-----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, NPsE3dJvnQA+9YvQj4GREZBwV0CYDyU5g3O3UlAk1WfexoO5pwirSG9YXD+t1kNy K0DX81vZ++ZH/cEzDVztkA== 0000820027-00-000025.txt : 20000202 0000820027-00-000025.hdr.sgml : 20000202 ACCESSION NUMBER: 0000820027-00-000025 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS EXTRA INCOME FUND INC CENTRAL INDEX KEY: 0000728374 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411458705 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03848 FILM NUMBER: 509316 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123722772 N-30D 1 AXP(SM) Extra Income Fund 1999 SEMIANNUAL REPORT American Express (R) Funds (icon of) clock AXP Extra Income Fund seeks to provide shareholders with high current income as its primary goal and, as its secondary goal, capital growth. Bonds with Something Extra Bonds aren't necessarily conservative securities strictly for people willing to settle for modest returns. High-yield corporate bonds, for example, are actually quite aggressive investments, offering high potential returns to investors willing to take more risk. These are the bonds that AXP Extra Income Fund invests in. High-yield bonds are issued by a wide range of companies -- from well-established ones that might be experiencing financial difficulty to new, rapidly growing ones that have yet to build a credit history. Importantly, the Fund spreads its investments among many bonds representing many types of businesses. This helps to spread the investment risk for shareholders. Contents From the Chairman 3 From the Portfolio Manager 4 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 17 Notes to Financial Statements (Portfolio) 20 Investments in Securities 24 (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board From the Chairman We are in an extraordinary period for investing in financial assets, with many stocks at their all-time highs. Looking at year 2000, American Express Financial Corporation, the Fund's investment manager, expects the economy to continue to grow and long-term interest rates to rise only slightly. This is a great time to take a close look at your goals and investments. We encourage you to: o Consult a professional investment adviser who can help you cut through mountains of data. o Set financial goals that extend beyond those achievable through retirement plans of your employer. o Learn as much as you can about your current investments. The portfolio manager's letter that follows provides a review of the Fund's investment strategies and performance. The annual report contains other valuable information as well. The Fund's prospectus describes its investment objectives and how it intends to achieve those objectives. As experienced investors know, information is vital to making good investment decisions. So, take a moment and decide again whether the Fund's investment objectives and management style fit with your other investments to help you reach your financial goals. And make it a practice on a regular basis to assess your investment options. Sincerely, Arne H. Carlson (picture of) Jack Utter Jack Utter Portfolio manager From the Portfolio Manager The bond market struggled for much of the past six months amid concerns about inflation and rising interest rates. Although high-yield issues fared better than most sectors of the market, an overall decline in prices resulted in AXP Extra Income Fund's Class A shares (excluding the sales charge) experiencing a loss of 0.57% on a total return basis for the first half of the fiscal year -- June through November 1999. The period got off to a reasonably good start, though, as the economy continued to chug along with little sign of higher inflation. Thanks in part to strength in its telecommunications and paper/forest products holdings, the Fund produced positive results through mid-summer. But the tone of the bond market changed abruptly about that time, as investors, prompted by a hike in short-term interest rates by the Federal Reserve Board (the Fed), became increasingly worried that higher inflation and still-higher interest rates might lie ahead. That concern was reinforced by another Fed rate hike in late August. While high-yield bonds suffered less from the rise in rates than did some sectors of the market, a substantial supply of new issues and a drop-off in demand on the part of investors in high-yield mutual funds kept downward pressure on prices through October. A LATE RALLY Still, the period did end on an encouraging note, as news of still-tame inflation finally boosted investors' spirits. For the Fund, the result was a sharp rebound in November, which proved to be its strongest month of the period. As I look toward the new fiscal year, with economic growth showing no sign of slacking off, I think the Fed may decide to push short-term interest rates somewhat higher in the months ahead to avoid a run-up in inflation. Nevertheless, while that almost surely would present a near-term problem for the bond market, I think it might ultimately lead to better performance as the period progresses. Beyond that, because high-yield bonds currently offer above-average investment value, I think they have the potential to attract increased interest from investors and, therefore, could enjoy improved price support. Jack Utter Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) Nov. 30, 1999 $3.76 May 31, 1999 $3.97 Decrease $0.21 Distributions -- June 1, 1999 - Nov. 30, 1999 From income $0.18 From capital gains $ -- Total distributions $0.18 Total return* -0.57%** Class B -- 6-month performance (All figures per share) Net asset value (NAV) Nov. 30, 1999 $3.76 May 31, 1999 $3.97 Decrease $0.21 Distributions -- June 1, 1999 - Nov. 30, 1999 From income $0.17 From capital gains $ -- Total distributions $0.17 Total return* -0.95%** Class Y -- 6-month performance (All figures per share) Net asset value (NAV) Nov. 30, 1999 $3.76 May 31, 1999 $3.97 Decrease $0.21 Distributions -- June 1, 1999 - Nov. 30, 1999 From income $0.19 From capital gains $ -- Total distributions $0.19 Total return* -0.54%** *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 Nov. 30, 1999) EchoStar DBS 9.38% 2009 1.13% $41,271,344 CSC Holdings 11.13% Pay-in-kind Series M Preferred 1.04 37,831,889 Outsourcing Solutions 11.00% 2006 .99 36,273,149 NTL 11.40% 2001 .98 35,800,000 AMFM 8.00% 2008 .98 35,638,874 Warren (SD) 14.00% 2006 .87 31,706,045 Nextel Partners 13.78% 2004 .86 31,254,749 Arcadia Financial 11.50% 2007 .83 30,448,200 Gaylord Container 9.88% 2008 .78 28,518,750 NTL 13.00% Pay-in-kind Series B Preferred .78 28,452,602 For further detail about these holdings, please refer to the section entitled "Investments in Securities." (icon of) pie chart The 10 holdings listed here make up 9.24% of net assets
Financial Statements Statement of assets and liabilities AXP Extra Income Fund, Inc. Nov. 30, 1999 (Unaudited) Assets Investments in High Yield Portfolio (Note 1) $3,651,363,506 -------------- Liabilities Dividends payable to shareholders 7,719,865 Accrued distribution fee 46,297 Accrued service fee 3 Accrued transfer agency fee 21,730 Accrued administrative services fee 4,325 Other accrued expenses 341,969 ------- Total liabilities 8,134,189 --------- Net assets applicable to outstanding capital stock $3,643,229,317 ============== Represented by Capital stock-- $.01 par value (Note 1) $ 9,700,103 Additional paid-in capital 4,362,502,381 Undistributed net investment income 4,166,258 Accumulated net realized gain (loss) (296,448,402) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (436,691,023) ------------ Total -- representing net assets applicable to outstanding capital stock $3,643,229,317 ============== Net assets applicable to outstanding shares: Class A $2,609,626,524 Class B $1,032,678,149 Class Y $ 924,644 Net asset value per share of outstanding capital stock: Class A shares 694,795,288 $ 3.76 Class B shares 274,968,994 $ 3.76 Class Y shares 246,059 $ 3.76 ------- -------------- See accompanying notes to financial statements.
Statement of operations AXP Extra Income Fund, Inc. Six months ended Nov. 30, 1999 (Unaudited) Investment income Income: Dividends $ 22,300,181 Interest 185,773,971 ----------- Total income 208,074,152 ----------- Expenses (Note 2): Expenses allocated from High Yield Portfolio 10,927,285 Distribution fee Class A 2,821,867 Class B 5,135,998 Transfer agency fee 2,034,657 Incremental transfer agency fee Class A 161,302 Class B 106,593 Service fee Class A 426,464 Class B 165,511 Class Y 571 Administrative services fees and expenses 833,338 Compensation of board members 5,578 Printing and postage 321,470 Registration fees 108,044 Audit fees 5,750 Other 4,678 ----- Total expenses 23,059,106 Earnings credits on cash balances (Note 2) (74,705) ------- Total net expenses 22,984,401 ---------- Investment income (loss) -- net 185,089,751 ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (71,632,319) Foreign currency transactions (3,631,875) ---------- Net realized gain (loss) on investments (75,264,194) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (140,219,970) ------------ Net gain (loss) on investments (215,484,164) ------------ Net increase (decrease) in net assets resulting from operations $ (30,394,413) ============== See accompanying notes to financial statements.
Statements of changes in net assets AXP Extra Income Fund, Inc. Nov. 30, 1999 May 31, 1999 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss)-- net $ 185,089,751 $ 373,495,853 Net realized gain (loss) on investments (75,264,194) (127,843,804) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (140,219,970) (413,763,674) ------------ ------------ Net increase (decrease) in net assets resulting from operations (30,394,413) (168,111,625) ----------- ------------ Distributions to shareholders from: Net investment income Class A (133,648,471) (296,255,921) Class B (47,982,538) (98,359,518) Class Y (55,680) (162,431) ------- -------- Total distributions (181,686,689) (394,777,870) ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 302,109,472 804,097,401 Class B shares 164,890,662 467,391,217 Class Y shares 217,368 648,414 Reinvestment of distributions at net asset value Class A shares 86,532,786 202,831,655 Class B shares 37,952,109 83,023,420 Class Y shares 54,009 162,431 Payments for redemptions Class A shares (440,558,597) (888,843,613) Class B shares (Note 2) (186,791,529) (374,265,469) Class Y shares (525,410) (1,139,232) -------- ---------- Increase (decrease) in net assets from capital share transactions (36,119,130) 293,906,224 ----------- ----------- Total increase (decrease) in net assets (248,200,232) (268,983,271) Net assets at beginning of period 3,891,429,549 4,160,412,820 ------------- ------------- Net assets at end of period $3,643,229,317 $3,891,429,549 ============== ============== Undistributed net investment income $ 4,166,258 $ 763,196 -------------- -------------- See accompanying notes to financial statements.
Notes to Financial Statements AXP Extra Income Fund, Inc. (Unaudited as to Nov. 30, 1999) 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) differs 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 High Yield Portfolio The Fund invests all of its assets in the High Yield Portfolio (the Portfolio), a series of Income Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in long-term corporate bonds in the lower-rating categories, commonly known as junk bonds. 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 Nov. 30, 1999 was 99.95%. 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 generally accepted accounting principles 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 daily and paid monthly, 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 0.05% to 0.025% 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 $19.50 o Class B $20.50 o Class Y $17.50 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 Plan), 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. The Plan went into effect July 1, 1999. Under terms of a prior Plan and Agreement of Distribution (the Prior Plan) that ended June 30, 1999, the Fund paid a distribution fee for Class B shares at an annual rate up to 0.75% of average daily net assets. The Prior Plan was not effective with respect to Class A 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. Under terms of a prior agreement that ended June 30, 1999, the Fund paid a shareholder service fee for Class A and Class B shares at a rate of 0.175% of average daily net assets. Effective July 1, 1999, the agreement for Class A and Class B shares was converted to the Plan and Agreement of Distribution discussed above. Sales charges received by the Distributor for distributing Fund shares were $10,648,566 for Class A and $1,432,177 for Class B for the six months ended Nov. 30, 1999. During the six months ended Nov. 30, 1999, the Fund's transfer agency fees were reduced by $74,705 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 Nov. 30, 1999 Class A Class B Class Y Sold 78,194,070 42,624,169 55,777 Issued for reinvested distributions 22,481,976 9,865,109 14,009 Redeemed (114,183,147) (48,416,831) (136,465) ------------ ----------- -------- Net increase (decrease) (13,507,101) 4,072,447 (66,679) Year ended May 31, 1999 Class A Class B Class Y Sold 196,364,147 113,211,748 159,985 Issued for reinvested distributions 49,792,206 20,406,881 39,979 Redeemed (217,533,478) (91,218,686) (284,954) ------------ ----------- -------- Net increase (decrease) 28,622,875 42,399,943 (84,990) 4. CAPITAL LOSS CARRYOVER For federal income tax purposes, the Fund has a capital loss carryover of $220,674,753 as of May 31, 1999, that if not offset by subsequent capital gains, will expire in 2000 through 2008. It is unlikely the board will authorize a distribution of any net realized gains until the available capital loss carryover has been offset or expires. 5. 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 Nov. 30, 1999.
6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. Fiscal period ended May 31, Per share income and capital changesa Class A 1999c 1999 1998 1997 1996b Net asset value, beginning of period $3.97 $4.58 $4.39 $4.34 $4.15 Income from investment operations: Net investment income (loss) .19 .40 .40 .39 .28 Net gains (losses) (both realized and unrealized) (.22) (.58) .17 .06 .20 Total from investment operations (.03) (.18) .57 .45 .48 Less distributions: Dividends from net investment income (.18) (.43) (.38) (.40) (.29) Net asset value, end of period $3.76 $3.97 $4.58 $4.39 $4.34 Ratios/supplemental data Net assets, end of period (in millions) $2,610 $2,814 $3,112 $2,582 $2,145 Ratio of expenses to average daily net assetsd .99%e .91% .89% .92% .94%e Ratio of net investment income (loss) to average daily net assets 9.84%e 9.86% 8.90% 9.01% 8.90%e Portfolio turnover rate (excluding short-term securities) 19% 47% 81% 92% 61% Total returnf (.57%) (3.67%) 13.24% 10.92% 11.73% a For a share outstanding throughout the period. Rounded to the nearest cent. b The Fund's fiscal year-end was changed from Aug. 31 to May 31, effective 1996. c Six months ended Nov. 30, 1999 (Unaudited). d Effective fiscal year 1996, 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 May 31, Per share income and capital changesa Class B Class Y 1999c 1999 1998 1997 1996b 1999c 1999 1998 1997 1996b Net asset value, beginning of period $3.97 $4.58 $4.39 $4.34 $4.15 $3.97 $4.58 $4.39 $4.34 $4.15 Income from investment operations: Net investment income (loss) .17 .37 .37 .36 .25 .19 .41 .41 .40 .28 Net gains (losses) (both realized and unrealized) (.21) (.58) .16 .06 .20 (.21) (.59) .16 .06 .20 Total from investment operations (.04) (.21) .53 .42 .45 (.02) (.18) .57 .46 .48 Less distributions: Dividends from net investment income (.17) (.40) (.34) (.37) (.26) (.19) (.43) (.38) (.41) (.29) Net asset value, end of period $3.76 $3.97 $4.58 $4.39 $4.34 $3.76 $3.97 $4.58 $4.39 $4.34 Ratios/supplemental data Net assets, end of period (in millions) $1,033 $1,076 $1,046 $613 $270 $1 $1 $2 $-- $-- Ratio of expenses to average daily net assetsd 1.74%e 1.67% 1.65% 1.68% 1.70%e .83%e .83% .82% .85% .76%e Ratio of net investment income (loss) to average daily net assets 9.11%e 9.11% 8.23% 8.18% 8.34%e 9.76%e 9.93% 10.07% 8.68% 8.24%e Portfolio turnover rate (excluding short-term securities) 19% 47% 81% 92% 61% 19% 47% 81% 92% 61% Total returnf (.95%) (4.39%) 12.42% 10.07% 11.10% (.54%) (3.58%) 13.42% 11.05% 11.83% a For a share outstanding throughout the period. Rounded to the nearest cent. b The Fund's fiscal year-end was changed from Aug. 31 to May 31, effective 1996. c Six months ended Nov. 30, 1999 (Unaudited). d Effective fiscal year 1996, 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 High Yield Portfolio Nov. 30, 1999 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $4,035,222,769) $3,582,460,337 Accrued interest and dividends receivable 91,065,797 Receivable for investment securities sold 80,245 ------ Total assets 3,673,606,379 ------------- Liabilities Disbursement in excess of cash on demand deposit 415,268 Payable for investment securities purchased 20,075,599 Accrued investment management services fee 55,767 ------ Total liabilities 20,546,634 ---------- Net assets $3,653,059,745 ============== See accompanying notes to financial statements.
Statement of operations High Yield Portfolio Six months ended Nov. 30, 1999 (Unaudited) Investment income Income: Dividends $ 22,201,859 Interest 185,999,071 ----------- Total income 208,200,930 ----------- Expenses (Note 2): Investment management services fee 10,703,078 Compensation of board members 8,221 Custodian fees 76,100 Audit fees 17,250 Other 204,951 ------- Total expenses 11,009,600 Earnings credits on cash balances (Note 2) (77,392) ------- Total net expenses 10,932,208 ---------- Investment income (loss) -- net 197,268,722 ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (71,669,176) Foreign currency transactions (3,633,441) ---------- Net realized gain (loss) on investments (75,302,617) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (140,281,232) ------------ Net gain (loss) on investments (215,583,849) ------------ Net increase (decrease) in net assets resulting from operations $ (18,315,127) ============= See accompanying notes to financial statements.
Statements of changes in net assets High Yield Portfolio Nov. 30, 1999 May 31, 1999 Six months ended Year ended (Unaudited) Operations Investment income (loss)-- net $ 197,268,722 $ 394,989,832 Net realized gain (loss) on investments (75,302,617) (127,910,210) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (140,281,232) (413,949,530) ------------ ------------ Net increase (decrease) in net assets resulting from operations (18,315,127) (146,869,908) Net contributions (withdrawals) from partners (223,222,018) (122,534,167) ------------ ------------ Total increase (decrease) in net assets (241,537,145) (269,404,075) Net assets at beginning of period 3,894,596,890 4,164,000,965 ------------- ------------- Net assets at end of period $3,653,059,745 $3,894,596,890 ============== ============== See accompanying notes to financial statements.
Notes to Financial Statements High Yield Portfolio (Unaudited as to Nov. 30, 1999) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES High Yield Portfolio (the Portfolio) is a series of Income Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests primarily in long-term corporate bonds in the lower-rating categories, commonly known as junk bonds. 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 options on debt securities or futures are exercised, the Portfolio will realize a gain or loss. When other options are 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 Nov. 30, 1999, 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 Nov. 30, 1999 was $64,118,063 representing 1.8% 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. 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 0.59% to 0.465% annually. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. During the six months ended Nov. 30, 1999, the Portfolio's custodian fees were reduced by $77,392 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 $678,098,198 and $747,520,445, respectively, for the six months ended Nov. 30, 1999. For the same period, the portfolio turnover rate was 19%. Realized gains and losses are determined on an identified cost basis.
Investments in Securities High Yield Portfolio Nov. 30, 1999 (Unaudited) (Percentages represent value of investments compared to net assets) Bonds (84.6%) Issuer Coupon Principal Value(a) rate amount Government obligations (--%) Govt of Algeria (U.S. Dollar) 03-04-00 7.06% $522,727(c) $512,273 Mortgage-backed securities (0.1%) Federal Home Loan Mtge Corp 08-01-17 7.50 2,820(e) 2,864 Merrill Lynch Mtge Investors 06-15-21 7.88 4,657,548 4,228,180 Total 4,231,044 Aerospace & defense (1.6%) BE Aerospace Sr Sub Nts Series B 03-01-08 8.00 10,200,000 8,440,500 Compass Aerospace Sr Sub Nts 04-15-05 10.13 11,335,000(d) 8,104,525 Fairchild Company Guaranty 04-15-09 10.75 19,550,000 16,617,500 L-3 Communications Sr Sub Nts Series B 05-01-07 10.38 6,145,000 6,344,713 Sequa Sr Nts 08-01-09 9.00 20,750,000 20,646,250 Total 60,153,488 Automotive & related (2.5%) EV Intl Company Guaranty Series A 03-15-07 11.00 10,500,000 7,350,000 French (JL) Auto Casting Sr Sub Nts 06-01-09 11.50 12,900,000(d) 12,738,750 Hayes Lemmerz Intl Company Guaranty Series B 07-15-07 9.13 10,000,000 9,725,000 Lear Sr Nts 05-15-09 8.11 20,000,000(d) 18,978,400 MSX Intl Company Guaranty 01-15-08 11.38 13,110,000 12,323,400 Oxford Automotive Company Guaranty Series D 06-15-07 10.13 25,120,000 22,670,800 Penda Sr Nts Series B 03-01-04 10.75 4,500,000 4,353,750 Venture Holdings Trust Sr Nts Series B 07-01-05 9.50 4,000,000 3,740,000 Total 91,880,100 Banks and savings & loans (0.5%) Sovereign Bancorp Sr Nts 11-15-06 10.50 16,400,000 16,543,500 Beverages & tobacco (0.3%) Canandaigua Brands Company Guaranty 03-01-09 8.50 12,500,000 11,906,250 Chemicals (1.3%) Allied Waste North America Company Guaranty Series B 01-01-06 7.63 4,250,000 3,867,500 01-01-09 7.88 18,675,000 16,620,750 Sr Sub Nts 08-01-09 10.00 4,250,000(d) 3,878,125 Lyondell Chemical Series B 05-01-07 9.88 9,500,000 9,785,000 Sr Sub Nts 05-01-09 10.88 8,800,000 9,174,000 Sterling Chemicals Company Guaranty Series B 07-15-06 12.38 5,000,000 5,150,000 Total 48,475,375 Commercial finance (0.4%) Advance Holding Zero Coupon Series B 04-15-03 12.45 8,800,000(g) 4,400,000 Netia Holdings (U.S. Dollar) Company Guaranty Series B 11-01-07 10.25 12,750,000(c) 10,773,750 Total 15,173,750 Communications equipment & services (12.9%) 21st Century Telecom Group Zero Coupon Sr Disc Nts 02-15-03 14.81 19,300,000(g) 8,878,000 AirGate PCS Zero Coupon 10-01-04 13.50 16,700(g) 10,145,250 Bestel (U.S. Dollar) Zero Coupon 05-15-01 12.75 6,400,000(c,g) 4,032,000 Birch Telecom Sr Nts 06-15-08 14.00 14,000,000 14,210,000 Caprock Communications Sr Nts Series B 07-15-08 12.00 17,000,000 17,085,000 Celcaribe Sr Nts 03-15-04 13.50 11,150,000 8,139,500 Covad Communications Group Sr Nts 02-15-09 12.50 10,000,000 10,300,000 Crown Castle Intl Zero Coupon Sr Disc Nts 08-01-04 11.30 14,750,000(d,g) 8,997,500 Dobson/Sygnet Communications Sr Nts 12-15-08 12.25 16,000,000 17,600,000 EchoStar DBS Sr Nts 02-01-09 9.38 41,015,000 41,271,344 Esprit Telecom Group (U.S. Dollar) Sr Nts 12-15-07 11.50 17,900,000(c) 18,168,500 06-15-08 10.88 17,000,000(c) 16,745,000 GST Equipment Funding Sr Nts 05-01-07 13.25 6,750,000 6,648,750 GST Network Funding Zero Coupon Sr Disc Nts 05-01-03 10.50 15,000,000(g) 7,518,750 GST Telecommunications Sr Sub Nts 11-15-07 12.75 6,750,000 6,615,000 Jordan Telecommunications Products Sr Nts Series B 08-01-07 9.88 25,950,000 25,431,000 Zero Coupon Sr Disc Nts Series B 08-01-00 10.04 21,900,000(g) 18,834,000 KMC Telecom Holdings Sr Nts 05-15-09 13.50 12,000,000(d) 11,880,000 Zero Coupon Sr Disc Nts 02-15-03 12.68 12,000,000(g) 6,390,000 MJD Communications Sr Sub Nts Series B 05-01-08 9.50 5,525,000 4,972,500 NTL Zero Coupon Sr Nts Series B 02-01-01 11.40 40,000,000(g) 35,800,000 PhoneTel Technologies Sr Nts 12-15-06 12.00 23,500,000(b) 3,995,000 Price Communications Wireless Company Guaranty Series B 12-15-06 9.13 24,700,000 25,132,250 RCN Zero Coupon Sr Disc Nts Series B 02-15-03 9.80 7,500,000(g) 4,893,750 Rhythms Net Connections Sr Nts 04-15-09 12.75 10,000,000 9,500,000 Spectrasite Holdings Zero Coupon Sr Disc Nts 04-15-04 11.25 17,200,000(g) 8,944,000 Tele1 Europe (U.S. Dollar) Sr Nts 05-15-09 13.00 8,000,000(c,d) 8,200,000 Telehub Communications Zero Coupon Company Guaranty 07-31-01 13.88 12,000,000(g) 1,200,000 Triton Communications Zero Coupon Company Guaranty 05-01-03 10.86 22,000,000(g) 15,537,500 Unisite Zero Coupon Sub Nts 12-15-00 13.00 9,000,000(d,g,i) 11,480,400 Versatel Telecom (U.S. Dollar) Sr Nts 05-15-08 13.25 16,600,000(c) 17,513,000 Vialog Company Guaranty 11-15-01 12.75 22,600,000 15,820,000 Voicestream Wire Sr Nts 11-15-09 10.38 8,700,000(d) 9,069,750 Zero Coupon Sr Disc Nts 11-15-04 11.88 17,600,000(d,g) 10,736,000 Williams Communication Group Sr Nts 10-01-09 10.88 15,000,000 15,712,500 Worldwide Fiber Sr Nts 08-01-09 12.00 16,000,000(d) 16,380,000 Total 473,776,244 Computers & office equipment (2.4%) Concentric Network Sr Nts 12-15-07 12.75 5,600,000 5,901,000 Cooperative Computing Sr Sub Nts 02-01-08 9.00 20,250,000 14,782,500 Decisionone Holdings Zero Coupon 08-01-02 9.89 8,450,000(b,g) 10,563 Globix Sr Nts 05-01-05 13.00 22,220,000 21,608,950 PSINet Sr Nts 12-01-06 10.50 3,050,000(d) 3,076,688 11-01-08 11.50 6,500,000 6,776,250 Sr Nts Series B 02-15-05 10.00 15,275,000 15,198,625 Verio Sr Nts 04-01-05 10.38 7,000,000 7,035,000 12-01-08 11.25 11,000,000(d) 11,495,000 Total 85,884,576 Electronics (0.7%) Hyundai Semiconductor (U.S. Dollar) Sr Nts 05-15-07 8.63 13,650,000(c,d) 10,957,196 Metromedia Fiber Network Sr Nts Series B 11-15-08 10.00 13,750,000 13,956,250 Total 24,913,446 Energy (3.4%) Canadian Forest Oil (U.S. Dollar) Company Guaranty 09-15-07 8.75 14,500,000(c) 13,920,000 Clark R&M Sr Sub Nts 11-15-07 8.88 10,100,000 6,464,000 Energy Corp of America Sr Sub Nts Series A 05-15-07 9.50 9,000,000 5,220,000 HS Resources Company Guaranty 11-15-06 9.25 4,250,000 4,196,875 Sr Sub Nts 12-01-03 9.88 9,700,000 9,687,875 Sr Sub Nts Series B 11-15-06 9.25 8,000,000 7,900,000 Hurricane Hydrocarbons (U.S. Dollar) Sr Nts 11-01-04 11.75 15,750,000(b,c,d) 8,190,000 Lodestar Holdings Company Guaranty 05-15-05 11.50 18,350,000 10,276,000 Michael Petroleum Sr Nts Series B 04-01-05 11.50 6,000,000(b) 2,880,000 Nuevo Energy Sr Sub Nts 06-01-08 9.50 12,000,000(d) 12,000,000 Ocean Energy Company Guaranty Series B 07-01-08 8.38 14,000,000 13,790,000 Rayovac Sr Sub Nts Series B 11-01-06 10.25 11,814,000 12,552,375 Roil (U.S. Dollar) 12-05-02 12.78 4,368,000(c,d) 3,363,360 Tesoro Petroleum Company Guaranty Series B 07-01-08 9.00 14,250,000 13,680,000 Total 124,120,485 Energy equipment & services (0.9%) DI Inds Sr Nts 07-01-07 8.88 6,000,000 5,460,000 Grey Wolf Company Guaranty Series C 07-01-07 8.88 1,750,000 1,596,875 Northern Offshore (U.S. Dollar) Company Guaranty Series B 05-15-05 10.00 21,000,000(c) 12,600,000 Plains Resources Company Guaranty Series D 03-15-06 10.25 9,000,000 8,460,000 Seven Seas Petroleum Sr Nts Series B 05-15-05 12.50 8,000,000 3,600,000 Total 31,716,875 Financial services (2.3%) AOA Holdings LLC Sr Nts 06-01-06 10.38 15,500,000(d) 15,441,875 Arcadia Financial Sr Nts 03-15-07 11.50 30,165,000 30,448,200 Gemini Inds 12-23-01 13.50 13,567,500(b,i) 6,783,750 Omnipoint Midwest Holding 12-31-06 9.40 4,250,000 4,037,500 12-31-06 10.00 8,500,000 8,075,000 ONO Finance (U.S. Dollar) Company Guaranty 05-01-09 13.00 4,070,000(c,d) 4,232,800 RBF Finance Company Guaranty 03-15-09 11.38 12,375,000 13,303,125 Total 82,322,250 Food (0.6%) Ameriserve Food Distributions Company Guaranty 10-15-06 8.88 5,100,000 2,703,000 07-15-07 10.13 6,125,000 1,837,500 Aurora Foods Sr Sub Nts Series D 02-15-07 9.88 10,000,000 10,250,000 Daya Guna (U.S. Dollar) Company Guaranty 06-01-07 10.00 3,690,000(c,d) 2,214,000 RAB Enterprises Company Guaranty 05-01-05 10.50 9,600,000 6,528,000 Total 23,532,500 Health care (0.6%) Alaris Medical Zero Coupon Sr Disc Nts 08-01-03 11.12 16,000,000(g) 7,040,000 Alaris Medical Systems Company Guaranty 12-01-06 9.75 16,450,000 13,653,500 Total 20,693,500 Health care services (3.2%) Abbey Healthcare Group Sr Sub Nts 11-01-02 9.50 25,750,000 24,591,250 Fountain View Company Guaranty Series B 04-15-08 11.25 8,600,000 6,536,000 Genesis Health Ventures Sr Sub Nts 10-01-06 9.25 9,725,000 3,403,750 Hanger Orthopedic Group Sr Sub Nts 06-15-09 11.25 9,600,000(d) 9,456,000 Magellan Health Services Sr Sub Nts 02-15-08 9.00 15,000,000 12,150,000 Oxford Health Plans Sr Nts 05-15-05 11.00 13,000,000 12,350,000 Paracelsus Healthcare Sr Sub Nts 08-15-06 10.00 17,600,000 9,680,000 Physician Sales & Service Company Guaranty 10-01-07 8.50 15,250,000 15,364,375 Tenet Healthcare Sr Sub Nts Series B 12-01-08 8.13 17,050,000 15,728,625 Triad Hospitals Holdings Sr Sub Nts 05-15-09 11.00 6,050,000(d) 6,292,000 Total 115,552,000 Household products (0.3%) Scotts Sr Sub Nts 01-15-09 8.63 10,385,000(d) 10,021,525 Industrial equipment & services (1.8%) Blount Company Guaranty 06-15-05 7.00 14,700,000 12,495,000 Fairfield Mfg Sr Sub Nts 10-15-08 9.63 13,600,000 12,920,000 Grove Holdings/Capital Zero Coupon 05-01-03 11.63 4,000,000(g) 440,000 Grove Inds 05-01-10 14.50 3,342,730 334,273 Motor & Gears Sr Nts Series D 11-15-06 10.75 30,500,000 28,365,000 Thermadyne Holdings Zero Coupon 06-01-03 12.50 12,000,000(g) 5,520,000 Thermadyne Mfg Company Guaranty 06-01-08 9.88 5,000,000 4,300,000 Total 64,374,273 Insurance (0.4%) Americo Life Sr Sub Nts 06-01-05 9.25 15,000,000 14,887,500 Leisure time & entertainment (6.0%) Alliance Atlantis Communications (U.S. Dollar) Sr Sub Nts 12-15-09 13.00 15,000,000(c) 14,925,000 Coast Hotels & Casino Company Guaranty 04-01-09 9.50 9,235,000 8,865,600 Hammons (JQ) Hotels 1st Mtge 02-15-04 8.88 12,000,000 11,040,000 Hollywood Casino Shreveport 1st Mtge 08-01-06 13.00 8,900,000(d) 9,456,250 Hollywood Park Company Guaranty Series B 02-15-07 9.25 10,000,000 9,900,000 Horseshoe Gaming Holding Company Guaranty 05-15-09 8.63 16,550,000 15,805,250 Icon Health & Fitness Company Guaranty 09-27-05 12.00 5,550,000(d) 2,997,000 Isle of Capri Casinos/Capital 1st Mtge Series B 08-31-04 13.00 15,750,000 17,088,750 Lodgenet Entertainment Sr Nts 12-15-06 10.25 15,000,000 15,150,000 Premier Cruises Sr Nts 03-15-08 11.00 11,000,000(b,d,h) -- Premier Parks Sr Nts 04-01-06 9.25 10,000,000 9,775,000 06-15-07 9.75 13,650,000 13,581,750 Regal Cinemas Sr Sub Nts 06-01-08 9.50 13,000,000 10,530,000 12-15-10 8.88 17,250,000 13,196,250 Trump Atlantic City Assn/Funding 1st Mtge Company Guaranty 05-01-06 11.25 26,945,000 22,094,900 Trump Holdings & Funding Sr Nts 06-15-05 15.50 28,050,000 25,385,250 United Artists Theatres Series 1995A 07-01-15 9.30 13,071,216 9,520,028 Sr Sub Nts Series B 04-15-08 9.75 27,000,000 5,130,000 Venetian Casino/LV Sands Company Guaranty 11-15-05 14.25 6,000,000 3,360,000 Total 217,801,028 Media (9.4%) Adelphia Communications Sr Deb 09-15-04 11.88 5,000,000 5,225,000 Sr Nts 11-15-00 9.38 14,000,000 13,877,500 Sr Nts Series B 02-01-08 8.38 9,500,000 8,977,500 AMFM Company Guaranty 11-01-08 8.00 35,550,000 35,638,874 Zero Coupon Sr Disc Nts 02-01-02 7.49 8,000,000(g) 6,980,000 Australis Holdings (U.S. Dollar) Zero Coupon Sr Disc Nts 11-01-00 13.35 17,900,000(b,c,g) 179,000 Australis Media (U.S. Dollar) 11-01-00 14.00 1,785,504(b,c) 1,600,342 (U.S. Dollar) Zero Coupon 05-15-00 12.32 43,500,000(b,c,g) 4,350 05-15-00 13.83 469,560(b,c,g) 2,348 Benedek Communications Zero Coupon Sr Disc Nts 05-15-01 13.89 13,500,000(g) 12,217,500 Big City Radio Zero Coupon Company Guaranty 03-15-01 11.25 10,000,000(g) 7,075,000 Bresnan Communications Sr Nts Series B 02-01-09 8.00 9,050,000 9,095,250 CBS Radio Pay-in-kind Sub Deb 01-15-09 11.38 9,475,300(j) 10,612,336 Central Euro Media (U.S. Dollar) Sr Nts 08-15-04 9.38 12,175,000(c) 4,748,250 Coaxial Communications/Phoenix Company Guaranty 08-15-06 10.00 10,000,000 9,825,000 Globo Communicacoes Participacoes (U.S. Dollar) Sr Nts 12-05-08 10.63 15,000,000(c,d) 12,056,250 Golden Sky Systems Company Guaranty Series B 08-01-06 12.38 8,500,000 8,585,000 MDC Communications (U.S. Dollar) Sr Sub Nts 12-01-06 10.50 16,350,000(c) 16,390,875 Outdoor Systems Company Guaranty 10-15-06 9.38 10,000,000 10,475,000 06-15-07 8.88 20,755,000 21,429,537 Paxson Communications Sr Sub Nts 10-01-02 11.63 14,700,000 15,251,250 Pegasus Media & Communications Series B 07-01-05 12.50 15,400,000 16,709,000 Sr Nts Series B 10-15-05 9.63 11,100,000 11,044,500 Price Communications Wireless Sr Sub Nts 07-15-07 11.75 10,000,000 11,000,000 Radio Unica Zero Coupon Company Guaranty 08-01-02 11.74 13,000,000(g) 8,482,500 Regional Independent Medical (U.S. Dollar) Sr Nts 07-01-08 10.50 15,200,000(c) 15,162,000 Sinclair Broadcast Group Sr Sub Nts 12-15-07 8.75 1,800,000 1,678,500 Company Guaranty 07-15-07 9.00 2,550,000 2,390,625 Susquehanna Media Sr Sub Nts 05-15-09 8.50 6,395,000 6,267,100 Telemundo Holdings Zero Coupon Sr Disc Nts Series B 08-15-03 11.50 17,000,000(g) 9,690,000 TeleWest Communications (U.S. Dollar) Sr Nts 11-01-08 11.25 8,000,000(c) 8,660,000 (U.S. Dollar) Zero Coupon 10-01-00 11.64 7,000,000(c,g) 6,483,750 (U.S. Dollar) Zero Coupon Sr Disc Nts 04-15-04 8.96 13,725,000(c,d,g) 8,749,688 Veninfotel (U.S. Dollar) Cv Pay-in-kind 03-01-02 10.00 10,418,625(c,i,j) 15,627,938 WRC Media/Weekly Read/JLC 11-15-09 12.75 12,500,000(d) 12,375,000 Total 344,566,763 Metals (2.4%) AK Steel Company Guaranty 02-15-09 7.88 15,000,000 14,250,000 EnviroSource Sr Nts 06-15-03 9.75 26,648,000 16,055,420 Great Lakes Acquisition Zero Coupon Series B 05-15-03 21.06 6,500,000(g) 3,079,375 Imexsa Export Trust (U.S. Dollar) 05-31-03 10.13 7,947,481(c,d) 7,788,531 Maxxam Group Holdings Sr Nts Series B 08-01-03 12.00 12,000,000 11,400,000 Ormet Company Guaranty 08-15-08 11.00 17,000,000(d) 15,130,000 Pen Holdings Company Guaranty Series B 06-15-08 9.88 10,625,000 10,040,625 Sheffield Steel 1st Mtge Series B 12-01-05 11.50 10,200,000 8,415,000 Total 86,158,951 Miscellaneous (10.6%) Adams Outdoor Advertising Sr Nts 03-15-06 10.75 10,800,000 11,313,000 Advanced Glassfiber Yarn Sr Sub Nts 01-15-09 9.88 17,720,000 16,125,200 Argo-Tech Company Guaranty 10-01-07 8.63 5,750,000 4,894,688 Company Guaranty Series D 10-01-07 8.63 13,000,000 11,082,500 Bistro Trust Sub Nts 12-31-02 9.50 10,000,000(d) 9,402,000 Booth Creek Ski Holdings Sr Nts Series B 03-15-07 12.50 4,500,000 3,228,750 Centaur Mining & Exploration (U.S. Dollar) Company Guaranty 12-01-07 11.00 11,500,000(c) 11,270,000 Charter Communications Holdings LLC Sr Nts 04-01-09 8.63 15,200,000 14,402,000 Comforce Operating Sr Nts Series B 12-01-07 12.00 4,750,000 3,408,125 Consolidated Container Sr Sub Nts 07-15-09 10.13 17,900,000(d) 18,034,250 Cybernet Internet Service Sr Nts 07-01-09 14.00 10,250,000(i) 8,968,750 Dura Operating Company Guaranty Series B 05-01-09 9.00 9,000,000 8,370,000 ECM Funding LP 06-10-02 11.92 1,079,825(i) 1,077,125 Equinix 12-01-07 13.00 17,000,000(d) 17,000,000 Falcon Products Company Guaranty Series B 06-15-09 11.38 15,250,000 14,411,250 Great Central Mines (U.S. Dollar) Sr Nts 04-01-08 8.88 10,000,000(c) 8,950,000 ISG Resources 04-15-08 10.00 17,445,000 15,351,600 Knology Holdings Zero Coupon Sr Disc Nts 10-15-02 12.14 6,600,000(g) 3,927,000 Nebco Evans Holding Zero Coupon Sr Disc Nts 07-15-02 34.18 8,500,000(g) 1,190,000 Nextel Partners Zero Coupon Sr Disc Nts 02-01-04 13.78 47,900,000(g) 31,254,749 Norcal Waste Systems Company Guaranty Series B 11-15-05 13.50 20,300,000 21,924,000 NSM Steel Company Guaranty 02-01-06 12.00 7,739,335(b,d) 464,360 02-01-08 12.25 11,700,000(b,d) 234,000 NTEX (U.S. Dollar) Sr Nts 06-01-06 11.50 6,900,000(c) 2,898,000 Outsourcing Solutions Sr Sub Nts Series B 11-01-06 11.00 37,395,000 36,273,149 Panolam Inds Sr Sub Nts 02-15-09 11.50 4,450,000(d) 4,527,875 Park-Ohio Inds Sr Sub Nts 12-01-07 9.25 19,025,000 18,311,563 Pierce Leahy Command Company Guaranty 05-15-08 8.13 25,150,000 23,106,563 Poland Telecom Finance (U.S. Dollar) Company Guaranty Series B 12-01-07 14.00 16,500,000(c) 12,375,000 Riviera Black Hawk 1st Mtge 06-01-05 13.00 10,425,000(d) 10,868,063 SC Intl 09-01-07 9.25 17,650,000 15,929,125 SFC New Holdings Sr Nts 08-15-01 11.25 15,000,000 14,400,000 SFC Sub Inc Zero Coupon 12-15-05 11.00 718,404(b,g) 72 Stellex Inds Sr Sub Nts Series B 11-01-07 9.50 11,450,000 8,244,000 Talton Holdings Company Guaranty Sr Nts Series B 06-30-07 11.00 3,650,000 3,449,250 Total 386,666,007 Multi-industry conglomerates (1.0%) Communications & Power Inds Sr Sub Nts Series B 08-01-05 12.00 10,000,000 8,100,000 Jordan Inds Sr Nts Series D 08-01-07 10.38 10,410,000 10,097,700 Zero Coupon Sr Sub Debs Series B 04-01-02 11.75 17,692,251(g) 11,499,963 Metromedia Intl Group Sr Disc Nts Series B 09-30-07 10.50 5,826,000 2,738,220 Prime Succession Sr Sub Nts 08-15-04 10.75 13,475,000 5,390,000 Total 37,825,883 Paper & packaging (7.2%) Bear Island LLC/Finance Sr Nts Series B 12-01-07 10.00 6,875,000 6,531,250 Berry Plastics Sr Sub Nts 04-15-04 12.25 3,250,000(d) 3,404,375 07-15-07 11.00 7,100,000(d) 6,975,750 BPC Holding Sr Nts Series B 06-15-06 12.50 11,750,000 10,839,375 Crown Paper Sr Sub Nts 09-01-05 11.00 18,025,000 12,617,500 Doman Inds (U.S. Dollar) 03-15-04 8.75 14,625,000(c) 12,431,250 (U.S. Dollar) Company Guaranty 07-01-04 12.00 9,750,000(c) 10,140,000 (U.S. Dollar) Sr Nts Series B 11-15-07 9.25 3,500,000(c) 2,738,750 Gaylord Container Sr Nts 06-15-07 9.75 6,000,000 5,760,000 02-15-08 9.88 32,500,000 28,518,750 Sr Nts Series B 06-15-07 9.38 3,750,000 3,506,250 Graham Packaging/GPC Capital Zero Coupon Sr Disc Nts Series B 01-15-03 11.57 6,900,000(g) 4,579,875 Grupo Industrial Durango (U.S. Dollar) 08-01-03 12.63 5,000,000(c) 5,012,500 Packaging Corp of America Company Guaranty 04-01-09 9.63 9,905,000 10,202,150 Repap New Brunswick (U.S. Dollar) 06-01-04 11.50 7,500,000(c) 7,668,750 (U.S. Dollar) Sr Nts 06-01-04 9.00 19,900,000(c) 19,551,750 04-15-05 10.63 18,550,000(c) 17,297,875 Riverwood Intl Company Guaranty 08-01-07 10.63 5,500,000 5,720,000 04-01-08 10.88 10,000,000 10,000,000 Company Guaranty Sr Nts 04-01-06 10.25 15,000,000 15,375,000 Silgan Holdings 06-01-09 9.00 13,250,000 12,521,250 Pay-in-kind 07-15-06 13.25 5,621,000(j) 6,084,733 Stone Container Sr Nts 08-01-16 12.58 9,000,000 9,247,500 Tjiwi Kimia Intl (U.S. Dollar) Company Guaranty 08-01-01 13.25 7,000,000(b,c) 6,195,000 Warren (SD) Pay-in-kind 12-15-06 14.00 27,690,869(j) 31,706,045 Total 264,625,678 Restaurants & lodging (1.4%) American Restaurant Group Company Guaranty Series B 02-15-03 11.50 9,000,000 6,750,000 Domino's Company Guaranty Series B 01-15-09 10.38 16,325,000 15,467,938 Florida Panthers Holdings Company Guaranty 04-15-09 9.88 11,000,000 10,560,000 Prime Hospitality Sr Sub Nts Series B 04-01-07 9.75 18,700,000 18,045,500 Total 50,823,438 Retail (1.5%) Amazon.com Zero Coupon Sr Disc Nts 05-01-03 10.00 11,500,000(g) 7,590,000 Dairy Mart Convenience Stores Sr Sub Nts 03-15-04 10.25 17,675,000 14,935,375 Sr Sub Nts Series B 03-15-04 10.25 6,250,000 5,281,250 Maxim Group Company Guaranty Series B 10-15-07 9.25 12,500,000(b) 10,593,750 Musicland Group Company Guaranty Series B 03-15-08 9.88 16,750,000 14,195,625 Rite Aid Cv Sub Nts 09-15-02 5.25 4,000,000 2,010,000 Total 54,606,000 Textiles & apparel (0.9%) Anvil Knitwear Sr Nts Series B 03-15-07 10.88 14,000,000 10,220,000 Galey & Lord Company Guaranty 03-01-08 9.13 20,050,000 4,611,500 GFSI Sr Sub Nts Series B 03-01-07 9.63 13,000,000 7,800,000 GFSI Holdings Zero Coupon Sr Disc Nts Series B 09-15-04 10.77 17,300,000(g) 5,190,000 Steel Heddle Group Zero Coupon Series B 06-01-03 13.74 6,200,000(g) 922,250 Steel Heddle Mfg Company Guaranty Series B 06-01-08 10.63 4,600,000 2,530,000 Total 31,273,750 Transportation (1.2%) American Architectural Company Guaranty 12-01-07 11.75 10,000,000 3,500,000 Autopistas Del Sol (U.S. Dollar) Sr Nts 08-01-09 10.25 10,800,000(c,d) 8,370,000 Enterprises Shipholding (U.S. Dollar) Sr Nts 05-01-08 8.88 21,305,000(c) 12,676,475 Global Ocean Carriers Sr Nts 07-15-07 10.25 13,500,000(b) 3,780,000 Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-04 9.25 3,500,000(c) 1,575,000 06-15-07 9.50 5,000,000(c) 2,150,000 Hermes Europe RailTel (U.S. Dollar) Sr Nts 01-15-09 10.38 10,500,000(c) 10,342,500 Total 42,393,975 Utilities -- gas (0.2%) Leviathan Gas Company Guaranty Series B 06-01-09 10.38 8,400,000 8,736,000 Utilities -- telephone (6.6%) Allegiance Telecom Zero Coupon Sr Disc Nts Series B 02-15-03 11.99 30,450,000(g) 21,467,250 AT&T Canada (U.S. Dollar) Sr Nts 08-15-07 12.00 8,750,000(c) 10,106,250 (U.S. Dollar) Zero Coupon Sr Disc Nts 11-01-02 10.74 8,300,000(c,g) 6,847,500 06-15-03 9.96 16,000,000(c,g) 12,480,000 COLT Telecommunications Group (U.S. Dollar) Zero Coupon 12-15-01 12.00 8,500,000(c,g) 7,458,750 Energis (U.S. Dollar) 06-15-09 9.75 8,175,000(c,d) 8,420,250 Geotek Communications Cv Sr Sub Nts 02-15-01 12.00 4,135,000(b) 5,169 Intermedia Communications Sr Nts Series B 11-01-07 8.88 11,025,000 10,253,250 06-01-08 8.60 2,400,000 2,190,000 Zero Coupon Sr Disc Nts Series B 07-15-02 10.65 22,375,000(g) 16,333,750 ITC Deltacom Sr Nts 03-01-08 8.88 17,250,000 16,732,500 11-15-08 9.75 4,500,000 4,590,000 McLeod USA Sr Nts 03-15-08 8.38 7,680,000 7,276,800 02-15-09 8.13 13,000,000 12,187,500 Omnipoint Communications Sr Nts 08-15-06 11.63 22,400,000 23,911,999 Paging Network Sr Sub Nts 02-01-06 8.88 8,500,000 2,805,000 08-01-07 10.13 7,950,000 2,623,500 Panamsat Intl Systems Pay-in-kind 04-15-05 12.75 4,000(j) 4,360 Primus Telecommunications Group Sr Nts 08-01-04 11.75 11,550,000 11,434,500 01-15-09 11.25 4,250,000 3,995,000 Sr Nts Series B 05-15-08 9.88 10,000,000 8,950,000 Pronet Sr Sub Nts 06-15-05 11.88 19,350,000 13,158,000 RSL Communications (U.S. Dollar) Company Guaranty 11-15-06 12.25 10,167,000(c) 10,319,505 11-15-08 10.50 1,875,000(c) 1,790,625 11-15-09 9.88 7,700,000(c) 6,776,000 United Pan-Europe Communications (European Monetary Unit) Sr Nts 11-01-09 11.25 8,500,000(c,i) 8,776,250 (U.S. Dollar) Sr Nts 08-01-09 10.88 10,200,000(c,d) 10,480,500 Total 241,374,208 Total bonds (Cost: $3,490,691,528) $3,087,522,635
Common stocks (2.2%) Issuer Shares Value(a) Arena Brands 111,111(b,i) $2,555,553 Celcaribe 1,812,990(b,d) 1,812,990 Communications & Power Inds 3,500(b) 525,000 Concentric Network 300,000(b) 8,531,250 Earthwatch 314,426(b,d) 707,459 Gaylord Container Cl A 1,000,000(b) 6,250,000 Global TeleSystems Group 215,400(b) 6,879,338 Intermedia Communications 311,942(b) 8,695,383 Jack in the Box 21,000(b) 442,313 Nextel Communications Cl A 41,056(b) 4,069,676 OpTel 17,000(b,d) 170 Pagemart Nationwide 50,750(b) 203,000 Pegasus Communications 16,923(b) 1,110,572 Premier Holdings 814,645 3,054,918 Price Communications 840,211(b) 21,057,787 Specialty Foods 300,000(b) 75,000 Versatel Telecom Intl ADR 200,000(b,c) 5,500,000 Weatherford Intl 170,580(b) 5,959,639 Wilshire Financial Services Group 2,412,000(b) 3,015,000 Wilshire Real Estate Investment Trust 140,000 306,250 Wireless One 25,000(b) 32,500 Total common stocks (Cost: $89,931,253) $80,783,798 Preferred stocks & other (9.2%) Issuer Shares Value(a) 21st Century Telecom Group 13.75% Pay-in-kind 3,301(j) $1,650,500 Warrants 2,600 26,000 Adelphia Business Solutions Pay-in-kind 5,810(j) 5,403,300 Allegiance Telecom Warrants 30,450 2,892,750 American Mobile Satellite Warrants 8,000(d) 400,000 American Restaurant Group 12.00% Pay-in-kind Series B 4,155(j) 3,324,000 Warrants 3,500 35 APP Finance II Mauritius Cl B 12.00% 22,600(b,c) 14,690,000 Australis Holdings Warrants 13,400(c) 134 Bar Technologies Warrants 10,000 200,000 Belco Oil & Gas 6.50% Cv 210,000 3,360,000 Bell Technology Warrants 19,525 1,952,500 Benedek Communications 11.50% Pay-in-kind 7,000(b,j) 5,600,000 Warrants 70,000 140,000 Bestel Warrants 10,400 312,000 Birch Telecom Warrants 14,000 77,000 Capstar Broadcasting 12.00% Pay-in-kind Exchangeable 50,562(j) 5,966,316 Capstar Communications 12.63% Pay-in-kind Series E 68,630(j) 8,098,340 Century Maintenance 13.25% Pay-in-kind Series C 136,096(j) 13,745,696 Clark Materials Handling 13.00% 7,621(b) 2,286,300 Clearnet Communications Warrants 42,240 633,600 Communications & Power Inds 14.00% Pay-in-kind Series B 213,634(j) 17,304,323 Concentric Network 13.50% Pay-in-kind Series B 13,539(j) 12,658,965 Crown Packaging Warrants 10,000(h) -- CSC Holdings 11.13% Pay-in-kind Series M 348,681(j) 37,831,889 11.75% Pay-in-kind Series H 159,224(j) 17,594,252 Cybernet Internet Warrants 10,250 1,127,500 Dairy Mart Warrants 311,333 108,967 Dobson Communications 13.00% Pay-in-kind 10,817(j) 11,628,275 Fairfield Mfg 11.25% Pay-in-kind 6,580(b,j) 6,514,199 Geotek Communications Warrants 872,500 1 HarCor Energy Warrants 110,000 55,000 Hemmeter Enterprises Warrants 36,000(h) -- HF Holdings Warrants 53,125(h) -- Hosiery Corp of America Warrants 10,000 400,000 Intermedia Communications 7.00% Cv Series F 240,000(b) 5,280,000 13.50% Pay-in-kind Series B 19,910(j) 18,914,500 Warrants 22,750 2,451,313 Intl Wireless Communications Warrants 14,750 148 Iridium World Communications Warrants 17,150 172 Jitney-Jungle Stores of America Cl A 15.00% 109,500 109,500 KMC Telecom Holdings Warrants 12,000 36,000 Knology Holdings Warrants 11,000 22,000 Lady Luck Gaming Pay-in-kind 50,000(b,i,j) 2,000,000 Liberty Group Publishing 14.75% Cv 19,097(b) 420,134 MetroNet Communications Warrants 8,750 1,116,336 Nakornthai Strip Mill Warrants 7,407,184 7 Nebco Evans Holdings 11.25% Pay-in-kind 137,299(j) 1,647,588 Nextel Communications 11.13% Pay-in-kind Series E 7,882(j) 8,039,640 13.00% Pay-in-kind Series D 21,853(j) 23,601,240 North Atlantic Trading 12.00% Pay-in-kind 1(b,d,j) 18 NTL 13.00% Pay-in-kind Series B 27,557(j) 28,452,602 ONO Finance Value Ctfs 4,070(c,d,i) 244,200 Packaging Corp of America 12.38% Pay-in-kind 44,968(j) 4,901,512 Paxson Communications 12.50% Pay-in-kind Exchangeable 245,072(b,j) 24,997,344 Pegasus Communications 12.75% Pay-in-kind 62,500(b,j) 7,000,000 12.75% Pay-in-kind Series A 3,653(b,j) 3,872,180 PLD Telekom Warrants 4,000(b) 200 Warrants 4,000 200 Poland Telecom Warrants 16,500(c) 907,500 Primus Telecommunications Warrants 11,550 288,750 R&B Falcon 13.88% Cm Pay-in-kind 432(d,j) 450,360 Warrants 12,000(d) 3,360,000 RSL Communications Warrants 9,500 888,250 SGW Holding 12.50% Pay-in-kind Series B 144,980(b,i,j) 2,464,660 Cv Series A 87,091(b,i) 899,940 Warrants 2,750 870,375 Sinclair Capital 11.63% 140,000 13,720,000 Tele1 Europe Warrants 8,000(d) 640,000 Telehub Communications Warrants 12,000 60,000 Unifi Communications Warrants 10,000 100 Unisite Cl C 5,938(i) 3,239,452 Warrants 4,504(i) 45 Vialog Warrants 22,600 836,200 Wireless One Warrants 23,250 233 Total preferred stocks & other (Cost: $378,130,394) $337,714,541
Short-term securities (2.1%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (1.5%) Federal Home Loan Mtge Corp Disc Nts 12-14-99 5.28% $1,000,000 $997,952 12-16-99 5.26 900,000 897,792 12-16-99 5.26 5,000,000 4,987,735 12-20-99 5.22 1,700,000 1,695,089 01-10-00 5.60 4,900,000 4,866,795 02-01-00 5.59 5,600,000 5,541,004 02-04-00 5.59 10,400,000 10,285,219 Federal Natl Mtge Assn Disc Nts 12-07-99 5.25 16,000,000 15,983,200 12-13-99 5.25 7,900,000 7,884,480 Total 53,139,266 Commercial paper (0.6%) Bell Atlantic 01-12-00 5.88 7,900,000 7,844,893 Electronic Data Systems 12-01-99 5.70 8,300,000(f) 8,298,686 GTE Funding 01-18-00 5.94 5,300,000 5,257,077 Natl Rural Utilities 12-02-99 5.30 1,900,000 1,899,441 Total 23,300,097 Total short-term securities (Cost: $76,469,594) $76,439,363 Total investments in securities (Cost: $4,035,222,769)(k) $3,582,460,337
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 Nov. 30, 1999, the value of foreign securities represented 13.69% 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) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Nov. 30, 1999. (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) 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) Negligible market value. (i) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Nov. 30, 1999, is as follows: Security Acquisition Cost dates Arena Brands Common 09-03-92 $5,888,888 Cybernet Internet Service 14.00% Sr Nts 2009 11-04-99 10,250,000 ECM Funding LP 11.92% 2002 04-13-92 1,277,510 Gemini Inds 13.50% 2001 12-23-96 13,500,000 Lady Luck Gambling Pay-in-kind Preferred 11-19-98 1,750,000 SGW Holdings 12.50% Pay-in-kind Series B Preferred 08-12-97 thru 08-31-99 2,332,663 Cv Series A Preferred 08-12-97 899,998 Unisite Cl C Preferred 12-17-97 2,750,066 Warrants 12-17-97 -- 13.00% Zero Coupon Sub Nts 2000* 12-18-97 9,000,000 United Pan-Europe Communications (European Monetary Unit) 11.25% Sr Nts 2009* 10-25-99 8,437,270 Veninfotel (U.S. Dollar) 10.00% Cv Pay-in-kind 2002 03-05-97 thru 09-01-98 9,450,000 Voicestream Wire 10.38% Sr Nts 2009* 11-05-99 8,700,000 11.88% Zero Coupon Sr Disc Nts 2004* 11-05-99 9,866,736 * Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (j) 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. (k) At Nov. 30, 1999, the cost of securities for federal income tax purposes was approximately $4,035,223,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $114,961,000 Unrealized depreciation (567,724,000) ------------ Net unrealized depreciation $(452,763,000) American Express Funds AXP Extra Income Fund IDS Tower 10 Minneapolis, MN 55440-0010 Ticker Symbol Class A: INEAX Class B: IEIBX Class Y: IEIYX PRSRT STD AUTO U.S. POSTAGE PAID SPENCER, IA PERMIT NO. 85 S-6470 N (1/00) 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-----