilities -- electric (0.6%)
AES 21,850(b) 1,720,688
Avista 16,300 664,225
Cleco 22,700 754,775
Duke Energy 33,100 1,737,750
El Paso Electric 93,900(b) 974,213
PECO Energy 58,000 2,138,749
Pinnacle West Capital 70,950 1,999,902
Public Service Co of New Mexico 42,500 669,375
Texas Utilities 49,400 1,466,563
TNP Enterprises 28,300 1,239,894
United Illuminating 22,400 879,200
Total 14,245,334
Utilities -- gas (0.3%)
BG Group 500,000(c) 2,812,048
Equitable Resources 24,800 1,111,350
New Jersey Resources 14,400 615,600
ONEOK 24,900 622,500
Piedmont Natural Gas 20,100 523,856
UGI 27,800 601,175
Total 6,286,529
Utilities -- telephone (5.3%)
AT&T 363,800 20,463,749
Bell Atlantic 246,300 15,055,088
BellSouth 177,250 8,330,750
Brightpoint 66,400(b) 813,400
COLT Telecom Group 33,000(b,c) 1,568,299
Embratel Participacoes ADR 34,000(c) 871,250
Global Crossing 49,700(b,c) 2,034,594
GTE 33,300 2,364,300
ICG Communications 16,000(b) 578,000
Intermedia Communications 960(b) 46,369
MCI WorldCom 377,762(b) 17,117,362
Nextel Communications Cl A 31,450(b) 4,662,463
Nippon Telegraph & Telephone 220(b,c) 3,492,574
Nippon Television Network 450(c) 319,503
NTT Data 37(c) 695,496
NTT Mobile Communication Network 74(c) 3,034,234
SBC Communications 269,221 11,307,282
Sprint 116,900 7,364,700
Sprint PCS 83,400(b,h) 5,447,063
Telecom Italia Mobile 182,088(c) 2,234,224
Telefonos de Mexico ADR Cl L 13,800(c) 924,600
U S WEST Communications Group 46,650 3,387,956
Vodafone AirTouch 884,469 4,907,450
Total 117,020,706
Total common stocks
(Cost: $1,345,471,810) $1,577,278,109
Preferred stocks & other (0.9%)
Issuer Shares Value(a)
Bar Technologies
Warrants 3,000 $2,625
Bell Technology
Warrants 3,410 1,619,750
Coastal
6.63 % Cv PRIDES 44,900(o) 1,271,230
Coltec Capital
5.25% Cv 13,800 501,975
Cox Communications
7.00% Cm Cv PRIDES 15,800(o) 1,003,300
CVS
6.00% Cv ACES 14,700(n) 993,169
Enron
7.00% Cv 24,700 544,944
Georgia-Pacific Group
7.50% Cv 19,000 814,625
Global Crossing
6.38% Cv 8,800(c,d) 948,200
Global TeleSystems Group
7.25% Cm Cv 20,800 842,400
Ingersoll-Rand
6.75% Cv PRIDES 38,475(o) 904,163
Intermedia Communications
7.00% Cm Cv Series F 55,300 1,831,812
13.50% Pay-in-kind Series B 1,000(i) 940,000
Kerr-McGee
5.50% Cv 13,700 614,788
KMC Telecom Holdings
Warrants 3,000 9,000
Lincoln Natl
7.75% Cm Cv 38,950 788,738
McKesson Financing Trust
5.00% Cv 24,600 888,675
Nakornthai Strip Mill
Warrants 2,722,298 3
Paxson Communications
12.50% Pay-in-kind Exchangeable 26,881(i) 2,768,742
PLD Telekom
Warrants 6,000 270
Poland Telecom
Warrants 4,400(c) 550
Sovereign Bancorp
7.50% Cv 20,800(b) 1,014,000
Suiza Capital
5.50% Cv 28,100 962,425
Telehub Communications
Warrants 2,500 1,250
Unifi Communications
Warrants 3,000 30
Wendys Financing
5.00% Cm Cv Series A 15,800 742,600
Total preferred stocks & other
(Cost: $18,647,918) $20,009,264
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (25.4%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (5.8%)
Federal Home Loan Mtge Corp
<S> <C> <C> <C>
03-01-13 5.50% $8,978,519 $8,289,282
03-01-15 7.50 50,000,000 49,914,062
12-01-25 7.50 11,505,159 11,325,448
07-01-28 6.00 9,163,050 8,358,442
09-01-28 6.00 9,147,568 8,336,456
Federal Natl Mtge Assn
03-01-14 5.50 9,261,228 8,528,405
05-01-24 7.50 8,624,165 8,494,803
09-01-28 6.50 9,027,620 8,471,879
10-01-28 6.00 9,249,135 8,429,314
Collateralized Mtge Obligation
05-18-26 5.00 9,593,000 8,066,470
Total 128,214,561
U.S. government obligations (6.1%)
U.S. Treasury
04-30-00 6.75 32,000,000(h,k,m) 32,017,087
06-30-02 6.25 8,000,000(k,m) 7,964,462
03-31-03 5.50 1,500,000(k,m) 1,462,169
05-15-04 7.25 4,800,000 4,948,593
08-15-04 7.25 20,000,000 20,659,800
08-15-05 6.50 12,500,000 12,588,583
05-15-07 6.63 12,500,000 12,736,121
08-15-17 8.88 16,000,000 20,450,339
08-15-23 6.25 9,700,000 9,839,874
08-15-27 6.38 8,500,000 8,845,313
Total 131,512,341
Aerospace & defense (0.3%)
L-3 Communications
Sr Sub Nts Series B
05-01-07 10.38 1,035,000 1,027,238
Northrop-Grumman
03-01-16 7.75 5,000,000 4,853,137
Total 5,880,375
Automotive & related (0.4%)
Exide
Cv Sr Sub Nts
12-15-05 2.90 2,450,000(d) 1,263,416
Hayes Lemmerz Intl
Company Guaranty Series B
07-15-07 9.13 1,250,000 1,125,000
Lear
Sub Nts
07-15-06 9.50 1,800,000 1,728,000
Mascotech
Cv Sub Deb
12-15-03 4.50 1,780,000 1,314,975
MSX Intl
Company Guaranty
01-15-08 11.38 2,450,000 2,278,500
Venture Holdings Trust
Sr Nts Series B
07-01-05 9.50 1,750,000 1,513,750
Total 9,223,641
Banks and savings & loans (0.3%)
Union Planters Bank
Sub Nts
03-15-08 6.50 5,000,000 4,528,930
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 1,500,000 1,469,082
Total 5,998,012
Chemicals (0.1%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 1,550,000 1,232,250
Communications equipment & services (0.7%)
American Tower
Cv
02-15-10 5.00 1,053,000(d) 1,196,471
Commscope
Cv Sub Nts
12-15-06 4.00 950,000(d) 1,135,250
Corning
Cv Sub Nts
03-01-08 4.88 255,000 1,075,463
Dobson/Sygnet Communications
Sr Nts
12-15-08 12.25 1,000,000 1,030,000
EchoStar Communications
Cv Sub Nts
01-01-07 4.88 1,070,000(d) 1,801,613
EchoStar DBS
Sr Nts
02-01-09 9.38 1,000,000 965,000
GT Group Telecom
(U.S. Dollar) Zero Coupon
02-01-05 13.25 1,025,000(c,d,g) 563,750
iBasis
03-15-05 5.75 990,000 676,913
Nextel Partners
Sr Nts
03-15-10 11.00 275,000(d) 266,750
NTL
Cv Sub Nts
12-15-09 5.75 1,003,000(d) 1,026,821
NTL Communications
Zero Coupon Sr Nts Series B
10-01-03 7.87 3,625,000(g) 2,428,749
Telehub Communications
Zero Coupon Company Guaranty
07-31-01 13.88 2,500,000(g) 200,000
Versatel Telecom
(European Monetary Unit)
12-17-04 4.00 1,880,000(c,d) 2,267,178
03-30-05 4.00 630,000(c,d) 627,411
(U.S. Dollar) Sr Nts
05-15-08 13.25 1,000,000(c) 1,037,500
Total 16,298,869
Computers & office equipment (0.5%)
ASM Lithography Holdings
(U.S. Dollar) Cv
11-30-04 4.25 1,030,000(c,d) 1,266,900
Concentric Network
Sr Nts
12-15-07 12.75 3,800,000 4,047,000
Globix
Sr Nts
02-01-10 12.50 1,250,000(d) 1,150,000
Hewlett-Packard
Zero Coupon Sub Nts
10-14-17 2.46 1,580,000(f) 1,212,650
Internet Capital Group
Cv Sub Nts
12-21-04 5.50 315,000 277,200
Juniper Networks
03-15-07 4.75 1,980,000 1,965,150
PSINet
Sr Nts Series B
02-15-05 10.00 1,005,000 949,725
Silicon Graphics
Cv Sr Nts
09-01-04 5.25 1,340,000 1,003,325
Total 11,871,950
Electronics (0.5%)
Conexant Systems
Cv Sub Nts
02-01-07 4.00 870,000(d) 791,700
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 4,500,000(c,d) 4,070,164
Intel
Cv Sub Nts
09-01-04 4.00 275,000 1,192,469
Photronics
Cv Sub Nts
06-01-04 6.00 474,000 607,313
SCI Systems
03-15-07 3.00 990,000 1,104,266
Thomas & Betts
01-15-06 6.50 4,500,000 4,268,137
Total 12,034,049
Energy (0.6%)
Devon Energy
Cv Deb
08-15-08 4.90 948,000 949,185
Lodestar Holdings
Company Guaranty
05-15-05 11.50 5,000,000 950,000
Roil
(U.S. Dollar)
12-05-02 12.78 2,520,000(c,d) 2,268,000
USX
03-01-08 6.85 10,000,000 9,542,302
Total 13,709,487
Financial services (0.9%)
Arcadia Financial
Sr Nts
03-15-07 11.50 1,250,000 1,325,000
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 1,685,000(c) 1,171,075
LaBranche
03-01-07 12.00 1,000,000(d) 980,000
Providian Natl Bank
Sr Nts
03-15-03 6.70 10,000,000 9,571,354
Wilmington Trust
05-01-08 6.63 6,300,000 5,919,484
Total 18,966,913
Furniture & appliances (0.1%)
Interface
Sr Sub Nts Series B
11-15-05 9.50 2,500,000 2,212,500
Health care (0.5%)
Alkermes
Cv Sub Nts
02-15-07 3.75 495,000(d) 415,800
Alpharma
Cv Sr Sub Nts
06-01-06 3.00 580,000(j) 737,325
06-01-06 3.00 810,000 1,057,560
Baxter Intl
02-15-28 6.63 10,000,000 8,691,201
Inhale Theraptic Systems
Cv Sub Nts
02-08-07 5.00 980,000(d) 1,038,800
Total 11,940,686
Health care services (0.3%)
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 2,500,000 1,850,000
Sunrise Assisted Living
Cv Sub Nts
06-15-02 5.50 1,975,000 1,545,438
Tenet Healthcare
Sr Sub Nts Series B
12-01-08 8.13 2,750,000 2,509,375
Total 5,904,813
Insurance (0.3%)
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.68 1,500,000 1,476,093
Nationwide CSN Trust
02-15-25 9.88 5,000,000(d) 5,389,065
Total 6,865,158
Leisure time & entertainment (0.5%)
AMC Entertainment
Sr Sub Nts
02-01-11 9.50 1,270,000 647,700
Time Warner
02-01-24 7.57 5,875,000 5,643,074
Sr Nts
01-15-28 6.95 5,000,000 4,472,900
Trump Atlantic City Assn/Funding
1st Mtge Company Guaranty
05-01-06 11.25 700,000 469,000
Total 11,232,674
Media (0.7%)
Australis Media
(U.S. Dollar)
11-01-00 14.00 145,084(c) 135,485
05-15-03 15.75 40,885(b,c) 409
(U.S. Dollar) Zero Coupon
05-15-03 15.75 5,000,000(b,c,g) 500
Charter Communications Holdings/Charter Capital
Sr Nts
01-15-10 10.25 1,250,000(d) 1,209,375
CSC Holdings
Sr Sub Debs
05-15-16 10.50 3,000,000 3,330,000
Getty Images
03-15-07 5.00 1,100,000(d) 888,250
Lenfest Communications
Sr Nts
02-15-08 7.63 1,500,000 1,477,140
News America Holdings
10-15-12 10.13 2,175,000 2,340,323
Telewest Communications
(British Pound) Cv
02-19-07 5.25 592,000(c,d) 1,486,831
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-04 11.54 1,250,000(c,d,g) 715,625
Veninfotel
(U.S. Dollar) Cv Pay-in-kind
03-01-02 10.00 2,734,889(c,i,j) 4,102,333
Total 15,686,271
Metals (0.1%)
EnviroSource
Sr Nts
06-15-03 9.75 530,000 333,900
Sr Nts Series B
06-15-03 9.75 1,300,000 819,000
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 2,115,569(c,d) 2,073,258
Total 3,226,158
Miscellaneous (0.7%)
Delphes 2
(U.S. Dollar)
05-05-09 7.75 2,700,000(c,d) 2,573,451
FCB/NC Capital
Company Guaranty
03-01-28 8.05 4,625,000 3,959,929
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 2,500,000(c) 2,237,500
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.88 2,200,000(b,c,d) 913,000
Network Associates
Zero Coupon Cv Sub Deb
02-13-18 5.43 4,740,000(f) 1,801,200
NSM Steel
Company Guaranty
02-01-06 12.00 2,060,396(b,d) 103,020
02-01-08 12.25 4,300,000(b,d) 86,000
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,075,000 947,344
Poland Telecom Finance
(U.S. Dollar) Company Guaranty Series B
12-01-07 14.00 4,400,000(c) 1,276,000
XM Satellite Radio
03-15-10 14.00 1,700,000(d) 1,615,000
Total 15,512,444
Multi-industry conglomerates (0.3%)
Jordan Inds
Sr Nts Series D
08-01-07 10.38 1,000,000 950,000
Metromedia Intl Group
Sr Disc Nts Series B
09-30-07 10.50 4,369,500 2,141,055
Prime Succession
Sr Sub Nts
08-15-04 10.75 980,000(b) 196,000
USI American Holdings
Sr Nts Series B
12-01-06 7.25 3,000,000 2,842,521
Total 6,129,576
Paper & packaging (0.5%)
APP China Group
(U.S. Dollar)
03-15-10 14.00 3,400,000(c,d) 2,941,000
Crown Paper
Sr Sub Nts
09-01-05 11.00 705,000 211,500
Doman Inds
(U.S. Dollar)
03-15-04 8.75 1,300,000(c) 1,059,500
Gaylord Container
Sr Nts
06-15-07 9.75 1,300,000 1,205,750
Owens-Illinois
Sr Nts
05-15-04 7.85 2,000,000 1,932,676
Repap New Brunswick
(U.S. Dollar) Sr Nts
06-01-04 9.00 1,000,000(c) 952,500
Silgan Holdings
06-01-09 9.00 2,050,000 1,980,813
Total 10,283,739
Restaurants & lodging (0.5%)
Domino's
Company Guaranty Series B
01-15-09 10.38 1,000,000 915,000
MGM Grand
02-06-08 6.88 10,000,000 9,013,694
Total 9,928,694
Retail (1.1%)
Costco Companies
Zero Coupon Cv Sub Nts
08-19-17 3.50 598,000(f) 711,620
Great Atlantic & Pacific Tea
04-15-07 7.75 10,000,000 9,218,859
Kroger
Sr Nts
07-15-06 8.15 5,000,000 5,126,861
Target
12-01-22 8.50 2,500,000 2,549,718
Wal-Mart CRAVE Trust
07-17-06 7.00 7,297,849(d) 7,067,237
Total 24,674,295
Transportation (0.6%)
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000(d) 9,255,500
Company Guaranty Medium-term Nts
01-15-06 6.95 3,000,000 2,852,394
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-07 9.50 580,000(c) 191,400
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 11.50 2,070,000(c,d) 703,800
Total 13,003,094
Utilities -- electric (0.8%)
Cleveland Electric Illuminating
07-01-00 7.19 3,000,000 2,998,941
CMS Energy
Sr Nts
05-15-02 8.13 2,900,000 2,877,313
El Paso Electric
1st Mtge Series B
05-01-01 7.75 5,000,000 5,003,591
Public Service Electric & Gas
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 7,365,000(l) 6,897,160
Total 17,777,005
Utilities -- gas (0.2%)
Columbia Gas System
Series E
11-28-10 7.32 5,043,000 4,734,436
Utilities -- telephone (1.9%)
AT&T Canada
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 9.95 3,800,000(c,g) 3,002,000
Bell Atlantic Financial Services
Cv
09-15-05 4.25 870,000(d) 1,235,391
BellSouth Capital Funding
02-15-30 7.88 4,000,000 4,050,528
COLT Telecom Group
(European Monetary Unit)
03-29-06 2.00 395,000(c,d) 893,154
Covad Comm Group
Sr Nts
02-15-10 12.00 500,000(d) 455,000
France Telecom
(European Monetary Unit) Cv
11-29-04 4.13 1,225,000(c) 1,389,350
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 2,485,000(b) 3,106
Global Crossing Holdings
(U.S. Dollar) Sr Nts
11-15-09 9.50 850,000(c,d) 820,250
Intermedia Communications
Sr Nts Series B
06-01-08 8.60 5,000,000 4,350,000
03-01-09 9.50 1,500,000 1,387,500
Level 3 Communications
03-15-08 11.00 750,000(d) 716,250
03-15-10 6.00 990,000 971,438
McLeod USA
Sr Nts
03-15-08 8.38 500,000 450,000
Nextel Communications
11-15-09 9.38 1,000,000 920,000
Cv Sr Nts
01-15-10 5.25 987,000(d) 1,175,764
Omnipoint Communications
Sr Nts
08-15-06 11.63 1,000,000 1,068,750
Primus Telecomm Group
02-15-07 5.75 1,579,000(d) 1,665,845
Qwest Communications Intl
Sr Nts Series B
11-01-08 7.25 450,000 431,174
11-01-08 7.50 4,550,000 4,473,743
Rhythms NetConnections
Sr Nts
02-15-10 14.00 500,000(d) 442,500
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-06 12.25 500,000(c) 497,500
Sprint Capital
Company Guaranty
05-01-09 6.38 3,000,000 2,766,390
U S WEST Capital Funding
Company Guaranty
07-15-28 6.88 9,250,000 8,144,984
United Pan-Europe Communications
(U.S. Dollar) Sr Nts
02-01-10 11.25 925,000(c,d) 888,000
02-01-10 11.50 550,000(c,d) 528,000
Total 42,726,617
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) 2,980,590
Total bonds
(Cost: $600,719,766) $559,761,198
Short-term securities (1.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (0.5%)
Federal Home Loan Bank Disc Nts
04-14-00 5.70% $800,000 $798,230
06-02-00 6.03 6,900,000 6,827,912
Federal Home Loan Mtge Corp Disc Nt
04-04-00 5.72 1,300,000 1,299,174
Federal Natl Mtge Assn Disc Nt
06-22-00 6.11 2,700,000 2,661,280
Total 11,586,596
Commercial paper (0.6%)
Colgate-Palmolive
04-25-00 6.03 900,000(e) 896,250
Clorox
04-06-00 5.83 3,900,000 3,896,217
Corporate Receivables
04-11-00 5.89 2,000,000(e) 1,996,382
Intl Lease Finance
04-05-00 5.80 3,400,000 3,397,195
Windmill Funding
04-05-00 5.86 3,400,000(e) 3,397,195
Total 13,583,239
Total short-term securities
(Cost: $25,175,346) $25,169,835
Total investments in securities
(Cost: $1,990,014,840)(p) $2,182,218,406
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
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, item identified is 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,
2000, the value of foreign securities represented 8.80% 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) 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, 2000, is as follows:
Security Acquisition Cost
dates
Alpharma 3.00% Cv Sr Sub Nts 2006* 02-24-00 $694,109
Veninfotel
(U.S. Dollar) 10.00% Cv Pay-in-kind 2002 03-05-97 thru 03-15-00 2,604,656
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(k) Partially pledged as initial margin deposit on the following open stock
index futures (see Note 6 to the financial statements):
Type of security Contracts
Sales contracts
Russell Index, June 2000 400
S&P 500 Index, June 2000 190
(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) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 6 to the financial statements):
Type of security Notional amount
Sale contracts
U.S. Treasury Note, June 2000, 5-year $15,000,000
U.S. Treasury Note, June 2000, 10-year 8,000,000
(n) ACES (Automatically Convertible Equity Securities) are structured as
convertible preferred securities. Investors receive an enhanced yield but based
upon a specific formula, potential appreciation is limited. ACES pay dividends,
have voting rights, are noncallable for at least three years and upon maturity,
convert into shares of common stock.
(o) PRIDES (Preferred Redeemable Increased Dividend Equity Securities) are
structured as convertible preferred securities. Investors receive an enhanced
yield but based upon a specific formula, potential appreciation is limited.
PRIDES pay dividends, have voting rights, are noncallable for three years and
upon maturity, convert into shares of common stock.
(p) At March 31, 2000, the cost of securities for federal income tax purposes
was approximately $1,990,015,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $331,289,000
Unrealized depreciation (139,086,000)
------------
Net unrealized appreciation $192,203,000
<PAGE>
PRSRT STD AUTO
U.S. POSTAGE
PAID
AMERICAN
EXPRESS
S-6143 R (5/00)
Ticker Symbol Class A: IMRFX Class B: IMRBX Class Y: IDRYX
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.
AXP Managed Allocation Fund
200 AXP Financial Center
Minneapolis, MN 554474
