-----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, MPswcuhfxepp0MGwuD72GvaZTmBhXgXRztTWGfNvKqY+51Xu5hi6Dwy13TXOykCY y9bAqzkISyY2EEc/QBwsQg== 0000820027-00-000261.txt : 20000324 0000820027-00-000261.hdr.sgml : 20000324 ACCESSION NUMBER: 0000820027-00-000261 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS GROWTH FUND INC CENTRAL INDEX KEY: 0000049702 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410329910 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02111 FILM NUMBER: 576337 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 N-30D 1 AXP(SM) Research Opportunities Fund 2000 SEMIANNUAL REPORT American Express(R) Funds (icon of) ruler AXP Research Opportunities seeks to provide shareholders with long-term capital growth. The Rewards of Research Behind every decision to buy or sell a stock is information -- in most cases, informationgathered by a research analyst. AXPResearch Opportunities Fund is designed to make the most of that research by investing only in Standard & Poor's 500 stocks that carry our analysts' highest rating. The intention is to construct a portfolio that has the potential to outperform the stock market as a whole. Contents From the Chairman 3 From the Portfolio Managers 3 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 16 Notes to Financial Statements (Portfolio) 19 Investments in Securities 24 (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board 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) Keith Tufte Keith Tufte Portfolio Manager (picture of) James M Johnson Jr. James M Johnson Jr. Portfolio Manager From the Portfolio Managers The past six months was a volatile but overall productive period for the U.S. stock market and AXP Research Opportunities Fund. For the first half of the fiscal year -- August 1999 through January 2000 -- the Fund's Class A shares generated a total return (excluding the sales charge) of 7.73%. This compares with 6.00% for the Standard & Poor's 500 (an unmanaged index of stocks commonly used to gauge the performance of the market as a whole). The stock market was in a moderate slump when the period began, as concerns about higher interest rates, a potential run-up in inflation and the uncertainty regarding the impact of the Y2K computer bug weighed on investors' minds. As a result, both the market and the Fund lost ground through September. THE MARKET TURNS AROUND In early October, though, the mood began to brighten, thanks to fresh reports of still-tame inflation and generally healthy corporate profits. Soon, with another example of the remarkable resilience it has displayed in recent years, the market was again on the advance. Over the next 10 weeks and with only the briefest of interruptions, stocks continued to gather momentum, powering to an all-time high by the end of 1999. Reflecting the positive environment, the Fund gained about 17% from October through December. The period ended on a down note, though, as renewed concern about inflation and interest rates drove the market into retreat in January. As was the case for the market as a whole, technology-related stocks were the driving force behind the Fund's positive performance during the period. To the Fund's benefit, we kept a substantial exposure to the tech sector (approaching 40% at times). Among the biggest winners were Intel, National Semiconductor, America Online, 3Com, IBM, Cisco System and EMC. Among other sectors, retailing, led by Wal-Mart and Home Depot, also made a strong contribution. General Electric, in the conglomerate group, was another good performer. Also to the Fund's benefit, it had only a small exposure to building materials, industrial transportation and tobacco stocks, which were weak. On the negative side were holdings in the telecommunications and financial services sectors. Looking at changes to the portfolio, we reduced the exposure to retailing and financial services, and added to technology and "cyclical" stocks such as chemicals, paper, basic metals and energy. The cyclical additions reflect our view that the economy will remain robust and that interest rates are likely to rise; in such an environment, those stocks should fare relatively well. We also added a bit to the drug sector, which is experiencing improving fundamentals and merger activity. However, as the second half of the fiscal year begins, the largest area of investment is still technology, which continues to boast very strong fundamentals. Keith Tufte James M. Johnson, Jr. Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2000 $7.61 July 31, 1999 $7.94 Decrease $0.33 Distributions -- Aug. 1, 1999 - Jan. 31, 2000 From income $0.38 From capital gai $0.61 Total distributi $0.99 Total return* +7.73%** Class B -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2000 $7.38 July 31, 1999 $7.76 Decrease $0.38 Distributions -- Aug. 1, 1999 - Jan. 31, 2000 From income $0.38 From capital $0.61 Total distributions $0.99 Total return* +7.32%** Class Y -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2000 $7.64 July 31, 1999 $7.96 Decrease $0.32 Distributions -- Aug. 1, 1999 - Jan. 31, 2000 From income $0.38 From capital gains $0.61 Total distributions $0.99 Total return* +7.85%** *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 Jan. 31, 2000) Microsoft 5.57% $49,793,905 Intel 3.06 27,386,888 Lucent Technologies 2.62 23,401,966 AT&T 2.48 22,201,683 Coca-Cola 2.45 21,915,278 Hewlett-Packard 2.34 20,959,364 SBC Communications 2.20 19,721,666 Pfizer 2.13 19,042,312 MCI WorldCom 2.07 18,514,305 Motorola 2.02 18,107,068 For further detail about these holdings, please refer to the section entitled "Investments in Securities." The 10 holdings listed here make up 26.94% of net assets (icon of) pie chart
Financial Statements Statement of assets and liabilities AXP Research Opportunities Fund Jan. 31, 2000 (Unaudited) Assets Investments in Aggressive Growth Portfolio (Note 1) $892,735,263 Liabilities Accrued distribution fee 38,931 Accrued service fee 3 Accrued transfer agency fee 12,847 Accrued administrative services fee 3,957 Other accrued expenses 55,549 ------ Total liabilities 111,287 ------- Net assets applicable to outstanding capital stock $892,623,976 ============ Represented by Capital stock-- $.01 par value (Note 1) $ 1,186,171 Additional paid-in capital 786,705,563 Net operating loss (1,567,634) Accumulated net realized gain (loss) 71,130,821 Unrealized appreciation (depreciation) on investments 35,169,055 ---------- Total-- representing net assets applicable to outstanding capital stock $892,623,976 ============ Net assets applicable to outstanding shares: Class A $554,851,318 Class B $337,459,535 Class Y $ 313,123 Net asset value per share of outstanding capital stock: Class A shares 72,874,413 $ 7.61 Class B shares 45,701,665 $ 7.38 Class Y shares 40,975 $ 7.64 See accompanying notes to financial statements.
Statement of operations AXP Research Opportunities Fund Six months ended Jan. 31, 2000 (Unaudited) Investment income Income: Dividends $ 3,408,116 Interest 989,648 Total income 4,397,764 Expenses (Note 2): Expenses allocated from Aggressive Growth Portfolio 2,641,225 Distribution fee Class A 654,792 Class B 1,543,688 Transfer agency fee 701,271 Incremental transfer agency fee Class A 49,900 Class B 48,858 Service fee-- Class Y 207 Administrative services fees and expenses 228,155 Compensation of board members 3,759 Printing and postage 42,114 Registration fees 59,588 Audit fees 2,750 Other 1,164 ----- Total expenses 5,977,471 Earnings credits on cash balances (Note 2) (12,073) ------- Total net expenses 5,965,398 --------- Investment income (loss) -- net (1,567,634) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 89,734,408 Financial futures contracts 292,978 ------- Net realized gain (loss) on investments 90,027,386 ---------- Net change in unrealized appreciation (depreciation) on investments (26,288,048) ----------- Net gain (loss) on investments 63,739,338 ---------- Net increase (decrease) in net assets resulting from operations $ 62,171,704 ============ See accompanying notes to financial statements.
Statements of changes in net assets AXP Research Opportunities Fund Jan. 31, 2000 July 31,1999 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ (1,567,634) $ (1,419,662) Net realized gain (loss) on investments 90,027,386 85,925,568 Net change in unrealized appreciation (depreciation) on investments (26,288,048) 18,671,763 ----------- ---------- Net increase (decrease) in net assets resulting from operations 62,171,704 103,177,669 ---------- ----------- Distributions to shareholders from: Net investment income Class A -- (167,981) Class Y -- (840) Net realized gain Class A (63,714,601) (17,205,662) Class B (39,240,635) (9,873,913) Class Y (48,595) (15,203) ------- ------- Total distributions (103,003,831) (27,263,599) ------------ ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 94,702,359 146,775,769 Class B shares 56,331,364 86,101,455 Class Y shares 12,386 378,451 Reinvestment of distributions at net asset value Class A shares 60,903,968 16,502,649 Class B shares 39,012,861 9,816,826 Class Y shares 48,595 16,043 Payments for redemptions Class A shares (57,576,629) (69,195,817) Class B shares (Note 2) (17,004,249) (30,310,794) Class Y shares (128,607) (72,990) -------- ------- Increase (decrease) in net assets from capital share transactions 176,302,048 160,011,592 ----------- ---------- Total increase (decrease) in net assets 135,469,921 235,925,662 Net assets at beginning of period 757,154,055 521,228,393 ----------- ----------- Net assets at end of period $892,623,976 $757,154,055 ============ ============ See accompanying notes to financial statements.
Notes to Financial Statements AXP Research Opportunities Fund (Unaudited as to Jan. 31, 2000) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Growth Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Growth Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. 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 Aggressive Growth Portfolio The Fund invests all of its assets in Aggressive Growth Portfolio (the Portfolio), a series of Growth Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of companies that comprise the S&P 500. 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 Jan. 31, 2000, was 99.78%. 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 An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 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 0.06% to 0.03% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19 o Class B $20 o Class Y $17 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B shares. Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $1,280,092 for Class A and $111,512 for Class B for the six months ended Jan. 31, 2000. During the six months ended Jan. 31, 2000, the Fund's transfer agency fees were reduced by $12,073 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 Jan. 31, 2000 Class A Class B Class Y Sold 11,913,347 7,269,011 1,566 Issued for reinvested distributions 7,629,392 5,032,380 6,067 Redeemed (7,177,764) (2,181,061) (16,654) ---------- ---------- ------- Net increase (decrease) 12,364,975 10,120,330 (9,021) ---------- ---------- ------ Year ended July 31, 1999 Class A Class B Class Y Sold 19,385,593 11,676,332 57,556 Issued for reinvested distributions 2,251,690 1,365,120 2,185 Redeemed (9,439,919) (4,195,350) (9,963) ---------- ---------- ------ Net increase (decrease) 12,197,364 8,846,102 49,778 ---------- --------- ------ 4. BANK BORROWINGS The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had no borrowings outstanding during the six months ended Jan. 31, 2000.
5. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. Fiscal period ended July 31, Per share income and capital changesa Class A 2000f 1999 1998 1997b Net asset value, beginning of period $7.94 $6.98 $6.86 $5.00 Income from investment operations: Net investment income (loss) -- (.01) .02 .01 Net gains (losses) (both realized and unrealized) .66 1.32 .65 1.86 Total from investment operations .66 1.31 .67 1.87 Less distributions: Dividends from net investment income -- -- -- -- Distributions from realized gains (.99) (.35) (.55) (.01) Total distributions (.99) (.35) (.55) (.01) Net asset value, end of period $7.61 $7.94 $6.98 $6.86 Ratios/supplemental data Net assets, end of period (in millions) $555 $481 $337 $205 Ratio of expenses to average daily net assetsd 1.15%c 1.12% 1.12% 1.52%c Ratio of net investment income (loss) to average daily net assets (.10%)c .04% .30% .20%c Portfolio turnover rate (excluding short-term securities) 72% 143% 148% 171% Total returne 7.73% 19.21% 10.76% 37.44% a For a share outstanding throughout the period. Rounded to the nearest cent. b Inception date was Aug. 19, 1996. c Adjusted to an annual basis. d Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. e Total return does not reflect payment of a sales charge. f Six months ended Jan. 31, 2000 (Unaudited).
Fiscal period ended July 31, Per share income and capital changesa Class B Class Y 2000f 1999 1998 1997b 2000f 1999 1998 1997b Net asset value, beginning of period $7.76 $6.88 $6.82 $5.00 $7.96 $7.01 $6.88 $5.00 Income from investment operations: Net investment income (loss) (.03) (.02) (.02) (.02) -- -- .03 .01 Net gains (losses) (both realized and unrealized) .64 1.25 .63 1.85 .67 1.32 .65 1.88 Total from investment operations .61 1.23 .61 1.83 .67 1.32 .68 1.89 Less distributions: Dividends from net investment income -- -- -- -- -- (.02) -- -- Distributions from realized gains (.99) (.35) (.55) (.01) (.99) (.35) (.55) (.01) Total distributions (.99) (.35) (.55) (.01) (.99) (.37) (.55) (.01) Net asset value, end of period $7.38 $7.76 $6.88 $6.82 $7.64 $7.96 $7.01 $6.88 Ratios/supplemental data Net assets, end of period (in millions) $337 $276 $184 $96 $-- $-- $-- $-- Ratio of expenses to average daily net assetsd 1.91%c 1.88% 1.88% 2.25%c .98%c 1.02% .87% .45%c Ratio of net investment income (loss) to average daily net assets (.85%)c (.72%) (.46%) (.53%)c .08%c .12% .40% .33%c Portfolio turnover rate (excluding short-term securities) 72% 143% 148% 171% 72% 143% 148% 171% Total returne 7.32% 18.31% 9.92% 36.48% 7.85% 19.34% 10.93% 37.66% a For a share outstanding throughout the period. Rounded to the nearest cent. b Inception date was Aug. 19, 1996. c Adjusted to an annual basis. d Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. e Total return does not reflect payment of a sales charge. f Six months ended Jan. 31, 2000 (Unaudited).
Financial Statements Statement of assets and liabilities Aggressive Growth Portfolio Jan. 31, 2000 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $872,108,680) $908,158,746 Cash in bank on demand deposit 78,673 Dividends and accrued interest receivable 577,251 Receivable for investment securities sold 1,837,934 --------- Total assets 910,652,604 ----------- Liabilities Payable for investment securities purchased 15,903,026 Accrued investment management services fee 45,459 Other accrued expenses 10,848 ------ Total liabilities 15,959,333 ---------- Net assets $894,693,271 ============ See accompanying notes to financial statements. Statement of operations Aggressive Growth Portfolio Six months ended Jan. 31, 2000 (Unaudited) Investment income Income: Dividends $ 3,416,114 Interest 991,283 ------- Total income 4,407,397 --------- Expenses (Note 2): Investment management services fee 2,602,413 Compensation of board members 4,118 Custodian fees 28,371 Audit fees 8,250 Other 6,391 ----- Total expenses 2,649,543 Earnings credits on cash balances (Note 2) (2,152) ------ Total net expenses 2,647,391 --------- Investment income (loss) -- net 1,760,006 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 89,972,389 Financial future contracts 293,620 ------- Net realized gain (loss) on investments 90,266,009 Net change in unrealized appreciation (depreciation) on investments(26,378,376) ----------- Net gain (loss) on investments 63,887,633 ---------- Net increase (decrease) in net assets resulting from operations $ 65,647,639 ============ See accompanying notes to financial statements.
Statements of changes in net assets Aggressive Growth Portfolio Jan. 31, 2000 July 31, 1999 Six months ended Year ended (Unaudited) Operations Investment income (loss)-- net $ 1,760,006 $ 3,142,262 Net realized gain (loss) on investments 90,266,009 86,175,979 Net change in unrealized appreciation (depreciation) on investments (26,378,376) 18,690,185 ----------- ---------- Net increase (decrease) in net assets resulting from operations 65,647,639 108,008,426 Net contributions (withdrawals) from partners 69,947,062 127,976,287 ---------- ----------- Total increase (decrease) in net assets 135,594,701 235,984,713 Net assets at beginning of period 759,098,570 523,113,857 ----------- ----------- Net assets at end of period $894,693,271 $759,098,570 ============ ============ See accompanying notes to financial statements.
Notes to Financial Statements Aggressive Growth Portfolio (Unaudited as to Jan. 31, 2000) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Aggressive Growth Portfolio invests primarily in equity securities of companies that comprise the S&P 500. 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 independent pricing service. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with AEFC to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.65% to 0.5% annually. Effective with the new Investment Management Services Agreement, the fee will be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of AXP Research Opportunities Fund to the Lipper Growth Fund Index. The maximum adjustment is 0.12% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference is less than 1% the adjustment will be zero. 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 Jan. 31, 2000, the Portfolio's custodian fees were reduced by $2,152 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 $618,077,097 and $568,741,085 respectively, for the six months ended Jan. 31, 2000. For the same period, the portfolio turnover rate was 72%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $45,930 for the six months ended Jan. 31, 2000. 4. STOCK INDEX FUTURES CONTRACTS As of Jan. 31, 2000, investments in securities included securities valued at $8,169,063 that were pledged as collateral to cover initial margin deposits on 79 open purchase contracts. The market value of the open purchase contracts as of Jan. 31, 2000 was $27,669,750 with a net unrealized loss of $795,787.
Investments in Securities Aggressive Growth Portfolio Jan. 31, 2000 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (96.6%) Issuer Shares Value(a) Aerospace & defense (1.2%) Goodrich (BF) 157,900 $3,947,500 Honeywell Intl 136,250 6,540,000 Total 10,487,500 Airlines (2.5%) AMR 187,860(b) 10,109,216 Southwest Airlines 747,950 11,920,453 Total 22,029,669 Automotive & related (1.0%) Delphi Automotive Systems 289,796 5,017,093 Ford Motor 80,550 4,007,363 Total 9,024,456 Banks and savings & loans (3.3%) Bank of New York 223,710 9,088,219 SLM Holding 85,600 3,333,050 Wachovia 92,480 5,924,500 Wells Fargo 278,250 11,130,000 Total 29,475,769 Beverages & tobacco (2.4%) Coca-Cola 381,550 21,915,278 Building materials & construction (0.5%) Weyerhaeuser 72,410 4,154,524 Chemicals (0.5%) Du Pont (EI) de Nemours 79,700 4,702,300 Communications equipment & services (5.8%) Lucent Technologies 423,565 23,401,966 Motorola 132,410 18,107,068 Tellabs 186,570(b) 10,074,780 Total 51,583,814 Computers & office equipment (23.1%) 3Com 332,990(b,e) 16,899,242 Automatic Data Processing 202,200 9,591,863 BMC Software 176,050(b) 6,667,894 Citrix Systems 27,300(b) 3,746,925 Compaq Computer 478,500 13,098,938 Computer Sciences 118,480(b) 10,885,350 Electronic Data Systems 132,990 8,993,449 First Data 215,080 10,552,363 Hewlett-Packard 193,620 20,959,364 Lexmark Intl Group Cl A 151,550(b) 14,283,587 Microsoft 508,750(b) 49,793,905 Novell 210,900(b) 7,038,788 Oracle 342,000(b) 17,083,968 Parametric Technology 308,800(b) 6,619,900 Solectron 57,220(b) 4,155,603 Unisys 233,100(b) 7,430,063 Total 207,801,202 Electronics (7.5%) Applied Materials 49,100(b) 6,738,975 Corning 39,150 6,038,888 Intel 276,810 27,386,888 KLA-Tencor 72,920(b) 4,274,935 LSI Logic 52,150(b) 4,263,263 Natl Semiconductor 87,290(b) 4,582,725 Teradyne 55,800(b) 3,613,050 Texas Instruments 93,090 10,042,083 Total 66,940,807 Energy (3.9%) Chevron 157,550 13,165,271 Conoco Cl B 448,640 10,571,080 Texaco 215,260 11,381,873 Total 35,118,224 Energy equipment & services (0.7%) Halliburton 164,700 5,929,200 Financial services (2.2%) Capital One Financial 100,680 4,127,880 Kansas City Southern Inds 58,730 4,063,382 MBNA 252,580 6,377,645 Providian Financial 65,210 5,502,094 Total 20,071,001 Food (1.5%) Bestfoods 68,530 2,981,055 General Mills 96,820(e) 3,019,574 Sara Lee 184,990 3,410,753 SUPERVALU 237,380 4,272,840 Total 13,684,222 Health care (11.7%) Amgen 196,880(b) 12,538,795 Baxter Intl 96,440 6,160,105 Biomet 32,800 1,305,850 Boston Scientific 233,900(b) 4,853,425 Bristol-Myers Squibb 267,230 17,637,180 Guidant 112,970(b) 5,945,046 Medtronic 207,040 9,472,080 Pfizer 523,500 19,042,312 Schering-Plough 280,920 12,360,480 Warner-Lambert 158,320 15,030,505 Total 104,345,778 Health care services (0.4%) Cardinal Health 68,280 3,264,638 Household products (2.7%) Colgate-Palmolive 203,300 12,045,525 Kimberly-Clark 189,800 11,755,738 Total 23,801,263 Industrial equipment & services (0.3%) Parker-Hannifin 61,580 2,663,335 Leisure time & entertainment (1.0%) Disney (Walt) 30,090 1,092,643 Viacom Cl B 136,970(b) 7,584,714 Total 8,677,357 Media (3.1%) CBS 154,840(b) 9,029,108 Comcast Special Cl A 192,710 8,864,660 MediaOne Group 127,890(b) 10,167,255 Total 28,061,023 Metals (0.3%) Nucor 51,310 2,552,673 Multi-industry conglomerates (3.1%) Danaher 92,620 3,994,238 General Electric 56,310 7,510,346 Grainger (WW) 91,460 4,384,364 Tyco Intl 268,600(c) 11,482,650 Total 27,371,598 Paper & packaging (0.9%) Fort James 142,300 3,806,525 Intl Paper 92,990 4,428,649 Total 8,235,174 Restaurants & lodging (0.2%) Wendy's Intl 101,940 1,917,746 Retail (5.9%) Bed Bath & Beyond 55,400(b) 1,506,188 Best Buy 92,000(b) 4,393,000 Circuit City Stores-Circuit City Group 107,930 4,155,305 Costco Wholesale 128,680(b) 6,297,278 CVS 147,200 5,142,800 Home Depot 35 1,982 Kroger 297,050(b) 5,161,244 Safeway 162,390(b) 6,201,268 Target 242,070(b) 15,991,748 TJX Companies 241,820 3,944,689 Total 52,795,502 Transportation (0.7%) Burlington Northern Santa Fe 178,640 4,298,525 Union Pacific 39,000 1,560,000 Total 5,858,525 Utilities -- electric (0.3%) CMS Energy 92,800 2,784,000 Utilities -- telephone (9.9%) AT&T 420,885 22,201,683 Bell Atlantic 268,740 16,645,084 MCI WorldCom 403,032(b) 18,514,305 SBC Communications 457,314 19,721,666 U S WEST Communications Group 174,250 11,587,625 Total 88,670,363 Total common stocks (Cost: $827,848,320) $863,916,941 Short-term securities (4.9%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (4.2%) Federal Home Loan Bank Disc Nts 02-16-00 5.55% $1,100,000 $1,096,920 03-08-00 5.79 1,600,000 1,590,511 Federal Home Loan Mtge Corp Disc Nts 02-01-00 5.53 1,300,000 1,299,783 02-23-00 5.62 1,400,000 1,394,273 03-29-00 5.78 4,400,000 4,358,034 04-04-00 5.76 5,100,000 5,046,325 Federal Natl Mtge Assn Disc Nts 03-01-00 5.63 4,800,000 4,777,580 03-02-00 5.63 1,900,000 1,890,438 03-02-00 5.83 1,300,000 1,293,458 03-23-00 5.73 4,200,000 4,164,113 04-13-00 5.78 6,200,000 6,125,573 04-20-00 5.83 5,000,000 4,934,222 Total 37,971,230 Commercial paper (0.7%) Abbey Natl North America 02-16-00 5.68 2,600,000 2,593,448 Falcon Assets 03-10-00 5.81 1,500,000(d) 1,490,624 Ford Motor Credit 03-03-00 5.56 600,000 596,833 Windmill Funding 03-10-00 5.80 1,600,000(d) 1,589,670 Total 6,270,575 Total short-term securities (Cost: $44,260,360) $44,241,805 Total investments in securities (Cost: $872,108,680)(f) $908,158,746 See accompanying notes to investments in securities.
Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. As of Jan. 31, 2000, the value of foreign securities represented 1.28% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (e) Partially pledged as initial margin deposit on the following open stock index futures purchase contracts (see Note 4 to the financial statements): Type of security Contracts S&P 500 Index, March 2000 79 (f) At Jan. 31, 2000, the cost of securities for federal income tax purposes was approximately $872,109,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $78,546,000 Unrealized depreciation (42,496,000) ----------- Net unrealized appreciation $36,050,000 American Express Funds AXP Research Opportunities Fund 200 AXP Financial Center Minneapolis, MN 55474 TICKER SYMBOL Class A:IRDAX Class B:IROBX Class Y:N/A PRSRT STD AUTO U.S. POSTAGE PAID SPENCER, IA PERMIT NO. 85 S-6359 E (3/00) 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-----