-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JGzxVzsFwNpkE/EiKaxGzdF0d+Q7gG6qzfJ6o9jVuw8S9S/cPaO8R83QH6duJV9f YKApAlAZFa4uiqUkT8idfQ== 0000820027-00-000471.txt : 20000517 0000820027-00-000471.hdr.sgml : 20000517 ACCESSION NUMBER: 0000820027-00-000471 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP STOCK FUND INC CENTRAL INDEX KEY: 0000052423 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410839317 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00498 FILM NUMBER: 637067 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH ST STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712727 FORMER COMPANY: FORMER CONFORMED NAME: IDS STOCK FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INVESTORS STOCK FUND INC DATE OF NAME CHANGE: 19831221 N-30D 1 AXP (SM) Stock Fund 2000 SEMIANNUAL REPORT American Express (R) Fund (icon of) magnifying glass AXP Stock Fund seeks to provide shareholders with current income and growth of capital. AMERICAN EXPRESS (R) Big Names, Big Business While some investors like to strive for the potentially outstanding returns that can be generated by stocks of newer companies, others are more comfortable with the usually steadier performance provided by stocks of more established businesses. AXP Stock Fund focuses on stocks in the latter group, many of which long ago made their marks in American enterprise and, in some cases, also have a strong international business presence. These stocks offer the potential dual benefit of growth along with a steady stream of dividend income. CONTENTS From the Chairman 3 From the Portfolio Manager 3 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 16 Notes to Financial Statements (Portfolio) 19 Investments in Securities 24 (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board The financial markets have always had their ups and downs, but in recent months volatility has become more frequent and intense. While no one can say with certainty what the markets will do, American Express Financial Corporation, the Fund's investment manager, expects economic growth to continue this year, accompanied by a modest rise in long-term interest rates. But no matter what transpires, this is a great time to take a close look at your goals and investments. We encourage you to: o Consult a professional investment advisor who can help you cut through mountains of data. o Set financial goals that extend beyond those achievable through retirement plans of your employer. o Learn as much as you can about your current investments. The portfolio manager's letter that follows provides a review of the Fund's investment strategies and performance. The semiannual report contains other valuable information as well. The Fund's prospectus describes its investment objectives and how it intends to achieve those objectives. As experienced investors know, information is vital to making good investment decisions. So, take a moment and decide again whether the Fund's investment objectives and management style fit with your other investments to help you reach your financial goals. And make it a practice on a regular basis to assess your investment options. Sincerely, Arne H. Carlson (picture of) G. Michael Kennedy G. Michael Kennedy Portfolio Manager From the Portfolio Manager AXP Stock Fund was well positioned to take advantage of an overall strong period for stocks, ultimately generating a total of return of 22.85% (excluding the sales charge) 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. A FAST FINISH 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. 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 Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2000 $28.69 Sept. 30, 1999 $26.14 Increase $ 2.55 Distributions -- Oct. 1, 1999 - March 31, 2000 From income $ 0.08 From capital gains $ 3.13 Total distributions $ 3.21 Total return* +22.85%** Class B -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2000 $28.45 Sept. 30, 1999 $25.97 Increase $ 2.48 Distributions -- Oct. 1, 1999 - March 31, 2000 From income $ -- From capital gains $ 3.13 Total distributions $ 3.13 Total return* +22.39%** Class Y -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2000 $28.69 Sept. 30, 1999 $26.14 Increase $ 2.55 Distributions -- Oct. 1, 1999 - March 31, 2000 From income $ 0.10 From capital gains $ 3.13 Total distributions $ 3.23 Total return* +22.93%** *Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested. The 10 Largest Holdings Percent Value (of net assets) (as of March 31, 2000) Microsoft 4.52% $233,749,999 General Electric 3.60 186,225,000 Cisco Systems 3.59 185,550,000 Corning 3.38 174,600,000 Texas Instruments 3.10 160,000,000 Intel 2.81 145,131,250 American Intl Group 2.40 123,803,438 Oracle 2.27 117,093,750 Nokia ADR Cl A 2.10 108,625,000 Wal-Mart Stores 1.93 99,900,000 For further detail about these holdings, please refer to the section entitled "Investments in Securities." The 10 holdings listed here make up 29.70% of net assets (icon of) pie chart
Financial Statements Statement of assets and liabilities AXP Stock Fund, Inc. March 31, 2000 (Unaudited) Assets Investments in Equity Portfolio (Note 1) $5,166,834,031 Liabilities Accrued distribution fee 37,398 Accrued service fee 2,990 Accrued transfer agency fee 11,627 Accrued administrative services fee 3,746 Other accrued expenses 352,641 ------- Total liabilities 408,402 ------- Net assets applicable to outstanding capital stock $5,166,425,629 ============== Represented by Capital stock-- $.01 par value (Note 1) $ 1,802,097 Additional paid-in capital 3,301,790,303 Undistributed net investment income 906,223 Accumulated net realized gain (loss) 259,348,272 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,602,578,734 ------------- Total -- representing net assets applicable to outstanding capital stock $5,166,425,629 ============== Net assets applicable to outstanding shares: Class A $3,644,064,164 Class B $ 441,734,589 Class Y $1,080,626,876 Net asset value per share of outstanding capital stock: Class A shares 127,019,504 $ 28.69 Class B shares 15,529,337 $ 28.45 Class Y shares 37,660,877 $ 28.69 See accompanying notes to financial statements.
Statement of operations AXP Stock Fund, Inc. Six months ended March 31, 2000 (Unaudited) Investment income Income: Dividends $ 28,296,259 Interest 5,822,091 Less foreign taxes withheld (50,843) ------- Total income 34,067,507 ---------- Expenses (Note 2): Expenses allocated from Equity Portfolio 11,862,546 Distribution fee Class A 4,262,807 Class B 1,981,917 Transfer agency fee 2,018,950 Incremental transfer agency fee Class A 117,469 Class B 44,302 Service fee-- Class Y 527,844 Administrative services fees and expenses 656,404 Compensation of board members 6,292 Printing and postage 117,135 Registration fees 75,414 Audit fees 5,125 Other 11,983 ------ Total expenses 21,688,188 Earnings credits on cash balances (Note 2) (148,358) -------- Total net expenses 21,539,830 ---------- Investment income (loss) -- net 12,527,677 Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 270,180,760 Foreign currency transactions (29,794) ------- Net realized gain (loss) on investments 270,150,966 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 715,188,233 ----------- Net gain (loss) on investments and foreign currencies 985,339,199 ----------- Net increase (decrease) in net assets resulting from operations $997,866,876 ============ See accompanying notes to financial statements.
Statements of changes in net assets AXP Stock Fund, Inc. March 31, 2000 Sept. 30, 1999 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss)-- net $ 12,527,677 $ 40,255,995 Net realized gain (loss) on investments 270,150,966 510,453,388 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 715,188,233 169,648,445 ----------- ----------- Net increase (decrease) in net assets resulting from operations 997,866,876 720,357,828 ----------- ----------- Distributions to shareholders from: Net investment income Class A (9,412,003) (28,984,586) Class B -- (727,808) Class Y (3,616,311) (11,296,077) Net realized gain Class A (366,196,061) (231,636,044) Class B (42,601,015) (22,611,501) Class Y (112,206,614) (85,949,857) ------------ ----------- Total distributions (534,032,004) (381,205,873) ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 96,781,491 185,607,226 Class B shares 49,299,274 97,231,333 Class Y shares 123,839,599 228,149,726 Reinvestment of distributions at net asset value Class A shares 344,079,242 238,871,722 Class B shares 42,094,054 23,120,523 Class Y shares 103,757,569 87,032,183 Payments for redemptions Class A shares (223,698,481) (334,985,548) Class B shares (Note 2) (34,882,044) (48,879,891) Class Y shares (315,609,496) (366,362,193) ------------ ------------ Increase (decrease) in net assets from capital share transactions 185,661,208 109,785,081 ----------- ----------- Total increase (decrease) in net assets 649,496,080 448,937,036 Net assets at beginning of period 4,516,929,549 4,067,992,513 ------------- ------------- Net assets at end of period $5,166,425,629 $4,516,929,549 ============== ============== Undistributed net investment income $ 906,223 $ 1,406,860 -------------- -------------- See accompanying notes to financial statements.
Notes to Financial Statements AXP Stock Fund, Inc. (Unaudited as to March 31, 2000) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Fund has 10 billion authorized shares of capital stock. The Fund offers Class A, Class B and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge and automatically convert to Class A shares during the ninth calendar year of ownership. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Equity Portfolio The Fund invests all of its assets in Equity Portfolio (the Portfolio), a series of Growth and Income Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in common stocks and securities convertible into common stocks. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of March 31, 2000 was 99.97%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. Dividends to shareholders Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with American Express Financial Corporation (AEFC) to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.04% to 0.02% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19 o Class B $20 o Class Y $17 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B shares. Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $1,271,974 for Class A and $185,620 for Class B for the six months ended March 31, 2000. During the six months ended March 31, 2000, the Fund's transfer agency fees were reduced by $148,358 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows: Six months ended March 31, 2000 Class A Class B Class Y Sold 3,546,640 1,807,666 4,509,030 Issued for reinvested distributions 12,742,589 1,573,849 3,845,511 Redeemed (8,058,175) (1,276,588) (11,379,124) ---------- ---------- ----------- Net increase (decrease) 8,231,054 2,104,927 (3,024,583) Year ended Sept. 30, 1999 Class A Class B Class Y Sold 6,892,360 3,642,250 8,518,604 Issued for reinvested distributions 9,237,814 901,335 3,365,176 Redeemed (12,452,760) (1,828,161) (13,675,361) ----------- ---------- ----------- Net increase (decrease) 3,677,414 2,715,424 (1,791,581) 4. BANK BORROWINGS The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had no borrowings outstanding during the six months ended March 31, 2000.
5. FINANCIAL HIGHLIGHTS The tables below show certain important finanicial information for evaluating the Fund's results. Fiscal period ended Sept. 30, Per share income and capital changesa Class A 2000b 1999 1998 1997 1996c Net asset value, beginning of period $26.14 $24.18 $27.44 $22.49 $19.96 Income from investment operations: Net investment income (loss) .07 .24 .29 .39 .43 Net gains (losses) (both realized and unrealized) 5.69 4.00 .22 6.11 3.17 Total from investment operations 5.76 4.24 .51 6.50 3.60 Less distributions: Dividends from net investment income (.08) (.24) (.30) (.43) (.39) Distributions from realized gains (3.13) (2.04) (3.47) (1.12) (.68) Total distributions (3.21) (2.28) (3.77) (1.55) (1.07) Net asset value, end of period $28.69 $26.14 $24.18 $27.44 $22.49 Ratios/supplemental data Net assets, end of period (in millions) $3,644 $3,105 $2,783 $2,877 $2,307 Ratio of expenses to average daily net assetsd .86%e .82% .77% .78% .80%e Ratio of net investment income (loss) to average daily net assets .54%e .90% 1.14% 1.58% 2.19%e Portfolio turnover rate (excluding short-term securities) 22% 76% 79% 82% 71% Total returnf 22.85% 17.71% 2.04% 30.22% 18.60% a For a share outstanding throughout the period. Rounded to the nearest cent. b Six months ended March 31, 2000 (Unaudited). c The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996. d Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. e Adjusted to an annual basis. f Total return does not reflect payment of a sales charge.
Fiscal period ended Sept. 30, Per share income and capital changesa Class B Class Y 2000b 1999 1998 1997 1996c 2000b 1999 1998 1997 1996c Net asset value, beginning of period $25.97 $24.05 $27.32 $22.42 $19.91 $26.14 $24.18 $27.44 $22.49 $19.96 Income from investment operations: Net investment income (loss) -- .06 .10 .22 .28 .10 .27 .31 .42 .47 Net gains (losses) (both realized and unrealized) 5.61 3.96 .21 6.05 3.17 5.68 4.00 .22 6.11 3.17 Total from investment operations 5.61 4.02 .31 6.27 3.45 5.78 4.27 .53 6.53 3.64 Less distributions: Dividends from net investment income -- (.06) (.11) (.25) (.26) (.10) (.27) (.32) (.46) (.43) Distributions from realized gains (3.13) (2.04) (3.47) (1.12) (.68) (3.13) (2.04) (3.47) (1.12) (.68) Total distributions (3.13) (2.10) (3.58) (1.37) (.94) (3.23) (2.31) (3.79) (1.58) (1.11) Net asset value, end of period $28.45 $25.97 $24.05 $27.32 $22.42 $28.69 $26.14 $24.18 $27.44 $22.49 Ratios/supplemental data Net assets, end of period (in millions) $442 $349 $258 $203 $107 $1,081 $1,063 $1,027 $1,082 $870 Ratio of expenses to average daily net assetsd 1.63%e 1.59% 1.53% 1.55% 1.57%e .71%e .72% .70% .66% .63%e Ratio of net investment income (loss) to average daily net assets (.22%)e .12% .39% .85% 1.61%e .70%e 1.00% 1.21% 1.71% 2.36%e Portfolio turnover rate (excluding short-term securities) 22% 76% 79% 82% 71% 22% 76% 79% 82% 71% Total returnf 22.39% 16.81% 1.27% 29.23% 17.78% 22.93% 17.81% 2.12% 30.38% 18.79% a For a share outstanding throughout the period. Rounded to the nearest cent. b Six months ended March 31, 2000 (Unaudited). c The Fund's fiscal year-end was changed from Oct. 31 to Sept. 30, effective 1996. d Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. e Adjusted to an annual basis. f Total return does not reflect payment of a sales charge.
Financial Statements Statement of assets and liabilities Equity Portfolio March 31, 2000 (Unaudited) Assets Investments in securities, at value (Note 1): (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.
Statement of operations Equity Portfolio Six months ended March 31, 2000 (Unaudited) Investment income Income: 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.
Statements of changes in net assets Equity Portfolio March 31, 2000 Sept. 30, 1999 Six month ended Year ended (Unaudited) Operations 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.
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.
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%) 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 Bonds (4.2%) Issuer Coupon Principal Value(a) rate amount COLT Telecom Group (European Monetary Unit) Cv 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.
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 American Express(R) Funds AXP Stock Fund 200 AXP Financial Center Minneapolis, MN 55474 TICKER SYMBOL Class A: INSTX Class B: IDSBX Class Y: IDSYX PRSRT STD AUTO U.S. POSTAGE PAID AMERICAN EXPRESS AMERICAN EXPRESS (R) S-6365 P (5/00) 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. -----END PRIVACY-ENHANCED MESSAGE-----