American Express
Strategist Growth and Income Fund, Inc.
2000 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) 48
Notes to Financial Statements (Equity Portfolio) 51
Investments in Securities (Equity Portfolio) 56
Financial Statements (Equity Income Portfolio) 65
Notes to Financial Statements (Equity Income Portfolio) 68
Investments in Securities (Equity Income Portfolio) 72
Financial Statements (Total Return Portfolio) 80
Notes to Financial Statements (Total Return Portfolio) 83
Investments in Securities (Total Return Portfolio) 88
<PAGE>
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
(picture of) Brad Stone
Brad Stone
Portfolio manager
From the Portfolio Managers
Strategist Balanced Fund
Value stocks and bonds struggled for much of the past six months, tempering the
performance of Strategist Balanced Fund. Still, it generated a positive total
return of 6.39% for the first half of the fiscal year -- October 1999 through
March 2000.
The period got off to a good start, as reports of still-benign inflation and
generally good corporate profits buoyed investors' spirits. The stock market
responded with a solid advance in the fall that, supported by fading concerns
about the Y2K computer bug and increasing excitement about the Internet, soon
turned into a roaring rally. The positive momentum continued through 1999 and
into the early days of January.
By that time, fear of potentially higher inflation and higher interest rates had
resurfaced. Stocks reacted by retreating over the next several weeks. But with
the characteristic resilience they've shown in recent years, stocks soon righted
themselves and rebounded sharply in March.
VALUE LAGS GROWTH
While the Fund's stock holdings roughly followed the pattern of the market,
their gains were less robust. The over-arching reason for the difference was the
Fund's emphasis on value stocks, which couldn't keep pace with the high-flying
Internet-related growth stocks that powered the broad market. In addition, the
Fund had a substantial exposure to industrial stocks, which suffered from rising
commodity prices, and financial services stocks, which weakened under the weight
of rising interest rates. The Fund's energy and technology holdings, on the
other hand, performed well overall.
The rising-rate trend also made life difficult at times for the bond portion of
the portfolio, which included corporate, mortgage-backed and U.S. Treasury
issues. (Rising rates depress bond prices.) To mitigate the effect of the rate
rise, we maintained a relatively short duration among bonds. (Duration is a
measure of how sensitive the bonds' prices are to interest-rate changes.
Generally, the longer the duration, the greater the sensitivity.)
We maintained an asset mix of 60% to 65% stocks, 30% to 35% bonds over the
period. The only change of note consisted of lowering the exposure to financial
services and industrial stocks.
As we look toward the second half of the fiscal year, we're encouraged by the
healthy gain of the Fund's stock holdings in March. While it's too early to draw
any firm conclusions, the upturn could be an indication of a "broadening out" in
the market -- that is, better performance from a wider range of stocks,
especially value issues. On the bond side, the possibility of higher interest
rates probably will hang over the market for a time yet.
Kurt Winters
Brad Stone
<PAGE>
(picture of) G. Michael Kennedy
G. Michael Kennedy
Portfolio manager
From the Portfolio Manager
Strategist Equity Fund
Strategist Equity Fund was well positioned to take advantage of an overall
strong period for stocks, ultimately generating a total of return of 22.64% for
the first half of the fiscal year -- October 1999 through March 2000. (A portion
of the return came in the form of a capital gain, which was paid to shareholders
in December 1999 and reduced the Fund's net asset value by the same amount at
that time.)
The stock market was coming off a late-summer slump when the period began. But
soon, thanks to fresh reports of still-tame inflation and generally healthy
corporate profits, the market started to advance. Gaining additional support
from vanishing concerns about the Y2K computer bug and increasing excitement
about the development of the Internet, stocks continued to gather momentum
through the end of 1999 and into early January.
By that time, worries about higher interest rates and potentially higher
inflation had intensified, which drove the market into retreat for several
weeks. But once again the market dug in and made a comeback, rallying strongly
to reach an all-time high in late March.
TECH LEADS THE WAY
The Fund's performance followed a similar but somewhat more consistent pattern,
as it registered gains in five of the six months. The biggest contribution came
from technology-related stocks, which comprised the largest area of investment.
Within that sector, telecommunications, semiconductor and business-to-business
Internet stocks were especially strong. Also providing good performance were
holdings in the capital goods, contract manufacturing, consumer cyclical,
financial services and utilities areas. Weak performers, on the other hand,
included transportation, basic materials and consumer staple stocks.
Looking at changes to the portfolio, I pared down the number of holdings from
more than 100 to 85. In conjunction with that, I increased the portfolio's
diversification by adding to investments in capital goods, energy and foreign
stocks, as well as convertible bonds. Concurrently, I reduced the exposure to
technology, financial services and retailing stocks.
With the second half of the fiscal year underway, it appears that the stock
market will continue to experience considerable volatility as investors try to
sort out a variety of conflicting factors, especially inflation and the
direction of interest rates. For the Fund, I think the biggest questions are
whether the market will continue to "broaden out" -- that is, allow a greater
variety of stocks to fully participate in possible upturns -- and whether the
valuation gap between growth stocks and value stocks narrows. If so, the Fund's
broadly diversified, comparatively conservative group of holdings should respond
relatively well.
G. Michael Kennedy
<PAGE>
(picture of) Kurt Winters
Kurt Winters
Portfolio manager
From the Portfolio Manager
Strategist Equity Income Fund
Despite a generally poor environment for value stocks, Strategist Equity Income
Fund finished the first half of the fiscal year in strong fashion to generate
positive results for the period as a whole. For the six months -- October 1999
through March 2000 -- the total return for the Fund was 5.47%.
The period got off to a good start, as reports of still-tame inflation and
generally good corporate profits buoyed the stock market from October through
the early days of January. While the Fund's value-stocks orientation took a back
seat to the performance of high-flying, technology-related growth stocks, the
Fund did register three straight months of gains.
The mood of the market changed dramatically in mid-January, though, as renewed
fear of potentially higher interest rates and higher inflation began to take a
toll. Widespread selling ensued, dragging down the market through February. The
interest-rate concern worked against the Fund, as it held a number of financial
services (largely banking and insurance) and utility stocks, both of which are
sensitive to rising interest rates.
SPRING SNAPBACK
But, in another display of the remarkable resilience that has been its hallmark
in recent years, the stock market came charging back in March. Thanks to a
pickup in non-technology stocks, especially financial services issues, the Fund
rebounded sharply with a gain of more than 11% for the month to close the period
on an up note. As for other major areas of investment, the Fund's industrial
holdings generated mixed results for the period as a whole.
Changes to the portfolio were minor during the period. Most notable was a
reduction in financial services and industrial stocks, which I made in light of
the market's concern about potentially higher interest rates.
Looking back over the six months, while it was a frustrating period overall, the
Fund's strong finish offers some encouragement as the second half of the fiscal
year begins. Only time will tell, of course, but this could be an early
indication that the stock market is starting to "broaden out" -- that is, a
greater variety of stocks may participate more fully in potential market
upturns. If so, the Fund is well positioned for such a shift, as it continues to
hold a widely diversified group of stocks that have been relatively ignored in
the momentum-driven, technology-centered market of recent years.
Kurt Winters
<PAGE>
(picture of) James M. Johnson Jr.
James M. Johnson Jr.
Portfolio manager
(picture of) Steven C. Merrell
Steven C. Merrell
Portfolio manager
From the Portfolio Managers
Strategist Total Return Fund
Powered by a generally strong U.S. stock market, Strategist Total Return Fund
generated a double-digit gain of 11.21% for the first half of the fiscal year --
October 1999 through March 2000.
Buoyed by reports of still-low inflation, robust economic growth and mostly
healthy corporate profits, the stock market began advancing shortly after the
outset of the period. Soon, with additional support from dissipating concerns
about the Y2K computer bug and increasing excitement about the Internet, the
market shifted into high gear. The positive momentum continued through the end
of 1999 and into early January, before renewed worries about potentially higher
inflation and rising interest rates drove the market into a several-week
retreat. But, in another example of the resilience it has shown in recent years,
the market rebounded to an all-time high in late March.
The U.S. bond market found the going more difficult for much of the six months,
as the threat of potentially higher inflation drove interest rates up and prices
down during the last three months of 1999. U.S. Treasury bonds rallied strongly
in the following quarter as long-term rates came down, but corporate and
mortgage-backed issues, which made up the bulk of the Fund's bond holdings,
realized only modest gains.
TECH FARES BEST
I maintained roughly a two-to-one ratio of stocks to bonds (60%-65% stocks,
25-30% bonds) in the portfolio over the six months. Large-capitalization U.S.
stocks easily comprised the largest area of investment, followed by small-cap
U.S. stocks and foreign stocks. Looking at business sectors, the greatest
emphasis was on technology-related stocks, which were by far the strongest
performers during the period. Holdings among health care and specialty retailers
also provided above-average gains.
Looking at changes to the portfolio, about mid-period I increased the overall
stock exposure, which included establishing a relatively small position in
foreign stocks (mainly in Japan), and lowered the bond exposure somewhat. Also,
in February I reduced holdings among small-cap stocks. In addition, as the
period progressed, I reduced the level of cash reserves, with most of that money
going into stocks.
As the second half of the fiscal year begins, I am sticking with our emphasis on
large-cap U.S. stocks, especially technology-related issues. Despite the
substantial price swings that have become commonplace in the stock market, I
think that the fundamentals, particularly the earnings growth potential, for
such stocks remain quite strong. At the same time, I want to avoid stocks whose
prices have risen beyond reasonable investment value and therefore are highly
vulnerable to downturns. The Fund's bond component also should continue to help
moderate the Fund's overall volatility.
James M. Johnson, Jr
Steven C. Merrell
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statements of assets and liabilities
Strategist Growth and Income Fund, Inc.
Strategist Strategist
March 31, 2000 (Unaudited) Balanced Fund Equity Fund
Assets
<S> <C> <C>
Investment in corresponding Portfolio (Note 1) $1,192,224 $1,354,489
Expense receivable from AEFC 69 208
-- ---
Total assets 1,192,293 1,354,697
--------- ---------
Liabilities
Accrued transfer agency fee 2 2
Accrued administrative services fees 1 1
Other accrued expenses 36,399 591
------ ---
Total liabilities 36,402 594
------ ---
Net assets applicable to outstanding capital stock $1,155,891 $1,354,103
========== ==========
Represented by
Capital stock-- $.01 par value (Note 1) $ 761 $ 381
Additional paid-in capital 1,085,251 932,522
Undistributed (excess of distributions over) net investment income 387 (4,487)
Accumulated net realized gain (loss) (5,386) 50,435
Unrealized appreciation (depreciation) on investments and
on translation of assets and liabilities in foreign currencies 74,878 375,252
------ -------
Total -- representing net assets applicable to outstanding capital stock $1,155,891 $1,354,103
========== ==========
Shares outstanding 76,092 38,117
------ ------
Net asset value per share of outstanding capital stock $ 15.19 $ 35.52
---------- ----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of assets and liabilities
Strategist Growth and Income Fund, Inc.
Strategist Equity Strategist Total
March 31, 2000 (Unaudited) Income Fund Return Fund
Assets
<S> <C> <C>
Investment in corresponding Portfolio (Note 1) $1,037,468 $912,336
Expense receivable from AEFC 54 718
Other prepaid assets -- 3,026
---- -----
Total assets 1,037,522 916,080
--------- -------
Liabilities
Dividends payable to shareholders 8 --
Accrued transfer agency fee 2 1
Accrued administrative services fees 1 1
Other accrued expenses 14,513 --
------
Total liabilities 14,524 2
------ -
Net assets applicable to outstanding capital stock $1,022,998 $916,078
========== ========
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,027 $ 684
Additional paid-in capital 943,900 827,026
Undistributed net investment income 370 1,105
Accumulated net realized gain (loss) (19,709) 8,483
Unrealized appreciation (depreciation) on investments and
on translation of assets and liabilities in foreign currencies 97,410 78,780
------ ------
Total -- representing net assets applicable to outstanding capital stock $1,022,998 $916,078
========== ========
Shares outstanding 102,698 68,449
------- ------
Net asset value per share of outstanding capital stock $ 9.96 $ 13.38
---------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of operations
Strategist Growth and Income Fund, Inc.
Strategist Strategist
Six months ended March 31, 2000 (Unaudited) Balanced Fund Equity Fund
Investment income
Income:
<S> <C> <C>
Dividends $ 6,531 $ 7,341
Interest 15,334 1,502
Less foreign taxes withheld (5) (14)
-- ---
Total income 21,860 8,829
------ -----
Expenses (Note 2):
Expenses allocated from corresponding Portfolio 2,967 3,080
Distribution fee 8 8
Transfer agency fee 463 310
Administrative services fees and expenses 238 252
Compensation of board members 353 567
Printing and postage 5,266 4,830
Registration fees 17,599 6,689
Audit fees 1,800 1,800
Other 11,541 2,115
------ -----
Total expenses 40,235 19,651
Less expenses reimbursed by AEFC (38,754) (11,773)
------- -------
Total net expenses 1,481 7,878
----- -----
Investment income (loss)-- net 20,379 951
------ ---
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 4,075 54,699
Financial futures contracts 2,245 --
Foreign currency transactions 12 (8)
Options contracts written 419 --
--- ----
Net realized gain (loss) on investments 6,751 54,691
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 43,937 198,526
------ -------
Net gain (loss) on investments and foreign currencies 50,688 253,217
------ -------
Net increase (decrease) in net assets resulting from operations $71,067 $254,168
======= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of operations
Strategist Growth and Income Fund, Inc.
Strategist Equity Strategist Total
Six months ended March 31, 2000 (Unaudited) Income Fund Return Fund
Investment income
Income:
<S> <C> <C>
Dividends $11,296 $ 2,904
Interest 1,171 11,067
Less foreign taxes withheld -- (13)
--- ---
Total income 12,467 13,958
------ ------
Expenses (Note 2):
Expenses allocated from corresponding Portfolio 2,566 2,413
Distribution fee 7 6
Transfer agency fee 359 134
Administrative services fees and expenses 201 173
Compensation of board members 431 413
Printing and postage 3,656 384
Registration fees 2,764 6,228
Audit fees 1,800 1,800
Other 5,215 746
----- ---
Total expenses 16,999 12,297
Less expenses reimbursed by AEFC (10,681) (6,846)
------- ------
Total net expenses 6,318 5,451
----- -----
Investment income (loss)-- net 6,149 8,507
----- -----
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (12,496) 24,491
Financial futures contracts -- (7,597)
Foreign currency transactions 9 7
- -
Net realized gain (loss) on investments (12,487) 16,901
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 60,298 67,021
------ ------
Net gain (loss) on investments and foreign currencies 47,811 83,922
------ ------
Net increase (decrease) in net assets resulting from operations $53,960 $92,429
======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Balanced Fund
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ 20,379 $ 30,457
Net realized gain (loss) on investments 6,751 67,458
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 43,937 38,340
------ ------
Net increase (decrease) in net assets resulting from operations 71,067 136,255
------ -------
Distributions to shareholders from:
Net investment income (23,310) (28,124)
Net realized gain (77,001) (69,978)
------- -------
Total distributions (100,311) (98,102)
-------- -------
Capital share transactions (Note 3)
Proceeds from sales 38,881 103,210
Reinvestment of distributions at net asset value 97,293 98,102
Payments for redemptions (127,818) (157,241)
-------- --------
Increase (decrease) in net assets from capital share transactions 8,356 44,071
----- ------
Total increase (decrease) in net assets (20,888) 82,224
Net assets at beginning of period 1,176,779 1,094,555
--------- ---------
Net assets at end of period $1,155,891 $1,176,779
========== ==========
Undistributed net investment income $ 387 $ 3,318
---------- ----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Equity Fund
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 951 $ 4,978
Net realized gain (loss) on investments 54,691 91,231
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 198,526 64,694
------- ------
Net increase (decrease) in net assets resulting from operations 254,168 160,903
------- -------
Distributions to shareholders from:
Net investment income (5,438) (16,724)
Net realized gain (90,402) (46,874)
------- -------
Total distributions (95,840) (63,598)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 5,582 62,285
Reinvestment of distributions at net asset value 95,840 63,598
Payments for redemptions (38,062) (25,926)
------- -------
Increase (decrease) in net assets from capital share transactions 63,360 99,957
------ ------
Total increase (decrease) in net assets 221,688 197,262
Net assets at beginning of period 1,132,415 935,153
--------- -------
Net assets at end of period $1,354,103 $1,132,415
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Equity Income Fund
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 6,149 $ 10,770
Net realized gain (loss) on investments (12,487) 81,152
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 60,298 60,252
------ ------
Net increase (decrease) in net assets resulting from operations 53,960 152,174
------ -------
Distributions to shareholders from:
Net investment income (8,889) (9,417)
Net realized gain (89,004) (88,590)
------- -------
Total distributions (97,893) (98,007)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 8,190 40,318
Reinvestment of distributions at net asset value 97,679 98,007
Payments for redemptions (44,766) (84,153)
------- -------
Increase (decrease) in net assets from capital share transactions 61,103 54,172
------ ------
Total increase (decrease) in net assets 17,170 108,339
Net assets at beginning of period 1,005,828 897,489
--------- -------
Net assets at end of period $1,022,998 $1,005,828
========== ==========
Undistributed net investment income $ 370 $ 3,110
---------- ----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Growth and Income Fund, Inc.
Strategist Total Return Fund
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 8,507 $ 19,362
Net realized gain (loss) on investments 16,901 39,273
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 67,021 40,822
------ ------
Net increase (decrease) in net assets resulting from operations 92,429 99,457
------ ------
Distributions to shareholders from:
Net investment income (9,572) (19,177)
Net realized gain (47,526) (51,422)
------- -------
Total distributions (57,098) (70,599)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 20,700 60,649
Reinvestment of distributions at net asset value 57,097 68,970
Payments for redemptions (12,854) (27,630)
------- -------
Increase (decrease) in net assets from capital share transactions 64,943 101,989
------ -------
Total increase (decrease) in net assets 100,274 130,847
Net assets at beginning of period 815,804 684,957
------- -------
Net assets at end of period $916,078 $815,804
======== ========
Undistributed net investment income $ 1,105 $ 2,170
-------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Strategist Growth and Income Fund, Inc.
(Unaudited as to March 31, 2000)
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, 2000, the percentages of the corresponding Portfolio owned by Balanced
Fund, Equity Fund, Equity Income Fund, and Total Return Fund were 0.03%, 0.03%,
0.04% and 0.04%, 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).
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Federal taxes
Each Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the 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, when
available, 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, 2000, American Express Financial Corporation (AEFC) owned 52,410
shares for Balanced Fund, 28,763 shares for Equity Fund, 82,663 shares for
Equity Income Fund and 2,863 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 has 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.
As of Oct. 1, 1999, American Express Financial Advisors Inc. is the Funds'
Distributor. Prior to Oct. 1, 1999, under a Plan and Agreement of Distribution,
each Fund paid American Express Service Corporation a distribution fee at an
annual rate of 0.25% of the Fund's average daily net assets for distribution
services.
AEFC has agreed to waive certain fees and to absorb certain other Fund expenses
through Sept. 30, 2000. 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, 2000, AEFC
further voluntarily agreed to waive certain fees and expenses to 0.25% for
Balanced Fund, 1.23% for Equity Income Fund and 1.26% 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, 2000
Equity Total
Balanced Equity Income Return
Fund Fund Fund Fund
Sold 2,534 165 810 1,595
Issued for reinvested distributions 6,491 2,851 9,866 4,411
Redeemed (8,709) (1,127) (4,383) (949)
------ ------ ------ ----
Net increase (decrease) 316 1,889 6,293 5,057
Year ended Sept. 30, 1999
Equity Total
Balanced Equity Income Return
Fund Fund Fund Fund
Sold 6,416 1,911 3,759 4,582
Issued for reinvested distributions 6,343 2,045 9,638 5,462
Redeemed (9,616) (792) (8,100) (2,111)
------ ---- ------ ------
Net increase (decrease) 3,143 3,164 5,297 7,933
<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
2000c 1999 1998 1997 1996b
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.53 $15.07 $16.57 $13.57 $13.36
Income from investment operations:
Net investment income (loss) .27 .41 .53 .66 .18
Net gains (losses) (both realized and unrealized) .70 1.40 (.39) 2.99 .17
Total from investment operations .97 1.81 .14 3.65 .35
Less distributions:
Dividends from net investment income (.31) (.38) (.52) (.65) (.14)
Distributions from realized gains (1.00) (.97) (1.12) -- --
Total distributions (1.31) (1.35) (1.64) (.65) (.14)
Net asset value, end of period $15.19 $15.53 $15.07 $16.57 $13.57
Ratios/supplemental data
Net assets, end of period (in thousands) $1,156 $1,177 $1,095 $895 $525
Ratio of expenses to average daily net assetsd .25%e .98% .93% .62% 1.25%e
Ratio of net investment income (loss)
to average daily net assets 3.42%e 2.55% 3.37% 4.60% 3.91%e
Portfolio turnover rate
(excluding short-term securities) 58% 134% 98% 49% 14%
Total return 6.39% 10.42% .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, 2000 (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 6.76%, 3.14%, 1.27%, 6.35% and 34.04% for the periods ended 2000,
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
2000c 1999 1998 1997 1996b
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $31.26 $28.28 $29.09 $22.40 $21.73
Income from investment operations:
Net investment income (loss) .02 .14 .18 .54 .21
Net gains (losses) (both realized and unrealized) 6.90 4.74 .24 6.64 .62
Total from investment operations 6.92 4.88 .42 7.18 .83
Less distributions:
Dividends from net investment income (.15) (.49) (.12) (.49) (.16)
Distributions from realized gains (2.51) (1.41) (1.11) -- --
Total distributions (2.66) (1.90) (1.23) (.49) (.16)
Net asset value, end of period $35.52 $31.26 $28.28 $29.09 $22.40
Ratios/supplemental data
Net assets, end of period (in thousands) $1,354 $1,132 $935 $778 $534
Ratio of expenses to average daily net assetsd 1.25%e 1.25% 1.25% .58% 1.25%e
Ratio of net investment income (loss)
to average daily net assets .15%e .45% .69% 2.17% 3.06%e
Portfolio turnover rate
(excluding short-term securities) 22% 76% 79% 82% 21%
Total return 22.64% 16.95% .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, 2000 (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 3.12%, 2.15%, 2.03%, 1.13% and 34.21% for the periods ended 2000,
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
2000c 1999 1998 1997 1996b
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.43 $9.85 $11.16 $8.92 $8.68
Income from investment operations:
Net investment income (loss) .06 .12 .21 .37 .13
Net gains (losses) (both realized and unrealized) .50 1.56 (.47) 2.22 .23
Total from investment operations .56 1.68 (.26) 2.59 .36
Less distributions:
Dividends from net investment income (.09) (.10) (.22) (.35) (.12)
Distributions from realized gains (.94) (1.00) (.83) -- --
Total distributions (1.03) (1.10) (1.05) (.35) (.12)
Net asset value, end of period $9.96 $10.43 $9.85 $11.16 $8.92
Ratios/supplemental data
Net assets, end of period (in thousands) $1,023 $1,006 $897 $827 $534
Ratio of expenses to average daily net assetsd 1.23%e 1.25% 1.25% 1.07% 1.25%e
Ratio of net investment income (loss)
to average daily net assets 1.20%e 1.05% 1.95% 3.65% 3.51%e
Portfolio turnover rate
(excluding short-term securities) 10% 84% 97% 81% 17%
Total return 5.47% 17.34% (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, 2000 (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 3.30%, 3.62%, 1.68%, 4.53%, and 24.26% for the periods ended 2000,
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
2000c 1999 1998 1997 1996b
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.87 $12.35 $14.53 $12.22 $11.89
Income from investment operations:
Net investment income (loss) .13 .32 .40 .31 .06
Net gains (losses) (both realized and unrealized) 1.28 1.46 (.94) 2.29 .31
Total from investment operations 1.41 1.78 (.54) 2.60 .37
Less distributions:
Dividends from net investment income (.15) (.32) (.40) (.29) (.04)
Distributions from realized gains (.75) (.94) (1.24) -- --
Total distributions (.90) (1.26) (1.64) (.29) (.04)
Net asset value, end of period $13.38 $12.87 $12.35 $14.53 $12.22
Ratios/supplemental data
Net assets, end of period (in thousands) $916 $816 $685 $686 $529
Ratio of expenses to average daily net assetsd 1.26%e 1.22% 1.15% 1.26% 1.30%e
Ratio of net investment income (loss)
to average daily net assets 1.96%e 2.46% 2.92% 2.29% .96%e
Portfolio turnover rate
(excluding short-term securities) 54% 81% 122% 99% 35%
Total return 11.21% 13.10% (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, 2000 (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 2.84%, 2.94%, 2.16%, 2.79%, and 31.60% for the periods ended 2000,
1999, 1998, 1997 and 1996, respectively.
e Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Balanced Portfolio
March 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $4,752,343,833) $5,053,342,729
Cash in bank on demand deposit 818,788
Dividends and accrued interest receivable 20,778,898
Receivable for investment securities sold 60,588,937
U.S. government securities held as collateral (Note 6) 86,610,277
----------
Total assets 5,222,139,629
-------------
Liabilities
Payable for investment securities purchased 380,010,133
Payable upon return of securities loaned (Note 6) 307,795,277
Accrued investment management services fee 60,450
Other accrued expenses 40,215
------
Total liabilities 687,906,075
-----------
Net assets $4,534,233,554
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Balanced Portfolio
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 24,802,126
Interest 58,214,532
Less foreign taxes withheld (21,455)
-------
Total income 82,995,203
----------
Expenses (Note 2):
Investment management services fee 11,054,259
Compensation of board members 8,965
Custodian fees 153,999
Audit fees 15,375
Other 32,436
------
Total expenses 11,265,034
Earnings credits on cash balances (Note 2) (1,777)
------
Total net expenses 11,263,257
----------
Investment income (loss) -- net 71,731,946
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 28,078,635
Financial futures contracts 8,539,065
Foreign currency transactions 58,659
Options contracts written (Note 4) 1,591,694
---------
Net realized gain (loss) on investments 38,268,053
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 165,762,466
-----------
Net gain (loss) on investments and foreign currencies 204,030,519
-----------
Net increase (decrease) in net assets resulting from operations $275,762,465
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Balanced Portfolio
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 71,731,946 $ 152,546,500
Net realized gain (loss) on investments 38,268,053 275,222,886
Net change in unrealized appreciation (depreciation) on investments
and on translations of assets and liabilities in foreign currencies 165,762,466 151,665,578
----------- -----------
Net increase (decrease) in net assets resulting from operations 275,762,465 579,434,964
Net contributions (withdrawals) from partners (447,942,347) (624,252,082)
------------ ------------
Total increase (decrease) in net assets (172,179,882) (44,817,118)
Net assets at beginning of period 4,706,413,436 4,751,230,554
------------- -------------
Net assets at end of period $4,534,233,554 $4,706,413,436
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Balanced Portfolio
(Unaudited as to March 31, 2000)
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
primarily in a combination of common stocks and senior securities (preferred
stocks and debt obligations). 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. 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 debt securities
at least equal to the amount of its commitment. As of March 31, 2000, the
Portfolio had entered into outstanding when-issued or forward-commitments of
$376,972,929.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.53% to 0.43% annually. The fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of AXP Mutual to the Lipper Balanced Fund Index.
The maximum adjustment is 0.08% of the Portfolio's average daily net assets
after deducting 1% from the performance difference. If the performance
difference is less than 1%, the adjustment will be zero. The adjustment
decreased the fee by $328,786 for the six months ended March 31, 2000.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio, and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the six months ended March 31, 2000, the Portfolio's custodian fees were
reduced by $1,777 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 $2,734,044,986 and $3,115,145,573, respectively, for the
six months ended March 31, 2000. For the same period, the portfolio turnover
rate was 58%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $35,141 for the
six months ended March 31, 2000.
4. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended March 31, 2000
Puts Calls
Contracts Premium Contracts Premium
Balance Sept. 30, 1999 -- $-- 12,500 $1,822,960
Opened 260 161,460 260 206,149
Closed -- -- (12,500) (1,822,960)
Exercised (260) (161,460) -- --
Expired -- -- (260) (206,149)
---- --- ---- --------
Balance March 31, 2000 -- $-- -- $--
See "Summary of significant accounting policies."
5. INTEREST RATE FUTURES CONTRACTS
As of March 31, 2000, investments in securities included securities valued at
$31,531,839 that were pledged as collateral to cover initial margin deposits on
700 open purchase contracts and 8,467 open sale contracts. The market value of
the open purchase contracts as of March 31, 2000 was $64,356,250 with a net
unrealized gain of $423,762. The market value of the open sale contracts as of
March 31, 2000 was $830,693,920 with a net unrealized loss of $14,416,808. See
"Summary of significant accounting policies".
6. LENDING OF PORTFOLIO SECURITIES
As of March 31, 2000, securities valued at $299,071,581 were on loan to brokers.
For collateral, the Portfolio received $221,185,000 in cash and U.S. government
securities valued at $86,610,277. Income from securities lending amounted to
$739,905 for the six months ended March 31, 2000. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Balanced Portfolio
March 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (64.8%)
Issuer Shares Value(a)
Aerospace & defense (1.6%)
<S> <C> <C>
Honeywell Intl 800,000 $42,150,000
Rockwell Intl 675,000 28,223,438
Total 70,373,438
Airlines (0.4%)
AMR 625,000(b) 19,921,875
Automotive & related (2.3%)
Delphi Automotive Systems 1,508,916 24,142,656
Ford Motor 515,000 23,657,813
General Motors 275,000 22,773,438
TRW 577,000 33,754,499
Total 104,328,406
Banks and savings & loans (6.5%)
Bank of America 1,315,000 68,955,312
Bank of New York 1,105,000 45,926,563
Chase Manhattan 480,000 41,850,000
FleetBoston Financial 1,035,000 37,777,500
Mellon Financial 1,110,000 32,745,000
SLM Holding 400,000 13,325,000
Wells Fargo 1,305,000 53,423,437
Total 294,002,812
Building materials & construction (1.3%)
Fluor 770,000 23,870,000
Martin Marietta Materials 710,450 33,746,375
Total 57,616,375
Chemicals (1.4%)
Air Products & Chemicals 815,000 23,176,563
Dow Chemical 120,000 13,680,000
Du Pont (EI) de Nemours 535,000 28,288,125
Total 65,144,688
Communications equipment & services (1.2%)
Motorola 375,000 53,390,625
Computers & office equipment (3.7%)
BMC Software 310,000(b) 15,306,250
Compaq Computer 635,000 16,906,875
Electronic Data Systems 243,000 15,597,563
EQUANT 216,800(b,c) 18,441,550
First Data 330,000 14,602,500
Hewlett-Packard 115,000 15,244,688
NOVA 565,000(b) 16,455,625
SABRE Holdings Cl A 246,158(b) 9,092,443
Solectron 720,000(b) 28,844,999
Unisys 630,000(b) 16,065,000
Total 166,557,493
Electronics (1.0%)
Natl Semiconductor 254,300(b) 15,416,938
Texas Instruments 175,000 28,000,000
Total 43,416,938
Energy (7.1%)
Chevron 865,000 79,958,437
Conoco Cl B 1,500,000 38,437,500
ENI 5,520,000(b,c,f) 27,631,092
Exxon Mobil 1,141,929 88,856,349
Texaco 910,000 48,798,750
Tosco 1,185,000 36,068,438
Total 319,750,566
Energy equipment & services (0.4%)
Halliburton 470,000 19,270,000
Financial services (8.3%)
Capital One Financial 865,000 41,465,938
Citigroup 2,535,000 150,357,187
Kansas City Southern Inds 1,061,080(b) 91,186,562
Morgan Stanley, Dean Witter, Discover & Co 625,000 50,976,562
Providian Financial 535,000 46,344,375
Total 380,330,624
Food (0.9%)
Bestfoods 325,000 15,214,063
General Mills 380,000 13,751,250
Sara Lee 655,000 11,790,000
Total 40,755,313
Health care (2.4%)
American Home Products 455,000 24,399,375
Baxter Intl 269,000 16,039,125
Guidant 260,000(b) 15,291,250
Mylan Laboratories 510,000 14,025,000
Pharmacia & Upjohn 320,000 18,960,000
Warner-Lambert 205,000 19,987,500
Total 108,702,250
Industrial equipment & services (1.7%)
Illinois Tool Works 655,000 36,188,750
Parker-Hannifin 1,005,000 41,519,063
Total 77,707,813
Insurance (3.7%)
American Intl Group 1,060,000 116,070,000
Aon 171,800 5,540,550
Marsh & McLennan 410,000 45,228,125
Total 166,838,675
Leisure time & entertainment (1.5%)
Disney (Walt) 985,000 40,754,375
Viacom Cl B 511,700(b) 26,992,175
Total 67,746,550
Media (0.8%)
Adelphia Communications Cl A 127,000(b) 6,223,000
MediaOne Group 375,000(b) 30,375,000
Total 36,598,000
Multi-industry conglomerates (0.8%)
Minnesota Mining & Mfg 210,000 18,598,125
Tyco Intl 340,000(c) 16,957,500
Total 35,555,625
Paper & packaging (0.7%)
Intl Paper 770,000 32,917,500
Real estate investment trust (0.5%)
Pinnacle Holdings 400,000(b) 22,100,000
Retail (4.6%)
Costco Wholesale 732,100(b) 38,481,006
Gap 925,000 46,076,562
Safeway 850,000(b) 38,462,500
Target 610,250 45,616,188
TJX Companies 1,900,000 42,156,250
Total 210,792,506
Transportation (0.5%)
Burlington Northern Santa Fe 1,110,000 24,558,750
Utilities -- electric (2.4%)
Carolina Power & Light 23 746
CMS Energy 85,000 1,540,625
Consolidated Edison 500,000 14,500,000
Dominion Resources 375,000 14,414,063
Duke Energy 556,800 29,231,999
Edison Intl 335,000 5,548,438
FPL Group 170,000 7,830,625
New Century Energies 255,000 7,665,938
Pinnacle West Capital 250,000 7,046,875
Reliant Energy 675,000 15,820,312
Texas Utilities 225,000 6,679,688
Total 110,279,309
Utilities -- gas (0.6%)
Coastal 595,000 27,370,000
Utilities -- telephone (8.4%)
ALLTEL 132,000 8,324,250
AT&T 1,485,000 83,531,249
AT&T - Liberty Media Group Cl A 560,000(b) 33,180,000
Bell Atlantic 679,800 41,552,775
BellSouth 825,000 38,775,000
Cable & Wireless 335,000(c) 6,282,907
Deutsche Telekom 100,000(c) 8,058,781
GTE 442,000 31,382,000
Intermedia Communications 6,866(b) 331,714
MCI WorldCom 1,282,500(b) 58,113,281
SBC Communications 917,360 38,529,120
Telefonica de Espana ADR 96,000(b,c,f) 7,164,000
U S WEST Communications Group 345,000 25,055,625
Total 380,280,702
Total common stocks
(Cost: $2,611,311,609) $2,936,306,833
Preferred stocks (0.7%)
Issuer Shares Value(a)
Cox Communications
7.00% Cm Cv PRIDES 225,500(k) $14,319,250
Global Crossing
6.38% Cv 25,100(c,d) 2,704,525
Global TeleSystems Group
7.25% Cm Cv 170,500 6,905,250
Intermedia Communications
7.00% Cm Cv Series F 203,000 6,724,375
Total preferred stocks
(Cost: $30,661,176) $30,653,400
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (39.8%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (20.9%)
Collateralized Mtge Obligation Trust
<S> <C> <C> <C> <C> <C>
12-20-14 9.95% $1,664,842 $1,722,095
Federal Home Loan Mtge Corp
10-01-03 7.00 2,104,667 2,078,359
07-01-07 6.50 149,943 148,521
07-01-08 6.75 900,782 890,505
06-01-09 5.50 2,881,588 2,707,763
01-01-11 6.50 10,540,273 10,213,200
03-01-13 5.50 12,243,435 11,303,566
11-15-13 5.50 10,500,000 9,174,060
11-01-14 7.50 50,004,985 49,997,722
04-01-15 7.50 30,000,000(g) 29,962,500
08-01-24 8.00 2,838,732 2,851,166
09-01-28 6.00 26,377,768 24,061,536
04-01-30 7.00 30,000,000(g) 28,846,875
Trust Series Z
10-15-23 6.50 30,745(j) 27,544
Federal Natl Mtge Assn
10-01-02 7.50 240,379 240,208
08-15-04 6.50 20,000,000 19,554,520
02-15-05 7.13 80,000,000(f) 80,092,560
01-01-09 5.50 4,684,267 4,363,084
09-15-09 6.63 110,000,000 105,785,350
08-01-13 6.00 25,528,630 24,018,469
12-01-13 5.50 873,221 805,159
01-01-14 5.50 6,362,363 5,866,458
02-01-14 5.50 1,743,767 1,607,852
02-01-14 7.50 875,662 870,461
04-01-14 5.50 1,048,917 967,161
06-01-14 5.50 33,382,520 30,774,680
07-01-14 5.50 8,542,274 7,866,341
09-01-14 5.50 950,096 874,917
04-01-15 7.50 80,000,000(g) 78,600,000
05-01-23 6.50 3,911,333 3,702,311
09-01-23 6.50 6,115,409 5,788,601
01-01-24 6.50 11,224,179 10,615,820
06-01-24 9.00 2,881,200 2,979,924
08-01-25 7.50 9,076,910 8,929,411
04-01-28 6.00 11,573,348 10,549,801
06-01-28 6.00 8,928,784(e) 8,139,122
06-01-28 6.00 11,274,146 10,277,061
06-01-28 7.00 21,557 20,742
07-01-28 6.00 12,953,049 11,807,481
12-01-28 6.50 11,055,240 10,374,679
09-01-29 6.50 88,139,296 82,713,441
04-01-30 7.00 30,000,000(g) 28,828,125
04-01-30 8.00 210,000,000(g) 210,393,750
04-01-30 8.50 30,000(g) 30,581
Total 941,423,482
U.S. government obligations (9.7%)
Resolution Funding Corp
10-15-19 8.13 15,000,000 17,154,060
U.S. Treasury
08-15-04 6.00 74,600,000(f) 73,634,676
11-15-05 5.88 1,800,000 1,761,650
05-15-06 6.88 25,000,000(f) 25,679,713
05-15-09 5.50 30,000,000(f) 28,528,140
11-15-15 9.88 24,000,000(f) 32,592,331
05-15-17 8.75 6,400,000 8,085,440
08-15-19 8.13 28,500,000(e) 34,633,345
11-15-21 8.00 15,600,000 18,981,160
02-15-23 7.13 12,700,000 14,205,204
08-15-29 6.13 20,000,000 20,410,000
05-15-30 6.25 85,000,000(f) 89,913,849
Zero Coupon
05-15-13 6.14 74,000,000(i) 32,761,946
11-15-13 6.16 90,000,000(i) 38,678,310
Total 437,019,824
Automotive & related (0.7%)
Ford Motor Credit
02-15-07 7.75 20,000,000 20,134,340
Lear
Company Guaranty Series B
05-15-09 8.11 15,000,000 13,697,250
Total 33,831,590
Banks and savings & loans (0.9%)
CIT Holdings LLC
(U.S. Dollar) Company Guaranty Series B
02-16-05 6.88 10,000,000(c) 9,717,030
Mellon Financial
Sub Nts
02-15-10 6.38 16,000,000 15,034,598
NationsBank
Sub Nts
05-15-10 6.60 11,825,000 11,078,766
Union Planters Capital
Company Guaranty
12-15-26 8.20 4,000,000 3,715,323
Total 39,545,717
Building materials & construction (0.2%)
Owens Corning
08-01-18 7.50 12,500,000 10,764,375
Commercial finance (0.1%)
Yale University
04-15-96 7.38 4,000,000 3,828,440
Communications equipment & services (0.4%)
KPNQwest
(U.S. Dollar) Sr Nts
06-01-09 8.13 15,000,000(c) 14,381,250
NTL
Cv Sub Nts
12-15-09 5.75 2,800,000(d) 2,866,500
Total 17,247,750
Electronics (0.2%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-04 8.25 10,000,000(c,d) 9,228,320
Energy (0.4%)
Occidental Petroleum
Medium-term Nts Series B
04-10-00 6.25 6,500,000 6,499,072
USX
03-01-08 6.85 10,000,000 9,542,302
Total 16,041,374
Financial services (0.7%)
AT&T Capital
Company Guaranty Medium-term Nts Series F
05-15-05 6.60 9,000,000 8,624,214
Bat-CRAVE-800
08-12-00 6.68 7,000,000(d) 6,992,692
Golden State Holdings
Sr Nts
08-01-03 7.00 10,000,000 9,369,705
Standard Credit Card Trust
Series A
10-07-04 5.95 8,550,000 8,219,457
Total 33,206,068
Health care services (0.1%)
Kaiser Permanente
07-15-05 9.55 6,000,000 6,457,200
Insurance (0.9%)
Nationwide CSN Trust
02-15-25 9.88 15,500,000(d) 16,706,102
New York Life Insurance
12-15-23 7.50 11,500,000(d) 10,319,157
Principal Mutual
03-01-44 8.00 7,150,000(d) 6,794,895
SAFECO Capital
Company Guaranty
07-15-37 8.07 10,000,000 8,695,330
Total 42,515,484
Media (0.5%)
Cox Communications
08-15-06 7.75 8,200,000 8,163,182
Time Warner Entertainment
Sr Nts
07-15-33 8.38 13,522,000 14,188,156
Total 22,351,338
Miscellaneous (0.1%)
DTE Burns Harbor LLC
Sr Nts
01-30-03 6.57 5,361,730(d) 5,185,115
Paper & packaging (0.2%)
Intl Paper
11-15-12 5.13 13,400,000 10,288,654
Restaurants & lodging (0.2%)
MGM Grand
02-01-05 6.95 10,000,000 9,298,622
Retail (0.2%)
Wal-Mart CRAVE Trust
07-17-06 7.00 10,946,773(d) 10,600,855
Utilities -- electric (1.5%)
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 5,400,000 5,352,325
Cleveland Electric Illuminating
07-01-00 7.19 5,000,000 4,998,236
07-01-04 7.67 10,000,000 9,851,960
CMS Energy
Sr Nts
07-01-03 8.38 20,000,000 19,336,279
Pacific Gas & Electric
1st Mtge Series 1992D
11-01-22 8.25 4,600,000 4,523,010
PSI Energy
1st Mtge Series BBB
07-15-09 8.00 8,085,000 8,172,926
Public Service Electric & Gas
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 13,000,000(h) 12,174,214
1st Mtge
05-01-23 6.38 5,000,000 4,822,450
Total 69,231,400
Utilities -- gas (0.2%)
Ras Laffan
(U.S. Dollar)
03-15-14 8.29 10,000,000(c,d) 9,690,420
Utilities -- telephone (1.7%)
Bell Telephone of Pennsylvania
03-15-33 7.38 5,000,000 4,671,216
BellSouth Capital Funding
02-15-10 7.75 11,500,000 11,677,099
GTE
11-01-21 8.75 5,000,000 5,553,362
Qwest Communications Intl
Sr Nts Series B
11-01-08 7.25 21,000,000 20,121,464
SBC Communications
10-15-34 6.63 6,100,000 5,252,725
07-15-43 7.38 7,500,000 6,983,339
U S WEST Capital Funding
Company Guaranty
07-15-28 6.88 9,000,000 7,924,849
U S WEST Communications
09-15-05 6.63 7,000,000 6,732,880
Vodafone Airtouch
Company Guaranty
05-01-08 6.65 6,950,000 6,548,512
Total 75,465,446
Total bonds
(Cost: $1,827,130,167) $1,803,221,474
Short-term securities (6.2%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (3.4%)
Federal Home Loan Bank Disc Nts
04-07-00 5.67% $26,800,000 $26,768,030
04-12-00 5.71 2,400,000 2,395,264
04-14-00 5.70 24,400,000 24,343,252
05-24-00 5.87 5,600,000 5,548,508
05-26-00 5.88 5,900,000 5,841,896
Federal Home Loan Mtge Corp Disc Nts
04-04-00 5.70 6,500,000 6,495,703
04-20-00 5.71 12,000,000 11,959,682
04-25-00 5.83 5,500,000 5,477,809
05-25-00 5.89 600,000 594,289
06-01-00 5.98 1,700,000 1,681,789
Federal Natl Mtge Assn Disc Nts
04-05-00 5.72 4,000,000 3,996,822
04-06-00 5.71 17,800,000 17,782,088
04-11-00 5.69 6,900,000 6,888,024
04-13-00 5.72 10,100,000 10,078,054
04-20-00 5.76 15,900,000 15,846,579
04-27-00 5.78 4,400,000 4,380,076
05-25-00 5.90 4,100,000 4,060,973
Total 154,138,838
Commercial paper (2.8%)
Alcoa
04-17-00 5.85 10,700,000 10,670,541
BBV Finance (Delaware)
04-28-00 5.89 11,600,000 11,544,651
Bell Atlantic Finance Services
04-26-00 5.89 20,400,000 20,313,513
Cargill Global Funding
04-27-00 5.89 15,700,000(l) 15,629,866
Clorox
04-10-00 5.83 1,700,000 1,697,252
04-25-00 5.89 15,500,000 15,436,814
Ford Motor Credit
04-13-00 5.83 4,700,000 4,689,787
Northern States Power
04-24-00 5.88 10,300,000 10,259,761
Paccar Financial
05-24-00 5.95 8,400,000 8,322,762
Preferred Receivables
04-13-00 5.87 16,800,000(l) 16,764,448
Toyota Motor Credit
05-16-00 5.98 13,800,000(l) 13,692,789
Total 129,022,184
Total short-term securities
(Cost: $283,240,881) $283,161,022
Total investments in securities
(Cost: $4,752,343,833)(m) $5,053,342,729
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. For debt securities,
principal amounts are denominated in the currency indicated. As of March 31,
2000, the value of foreign securities represented 2.87% 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) 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 2000, 10-year notes $70,000,000
Sale contracts
U.S. Treasury Bonds, June 2000 104,600,000
U.S. Treasury Note, June 2000, 5-year notes 160,000,000
U.S. Treasury Note, June 2000, 10-year notes 582,100,000
(f) Security is partially or fully on loan. See Note 6 to the financial
statements.
(g) At March 31, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $376,972,929.
(h) The following abbreviation is used in portfolio descriptions to identify the
insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
(i) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(j) 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.
(k) 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.
(l) 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.
(m) At March 31, 2000, the cost of securities for federal income tax purposes
was approximately $4,789,059,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $485,849,000
Unrealized depreciation (221,565,000)
------------
Net unrealized appreciation $264,284,000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Equity Portfolio
March 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1):
<S> <C>
(identified cost, $3,657,834,553) $5,260,809,568
Cash in bank on demand deposit 750,186
Dividends and accrued interest receivable 5,391,705
Receivable for investment securities sold 14,149,127
U.S. government securities held as collateral (Note 4) 25,337,034
----------
Total assets 5,306,437,620
-------------
Liabilities
Payable for investment securities purchased 45,381,820
Payable upon return of securities loaned (Note 4) 92,633,834
Accrued investment management services fee 65,928
Other accrued expenses 167,518
-------
Total liabilities 138,249,100
-----------
Net assets $5,168,188,520
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Equity Portfolio
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 28,303,600
Interest 5,809,984
Less foreign taxes withheld (50,856)
-------
Total income 34,062,728
----------
Expenses (Note 2):
Investment management services fee 11,692,038
Compensation of board members 8,784
Custodian fees 127,571
Audit fees 15,375
Other 28,046
------
Total expenses 11,871,814
Earnings credits on cash balances (Note 2) (6,188)
------
Total net expenses 11,865,626
----------
Investment income (loss) -- net 22,197,102
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (including $9,055,252 realized
gain on sales of affiliated issuers) (Note 3) 270,235,459
Foreign currency transactions (29,802)
-------
Net realized gain (loss) on investments 270,205,657
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 715,386,759
-----------
Net gain (loss) on investments and foreign currencies 985,592,416
-----------
Net increase (decrease) in net assets resulting from operations $1,007,789,518
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Equity Portfolio
March 31, 2000 Sept. 30, 1999
Six month ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 22,197,102 $ 56,845,389
Net realized gain (loss) on security transactions 270,205,657 510,544,619
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 715,386,759 169,713,139
----------- -----------
Net increase (decrease) in net assets resulting from operations 1,007,789,518 737,103,147
Net contributions (withdrawals) from partners (359,365,303) (286,491,766)
------------ ------------
Total increase (decrease) in net assets 648,424,215 450,611,381
Net assets at beginning of period 4,519,764,305 4,069,152,924
------------- -------------
Net assets at end of period $5,168,188,520 $4,519,764,305
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Equity Portfolio
(Unaudited as to March 31, 2000)
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 accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
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 debt securities
at least equal to the amount of its commitment. As of March 31, 2000, the
Portfolio had entered into outstanding when-issued or forward-commitments of
$5,646,000.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the portfolio's average daily net assets in reducing
percentages from 0.53% to 0.4% annually. The fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of AXP Stock Fund to the Lipper Large-Cap Core
Index. The maximum adjustment is 0.08% of the Portfolio's average daily net
assets after deducting 1% from the performance difference. If the performance
difference is less than 1% the adjustment will be zero. The adjustment increased
the fee by $390,439 for the six months ended March 31, 2000.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the six months ended March 31, 2000, the Portfolio's custodian fees were
reduced by $6,188 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 $1,043,869,884 and $1,244,589,231, respectively, for the
six months ended March 31, 2000. For the same period, the portfolio turnover
rate was 22%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $191,700 for the
six months ended March 31, 2000.
4. LENDING OF PORTFOLIO SECURITIES
As of March 31, 2000, securities valued at $95,597,326 were on loan to brokers.
For collateral, the Portfolio received $67,296,800 in cash and U.S. government
securities valued at $25,337,034. As of March 31, 2000, due to fluctuating
market conditions, the Fund requested additional collateral which was received
on April 3, 2000. Income from securities lending amounted to $157,030 for the
six months ended March 31, 2000. The risks to the Portfolio of securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Equity Portfolio
March. 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (87.6%)
Issuer Shares Value(a)
Airlines (0.6%)
<S> <C> <C>
Southwest Airlines 1,500,000 $31,218,750
Automotive & related (1.1%)
Ford Motor 1,200,000 55,125,000
Banks and savings & loans (2.8%)
Bank of America 500,000 26,218,750
Bank of New York 875,000 36,367,188
First Union 1,000,000 37,250,000
Wells Fargo 1,100,000 45,031,250
Total 144,867,188
Chemicals (0.7%)
Dow Chemical 300,000 34,200,000
Communications equipment & services (5.2%)
CIENA 500,000(b) 63,062,500
Motorola 500,000 71,187,500
Nokia ADR Cl A 500,000(c) 108,625,000
Tellabs 400,000(b) 25,193,750
Total 268,068,750
Computers & office equipment (19.2%)
BMC Software 500,000(b) 24,687,500
Cisco Systems 2,400,000(b) 185,550,000
Compaq Computer 1,400,000 37,275,000
Electronic Arts 200,000(b) 14,237,500
EMC 400,000(b) 50,000,000
EQUANT 400,000(b,c) 34,025,000
First Data 900,000 39,825,000
Intl Business Machines 700,000 82,600,000
Lexmark Intl Group Cl A 300,000(b) 31,725,000
Microsoft 2,200,000(b) 233,749,999
Oracle 1,500,000(b) 117,093,750
SAP ADR 500,000(c,f) 29,875,000
Solectron 1,992,898(b) 79,840,476
Unisys 1,200,000(b) 30,600,000
Total 991,084,225
Electronics (11.0%)
Corning 900,000 174,600,000
Flextronics Intl 1,200,000(b,c,f) 84,525,000
Intel 1,100,000 145,131,250
Texas Instruments 1,000,000 160,000,000
Total 564,256,250
Energy (4.8%)
BP Amoco ADR 800,000(c) 42,450,000
Chevron 400,000 36,975,000
Conoco Cl A 1,700,000 41,862,500
Exxon Mobil 1,194,067 92,913,338
Kerr-McGee 600,000 34,650,000
Total 248,850,838
Energy equipment & services (1.8%)
Halliburton 1,300,000 53,300,000
Schlumberger 525,000 40,162,500
Total 93,462,500
Financial services (2.3%)
Citigroup 1,350,000 80,071,875
Morgan Stanley, Dean Witter, Discover & Co 500,000 40,781,250
Total 120,853,125
Food (2.0%)
Bestfoods 1,200,000 56,175,000
ConAgra 700,000 12,687,500
Ralston-Ralston Purina Group 1,800,000(b,h) 35,775,000
Total 104,637,500
Health care (8.0%)
Amgen 1,000,000(b) 61,375,000
Baxter Intl 700,000 41,737,500
Bristol-Myers Squibb 800,000 46,200,000
Guidant 500,000(b) 29,406,250
Medtronic 800,000 41,150,000
Merck & Co 300,000 18,637,500
Mylan Laboratories 1,300,000 35,750,000
Pfizer 1,200,000 43,875,000
Pharmacia & Upjohn 800,000 47,400,000
Schering-Plough 500,000 18,375,000
Warner-Lambert 300,000 29,250,000
Total 413,156,250
Household products (0.9%)
Colgate-Palmolive 850,000 47,918,750
Industrial equipment & services (1.2%)
Deere & Co 600,000 22,800,000
Illinois Tool Works 700,000 38,675,000
Total 61,475,000
Insurance (2.4%)
American Intl Group 1,130,625 123,803,438
Leisure time & entertainment (0.5%)
Royal Caribbean Cruises 1,000,000 28,000,000
Media (3.3%)
Hispanic Broadcasting 300,000(b) 33,975,000
Infinity Broadcasting Cl A 1,317,000(b) 42,637,875
MediaOne Group 500,000(b) 40,500,000
USA Networks 2,400,000(b) 54,150,000
Total 171,262,875
Metals (0.8%)
Alcoa 600,000 42,150,000
Multi-industry conglomerates (5.6%)
General Electric 1,200,000 186,225,000
Grainger (WW) 800,000 43,400,000
Minnesota Mining & Mfg 400,000 35,425,000
Tyco Intl 500,000(c) 24,937,500
Total 289,987,500
Paper & packaging (0.8%)
Intl Paper 1,000,000 42,750,000
Retail (4.5%)
Circuit City Stores-Circuit City Group 887,400 54,020,475
Home Depot 750,000 48,375,000
Target 400,000 29,900,000
Wal-Mart Stores 1,800,000 99,900,000
Total 232,195,475
Transportation (0.3%)
Burlington Northern Santa Fe 700,000 15,487,500
Utilities -- electric (1.4%)
Carolina Power & Light 350,000 11,353,125
Duke Energy 200,000 10,500,000
New Century Energies 900,000(f) 27,056,250
Texas Utilities 350,000 10,390,625
Unicom 400,000 14,600,000
Total 73,900,000
Utilities -- gas (2.5%)
Coastal 1,000,000 46,000,000
Enron 1,100,000 82,362,500
Total 128,362,500
Utilities -- telephone (3.9%)
AT&T 1,050,000 59,062,528
BellSouth 500,000 23,500,000
Global TeleSystems Group 900,000(b) 18,450,000
MCI WorldCom 500,000(b) 22,656,250
SBC Communications 492,000 20,664,000
U S WEST Communications Group 800,000 58,100,000
Total 202,432,778
Total common stocks
(Cost: $2,994,165,467) $4,529,506,192
Preferred stocks (5.4%)
Issuer Shares Value(a)
Adelphia Communications
5.50% Cv Series D 73,500 $11,263,875
CVS
6.00% Cv ACES 200,000(i) 13,512,500
Enron
7.00% Cv 745,000 16,436,563
Finova Finance Trust
5.50% Cv 325,000 10,725,000
Georgia-Pacific Group
7.50% Cv 625,000 26,796,875
Global Crossing
6.38% Cv 250,000(c,d) 26,937,499
Global TeleSystems Group
7.25% Cm Cv 300,000(d) 12,150,000
Ingersoll-Rand
6.75% Cv PRIDES 800,000(j) 18,800,000
Kerr-McGee
5.50% Cv 600,000 26,925,000
MediaOne Group
7.00% Cv 675,000 35,100,000
MS-Applied Material
6.00% Cv 180,000 12,487,500
MS-Gillette
5.25% Cv 186,795 14,464,938
SBH-Cincinnati Bell
6.25% 216,200 25,727,800
Sprint
8.25% Cv 206,925 13,398,394
Wendys Financing
5.00% Cm Cv Series A 340,000 15,980,000
Total preferred stocks
(Cost: $280,384,316) $280,705,944
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (4.2%)
Issuer Coupon Principal Value(a)
rate amount
COLT Telecom Group
(European Monetary Unit) Cv
<S> <C> <C> <C>
08-06-05 2.00% 25,000,000(c) $43,858,658
Costco
Zero Coupon Cv Sub Nts
08-19-17 3.50 21,000,000(d,g) 24,990,000
Devon Energy
Cv Deb
08-15-08 4.90 15,000,000 15,018,750
Exodus Communications
07-15-08 4.75 25,100,000(d) 51,611,875
Internet Capital Group
Cv Sub Nts
12-21-04 5.50 15,000,000 13,200,000
Level 3 Communications
03-15-10 6.00 10,446,000 10,250,138
Network Associates
Zero Coupon Cv Sub Deb
02-13-18 4.09 20,000,000(g) 7,600,000
NTL
Cv Sub Nts
12-15-09 5.75 18,000,000(d) 18,427,500
Telewest Communication
(British Pound) Cv
02-19-07 5.25 12,240,000(c,d) 30,741,234
Total bonds
(Cost: $148,303,592) $215,698,155
Short-term securities (4.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (2.9%)
Federal Home Loan Bank Disc Nts
05-02-00 5.86% $6,800,000 $6,764,760
05-19-00 5.92 29,100,000 28,859,877
05-24-00 5.94 13,400,000 13,276,786
Federal Home Loan Mtge Corp Disc Nts
05-09-00 5.90 4,200,000 4,173,337
05-16-00 5.97 26,100,000 25,902,568
06-01-00 5.98 18,800,000 18,598,610
06-15-00 6.06 700,000 690,808
Federal Natl Mtge Assn Disc Nts
04-06-00 5.71 18,500,000 18,481,384
04-11-00 5.69 10,700,000 10,681,429
04-13-00 5.72 4,800,000 4,789,570
06-15-00 6.08 18,600,000 18,355,761
Total 150,574,890
Commercial paper (1.3%)
Barclays U.S. Funding
05-12-00 6.04 5,700,000 5,660,099
Bell Atlantic Finance Services
05-31-00 6.06 9,100,000 9,004,091
Bell Atlantic Network Funding
05-10-00 5.95 3,200,000 3,178,986
Ciesco LP
04-27-00 5.91 3,900,000 3,882,340
Clorox
04-25-00 5.89 500,000 497,962
Fleet Funding
04-18-00 5.87 2,500,000(e) 2,492,600
Ford Motor Credit
04-13-00 5.83 7,900,000 7,882,835
06-02-00 6.10 7,900,000 7,816,497
Intl Lease Finance
04-25-00 5.84 10,000,000 9,958,750
05-30-00 6.08 4,300,000 4,255,710
Northern States Power
06-19-00 6.18 10,200,000 10,059,013
Toyota Motor Credit
05-11-00 6.00 4,700,000(e) 4,668,097
Total 69,356,980
Letter of credit (0.3%)
Bank of America-
AES Hawaii
04-13-00 5.83 15,000,000 14,967,407
Total short-term securities
(Cost: $234,981,178) $234,899,277
Total investments in securities
(Cost: $3,657,834,553)(k) $5,260,809,568
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. For debt securities,
principal amounts are denominated in the currency indicated. As of March 31,
2000, the value of foreign securities represented 8.24% 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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(g) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(h) At March 31, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $5,646,000.
(i) 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.
(j) 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.
(k) At March 31, 2000, the cost of securities for federal income tax purposes
was approximately $3,657,835,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $1,755,062,000
Unrealized depreciation (152,087,000)
------------
Net unrealized appreciation $1,602,975,000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Equity Income Portfolio
March 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $2,260,983,399) $2,503,281,204
Cash in bank on demand deposit 89,604
Dividends and accrued interest receivable 2,898,464
Receivable for investment securities sold 43,238,906
----------
Total assets 2,549,508,178
-------------
Liabilities
Payable for investment securities purchased 963,962
Payable upon return of securities loaned (Note 4) 5,625,000
Accrued investment management services fee 33,837
Other accrued expenses 157,433
-------
Total liabilities 6,780,232
---------
Net assets applicable to outstanding capital stock $2,542,727,946
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations Equity Income Portfolio
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 29,157,811
Interest 3,027,267
---------
Total income 32,185,078
----------
Expenses (Note 2):
Investment management services fee 6,480,583
Compensation of board members 6,648
Custodian fees 85,269
Audit fees 12,000
Other 29,781
------
Total expenses 6,614,281
Earnings credits on cash balances (Note 2) (2,656)
------
Total net expenses 6,611,625
---------
Investment income (loss) -- net 25,573,453
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (25,550,866)
Foreign currency transactions 27,875
------
Net realized gain (loss) on investments (25,522,991)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 141,249,651
-----------
Net gain (loss) on investments and foreign currencies 115,726,660
-----------
Net increase (decrease) in net assets resulting from operations $141,300,113
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Equity Income Portfolio
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Undaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 25,573,453 $ 48,741,010
Net realized gain (loss) on investments (25,522,991) 211,365,708
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 141,249,651 161,093,888
----------- -----------
Net increase (decrease) in net assets resulting from operations 141,300,113 421,200,606
Net contributions (withdrawals) from partners (238,751,522) (191,699,690)
------------ ------------
Total increase (decrease) in net assets (97,451,409) 229,500,916
Net assets at beginning of period 2,640,179,355 2,410,678,439
------------- -------------
Net assets at end of period $2,542,727,946 $2,640,179,355
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Equity Income Portfolio
(Unaudited as to March 31, 2000)
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 accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.53% to 0.4% annually. The fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of AXP Diversified Equity Income Fund to the
Lipper Equity Income Fund Index. The maximum adjustment is 0.08% of the Fund's
average daily net assets after deducting 1% from the performance difference. If
the performance difference is less than 1%, the adjustment will be zero. The
adjustment increased the fee by $11,250 for the period.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the six months ended March 31, 2000, the Portfolio's custodian fees were
reduced by $2,656 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 $562,762,480 and $799,827,837, respectively, for the six
months ended March 31, 2000. For the same period, the portfolio turnover rate
was 10%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $27,552 for the
six months ended March 31, 2000.
4. LENDING OF PORTFOLIO SECURITIES
As of March 31, 2000, securities valued at $5,596,875 were on loan to brokers.
For collateral, the Portfolio received $5,625,000 in cash. Income from
securities lending amounted to $34,469 for the six months ended March 31, 2000.
The risks to the Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the securities when due.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Equity Income Portfolio
March 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (89.6%)
Issuer Shares Value(a)
Aerospace & defense (1.9%)
<S> <C> <C>
Goodrich (BF) 614,400 $17,625,600
Honeywell Intl 124,800 6,575,400
Rockwell Intl 577,900 24,163,444
Total 48,364,444
Automotive & related (1.9%)
Ford Motor 566,400 26,019,000
General Motors 278,400 23,055,000
Total 49,074,000
Banks and savings & loans (9.6%)
Allied Capital 936,000 16,321,500
Bank of America 974,400 51,095,100
Bank of New York 715,200 29,725,500
Chase Manhattan 226,000 19,704,375
First Union 598,100 22,279,225
FleetBoston Financial 988,730 36,088,645
Mellon Financial 772,800 22,797,600
SLM Holding 321,600 10,713,300
Wells Fargo 868,800 35,566,500
Total 244,291,745
Building materials & construction (1.9%)
Fluor 630,000 19,530,000
Martin Marietta Materials 623,800 29,630,500
Total 49,160,500
Chemicals (1.8%)
Dow Chemical 96,000 10,944,000
Du Pont (EI) de Nemours 432,000 22,842,000
Lyondell Petrochemical 892,800 13,168,800
Total 46,954,800
Communications equipment & services (1.6%)
Motorola 292,800 41,687,400
Computers & office equipment (5.6%)
BMC Software 240,000(b) 11,850,000
Compaq Computer 475,000 12,646,875
Electronic Data Systems 177,600 11,399,700
EQUANT 168,100(b,c) 14,299,006
First Data 264,000 11,682,000
Hewlett-Packard 91,200 12,089,700
NOVA 880,900(b) 25,656,213
Solectron 614,400(b) 24,614,400
Unisys 730,000(b) 18,615,000
Total 142,852,894
Energy (10.9%)
Chevron 768,000 70,992,000
Conoco Cl A 1,248,000 30,732,000
Conoco Cl B 360,000 9,225,000
ENI 4,950,000(b,c) 24,777,881
Exxon Mobil 963,214 74,950,089
Sunoco 883,200 24,177,600
Texaco 801,600 42,985,800
Total 277,840,370
Energy equipment & services (0.6%)
Halliburton 374,400 15,350,400
Financial services (13.0%)
Alliance Capital Management Holding LP 964,800 39,978,900
Citigroup 2,011,200 119,289,299
Kansas City Southern Inds 432,000(b) 37,125,000
MBNA 1,660,800 42,350,400
Morgan Stanley, Dean Witter, Discover & Co 620,000 50,568,750
Providian Financial 456,000 39,501,000
Total 328,813,349
Food (1.9%)
Bestfoods 384,000 17,976,000
General Mills 460,800 16,675,200
Sara Lee 763,200 13,737,600
Total 48,388,800
Health care (4.2%)
American Home Products 446,400 23,938,200
Baxter Intl 319,000 19,020,375
Mylan Laboratories 750,000 20,625,000
Pharmacia & Upjohn 345,600 20,476,800
Warner-Lambert 240,000 23,400,000
Total 107,460,375
Household products (1.3%)
Colgate-Palmolive 576,000 32,472,000
Industrial equipment & services (2.4%)
Caterpillar 192,000 7,572,000
Illinois Tool Works 432,000 23,868,000
Parker-Hannifin 720,000 29,745,000
Total 61,185,000
Insurance (4.8%)
American Intl Group 749,950 82,119,525
Aon 134,800 4,347,300
Marsh & McLennan 331,200 36,535,500
Total 123,002,325
Media (3.7%)
Adelphia Communications Cl A 168,000(b) 8,232,000
CBS 1,091,300(b) 61,794,863
MediaOne Group 288,000(b) 23,328,000
Total 93,354,863
Paper & packaging (2.3%)
American Natl Can Group 1,344,000 17,640,000
Intl Paper 945,600 40,424,400
Total 58,064,400
Retail (5.9%)
Circuit City Stores-Circuit City Group 1,065,700 64,874,488
CVS 772,800 29,028,300
Target 744,000 55,614,000
Total 149,516,788
Utilities -- electric (1.8%)
CMS Energy 30,600 554,625
Dominion Resources 275,000 10,570,313
Duke Energy 240,000 12,600,000
Edison Intl 120,000 1,987,500
FPL Group 300,000 13,818,750
New Century Energies 90,000 2,705,625
NiSource 165,000 2,784,375
Total 45,021,188
Utilities -- gas (1.1%)
Coastal 250,000 11,500,000
El Paso Energy 150,000 6,056,250
Williams Companies 250,000 10,984,375
Total 28,540,625
Utilities -- telephone (11.4%)
ALLTEL 96,000 $6,054,000
AT&T 1,176,000 66,149,999
Bell Atlantic 696,000 42,542,999
BellSouth 724,800 34,065,600
Cable & Wireless 290,000(c) 5,438,934
Deutsche Telekom 88,000(c) 7,091,728
GTE 335,600 23,827,600
MCI WorldCom 771,800(b) 34,972,187
SBC Communications 775,900 32,587,800
Sprint 87,400 5,506,200
Sprint PCS 71,000(b) 4,637,188
Telefonica de Espana ADR 79,700(b,c,e) 5,947,613
U S WEST Communications Group 254,400 18,475,800
Total 287,297,648
Total common stocks
(Cost: $2,026,229,879) $2,278,693,914
Preferred stocks (5.4%)
Issuer Shares Value(a)
Cox Communications
7.00% Cm Cv PRIDES 300,000(g) $19,050,000
CNF Trust
5.00% Cv Series A 500,000 21,250,000
Global Crossing
6.38% Cv 23,000(c,d) 2,478,250
Global TeleSystems Group
7.25% Cm Cv 143,000 5,791,500
Ingersoll-Rand
6.75% Cv PRIDES 1,000,000(g) 23,500,000
Intermedia Communications
7.00% Cm Cv Series F 259,000(b) 8,579,375
Sovereign Bancorp
7.50% Cv 492,000(b) 23,985,000
Union Pacific Capital
6.25% Cv 541,000 21,166,625
6.25% Cm Cv 270,500 10,583,313
Total preferred stocks
(Cost: $146,432,693) $136,384,063
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bond (0.1%)
Issuer Coupon Principal Value(a)
rate amount
NTL
Cv Sub Nts
<S> <C> <C> <C>
12-15-09 5.75% $2,600,000(d) $2,661,750
Total bond
(Cost: $2,753,179) $2,661,750
Short-term securities (3.4%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (1.8%)
Federal Home Loan Bank Disc Nts
05-03-00 5.83% $31,400,000 $31,228,736
05-12-00 5.84 6,300,000 6,255,057
05-26-00 5.88 900,000 891,137
Federal Home Loan Mtge Corp Disc Nt
05-12-00 6.02 3,300,000 3,276,996
Federal Natl Mtge Assn Disc Nt
06-01-00 6.01 2,400,000 2,374,291
Total 44,026,217
Commercial paper (1.6%)
Fleet Funding
05-31-00 6.09 1,000,000(f) 989,461
Heinz (HJ)
05-04-00 6.06 1,200,000 1,193,166
Pacific Gas & Electric
04-03-00 6.03 5,100,000 5,097,437
Procter & Gamble
05-01-00 5.88 10,900,000 10,845,091
05-03-00 6.05 6,600,000 6,563,579
Sheffield Receivables
06-16-00 6.16 3,600,000(f) 3,552,106
USAA Capital
05-24-00 6.09 2,400,000 2,377,931
Windmill Funding
05-25-00 6.12 11,000,000(f) 10,896,489
Total 41,515,260
Total short-term securities
(Cost: $85,567,648) $85,541,477
Total investments in securities
(Cost: $2,260,983,399)(h) $2,503,281,204
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, 2000,
the value of foreign securities represented 2.36% 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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(f) 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.
(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) At March 31, 2000, the cost of securities for federal income tax purposes
was approximately $2,261,118,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $382,892,000
Unrealized depreciation (140,729,000)
------------
Net unrealized appreciation $242,163,000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Total Return Portfolio
March 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $1,990,014,840) $2,182,218,406
Cash in bank on demand deposit 336,532
Dividends and accrued interest receivable 10,467,417
Receivable for investment securities sold 21,396,157
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 32,188
U.S. government securities held as collateral (Note 5) 26,408,250
----------
Total assets 2,240,858,950
-------------
Liabilities
Payable for investment securities purchased 8,279,057
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 5,309
Payable upon return of securities loaned (Note 5) 31,411,550
Accrued investment management services fee 29,947
Other accrued expenses 153,979
-------
Total liabilities 39,879,842
----------
Net assets $2,200,979,108
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Total Return Portfolio
Six months ended March 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 7,544,898
Interest 29,255,299
Less foreign taxes withheld (32,983)
-------
Total income 36,767,214
----------
Expenses (Note 2):
Investment management services fee 6,163,797
Compensation of board members 6,292
Custodian fees 43,400
Audit fees 15,000
Other 30,060
------
Total expenses 6,258,549
Earnings credits on cash balances (Note 2) (4,488)
------
Total net expenses 6,254,061
---------
Investment income (loss) -- net 30,513,153
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 84,035,147
Financial futures contracts (18,328,652)
Foreign currency transactions 256,372
-------
Net realized gain (loss) on investments 65,962,867
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 151,598,657
-----------
Net gain (loss) on investments and foreign currencies 217,561,524
-----------
Net increase (decrease) in net assets resulting from operations $248,074,677
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Total Return Portfolio
March 31, 2000 Sept. 30, 1999
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 30,513,153 $ 83,132,960
Net realized gain (loss) on investments 65,962,867 148,588,089
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 151,598,657 152,366,575
----------- -----------
Net increase (decrease) in net assets resulting from operations 248,074,677 384,087,624
Net contributions (withdrawals) from partners (319,908,321) (691,086,627)
------------ ------------
Total increase (decrease) in net assets (71,833,644) (306,999,003)
Net assets at beginning of period 2,272,812,752 2,579,811,755
------------- -------------
Net assets at end of period $2,200,979,108 $2,272,812,752
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Total Return Portfolio
(Unaudited as to March 31, 2000)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Total Return Portfolio (the Portfolio) is a series of Growth and Income Trust
(the Trust) and is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. Total Return
Portfolio seeks to provide maximum total return through a combination of growth
of capital and current income by investing in U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Declaration of Trust permits the Trustees to issue non-transferable
interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Illiquid securities
As of March 31, 2000, investments in securities included issues that are
illiquid which the Portfolio currently limits to 10% of net assets, at market
value, at the time of purchase. The aggregate value of such securities as of
March 31, 2000 was $4,839,658 representing 0.22% of net assets. According to
board guidelines, certain unregistered securities are determined to be liquid
and are not included within the 10% limitation specified above.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with American Express Financial Corporation (AEFC) to manage its
portfolio. Under this agreement, AEFC determines which securities will be
purchased, held or sold. The management fee is a percentage of the Portfolio's
average daily net assets in reducing percentages from 0.53% to 0.40% annually.
The fee may be adjusted upward or downward by a performance incentive adjustment
based on a comparison of the performance of Class A shares of AXP Managed
Allocation Fund to the Lipper Flexible Portfolio Fund Index. The maximum
adjustment is 0.08% of the Portfolio's average daily net assets after deducting
1% from the performance difference. If the performance difference is less than
1%, the adjustment will be zero. The adjustment increased the fee by $565,613
for the six months ended March 31, 2000.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the six months ended March 31, 2000, the Portfolio's custodian fees were
reduced by $4,488 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $1,109,996,687 and $1,162,940,538 respectively, for the
six months ended March 31, 2000. For the same period, the portfolio turnover
rate was 54%. Realized gains and losses are determined on an identified cost
basis.
Brokerage commissions paid to brokers affiliated with AEFC were $65,322 for the
six months ended March 31, 2000.
4. FOREIGN CURRENCY CONTRACTS
As of March 31, 2000, the Portfolio has foreign currency exchange contracts that
obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
April 3, 2000 17,213,240 162,339 $-- $5,309
Japanese Yen U.S. Dollar
April 3, 2000 1,096,883 115,927,407 32,188 --
U.S. Dollar Japanese Yen
Total $32,188 $5,309
5. LENDING OF PORTFOLIO SECURITIES
As of March 31, 2000, securities valued at $29,953,300 were on loan to brokers.
For collateral, the Portfolio received $5,003,300 in cash and U.S. government
securities valued at $26,408,250. Income from securities lending amounted to
$26,737 for the six months ended March 31, 2000. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
6. FUTURES CONTRACTS
As of March 31, 2000, investments in securities included securities valued at
$11,720,080 that were pledged as collateral to cover initial margin deposits on
230 open sale interest rate contracts and 590 open sale stock index contracts.
The market value of the open sale interest rate contracts as of March 31, 2000
was $22,621,250 with a net unrealized loss of $399,006. The market value of the
open sale stock index contracts as of March 31, 2000 was $181,046,750 with a net
unrealized gain of $6,996,084. See "Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Total Return Portfolio
March 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (71.7%)
Issuer Shares Value(a)
Aerospace & defense (0.7%)
<S> <C> <C>
Boeing 74,000 $2,807,375
Goodrich (BF) 46,050 1,321,059
Honeywell Intl 145,050 7,642,322
United Technologies 71,550 4,521,066
Total 16,291,822
Airlines (0.2%)
America West Holdings Cl B 42,000(b) 651,000
Amtran 27,300(b) 487,988
SkyWest 43,100 1,686,288
Southwest Airlines 106,075 2,207,685
Total 5,032,961
Automotive & related (1.4%)
Bridgestone 44,000(c) 970,636
Delphi Automotive Systems 191,024 3,056,384
DollarThrifty Automotive Group 49,200(b) 845,625
Ford Motor 204,900 9,412,593
General Motors 115,750 9,585,546
Gentex 75,800(b) 2,809,338
Smith (AO) 37,300 671,400
Tower Automotive 68,000(b) 1,113,500
Toyota Motor 46,000(c) 2,405,844
Total 30,870,866
Banks and savings & loans (3.3%)
Bank of America 224,665 11,780,871
Bank of New York 153,550 6,381,922
Banque Natl de Paris 7,276(c) 574,518
Cullen/Frost Bankers 64,700 1,710,506
Deutsche Bank 22,151(c) 1,472,390
Dime Community Bancshares 30,400 480,700
First Midwest Bancorp 26,850 651,113
Firstar 170,100 3,901,669
Flagstar Bancorp 47,400 616,200
FleetBoston Financial 274,421 10,016,367
Garanti Banking 41,045,286(b,c) 522,715
Hamilton Bancorp 38,000(b) 593,750
Hudson United Bancorp 14,111 306,032
Instituto Bancario San Paolo di Torino 138,996(c) 1,903,703
MAF Bancorp 29,700 480,769
Mellon Financial 72,700 2,144,650
NBT Bancorp 20,685 299,933
Overseas Union Bank 157,000(c) 706,216
Provident Bankshares 17,235 271,451
Queens County Bancorp 34,200 617,738
Republic Bancorp 58,410 545,768
Silicon Valley Bancshares 12,700(b) 912,813
SLM Holding 13,250 441,391
Southtrust 81,500 2,073,156
U.S. Trust 11,400 2,154,600
Uniao de Bancos Brasileiros GDR 22,000(c) 698,500
Wachovia 70,550 4,766,534
Webster Financial 22,000 506,000
Wells Fargo 324,450 13,282,171
Wilshire Financial Services Group 411,726(b) 334,527
Yapi Kredit Finance 19,050,000 509,466
Total 71,658,139
Beverages & tobacco (1.1%)
Anheuser-Busch 80,150 4,989,338
Beringer Wine Estates Holdings Cl B 22,900(b) 821,538
Canandaigua Wine Cl A 31,400(b) 1,601,400
Coca-Cola 262,300 12,311,705
Fomento Economico Mexicano ADR 14,000(c) 630,000
PepsiCo 129,800 4,486,213
Total 24,840,194
Building materials & construction (0.8%)
Dycom Inds 53,800(b) 2,622,750
Elcor 33,200 1,145,400
Florida Rock Inds 28,600 800,800
Horton (DR) 89,600 1,170,400
Insituform Technologies Cl A 39,100(b) 1,197,438
NCI Building Systems 32,400(b) 609,525
Pulte 29,400 613,725
Ryland Group 43,100 808,125
URS 50,800(b) 666,750
Weyerhaeuser 121,850 6,945,450
Total 16,580,363
Chemicals (0.7%)
Air Products & Chemicals 33,000 938,438
Asahi Chemical Inds 220,000(c) 1,403,458
Dow Chemical 48,400 5,517,599
Du Pont (EI) de Nemours 100,850 5,332,444
Engelhard 102,850 1,555,606
Geon 33,700 724,550
Total 15,472,095
Communications equipment & services (4.1%)
Adaptive Broadband 16,400(b) 877,400
Advanced Fibre Communications 7,400(b) 463,888
Aspect Communications 35,000(b) 1,297,188
C-COR Electronics 15,500(b) 759,500
China Telecom 144,000(b,c) 1,262,176
Com21 12,800(b) 601,600
CommScope 55,900(b) 2,550,438
Corsair Communications 12,000(b) 229,500
Digital Microwave 53,100(b) 1,798,763
Ericsson (LM) Cl B 55,000(c) 4,838,878
Glenayre Technologies 29,000(b) 509,313
Harmonic Lightwaves 3,000(b) 249,750
InterVoice 22,000(b) 635,250
Leap Wireless Intl 9,100(b) 898,056
Lucent Technologies 278,700(c) 16,931,024
Marconi 158,632 1,891,660
Motorola 90,650 12,906,293
Net2000 Communications 24,200(b) 574,750
Nokia 20,700(c) 4,378,445
Nortel Networks 120,600(c) 15,195,599
P-COM 68,600(b) 1,269,100
Proxim 9,700(b) 1,160,969
QUALCOMM 42,950(b) 6,412,972
Scientific-Atlanta 60,600 3,844,313
Sonera 38,416(c) 2,621,555
Spectrian 55,900(b) 1,257,750
Tellabs 75,800(b) 4,774,216
Total 90,190,346
Computers & office equipment (15.2%)
3Com 38,450(b) 2,138,781
About.com 13,400(b) 1,180,875
Acxiom 25,300(b) 841,225
ADAC Laboratories 32,800(b) 451,000
Allaire 9,800(b) 741,125
America Online 177,100(b) 11,909,974
American Management Systems 29,500(b) 1,292,469
Aspect Development 6,800(b) 437,750
Aspen Technology 24,000(b) 969,000
Automatic Data Processing 66,800 3,223,100
BindView Development 14,400(b) 447,300
BISYS Group 5,900(b) 392,350
Black Box 6,700(b) 463,870
Cabletron Systems 75,900(b) 2,224,819
Canon 36,000(c) 1,560,263
Cap Gemini 17,200(c) 4,658,780
Cisco Systems 664,700(b) 51,389,618
Citrix Systems 34,400(b) 2,279,000
Cognex 27,400(b) 1,580,638
Compaq Computer 190,450 5,070,731
Computer Associates Intl 76,850 4,548,559
Computer Sciences 58,500(b) 4,628,813
Dell Computer 246,600(b) 13,300,987
Dendrite Intl 20,800(b) 435,500
Diamond Technology Partners 9,600(b) 631,200
Electronic Data Systems 135,000 8,665,313
EMC 134,300(b) 16,787,499
Emulex 3,300(b) 360,113
Eprise 24,300(b) 382,725
FactSet Research Systems 23,200 627,850
First Data 222,300 9,836,774
Fujitsu 87,000(c) 2,669,102
go2net 3,100(b) 249,744
Hadco 17,100(b) 1,105,088
Harbinger 19,000(b) 553,375
HearMe 19,600(b) 494,900
Hewlett-Packard 127,200 16,861,949
Hitachi Software Engineering 8,000(c) 982,518
HNC Software 10,100(b) 727,831
Hyperion Solutions 27,900(b) 906,750
Informatica 6,100(b) 468,556
Insight Enterprises 15,800(b) 575,713
Intl Business Machines 119,600 14,112,799
IntraNet Solutions 20,700(b) 952,200
ISS Group 3,800(b) 442,700
Kronos 12,000(b) 355,500
Level 8 Systems 15,400(b) 719,950
Lexmark Intl Group Cl A 41,900(b) 4,430,925
Macromedia 18,200(b) 1,643,688
MarchFirst 24,800(b) 885,050
Maxtor 29,700(b) 384,244
MedQuist 43,000(b) 1,169,063
Mercury Interactive 33,900(b) 2,686,575
Micromuse 3,200(b) 444,200
MICROS Systems 10,000(b) 629,375
Microsoft 509,050(b) 54,086,562
Natl Computer Systems 20,200 1,025,150
Natl Instruments 29,000(b) 1,361,188
Netopia 7,000(b) 503,563
Network Appliance 41,700 3,450,675
New Era of Networks 5,800(b) 227,650
Novell 48,200(b) 1,379,725
NVIDIA 6,200(b) 523,803
Oracle 302,400(b) 23,606,099
OTG Software 5,400(b) 217,688
Peregrine Systems 11,000(b) 737,688
Pinnacle Systems 28,000(b) 931,000
Project Software & Development 6,400(b) 361,600
Proxicom 15,800(b) 700,138
Rare Medium Group 15,600(b) 688,350
Razorfish Cl A 8,300(b) 228,250
Remedy 28,000(b) 1,179,500
RSA Security 18,000(b) 932,625
S1 5,200(b) 445,575
Sagent Technology 15,800(b) 455,238
SanDisk 6,400(b) 784,000
SAP 2,846(c) 2,049,740
SERENA Software 25,050(b) 798,469
Solectron 155,850(b) 6,243,741
Sun Microsystems 94,700(b) 8,873,686
THQ 20,000(b) 357,500
Unisys 130,900(b) 3,337,950
Verity 24,200(b) 986,150
Xircom 10,600(b) 392,200
Yahoo! 57,450(b) 9,845,493
Zixit 4,300(b) 313,094
Total 334,933,886
Electronics (6.3%)
Alpha Inds 16,300(b) 1,548,500
Alps Electric 41,000(c) 559,844
Amkor Technology 11,900(b) 631,444
ANADIGICS 2,550(b) 168,300
Analog Devices 40,200(b) 3,238,613
Applied Materials 122,388(b) 11,535,030
Audiovox Cl A 4,900(b) 213,763
Brooks Automation 7,000(b) 437,500
Burr-Brown 17,250(b) 937,969
C&D Technologies 17,000 1,003,000
C-Cube Microsystems 18,600(b) 1,354,313
Conexant Systems 19,300(b) 1,370,300
Corning 44,270 8,588,379
Credence Systems 750(b) 93,844
CTS 14,100 803,700
Cypress Semiconductor 11,900(b) 586,819
Dallas Semiconductor 13,400 470,675
Electro Scientific Inds 27,800(b) 1,612,400
Exar 16,650(b) 1,191,516
Harman Intl Inds 23,600 1,416,000
Helix Technology 21,600 1,297,350
Hitachi 183,000(c) 2,172,652
Integrated Device Technology 10,000(b) 396,250
Intel 330,250 43,572,358
Intl Rectifier 31,300(b) 1,193,313
KEMET 18,300(b) 1,157,475
KLA-Tencor 29,200(b) 2,460,100
Kulicke & Soffa Inds 24,400(b) 1,563,125
Kyocera 8,000 1,337,034
Lam Research 11,700(b) 527,231
Lattice Semiconductor 29,200(b) 1,976,475
LSI Logic 59,100(b) 4,292,138
Matsushita Communication Industrial 10,000(c) 1,840,760
Micrel 20,000(b) 1,920,000
MRV Communications 2,000(b) 183,250
Natl Semiconductor 53,650(b) 3,252,531
Nintendo 7,000(c) 1,230,582
Photronics 6,000(b) 211,875
Power Integrations 18,200(b) 455,000
Powerwave Technologies 14,300(b) 1,787,500
Rohm 4,600(c) 1,599,416
S3 40,000(b) 840,000
Sensormatic Electronics 45,000(b) 1,009,688
Siliconix 2,000(b) 190,125
Teradyne 33,200(b) 2,730,700
Texas Instruments 90,750 14,519,999
Three-Five Systems 20,000(b) 1,200,000
TranSwitch 5,800(b) 557,525
Trimble Navigation 47,600(b) 1,225,700
TriQuint Semiconductor 4,400(b) 323,400
Varian Medical Systems 50,100(b) 2,285,813
Vicor 28,800(b) 518,400
Total 137,589,674
Energy (3.5%)
Anadarko Petroleum 51,400 1,988,538
Apache 97,400 4,845,650
Barrett Resources 43,400(b) 1,293,863
Chevron 184,600 17,063,963
Conoco Cl B 129,800 3,326,125
Exxon Mobil 342,475 26,648,835
HS Resources 45,100(b) 952,738
Newfield Exploration 34,300(b) 1,209,075
Petro-Canada 37,000(c) 615,096
Repsol-YPF 144,200(c) 3,161,896
Royal Dutch Petroleum 43,300(c) 2,492,456
Texaco 156,450 8,389,631
Tosco 65,100 1,981,481
Total Petroleum Cl B 13,952 2,089,816
Total 76,059,163
Energy equipment & services (0.3%)
Halliburton 25,400 1,041,400
Louis Dreyfus Natural Gas 30,400(b) 1,033,600
Marine Drilling 46,400(b) 1,273,100
Patterson Energy 13,800(b) 438,150
Pride Intl 97,900(b) 2,233,344
Tuboscope 61,500(b) 1,045,500
UTI Energy 14,900(b) 562,475
Total 7,627,569
Financial services (3.8%)
AmeriCredit 66,800(b) 1,089,675
Capital One Financial 93,250 4,470,172
Citigroup 403,050 23,905,902
Delphi Financial Group Cl A 27,515(b) 835,768
Fannie Mae 183,200 10,339,349
Financial Federal 43,700(b) 794,794
Jefferies Group 28,600 654,225
Kansas City Southern Inds 97,250(b) 8,357,422
Lehman Brothers Holdings 64,250 6,232,250
MBNA 316,850 8,079,675
Metris Companies 33,200 1,290,650
Morgan Stanley, Dean Witter, Discover & Co 66,050 5,387,203
Nikko Securities 92,000(c) 1,392,432
Paychex 42,900 2,246,888
Providian Financial 55,500 4,807,688
Radian Group 37,300 1,776,413
Raymond James Financial 21,900 454,425
SEI Investments 4,200 476,438
Total 82,591,369
Food (1.2%)
Bestfoods 162,050 7,585,965
Earthgrains 58,000 862,750
General Mills 106,100 3,839,494
Performance Food Group 29,600(b) 647,500
Sara Lee 337,650 6,077,700
Smithfield Foods 62,100(b) 1,242,000
Suiza Foods 16,000(b) 644,000
SUPERVALU 283,600 5,370,675
Total 26,270,084
Furniture & appliances (0.2%)
Briggs & Stratton 15,800 649,775
Furniture Brands Intl 32,000(b) 602,000
La-Z-Boy 62,900 967,088
Matsushita Electric Industrial 53,000 1,584,709
Salton 20,000(b) 867,500
Total 4,671,072
Health care (6.2%)
Abbott Laboratories 138,900 4,887,544
Affymetrix 3,100(b) 460,156
Alkermes 2,300(b) 212,750
Alpharma Cl A 32,100 1,179,675
American Home Products 100,450 5,386,631
Amgen 112,200(b) 6,886,274
Baxter Intl 119,300 7,478,618
Bio-Technology General 23,100(b) 358,050
Biomet 60,000 2,182,500
Bristol-Myers Squibb 327,400 18,907,349
Celgene 2,100(b) 209,081
Cephalon 20,000(b) 750,000
Coherent 30,600(b) 1,591,200
COR Therapeutics 8,400(b) 553,744
Diversa 8,300(b) 390,100
Enzo Biochem 14,000(b) 987,000
ENZON 5,900(b) 222,356
Gilead Sciences 3,300(b) 209,138
Glaxo Wellcome ADR 160,816(c) 4,595,833
Guidant 61,350(b) 3,608,147
Human Genome Sciences 4,000(b) 332,250
IDEC Pharmaceuticals 13,700(b) 1,346,025
Immune Response 32,800(b,h) 377,200
Incyte Pharmaceuticals 15,100(b) 1,313,700
Jones Pharma 39,900 1,211,963
Laboratory 175,000(b) 754,688
Liposome 30,500(b) 532,797
Medtronic 127,800 6,573,713
Merck & Co 77,750 4,830,219
Pfizer 577,000 21,096,562
Pharmacia & Upjohn 71,750 4,251,188
Priority Healthcare Cl B 30,650(b) 1,540,163
Protein Design Labs 10,100(b) 802,950
Quest Diagnostics 47,500(b) 1,888,125
Regeneron Pharmaceuticals 5,500(b) 162,594
Sankyo 47,000(c) 1,183,297
Schering-Plough 245,030 9,004,852
Sequenom 9,700(b) 381,938
SmithKline Beecham 152,870(c) 2,015,223
Techne 18,900(b) 1,304,100
Vertex Pharmaceuticals 18,300(b) 856,669
Warner-Lambert 138,850 13,537,874
Wesley Jessen VisionCare 23,400(b) 840,938
Total 137,195,174
Health care services (0.3%)
Abgenix 3,700(b) 511,063
Apria Healthcare Group 49,000(b) 707,438
Biopure 13,700(b) 456,381
Cerner 30,000(b) 810,000
Columbia/HCA Healthcare 83,300 2,108,531
Cytyc 18,000(b) 868,500
IntraBiotics Pharmaceuticals 16,900(b) 253,500
Patterson Dental 30,700(b) 1,174,275
Total 6,889,688
Household products (0.7%)
Colgate-Palmolive 51,500 2,903,313
Kimberly-Clark 148,450 8,313,199
Procter & Gamble 52,650 2,961,563
Valence Technology 19,700(b) 464,181
Total 14,642,256
Industrial equipment & services (0.9%)
Amada 118,000(c) 953,884
Castorama Dubois 9,500(c) 2,040,346
Deere & Co 74,700 2,838,600
Illinois Tool Works 63,650 3,516,662
Ingersoll-Rand 26,500 1,172,625
Kennametal 39,000 1,172,438
Manitowoc 32,200 871,413
Parker-Hannifin 125,950 5,203,308
Roper Inds 30,400 1,031,700
Total 18,800,976
Insurance (1.5%)
American Intl Group 173,137 18,958,501
CIGNA 46,350 3,511,012
Fidelity Natl Financial 49,200 679,575
First American Financial 34,600 490,888
Fortis 112,100(c) 2,870,031
Gallagher (Arthur J) 42,600 1,384,500
Hooper Holmes 53,000 1,818,563
LandAmerica Financial Group 17,500 339,063
Prudential 112,346(c) 1,692,968
Reinsurance Group of America 18,300 435,769
Total 32,180,870
Leisure time & entertainment (0.9%)
Aztar 150,300(b) 1,427,850
Disney (Walt) 213,900 8,850,112
EMI Group ADR 330,200(c) 3,658,953
Viacom Cl B 103,450(b) 5,456,988
Total 19,393,903
Media (1.5%)
Catalina Marketing 15,900(b) 1,609,875
CBS 134,600(b) 7,621,724
Comcast Special Cl A 131,250 5,692,969
Emmis Communications Cl A 13,100(b) 609,150
McClatchy Newspapers 23,200 759,800
MediaOne Group 72,150(b) 5,844,150
Modem Media Poppe Tyson 3,800(b) 123,025
New York Times Cl A 38,750 1,663,828
News 66,000(c) 921,543
Price Communications 37,400(b) 860,200
Radio One Cl A 5,950(b) 396,419
Scholastic 20,800(b) 1,121,900
Snyder Communications 36,900(b) 830,250
Sony 21,000(c) 2,965,668
True North Communications 24,200 951,363
Valassis Communications 49,000(b) 1,632,313
Total 33,604,177
Metals (0.5%)
Alcoa 26,900 1,889,725
Broken Hill Proprietary 68,000(c) 735,900
Mueller Inds 43,700(b) 1,327,388
Nippon Steel 577,000(c) 1,376,820
Nucor 54,150 2,707,499
Ryerson Tull 49,100 761,050
Steel Technologies 88,200 700,088
Stillwater Mining 23,600(b) 944,000
WMC 175,000(c) 683,794
Total 11,126,264
Miscellaneous (0.3%)
Apex 9,400(b) 348,975
Beasley Broadcast Group Cl A 45,900(b) 424,575
eLoyalty 25,500(b) 608,813
Epcos 3,314(b,c) 437,712
Intraware 20,400(b) 842,775
PFF Bancorp 42,000 651,000
Philadelphia Suburban 29,700 538,313
Quintus 8,000(b) 237,500
TSI Intl Software 2,400(b) 199,350
United Pan-Europe Communications 55,200(b,c) 2,579,782
ValueClick 32,700(b) 684,656
Total 7,553,451
Multi-industry conglomerates (3.7%)
Agribrands Intl 19,100(b) 750,869
Bell & Howell 18,700(b) 584,375
Bombardier Cl B 27,000(c) 677,463
Brady (WH) Cl A 52,100 1,624,869
Danaher 106,200 5,416,200
Emerson Electric 18,800 994,050
General Electric 359,200 55,743,349
Hutchison Whampoa 79,000(c) 1,425,471
NCO Group 22,450(b) 716,997
Secom 11,000(c) 942,781
Sylvan Learning Systems 45,400(b) 723,563
Tyco Intl 246,600(c) 12,299,174
Zebra Technologies Cl A 11,300(b) 565,000
Total 82,464,161
Paper & packaging (0.5%)
AptarGroup 42,800 1,142,225
Ball 11,400 394,013
Champion Intl 40,800 2,172,600
Intl Paper 128,600 5,497,649
Pope & Talbot 61,700 1,133,738
Silgan Holdings 31,600(b) 383,150
Total 10,723,375
Restaurants & lodging (0.5%)
Applebee's Intl 18,100 509,063
CEC Entertainment 38,100(b) 1,033,463
Cheesecake Factory (The) 23,600(b) 982,350
Darden Restaurants 220,200 3,922,312
Jack in the Box 24,400(b) 520,025
Ruby Tuesday 51,700 904,750
Ryan's Family Steak Houses 99,900(b) 955,294
Taco Cabana Cl A 122,300(b) 726,156
Wendy's Intl 116,550 2,352,853
Total 11,906,266
Retail (4.6%)
Ames Dept Stores 26,600(b) 653,363
AnnTaylor Stores 14,500(b) 333,500
Bed Bath & Beyond 62,950(b) 2,478,656
Best Buy 37,350(b) 3,212,100
Circuit City Stores-Circuit City Group 70,050 4,264,294
Copart 11,000(b) 192,500
Costco Wholesale 62,050(b) 3,261,503
CVS 70,250 2,638,766
FamilyMart 27,300(c) 1,350,709
Fossil 63,400(b) 1,485,938
Gap 91,300 4,547,881
Home Depot 206,700 13,332,149
Kroger 225,300(b) 3,956,831
Linens `N Things 37,400(b) 1,280,950
Lowe's Companies 70,750 4,130,031
Men's Wearhouse 59,300(b) 1,756,763
NBTY 76,600(b) 1,048,463
Pacific Sunwear of California 30,150(b) 1,160,775
Regis 44,450 658,416
Safeway 102,850(b) 4,653,962
ShopKo Stores 50,300(b) 892,825
Tandy 36,250 1,839,688
Target 67,900 5,075,524
Tesco 713,189(c) 2,370,291
TJX Companies 137,500 3,050,781
United Stationers 44,000(b) 1,570,250
Wal-Mart Stores 403,650 22,402,574
Walgreen 116,200 2,992,150
Whole Foods Market 32,000(b) 1,326,000
World Online Intl 6,198(b,c) 138,515
Zale 53,700(b) 2,533,969
Total 100,590,117
Textiles & apparel (0.1%)
Asahi Glass 89,000(c) 759,328
Brown Shoe 77,100 925,199
Dixie Group 65,400(b) 290,213
Total 1,974,740
Transportation (0.5%)
Atlas Air 30,150(b) 825,356
Burlington Northern Santa Fe 83,500 1,847,437
EGL 13,100(b) 306,213
Expeditors Intl of Washington 14,600 580,350
Landstar System 28,200(b) 1,543,950
Offshore Logistics 70,000(b) 971,250
Union Pacific 34,100 1,334,163
USFreightways 44,800 1,677,200
Werner Enterprises 53,800 914,600
Total 10,000,519
Utilities -- electric (0.6%)
AES 21,850(b) 1,720,688
Avista 16,300 664,225
Cleco 22,700 754,775
Duke Energy 33,100 1,737,750
El Paso Electric 93,900(b) 974,213
PECO Energy 58,000 2,138,749
Pinnacle West Capital 70,950 1,999,902
Public Service Co of New Mexico 42,500 669,375
Texas Utilities 49,400 1,466,563
TNP Enterprises 28,300 1,239,894
United Illuminating 22,400 879,200
Total 14,245,334
Utilities -- gas (0.3%)
BG Group 500,000(c) 2,812,048
Equitable Resources 24,800 1,111,350
New Jersey Resources 14,400 615,600
ONEOK 24,900 622,500
Piedmont Natural Gas 20,100 523,856
UGI 27,800 601,175
Total 6,286,529
Utilities -- telephone (5.3%)
AT&T 363,800 20,463,749
Bell Atlantic 246,300 15,055,088
BellSouth 177,250 8,330,750
Brightpoint 66,400(b) 813,400
COLT Telecom Group 33,000(b,c) 1,568,299
Embratel Participacoes ADR 34,000(c) 871,250
Global Crossing 49,700(b,c) 2,034,594
GTE 33,300 2,364,300
ICG Communications 16,000(b) 578,000
Intermedia Communications 960(b) 46,369
MCI WorldCom 377,762(b) 17,117,362
Nextel Communications Cl A 31,450(b) 4,662,463
Nippon Telegraph & Telephone 220(b,c) 3,492,574
Nippon Television Network 450(c) 319,503
NTT Data 37(c) 695,496
NTT Mobile Communication Network 74(c) 3,034,234
SBC Communications 269,221 11,307,282
Sprint 116,900 7,364,700
Sprint PCS 83,400(b,h) 5,447,063
Telecom Italia Mobile 182,088(c) 2,234,224
Telefonos de Mexico ADR Cl L 13,800(c) 924,600
U S WEST Communications Group 46,650 3,387,956
Vodafone AirTouch 884,469 4,907,450
Total 117,020,706
Total common stocks
(Cost: $1,345,471,810) $1,577,278,109
Preferred stocks & other (0.9%)
Issuer Shares Value(a)
Bar Technologies
Warrants 3,000 $2,625
Bell Technology
Warrants 3,410 1,619,750
Coastal
6.63 % Cv PRIDES 44,900(o) 1,271,230
Coltec Capital
5.25% Cv 13,800 501,975
Cox Communications
7.00% Cm Cv PRIDES 15,800(o) 1,003,300
CVS
6.00% Cv ACES 14,700(n) 993,169
Enron
7.00% Cv 24,700 $544,944
Georgia-Pacific Group
7.50% Cv 19,000 814,625
Global Crossing
6.38% Cv 8,800(c,d) 948,200
Global TeleSystems Group
7.25% Cm Cv 20,800 842,400
Ingersoll-Rand
6.75% Cv PRIDES 38,475(o) 904,163
Intermedia Communications
7.00% Cm Cv Series F 55,300 1,831,812
13.50% Pay-in-kind Series B 1,000(i) 940,000
Kerr-McGee
5.50% Cv 13,700 614,788
KMC Telecom Holdings
Warrants 3,000 9,000
Lincoln Natl
7.75% Cm Cv 38,950 788,738
McKesson Financing Trust
5.00% Cv 24,600 888,675
Nakornthai Strip Mill
Warrants 2,722,298 3
Paxson Communications
12.50% Pay-in-kind Exchangeable 26,881(i) 2,768,742
PLD Telekom
Warrants 6,000 270
Poland Telecom
Warrants 4,400(c) 550
Sovereign Bancorp
7.50% Cv 20,800(b) 1,014,000
Suiza Capital
5.50% Cv 28,100 962,425
Telehub Communications
Warrants 2,500 1,250
Unifi Communications
Warrants 3,000 30
Wendys Financing
5.00% Cm Cv Series A 15,800 742,600
Total preferred stocks & other
(Cost: $18,647,918) $20,009,264
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (25.4%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (5.8%)
Federal Home Loan Mtge Corp
<S> <C> <C> <C>
03-01-13 5.50% $8,978,519 $8,289,282
03-01-15 7.50 50,000,000 49,914,062
12-01-25 7.50 11,505,159 11,325,448
07-01-28 6.00 9,163,050 8,358,442
09-01-28 6.00 9,147,568 8,336,456
Federal Natl Mtge Assn
03-01-14 5.50 9,261,228 8,528,405
05-01-24 7.50 8,624,165 8,494,803
09-01-28 6.50 9,027,620 8,471,879
10-01-28 6.00 9,249,135 8,429,314
Collateralized Mtge Obligation
05-18-26 5.00 9,593,000 8,066,470
Total 128,214,561
U.S. government obligations (6.1%)
U.S. Treasury
04-30-00 6.75 32,000,000(h,k,m) 32,017,087
06-30-02 6.25 8,000,000(k,m) 7,964,462
03-31-03 5.50 1,500,000(k,m) 1,462,169
05-15-04 7.25 4,800,000 4,948,593
08-15-04 7.25 20,000,000 20,659,800
08-15-05 6.50 12,500,000 12,588,583
05-15-07 6.63 12,500,000 12,736,121
08-15-17 8.88 16,000,000 20,450,339
08-15-23 6.25 9,700,000 9,839,874
08-15-27 6.38 8,500,000 8,845,313
Total 131,512,341
Aerospace & defense (0.3%)
L-3 Communications
Sr Sub Nts Series B
05-01-07 10.38 1,035,000 1,027,238
Northrop-Grumman
03-01-16 7.75 5,000,000 4,853,137
Total 5,880,375
Automotive & related (0.4%)
Exide
Cv Sr Sub Nts
12-15-05 2.90 2,450,000(d) 1,263,416
Hayes Lemmerz Intl
Company Guaranty Series B
07-15-07 9.13 1,250,000 1,125,000
Lear
Sub Nts
07-15-06 9.50 1,800,000 1,728,000
Mascotech
Cv Sub Deb
12-15-03 4.50 1,780,000 1,314,975
MSX Intl
Company Guaranty
01-15-08 11.38 2,450,000 2,278,500
Venture Holdings Trust
Sr Nts Series B
07-01-05 9.50 1,750,000 1,513,750
Total 9,223,641
Banks and savings & loans (0.3%)
Union Planters Bank
Sub Nts
03-15-08 6.50 5,000,000 4,528,930
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 1,500,000 1,469,082
Total 5,998,012
Chemicals (0.1%)
Allied Waste North America
Company Guaranty Series B
01-01-09 7.88 1,550,000 1,232,250
Communications equipment & services (0.7%)
American Tower
Cv
02-15-10 5.00 1,053,000(d) 1,196,471
Commscope
Cv Sub Nts
12-15-06 4.00 950,000(d) 1,135,250
Corning
Cv Sub Nts
03-01-08 4.88 255,000 1,075,463
Dobson/Sygnet Communications
Sr Nts
12-15-08 12.25 1,000,000 1,030,000
EchoStar Communications
Cv Sub Nts
01-01-07 4.88 1,070,000(d) 1,801,613
EchoStar DBS
Sr Nts
02-01-09 9.38 1,000,000 965,000
GT Group Telecom
(U.S. Dollar) Zero Coupon
02-01-05 13.25 1,025,000(c,d,g) 563,750
iBasis
03-15-05 5.75 990,000 676,913
Nextel Partners
Sr Nts
03-15-10 11.00 275,000(d) 266,750
NTL
Cv Sub Nts
12-15-09 5.75 1,003,000(d) 1,026,821
NTL Communications
Zero Coupon Sr Nts Series B
10-01-03 7.87 3,625,000(g) 2,428,749
Telehub Communications
Zero Coupon Company Guaranty
07-31-01 13.88 2,500,000(g) 200,000
Versatel Telecom
(European Monetary Unit)
12-17-04 4.00 1,880,000(c,d) 2,267,178
03-30-05 4.00 630,000(c,d) 627,411
(U.S. Dollar) Sr Nts
05-15-08 13.25 1,000,000(c) 1,037,500
Total 16,298,869
Computers & office equipment (0.5%)
ASM Lithography Holdings
(U.S. Dollar) Cv
11-30-04 4.25 1,030,000(c,d) 1,266,900
Concentric Network
Sr Nts
12-15-07 12.75 3,800,000 4,047,000
Globix
Sr Nts
02-01-10 12.50 1,250,000(d) 1,150,000
Hewlett-Packard
Zero Coupon Sub Nts
10-14-17 2.46 1,580,000(f) 1,212,650
Internet Capital Group
Cv Sub Nts
12-21-04 5.50 315,000 277,200
Juniper Networks
03-15-07 4.75 1,980,000 1,965,150
PSINet
Sr Nts Series B
02-15-05 10.00 1,005,000 949,725
Silicon Graphics
Cv Sr Nts
09-01-04 5.25 1,340,000 1,003,325
Total 11,871,950
Electronics (0.5%)
Conexant Systems
Cv Sub Nts
02-01-07 4.00 870,000(d) 791,700
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 4,500,000(c,d) 4,070,164
Intel
Cv Sub Nts
09-01-04 4.00 275,000 1,192,469
Photronics
Cv Sub Nts
06-01-04 6.00 474,000 607,313
SCI Systems
03-15-07 3.00 990,000 1,104,266
Thomas & Betts
01-15-06 6.50 4,500,000 4,268,137
Total 12,034,049
Energy (0.6%)
Devon Energy
Cv Deb
08-15-08 4.90 948,000 949,185
Lodestar Holdings
Company Guaranty
05-15-05 11.50 5,000,000 950,000
Roil
(U.S. Dollar)
12-05-02 12.78 2,520,000(c,d) 2,268,000
USX
03-01-08 6.85 10,000,000 9,542,302
Total 13,709,487
Financial services (0.9%)
Arcadia Financial
Sr Nts
03-15-07 11.50 1,250,000 1,325,000
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 1,685,000(c) 1,171,075
LaBranche
03-01-07 12.00 1,000,000(d) 980,000
Providian Natl Bank
Sr Nts
03-15-03 6.70 10,000,000 9,571,354
Wilmington Trust
05-01-08 6.63 6,300,000 5,919,484
Total 18,966,913
Furniture & appliances (0.1%)
Interface
Sr Sub Nts Series B
11-15-05 9.50 2,500,000 2,212,500
Health care (0.5%)
Alkermes
Cv Sub Nts
02-15-07 3.75 495,000(d) 415,800
Alpharma
Cv Sr Sub Nts
06-01-06 3.00 580,000(j) 737,325
06-01-06 3.00 810,000 1,057,560
Baxter Intl
02-15-28 6.63 10,000,000 8,691,201
Inhale Theraptic Systems
Cv Sub Nts
02-08-07 5.00 980,000(d) 1,038,800
Total 11,940,686
Health care services (0.3%)
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 2,500,000 1,850,000
Sunrise Assisted Living
Cv Sub Nts
06-15-02 5.50 1,975,000 1,545,438
Tenet Healthcare
Sr Sub Nts Series B
12-01-08 8.13 2,750,000 2,509,375
Total 5,904,813
Insurance (0.3%)
Executive Risk Capital
Company Guaranty Series B
02-01-27 8.68 1,500,000 1,476,093
Nationwide CSN Trust
02-15-25 9.88 5,000,000(d) 5,389,065
Total 6,865,158
Leisure time & entertainment (0.5%)
AMC Entertainment
Sr Sub Nts
02-01-11 9.50 1,270,000 647,700
Time Warner
02-01-24 7.57 5,875,000 5,643,074
Sr Nts
01-15-28 6.95 5,000,000 4,472,900
Trump Atlantic City Assn/Funding
1st Mtge Company Guaranty
05-01-06 11.25 700,000 469,000
Total 11,232,674
Media (0.7%)
Australis Media
(U.S. Dollar)
11-01-00 14.00 145,084(c) 135,485
05-15-03 15.75 40,885(b,c) 409
(U.S. Dollar) Zero Coupon
05-15-03 15.75 5,000,000(b,c,g) 500
Charter Communications Holdings/Charter Capital
Sr Nts
01-15-10 10.25 1,250,000(d) 1,209,375
CSC Holdings
Sr Sub Debs
05-15-16 10.50 3,000,000 3,330,000
Getty Images
03-15-07 5.00 1,100,000(d) 888,250
Lenfest Communications
Sr Nts
02-15-08 7.63 1,500,000 1,477,140
News America Holdings
10-15-12 10.13 2,175,000 2,340,323
Telewest Communications
(British Pound) Cv
02-19-07 5.25 592,000(c,d) 1,486,831
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-04 11.54 1,250,000(c,d,g) 715,625
Veninfotel
(U.S. Dollar) Cv Pay-in-kind
03-01-02 10.00 2,734,889(c,i,j) 4,102,333
Total 15,686,271
Metals (0.1%)
EnviroSource
Sr Nts
06-15-03 9.75 530,000 333,900
Sr Nts Series B
06-15-03 9.75 1,300,000 819,000
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 2,115,569(c,d) 2,073,258
Total 3,226,158
Miscellaneous (0.7%)
Delphes 2
(U.S. Dollar)
05-05-09 7.75 2,700,000(c,d) 2,573,451
FCB/NC Capital
Company Guaranty
03-01-28 8.05 4,625,000 3,959,929
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 2,500,000(c) 2,237,500
Guangdong Enterprises
(U.S. Dollar) Sr Nts
05-22-07 8.88 2,200,000(b,c,d) 913,000
Network Associates
Zero Coupon Cv Sub Deb
02-13-18 5.43 4,740,000(f) 1,801,200
NSM Steel
Company Guaranty
02-01-06 12.00 2,060,396(b,d) 103,020
02-01-08 12.25 4,300,000(b,d) 86,000
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 1,075,000 947,344
Poland Telecom Finance
(U.S. Dollar) Company Guaranty Series B
12-01-07 14.00 4,400,000(c) 1,276,000
XM Satellite Radio
03-15-10 14.00 1,700,000(d) 1,615,000
Total 15,512,444
Multi-industry conglomerates (0.3%)
Jordan Inds
Sr Nts Series D
08-01-07 10.38 1,000,000 950,000
Metromedia Intl Group
Sr Disc Nts Series B
09-30-07 10.50 4,369,500 2,141,055
Prime Succession
Sr Sub Nts
08-15-04 10.75 980,000(b) 196,000
USI American Holdings
Sr Nts Series B
12-01-06 7.25 3,000,000 2,842,521
Total 6,129,576
Paper & packaging (0.5%)
APP China Group
(U.S. Dollar)
03-15-10 14.00 3,400,000(c,d) 2,941,000
Crown Paper
Sr Sub Nts
09-01-05 11.00 705,000 211,500
Doman Inds
(U.S. Dollar)
03-15-04 8.75 1,300,000(c) 1,059,500
Gaylord Container
Sr Nts
06-15-07 9.75 1,300,000 1,205,750
Owens-Illinois
Sr Nts
05-15-04 7.85 2,000,000 1,932,676
Repap New Brunswick
(U.S. Dollar) Sr Nts
06-01-04 9.00 1,000,000(c) 952,500
Silgan Holdings
06-01-09 9.00 2,050,000 1,980,813
Total 10,283,739
Restaurants & lodging (0.5%)
Domino's
Company Guaranty Series B
01-15-09 10.38 1,000,000 915,000
MGM Grand
02-06-08 6.88 10,000,000 9,013,694
Total 9,928,694
Retail (1.1%)
Costco Companies
Zero Coupon Cv Sub Nts
08-19-17 3.50 598,000(f) 711,620
Great Atlantic & Pacific Tea
04-15-07 7.75 10,000,000 9,218,859
Kroger
Sr Nts
07-15-06 8.15 5,000,000 5,126,861
Target
12-01-22 8.50 2,500,000 2,549,718
Wal-Mart CRAVE Trust
07-17-06 7.00 7,297,849(d) 7,067,237
Total 24,674,295
Transportation (0.6%)
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000(d) 9,255,500
Company Guaranty Medium-term Nts
01-15-06 6.95 3,000,000 2,852,394
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-07 9.50 580,000(c) 191,400
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 11.50 2,070,000(c,d) 703,800
Total 13,003,094
Utilities -- electric (0.8%)
Cleveland Electric Illuminating
07-01-00 7.19 3,000,000 2,998,941
CMS Energy
Sr Nts
05-15-02 8.13 2,900,000 2,877,313
El Paso Electric
1st Mtge Series B
05-01-01 7.75 5,000,000 5,003,591
Public Service Electric & Gas
1st & Ref Mtge (AMBAC Insured)
01-01-16 6.75 7,365,000(l) 6,897,160
Total 17,777,005
Utilities -- gas (0.2%)
Columbia Gas System
Series E
11-28-10 7.32 5,043,000 4,734,436
Utilities -- telephone (1.9%)
AT&T Canada
(U.S. Dollar) Zero Coupon Sr Disc Nts
06-15-03 9.95 3,800,000(c,g) 3,002,000
Bell Atlantic Financial Services
Cv
09-15-05 4.25 870,000(d) 1,235,391
BellSouth Capital Funding
02-15-30 7.88 4,000,000 4,050,528
COLT Telecom Group
(European Monetary Unit)
03-29-06 2.00 395,000(c,d) 893,154
Covad Comm Group
Sr Nts
02-15-10 12.00 500,000(d) 455,000
France Telecom
(European Monetary Unit) Cv
11-29-04 4.13 1,225,000(c) 1,389,350
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 2,485,000(b) 3,106
Global Crossing Holdings
(U.S. Dollar) Sr Nts
11-15-09 9.50 850,000(c,d) 820,250
Intermedia Communications
Sr Nts Series B
06-01-08 8.60 5,000,000 4,350,000
03-01-09 9.50 1,500,000 1,387,500
Level 3 Communications
03-15-08 11.00 750,000(d) 716,250
03-15-10 6.00 990,000 971,438
McLeod USA
Sr Nts
03-15-08 8.38 500,000 450,000
Nextel Communications
11-15-09 9.38 1,000,000 920,000
Cv Sr Nts
01-15-10 5.25 987,000(d) 1,175,764
Omnipoint Communications
Sr Nts
08-15-06 11.63 1,000,000 1,068,750
Primus Telecomm Group
02-15-07 5.75 1,579,000(d) 1,665,845
Qwest Communications Intl
Sr Nts Series B
11-01-08 7.25 450,000 431,174
11-01-08 7.50 4,550,000 4,473,743
Rhythms NetConnections
Sr Nts
02-15-10 14.00 500,000(d) 442,500
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-06 12.25 500,000(c) 497,500
Sprint Capital
Company Guaranty
05-01-09 6.38 3,000,000 2,766,390
U S WEST Capital Funding
Company Guaranty
07-15-28 6.88 9,250,000 8,144,984
United Pan-Europe Communications
(U.S. Dollar) Sr Nts
02-01-10 11.25 925,000(c,d) 888,000
02-01-10 11.50 550,000(c,d) 528,000
Total 42,726,617
Municipal bond (0.1%)
New Jersey Economic Development
Authority State Pension Funding
Revenue Bond (MBIA Insured)
02-15-29 7.43 3,000,000(l) 2,980,590
Total bonds
(Cost: $600,719,766) $559,761,198
Short-term securities (1.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (0.5%)
Federal Home Loan Bank Disc Nts
04-14-00 5.70% $800,000 $798,230
06-02-00 6.03 6,900,000 6,827,912
Federal Home Loan Mtge Corp Disc Nt
04-04-00 5.72 1,300,000 1,299,174
Federal Natl Mtge Assn Disc Nt
06-22-00 6.11 2,700,000 2,661,280
Total 11,586,596
Commercial paper (0.6%)
Colgate-Palmolive
04-25-00 6.03 900,000(e) 896,250
Clorox
04-06-00 5.83 3,900,000 3,896,217
Corporate Receivables
04-11-00 5.89 2,000,000(e) 1,996,382
Intl Lease Finance
04-05-00 5.80 3,400,000 3,397,195
Windmill Funding
04-05-00 5.86 3,400,000(e) 3,397,195
Total 13,583,239
Total short-term securities
(Cost: $25,175,346) $25,169,835
Total investments in securities
(Cost: $1,990,014,840)(p) $2,182,218,406
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of March 31,
2000, the value of foreign securities represented 8.80% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(h) Security is partially or fully on loan. See Note 5 to the financial
statements.
(i) Pay-in-kind securities are securities in which the issuer makes interest or
dividend payments in cash or in additional securities. The securities usually
have the same terms as the original holdings.
(j) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at March 31, 2000, is as follows:
Security Acquisition Cost
dates
Alpharma
3.00% Cv Sr Sub Nts 2006* 02-24-00 $694,109
Veninfotel
(U.S. Dollar) 10.00% Cv Pay-in-kind 2002 03-05-97 thru 03-15-00 2,604,656
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(k) Partially pledged as initial margin deposit on the following open stock
index futures (see Note 6 to the financial statements):
Type of security Contracts
Sales contracts
Russell Index, June 2000 400
S&P 500 Index, June 2000 190
(l) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
MBIA -- Municipal Bond Investors Assurance
(m) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 6 to the financial statements):
Type of security Notional amount
Sale contracts
U.S. Treasury Note, June 2000, 5-year $15,000,000
U.S. Treasury Note, June 2000, 10-year 8,000,000
(n) ACES (Automatically Convertible Equity Securities) are structured as
convertible preferred securities. Investors receive an enhanced yield but based
upon a specific formula, potential appreciation is limited. ACES pay dividends,
have voting rights, are noncallable for at least three years and upon maturity,
convert into shares of common stock.
(o) PRIDES (Preferred Redeemable Increased Dividend Equity Securities) are
structured as convertible preferred securities. Investors receive an enhanced
yield but based upon a specific formula, potential appreciation is limited.
PRIDES pay dividends, have voting rights, are noncallable for three years and
upon maturity, convert into shares of common stock.
(p) At March 31, 2000, the cost of securities for federal income tax purposes
was approximately $1,990,015,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $331,289,000
Unrealized depreciation (139,086,000)
------------
Net unrealized appreciation $192,203,000
<PAGE>
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
S-6137 E (5/00)
