-----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, HlQ8DK7R+MD/U2bAGNs9eZJQGp41yUgmdEqji96hQ76z29FqALGny2XOVIxsYCpn LH795DaZIPb48IfikXfl5Q== 0000820027-01-500039.txt : 20010319 0000820027-01-500039.hdr.sgml : 20010319 ACCESSION NUMBER: 0000820027-01-500039 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GROWTH SERIES INC/MN 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: 1569736 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 MAIL ADDRESS: STREET 1: 80 S. 8TH STREET CITY: MINNEAPOLIS STATE: MN ZIP: 55440 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH FUND INC DATE OF NAME CHANGE: 20000829 FORMER COMPANY: FORMER CONFORMED NAME: IDS GROWTH FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 s6359f.txt AXP RESEARCH OPPORTUNITIES FUND AXP(R) Research Opportunities Fund 2001 SEMIANNUAL REPORT American Express Funds (icon of) ruler AXP Research Opportunities Fund 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) 17 Notes to Financial Statements (Portfolio) 20 Investments in Securities 23 (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 this year, accompanied by a modest rise in long-term interest rates. But no matter what transpires, this is a great time to take a close look at your goals and investments. We encourage you to: o Consult a professional investment advisor who can help you cut through mountains of data. o Set financial goals that extend beyond those achievable through the retirement plan 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 semiannual report contains other valuable information as well. The Fund's prospectus describes its investment objectives and how it intends to achieve those objectives. As experienced investors know, information is vital to making good investment decisions. So, take a moment and decide again whether the Fund's investment objectives and management style fit with your other investments to help you reach your financial goals. And make it a practice on a regular basis to assess your investment options. On behalf of the Board, Arne H. Carlson (picture of) James M. Johnson, Jr. James M. Johnson, Jr. Portfolio manager From the Portfolio Managers In a highly volatile six months for the stock market, the downs ultimately outweighed the ups for AXP Research Opportunities Fund. For the first half of the fiscal year -- August 2000 through January 2001 -- the Fund's Class A shares lost 4.33% (excluding the sales charge). Investors were in good spirits as the period began, which was reflected in a sharp gain by the stock market last August. But by early September, the possibility of a slowdown in economic growth and, therefore, a slump in corporate profits began to create doubts about the future. The result was an almost uninterrupted stock slide that didn't level off until late December, by which time the market was down more than 15%. Some welcome relief came the following month, though, as the new year brought a market rebound that ended the period on a positive note. (picture of) Keith Tufte Keith Tufte Portfolio manager TECH WRECK As has been the case in recent years, the market's ups and downs were largely driven by the fortunes of technology and telecommunications equipment stocks. For the Fund, such stocks also had a major effect on performance as they comprised the largest area of investment (about a third of the portfolio early in the period). Some notable losers during last fall's downturn included Lucent, Motorola, JDS Uniphase, Nortel, Cisco Systems and IBM. To stem the losses, we decreased the tech and telecom holdings as the period progressed and shifted more money into health care. That strategy paid off, as health care provided strong gains in late 2000, with Alza, Pfizer, Medtronic and HCA Healthcare among the Fund's biggest winners. Looking at other sectors, utilities and energy were strong performers for most of the six months, thanks to gains by Duke Power, Enron and AES. Safeway, in the food retailing sector, and Tyco, in the industrial sector, also were up substantially. Given that the market seems likely to remain volatile and unforgiving toward companies whose profits fail to meet investors' expectations, we plan to maintain an emphasis on high-quality companies that appear likely to enjoy consistent growth. An additional criterion is that the stock price should offer at least reasonably good investment value. As the new fiscal year begins, that strategy has resulted in the Fund's portfolio having an average exposure to technology stocks, an above-average exposure to health care and financial services stocks, and a below-average exposure to basic materials and industrial stocks. James M. Johnson, Jr., CFA Keith Tufte Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2001 $6.23 July 31, 2000 $7.61 Decrease $1.38 Distributions -- Aug. 1, 2000 - Jan. 31, 2001 From income $0.90 From long-term capital gains $0.09 Total distributions $0.99 Total return* -4.33% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2001 $5.96 July 31, 2000 $7.36 Decrease $1.40 Distributions -- Aug. 1, 2000 - Jan. 31, 2001 From income $0.90 From long-term capital gains $0.09 Total distributions $0.99 Total return* -4.76% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2001 $5.96 July 31, 2000 $7.36 Decrease $1.40 Distributions -- Aug. 1, 2000 - Jan. 31, 2001 From income $0.90 From long-term capital gains $0.09 Total distributions $0.99 Total return* -4.76% Class Y -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2001 $6.27 July 31, 2000 $7.65 Decrease $1.38 Distributions -- Aug. 1, 2000 - Jan. 31, 2001 From income $0.90 From long-term capital gains $0.09 Total distributions $0.99 Total return* -4.32% * 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 10 Largest Holdings Percent Value (of net assets) (as of Jan. 31, 2001) General Electric 3.43% $25,985,400 Pfizer 2.94 22,209,284 Cisco Systems 2.76 20,908,843 AOL Time Warner 2.29 17,308,007 SBC Communications 1.99 15,046,520 Intl Business Machines 1.96 14,806,400 Verizon 1.87 14,144,130 American Intl Group 1.65 12,472,434 Viacom Cl B 1.56 11,790,720 Home Depot 1.55 11,693,320 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 22.00% of net assets Financial Statements Statement of assets and liabilities AXP Research Opportunities Fund Jan. 31, 2001 (Unaudited) Assets Investment in Aggressive Growth Portfolio (Note 1) $756,653,964 ------------ Capital shares receivable 1,373 Total assets 756,655,337 ----------- Liabilities Accrued distribution fee 11,272 Accrued service fee 1 Accrued transfer agency fee 4,038 Accrued administrative services fee 1,138 Other accrued expenses 24,356 ------ Total liabilities 40,805 ------ Net assets applicable to outstanding capital stock $756,614,532 ============ Represented by Capital stock-- $.01 par value (Note 1) $ 1,236,639 Additional paid-in capital 795,098,135 Undistributed net investment income 312,948 Accumulated net realized gain (loss) (39,946,885) Unrealized appreciation (depreciation) on investments (86,305) ------- Total -- representing net assets applicable to outstanding capital stock $756,614,532 ============ Net assets applicable to outstanding shares Class A $459,122,885 Class B $296,891,606 Class C $ 231,496 Class Y $ 368,545 Net asset value per share of outstanding capital stock: Class A shares 73,718,118 $ 6.23 Class B shares 49,848,155 $ 5.96 Class C shares 38,828 $ 5.96 Class Y shares 58,782 $ 6.27 See accompanying notes to financial statements. Statement of operations AXP Research Opportunities Fund Six months ended Jan. 31, 2001 (Unaudited) Investment income Income: Dividends $ 3,462,742 Interest 2,766,681 --------- Total income 6,229,423 --------- Expenses (Note 2): Expenses allocated from Aggressive Growth Portfolio 2,568,635 Distribution fee Class A 638,228 Class B 1,612,039 Class C 709 Transfer agency fee 678,372 Incremental transfer agency fee Class A 47,380 Class B 48,582 Class C 31 Service fee-- Class Y 151 Administrative services fees and expenses 232,738 Compensation of board members 3,400 Printing and postage 47,840 Registration fees 56,564 Audit fees 2,875 Other 3,853 ----- Total expenses 5,941,397 Earnings credits on cash balances (Note 2) (24,922) ------- Total net expenses 5,916,475 --------- Investment income (loss)-- net 312,948 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (15,721,946) Futures contracts (21,367,843) Options contracts written 84,603 ------ Net realized gain (loss) on investments (37,005,186) Net change in unrealized appreciation (depreciation) on investments (1,433,013) ---------- Net gain (loss) on investments (38,438,199) ----------- Net increase (decrease) in net assets resulting from operations $(38,125,251) ============ See accompanying notes to financial statements.
Statements of changes in net assets AXP Research Opportunities Fund Jan. 31, 2001 July 31, 2000 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss)-- net $ 312,948 $ (2,315,065) Net realized gain (loss) on investments (37,005,186) 124,226,458 Net change in unrealized appreciation (depreciation) on investments (1,433,013) (60,246,113) ---------- ----------- Net increase (decrease) in net assets resulting from operations (38,125,251) 61,665,280 ----------- ---------- Distributions to shareholders from: Net realized gain Class A (63,540,495) (63,710,249) Class B (42,333,113) (39,244,541) Class C (27,210) -- Class Y (37,724) (48,595) ------- ------- Total distributions (105,938,542) (103,003,385) ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Notes 2 and 5) 30,739,831 166,386,521 Class B shares 16,224,811 95,693,551 Class C shares 183,551 59,404 Class Y shares 107,983 104,177 Reinvestment of distributions at net asset value Class A shares 62,626,777 60,899,683 Class B shares 41,987,967 39,015,490 Class C shares 27,210 -- Class Y shares 37,724 48,595 Payments for redemptions Class A shares (88,152,522) (144,633,828) Class B shares (Note 2) (39,645,344) (56,592,557) Class C shares (Note 2) (1,902) -- Class Y shares (19,473) (235,274) ------- -------- Increase (decrease) in net assets from capital share transactions 24,116,613 160,745,762 ---------- ----------- Total increase (decrease) in net assets (119,947,180) 119,407,657 Net assets at beginning of period 876,561,712 757,154,055 ----------- ----------- Net assets at end of period $ 756,614,532 $ 876,561,712 ============= ============= Undistributed net investment income $ 312,948 $ -- ------------- ------------- See accompanying notes to financial statements.
Notes to Financial Statements AXP Research Opportunities Fund (Unaudited as to Jan. 31, 2001) 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. Class C shares of the Fund were offered to the public on June 26, 2000. Prior to this date, American Express Financial Corporation (AEFC) purchased 260 shares of capital stock at $7.69 per share, which represented the initial capital in Class C. The Fund offers Class A, Class B, Class C 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 (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in 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, 2001, was 99.99%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. Dividends to shareholders 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 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 $19.00 o Class B $20.00 o Class C $19.50 o Class Y $17.00 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 and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor 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 $378,646 for Class A and $124,460 for Class B for the six months ended Jan. 31, 2001. During the six months ended Jan. 31, 2001, the Fund's transfer agency fees were reduced by $24,922 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, 2001 Class A Class B Class C Class Y Sold 4,195,382 2,311,477 26,424 17,165 Issued for reinvested distributions 10,669,040 7,469,049 4,842 6,383 Redeemed (12,071,082) (5,628,406) (260) (2,818) ----------- ---------- ---- ------ Net increase (decrease) 2,793,340 4,152,120 31,006 20,730 --------- --------- ------ ------ Year ended July 31, 2000 Class A Class B Class C* Class Y Sold 21,031,597 12,460,910 7,822 12,602 Issued for reinvested distributions 7,628,858 5,032,734 -- 6,067 Redeemed (18,245,115) (7,378,944) -- (30,613) ----------- ---------- ----- ------- Net increase (decrease) 10,415,340 10,114,700 7,822 (11,944) ---------- ---------- ----- ------- *Inception date was June 26, 2000.
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, 2001. 5. FUND MERGER As of the close of business on July 14, 2000 AXP Research Opportunities Fund acquired the assets and assumed the identified liabilities of Strategist Special Growth Fund. The aggregate net assets of AXP Research Opportunities Fund immediately before the acquisition were $946,240,117. The merger was accomplished by a tax-free exchange of 363,505 shares of Strategist Special Growth Fund valued at $2,013,472. In exchange for the Strategist Special Growth Fund shares and net assets, AXP Research Opportunities Fund issued the following number of shares: Shares Net assets Class A 246,489 $2,013,472 Strategist Special Growth Fund's net assets at that date consisted of capital stock of $1,877,754 and unrealized appreciation of $135,718. 6. NEW ACCOUNTING PRONOUNCEMENT In November 2000, the AICPA issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after Dec. 15, 2000. Adopting the revised Guide is not expected to have a significant impact on the Fund's financial position, results of operations or changes in its net assets.
7. 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 changes(a) Class A 2001(b) 2000 1999 1998 1997(c) Net asset value, beginning of period $7.61 $7.94 $6.98 $6.86 $5.00 Income from investment operations: Net investment income (loss) .01 -- (.01) .02 .01 Net gains (losses) (both realized and unrealized) (.40) .66 1.32 .65 1.86 Total from investment operations (.39) .66 1.31 .67 1.87 Less distributions: Distributions from realized gains (.99) (.99) (.35) (.55) (.01) Net asset value, end of period $6.23 $7.61 $7.94 $6.98 $6.86 Ratios/supplemental data Net assets, end of period (in millions) $459 $540 $481 $337 $205 Ratio of expenses to average daily net assets(d) 1.13%(e) 1.14% 1.12% 1.12% 1.52%(e) Ratio of net investment income (loss) to average daily net assets .37%(e) .02% .04% .30% .20%(e) Portfolio turnover rate (excluding short-term securities) 144% 160% 143% 148% 171% Total return(f) (4.33%) 7.73% 19.21% 10.76% 37.44% (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended Jan. 31, 2001 (Unaudited). (c) Inception date was Aug. 19, 1996. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge.
Fiscal period ended July 31, Per share income and capital changes(a) Class B 2001(b) 2000 1999 1998 1997(c) Net asset value, beginning of period $7.36 $7.76 $6.88 $6.82 $5.00 Income from investment operations: Net investment income (loss) (.01) (.05) (.02) (.02) (.02) Net gains (losses) (both realized and unrealized) (.40) .64 1.25 .63 1.85 Total from investment operations (.41) .59 1.23 .61 1.83 Less distributions: Distributions from realized gains (.99) (.99) (.35) (.55) (.01) Net asset value, end of period $5.96 $7.36 $7.76 $6.88 $6.82 Ratios/supplemental data Net assets, end of period (in millions) $297 $336 $276 $184 $96 Ratio of expenses to average daily net assets(d) 1.89%(e) 1.91% 1.88% 1.88% 2.25%(e) Ratio of net investment income (loss) to average daily net assets (.39%)(e) (.73%) (.72%) (.46%) (.53%)(e) Portfolio turnover rate (excluding short-term securities) 144% 160% 143% 148% 171% Total return(f) (4.76%) 7.03% 18.31% 9.92% 36.48% (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended Jan. 31, 2001 (Unaudited). (c) Inception date was Aug. 19, 1996. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge.
Fiscal period ended July 31, Per share income and capital changes(a) Class C 2001(b) 2000(c) Net asset value, beginning of period $7.36 $7.50 Income from investment operations: Net investment income (loss) -- .02 Net gains (losses) (both realized and unrealized) (.41) (.16) Total from investment operations (.41) (.14) Less distributions: Distributions from realized gains (.99) -- Net asset value, end of period $5.96 $7.36 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- Ratio of expenses to average daily net assets(d) 1.89%(e) 1.91%(e) Ratio of net investment income (loss) to average daily net assets (.25%)(e) (.50%)(e) Portfolio turnover rate (excluding short-term securities) 144% 160% Total return(f) (4.76%) (1.87%) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended Jan. 31, 2001 (Unaudited). (c) Inception date was June 26, 2000. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge.
Fiscal period ended July 31, Per share income and capital changes(a) Class Y 2001(b) 2000 1999 1998 1997(c) Net asset value, beginning of period $7.65 $7.96 $7.01 $6.88 $5.00 Income from investment operations: Net investment income (loss) .02 .01 -- .03 .01 Net gains (losses) (both realized and unrealized) (.41) .67 1.32 .65 1.88 Total from investment operations (.39) .68 1.32 .68 1.89 Less distributions: Dividends from net investment income -- -- (.02) -- -- Distributions from realized gains (.99) (.99) (.35) (.55) (.01) Total distributions (.99) (.99) (.37) (.55) (.01) Net asset value, end of period $6.27 $7.65 $7.96 $7.01 $6.88 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(d) .97%(e) .97% 1.02% .87% 1.45%(e) Ratio of net investment income (loss) to average daily net assets .55%(e) .17% .12% .40% .33%(e) Portfolio turnover rate (excluding short-term securities) 144% 160% 143% 148% 171% Total return(f) (4.32%) 7.99% 19.34% 10.93% 37.66% (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended Jan. 31, 2001 (Unaudited). (c) Inception date was Aug. 19, 1996. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge.
Financial Statements Statement of assets and liabilities Aggressive Growth Portfolio Jan. 31, 2001 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $753,561,554) $751,807,272 Dividends receivable 572,076 Receivable for investment securities sold 40,332,356 ---------- Total assets 792,711,704 ----------- Liabilities Disbursements in excess of cash on demand deposit 93,309 Payable for investment securities purchased 35,844,558 Accrued investment management services fee 12,946 Other accrued expenses 16,613 ------ Total liabilities 35,967,426 ---------- Net assets $756,744,278 ============ See accompanying notes to financial statements. Statement of operations Aggressive Growth Portfolio Six months ended Jan. 31, 2001 (Unaudited) Investment income Income: Dividends $ 3,463,132 Interest 2,771,718 --------- Total income 6,234,850 --------- Expenses (Note 2): Investment management services fee 2,512,936 Compensation of board members 3,750 Custodian fees 39,560 Audit fees 8,625 Other 8,653 ----- Total expenses 2,573,524 Earnings credits on cash balances (Note 2) (4,600) ------ Total net expenses 2,568,924 --------- Investment income (loss)-- net 3,665,926 --------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) (15,725,087) Futures contracts (21,370,394) Options contracts written (Note 5) 84,613 ------ Net realized gain (loss) on investments (37,010,868) Net change in unrealized appreciation (depreciation) on investments (1,431,697) ---------- Net gain (loss) on investments (38,442,565) ----------- Net increase (decrease) in net assets resulting from operations $(34,776,639) ============ See accompanying notes to financial statements. Statements of changes in net assets Aggressive Growth Portfolio Jan. 31, 2001 July 31, 2000 Six months ended Year ended (Unaudited) Operations Investment income (loss)-- net $ 3,665,926 $ 4,657,284 Net realized gain (loss) on investments (37,010,868) 124,551,441 Net change in unrealized appreciation (depreciation) on investments (1,431,697) (60,287,301) ---------- ----------- Net increase (decrease) in net assets resulting from operations (34,776,639) 68,921,424 Net contributions (withdrawals) from partners (85,284,691) 48,785,614 ----------- ---------- Total increase (decrease) in net assets (120,061,330) 117,707,038 Net assets at beginning of period 876,805,608 759,098,570 ----------- ----------- Net assets at end of period $ 756,744,278 $876,805,608 ============= ============ See accompanying notes to financial statements. Notes to Financial Statements Aggressive Growth Portfolio (Unaudited as to Jan. 31, 2001) 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 accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by 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. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of AXP Research Opportunities Fund to the Lipper Large-Cap Core 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. The adjustment decreased the fee by $89,978 for the six months ended Jan. 31, 2001. 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, 2001, the Portfolio's custodian fees were reduced by $4,600 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to American Express Trust Company, an affiliate of AEFC. According to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,064,557,103 and $1,131,722,902 respectively, for the six months ended Jan. 31, 2001. For the same period, the portfolio turnover rate was 144%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $31,761 for the six months ended Jan. 31, 2001. Income from securities lending amounted to $19 for the six months ended Jan. 31, 2001. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 4. STOCK INDEX FUTURES CONTRACTS As of Jan. 31, 2001, investments in securities included securities valued at $9,276,569 that were pledged as collateral to cover initial margin deposits on 241 open purchase contracts. The market value of the open purchase contracts as of Jan. 31, 2001 was $82,717,225 with a net unrealized gain of $1,667,938. 5. OPTIONS CONTRACTS WRITTEN Contracts and premium amounts associated with options contracts written are as follows: Six months ended Jan. 31, 2001 Calls Contracts Premium Balance July 31, 2000 -- $ -- Opened 900 118,125 Closed (900) (118,125) ---- -------- Balance Jan. 31, 2001 -- $ -- ---- -------- 6. NEW ACCOUNTING PRONOUNCEMENT In November 2000, the AICPA issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after Dec. 15, 2000. Adopting the revised Guide is not expected to have a significant impact on the Portfolio's financial position, results of operations or changes in its net assets. Investments in Securities Aggressive Growth Portfolio Jan. 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (88.7%) Issuer Shares Value(a) Airlines (0.7%) AMR 138,400(b) $5,410,056 Banks and savings & loans (6.8%) Bank of America 185,100 9,962,082 Firstar 416,300 9,824,680 FleetBoston Financial 233,100 10,102,554 Mellon Financial 103,100 4,804,460 Washington Mutual 145,400 7,015,550 Wells Fargo 193,900 9,987,789 Total 51,697,115 Beverages & tobacco (2.2%) Anheuser-Busch 132,700 5,753,872 Philip Morris 163,900 7,211,600 UST 131,400 3,350,700 Total 16,316,172 Chemicals (0.6%) Du Pont (EI) de Nemours 95,400 4,169,934 Communications equipment & services (2.3%) Corning 189,200 10,729,532 JDS Uniphase 56,600(b) 3,102,388 Lucent Technologies 196,300 3,651,180 Total 17,483,100 Computer software & services (0.5%) Siebel Systems 52,700(b) 3,494,669 Computers & office equipment (13.4%) AOL Time Warner 329,300(b) 17,308,007 Cisco Systems 558,500(b) 20,908,843 Compaq Computer 229,200 5,434,332 Computer Sciences 106,600(b) 6,886,360 EMC 132,200(b) 10,045,878 First Data 84,500 5,138,445 Intl Business Machines 132,200 14,806,400 Juniper Networks 17,300(b,e) 1,845,694 Sanmina 181,900(b) 8,844,888 Solectron 270,700(b) 10,787,395 Total 102,006,242 Electronics (5.5%) Applied Materials 149,200(b) 7,506,625 Celestica 16,100(b,c) 1,063,405 Linear Technology 119,100 7,458,638 Maxim Integrated Products 114,400(b) 6,985,550 Novellus Systems 36,300(b) 1,756,013 Texas Instruments 228,300 9,999,539 Xilinx 132,000(b) 7,128,000 Total 41,897,770 Energy (3.4%) BP Amoco ADR 167,400(c) 8,621,100 Chevron 116,600 9,710,448 Kerr-McGee 109,900 7,106,134 Total 25,437,682 Energy equipment & services (2.9%) Halliburton 225,400 9,284,226 Rowan Companies 148,600(b) 4,056,780 Transocean Sedco Forex 188,900 8,585,505 Total 21,926,511 Financial services (7.0%) Capital One Financial 65,200 4,108,904 Countrywide Credit Inds 74,900 3,610,929 Fannie Mae 123,400 9,153,812 Lehman Brothers Holdings 131,100(e) 10,786,908 MBNA 291,400 10,545,766 Merrill Lynch 89,300 6,474,250 Providian Financial 142,800 8,332,380 Total 53,012,949 Food (1.5%) Heinz (HJ) 162,800 7,129,012 SUPERVALU 287,600(e) 3,853,840 Total 10,982,852 Health care (12.8%) Allergan 108,300 8,853,525 ALZA 95,900(b) 3,970,260 Amgen 140,400(b) 9,871,875 Baxter Intl 106,500 9,359,220 Biomet 125,300 4,221,044 Guidant 162,200(b) 8,028,900 King Pharmaceuticals 196,500(b) 8,903,415 Pfizer 491,900 22,209,284 Pharmacia 193,800 10,856,676 Schering-Plough 207,700(e) 10,468,080 Total 96,742,279 Health care services (1.2%) HCA-The Healthcare 138,100 5,166,321 Tenet Healthcare 83,500 3,642,270 Total 8,808,591 Insurance (2.9%) American Intl Group 146,700 12,472,434 Marsh & McLennan 88,700 9,592,905 Total 22,065,339 Leisure time & entertainment (1.6%) Viacom Cl B 213,600(b) 11,790,720 Media (2.8%) Clear Channel Communications 140,300(b) 9,148,963 Deluxe 122,900 2,579,671 Infinity Broadcasting Cl A 201,000(b) 6,582,750 Univision Communications Cl A 67,000(b) 2,856,210 Total 21,167,594 Miscellaneous (1.0%) Convergys 163,900(b) 7,786,889 Multi-industry conglomerates (5.4%) General Electric 564,900 25,985,400 Robert Half Intl 134,300(b) 3,592,525 Tyco Intl 187,600(c) 11,556,160 Total 41,134,085 Retail (8.5%) Best Buy 111,200(b) 5,537,760 Federated Dept Stores 167,200(b) 7,450,432 Gap 179,100 5,838,660 Home Depot 242,600 11,693,320 Kohl's 120,800(b) 8,576,800 Kroger 379,700(b) 9,321,635 May Department Stores 178,400 6,948,680 Safeway 175,500(b) 8,892,585 Total 64,259,872 Utilities -- electric (0.3%) Exelon 31,500 1,906,065 Utilities -- gas (0.3%) El Paso Energy 38,745 2,437,062 Utilities -- telephone (5.2%) BellSouth 243,000 10,242,450 SBC Communications 311,200 15,046,520 Verizon 257,400 14,144,130 Total 39,433,100 Total common stocks (Cost: $673,108,006) $671,366,648
Short-term securities (10.6%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (5.7%) Federal Home Loan Bank Disc Nts 03-02-01 6.31% $100,000 $99,445 03-21-01 5.45 7,000,000 6,948,454 Federal Home Loan Mtge Corp Disc Nts 03-06-01 5.55 4,600,000 4,576,018 03-27-01 5.37 30,000,000 29,755,708 Federal Natl Mtge Assn Disc Nt 03-05-01 5.50 2,100,000 2,089,470 Total 43,469,095 Commercial paper (4.9%) Caterpillar 02-09-01 6.46 7,200,000(d) 7,188,390 Commerzbank U.S. Finance 03-08-01 5.51 3,400,000 3,381,368 CXC 02-07-01 6.51 4,800,000(d) 4,793,933 General Electric Capital 02-06-01 6.54 5,100,000 5,094,407 Merrill Lynch 03-12-01 5.53 3,600,000 3,578,000 Natl Rural Utilities 02-16-01 5.68 1,600,000 1,595,968 Paccar Financial 04-18-01 5.54 4,100,000 4,052,031 Salomon Smith Barney 02-14-01 6.48 1,900,000 1,895,160 Toyota Motor Credit 02-08-01 6.45 5,400,000(d) 5,392,272 Total 36,971,529 Total short-term securities (Cost: $80,453,548) $80,440,624 Total investments in securities (Cost: $753,561,554)(f) $751,807,272 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, 2001, the value of foreign securities represented 2.81% 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 contracts (see Note 4 to the financial statements): Type of security Contracts Purchase contracts S&P 500 Index, March 2001 241 (f) At Jan. 31, 2001, the cost of securities for federal income tax purposes was approximately $753,562,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 39,491,000 Unrealized depreciation (41,246,000) ----------- Net unrealized depreciation $ (1,755,000) ------------ PRSRT STD AUTO U.S. POSTAGE PAID AMERICAN EXPRESS American Express Funds AXP Research Opportunities Fund 70100 AXP Financial Center Minneapolis, MN 55474 TICKER SYMBOL Class A: IRDAX Class B: IROBX Class C: N/A Class Y: N/A S-6359 F (3/01) 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. -----END PRIVACY-ENHANCED MESSAGE-----