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Riversource Investment Series, Inc. – ‘N-30D’ for 9/30/00

On:  Monday, 12/4/00, at 4:52pm ET   ·   For:  9/30/00   ·   Accession #:  820027-0-890   ·   File #:  811-00054

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/04/00  Riversource Inv Series, Inc.      N-30D       9/30/00    1:34K                                    Ameriprise Financial Inc

Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Axp Investment Series, Inc.                           26     71K 


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AXP(SM) Diversified Equity Income Fund 2000 ANNUAL REPORT (PROSPECTUS ENCLOSED) American Express Funds (icon of) magnifying glass AXP Diversified Equity Income Fund seeks to provide shareholders with a high level of current income and, as a secondary goal, steady growth of capital. (This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) AMERICAN EXPRESS(R)
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Dual-purpose Stocks Some of the most successful investments over the years have been stocks that reward investors in two ways -- through growth in the value of the share price as well as through payment of regular dividend income. AXP Diversified Equity Income sets its sights on stocks that can provide this benefit. The Fund takes advantage of opportunities across various industries, among different types of securities and in markets throughout the world to find investments that meet its combination growth-and- dividend requirement. Table of Contents 2000 ANNUAL REPORT The purpose of this annual report is to tell investors how the Fund performed. From the Chairman 3 From the Portfolio Manager 3 Fund Facts 5 The 10 Largest Holdings 6 Making the Most of the Fund 7 The Fund's Long-term Performance 8 Independent Auditors' Report (Fund) 10 Financial Statements (Fund) 11 Notes to Financial Statements (Fund) 14 Independent Auditors' Report (Portfolio) 21 Financial Statements (Portfolio) 22 Notes to Financial Statements (Portfolio) 24 Investments in Securities 27 Federal Income Tax Information 30 AXP DIVERSIFIED EQUITY INCOME FUND
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(picture of) Arne H. Carlson Arne H. Carlson Chairman of the board From the Chairman The financial markets have always had their ups and downs, but in recent months volatility has become more frequent and intense. While no one can say with certainty what the markets will do, American Express Financial Corporation, the Fund's investment manager, expects economic growth to continue, accompanied by a modest rise in long-term interest rates. But no matter what transpires, this is a great time to take a close look at your goals and investments. We encourage you to: o Consult a professional investment advisor who can help you cut through mountains of data. o Set financial goals that extend beyond those achievable through retirement plans of your employer. o Learn as much as you can about your current investments. The portfolio manager's letter that follows provides a review of the Fund's investment strategies and performance. The annual report contains other valuable information as well. The Fund's prospectus describes its investment objectives and how it intends to achieve those objectives. As experienced investors know, information is vital to making good investment decisions. So, take a moment and decide again whether the Fund's investment objectives and management style fit with your other investments to help you reach your financial goals. And make it a practice on a regular basis to assess your investment options. On behalf of the Board, Arne H. Carlson (picture of) Keith Tufte Keith Tufte Portfolio manager From the Portfolio Manager In a highly volatile environment for the stock market, value stocks exhibited comparatively steady, though unspectacular performance, during the past 12 months. For AXP Diversified Equity Income's Class A shares, the result was a total return of 5.66% (excluding the sales charge) for the fiscal year -- October 1999 through September 2000. The period got off to a strong start, as reports of still-tame inflation and generally good corporate profits buoyed the stock market from October 1999 through early January 2000. While the Fund's value-stock orientation took a ANNUAL REPORT - 2000
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back seat to the stunning performance of high-flying, technology-related growth stocks, the Fund did register three straight months of gains. MOOD SWINGS From that point, the market found itself caught in a whirlwind of changing outlooks regarding inflation, interest rates, the economy and corporate profits. The result was substantial swings -- monthly, weekly and even daily -- for stocks over the final nine months of the period. But after all thrashing about was over, the market ended up at nearly the same level it was shortly after the start of the year -- a lot of activity but essentially no progress. For the Fund, the trip was less eventful because of its emphasis on value stocks, which experienced less volatility (both up and down) than the overall market. This was especially evident in comparison with technology-related growth stocks, which were usually at the forefront of the market's surges and slumps. Looking at the Fund's holdings, the biggest and most productive area of investment was financial services, which includes banks and insurance companies. Other substantial areas included energy, which, because of higher oil prices, provided positive performance, as did utilities. Industrials and telecommunications, on the other hand, turned out to be very poor performers. The most notable change to the portfolio was an increase in financial services stocks, which I made soon after becoming manager of the Fund in July. That worked to the Fund's advantage late in the fiscal year. As the new fiscal year begins, the stock market continues to be pushed and pulled as investors try to sort out what will happen with economic growth, interest rates and corporate profits. While only time will resolve those questions, I am encouraged that value stocks showed improved performance during the past several months. If the market continues to have trouble making headway, I think that trend may well continue. Keith Tufte (Note to shareholders: On Nov. 6, 2000, Warren Spitz became portfolio manager of AXP Diversified Equity Income Fund. His 17 years of investment experience include positions as a research analyst and a portfolio manager.) AXP DIVERSIFIED EQUITY INCOME FUND
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Fund Facts Class A -- 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 2000 $8.96 Sept. 30, 1999 $9.40 Decrease $0.44 Distributions -- Oct. 1, 1999 - Sept. 30, 2000 From income $0.18 From capital gains $0.78 Total distributions $0.96 Total return** +5.66% Class B -- 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 2000 $8.94 Sept. 30, 1999 $9.40 Decrease $0.46 Distributions -- Oct. 1, 1999 - Sept. 30, 2000 From income $0.13 From capital gains $0.78 Total distributions $0.91 Total return** +4.85% Class C -- June 26, 2000* - Sept. 30, 2000 (All figures per share) Net asset value (NAV) Sept. 30, 2000 $8.94 June 26, 2000* $8.66 Increase $0.28 Distributions -- June 26, 2000* - Sept. 30, 2000 From income $0.02 From capital gains $ -- Total distributions $0.02 Total return** +3.47%*** Class Y-- 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 2000 $8.96 Sept. 30, 1999 $9.40 Decrease $0.44 Distributions-- Oct. 1, 1999 - Sept. 30, 2000 From income $0.19 From capital gains $0.78 Total distributions $0.97 Total return** +5.79% * Inception date. ** The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. *** The total return for Class C is not annualized. ANNUAL REPORT - 2000
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The 10 Largest Holdings Percent Value (of net assets) (as of Sept. 30, 2000) Exxon Mobil 3.90% $85,846,447 Citigroup 3.89 85,689,062 American Intl Group 3.82 83,965,781 Chevron 2.82 62,061,999 Bank of America 2.74 60,199,824 Providian Financial 2.63 57,912,000 Wells Fargo 2.26 49,787,063 FleetBoston Financial 2.21 48,700,470 Morgan Stanley, Dean Witter, Discover & Co 2.20 48,461,875 Mellon Financial 2.17 47,664,225 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 28.64% of net assets AXP DIVERSIFIED EQUITY INCOME FUND
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Making the Most of the Fund BUILD YOUR ASSETS SYSTEMATICALLY One of the best ways to invest in the Fund is by dollar-cost averaging -- a time-tested strategy that can make market fluctuations work for you. To dollar-cost average, simply invest a fixed amount of money regularly. You'll automatically buy more shares when the Fund's share price is low, fewer shares when it is high. The chart below shows how dollar-cost averaging works. In these three hypothetical scenarios, you will see six months of share price fluctuations. This strategy does not ensure a profit or avoid a loss if the market declines. But, if you can continue to invest regularly through changing market conditions even when the price of your shares falls or the market declines, it can be an effective way to accumulate shares to meet your long-term goals. How dollar-cost averaging works Jan Feb Mar Apr May Jun $15 $16 $18 $20 $10 $10 $12 $14 $ 5 Accumulated shares* Average market Your average price per share cost per share 42.25 $15 $14.20 ------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun $15 $10 $10 $8 $8 $10 $ 5 $5 $5 Accumulated shares* Average market Your average price per share cost per share 85.0 $7.66 $7.05 ------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun $15 $10 $10 $8 $6 $7 $ 5 $4 $4 Accumulated shares* Average market Your average price per share cost per share 103.5 $6.50 $5.80 ------------------------------------------------------------------------------- $100 invested per month. Total invested: $600 *Shares purchased is determined by dividing the amount invested per month by the current share price. THREE WAYS TO BENEFIT FROM A MUTUAL FUND: o your shares increase in value when the Fund's investments do well o you receive capital gains when the gains on investments sold by the Fund exceed losses o you receive income when the Fund's stock dividends, interest and short-term gains exceed its expenses. All three make up your total return. You potentially can increase your investment if, like most investors, you reinvest your dividends and capital gain distributions to buy additional shares of the Fund or another fund. ANNUAL REPORT - 2000
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The Fund's Long-term Performance _______________________________________________________________________________ How $10,000 has grown in AXP Diversified Equity Income Fund _______________________________________________________________________________ $70,000 $60,000 S&P 500 Index $50,000 Lipper Equity Income $40,000 Funds Index Russell 1000(R) $30,000 Value Index $20,000 $36,950 AXP Diversified Equity Income Fund Class A $9,425 (The printed version of this chart contains a line graph with four lines corresponding to the three Indexes and Fund noted above.) '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 Average Annual Total Returns (as of Sept. 30, 2000) 1 year 5 years 10 years Since inception Class A -0.40% +11.36% --% +14.03%** Class B +1.05% +11.71% --% +13.05%* Class Y +5.79% +12.82% --% +14.14%* * Inception date was March 20, 1995. ** Inception date was October 15, 1990. Assumes: Holding period from 11/1/90 to 9/30/00. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund has a value of $21,288. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to three widely cited unmanaged performance indexes, the Standard & Poor's 500 Index (S&P 500 Index), Russell 1000(R) Value Index and the Lipper Equity Income Funds Index. In comparing AXP Diversified Equity Income Fund (Class A) to the three indexes, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indexes. Class C became effective June 26, 2000 and therefore performance information is not presented. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5.75%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. AXP DIVERSIFIED EQUITY INCOME FUND
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Standard & Poor's 500 Index (S&P 500 Index), an unmanaged list of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the S&P 500 companies may be generally larger than those in which the Fund invests. Russell 1000(R) Value Index, an unmanaged index, measures the performance of those Russell 1000 companies lower price-to-book ratios and lower forecasted growth values. Lipper Equity Income Funds Index, an unmanaged index published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. ANNUAL REPORT - 2000
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The financial statements contained in Post-Effective Amendment #103 to Registration Statement No. 2-11328 filed on or about November 27, 2000, are incorporated by reference.
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Federal Income Tax Information (Unaudited) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. AXP Diversified Equity Income Fund Fiscal year ended Sept. 30, 2000 Class A Income distributions taxable as dividend income, 100% qualifying for deduction by corporations. Payable date Per share Dec. 22, 1999 $0.10069 March 23, 2000 0.02640 June 21, 2000 0.03213 Sept. 21, 2000 0.02397 Total $0.18319 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 22, 1999 $0.77938 Total distributions $0.96257 The distribution of $0.88007 per share, payable Dec. 22, 1999, consisted of $0.04774 derived from net investment income, $0.05295 from net short-term capital gains (a total of $0.10069 taxable as dividend income) and $0.77938 from net long-term capital gains. Class B Income distributions taxable as dividend income, 100% qualifying for deduction by corporations. Payable date Per share Dec. 22, 1999 $0.08227 March 23, 2000 0.01415 June 21, 2000 0.01531 Sept. 21, 2000 0.01970 Total $0.13143 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 22, 1999 $0.77938 Total distributions $0.91081 The distribution of $0.86165 per share, payable Dec. 22, 1999, consisted of $0.02932 derived from net investment income, $0.05295 from net short-term capital gains (a total of $0.08227 taxable as dividend income) and $0.77938 from net long-term capital gains. AXP DIVERSIFIED EQUITY INCOME FUND
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Class C Income distribution taxable as dividend income, 100% qualifying for deduction by corporations. Payable date Per share Sept. 21, 2000 $0.02029 Total distributions $0.02029 Class Y Income distributions taxable as dividend income, 100% qualifying for deduction by corporations. Payable date Per share Dec. 22, 1999 $0.10463 March 23, 2000 0.02912 June 21, 2000 0.03575 Sept. 21, 2000 0.02488 Total $0.19438 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 22, 1999 $0.77938 Total distributions $0.97376 The distribution of $0.88401 per share, payable Dec. 22, 1999, consisted of $0.05168 derived from net investment income, $0.05295 from net short-term capital gains (a total of $0.10463 taxable as dividend income) and $0.77938 from net long-term capital gains. ANNUAL REPORT - 2000
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American Express(R) Funds AXP Diversified Equity Income Fund 70100 AXP Financial Center Minneapolis, MN 55474 AMERICAN EXPRESS(R) S-6475 T (11/00) This report must be accompanied or preceded by the Fund's current prospectus. 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.
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AXP (SM) Mutual 2000 ANNUAL REPORT (PROSPECTUS ENCLOSED) American Express(R) Funds (icon of) magnifying glass AXP Mutual seeks to provide shareholders with a balance of growth of capital and current income. (This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) AMERICAN EXPRESS(R)
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A Beneficial Balance A balanced portfolio is one of the building blocks of investment planning. And balance is what AXP Mutual is all about. The Fund starts with a focus on stocks, many of which are part of the who's who of corporate America. To help balance the fluctuations inherent in stocks, as well as provide greater income to investors, bonds are added to the portfolio. The result: a Fund that offers income above that of a pure stock fund, while still providing potential for capital appreciation. Table of Contents 2000 ANNUAL REPORT The purpose of this annual report is to tell investors how the Fund performed. From the Chairman 3 From the Portfolio Managers 3 Fund Facts 5 The 10 Largest Holdings 6 Making the Most of the Fund 7 The Fund's Long-term Performance 8 Independent Auditors' Report (Fund) 9 Financial Statements (Fund) 10 Notes to Financial Statements (Fund) 13 Independent Auditors' Report (Portfolio) 19 Financial Statements (Portfolio) 20 Notes to Financial Statements (Portfolio) 22 Investments in Securities 25 Federal Income Tax Information 30 AXP MUTUAL
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(picture of) Arne H. Carlson Arne H. Carlson Chairman of the board From the Chairman The financial markets have always had their ups and downs, but in recent months volatility has become more frequent and intense. While no one can say with certainty what the market will do, 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. 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 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 managers' 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. Arne H. Carlson (picture of) Michael L. Manns Michael L. Manns Portfolio Manager (picture of) Brad Stone Brad Stone Portfolio Manager From the Portfolio Managers Value stocks and bonds struggled for much of the past 12 months, tempering the performance of AXP Mutual. The Fund did finish in positive territory, though, as its Class A shares generated a total return of 3.78% (excluding the sales charge) for the October 1999 through September 2000 fiscal year. The period got off to a strong start, as reports of still-benign inflation and generally good corporate profits buoyed stock investors' spirits. But, after rallying powerfully into early January, the stock market began meeting resistance in the form of higher interest rates. By spring, concerns about the strength of future corporate profits had also entered the picture, and stocks were quickly driven into a sharp sell-off. ANNUAL REPORT - 2000
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SUMMER RECOVERY The market managed to gain back some ground during the summer, as investors took solace in the anticipation that the Federal Reserve was approaching the end of its interest-rate increases. But profit worries resurfaced in September, sending stocks into another slump. While the Fund's stock holdings roughly followed the pattern of the market, their gains were generally less robust. The over-arching reason for the difference was the Fund's emphasis on value stocks, which couldn't keep pace with the high-flying, technology-related growth stocks that powered the market in late 1999 and early 2000. In addition, the Fund had a substantial exposure to industrial stocks, which suffered from rising commodity prices. On the other hand, the Fund did get a good boost last summer from its financial services stocks, which benefited from a leveling-off of long-term interest rates, and energy stocks, which responded to higher oil prices. The rise in interest rates early in the period made life difficult for the bond portion of the portfolio, which included corporate, mortgage-backed and U.S. Treasury issues. (Rising rates depress bond prices.) To mitigate the effect of the rate rise, we maintained a relatively short duration in the portfolio. (Duration, a function of the average maturity of the bond holdings, influences how sensitive the bonds' prices are to interest-rate changes. Generally, the longer the duration, the greater the sensitivity.) As the rising-rate trend dissipated later in the period, our bond holdings enjoyed better performance. Another part of our investment strategy was to use dollar rolls to enhance the Fund's yield, as well as Treasury futures and options to manage fluctuations in the Fund's net asset value. Bonds comprised between 30% to 35% of the portfolio during the fiscal year, while stocks made up 60% to 65%. Michael L. Manns Brad Stone AXP MUTUAL
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Fund Facts Class A-- 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 2000 $12.21 Sept. 30, 1999 $12.94 Decrease $ 0.73 Distributions -- Oct. 1, 1999 - Sept. 30, 2000 From income $ 0.40 From capital gains $ 0.82 Total distributions $ 1.22 Total return** +3.78% Class B -- 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 2000 $12.12 Sept. 30, 1999 $12.86 Decrease $ 0.74 Distributions -- Oct. 1, 1999 - Sept. 30, 2000 From income $ 0.30 From capital gains $ 0.82 Total distributions $ 1.12 Total return** +2.93% Class C -- June 26, 2000* - Sept. 30, 2000 (All figures per share) Net asset value (NAV) Sept. 30, 2000 $12.16 June 26, 2000* $12.09 Increase $ 0.07 Distributions -- June 26, 2000* - Sept. 30, 2000 From income $ 0.06 From capital gains $ -- Total distributions $ 0.06 Total return** +1.05%*** Class Y-- 12-month performance (All figures per share) Net asset value (NAV) Sept. 30, 2000 $12.21 Sept. 30, 1999 $12.95 Decrease $ 0.74 Distributions-- Oct. 1, 1999 - Sept. 30, 2000 From income $ 0.42 From capital gains $ 0.82 Total distributions $ 1.24 Total return** +3.87% *Inception date. **The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. ***The total return for Class C is not annualized. ANNUAL REPORT - 2000
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The 10 Largest Holdings Percent Value (of net assets) (as of Sept. 30, 2000) Cisco Systems 3.43% $137,705,099 Oracle 2.72 109,368,000 General Electric 2.63 105,700,806 Pfizer 2.57 103,145,043 Intel 2.35 94,172,399 Citigroup 2.26 90,752,881 EMC 1.96 78,804,375 Microsoft 1.93 77,523,675 Cardinal Health 1.87 74,932,919 Corning 1.81 72,765,000 Excludes U.S. Treasury and government agency holdings. For further detail about these holdings, please refer to the section entitled "Investments in Securities." The 10 holdings listed here make up 23.53% of net assets (icon of) pie chart AXP MUTUAL
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Making the Most of the Fund BUILD YOUR ASSETS SYSTEMATICALLY One of the best ways to invest in the Fund is by dollar-cost averaging -- a time-tested strategy that can make market fluctuations work for you. To dollar-cost average, simply invest a fixed amount of money regularly. You'll automatically buy more shares when the Fund's share price is low, fewer shares when it is high. The chart below shows how dollar-cost averaging works. In these three hypothetical scenarios, you will see six months of share price fluctuations. This strategy does not ensure a profit or avoid a loss if the market declines. But, if you can continue to invest regularly through changing market conditions even when the price of your shares falls or the market declines, it can be an effective way to accumulate shares to meet your long-term goals. How dollar-cost averaging works Jan Feb Mar Apr May Jun $15 $16 $18 $20 $10 $10 $12 $14 $ 5 Accumulated shares* Average market Your average price per share cost per share 42.25 $15 $14.20 ------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun $15 $10 $10 $8 $8 $10 $ 5 $5 $5 Accumulated shares* Average market Your average price per share cost per share 85.0 $7.66 $7.05 ------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun $15 $10 $10 $8 $6 $7 $ 5 $4 $4 Accumulated shares* Average market Your average price per share cost per share 103.5 $6.50 $5.80 ------------------------------------------------------------------------------- $100 invested per month. Total invested: $600 *Shares purchased is determined by dividing the amount invested per month by the current share price. THREE WAYS TO BENEFIT FROM A MUTUAL FUND: o your shares increase in value when the Fund's investments do well o you receive capital gains when the gains on investments sold by the Fund exceed losses o you receive income when the Fund's stock dividends, interest and short-term gains exceed its expenses. All three make up your total return. You potentially can increase your investment if, like most investors, you reinvest your dividends and capital gain distributions to buy additional shares of the Fund or another fund.How dollar-cost averaging works Accumulated ANNUAL REPORT - 2000
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The Fund's Long-term Performance _______________________________________________________________________________ How $10,000 has grown in AXP Mutual _______________________________________________________________________________ $70,000 $60,000 $50,000 S&P 500 Index Lipper Balanced $40,000 Funds Index $30,000 $30,075 AXP Mutual Class A $20,000 $9,425 (The printed version of this chart contains a line graph with four lines corresponding to the three Indexes and Fund noted above.) '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 Average Annual Total Returns (as of Sept. 30, 2000) 1 year 5 years 10 years (A) Since inception (B&Y) Class A -2.18% +8.97% +11.64% --% Class B -0.84% +9.30% --% +10.60%* Class Y +3.87% +10.41% --% +11.70%* * Inception date was March 20, 1995. Assumes: Holding period from 10/1/90 to 9/30/00. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund has a value of $20,151. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to two widely cited performance indexes, the Standard & Poor's 500 Index (S&P 500 Index) and the Lipper Balanced Funds Index. In comparing AXP Mutual (Class A) to the two indexes, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indexes. Class C became effective June 26, 2000 and therefore performance information is not presented. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Average annual total return figures reflect the impact of the applicable sales charge, up to a maximum of 5.75%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Standard & Poor's 500 Index (S&P 500 Index), an unmanaged list of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the S&P500 companies may be generally larger than those in which the Fund invests. Lipper Balanced Funds Index, an unmanaged index published by Lipper Inc., includes 10 funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. AXP MUTUAL
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The financial statements contained in Post-Effective Amendment #103 to Registration Statement No. 2-11328 filed on or about November 27, 2000, are incorporated by reference.
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Federal Income Tax Information (Unaudited) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Class A Income distributions taxable as dividend income, 37.08% qualifying for deduction by corporations. Payable date Per share Dec. 22, 1999 $0.18025 March 24, 2000 0.07529 June 22, 2000 0.08425 Sept. 22, 2000 0.06033 Total $0.40012 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 22, 1999 $0.82041 Total distributions $1.22053 The distribution of $1.00066 per share, payable Dec. 22, 1999, consisted of $0.09356 derived from net investment income, $0.08669 from net short-term capital gains (a total of $0.18025 taxable as dividend income) and $0.82041 from net long-term capital gains. Class B Income distributions taxable as dividend income, 37.08% qualifying for deduction by corporations. Payable date Per share Dec. 22, 1999 $0.14737 March 24, 2000 0.05090 June 22, 2000 0.06060 Sept. 22, 2000 0.04453 Total $0.30340 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 22, 1999 $0.82041 Total distributions $1.12381 The distribution of $0.96778 per share, payable Dec. 22, 1999, consisted of $0.06068 derived from net investment income, $0.08669 from net short-term capital gains (a total of $0.14737 taxable as dividend income) and $0.82041 from net long-term capital gains. AXP MUTUAL
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Class C Income distributions taxable as dividend income, 37.08% qualifying for deduction by corporations. Payable date Per share Sept. 22, 2000 0.05755 Total distributions $0.05755 Class Y Income distributions taxable as dividend income, 37.08% qualifying for deduction by corporations. Payable dat Per share Dec. 22, 1999 $0.18572 March 24, 2000 0.08033 June 22, 2000 0.08928 Sept. 22, 2000 0.06555 Total $0.42088 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 22, 1999 $0.82041 Total distributions $1.24129 The distribution of $1.00613 per share, payable Dec. 22, 1999, consisted of $0.09903 derived from net investment income, $0.08669 from net short-term capital gains (a total of $0.18572 taxable as dividend income) and $0.82041 from net long-term capital gains. ANNUAL REPORT - 2000
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American Express(R) Funds AXP Mutual 70100 AXP Financial Center Minneapolis, MN 55474 AMERICAN EXPRESS(R) S-6326 U (11/00) This report must be accompanied or preceded by the Fund's current prospectus. 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.
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STATEMENT OF DIFFERENCES Difference Description 1) The layout is different 1) Some of the layout in the throughout the annual report. annual report to shareholders is in two columns. 2) There are pictures, icons 2) Each picture, icon and and graphs throughout the graph is described in annual report. parentheses.

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This ‘N-30D’ Filing    Date First  Last      Other Filings
Filed on:12/4/00
11/27/001022485BPOS,  NSAR-B
11/6/004
For Period End:9/30/0052124F-2NT,  NSAR-B
9/21/0012
6/26/00521
12/22/991124
10/1/99518
9/30/9951824F-2NT,  N-30D,  NSAR-B
3/20/95821
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