AMERICAN EXPRESS Financial Advisors
Strategist Growth and Income Fund, Inc.
1999 Semiannual Report
Strategist Balanced Fund
Strategist Equity Fund
Strategist Equity Income Fund
Strategist Total Return Fund
<PAGE>
Table of Contents
From the Portfolio Managers 2
Financial Statements (Strategist Growth and Income Fund, Inc.) 10
Notes to Financial Statements (Strategist Growth and Income Fund, Inc.) 18
Financial Statements (Balanced Portfolio) 26
Notes to Financial Statements (Balanced Portfolio) 29
Investments in Securities (Balanced Portfolio) 34
Financial Statements (Equity Portfolio) 52
Notes to Financial Statements (Equity Portfolio) 55
Investments in Securities (Equity Portfolio) 60
Financial Statements (Equity Income Portfolio) 70
Notes to Financial Statements (Equity Income Portfolio) 73
Investments in Securities (Equity Income Portfolio) 77
Financial Statements (Total Return Portfolio) 84
Notes to Financial Statements (Total Return Portfolio) 87
Investments in Securities (Total Return Portfolio) 92
<PAGE>
From the Portfolio Managers
Strategist Balanced Fund
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
(picture of) Brad Stone
Brad Stone
Portfolio manager
Strategist Balanced Fund enjoyed a very productive six months, thanks largely to
a rebound in the stock market. For the first half of the fiscal year -- October
1998 through March 1999 -- the Fund's total return was 12.72%. (A portion of the
return came in the form of a capital gain, which was paid to shareholders in
December 1998 and reduced the Fund's net asset value by the same amount at that
time.)
The period began with U.S. stocks trying to shake off the effects of a
late-summer decline that drove the market down by nearly 20%. But, in another
display of the remarkable resilience it has shown in recent years, the market
was soon on its way to making up the lost ground. Supported by three reductions
in short-term interest rates by the Federal Reserve, the tentative advance
quickly turned into a roaring rally that culminated in an all-time high for the
market in late March.
CORPORATE BONDS PERFORM WELL
On the bond side, an increase in long-term interest rates hindered the
performance of U.S. Treasury bonds. But corporate issues, buoyed by an economy
that continued to grow at a healthy rate, and mortgage-backed bonds performed
relatively well. We emphasized higher-quality bonds throughout the period.
As for the asset mix, we kept between 60% and 65% of the assets in stocks and
32% to 39% in bonds, with the bond component rising somewhat as the period
progressed. The largest sector exposure (up to 29% of assets) was to financial
services issues, including those of banks and insurance companies. Technology
and utilities securities made up the next two largest weightings. Although a
comparatively small area of investment, energy-related stocks enjoyed a strong
comeback and made a solid contribution to performance.
Changes to the portfolio were relatively modest. We lowered the technology
exposure somewhat and increased the financial services holdings during the
period. We also reduced the duration of the bond side of the portfolio to make
it less vulnerable to a potential rise in interest rates.
Looking to the rest of the fiscal year, it appears that the stock market may be
"broadening out" -- that is, a wider range of stocks may be gaining support from
investors. That would be good for the Fund, as its more conservative portfolio
has been at a disadvantage in a market that has been led by a relatively small
number of glamorous growth stocks. As for bonds, we plan to maintain an emphasis
on corporate and mortgage-backed issues, which should do well assuming the
economy stays strong.
Kurt Winters
Brad Stone
<PAGE>
From the Portfolio Managers
Strategist Equity Fund
(picture of) Richard H. Warden
Richard H. Warden
Portfolio manager
(picture of) G. Michael Kennedy
G. Michael Kennedy
Portfolio manager
Taking advantage of a powerful rebound by the stock market, Strategist Equity
Fund produced a substantial gain during the first half of the fiscal year. For
the period -- October 1998 through March 1999 -- the Fund's total return was
20.94%. (A portion of the return came in the form of a capital gain, which was
paid to shareholders in December 1998 and reduced the Fund's net asset value by
the same amount at that time.)
At the outset of the six months, stocks were trying to regroup from a steep,
late-summer decline that drove down the broad market by nearly 20% and cut
prices on certain stocks roughly in half. But with the remarkable resilience
that has been its hallmark in recent years, the market gathered itself and began
to move forward. Supported by three reductions in short-term interest rates by
the Federal Reserve Board during the fall, stocks quickly turned a tentative
advance into a roaring rally that, by late March, propelled the market to an
all-time high. Of the six months, every one but February, when long-term
interest rates rose rather sharply, showed a solid gain.
Consistent with the trend of recent years, the market's resurgence was driven by
large-capitalization stocks. Because of its emphasis on large-cap issues, that
worked to the advantage of the Fund.
BIG HOLDINGS DO WELL
More specifically, the Fund's largest areas of investment were technology,
financial services, retailing, utilities, consumer products and health care, all
of which made positive contributions to performance. Looking at individual
stocks, several of the Fund's largest holdings were also among its best
performers. They included General Electric, Safeway, Wal-Mart, Microsoft,
Schering-Plough, and Rite Aid.
As for changes to the portfolio, we added to the technology exposure about
mid-period and reduced the level of cash reserves (from about 14% last fall to
about 5% at period-end). The higher-than-usual cash level came about from the
sale of a number of stocks to reduce the capital gain that had built up and was
due to be paid to shareholders as a taxable distribution last December. As it
turned out, the cash reduction enhanced performance because more money was put
to work in stocks, especially technology issues, which provided a better return
than cash.
Looking to the second half of the fiscal year, inflation remains remarkably low,
long-term interest rates have yet to experience a sustained increase and the
economy continues to chug along. At this point (mid-April), the biggest
potential hurdle for the stock market is the strength of corporate profits in
1999. In any event, though, large-cap stocks appear to still be in favor and
should do well if the market manages to advance in the months ahead.
Richard H. Warden
G. Michael Kennedy
<PAGE>
From the Portfolio Manager
Strategist Equity Income Fund
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
Strategist Equity Income Fund made a strong comeback during the past six months,
generating a substantial gain during the period. For the first half of the
fiscal year -- October 1998 through March 1999 -- the Fund produced a total
return of 17.43%. (This figure includes a substantial 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.)
At the outset of the period, the U.S. stock market was trying to shake off the
effects of a late-summer decline that drove the market down by nearly 20%. But
with the remarkable resilience they've shown in recent years, stocks not only
righted themselves during the autumn but also began to regain some lost ground.
Supported by three reductions in short-term interest rates by the Federal
Reserve and ongoing strength of the economy, the advance turned into a
spectacular rally that sent the market to an all-time high by late March.
LESS-VOLATILE PERFORMANCE
The Fund's performance pattern generally followed that of the broad market, but
its ups and downs were less dramatic -- a reflection of the higher-than-average
yields of the Fund's holdings, which helped mute fluctuations in the net asset
value.
The largest area of investment during the period was in financial services
stocks, including those of banks and insurance and brokerage companies. They
comprised nearly 30% of assets. Most of the rest of the portfolio was divided in
roughly equal amounts among utility, technology and energy-related stocks. The
latter two groups were especially strong and made a substantial contribution to
the Fund's gain.
As the second half of the fiscal year begins, the stock market continues to
experience very narrow leadership; the largest growth stocks, helped in recent
months by the soaring Internet sector, remain responsible for the lion's share
of the market's returns.
Still, the Fund's performance over the past six months could be an indication
that a broader range of stocks will now participate more fully in potential
market advances. The Fund is positioned to respond to such an environment. On
the other hand, if the market's tone deteriorates, the comparatively
conservative, higher-yielding structure of the Fund's portfolio should allow it
to hold up relatively well.
Kurt Winters
<PAGE>
From the Portfolio Manager
Strategist Total Return Fund
(picture of) Steve Merrell
Steve Merrell
Portfolio manager
Strong recoveries by U.S. stocks, as well as high-yield and emerging-market
bonds, led to a productive six months for Strategist Total Return Fund. For the
first half of the fiscal year -- October 1998 through March 1999 -- the Fund
generated a total return of 13.87%. (A portion of the return came in the form of
a capital gain that was paid to shareholders in December 1998 and reduced the
Fund's net asset value by the same amount at that time.)
The period began with U.S. stocks trying to shake off the effects of a
late-summer decline that drove the market down by nearly 20%. But soon, in
another display of the remarkable resilience it has shown in recent years, the
market was on its way to making up the lost ground. Supported by three
reductions in short-term interest rates by the Federal Reserve, and ongoing
strength of the economy, the advance turned into a spectacular rally that sent
the market to an all-time high by late March. The run-up was led by
large-capitalization stocks, which worked to the Fund's benefit as the major
portion of its investments (more than 50% by period-end) was in that sector.
BONDS MAKE SOLID CONTRIBUTION
On the bond side, an increase in long-term interest rates hindered the
performance of U.S. Treasury bonds. But corporate bonds, especially high-yield
issues, and emerging-market bonds, especially Russian issues, rebounded sharply
during the final three months of the period. Although they made up a relatively
small portion of the Fund's total investments (about 12%), high-yield and
emerging-market bonds' strong performance had a distinctly positive effect on
the Fund's return.
Looking more closely at the asset allocation, we modestly increased the exposure
to stocks (from about 60% to 65%) late in 1998. The shift included the addition
of some small-capitalization issues, whose low prices offered good investment
value. We also brought the level of cash reserves down during the six months
(from about 10% to less than 1%), as we believed the investment environment,
especially for U.S. stocks, was improving. Stock investments in major foreign
markets stayed in the 7% to 10% range.
As for what the second half of the fiscal year might hold, at this point
(mid-April), the global investment environment appears more healthy than it was
several months ago, thanks to the abatement of financial crises in several
smaller economies. In the U.S., the favorable factors of low inflation,
relatively stable long-term interest rates and a still-growing economy remain in
place. While that certainly doesn't guarantee positive results from financial
assets, the view of our portfolio management team is that U.S. stocks and bonds
are still the best places to be, and we continue to position the portfolio
accordingly.
Steven Merrell
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<CAPTION>
Financial Statements
Statements of assets and liabilities
Strategist Growth and Income Fund, Inc.
Strategist Strategist
March 31, 1999 (Unaudited) Balanced Fund Equity Fund
Assets
<S> <C> <C>
Investment in corresponding Portfolio (Note 1) $1,243,099 $1,142,581
Expense receivable from AEFC -- 27
---- --
Total assets 1,243,099 1,142,608
Liabilities
Accrued distribution fee 8 8
Accrued transfer agency fee 3 2
Accrued administrative services fee 2 1
Other accrued expenses 34,515 12,171
------ ------
Total liabilities 34,528 12,182
------ ------
Net assets applicable to outstanding capital stock $1,208,571 $1,130,426
========== ==========
Represented by
Capital stock-- $.01 par value (Note 1) $ 767 $ 350
Additional paid-in capital 1,094,253 830,568
Undistributed net investment income 717 (4,810)
Accumulated net realized gain (loss) 20,430 11,787
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 92,404 292,531
------ -------
Total -- representing net assets applicable to
outstanding capital stock $1,208,571 $1,130,426
========== ==========
Shares outstanding 76,689 35,048
------ ------
Net asset value per share of outstanding capital stock $ 15.76 $ 32.25
---------- ----------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of assets and liabilities
Strategist Growth and Income Fund, Inc.
Strategist Equity Strategist Total
March 31, 1999 (Unaudited) Income Fund Return Fund
Assets
<S> <C> <C>
Investment in corresponding Portfolio (Note 1) $1,030,399 $789,896
Expense receivable from AEFC 13 34
Organizational costs (Note 1) -- 1,085
---- -----
Total assets 1,030,412 791,015
--------- -------
Liabilities
Dividends payable to shareholders 7 --
Accrued distribution fee 7 5
Accrued transfer agency fee 2 1
Accrued administrative services fee 1 1
Other accrued expenses 20,346 17,083
------ ------
Total liabilities 20,363 17,090
------ ------
Net assets applicable to outstanding capital stock $1,010,049 $773,925
========== ========
Represented by
Capital stock-- $.01 par value (Note 1) $ 966 $ 600
Additional paid-in capital 885,758 717,912
Undistributed net investment income 158 1,162
Accumulated net realized gain (loss) 49,828 1,346
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 73,339 52,905
------ ------
Total -- representing net assets applicable to
outstanding capital stock $1,010,049 $773,925
========== ========
Shares outstanding 96,584 59,986
------ ------
Net asset value per share of outstanding capital stock $ 10.46 $ 12.90
---------- --------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of operations
Strategist Growth and Income Fund, Inc.
Strategist Strategist
Six months ended March 31, 1999 (Unaudited) Balanced Fund Equity Fund
Investment income
Income:
<S> <C> <C>
Dividends $ 7,530 $ 1,891
Interest 14,389 2,567
Less foreign taxes withheld (8) (61)
-- ---
Total income 21,911 4,397
------ -----
Expenses (Note 2):
Expenses allocated from corresponding Portfolio 2,740 2,700
Distribution fee 1,468 1,312
Transfer agency fee 552 305
Administrative services fees and expenses 233 210
Compensation of board members 208 274
Registration fees 16 5,230
Audit fees 1,750 1,750
Other -- 1,413
---- -----
Total expenses 6,967 13,194
Less expenses reimbursed by AEFC (1,078) (6,648)
------ ------
Total net expenses 5,889 6,546
----- -----
Investment income (loss)-- net 16,022 (2,149)
------ ------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 16,300 11,859
Financial futures contracts 2,361 --
Options contracts written 4,587 --
----- -----
Net realized gain (loss) on investments 23,248 11,859
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 99,803 180,499
------ -------
Net gain (loss) on investments and foreign currencies 123,051 192,358
------- -------
Net increase (decrease) in net assets resulting from operations $139,073 $190,209
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See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of operations
Strategist Growth and Income Fund, Inc.
Strategist Equity Strategist Total
Six months ended March 31, 1999 (Unaudited) Income Fund Return Fund
Investment income
Income:
<S> <C> <C>
Dividends $ 11,253 $ 2,395
Interest 861 12,634
Less foreign taxes withheld (75) (20)
--- ---
Total income 12,039 15,009
------ ------
Expenses (Note 2):
Expenses allocated from corresponding Portfolio 2,460 1,724
Distribution fee 1,211 932
Transfer agency fee 450 181
Administrative services fees and expenses 194 149
Compensation of board members 423 418
Registration fees 5,291 3,689
Audit fees 1,750 1,750
----- -----
Total expenses 11,779 8,843
Less expenses reimbursed by AEFC (5,795) (4,072)
------ ------
Total net expenses 5,984 4,771
----- -----
Investment income (loss)-- net 6,055 10,238
----- ------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 43,227 4,670
Financial futures contracts 6,577 3,021
Foreign currency transactions -- (860)
Options contracts written -- (3,839)
---- ------
Net realized gain (loss) on investments 49,804 2,992
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 96,479 81,968
------ ------
Net gain (loss) on investments and foreign currencies 146,283 84,960
------- ------
Net increase (decrease) in net assets resulting from operations $152,338 $95,198
======== =======
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Balanced Fund
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 16,022 $ 34,830
Net realized gain (loss) on investments 23,248 68,234
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 99,803 (105,115)
------ --------
Net increase (decrease) in net assets resulting from operations 139,073 (2,051)
------- ------
Distributions to shareholders from:
Net investment income (16,513) (33,720)
Net realized gain (69,979) (59,803)
------- -------
Total distributions (86,492) (93,523)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 23,350 282,355
Reinvestment of distributions at net asset value 86,492 93,437
Payments for redemptions (48,407) (80,708)
------- -------
Increase (decrease) in net assets from capital share transactions 61,435 295,084
------ -------
Total increase (decrease) in net assets 114,016 199,510
Net assets at beginning of period 1,094,555 895,045
--------- -------
Net assets at end of period $1,208,571 $1,094,555
========== ==========
Undistributed net investment income $ 717 $ 1,208
---------- ----------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Equity Fund
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ (2,149) $ 6,052
Net realized gain (loss) on investments 11,859 50,857
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 180,499 (56,086)
------- -------
Net increase (decrease) in net assets resulting from operations 190,209 823
------- ---
Distributions to shareholders from:
Net investment income (9,394) (3,310)
Net realized gain (46,874) (30,218)
------- -------
Total distributions (56,268) (33,528)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 20,674 172,761
Reinvestment of distributions at net asset value 56,268 33,528
Payments for redemption (15,610) (16,750)
------- -------
Increase (decrease) in net assets from capital share transactions 61,332 189,539
------ -------
Total increase (decrease) in net assets 195,273 156,834
Net assets at beginning of period 935,153 778,319
------- -------
Net assets at end of period $1,130,426 $935,153
========== ========
Undistributed (excess of distributions over) net investment income $ (4,810) $ 6,733
---------- --------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Equity Income Fund
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 6,055 $ 17,613
Net realized gain (loss) on investments 49,804 93,664
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 96,479 (142,332)
------ --------
Net increase (decrease) in net assets resulting from operations 152,338 (31,055)
------- -------
Distributions to shareholders from:
Net investment income (6,920) (18,054)
Net realized gain (88,590) (61,081)
------- -------
Total distributions (95,510) (79,135)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 28,806 148,894
Reinvestment of distributions at net asset value 95,591 79,110
Payments for redemptions (68,665) (47,384)
------- -------
Increase (decrease) in net assets from capital share transactions 55,732 180,620
------ -------
Total increase (decrease) in net assets 112,560 70,430
Net assets at beginning of period 897,489 827,059
------- -------
Net assets at end of period $1,010,049 $897,489
========== ========
Undistributed net investment income $ 158 $ 1,023
---------- --------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Total Return Fund
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 10,238 $ 21,099
Net realized gain (loss) on investments 2,992 55,511
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilites in foreign currencies 81,968 (106,027)
------ --------
Net increase (decrease) in net assets resulting from operations 95,198 (29,417)
------ -------
Distributions to shareholders from:
Net investment income (11,202) (20,856)
Net realized gain (51,422) (58,828)
------- -------
Total distributions (62,624) (79,684)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 19,371 47,658
Reinvestment of distributions at net asset value 61,545 79,621
Payments for redemptions (24,522) (19,649)
------- -------
Increase (decrease) in net assets from capital share transactions 56,394 107,630
------ -------
Total increase (decrease) in net assets 88,968 (1,471)
Net assets at beginning of period 684,957 686,428
------- -------
Net assets at end of period $773,925 $684,957
======== ========
Undistributed net investment income $ 1,162 $ 2,126
-------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Strategist Growth and Income Fund, Inc.
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Strategist Balanced Fund (Balanced Fund), Strategist Equity Fund (Equity Fund),
Strategist Equity Income Fund (Equity Income Fund), and Strategist Total Return
Fund (Total Return Fund) are series of capital stock within Strategist Growth
and Income Fund, Inc. Each Fund is registered under the Investment Company Act
of 1940 (as amended) as a diversified, open-end management investment company.
Strategist Growth and Income Fund, Inc. has 3 billion authorized shares of
capital stock that can be allocated among the separate series as designated by
the board.
Investments in Portfolios
Each of the Funds seeks to achieve its investment objectives by investing all of
its net investable assets in a corresponding series of Growth and Income Trust
(the Trust).
Balanced Fund invests all of its assets in Balanced Portfolio, an open-end
investment company that has the same objectives as the Fund. Balanced Portfolio
balances its investments between common stocks and senior securities (preferred
stocks and debt securities) issued by U.S. and foreign companies.
Equity Fund invests all of its assets in Equity Portfolio, an open-end
investment company that has the same objectives as the Fund. Equity Portfolio
invests primarily in common stocks and securities convertible into common
stocks.
Equity Income Fund invests all of its assets in Equity Income Portfolio, an
open-end investment company that has the same objectives as the Fund. Equity
Income Portfolio seeks to provide a high level of current income and, as a
secondary goal, steady growth of capital by investing primarily in
dividend-paying stocks.
Total Return Fund invests all of its assets in Total Return Portfolio, an
open-end investment company that has the same objectives as the Fund. Total
Return Portfolio invests primarily in U.S. equity securities, U.S. and foreign
debt securities, foreign equity securities, and money market instruments.
Each Fund records daily its share of the corresponding Portfolio's income,
expenses and realized and unrealized gains and losses. The financial statements
of the Portfolios are included elsewhere in this report and should be read in
conjunction with the Funds' financial statements. Each Fund records its
investment in the corresponding Portfolio at the value that is equal to the
Fund's proportionate ownership interest in the Portfolio's net assets. As of
March 31, 1999, the percentages of the corresponding Portfolio owned by Balanced
Fund, Equity Fund, Equity Income Fund, and Total Return Fund were 0.02%, 0.02%,
0.04% and 0.03%, respectively. Valuation of securities held by the Portfolios is
discussed in Note 1 of the Portfolios' "Notes to financial statements" (included
elsewhere in this report).
Organizational costs
Each Fund incurred organizational expenses in connection with the start-up and
initial registration of the Fund. These costs will be amortized over 60 months
on a straight-line basis beginning with the commencement of operations. If any
or all of the shares held by American Express Financial Corporation (AEFC)
representing initial capital of the Fund are redeemed during the amortization
period, the redemption proceeds will be reduced by the pro rata portion of the
unamortized organizational cost balance.
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Federal taxes
Each Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to the shareholders. No provision for income or excise taxes is
thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Funds.
Dividends to shareholders
Dividends from net investment income, declared quarterly and paid at the end of
each calendar quarter for Balanced Fund, Equity Fund and Total Return Fund, and
declared daily and paid each calendar quarter for Equity Income Fund, are
reinvested in additional shares of the Funds at net asset value or payable in
cash. Capital gains, when available, are distributed along with the last income
dividend of the calendar year.
Other
As of March 31, 1999, AEFC owned 47,708 shares for Balanced Fund, 26,482 shares
for Equity Fund, 74,677 shares for Equity Income Fund and 53,927 shares for
Total Return Fund.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, each Fund accrues its
own expenses as follows:
Each Fund entered into an agreement with AEFC to provide administrative
services. Under an Administrative Services Agreement, each 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.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. Each Fund pays
AECSC an annual fee per shareholder account of $20.
Under a Plan and Agreement of Distribution, each Fund pays American Express
Service Corporation (the Distributor) a distribution fee at an annual rate of
0.25% of the Fund's average daily net assets for distribution services.
AEFC and the Distributor have agreed to waive certain fees and to absorb certain
other Fund expenses through Dec. 31, 1999. Under this agreement, each Fund's
total expenses will not exceed 1.25% (1.30% for Total Return Fund) of each of
the Fund's average daily net assets. In addition, for the six months ended March
31, 1999, AEFC further voluntarily agreed to waive certain fees and expenses to
1.00% for Balanced Fund, 1.24% for Equity Income Fund and 1.28% for Total Return
Fund.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended March 31, 1999
Equity Total
Balanced Equity Income Return
Fund Fund Fund Fund
Sold 1,485 647 2,734 1,512
Issued for reinvested distributions 5,613 1,819 9,418 4,889
Redeemed (3,042) (482) (6,676) (1,874)
------ ---- ------ ------
Net increase (decrease) 4,056 1,984 5,476 4,527
Year ended Sept. 30, 1998
Equity Total
Balanced Equity Income Return
Fund Fund Fund Fund
Sold 17,601 5,667 13,570 3,489
Issued for reinvested distributions 6,007 1,202 7,727 6,111
Redeemed (4,983) (562) (4,302) (1,373)
------ ---- ------ ------
Net increase (decrease) 18,625 6,307 16,995 8,227
<PAGE>
<TABLE>
<CAPTION>
4. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating each
Fund's results.
Balanced Fund
Fiscal period ended Sept. 30,
Per share income and capital changesa
1999c 1998 1997 1996b
<S> <C> <C> <C> <C>
Net asset value, beginning of period $15.07 $16.57 $13.57 $13.36
Income from investment operations:
Net investment income (loss) .22 .53 .66 .18
Net gains (losses) (both realized and unrealized) 1.66 (.39) 2.99 .17
Total from investment operations 1.88 .14 3.65 .35
Less distributions:
Dividends from net investment income (.22) (.52) (.65) (.14)
Distributions from realized gains (.97) (1.12) -- --
Total distributions (1.19) (1.64) (.65) (.14)
Net asset value, end of period $15.76 $15.07 $16.57 $13.57
Ratios/supplemental data
Net assets, end of period (in thousands) $1,209 $1,095 $895 $525
Ratio of expenses to average daily net assetsd 1.00%e .93% .62% 1.25%e
Ratio of net investment income (loss)
to average daily net assets 2.73%e 3.37% 4.60% 3.91%e
Portfolio turnover rate
(excluding short-term securities) 62% 98% 49% 14%
Total return 12.72% .73% 27.43% 2.59%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was May 13, 1996.
c Six months ended March 31, 1999 (Unaudited).
d The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets would
have been 1.19%, 1.27%, 6.35% and 34.04% for the periods ended 1999, 1998, 1997
and 1996, respectively.
e Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Equity Fund
Fiscal period ended Sept. 30,
Per share income and capital changesa
1999c 1998 1997 1996b
<S> <C> <C> <C> <C>
Net asset value, beginning of period $28.28 $29.09 $22.40 $21.73
Income from investment operations:
Net investment income (loss) (.06) .18 .54 .21
Net gains (losses) (both realized and unrealized) 5.72 .24 6.64 .62
Total from investment operations 5.66 .42 7.18 .83
Less distributions:
Dividends from net investment income (.28) (.12) (.49) (.16)
Distributions from realized gains (1.41) (1.11) -- --
Total distributions (1.69) (1.23) (.49) (.16)
Net asset value, end of period $32.25 $28.28 $29.09 $22.40
Ratios/supplemental data
Net assets, end of period (in thousands) $1,130 $935 $778 $534
Ratio of expenses to average daily net assetsd 1.25%e 1.25% .58% 1.25%e
Ratio of net investment income (loss)
to average daily net assets (.41%)e .69% 2.17% 3.06%e
Portfolio turnover rate
(excluding short-term securities) 31% 79% 82% 21%
Total return 20.94% .91% 28.28% 3.81%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was May 13, 1996.
c Six months ended March 31, 1999 (Unaudited).
d The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets would
have been 2.51%, 2.03%, 1.13% and 34.21% for the periods ended 1999, 1998, 1997
and 1996, respectively.
e Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Equity Income Fund
Fiscal period ended Sept. 30,
Per share income and capital changesa
1999c 1998 1997 1996b
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.85 $11.16 $8.92 $8.68
Income from investment operations:
Net investment income (loss) .07 .21 .37 .13
Net gains (losses) (both realized and unrealized) 1.61 (.47) 2.22 .23
Total from investment operations 1.68 (.26) 2.59 .36
Less distributions:
Dividends from net investment income (.08) (.22) (.35) (.12)
Distributions from realized gains (.99) (.83) -- --
Total distributions (1.07) (1.05) (.35) (.12)
Net asset value, end of period $10.46 $9.85 $11.16 $8.92
Ratios/supplemental data
Net assets, end of period (in thousands) $1,010 $897 $827 $534
Ratio of expenses to average daily net assetsd 1.24%e 1.25% 1.07% 1.25%e
Ratio of net investment income (loss)
to average daily net assets 1.25%e 1.95% 3.65% 3.51%e
Portfolio turnover rate
(excluding short-term securities) 51% 97% 81% 17%
Total return 17.43% (2.61%) 29.44% 4.10%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was May 13, 1996.
c Six months ended March 31, 1999 (Unaudited).
d The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets would
have been 2.43%, 1.68%, 4.53%, and 24.26% for the periods ended 1999, 1998, 1997
and 1996, respectively.
e Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total Return Fund
Fiscal period ended Sept 30,
Per share income and capital changesa
1999c 1998 1997 1996b
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.35 $14.53 $12.22 $11.89
Income from investment operations:
Net investment income (loss) .18 .40 .31 .06
Net gains (losses) (both realized and unrealized) 1.50 (.94) 2.29 .31
Total from investment operations 1.68 (.54) 2.60 .37
Less distributions:
Dividends from net investment income (.20) (.40) (.29) (.04)
Distributions from realized gains (.93) (1.24) -- --
Total distributions (1.13) (1.64) (.29) (.04)
Net asset value, end of period $12.90 $12.35 $14.53 $12.22
Ratios/supplemental data
Net assets, end of period (in thousands) $774 $685 $686 $529
Ratio of expenses to average daily net assetsd 1.28%e 1.15% 1.26% 1.30%e
Ratio of net investment income (loss)
to average daily net assets 2.75%e 2.92% 2.29% .96%e
Portfolio turnover rate
(excluding short-term securities) 43% 122% 99% 35%
Total return 13.87% (4.09%) 21.35% 3.18%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was May 13, 1996.
c Six months ended March 31, 1999 (Unaudited).
d The Advisor and Distributor voluntarily limited total opering expenses.
Without this agreement, the ratio of expenses to average daily net assets would
have been 2.37%, 2.16%, 2.79%, and 31.60% for the periods ended 1999, 1998, 1997
and 1996, respectively.
e Adjusted to an annual basis.
</TABLE>
<PAGE>
Financial Statements
Statement of assets and liabilities
Balanced Portfolio
March 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $5,070,520,471) $5,446,852,182
Dividends and accrued interest receivable 26,154,406
Receivable for investment securities sold 485,688,612
U.S. government securities held as collateral (Note 6) 10,774,493
----------
Total assets 5,969,469,693
-------------
Liabilities
Disbursements in excess of cash on demand deposit 53,061,090
Payable for investment securities purchased 912,551,736
Payable upon return of securities loaned (Note 6) 32,279,493
Options contracts written, at value
(premium received $7,429,836) (Note 4) 6,418,735
Other accrued expenses 87,750
------
Total liabilities 1,004,398,804
-------------
Net assets $4,965,070,889
==============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Balanced Portfolio
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 31,054,309
Interest 59,285,038
Less foreign taxes withheld (32,623)
-------
Total income 90,306,724
----------
Expenses (Note 2):
Investment management services fee 11,032,878
Compensation of board members 11,902
Custodian fees 191,239
Audit fees 15,188
Other 41,722
------
Total expenses 11,292,929
Earnings credits on cash balances (Note 2) (5,922)
------
Total net expenses 11,287,007
----------
Investment income (loss) -- net 79,019,717
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 70,106,445
Financial futures contracts (Note 5) 9,706,537
Options contracts written (Note 4) 19,168,145
----------
Net realized gain (loss) on investments 98,981,127
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 410,763,116
-----------
Net gain (loss) on investments and foreign currencies 509,744,243
-----------
Net increase (decrease) in net assets resulting from operations $588,763,960
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Balanced Portfolio
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 79,019,717 $ 185,535,190
Net realized gain (loss) on investments 98,981,127 536,885,565
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 410,763,116 (663,319,521)
----------- ------------
Net increase (decrease) in net assets resulting from operations 588,763,960 59,101,234
Net contributions (withdrawals) from partners (374,923,625) (161,190,578)
------------ ------------
Total increase (decrease) in net assets 213,840,335 (102,089,344)
Net assets at beginning of period 4,751,230,554 4,853,319,898
------------- -------------
Net assets at end of period $4,965,070,889 $4,751,230,554
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Balanced Portfolio
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Balanced 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. Balanced Portfolio
seeks to provide a balance of growth of capital and current income by investing
in common stocks and senior securities (preferred stocks and debt securities)
issued by U.S. and foreign companies. The Portfolio also may invest in
derivative instruments and money market instruments. The Declaration of Trust
permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Portfolio on
a forward-commitment or when-issued basis can take place one month or more after
the transaction date. During this period, such securities are subject to market
fluctuations, and they may affect the Portfolio's net assets the same as owned
securities. The Portfolio designates cash or liquid high-grade short-term debt
securities at least equal to the amount of its commitment. As of March 31, 1999,
the Portfolio had entered into outstanding when-issued or forward-commitments of
$631,357,248.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.53% to 0.43% annually. The fees may be increased or decreased
by a performance adjustment based on a comparison of the performance of Class A
shares of IDS Mutual to the Lipper Balanced Fund Index. The maximum adjustment
is 0.08% of the Portfolio's average daily net assets on an annual basis. The
adjustment decreased the fee by $1,068,395 for the six months ended March 31,
1999.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio, and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended March 31, 1999, the Portfolio's custodian fees were
reduced by $5,922 as a result of earnings credits from overnight cash balances.
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 $3,256,606,437 and $3,049,918,502, respectively, for the
six months ended March 31, 1999. For the same period, the portfolio turnover
rate was 62%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $51,096 for the
six months ended March 31, 1999.
4. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended March 31, 1999
Puts Calls
Contracts Premium Contracts Premium
Balance Sept. 30, 1998 2,400 $ 4,153,631 2,750 $ 4,469,066
Opened 10,455 14,769,177 13,251 19,605,833
Exercised (4,200) (5,948,536) (3,836) (5,001,552)
Closed (6,275) (10,047,691) (9,305) (14,570,092)
------ ----------- ------ -----------
Balance March 31, 1999 2,380 2,926,581 2,860 4,503,255
See "Summary of significant accounting policies."
5. FINANCIAL FUTURES CONTRACTS
As of March 31, 1999, investments in securities included securities valued at
$31,724,401 that were pledged as collateral to cover initial margin deposits on
568 open purchased contracts and 5,578 open sale contracts. The market value of
the open purchase contracts as of March 31, 1999 was $100,193,600 with net
unrealized loss of $1,001,360. The market value of the open sale contracts as of
March 31, 1999 was $665,197,625 with a net unrealized gain of $5,250,533. See
"Summary of significant accounting policies."
6. LENDING OF PORTFOLIO SECURITIES
As of March 31, 1999, securities valued at $31,200,360 were on loan to brokers.
For collateral, the Portfolio received $21,505,000 in cash and U.S. government
securities valued at $10,774,493. Income from securities lending amounted to
$63,961 for the six months ended March 31, 1999. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Balanced Portfolio
March 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (62.6%)
Issuer Shares Value(a)
Aerospace & defense (1.5%)
<S> <C> <C>
AlliedSignal 800,000 $39,350,000
Rockwell Intl 770,000(e,f) 32,676,875
Total 72,026,875
Automotive & related (3.3%)
Delphi Automotive Systems 1,925,000(b) 34,168,750
Ford Motor 989,500 56,154,125
General Motors 545,000 47,346,875
TRW 577,000 26,253,500
Total 163,923,250
Banks and savings & loans (8.0%)
Bank of New York 1,185,000 42,585,938
Bank One 1,270,000 69,929,374
BankAmerica 1,400,000 98,874,999
Chase Manhattan 590,000 47,974,375
Fleet Financial Group 765,000 28,783,125
Mellon Bank 370,000 26,038,750
Washington Mutual 930,000 38,013,750
Wells Fargo 1,355,000 47,509,688
Total 399,709,999
Building materials & construction (0.6%)
American Standard 800,000(b) 27,500,000
Chemicals (2.1%)
Air Products & Chemicals 965,000 33,051,250
Dow Chemical 170,000 15,841,875
Du Pont (EI) de Nemours 940,000 54,578,750
Total 103,471,875
Communications equipment & services (0.9%)
Northern Telecom 710,400(c) 44,133,600
Computers & office equipment (4.7%)
3Com 1,177,200(b,e,f) 27,443,475
BMC Software 505,000(b) 18,716,563
Compaq Computer 1,030,000 32,638,125
Electronic Data Systems 510,000 24,830,625
First Data 615,500 26,312,625
Hewlett-Packard 250,000 16,953,125
Intl Business Machines 350,000 62,037,499
Wang Laboratories 1,166,500(b) 22,892,563
Total 231,824,600
Electronics (1.1%)
Applied Materials 495,000(b) 30,535,313
Texas Instruments 260,000 25,805,000
Total 56,340,313
Energy (6.4%)
Chevron 755,000 66,770,312
Mobil 830,000 73,039,999
Royal Dutch Petroleum 745,000(c) 38,740,000
Texaco 1,110,000(e,f) 62,992,500
Tosco 1,755,000 43,545,938
Unocal 1,040,000 38,285,000
Total 323,373,749
Financial services (4.8%)
Associates First Capital Cl A 840,000 37,800,000
Citigroup 1,590,000 101,561,249
Fannie Mae 325,000 22,506,250
Franchise Finance Corp of America 117,500 2,474,844
MBNA 1,300,000 31,037,500
Morgan Stanley, Dean Witter, Discover & Co 410,000 40,974,375
Total 236,354,218
Food (1.4%)
Bestfoods 470,000 22,090,000
General Mills 310,000 23,424,375
Sara Lee 900,000(e,f) 22,275,000
Total 67,789,375
Health care (2.7%)
American Home Products 350,000 22,837,500
Amgen 455,000(b) 34,068,124
Baxter Intl 350,000 23,100,000
Boston Scientific 815,000(b) 33,058,438
Warner-Lambert 345,000 22,834,688
Total 135,898,750
Health care services (0.5%)
McKesson HBOC 355,000 23,430,000
Household products (0.9%)
Procter & Gamble 450,000 44,071,875
Industrial equipment & services (2.3%)
Browning-Ferris Inds 1,015,000 39,140,938
Illinois Tool Works 655,000 40,528,125
Parker-Hannifin 1,005,000 34,421,250
Total 114,090,313
Insurance (4.3%)
American General 530,900 37,428,450
American Intl Group 776,250 93,635,156
Lincoln Natl 500,000 49,437,500
Marsh & McLennan 465,000 34,497,188
Total 214,998,294
Leisure time & entertainment (0.9%)
Disney (Walt) 1,090,000 33,926,250
Mattel 343,200 8,537,100
Total 42,463,350
Multi-industry conglomerates (0.7%)
Emerson Electric 335,000 17,734,063
Xerox 325,000 17,346,875
Total 35,080,938
Paper & packaging (1.2%)
Intl Paper 770,000 32,484,375
Tenneco 1,022,000 28,552,125
Total 61,036,500
Retail (4.9%)
American Stores 2,200,000 72,600,000
Costco Companies 600,000(b) 54,937,500
Dayton Hudson 1,190,000 79,283,749
TJX Companies 1,225,000 41,650,000
Total 248,471,249
Transportation (1.6%)
Burlington Northern Santa Fe 1,260,000 41,422,500
Union Pacific 747,000 39,917,813
Total 81,340,313
Utilities -- electric (3.9%)
Carolina Power & Light 585,000 22,120,313
CMS Energy 775,000 31,048,438
Duke Energy 601,800 32,873,325
Edison Intl 885,000 19,691,250
New Century Energies 755,000 25,717,188
Northern States Power 330,000 7,651,875
PECO Energy 720,000 33,299,999
Texas Utilities 480,000 20,010,000
Total 192,412,388
Utilities -- gas (0.7%)
Coastal 1,035,000 34,155,000
Utilities -- telephone (3.1%)
Ameritech 835,000 48,325,625
AT&T 250,000 19,953,125
BellSouth 680,000 27,242,500
SBC Communications 590,000 27,803,750
U S WEST Communications Group 545,000 30,009,063
Total 153,334,063
Total common stocks
(Cost: $2,778,603,102) $3,107,230,887
Preferred stock (1.4%)
Issuer Shares Value(a)
Houston Inds
7.00% Cv ACES 567,000(j) 68,323,500
Total preferred stock
(Cost: $44,211,203) $68,323,500
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (39.7%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (14.8%)
Collateralized Mtge Obligation Trust
<S> <C> <C> <C>
12-20-14 9.95% $2,414,526 $2,559,036
Federal Home Loan Mtge Corp
10-01-03 7.00 3,017,218 3,085,799
07-01-07 6.50 290,596 290,808
07-01-08 6.75 1,382,898 1,392,329
06-01-09 5.50 3,687,449 3,619,342
01-01-11 6.50 12,978,702 13,130,942
03-01-13 5.50 13,794,509 13,449,445
08-01-24 8.00 3,812,864 3,970,717
03-01-26 7.00 7,521,224 7,632,463
09-01-28 6.00 27,501,807 26,752,933
Collateralized Mtge Obligation
01-15-03 7.50 6,176,839 6,338,116
04-15-22 8.50 7,000,000 7,347,130
Trust Series Z
10-15-23 6.50 2,696,047(m) 2,480,283
Federal Natl Mtge Assn
10-01-02 7.50 427,808 440,009
01-01-09 5.50 5,550,675 5,434,277
03-01-10 5.50 30,000,000(k) 29,203,125
03-01-10 6.00 30,000,000(k) 29,765,625
03-01-10 6.50 100,000,000(k) 100,875,000
07-01-13 6.50 15,368,922 15,511,865
08-01-13 6.00 28,345,695 28,132,436
02-01-14 7.50 1,204,900 1,231,962
05-01-23 6.50 4,456,996 4,442,154
09-01-23 6.50 6,926,931 6,903,865
01-01-24 6.50 12,763,606 12,721,103
06-01-24 9.00 3,976,858 4,254,562
03-01-25 6.50 90,000,000(k) 89,550,000
03-01-25 7.00 30,000,000(k) 30,403,125
08-01-25 7.50 11,702,408 12,033,001
06-01-26 8.50 41,469 43,574
03-01-28 6.00 82,400,743 80,103,381
04-01-28 6.00 26,800,437 26,051,772
04-01-28 6.00 2,248,425(d,e,f) 2,185,738
06-01-28 6.00 11,683,940 11,356,790
06-01-28 6.00 9,326,412(d,e,f) 9,065,272
06-01-28 7.00 24,041,293 24,384,633
07-01-28 6.00 13,671,727 13,288,919
08-01-28 7.00 36,618,384 37,141,341
09-01-28 6.50 48,514,121 48,297,985
12-01-28 6.50 11,858,619 11,807,982
Collateralized Mtge Obligation
Trust Series Z
12-25-06 8.00 11,217,885(m) 11,689,261
10-25-16 7.00 629,069(m) 626,993
Total 738,995,093
U.S. government obligations (9.9%)
Resolution Funding Corp
10-15-19 8.13 50,000,000 61,561,820
Zero Coupon
01-15-19 6.50 53,000,000(n) 15,589,367
10-15-19 6.32 50,000,000(n) 13,985,685
10-15-20 5.69 99,400,000(n) 26,131,346
U.S. Treasury
02-15-16 9.25 90,000,000 122,499,899
05-15-17 8.75 50,000,000 65,793,140
08-15-19 8.13 65,000,000(d,e,f) 81,918,778
11-15-21 8.00 16,000,000 20,117,802
02-15-23 7.13 12,700,000 14,659,483
08-15-23 6.25 25,000,000(d,e,f) 26,110,000
11-15-27 6.13 10,000,000(g) 10,393,248
02-15-29 5.25 22,300,000(g) 21,090,894
TIPS
01-15-09 3.88 6,500,000(h) 6,479,688
Zero Coupon
11-15-04 4.89 7,500,000(d,e,f,n) 5,558,693
Total 491,889,843
Aerospace & defense (0.2%)
United Technologies
11-15-19 8.88 9,500,000 11,901,900
Automotive & related (0.2%)
Ford Motor Credit
08-15-08 6.75 10,000,000 10,313,810
Banks and savings & loans (2.3%)
BankAmerica
Sr Nts
02-15-09 5.88 10,000,000 9,697,599
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 10,000,000(c,i) 8,560,000
Fleet Financial Group
Sub Nts
05-15-08 6.38 10,000,000 10,002,564
Mellon Financial
Sub Nts
02-15-10 6.38 16,000,000 16,229,941
Morgan (JP)
Sr Sub Medium-term Nts Series A
02-15-12 4.00 15,000,000 13,270,950
NationsBank
Sub Nts
05-15-10 6.60 11,825,000 11,972,441
Swiss Bank
Sub Deb
07-15-25 7.50 4,700,000 5,021,295
09-01-26 7.75 11,000,000 11,970,037
Union Planters Capital
Company Guaranty
12-15-26 8.20 10,000,000 9,987,179
US Capital
02-01-27 8.41 10,000,000(i) 10,388,541
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 5,800,000 6,339,669
Total 113,440,216
Building materials & construction (0.2%)
Tyco Intl Group
(U.S. Dollar) Company Guaranty
06-15-28 7.00 9,100,000(c) 9,109,971
Chemicals (0.2%)
IMC Global
10-15-01 6.63 10,000,000 9,999,520
Commercial finance -- personal loans (0.1%)
Yale University
04-15-96 7.38 4,000,000 4,356,782
Communications equipment & services (0.2%)
U S West Capital Funding
Company Guaranty
07-15-28 6.88 9,000,000 9,049,711
Electronics (0.3%)
Harris
12-01-18 10.38 4,000,000 4,217,524
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-04 8.25 10,000,000(c,i) 8,599,444
Total 12,816,968
Energy (1.0%)
Occidental Petroleum
Medium-term Nts Series B
04-10-00 6.25 6,500,000 6,479,272
Petronas
(U.S. Dollar)
08-15-15 7.75 10,000,000(c,i) 8,876,195
R & B Falcon
Sr Nts Series B
04-15-05 6.75 10,000,000 8,000,000
Union Pacific Resources
05-15-28 7.15 10,000,000 8,723,599
USX
03-01-08 6.85 10,000,000 9,803,968
Woodside Petroleum
(U.S. Dollar)
04-15-08 6.60 10,000,000(c,i) 9,208,171
Total 51,091,205
Energy equipment & services (0.4%)
Global Marine
09-01-07 7.13 10,000,000 9,939,937
Pioneer Natural Resource
01-15-08 6.50 10,350,000 8,479,068
Total 18,419,005
Financial services (1.5%)
AT&T Capital
Company Guaranty Medium-term Nts Series F
05-15-05 6.60 9,000,000 9,002,556
Bat-CRAVE-800
08-12-00 6.68 7,000,000(i) 7,072,767
Citibank Credit Card Master Trust
Series A
10-07-04 5.95 8,550,000 8,609,850
Equitable Life Assurance Society US Cl B1
Collateralized Mtge Obligation
05-15-09 7.33 5,500,000(i) 5,770,160
Golden State Holdings
Sr Nts
08-01-03 7.00 10,000,000 9,806,127
Household Finance
Medium-term Nts Series E
06-17-08 6.40 8,020,000 8,024,548
Liberty Mutual Insurance
10-15-97 7.70 10,000,000 9,792,370
Railcar Leasing
(U.S. Dollar)
01-15-13 7.13 15,000,000(c,i) 15,890,571
Total 73,968,949
Health care services (0.4%)
Kaiser Permanente
07-15-05 9.55 6,000,000 6,983,359
Service Corp Intl
03-15-08 6.50 2,000,000 1,921,440
04-15-09 7.70 10,000,000 10,410,316
Total 19,315,115
Insurance (1.8%)
American General Institute Capital
Company Guaranty Series A
12-01-45 7.57 15,000,000(i) 15,615,348
American United Life Insurance
03-30-26 7.75 10,375,000(i) 10,564,167
Nationwide CSN Trust
02-15-25 9.88 15,500,000(i) 18,153,703
New York Life Insurance
12-15-23 7.50 11,500,000(i) 11,245,611
Principal Mutual
03-01-44 8.00 7,150,000(i) 7,560,044
SAFECO Capital
Company Guaranty
07-15-37 8.07 10,000,000 10,012,193
SunAmerica
04-28-23 8.13 5,150,000 5,945,554
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 7,500,000(c,i) 8,013,028
Total 87,109,648
Media (0.5%)
Belo (AH)
Sr Nts
06-01-07 7.13 15,000,000 15,215,181
Time Warner Entertainment
Sr Nts
07-15-33 8.38 10,000,000 11,836,406
Total 27,051,587
Miscellaneous (0.4%)
DTE Burns Harbor LLC
Sr Nts
01-30-03 6.57 7,119,480(i) 7,026,856
Florida Windstorm
(MBIA Insured)
02-25-19 7.13 15,000,000(i,l) 15,085,755
Total 22,112,611
Paper & packaging (0.2%)
Intl Paper
11-15-12 5.13 13,400,000 11,437,565
Real estate investment trust (0.1%)
Property Trust of America
02-15-14 7.50 5,000,000 5,021,544
Restaurants & lodging (0.2%)
MGM Grand
02-01-05 6.95 10,000,000 9,450,985
Retail (0.3%)
Wal-Mart CRAVE Trust
07-17-06 7.00 12,237,423(i) 12,433,589
Transportation (1.2%)
Atlas Air Series C
01-02-10 8.01 14,165,941 14,192,857
Burlington Northern Santa Fe
12-15-25 7.00 10,200,000 10,384,931
Canadian Natl Railroad
(U.S. Dollar)
05-15-23 7.63 6,000,000(c) 6,499,477
CSX
05-01-27 7.25 10,000,000 10,596,233
Mass Transit Railway
(U.S. Dollar)
02-04-09 7.50 16,375,000(c) 16,749,078
Total 58,422,576
Utilities -- electric (1.9%)
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 5,400,000 5,946,727
Cleveland Electric Illuminating
07-01-00 7.19 5,000,000 5,073,382
07-01-04 7.67 10,000,000 10,508,950
Entergy Louisiana
1st Mtge
03-01-08 6.50 5,535,000 5,582,883
Israel Electric
(U.S. Dollar) Sr Nts
12-15-06 7.25 10,000,000(c) 9,942,500
Pacific Gas & Electric
1st Mtge Series 1992D
11-01-22 8.25 4,600,000 4,893,632
Public Service Electric & Gas
1st Mtge
05-01-23 6.38 13,325,000 13,326,918
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 13,000,000(l) 13,180,837
TU Electric Capital
Company Guaranty
01-30-37 8.18 10,000,000 10,502,960
Wisconsin Electric Power
01-15-23 7.75 5,500,000 5,706,657
12-01-95 6.88 8,000,000 8,016,481
Total 92,681,927
Utilities -- gas (0.2%)
Ras Laffan
(U.S. Dollar)
03-15-14 8.29 10,000,000(c,i) 9,401,806
Utilities -- telephone (1.2%)
Airtouch Communications
05-01-08 6.65 6,950,000 7,164,072
Bell Telephone of Pennsylvania
03-15-33 7.38 5,000,000 5,071,825
GTE
11-01-21 8.75 5,000,000 6,143,190
Qwest Communications Intl
Sr Nts
11-01-08 7.25 21,000,000(i) 21,472,499
SBC Communications
10-15-34 6.63 6,100,000 5,870,766
07-15-43 7.38 7,500,000 7,870,850
U S WEST Communications
09-15-05 6.63 7,000,000(d,e,f) 7,204,250
Total 60,797,452
Total bonds
(Cost: $1,946,834,037) $1,970,589,378
See accompanying notes to investments in securities
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Options purchased (--%)
Issuer Shares Exercise Expiration Value(a)
price date
Puts
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures, June 1999 320,000 $106 May 1999 $49,984
U.S. Treasury Note Futures, June 1999, 10-year notes 100,000 111 May 1999 109,370
Total options purchased
(Cost: $323,066) $159,354
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (6.1%)(d)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (1.5%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
04-06-99 4.82% $26,600,000 $26,582,266
04-19-99 4.80 25,000,000 24,940,250
05-14-99 4.80 25,000,000 24,857,563
Total 76,380,079
Commercial paper (4.6%)
BBV Finance (Delaware)
04-19-99 4.87 19,500,000 19,452,711
BMW US Capital
05-13-99 4.87 3,000,000 2,983,060
Ciesco LP
04-13-99 4.89 17,800,000 17,771,105
Commerzbank U.S. Finance
04-07-99 4.90 15,000,000 14,987,800
Delaware Funding
04-23-99 4.89 11,500,000(o) 11,465,845
Fleet Funding
04-21-99 4.88 13,700,000(o) 13,663,010
04-29-99 4.87 4,000,000(o) 3,984,911
Ford Motor Credit
04-08-99 4.90 10,000,000 9,990,511
04-16-99 4.90 10,000,000 9,979,667
Glaxo Wellcome
04-12-99 4.88 9,700,000(o) 9,685,596
GMAC
04-22-99 4.90 10,000,000 9,971,592
Goldman Sachs Group
04-01-99 4.87 11,000,000 11,000,000
GTE Funding
04-06-99 4.89 19,342,000 19,328,917
Heinz (HJ)
05-03-99 4.86 8,300,000 8,264,365
Household Finance
04-01-99 4.87 11,500,000 11,500,000
Merrill Lynch
04-08-99 4.90 7,200,000 7,193,140
Morgan Stanley, Dean Witter, Discover & Co
04-05-99 4.89 10,000,000 9,994,589
Novartis Finance
04-08-99 4.86 4,100,000(o) 4,096,133
Paccar Financial
04-20-99 4.85 12,400,000 12,368,390
Societe Generale North America
04-07-99 4.90 12,600,000 12,589,752
Variable Funding Capital
04-05-99 4.87 3,900,000(o) 3,897,890
Total 224,168,984
Total short-term securities
(Cost: $300,549,063) $300,549,063
Total investments in securities
(Cost: $5,070,520,471)(p) $5,446,852,182
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of March 31,
1999, the value of foreign securities represented 3.90% of net assets.
(d) At March 31, 1999, securities valued at $31,724,401 were held to cover open
call options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures, June 1999 84,000 $120 May 1999 $1,548,750
U.S. Treasury Bond Futures, June 1999 144,000 122 May 1999 1,372,493
U.S. Treasury Bond Futures, June 1999 34,000 124 May 1999 143,435
U.S. Treasury Note Futures, June 1999,
10-year notes 24,000 116 May 1999 101,249
Total $3,165,927
At March 31, 1999, cash or short-term securities were designated to cover open
put options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
U.S. Treasury Bond Futures, June 1999 54,000 $118 May 1999 $337,500
U.S. Treasury Bond Futures, June 1999 94,000 120 May 1999 1,204,375
U.S. Treasury Bond Futures, June 1999 40,000 124 May 1999 1,531,248
U.S. Treasury Note Futures, June 1999,
10-year notes 50,000 113 May 1999 179,685
Total $3,252,808
(e) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
Type of security Notional amount
Purchase contracts
U.S. Treasury Note, June 1999, 10-year notes $400,000
Sale contracts
U.S. Treasury Bond, June 1999 4,778,000
U.S. Treasury Note, June 1999, 5-year notes 800,000
(f) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 5 to the financial statements):
Type of security Contracts
S&P 500 Index, June 1999 168
(g) Security is partially or fully on loan. See Note 6 to the financial
statements.
(h) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(i) 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.
(j) 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.
(k) At March 31, 1999, the cost of securities purchased, including interest
purchased, on a when-issued basis was $631,357,248.
(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) This security is a collateralized mortgage obligation that pays no interest
or principal during its initial accrual period until previous series within the
trust have been paid off. Interest is accrued at an effective yield; similar to
a zero coupon bond.
(n) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(o) 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.
(p) At March 31, 1999, the cost of securities for federal income tax purposes
was approximately $5,070,512,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $508,254,000
Unrealized depreciation (131,914,000)
------------
Net unrealized appreciation $376,340,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Equity Portfolio
March 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1):
<S> <C>
Investments in securities of unaffiliated issuers (identified cost $3,266,002,145) $4,688,886,704
Investments in securities of affiliated issuers (identified cost $27,605,473) 54,398,438
----------
Total investments in securities (identified cost $3,293,607,618) 4,743,285,142
Dividends and accrued interest receivable 5,562,029
Receivable for investment securities sold 59,338,078
U.S. government securities held as collateral (Note 4) 9,918,396
---------
Total assets 4,818,103,645
=============
Liabilities
Disbursements in excess of cash on demand deposit 1,342,514
Payable for investment securities purchased 35,345,889
Payable upon return of securities loaned (Note 4) 37,709,296
Accrued investment management services fee 60,975
Other accrued expenses 156,494
-------
Total liabilities 74,615,168
----------
Net assets $4,743,488,477
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Equity Portfolio
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 30,128,564
Interest 10,943,262
Less foreign taxes withheld (263,895)
--------
Total income 40,807,931
----------
Expenses (Note 2):
Investment management services fee 11,209,160
Compensation of board members 11,076
Custodian fees 202,915
Audit fees 14,813
Other 45,244
------
Total expenses 11,483,208
Earnings credit on cash balances (Note 2) (4,848)
------
Total net expenses 11,478,360
----------
Investment income (loss) -- net 29,329,571
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 91,380,320
Foreign currency transactions (595)
----
Net realized gain (loss) on investments 91,379,725
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 731,805,357
-----------
Net gain (loss) on investments and foreign currencies 823,185,082
-----------
Net increase (decrease) in net assets resulting from operations $852,514,653
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Equity Portfolio
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss) -- net $ 29,329,571 $ 62,955,925
Net realized gain (loss) on investments 91,379,725 401,372,703
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 731,805,357 (356,961,919)
----------- ------------
Net increase (decrease) in net assets resulting from operations 852,514,653 107,366,709
Net contributions (withdrawals) from partners (178,179,100) (202,014,550)
------------ ------------
Total increase (decrease) in net assets 674,335,553 (94,647,841)
Net assets at beginning of period 4,069,152,924 4,163,800,765
------------- -------------
Net assets at end of period $4,743,488,477 $4,069,152,924
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Equity Portfolio
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity 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. Equity Portfolio
invests primarily in common stocks and securities convertible into common
stocks. The Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the portfolio's average daily net assets in reducing
percentages from 0.53% to 0.4% annually. The fees may be increased or decreased
by a performance adjustment based on a comparison of the performance of Class A
shares of IDS Stock Fund to the Lipper Growth and Income Fund Index. The maximum
adjustment is 0.08% of the Portfolio's average daily net assets on an annual
basis. The adjustment increased the fee by $698,688 for the six months ended
March 31, 1999.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended March 31, 1999, the Portfolio's custodian fees were
reduced by $4,848 as a result of earnings credits from overnight cash balances.
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 $1,306,780,251 and $1,400,098,654, respectively, for the
six months ended March 31, 1999. For the same period, the portfolio turnover
rate was 31%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $60,296 for the
six months ended March 31, 1999.
4. LENDING OF PORTFOLIO SECURITIES
As of March 31, 1999, securities valued at $36,132,475 were on loan to brokers.
For collateral, the Portfolio received $27,790,900 in cash and U.S. government
securities valued at $9,918,396. Income from securities lending amounted to
$82,608 for the six months ended March 31, 1999. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
5. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended March 31, 1999
Calls
Contracts Premium
Balance Sept. 30, 1998 -- $ --
Opened 1,000 162,690
Closed (1,000) (162,690)
------ --------
Balance March 31, 1999 -- $ --
See "Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Equity Portfolio
March 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (82.9%)
Issuer Shares Value(a)
Aerospace & defense (1.8%)
<S> <C> <C>
Gulfstream Aerospace 847,900(b) $36,777,663
Raytheon Cl B 800,000 46,900,000
Total 83,677,663
Airlines (0.6%)
Southwest Airlines 1,000,000 30,250,000
Automotive & related (1.3%)
Delphi Automotive Systems 889,200(b) 15,783,300
Federal-Mogul 385,000 16,555,000
Ford Motor 500,000 28,375,000
Total 60,713,300
Banks and savings & loans (4.3%)
Bank One 810,000 44,600,625
BankAmerica 700,000 49,437,500
Wachovia 620,000 50,336,250
Washington Mutual 750,000 30,656,250
Wells Fargo 800,000 28,050,000
Total 203,080,625
Beverages & tobacco (1.0%)
Coca-Cola 800,000 49,100,000
Building materials & construction (1.4%)
Martin Marietta Materials 1,200,000 68,475,000
Chemicals (0.5%)
Waste Management 547,375 24,289,766
Communications equipment & services (1.2%)
Nokia Oyj ADR Cl A 250,000(c) 38,937,500
Tellabs 200,000(b) 19,550,000
Total 58,487,500
Computers & office equipment (13.7%)
3Com 600,000(b) 13,987,500
America Online 800,000 116,800,000
Ascend Communications 650,000(b) 54,396,875
Cisco Systems 600,000(b) 65,737,500
Compaq Computer 1,500,000 47,531,250
Equant 400,000(b,c,d) 30,100,000
Gateway 2000 450,000(b) 30,853,125
Intl Business Machines 500,000 88,625,000
Microsoft 2,000,000(b) 179,249,999
Solectron 396,449(b) 19,252,555
Total 646,533,804
Electronics (2.7%)
Altera 347,826(b) 20,695,647
Intel 500,000 59,562,500
Texas Instruments 500,000 49,625,000
Total 129,883,147
Energy (2.4%)
Conoco Cl A 1,267,100 31,123,144
Exxon 600,000 42,337,500
Mobil 450,000 39,600,000
Total 113,060,644
Energy equipment & services (0.7%)
Schlumberger 525,000(c) 31,598,438
Financial services (4.5%)
Associates First Capital Cl A 566,120 25,475,400
Mutual Risk Management 1,525,000(c,d) 58,331,250
Providian Financial 1,200,000 132,000,000
Total 215,806,650
Food (1.8%)
General Mills 500,000 37,781,250
Sara Lee 2,000,000 49,500,000
Total 87,281,250
Health care (10.0%)
American Home Products 700,000 45,675,000
Amgen 500,000(b) 37,437,500
Baxter Intl 750,000 49,500,000
Bristol-Myers Squibb 1,000,000 64,312,500
Guidant 1,150,000 69,575,000
Medtronic 400,000 28,700,000
Pfizer 400,000 55,500,000
Schering-Plough 1,300,000 71,906,249
Warner-Lambert 750,000 49,640,625
Total 472,246,874
Household products (2.7%)
Gillette 500,000 29,718,750
Procter & Gamble 600,000 58,762,500
Unilever 600,000(c) 39,862,500
Total 128,343,750
Industrial equipment & services (1.0%)
Illinois Tool Works 800,000 49,500,000
Insurance (3.6%)
ACE 750,000(c) 23,390,625
American Intl Group 904,500 109,105,313
XL Capital Cl A 650,000 39,487,500
Total 171,983,438
Media (3.7%)
Clear Channel Communications 1,200,000(b) 80,475,000
Infinity Broadcasting Cl A 1,317,000(b) 33,912,750
MediaOne Group 500,000(b) 31,750,000
USA Networks 800,000(b) 28,650,000
Total 174,787,750
Metals (1.1%)
Stillwater Mining 2,062,500(b,e) 54,398,438
Multi-industry conglomerates (4.2%)
Emerson Electric 615,380 32,576,679
General Electric 1,500,000 165,937,500
Total 198,514,179
Paper & packaging (0.9%)
Intl Paper 1,000,000 42,187,500
Retail (9.5%)
American Stores 700,000 23,100,000
Circuit City Stores 450,000 34,481,250
Dayton Hudson 1,100,000 73,287,500
Home Depot 1,200,000 74,700,000
Rite Aid 1,795,000 44,875,000
Safeway 1,750,000(b) 89,796,875
Wal-Mart Stores 1,200,000 110,624,999
Total 450,865,624
Utilities -- electric (1.5%)
Carolina Power & Light 350,000 13,234,375
CMS Energy 300,000 12,018,750
Duke Energy 200,000 10,925,000
New Century Energies 150,000 5,109,375
Texas Utilities 350,000 14,590,625
Unicom 400,000 14,625,000
Total 70,503,125
Utilities -- telephone (6.7%)
Ameritech 800,000 46,300,000
AT&T 1,150,775 91,846,229
BellSouth 750,000 30,046,875
MCI WorldCom 875,422(b) 77,529,561
SBC Communications 439,200 20,697,300
U S WEST Communications Group 900,000 49,556,250
Total 315,976,215
Total common stocks
(Cost: $2,532,012,453) $3,931,544,680
Preferred stocks (8.3%)
BS-Medtronic
5.00% Cv 884,250 41,913,450
BS-Service Corp Intl
5.00% 1,100,000 16,346,000
CVS
6.00% Cv ACES 200,000(f) 17,100,000
Federal-Mogul Finance Trust
7.00% Cm Cv 270,000 14,478,750
Finova Finance Trust
5.50% Cv 325,000 22,750,000
Glenborough Realty Trust
7.75% Cv Series A 402,105 6,735,259
Host Marriott Finance Trust
6.75% Cv 300,000 11,812,500
Houston Inds
7.00% Cv ACES 325,000(f) 39,162,500
Ingersoll-Rand
6.75% Cv PRIDES 800,000(g) 20,200,000
McKesson
5.00% Cv 200,000(h) 18,050,000
MediaOne Group
6.25% Cv 569,500 47,126,125
MS-Applied Material
6.00% Cv 180,000 8,460,000
MS-Gillette
Cv 186,795 21,714,919
MS-UNUM
3.25% Cv 1,217,092 56,290,505
Newell Finance Trust
5.25% Cm Cv 250,000(h) 13,812,500
PLC Capital Trust II
6.50% Cv PRIDES 85,600(g) 5,333,950
SBH-Cincinnati Bell
6.25% 216,200 15,323,175
Sprint
8.25% Cv 206,925 15,105,525
Total preferred stocks
(Cost: $355,366,716) $391,715,158
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (2.4%)
Issuer Coupon Principal Value(a)
rate amount
AirTours
(British Pound) Cv Sub Nts
<S> <C> <C> <C>
01-05-04 5.75% 8,216,000(c,h) $15,254,437
Colt Telecom Group
(European Monetary Unit) Cv
08-06-05 1.12 25,000,000(c) 17,057,989
Costco
Zero Coupon Cv Sub Nts
08-01-17 3.51 21,000,000(h,i) 22,470,000
Exodus Communications
Cv Sub Nts
03-15-06 5.00 6,000,000(h) 9,552,300
Network Associates
Zero Coupon Cv Sub Debs
02-13-18 4.09 20,000,000(h,i) 7,200,000
Office Depot
Zero Coupon Cv Nts
11-01-08 3.70 7,300,000(i) 6,332,750
Pennzenergy
Cv
08-15-08 4.90 15,000,000 15,000,000
Telewest Communication
(British Pound) Cv
02-19-07 5.25 12,240,000(c,h) 19,761,474
Total bonds
(Cost: $98,828,610) $112,628,950
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (6.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (2.1%)
Federal Home Loan Bank Disc Nt
<S> <C> <C> <C>
05-21-99 4.77% $21,600,000 $21,457,800
Federal Home Loan Mtge Corp Disc Nts
04-08-99 4.82 600,000 599,440
04-14-99 4.78 19,400,000 19,366,724
04-23-99 4.80 24,800,000 24,727,556
05-12-99 4.80 8,100,000 8,055,997
05-17-99 4.77 25,000,000 24,848,582
Total 99,056,099
Commercial paper (4.2%)
Albertson's
04-12-99 4.87 2,100,000(j) 2,096,888
BBV Finance (Delaware)
04-14-99 4.87 10,000,000 9,980,804
05-19-99 4.86 8,200,000 8,146,312
Becton Dickinson
05-10-99 4.86 1,600,000 1,591,611
BMW US Capital
04-22-99 4.86 18,900,000 18,846,639
Ciesco LP
04-12-99 4.85 7,400,000 7,388,334
05-04-99 4.87 5,400,000 5,376,042
05-06-99 4.87 8,200,000 8,161,334
Daimler/Chrysler
04-15-99 4.88 12,700,000 12,675,997
Delaware Funding
04-23-99 4.89 2,000,000(j) 1,994,060
Dresdner US Finance
04-13-99 4.88 18,700,000 18,669,706
Fleet Funding
04-16-99 4.88 10,000,000(j) 9,979,750
04-21-99 4.88 11,200,000(j) 11,169,760
Goldman Sachs Group
04-01-99 4.87 10,000,000 10,000,000
GTE Funding
04-05-99 4.90 1,400,000 1,399,241
Household Finance
05-03-99 4.87 6,100,000 6,073,756
Morgan Stanley, Dean Witter, Discover & Co
04-05-99 4.89 7,100,000 7,096,158
04-13-99 4.89 10,000,000 9,983,767
Natl Australia Funding (Delaware)
04-13-99 4.87 9,500,000 9,484,578
Paccar Financial
04-20-99 4.85 9,800,000 9,775,018
Societe Generale North America
04-07-99 4.90 9,300,000 9,292,436
UBS Finance (Delaware)
04-16-99 4.87 11,300,000 11,277,165
Variable Funding Capital
04-05-99 4.87 10,900,000(j) 10,894,102
Total 201,353,458
Letter of credit (0.2%)
Bank of America-
AES Hawaii
04-15-99 4.88 7,000,000 6,986,797
Total short-term securities
(Cost: $307,399,839) $307,396,354
Total investments in securities
(Cost: $3,293,607,618)(k) $4,743,285,142
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of March 31,
1999, the value of foreign securities represented 5.78% of net assets.
(d) Security is partially or fully on loan. See Note 4 to the financial
statements.
(e) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
six months ended March 31, 1999 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
<S> <C> <C> <C> <C> <C> <C>
Stillwater Mining $24,603,388 $3,002,085 $-- $27,605,473 $-- $54,398,438
(f) 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.
(g) 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.
(h) 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.
(i) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(j) 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.
(k) At March 31, 1999, the cost of securities for federal income tax purposes
was approximately $3,293,608,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $1,526,462,000
Unrealized depreciation (76,785,000)
-----------
Net unrealized appreciation $1,449,677,000
</TABLE>
<PAGE>
Financial Statements
Statement of assets and liabilities
Equity Income Portfolio
March 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $2,479,496,295) $2,676,911,451
Dividends and accrued interest receivable 3,321,663
Receivable for investment securities sold 16,772,378
----------
Total assets 2,697,005,492
-------------
Liabilities
Disbursements in excess of cash on demand deposit 24,828,295
Payable for investment securities purchased 23,440,589
Accrued investment management services fee 36,222
Other accrued expenses 13,457
------
Total liabilities 48,318,563
----------
Net assets $2,648,686,929
==============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Equity Income Portfolio
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 29,974,632
Interest 2,287,348
Less foreign taxes withheld (199,438)
--------
Total income 32,062,542
----------
Expenses (Note 2):
Investment management services fee 6,427,169
Compensation of board members 8,184
Custodian fees 61,657
Audit fees 11,625
Other 34,897
------
Total expenses 6,543,532
Earnings credits on cash balances (Note 2) (3,547)
------
Total net expenses 6,539,985
---------
Investment income (loss) -- net 25,522,557
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 115,953,337
Financial futures contracts (Note 4) 17,566,011
Foreign currency transactions (387)
----
Net realized gain (loss) on investments 133,518,961
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 255,465,370
-----------
Net gain (loss) on investments and foreign currencies 388,984,331
-----------
Net increase (decrease) in net assets resulting from operations $414,506,888
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Equity Income Portfolio
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 25,522,557 $ 64,833,066
Net realized gain (loss) on investments 133,518,961 263,358,256
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 255,465,370 (386,481,334)
----------- ------------
Net increase (decrease) in net assets resulting from operations 414,506,888 (58,290,012)
Net contributions (withdrawals) from partners (176,498,398) 248,383,687
------------ -----------
Total increase (decrease) in net assets 238,008,490 190,093,675
Net assets at beginning of period 2,410,678,439 2,220,584,764
------------- -------------
Net assets at end of period $2,648,686,929 $2,410,678,439
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Equity Income Portfolio
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equity Income 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. Equity Income
Portfolio seeks to provide a high level of current income and, as a secondary
goal, steady growth of capital by investing primarily in dividend-paying stocks.
The Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.53% to 0.4% annually.
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.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended March 31, 1999, the Portfolio's custodian fees were
reduced by $3,547 as a result of earnings credits from overnight cash balances.
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 $1,285,942,229 and $1,339,812,816, respectively, for the
six months ended March 31, 1999. For the same period, the portfolio turnover
rate was 51%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $40,425 for the
six months ended March 31, 1999.
Income from securities lending amounted to $26,255 for the six months ended
March 31, 1999. The risks to the Portfolio of securities lending are that the
borrower may not provide additional collateral when required or return the
securities when due.
4. STOCK INDEX FUTURES CONTRACTS
Investments in securities as of March 31, 1999, included securities valued at
$3,588,750 that were pledged as collateral to cover initial margin deposits on
290 open purchase contracts. The market value of the open purchase contracts as
of March 31, 1999 was $93,764,250 with a net unrealized loss of $1,995,490. See
"Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Equity Income Portfolio
March 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (91.2%)
Issuer Shares Value(a)
Aerospace & defense (1.8%)
<S> <C> <C>
Goodrich (BF) 640,000 $21,960,000
Rockwell Intl 602,000 25,547,375
Total 47,507,375
Automotive & related (5.5%)
Dana 780,000 29,640,000
Ford Motor 730,000 41,427,500
General Motors 575,000 49,953,125
TRW 530,000 24,115,000
Total 145,135,625
Banks and savings & loans (11.5%)
Bank of New York 895,000 32,164,062
Bank One 885,000 48,730,312
BankAmerica 1,055,000 74,509,374
BankBoston 325,000 14,076,563
Chase Manhattan 375,400 30,524,713
Fleet Financial Group 780,000 29,347,500
Mellon Bank 285,000 20,056,875
Washington Mutual 740,000 30,247,500
Wells Fargo 755,000 26,472,188
Total 306,129,087
Chemicals (2.7%)
Dow Chemical 135,000 12,580,313
Du Pont (EI) de Nemours 570,000 33,095,625
Imperial Chemical Inds 360,000(c) 12,892,500
Lyondell Petrochemical 930,000 12,729,375
Total 71,297,813
Communications equipment & services (1.3%)
Northern Telecom 565,200(c) 35,113,050
Computers & office equipment (6.3%)
3Com 1,050,600(b) 24,492,113
BMC Software 385,000(b) 14,269,063
Electronic Data Systems 500,000 24,343,750
First Data 490,000 20,947,500
Hewlett-Packard 200,000 13,562,500
Intl Business Machines 330,000 58,492,499
Wang Laboratories 540,000(b) 10,597,500
Total 166,704,925
Electronics (0.9%)
Applied Materials 310,000(b) 19,123,125
Intel 37,250 4,437,406
Total 23,560,531
Energy (11.4%)
Chevron 560,000 49,524,999
Conoco Cl A 1,545,900 37,971,169
FirstEnergy 435,000 12,152,813
Mobil 630,000 55,439,999
Royal Dutch Petroleum 770,000(c) 40,040,000
Sunoco 535,000 19,293,438
Texaco 735,000 41,711,249
Ultramar Diamond Shamrock 750,000 16,218,750
Unocal 865,000 31,842,813
Total 304,195,230
Financial services (6.2%)
Associates First Capital Cl A 605,000 27,225,000
Citigroup 1,010,000 64,513,750
Fannie Mae 245,000 16,966,250
MBNA 1,040,000 24,830,000
Morgan Stanley, Dean Witter, Discover & Co 320,000 31,980,000
Total 165,515,000
Food (3.2%)
Bestfoods 625,000 29,375,000
General Mills 370,000 27,958,125
Sara Lee 1,130,000(e) 27,967,500
Total 85,300,625
Health care (3.7%)
American Home Products 555,000 36,213,750
Baxter Intl 475,000 31,350,000
Pharmacia & Upjohn 500,000 31,187,500
Total 98,751,250
Household products (2.6%)
Colgate-Palmolive 300,000 27,600,000
Procter & Gamble 415,000 40,644,063
Total 68,244,063
Industrial equipment & services (3.1%)
Browning-Ferris Inds 700,000 26,993,750
Illinois Tool Works 490,000 30,318,750
Parker-Hannifin 750,000 25,687,500
Total 83,000,000
Insurance (7.2%)
American General 625,450 44,094,225
American Intl Group 530,000 63,931,249
Lincoln Natl 530,000 52,403,750
Marsh & McLennan 408,500 30,305,594
Total 190,734,818
Multi-industry conglomerates (1.0%)
Emerson Electric 225,000 11,910,938
Xerox 250,000 13,343,750
Total 25,254,688
Paper & packaging (3.3%)
Intl Paper 595,000 25,101,563
Tenneco 1,185,000 33,105,937
Union Camp 429,000 28,796,625
Total 87,004,125
Real estate investment trust (1.0%)
FelCor Suite Hotels 400,000 9,275,000
Highwoods Properties 400,000 9,425,000
Kimco Realty 200,000 7,375,000
Total 26,075,000
Retail (6.3%)
American Stores 1,150,000 37,950,000
Circuit City Stores 745,000 57,085,625
Dayton Hudson 1,060,000 70,622,500
Total 165,658,125
Transportation (0.5%)
Teekay Shipping 750,000(c) 12,375,000
Utilities -- electric (5.3%)
CMS Energy 450,000 18,028,125
Duke Energy 346,100 18,905,713
Edison Intl 655,000 14,573,750
FPL Group 215,000 11,448,750
New Century Energies 425,000 14,476,563
NIPSCO Inds 500,000 13,500,000
PECO Energy 560,000 25,899,999
Pinnacle West Capital 250,000 9,093,750
Texas Utilities 350,000 14,590,625
Total 140,517,275
Utilities -- gas (0.5%)
El Paso Energy 380,000 12,421,250
Utilities -- telephone (5.8%)
Ameritech 640,000 37,040,000
AT&T 160,000 12,770,000
BellSouth 470,000 18,829,375
MCI WorldCom 536,000(b) 47,469,500
SBC Communications 365,000 17,200,625
U S WEST Communications Group 375,000 20,648,438
Total 153,957,938
Total common stocks
(Cost: $2,213,462,989) $2,414,452,793
Preferred stocks (3.9%)
Issuer Shares Value(a)
BS-Service Corp Intl
5.00% 475,000 $7,058,500
Federal-Mogul Finance Trust
7.00% Cv 500,000 26,812,500
MediaOne Group
6.25% Cv 344,100 28,474,275
Union Pacific Capital
6.25% Cv 811,500 40,473,563
Total preferred stocks
(Cost: $103,323,717) $102,818,838
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (2.0%)
Issuer Coupon Principal Value(a)
rate amount
Rite Aid
Cv Sub Nts
<S> <C> <C> <C>
09-15-02 5.25% $26,500,000 $27,162,500
Waste Management
Cv Sub Nts
02-01-02 4.00 21,000,000 24,648,750
Total bonds
(Cost: $54,881,019) $51,811,250
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (4.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (1.0%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
05-07-99 4.80% $11,400,000 $11,345,622
05-14-99 4.80 6,600,000 6,562,397
05-17-99 4.77 4,100,000 4,075,168
Federal Natl Mtge Assn Disc Nt
04-09-99 4.78 4,300,000 4,295,461
Total 26,278,648
Commercial paper (2.9%)
Alabama Power
04-20-99 4.86 9,100,000 9,076,755
Albertson's
04-12-99 4.87 4,100,000(d) 4,093,924
Ameritech Capital Funding
05-11-99 4.84 2,300,000(d) 2,287,682
BBV Finance (Delaware)
04-19-99 4.87 1,000,000 997,575
BMW US Capital
05-05-99 4.86 11,800,000 11,746,172
Ciesco LP
04-09-99 4.85 3,500,000 3,496,243
05-04-99 4.87 12,500,000 12,444,542
Clorox
04-27-99 4.86 2,200,000 2,192,326
Delaware Funding
05-11-99 4.88 7,700,000(d) 7,658,505
Dresdner US Finance
04-01-99 4.87 7,700,000 7,700,000
Duke Energy
04-20-99 4.86 10,700,000 10,672,667
Fleet Funding
04-29-99 4.87 800,000(d) 796,982
Salomon Smith Barney
04-05-99 4.90 2,400,000 2,398,699
Total 75,562,072
Letter of credit (0.2%)
Bank of America-
AES Hawaii
04-16-99 4.88 6,000,000 5,987,850
Total short-term securities
(Cost: $107,828,570) $107,828,570
Total investments in securities
(Cost: $2,479,496,295)(f) $2,676,911,451
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.
(c) Foreign security values are stated in U.S. dollars. As of March 31, 1999,
the value of foreign securities represented 3.79% of net assets.
(d) 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.
(e) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 4 to the financial statements):
Type of security Contracts
S&P 500 Index, June 1999 290
(f) At March 31, 1999, the cost of securities for federal income tax purposes
was approximately $2,479,496,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $341,809,000
Unrealized depreciation (144,394,000)
------------
Net unrealized appreciation $197,415,000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Total Return Portfolio
March 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1):
Investment in securities of unaffiliated issuers (identified cost
<S> <C>
$2,439,266,507) $2,624,362,328
Investment in securities of affiliated issuers
(identified cost $1,086,453 1,271,338
---------
Total investments in securities (identified cost $2,440,352,960) 2,625,633,666
Dividends and accrued interest receivable 19,777,328
Receivable for investment securities sold 15,674,825
U. S. government securities held as collateral for securities loaned (Note 5) 13,033,920
----------
Total assets 2,674,119,739
Liabilities
Disbursements in excess of cash on demand deposit 2,711,710
Payable upon return of securities loaned (Note 5) 54,023,620
Payable for investment securities purchased 10,466,532
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 1,976
Accrued investment management services fee 35,212
Other accrued expenses 129,700
-------
Total liabilities 67,368,750
----------
Net assets $2,606,750,989
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Total Return Portfolio
Six months ended March 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 8,330,258
Interest 44,295,322
Less foreign taxes withheld (67,153)
-------
Total income 52,558,427
----------
Expenses (Note 2):
Investment management services fee 5,575,723
Compensation of board members 8,598
Custodian fees 404,440
Audit fees 14,625
Other 35,823
------
Total expenses 6,039,209
Earnings credits on cash balances (Note 2) (5,261)
------
Total net expenses 6,033,948
---------
Investment income (loss) -- net 46,524,479
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (including $13,217,642 realized loss on investments
of affiliated issuers) (Note 3) 18,828,980
Financial futures contracts 10,926,690
Foreign currency tranactions (2,891,333)
Options contracts written (13,940,329)
-----------
Net realized gain (loss) on investments 12,924,008
Net change in unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign currencies 290,401,443
-----------
Net gain (loss) on investments 303,325,451
-----------
Net increase (decrease) in net assets resulting from operations $349,849,930
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Total Return Portfolio
March 31, 1999 Sept. 30, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 46,524,479 $ 101,362,151
Net realized gain (loss) on investments 12,924,008 266,111,907
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 290,401,443 (447,531,928)
----------- ------------
Net increase (decrease) in net assets resulting from operations 349,849,930 (80,057,870)
Net contributions (withdrawals) from partners (322,910,696) (339,337,021)
------------ ------------
Total increase (decrease) in net assets 26,939,234 (419,394,891)
Net assets at beginning of period 2,579,811,755 2,999,206,646
------------- -------------
Net assets at end of period $2,606,750,989 $2,579,811,755
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Total Return Portfolio
(Unaudited as to March 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Total Return Portfolio (the Portfolio) is a series of Growth and Income Trust
(the Trust) and is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. Total Return
Portfolio seeks to provide maximum total return through a combination of growth
of capital and current income by investing in U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Illiquid securities
As of March 31, 1999, investments in securities included issues that are
illiquid. The Portfolio currently limits investments in illiquid securities to
10% of net assets, at market value, at the time of purchase. The aggregate value
of such securities as of March 31, 1999 was $3,543,750 representing 0.14% of net
assets. Pursuant to guidelines adopted by the board, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.53% to 0.40% annually. The fees may be increased or decreased
by a performance adjustment based on a comparison of the performance of Class A
shares of IDS Managed Allocation Fund to the Lipper Flexible Portfolio Fund
Index. The maximum adjustment is 0.08% of the Portfolio's average daily net
assets on an annual basis. The adjustment decreased the fee by $919,386 for the
six months ended March 31, 1999.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the six months ended March 31, 1999, the Portfolio's custodian fees were
reduced by $5,261 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $1,099,336,800 and $1,032,553,618, respectively, for the
six months ended March 31, 1999. For the same period, the portfolio turnover
rate was 43%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $62,721 for the
six months ended March 31, 1999.
4. FOREIGN CURRENCY CONTRACTS
As of March 31, 1999, the Portfolio had entered into foreign currency exchange
contracts that obligate it to deliver currencies at specified future dates. The
unrealized appreciation and/or depreciation on these contracts is included in
the accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
April 1, 1999 246,804 265,438 $-- $1,296
European Monetary Unit U.S. Dollar
April 7, 1999 572,143 923,181 -- 544
British Pound U.S. Dollar
April 8, 1999 257,417 415,464 -- 136
British Pound U.S. Dollar
Total $-- $1,976
5. LENDING OF PORTFOLIO SECURITIES
As of March 31, 1999, securities valued at $52,456,563 were on loan to brokers.
For collateral, the Portfolio received $40,989,700 in cash and U.S. government
securities valued at $13,033,920. Income from securities lending amounted to
$152,993 for the six months ended March 31, 1999. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
6. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended March 31, 1999
Puts
Contracts Premium
Balance Sept. 30, 1998 1,750 $6,263,389
Closed (1,750) (6,263,389)
------ ----------
Balance March 31, 1999 -- $ --
See "Summary of significant accounting policies."
7. STOCK INDEX FUTURES CONTRACTS
Investments in securities as of March 31, 1999, included securities valued at
$15,152,987 that were pledged as collateral to cover initial margin deposits on
204 open purchase contracts. The market value of the open purchase contracts as
of March 31, 1999 was $65,958,300 with a net unrealized gain of $53,551. See
"Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Total Return Portfolio
March 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (63.8%)
Issuer Shares Value(a)
Aerospace & defense (0.4%)
<S> <C> <C>
Alliant Techsystems 13,500(b) $1,048,781
AlliedSignal 79,900 3,930,081
Goodrich (BF) 149,200 5,119,426
Total 10,098,288
Airlines (0.3%)
America West Holdings Cl B 22,000(b) 419,375
Amtran 24,400(b) 463,600
Comair Holdings 18,300 432,338
Qantas Airways 341,529(c) 902,490
SkyWest 18,200 525,525
Southwest Airlines 157,550 4,765,887
Total 7,509,215
Automotive & related (2.5%)
Dana 226,200 8,595,600
Ford Motor 394,500 22,387,874
General Motors 316,700 27,513,312
Gentex 64,300(b) 1,386,469
Myers Inds 39,000 838,500
Smith (AO) 38,200 725,800
Standard Motor Products 16,400 339,275
Tower Automotive 46,900(b) 873,513
Toyota Motor 65,000(c) 1,882,784
Total 64,543,127
Banks and savings & loans (5.5%)
Advest Group 27,800 514,300
Anchor Bancorp Wisconsin 30,000 461,250
Banca Intesa 921,116(b,c) 5,435,413
Bank of New York 169,200 6,080,625
Bank One 459,962 25,326,657
BankAmerica 317,465 22,420,965
Banque Natl de Paris 55,616(b,c) 4,844,626
Bayerische Vereinsbank 2,261(b,c) 135,374
Chase Manhattan 100,100 8,139,381
Credito Italiano 1,197,661(b,c) 6,471,921
Cullen/Frost Bankers 29,000 1,390,188
Dime Community Bancshares 27,300 626,194
First Financial Holdings 20,300 365,400
FirstMerit 57,100 1,470,325
Flagstar Bancorp 19,400 514,100
Gold Banc 29,800 443,275
HUBCO 25,200 845,775
Instituto Bancario San Paolo di Torino 386,885(c,h) 6,292,801
MAF Bancorp 26,700 594,075
NBT Bancorp 18,200 379,925
Nordbanken Holding 479,889(b,c) 2,746,213
Oversea-Chinese Banking 378,000(b,c) 2,561,593
Overseas Union Bank 713,000(b,c) 2,519,172
Provident Bankshares 14,700 384,038
Queens County Bancorp 30,800 831,600
Reliance Bancorp 19,700 566,375
Republic Bancorp 47,500 617,500
Southwest Bancorp of Texas 42,700(b) 525,744
State Street 72,300 5,942,156
Sterling Bancshares 62,700 650,513
Thai Farmers Bank 170,000(b,c,j) 343,213
Toronto-Dominion Bank 30,457(c) 1,395,158
U.S. Trust 18,100 1,342,794
UBS 17,922(c) 5,644,437
UST 29,100 635,653
Wachovia 91,300 7,412,419
Walter Inds 47,400(b) 533,250
Washington Mutual 112,200 4,586,175
Webster Financial 37,200 1,074,150
Wells Fargo 286,200 10,034,887
Total 143,099,610
Beverages & tobacco (1.1%)
Anheuser-Busch 73,500 5,599,781
Beringer Wine Estates Holdings Cl B 15,900(b) 578,363
Canandaigua Wine Cl A 10,500(b) 528,938
Coca-Cola 338,600 20,781,574
Fomento Economico Mexicano ADR 30,000(j) 928,125
Total 28,416,781
Building materials & construction (0.3%)
Dycom Inds 22,200(b) 965,700
Florida Rock Inds 14,000 477,750
Granite Construction 23,100 539,963
Horton (DR) 80,400 1,346,700
Insituform Technologies Cl A 56,000(b) 980,000
Lone Star Inds 26,000 806,000
NCI Building Systems 29,000(b) 681,500
Pulte 26,400 549,450
Ryland Group 49,700 1,258,031
Tredegar Inds 16,700 516,656
URS 29,400 531,038
Total 8,652,788
Chemicals (1.0%)
Air Products & Chemicals 183,600 6,288,299
Dexter 22,800 718,200
Du Pont (EI) de Nemours 80,700 4,685,644
Geon 30,300 689,325
Henkel KgaA 98,886(c,h) 7,267,230
MacDermid 17,800 604,088
Tetra Tech 32,700(b) 688,744
Waste Management 108,265 4,804,259
Total 25,745,789
Communications equipment & services (1.5%)
ANTEC 21,000(b) 451,500
CommScope 27,000(b) 565,313
Ericsson (LM) Cl B 205,986(b,c) 5,016,089
Lucent Technologies 187,600 20,213,899
Newbridge Networks 58,800(b,c) 1,831,412
Northern Telecom 83,220(c) 5,170,042
Oak Inds 16,300(b) 517,525
Orbital Sciences 21,400(b) 605,888
SymmetriCom 86,400(b) 545,400
Tellabs 36,300(b) 3,548,325
Total 38,465,393
Computers & office equipment (9.4%)
3Com 149,300(b) 3,480,556
Acxiom 22,600(b) 598,900
America Online 85,100(b) 12,424,600
American Management Systems 22,400(b) 764,400
Apple Computer 97,300(h) 3,496,719
Avid Technology 15,400(b) 268,538
BISYS Group 12,800(b) 720,000
BMC Software 104,500(b) 3,873,031
Ciber 32,500(b) 623,594
Cisco Systems 205,000(b) 22,460,312
Cognex 27,900(b) 660,881
Compaq Computer 254,100 8,051,794
Complete Business Solutions 21,700(b) 425,863
Computer Sciences 243,500 13,438,156
Computer Task Group 22,800 487,350
Electronic Data Systems 314,600 15,317,087
EMC 83,600(b) 10,679,900
FactSet Research Systems 21,300 921,225
Fair Isaac & Co 8,200 303,913
First Data 375,400 16,048,349
Gateway 2000 93,000(b) 6,376,313
Great Plains Software 12,700(b) 491,331
Hadco 27,800(b) 875,700
Henry (Jack) & Associates 24,100 885,675
Hewlett-Packard 84,100 5,703,031
HNC Software 24,700(b) 808,925
Hutchinson Technology 24,100(b) 599,488
Insight Enterprises 14,400(b) 356,400
Inter-Tel 20,000 311,250
Intl Business Machines 232,200 41,157,449
Komag 70,000(b) 306,250
Macromedia 43,600(b) 1,975,625
MedQuist 31,200(b) 936,000
Mercury Interactive 22,400(b) 798,000
Microsoft 528,600(b) 47,375,774
MindSpring Enterprises 3,600(b) 309,825
Natl Data 9,800 411,600
New Era of Networks 9,900(b) 670,725
Novell 158,000(b) 3,979,625
Paymentech 20,000(b) 472,500
Profit Recovery Group Intl 19,600(b) 774,200
Progress Software 17,800(b) 607,425
Read-Rite 28,200(b) 185,944
Sanmina 38,000(b) 2,422,500
Unisys 452,500 12,528,594
Whittman-Hart 12,200(b) 262,300
Xircom 22,200(b) 557,775
Xylan 11,400(b) 419,663
Total 247,605,055
Electronics (2.5%)
Actel 38,400(b) 631,200
AFC Cable Systems 17,200(b) 511,700
Applied Materials 60,700(b) 3,744,431
C-Cube Microsystems 21,800(b) 431,913
Celestica 42,800 1,403,976
CTS 16,700 825,606
Dallas Semiconductor 13,300 513,713
Dionex 29,600(b) 1,117,400
Electro Scientific Inds 20,000(b) 930,000
Etec Systems 14,200(b) 418,013
Helix Technology 37,000 568,875
Intel 249,100 29,674,037
Jabil Circuit 16,800(b) 680,400
Kulicke & Soffa Inds 28,200(b) 712,050
Lattice Semiconductor 24,900(b) 1,134,506
Level One Communications 7,850(b) 381,706
Matsushita Communication Industrial 60,000 4,058,610
Micrel 13,000(b) 650,813
Novellus Systems 22,200(b) 1,223,775
Park Electrochemical 19,400 455,900
Plexus 17,400(b) 485,025
QLogic 9,000(b) 604,125
Sawtek 25,900(b) 874,125
SGS-Thomson Microelectronics 59,010(b) 5,864,119
TDK 20,000 1,619,728
Texas Instruments 48,800 4,843,400
Unitrode 42,700(b) 605,806
Vitesse Semiconductor 11,600(b) 587,250
Total 65,552,202
Energy (3.5%)
Arch Coal 48,500 642,625
Chevron 208,700 18,456,906
Devon Energy 39,700 1,094,231
Exxon 124,800 8,806,200
FirstEnergy 57,300 1,600,819
Forest Oil 47,500 356,250
Mobil 174,600 15,364,800
Petro-Canada 337,300 3,945,225
Royal Dutch Petroleum 448,100(c) 23,301,200
Santa Fe Energy Resources 138,400(b) 1,012,050
Sunoco 77,500 2,794,844
Texaco 137,600 7,808,800
Total Petroleum Cl B 46,294(b) 5,708,680
Vintage Petroleum 23,000 207,000
Total 91,099,630
Energy equipment & services (0.1%)
Marine Drilling 97,200(b) 1,069,200
Pride Intl 118,800(b) 980,100
Total 2,049,300
Financial services (3.4%)
Associates First Capital Cl A 87,400 3,933,000
Capital One Financial 23,000 3,473,000
Citigroup 149,800 9,568,475
CMAC Investment 17,400 678,600
Countrywide Credit Inds 53,500 2,006,250
Delphi Financial Group Cl A 23,800 806,225
Fannie Mae 124,200 8,600,850
Financial Federal 26,800 509,200
Jefferies Group 25,700 1,219,144
Lehman Brothers Holdings 167,600 10,014,100
MBNA 175,100 4,180,513
Merrill Lynch & Co 97,500 8,622,656
Morgan Keegan 32,900 544,906
Morgan Stanley, Dean Witter, Discover & Co 189,600 18,948,150
Mutual Risk Management 19,800(c) 757,350
Providian Financial 67,100 7,381,000
Raymond James Financial 23,800 470,050
Schwab (Charles) 53,250 5,118,656
SEI Investments 5,400 499,500
Total 87,331,625
Food (2.2%)
Bestfoods 234,500 11,021,500
Corn Products Intl 36,000 861,750
Earthgrains 49,100 1,089,406
General Mills 326,500 24,671,156
Performance Food Group 26,600(b) 698,250
Pilgrim's Pride Cl B 32,400 532,575
Ralcorp Holdings 34,700(b) 659,300
Sara Lee 420,500 10,407,375
Smithfield Foods 40,600(b) 921,113
Sysco 248,000 6,525,500
United Natural Foods 27,100(b) 633,463
Total 58,021,388
Furniture & appliances (0.2%)
Briggs & Stratton 17,400 858,038
Ethan Allen Interiors 16,800 698,250
La-Z-Boy 72,300 1,373,700
Mohawk Inds 56,000(b) 1,680,000
Total 4,609,988
Health care (6.8%)
Alpharma Cl A 13,600 533,800
ALZA 60,400(b) 2,310,300
American Home Products 128,600 8,391,150
Amgen 148,200(b) 11,096,475
Barr Laboratories 11,300(b) 344,650
Baxter Intl 164,100 10,830,600
Bio-Technology General 98,800(b) 589,713
Boston Scientific 152,000(b) 6,165,500
Bristol-Myers Squibb 363,400 23,371,162
Guidant 117,200(b) 7,090,600
IDEC Pharmaceuticals 12,800(b) 657,600
IDEXX Laboratories 38,200(b) 914,413
Incyte Pharmaceuticals 11,300(b) 226,706
Johnson & Johnson 85,500 8,010,281
Jones Medical Inds 28,700 997,325
Lilly (Eli) 49,300 4,184,338
Maxxim Medical 19,000(b) 358,625
MedImmune 33,300(b) 1,970,944
Medtronic 121,000 8,681,750
Merck & Co 82,000 6,575,375
Millennium Pharmaceuticals 24,500(b) 765,625
Novartis 872(b) 1,418,045
Pfizer 143,500(k) 19,910,624
Pharmacia & Upjohn 108,400 6,761,450
Priority Healthcare Cl B 18,100(b) 819,025
Quest Diagnostics 34,400(b) 765,400
Safeskin 28,500(b) 211,969
Schering-Plough 325,800 18,020,812
Takeda Chemical Inds 38,000 1,472,956
Techne 14,200(b) 410,025
VISX 17,400(b) 1,871,588
Warner-Lambert 309,200 20,465,174
Total 176,194,000
Health care services (0.7%)
AmeriSource Health Cl A 10,400(b) 355,550
Apria Healthcare Group 85,900(b) 1,020,063
Cardinal Health 33,500 2,211,000
Express Scripts Cl A 18,100(b) 1,555,469
Hanger Orthopedic Group 13,300(b) 179,550
McKesson HBOC 67,200 4,435,199
Orthodontic Centers of America 38,600(b) 607,950
Owens & Minor 41,300 418,163
Patterson Dental 26,200(b) 1,133,150
Pediatrix Medical Group 24,300(b,h) 683,438
Renal Care Group 22,400(b) 439,600
Sierra Health Services 46,600(b) 605,800
Universal Health Services Cl B 32,100(b) 1,388,325
Yamanouchi Pharmaceutical 120,000 3,800,195
Total 18,833,452
Household products (0.4%)
Chattem 17,400 543,750
Procter & Gamble 66,500(k) 6,512,844
Unilever 274,469(b) 2,563,513
Total 9,620,107
Industrial equipment & services (0.8%)
Applied Power Cl A 35,600 970,100
G & K Services Cl A 13,100 605,056
Gardner Denver 60,000(b) 952,500
Gleason 45,900 777,431
Ingersoll-Rand 87,000 4,317,375
JLG Inds 39,300 535,463
Mannesmann 55,373(b,c) 7,079,593
Nordson 12,500 696,875
Philips Electronics 55,286(b) 4,508,164
Regal Beloit 31,500 568,969
Varlen 19,600 431,200
Total 21,442,726
Insurance (2.0%)
Allied Zurich 190,107 2,562,851
American Bankers Insurance Group 14,900 774,800
American General 137,100 9,665,550
American Intl Group 128,250 15,470,157
Aon 38,600 2,441,450
Chartwell Re 30,100 519,225
Enhance Financial Services Group 41,200 937,300
Fidelity Natl Financial 39,800 597,000
First American Financial 62,500 988,281
Gallagher (Arthur J) 26,100 1,200,600
Hooper Holmes 31,400 490,625
LandAmerica Financial Group 15,700 455,300
Lincoln Natl 150,400 14,870,800
NAC Re 10,700 574,456
Reinsurance Group of America 20,100 855,506
Total 52,403,901
Leisure time & entertainment (1.5%)
Anchor Gaming 5,700(b) 249,375
Aztar 134,800(b) 648,725
Disney (Walt) 465,900 14,501,137
Hasbro 148,050 4,284,197
Time Warner 222,600 15,818,512
Viacom Cl B 47,800(b) 4,012,213
Total 39,514,159
Media (0.6%)
British Sky Broadcasting Group 556,752 4,804,491
Catalina Marketing 5,200(b) 446,550
CBS 88,700 3,631,156
Consolidated Graphics 12,400(b) 716,100
Houghton Mifflin 14,400 675,000
McClatchy Newspapers 19,800 664,538
MediaOne Group 35,300(b) 2,241,550
Metro Networks 4,000(b) 220,000
Scholastic 5,800(b) 283,475
Valassis Communications 18,200(b) 941,850
Westwood One 21,300(b) 607,050
World Color Press 41,500(b) 881,875
Total 16,113,635
Metals (0.4%)
AK Steel Holding 39,100 882,194
ALCOA 125,204 5,156,839
Cleveland-Cliffs 23,800 810,688
Material Sciences 44,600(b) 284,325
Mueller Inds 22,800(b) 510,150
Ryerson Tull 41,200 605,125
Steel Technologies 79,200 623,700
Stillwater Mining 34,200(b) 902,025
Total 9,775,046
Multi-industry conglomerates (3.5%)
Bell & Howell 24,000(b) 703,500
Bombardier Cl B 260,000(b) 3,420,146
Brady (WH) Cl A 30,100 630,219
Cendant 105,600(b) 1,663,200
Danaher 143,700 7,508,325
DeVry 26,200(b) 759,800
Eastman Kodak 69,600 4,445,700
Education Management 28,200(b) 867,150
Electronics for Imaging 22,700(b) 885,300
General Electric 823,312(b) 7,483,577
General Electric 258,800 28,629,749
Labor Ready 12,700(b) 330,994
Lason 9,000(b) 506,250
Mettler-Toledo Intl 29,500(b) 730,125
NCO Group 15,300(b) 566,100
Pre-Paid Legal Services 15,000(b) 367,500
Sylvan Learning Systems 23,600(b) 646,050
Tyco Intl 335,700(c) 24,086,475
Williams 1,012,850 6,536,934
Total 90,767,094
Paper & packaging (0.6%)
AptarGroup 21,600 561,600
Ball 17,600 826,100
Caraustar Inds 28,600 657,800
Fort James 87,400 2,769,488
Intl Paper 145,000 6,117,187
Owens-Illinois 111,700(b) 2,792,500
Tenneco 103,700 2,897,119
Total 16,621,794
Restaurants & lodging (0.7%)
Bob Evans Farms 38,600 772,000
CEC Entertainment 14,400(b) 516,600
CKE Restaurants 22,500 444,375
Darden Restaurants 198,000 4,083,750
Foodmaker 21,700(b) 553,350
Marriott Intl Cl A 72,900 2,451,263
Ruby Tuesday 29,900 519,513
Ryan's Family Steak Houses 89,600(b) 1,080,800
Taco Cabana Cl A 72,700(b) 640,669
Tricorn Global Restaurants 97,500(b) 6,849,374
Total 17,911,694
Retail (4.4%)
Albertson's 142,000(h) 7,712,375
American Stores 198,500 6,550,500
Ames Dept Stores 23,900(b) 887,288
AnnTaylor Stores 39,600(b) 1,749,825
Bindley Western Inds 35,800 1,022,538
Cost Plus 32,100(b) 942,938
CVS 204,700 9,723,249
Dept 56 12,300(b) 374,381
Eagle Hardware & Garden 17,800(b) 679,738
Fossil 10,400(b) 310,050
Great Universal Stores 439,055(b) 4,795,403
Haverty Furniture Companies 18,400 466,900
Home Depot 84,700 5,272,575
Kroger 206,500(b) 12,364,187
Linens `N Things 22,600(b) 1,025,475
Men's Wearhouse 43,200(b) 1,247,400
Pier 1 Imports 68,600 557,375
Regis 35,250 938,531
Rite Aid 170,300 4,257,500
Safeway 154,700(b) 7,938,044
ShopKo Stores 42,600(b) 1,272,675
TJX Companies 72,100 2,451,400
Trans World Entertainment 39,000(b) 429,000
Wal-Mart Stores 336,400 31,011,874
Walgreen 329,400 9,305,550
Wet Seal Cl A 9,300(b) 342,938
Williams-Sonoma 15,500(b) 437,875
Zale 46,900(b) 1,603,394
Total 115,670,978
Textiles & apparel (0.1%)
Angelica 48,200 674,800
Authentic Fitness 33,300 514,069
Brown Group 62,900 829,494
Dixie Group 90,000 641,250
K-Swiss Cl A 14,200 358,550
Oshkosh B'Gosh Cl A 48,800 863,150
Total 3,881,313
Transportation (0.3%)
Atlas Air 17,850(b) 514,303
Burlington Northern Santa Fe 167,000 5,490,125
Expeditors Intl of Washington 10,800 583,200
Landstar System 25,300(b) 838,063
Offshore Logistics 62,800(b) 730,050
USFreightways 22,400 736,400
Total 8,892,141
Utilities -- electric (1.0%)
Carolina Power & Light 93,400 3,531,688
Cinergy 66,000 1,815,000
Cleco 20,400 601,800
DTE Energy 57,200 2,198,625
Edison Intl 162,000 3,604,500
El Paso Electric 88,100 671,763
Iberdrola 146,687(b,c) 2,175,060
PECO Energy 98,900 4,574,125
Public Service Co of New Mexico 25,200 428,400
Sierra Pacific Resources 19,000 668,563
Suez Lyonnaise des Eaux 26,464 4,902,206
TNP Enterprises 25,400 730,250
United Illuminating 20,100 842,944
Total 26,744,924
Utilities -- gas (0.2%)
Equitable Resources 44,400 1,157,175
New Jersey Resources 14,000 497,875
ONEOK 22,300 551,925
Piedmont Natural Gas 37,200 1,302,000
Southwestern Energy 71,300 503,556
Total 4,012,531
Utilities -- telephone (5.9%)
AirTouch Communications 49,900(b) 4,821,588
Ameritech 212,300 12,286,863
AT&T 323,500 25,819,343
Bell Atlantic 124,800 6,450,600
BellSouth 275,000 11,017,188
Brightpoint 33,400(b) 197,269
Equant 30,647 2,331,771
GTE 85,500 5,172,750
MCI WorldCom 204,175(b) 18,082,247
Nippon Telegraph & Telephone 566(b,c) 5,544,568
NTT Mobile Communication Network 780 3,853,397
Orange 328,223 4,615,570
Philippine Long Distance Telephone 45,000(c) 1,184,517
SBC Communications 256,300 12,078,138
Telecom Corp of New Zealand 190,000(c) 926,782
Telecom Italia 920,921(b) 5,474,047
Telecom Italia 764,904(h) 8,134,448
Telefonica de Espana 38,948 1,653,837
U S WEST Communications Group 253,500 13,958,343
Vodafone 498,642 9,314,533
Total 152,917,799
Total common stocks
(Cost: $1,426,540,121) $1,664,117,473
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Preferred stocks & other (0.5%)
Issuer Shares Value(a)
Banca Intesa
<S> <C> <C>
Warrants 1,156,727 $1,450,189
Bar Technologies
Warrants 3,000(d) 165,000
Bell Technology
Warrants 3,410 204,600
KMC Telecom Holdings
Warrants 3,000 7,500
Nakornthai Strip Mill
Warrants 2,722,298 3
Paxson Communications
12.50% Pay-in-kind Exchangeable 25,300(i) 2,327,600
Poland Telecom
Warrants 8,500 193,100
Republic of Argentina
Warrants 4,500(c) 11,250
Telehub Communications
Warrants 2,500 25,000
Unifi Communications
Warrants 3,000 30
Versatel
Warrants 5,500 418,000
Total preferred stocks & other
(Cost: $3,401,209) $4,802,272
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (32.9%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (9.5%)
Govt of Russia
(Russian Ruble)
<S> <C> <C> <C>
09-27-00 14.00% 19,002,914(b,c) $21,431
12-15-20 6.63 16,000,000(b,c) 1,040,000
(Russian Ruble) Zero Coupon
05-05-99 -- 28,554,000(b,c,f,m) --
(U.S. Dollar)
12-29-49 6.63 14,885,700(b,c) 1,153,642
Republic of Argentina
(Argentine Peso)
07-10-02 8.75 5,000,000(c) 4,252,998
07-10-02 8.75 7,900,000(c,d) 6,719,737
02-12-07 11.75 7,500,000(c) 6,754,688
(U.S. Dollar)
04-07-09 11.75 4,500,000(c) 4,378,500
Republic of Korea
(U.S. Dollar)
04-15-08 8.88 8,950,000(c) 9,576,751
Republic of Panama
(U.S. Dollar)
02-13-02 7.88 1,000,000(c,d) 972,500
U.S. Treasury
11-30-99 5.63 3,500,000 3,520,241
04-30-00 6.75 32,000,000 32,610,345
06-30-02 6.25 8,000,000(k) 8,261,798
03-31-03 5.50 1,500,000 1,517,129
08-15-04 7.25 20,000,000 21,850,780
08-15-05 6.50 12,500,000 13,273,894
05-15-08 5.63 12,500,000(h) 12,726,656
08-15-23 6.25 9,700,000 10,130,680
08-15-27 6.38 20,000,000 21,414,640
11-15-27 6.13 50,000,000 51,966,239
United Mexican States
(U.S. Dollar)
03-12-08 8.63 1,700,000(c,h) 1,598,000
12-31-19 6.25 29,500,000(c) 23,102,188
05-15-26 11.50 6,750,000(c,h) 7,492,500
Total 244,335,337
Mortgage-backed securities (3.3%)
Federal Home Loan Mtge Corp
03-01-13 5.50 10,115,973 9,862,926
12-01-25 7.50 15,179,398 15,617,778
07-01-28 6.00 9,744,346 9,479,007
09-01-28 6.00 9,610,077 9,351,257
Federal Natl Mtge Assn
05-01-24 7.50 10,559,545 10,861,126
09-01-28 6.50 9,711,635 9,670,167
10-01-28 6.00 9,797,354 9,523,028
Federal Natl Mtge Assn
Collateralized Mtge Obligation
05-18-26 5.00 9,593,000 8,881,167
Total 83,246,456
Aerospace & defense (0.3%)
L-3 Communications
Sr Sub Nts Series B
05-01-07 10.38 1,035,000 1,138,500
Newport News Shipbuilding
Sr Nts
12-01-06 8.63 800,000 860,000
Northrop-Grumman
03-01-16 7.75 5,000,000 5,235,831
Total 7,234,331
Automotive & related (0.1%)
MSX Intl
Company Guaranty
01-15-08 11.38 2,450,000 2,450,000
Banks and savings & loans (0.9%)
Corp Andina de Fomento
(U.S. Dollar)
02-01-03 7.10 6,500,000(c) 6,467,026
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 2,500,000(c,d) 2,140,000
Greenpoint Capital
Company Guaranty
06-01-27 9.10 1,300,000 1,395,910
Union Planters Bank
Sub Nts
03-15-18 6.50 10,000,000 9,807,431
US Capital
02-01-27 8.41 1,500,000(d) 1,558,281
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 1,500,000(d) 1,639,569
Wilshire Financial Services
Series B
08-15-04 13.00 4,000,000(b) 640,000
Total 23,648,217
Building materials & construction (0.1%)
Southdown
Sr Sub Nts Series B
03-01-06 10.00 2,350,000 2,596,750
Chemicals (0.3%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 3,550,000 3,470,125
Polymer Group
Company Guaranty Series B
03-01-08 8.75 4,000,000 4,040,000
Total 7,510,125
Commercial finance (0.2%)
Netia Holdings
(U.S. Dollar) Company Guaranty Series B
11-01-07 10.25 6,000,000(c) 5,670,000
Communications equipment & services (1.2%)
IXC Communications
Sr Sub Nts
04-15-08 9.00 2,000,000 2,065,000
KMC Telecom Holdings
Zero Coupon Sr Disc Nts
02-15-03 12.68 3,000,000(g) 1,657,500
MJD Communications
Sr Sub Nts Series B
05-01-08 9.50 1,000,000 1,010,000
NTL
Zero Coupon Sr Nts
10-01-03 7.87 9,625,000(g) 6,593,125
Poland Telecom
(U.S. Dollar) Company Guaranty
06-01-04 14.00 3,000,000(c) 1,800,000
TCI Telecommunications
Sr Nts
02-15-28 7.13 1,400,000 1,469,671
Telehub Communications
Zero Coupon Company Guaranty
07-31-01 13.88 2,500,000(g) 1,528,125
US West Capital Funding
Company Guaranty
07-15-28 6.88 9,250,000 9,301,091
Versatel Telecom
(U.S. Dollar) Sr Nts
05-15-08 13.25 5,500,000(c) 5,775,000
Total 31,199,512
Computers & office equipment (0.3%)
Concentric Network
Sr Nts
12-15-07 12.75 3,800,000 4,341,500
Globix
Sr Nts
05-01-05 13.00 3,410,000 3,546,400
PSINet
Sr Nts Series B
02-15-05 10.00 1,005,000 1,070,325
Total 8,958,225
Electronics (0.3%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 4,500,000(c,d) 3,699,169
Thomas & Betts
01-15-06 6.50 4,500,000 4,538,596
Total 8,237,765
Energy (1.0%)
Lodestar Holdings
Company Guaranty
05-15-05 11.50 5,000,000 4,050,000
R & B Falcon
04-15-08 6.95 5,000,000 3,688,324
Roil
(U.S. Dollar)
12-05-02 12.78 8,299,800(c,d) 1,742,958
Union Pacific Resources
05-15-28 7.15 7,500,000 6,542,699
USX
03-01-08 6.85 10,000,000 9,803,968
Total 25,827,949
Energy equipment & services (0.0%)
DI Inds
Sr Nts
07-01-07 8.88 1,500,000 1,177,500
Financial services (1.3%)
Airplanes GPA Cl D
(U.S. Dollar) Series 1
03-15-19 10.88 2,750,000(c) 2,737,323
Arcadia Financial
Sr Nts
03-15-07 11.50 1,825,000 1,478,250
Beneficial
Medium-term Nts
02-18-13 6.25 10,000,000 10,087,666
Providian Natl Bank
Sr Nts
03-15-03 6.70 10,000,000 10,050,821
SASCO
02-25-28 6.76 2,500,000 2,513,050
Tjiwi Kimia Finance Mauritius
(U.S. Dollar) Company Guaranty
08-01-04 10.00 2,900,000(c) 1,551,500
Wilmington Trust
05-01-08 6.63 6,300,000 6,293,229
Total 34,711,839
Food (0.1%)
Ameriserve Food Distributions
Company Guaranty
07-15-07 10.13 1,750,000 1,242,500
Daya Guna
(U.S. Dollar) Company Guaranty
06-01-07 10.00 2,400,000(c,d) 1,548,000
Total 2,790,500
Furniture & appliances (0.2%)
Interface
Sr Sub Nts Series B
11-15-05 9.50 2,500,000 2,646,875
Lifestyle Furnishings
Company Guaranty
08-01-06 10.88 3,250,000 3,664,375
Total 6,311,250
Health care (0.6%)
Baxter Intl
02-15-28 6.63 10,000,000 9,596,338
Lilly (Eli)
01-01-36 6.77 5,000,000 5,067,540
Total 14,663,878
Health care services (1.1%)
Abbey Healthcare Group
Sr Sub Nts
11-01-02 9.50 250,000 248,750
Fountain View
Company Guaranty Series B
04-15-08 11.25 2,150,000 1,892,000
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 2,500,000 2,156,250
Manor Care
Sr Nts
06-15-06 7.50 7,000,000 7,286,155
Owens & Minor
Company Guaranty Sr Sub Nts
06-01-06 10.88 3,200,000 3,488,000
Oxford Health Plans
Sr Nts
05-15-05 11.00 1,125,000(d) 1,153,125
Service Corp Intl
03-15-20 6.30 11,850,000 11,687,525
Total 27,911,805
Household products (0.3%)
Chattem
Company Guaranty Series B
04-01-08 8.88 2,200,000 2,211,000
Revlon Consumer Products
Sr Nts
02-01-06 8.13 5,000,000 4,825,000
Total 7,036,000
Industrial equipment & services (--%)
AGCO
Sr Sub Nts
03-15-06 8.50 1,025,000 960,938
Insurance (1.0%)
American United Life Insurance
03-30-26 7.75 5,000,000(d) 5,091,165
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.68 1,500,000 1,610,229
Metropolitan Life Insurance
11-01-25 7.80 4,800,000(d) 5,276,760
Minnesota Mutual Life
09-15-25 8.25 4,500,000(d) 5,095,665
Nationwide CSN Trust
02-15-25 9.88 5,000,000(d) 5,856,033
Veritas Holdings
(U.S. Dollar) Sr Nts
12-15-03 9.63 1,273,000(c) 1,298,460
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 1,875,000(c,d) 2,003,257
Total 26,231,569
Leisure time & entertainment (1.5%)
Loews Cineplex Entertainment
Sr Sub Nts
08-01-08 8.88 4,500,000 4,494,375
Mirage Resorts
02-01-08 6.75 8,750,000 8,441,738
Speedway Motorsports
08-15-07 8.50 2,000,000 2,105,000
Time Warner
02-01-24 7.57 11,875,000 12,723,496
Sr Nts
01-15-28 6.95 5,000,000 5,024,115
Venetian Casino/LV Sands
Company Guaranty
11-15-04 12.25 3,940,000(h) 4,077,900
11-15-05 10.00 1,500,000 1,440,000
Total 38,306,624
Media (1.0%)
Australis Media
(U.S. Dollar)
11-01-00 14.00 196,641(b,c) 161,484
05-15-03 15.75 40,885(b,c) 4
(U.S. Dollar) Zero Coupon
05-15-00 15.75 5,000,000(b,c,g) 500
CSC Holdings
Sr Sub Debs
05-15-16 10.50 3,000,000 3,555,000
Globo Communicacoes Participacoes
(U.S. Dollar) Sr Nts
12-05-08 10.63 3,500,000(c,d) 2,292,500
Heritage Media
Sr Sub Nts
02-15-06 8.75 5,000,000 5,381,250
Lamar Advertising
Company Guaranty
12-01-06 9.63 800,000 868,000
MDC Communications
(U.S. Dollar) Sr Sub Nts
12-01-06 10.50 1,000,000(c) 1,012,500
News America Holdings
10-15-12 10.13 2,175,000 2,494,155
Regional Independent Medical
(U.S. Dollar) Sr Nts
07-01-08 10.50 4,000,000(c) 4,150,000
TCI Communications
08-01-15 8.75 1,700,000 2,079,048
Veninfotel
(U.S. Dollar) Cv Pay-in-kind
03-01-02 10.00 2,362,500(c,d,i,n) 3,543,750
Total 25,538,191
Metals (0.4%)
Bar Technologies
Company Guaranty
04-01-01 13.50 3,000,000(d) 3,150,000
EnviroSource
Sr Nts
06-15-03 9.75 530,000 451,163
Sr Nts Series B
06-15-03 9.75 1,300,000 1,106,625
Grupo Minero Mexico
(U.S. Dollar) Company Guaranty Series A
04-01-08 8.25 2,600,000(c) 2,171,000
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 2,639,406(c,d) 2,388,662
Southern Peru Copper
(U.S. Dollar)
05-30-07 7.90 1,000,000(c) 904,146
Total 10,171,596
Miscellaneous (1.7%)
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 3,900,000 4,260,750
Alliance Imaging
Sr Sub Nts
12-15-05 9.63 5,000,000 4,937,500
CTI Holdings
(U.S. Dollar) Zero Coupon Sr Nts
04-15-03 11.50 3,800,000(c,g) 2,071,000
Delphes 2
(U.S. Dollar)
05-05-09 7.75 3,700,000(c) 3,667,440
FCB/NC Capital
Company Guaranty
03-01-28 8.05 4,625,000 4,593,644
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 2,500,000(c,d) 2,450,000
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.88 2,200,000(c,d) 704,000
Jasmine Submarine Telecom
(U.S. Dollar) Sr Nts
05-30-11 8.48 609,765(c,d) 496,553
Jorgensen (Earle M)
Sr Nts
04-01-05 9.50 1,225,000 1,114,750
NSM Steel
Company Guaranty
02-01-06 12.00 2,775,000(b) 555,000
02-01-08 12.25 4,300,000(b) 387,000
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,075,000 1,064,250
Pindo Deli Finance Mauritius
(U.S. Dollar) Company Guaranty
10-01-07 10.75 1,300,000(c) 715,000
Poland Telecom Finance
(U.S. Dollar) Company Guaranty Series B
12-01-07 14.00 5,500,000(c) 5,032,500
Provident Companies
03-15-38 7.41 11,000,000 10,854,147
PTC Intl Finance
(U.S. Dollar) Zero Coupon Company Guaranty
07-01-02 10.75 2,000,000(c,g) 1,452,500
Transamerica Energy
06-15-02 11.50 600,000 108,000
Zero Coupon
06-15-99 13.00 1,300,000(g) 260,000
Total 44,724,034
Multi-industry conglomerates (0.5%)
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 1,650,000(c,d) 1,419,664
(U.S. Dollar) Company Guaranty Series B
08-01-17 7.45 1,000,000(c,d) 889,660
Packaged Ice
Company Guaranty Series B
02-01-05 9.75 6,475,000 6,636,875
Pierce Leahy
Sr Sub Nts
07-15-06 11.13 488,000(d) 544,120
Prime Succession
Sr Sub Nts
08-15-04 10.75 980,000 706,825
USI American Holdings
Sr Nts Series B
12-01-06 7.25 3,000,000 3,052,331
Total 13,249,475
Paper & packaging (0.6%)
Doman Inds
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 2,300,000(c) 1,451,875
Gaylord Container
Sr Nts
06-15-07 9.75 1,300,000 1,257,750
Sr Nts Series B
06-15-07 9.38 9,000,000 8,617,500
Owens-Illinois
Sr Nts
05-15-04 7.85 2,000,000 2,057,948
Silgan Holdings
06-01-09 9.00 2,050,000 2,111,500
Total 15,496,573
Restaurants & lodging (0.6%)
Domino's
Sr Sub Nts
01-15-09 10.38 3,275,000(d) 3,389,625
Extended Stay America
Sr Sub Nts
03-15-08 9.15 4,750,000 4,631,250
MGM Grand
02-06-08 6.88 10,000,000 8,821,963
Total 16,842,838
Retail (1.1%)
Amazon.com
Zero Coupon Sr Disc Nts
05-01-03 10.00 4,850,000(g) 3,298,000
Dayton Hudson
12-01-22 8.50 2,500,000 2,724,702
Great Atlantic & Pacific Tea
04-15-07 7.75 10,000,000 9,946,778
Kroger
Sr Nts
07-15-06 8.15 5,000,000 5,550,907
Wal-Mart CRAVE Trust
07-17-06 7.00 8,158,282(d) 8,289,059
Total 29,809,446
Textiles & apparel (0.2%)
Pillowtex
Company Guaranty Sr Sub Nts Series B
12-15-07 9.00 1,875,000 1,898,438
Texon Intl
(European Monetary Unit) Sr Nts
02-01-08 3.11 4,000,000(c) 2,022,438
Total 3,920,876
Transportation (0.6%)
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000(d) 9,979,000
Company Guaranty Medium-term Nts
01-15-06 6.95 3,000,000(d) 3,012,210
Greater Beijing
(U.S. Dollar) Sr Nts
06-15-04 9.25 275,000(c) 148,500
06-15-07 9.50 1,200,000(c) 630,000
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 12.00 5,000,000(c,d) 2,500,000
Total 16,269,710
Utilities -- electric (1.0%)
Cleveland Electric Illuminating
07-01-00 7.19 3,000,000 3,044,029
CMS Energy
Sr Nts
05-15-02 8.13 2,900,000 2,995,092
El Paso Electric
1st Mtge Series B
05-01-01 7.75 5,000,000 5,141,194
Korea Electric Power
(U.S. Dollar)
02-01-27 7.00 9,100,000(c) 8,511,988
Public Service Electric & Gas
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 7,365,000(l) 7,467,451
Total 27,159,754
Utilities -- gas (0.2%)
Columbia Gas System
Series E
11-28-10 7.32 5,043,000 5,202,410
Utilities -- telephone (1.3%)
Covad Communications Group
Sr Nts
02-15-09 12.50 2,000,000(d) 2,010,000
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 2,485,000(b) 3,106
Grupo Iusacell
(U.S. Dollar)
07-15-04 10.00 1,000,000(c) 957,500
Intermedia Communications
Sr Nts
03-01-09 9.50 3,000,000(d) 3,157,500
Sr Nts Series B
11-01-07 8.88 1,600,000 1,628,000
06-01-08 8.60 5,000,000(d) 5,000,000
McLeod USA
Sr Nts
03-15-08 8.38 2,300,000 2,328,750
MetroNet Communications
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 9.95 3,800,000(c,g) 2,945,000
Omnipoint Communications
Sr Nts
08-15-06 11.63 5,000,000 4,362,500
Philippine Long Distance Telephone
(U.S. Dollar) Medium-term Nts Series E
03-06-07 7.85 250,000(c) 221,166
03-06-17 8.35 1,000,000(c,d) 814,156
Qwest Communications Intl
11-01-08 7.50 4,550,000(d) 4,749,063
Sr Nts
11-01-08 7.25 450,000(d) 460,125
Rogers Cantel
(U.S. Dollar)
06-01-08 9.38 2,800,000(c) 3,094,000
WorldCom
04-01-07 7.75 3,000,000 3,293,345
Total 35,024,211
Municipal bond (0.1%)
New Jersey Economic Development Authority
State Pension Funding Revenue Bond (MBIA Insured)
02-15-29 7.43 3,000,000(l) 3,324,780
Total bonds
(Cost: $911,443,240) $857,750,464
See accompanuing notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (3.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (2.3%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
04-14-99 4.78% $25,200,000 $25,156,774
04-14-99 4.80 4,600,000 4,592,085
05-12-99 4.79 21,800,000 21,681,572
05-12-99 4.81 9,200,000 9,145,209
Total 60,575,640
Commercial paper (1.5%)
BBV Finance (Delaware)
05-19-99 4.86 2,100,000 2,086,251
Clorox
04-27-99 4.85 6,400,000 6,377,675
Dresdner US Finance
04-13-99 4.88 8,900,000 8,885,581
Duke Energy
04-20-99 4.86 5,600,000 5,585,695
Fleet Funding
04-21-99 4.88 1,900,000(e) 1,894,870
Glaxo Wellcome
04-12-99 4.88 2,200,000(e) 2,196,733
Goldman Sachs Group
04-21-99 4.90 2,300,000 2,293,777
05-11-99 4.87 5,700,000 5,669,347
Societe Generale North America
04-07-99 4.90 1,000,000 999,187
Variable Funding Capital
04-05-99 4.87 2,400,000(e) 2,398,701
Total 38,387,817
Total short-term securities
(Cost: $98,968,390) $98,963,457
Total investments in securities
(Cost: $2,440,352,960)(o) $2,625,633,666
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, items identified are in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of March 31,
1999, the value of foreign securities represented 11.04% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(h) Security is partially or fully on loan. See Note 5 to the financial
statements.
(i) Pay-in-kind securities are securities in which the issuer makes interest or
dividend payments in cash or in additional securities. The securities usually
have the same terms as the original holdings.
(j) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
six months ended March 31, 1999 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
<S> <C> <C> <C> <C> <C> <C>
China North Ind $13,079,176 $10,604,176 $23,683,352 $-- $-- $--
Fomento Economico
Mexicano ADR 10,019,149 792,894 10,019,149 792,894 -- 928,125
Thai Farmers Bank 1,670,797 293,559 1,670,797 293,559 -- 343,213
--------- ------- --------- ------- --- -------
Total $24,769,122 $11,690,629 $35,373,298 $1,086,453 $-- $1,271,338
(k) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 7 to the financial statements):
Type of security Contracts
S&P 500 Index, June 1999 204
(l) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
MBIA -- Municipal Bond Investors Assurance
(m) Negligible market value.
(n) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at March 31, 1999, is as follows:
Security Acquisition Cost
dates
Veninfotel
(U.S. Dollar) 10.00% Cv Pay-in-kind 2002 03-05-97 thru 09-01-98 $2,362,500
(o) At March 31, 1999, the cost of securities for federal income tax purposes
was approximately $2,440,353,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $313,894,000
Unrealized depreciation (128,613,000)
------------
Net unrealized appreciation $185,281,000
</TABLE>
<PAGE>
American Express Service Corporation, Distributor
S-6137 D (5/99)
