0000820027-01-500459.txt : 20011009
0000820027-01-500459.hdr.sgml : 20011009
ACCESSION NUMBER: 0000820027-01-500459
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010731
FILED AS OF DATE: 20010928
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AXP GROWTH SERIES INC/MN
CENTRAL INDEX KEY: 0000049702
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 410329910
STATE OF INCORPORATION: MN
FISCAL YEAR END: 0731
FILING VALUES:
FORM TYPE: N-30D
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-02111
FILM NUMBER: 1747077
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
s-6356j.txt
AXP RESEARCH OPPORTUNITIES FUND
AXP(R) Research
Opportunities
Fund
2001 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
(icon of) ruler
AXP Research Opportunities Fund seeks to provide shareholders with long-term
capital growth.
(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.)
The Rewards of Research
Behind every decision to buy or sell a stock is information -- in most cases,
information gathered by a research analyst. AXP Research Opportunities Fund is
designed to make the most of that research by investing mainly 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.
Table of Contents
2001 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
Board Members and Officers 9
Independent Auditors' Report (Fund) 11
Financial Statements (Fund) 12
Notes to Financial Statements (Fund) 15
Independent Auditors' Report (Portfolio) 21
Financial Statements (Portfolio) 22
Notes to Financial Statements (Portfolio) 24
Investments in Securities 27
Federal Income Tax Information 30
--------------------------------------------------------------------------------
2 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
First, I want to thank you for being a shareholder in American Express funds.
While we strongly believe in the virtues of investment, we also are very
sensitive to the fluctuations of the financial markets. That is why we want to
re-emphasize the importance of making certain that you frequently review your
investments and regularly meet with your financial advisor. By doing so, you can
take advantage of shifts in the markets to position your portfolio relative to
expected market volatility and, possibly, achieve better overall performance.
Second, I strongly advise that you keep a focus on the long-term. Reviewing past
performance is helpful, but it should not be viewed as a leading indicator of
the future. One constant is the necessity to have a financial plan based on
appropriate asset allocation. Make sure that the plan provides what you need and
expect.
Our job, as a Board, is to monitor and confirm that the Fund complies with its
investment objective and that its management style stays on target. We want the
Fund to be able to deliver to you, the shareholder, the type of performance you
expect and the best results that can be obtained. Toward that end, American
Express has made significant changes in its investment management capability,
and will continue to make changes as it strives to provide a consistent standard
of excellence.
On behalf of the Board,
Arne H. Carlson
(picture of) James M. Johnson, Jr.
James M. Johnson, Jr.
Portfolio manager
From the Portfolio Manager
It was a trying 12 months for the stock market, as a weakening economy and a
decline in corporate profits took a toll on share prices. Reflecting the
difficult environment, AXP Research Opportunities Fund's Class A shares lost
17.54% (excluding the sales charge) for the fiscal year -- August 2000 through
July 2001.
Investors were in good spirits as the period began, as evidenced by the market's
sharp gain in August 2000. 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.
--------------------------------------------------------------------------------
3 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
A surprise cut in short-term interest rates by the Federal Reserve sparked a
rally early in the new year. But that was followed by another downturn in
February and March. The market managed to make up some of the lost ground during
the spring, only to fall back again over the summer in the face of more
disappointing economic and profit reports.
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 at the
peak). 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.
Looking at other sectors, utilities and energy were strong performers early in
the period, while leisure/entertainment did well during the final months. On the
other hand, performance was hurt by weakness in the retail and food/drug sectors
late in the period.
For the 12 months as a whole, the Fund's best-performing stocks included
Wendy's, Philip Morris, Lehman Brothers, Alza, Cardinal Health, Deluxe Check,
Fannie Mae and Kroger. Leading the losers were Corning, JDS Uniphase, Lucent,
Yahoo, EMC, Juniper, Cisco Systems, Guidant, Brocade and Dell.
Also affecting the Fund's performance were its investments in S&P 500 futures
contracts, which, consistent with the Fund's guidelines, I periodically use to
keep the Fund fully invested in stocks. Just like investments in individual
stocks, investments in futures can have a positive or negative effect on
performance, especially during times of high market volatility. Over the past
period, they had a negative effect.
As the new fiscal year begins, while the economy seems unlikely to slip into
recession, I think growth will remain slow. In addition, I think there's the
potential for somewhat higher inflation in the months ahead. Given those
factors, I plan to maintain a conservative investment approach that centers on
stocks that are less vulnerable in a sluggish economy, such as food and health
care.
James M. Johnson, Jr. CFA
--------------------------------------------------------------------------------
4 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $5.37
July 31, 2000 $7.61
Decrease $2.24
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $0.90
From long-term capital gains $0.09
Total distributions $0.99
Total return* -17.54%
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $5.12
July 31, 2000 $7.36
Decrease $2.24
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $0.90
From long-term capital gains $0.09
Total distributions $0.99
Total return* -18.19%
Class C -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $5.13
July 31, 2000 $7.36
Decrease $2.23
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $0.90
From long-term capital gains $0.09
Total distributions $0.99
Total return* -18.03%
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $5.42
July 31, 2000 $7.65
Decrease $2.23
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $0.90
From long-term capital gains $0.09
Total distributions $0.99
Total return* -17.29%
* 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.
--------------------------------------------------------------------------------
5 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
The 10 Largest Holdings
Percent Value
(of net assets) (as of July 31, 2001)
General Electric 4.65% $27,900,900
Pfizer 3.15 18,874,637
AOL Time Warner 2.49 14,939,415
American Intl Group 2.21 13,270,050
Johnson & Johnson 1.99 11,918,230
Intel 1.96 11,760,045
Bank of America 1.86 11,133,500
Cisco Systems 1.84 11,041,890
Home Depot 1.81 10,889,994
Washington Mutual 1.75 10,484,550
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(picture of) pie chart
The 10 holdings listed here
make up 23.71% of net assets
--------------------------------------------------------------------------------
6 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
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 $10
$ 5 $8 $5 $5 $8
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
$ 5 $8 $6 $4 $4 $7
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.
--------------------------------------------------------------------------------
7 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
The Fund's Long-term Performance
Value of your $10,000 in AXP Research Opportunities Fund
(line chart)
$30,000
$20,000
$15,634
S&P 500 Index AXP Research Opportunities
$9,425 Fund Class A
Lipper Large-Cap Core Index
9/1/96 7/97 7/98 7/99 7/00 7/01
Average Annual Total Returns (as of July 31, 2001)
1 year Since inception
Class A -22.28% +8.82%*
Class B -20.97% +9.18%*
Class C -18.72% -18.01%**
Class Y -17.29% +10.35%*
* Inception date was Aug. 19, 1996.
** Inception date was June 26, 2000.
Assumes: Holding period from 9/1/96 to 7/31/01. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $5,381. 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, Standard & Poor's 500 Index (S&P 500 Index)
and the Lipper Large-Cap Core Index. In comparing AXP Research Opportunities
Fund (Class A) to these 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.
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 maximum applicable sales charge. This was a
period of widely fluctuating security prices. Past performance is no guarantee
of future results.
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.
Lipper Large-Cap Core 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.
--------------------------------------------------------------------------------
8 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. Each member oversees 15
Master Trust portfolios and 68 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the board.
Independent Board Members
----------------- ---------------- ----------------- -------------------------
Name, address, Position held Principal Other directorships
age with occupations
Registrant and during past
length of five years
service
----------------- ---------------- ----------------- -------------------------
H. Brewster Board member Retired chair Merck & Co., Inc.
Atwater, Jr. since 1996 and chief (pharmaceuticals)
4900 IDS Tower executive
Minneapolis, MN officer,
55402 General Mills,
Born in 1931 Inc. (consumer
foods)
----------------- ---------------- ----------------- -------------------------
Arne H. Carlson Chair of the Chair, Board
901 S. Board since Services
Marquette Ave. 1999 Corporation
Minneapolis, MN (provides
55402 administrative
Born in 1934 services to
boards) Former
Governor of
Minnesota
----------------- ---------------- ----------------- -------------------------
Lynne V. Cheney Board member Distinguished The Reader's Digest
American since 1994 Fellow, AEI Association Inc.
Enterprise
Institute for
Public Policy
Research (AEI)
1150 17th St.,
N.W.
Washington,
D.C. 20036
Born in 1941
----------------- ---------------- ----------------- -------------------------
Livio D. Board member Retired chair Cargill, Incorporated
DeSimone since 2001 of the board (commodity merchants
30 Seventh and chief and processors), Target
Street executive Corporation (department
St. Paul, MN officer, stores), General Mills,
55101-4901 Minnesota Inc. (consumer foods)
Born in 1936 Mining and and Vulcan Materials
Manufacturing Company (construction
(3M) materials/chemicals)
----------------- ---------------- ----------------- -------------------------
Ira D. Hall Board member Treasurer,
Texaco, Inc. since 2001 Texaco Inc.
2000 since 1998.
Westchester Prior to that,
Avenue White director,
Plains, NY International
10650 Operations IBM
Born in 1944 Corp.
----------------- ---------------- ----------------- -------------------------
Heinz F. Hutter Board member Retired
P.O. Box 2187 since 1994 president and
Minneapolis, MN chief operating
55402 officer,
Born in 1929 Cargill,
Incorporated
(commodity
merchants and
processors)
----------------- ---------------- ----------------- -------------------------
Anne P. Jones Board member Attorney and Motorola, Inc.
5716 Bent since 1985 telecommunications (electronics)
Branch Rd. consultant
Bethesda, MD
20816
Born in 1935
----------------- ---------------- ----------------- -------------------------
William R. Board member RII
Pearce 2050 since 1980 Weyerhaeuser
2050 One World
Financial Plaza Timberfund,
Minneapolis, MN L.P. (develops
55402 timber
Born in 1927 resources) -
management
committee;
Former chair,
American
Express Funds
--------------------------------------------------------------------------------
9 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Independent Board Members
----------------- ---------------- ----------------- -------------------------
Name, address, Position held Principal Other directorships
age with occupations
Registrant and during past
length of five years
service
----------------- ---------------- ----------------- -------------------------
Alan K. Simpson Board member Former Biogen, Inc.
1201 Sunshine since 1997 three-term (bio-pharmaceuticals)
Ave. United States
Cody, WY 82414 Senator for
Born in 1931 Wyoming
----------------- ---------------- ----------------- -------------------------
C. Angus Board member Retired chair The Valspar Corporation
Wurtele since 1994 of the board (paints), Bemis
Sutie 1700, and chief Corporation (packaging)
Foshay Tower executive
Minneapolis, MN officer,
55402 The Valspar
Born in 1934 Corporation
----------------- ---------------- ----------------- -------------------------
Board Members Affiliated with American Express Financial Corporation (AEFC)
----------------- ---------------- ----------------- -------------------------
Name, address, Position held Principal Other directorships
age with occupations
Registrant and during past
length of five years
service
----------------- ---------------- ----------------- -------------------------
David R. Hubers Board member Retired chief Chronimed Inc.
50643 AXP since 1993 executive (specialty
Financial officer, pharmaceutical
Center director and distribution) RTW Inc.
Minneapolis, MN chair of the (manages workers
55474 board of AEFC compensation programs)
Born in 1943 Lawson Software, Inc.
(technology based
business applications)
----------------- ---------------- ----------------- -------------------------
John R. Thomas Board member Senior vice
50652 AXP since 1987, president -
Financial president information and
Center since 1997 technology of
Minneapolis, MN AEFC
55474
Born in 1937
----------------- ---------------- ----------------- -------------------------
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Thomas, who is president, the Fund's
other officers are:
Other Officers
----------------- ---------------- ----------------- -------------------------
Name, address, Position held Principal Other directorships
age with occupations
Registrant and during past
length of five years
service
----------------- ---------------- ----------------- -------------------------
John M. Knight Treasurer Vice president
50005 AXP since 1999 - investment
Financial accounting of
Center AEFC
Minneapolis, MN
55474
Born in 1952
----------------- ---------------- ----------------- -------------------------
Leslie L. Ogg Vice President of
901 S. president, Board Services
Marquette Ave. general Corporation
Minneapolis, MN counsel and
55402 secretary
Born in 1938 since 1978
----------------- ---------------- ----------------- -------------------------
Frederick C. Vice president Senior vice
Quirsfeld since 1998 president -
53609 AXP fixed income of
Financial AEFC
Center
Minneapolis, MN
55474
Born in 1947
----------------- ---------------- ----------------- -------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
--------------------------------------------------------------------------------
10 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Independent Auditors' Report
THE BOARD AND SHAREHOLDERS
AXP GROWTH SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP
Research Opportunities Fund (a series of AXP Growth Series, Inc.) as of July 31,
2001, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended July 31, 2001, and the financial highlights for each of the years in the
four-year period ended July 31, 2001, and for the period from August 19, 1996
(commencement of operations) to July 31, 1997. These financial statements and
the financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AXP Research Opportunities Fund
as of July 31, 2001, and the results of its operations, changes in its net
assets and the financial highlights for each of the periods stated in the first
paragraph above, in conformity with accounting principles generally accepted in
the United States of America.
KPMG LLP
Minneapolis, Minnesota
September 7, 2001
--------------------------------------------------------------------------------
11 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Research Opportunities Fund
July 31, 2001
Assets
Investment in Aggressive Growth Portfolio (Note 1) $ 600,139,538
Capital shares receivable 1,223
-----
Total assets 600,140,761
-----------
Liabilities
Accrued distribution fee 8,947
Accrued service fee 1
Accrued transfer agency fee 3,766
Accrued administrative services fee 926
Other accrued expenses 82,088
------
Total liabilities 95,728
------
Net assets applicable to outstanding capital stock $ 600,045,033
=============
Represented by
Capital stock -- $.01 par value (Note 1) $ 1,138,145
Additional paid-in capital 741,581,836
Undistributed net investment income 548,546
Accumulated net realized gain (loss) (Note 7) (106,032,382)
Unrealized appreciation (depreciation) on investments (37,191,112)
-----------
Total -- representing net assets applicable to outstanding capital stock $ 600,045,033
=============
Net assets applicable to outstanding shares: Class A $ 364,714,877
Class B $ 234,749,843
Class C $ 265,758
Class Y $ 314,555
Net asset value per share of outstanding capital stock: Class A shares 67,857,675 $ 5.37
Class B shares 45,846,846 $ 5.12
Class C shares 51,849 $ 5.13
Class Y shares 58,085 $ 5.42
------ -------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
12 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Statement of operations
AXP Research Opportunities Fund
Year ended July 31, 2001
Investment income
Income:
Dividends $ 6,757,871
Interest 4,544,136
Less foreign taxes withheld (2,952)
------
Total income 11,299,055
----------
Expenses (Note 2):
Expenses allocated from Aggressive Growth Portfolio 4,558,756
Distribution fee
Class A 1,126,970
Class B 2,887,923
Class C 1,897
Transfer agency fee 1,295,273
Incremental transfer agency fee
Class A 90,130
Class B 93,228
Class C 87
Service fee -- Class Y 315
Administrative services fees and expenses 412,205
Compensation of board members 8,050
Printing and postage 184,140
Registration fees 120,076
Audit fees 6,000
Other 746
---
Total expenses 10,785,796
Earnings credits on cash balances (Note 2) (35,287)
-------
Total net expenses 10,750,509
----------
Investment income (loss) -- net 548,546
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (73,672,771)
Futures contracts (29,712,464)
Options contracts written 299,665
-------
Net realized gain (loss) on investments (103,085,570)
Net change in unrealized appreciation (depreciation) on investments (38,537,820)
-----------
Net gain (loss) on investments (141,623,390)
------------
Net increase (decrease) in net assets resulting from operations $(141,074,844)
=============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
13 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Statements of changes in net assets
AXP Research Opportunities Fund
Year ended July 31, 2001 2000
Operations and distributions
Investment income (loss) -- net $ 548,546 $ (2,315,065)
Net realized gain (loss) on investments (103,085,570) 124,226,458
Net change in unrealized appreciation (depreciation) on investments (38,537,820) (60,246,113)
----------- -----------
Net increase (decrease) in net assets resulting from operations (141,074,844) 61,665,280
------------ ----------
Distributions to shareholders from:
Net realized gain
Class A (63,547,161) (63,710,249)
Class B (42,332,023) (39,244,541)
Class C (27,210) --
Class Y (37,723) (48,595)
------- -------
Total distributions (105,944,117) (103,003,385)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Notes 2 and 5) 60,791,841 166,386,521
Class B shares 24,966,464 95,693,551
Class C shares 265,362 59,404
Class Y shares 110,852 104,177
Reinvestment of distributions at net asset value
Class A shares 62,625,709 60,899,683
Class B shares 41,987,018 39,015,490
Class C shares 27,210 --
Class Y shares 37,724 48,595
Payments for redemptions
Class A shares (150,872,613) (144,633,828)
Class B shares (Note 2) (69,396,656) (56,592,557)
Class C shares (Note 2) (14,432) --
Class Y shares (26,197) (235,274)
------- --------
Increase (decrease) in net assets from capital share transactions (29,497,718) 160,745,762
----------- -----------
Total increase (decrease) in net assets (276,516,679) 119,407,657
Net assets at beginning of year 876,561,712 757,154,055
----------- -----------
Net assets at end of year $ 600,045,033 $ 876,561,712
============= =============
Undistributed net investment income $ 548,546 $ --
------------- -----------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
14 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Notes to Financial Statements
AXP Research Opportunities Fund
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 July 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, liabilities and contingent 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.
--------------------------------------------------------------------------------
15 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
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.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, accumulated net realized loss has been decreased by $462 resulting
in a net reclassification adjustment to decrease paid-in capital by $462.
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
$677,645 for Class A, $226,413 for Class B and $59 for Class C for the year
ended July 31, 2001.
--------------------------------------------------------------------------------
16 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
During the year ended July 31, 2001, the Fund's transfer agency fees were
reduced by $35,287 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2001
Class A Class B Class C Class Y
Sold 9,614,169 3,961,702 41,810 17,678
Issued for reinvested distributions 10,668,858 7,468,880 4,841 6,383
Redeemed (23,350,130) (11,279,771) (2,624) (4,028)
----------- ----------- ------ ------
Net increase (decrease) (3,067,103) 150,811 44,027 20,033
---------- ------- ------ ------
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 year ended July 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.
--------------------------------------------------------------------------------
17 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
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. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund has a capital loss carry-over of
$100,482,475 as of July 31, 2001, that if not offset by subsequent capital
gains, will expire in 2010. It is unlikely the board will authorize a
distribution of any net realized capital gains until the available capital loss
carry-over has been offset or expires.
--------------------------------------------------------------------------------
18 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
8. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended July 31, 2001 2000 1999 1998 1997(b)
Net asset value, beginning of period $ 7.61 $7.94 $6.98 $6.86 $5.00
------ ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .02 -- (.01) .02 .01
Net gains (losses) (both realized and unrealized) (1.27) .66 1.32 .65 1.86
----- --- ---- --- ----
Total from investment operations (1.25) .66 1.31 .67 1.87
----- --- ---- --- ----
Less distributions:
Distributions from realized gains (.99) (.99) (.35) (.55) (.01)
---- ---- ---- ---- ----
Net asset value, end of period $ 5.37 $7.61 $7.94 $6.98 $6.86
------ ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $365 $540 $481 $337 $205
---- ---- ---- ---- ----
Ratio of expenses to average daily net assets(d) 1.16% 1.14% 1.12% 1.12% 1.52%(e)
---- ---- ---- ---- ----
Ratio of net investment income
(loss) to average daily net assets .37% .02% .04% .30% .20%(e)
--- --- --- --- ---
Portfolio turnover rate
(excluding short-term securities) 234% 160% 143% 148% 171%
--- --- --- --- ---
Total return(f) (17.54%) 7.73% 19.21% 10.76% 37.44%
------ ---- ----- ----- -----
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2001 2000 1999 1998 1997(b)
Net asset value, beginning of period $ 7.36 $7.76 $6.88 $6.82 $5.00
------ ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) (.02) (.05) (.02) (.02) (.02)
Net gains (losses) (both realized and unrealized) (1.23) .64 1.25 .63 1.85
----- --- ---- --- ----
Total from investment operations (1.25) .59 1.23 .61 1.83
----- --- ---- --- ----
Less distributions:
Distributions from realized gains (.99) (.99) (.35) (.55) (.01)
---- ---- ---- ---- ----
Net asset value, end of period $ 5.12 $7.36 $7.76 $6.88 $6.82
------ ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $235 $336 $276 $184 $96
---- ---- ---- ---- ---
Ratio of expenses to average daily net assets(d) 1.92% 1.91% 1.88% 1.88% 2.25%(e)
---- ---- ---- ---- ----
Ratio of net investment income (loss)
to average daily net assets (.39%) (.73%) (.72%) (.46%) (.53%)(e)
---- ---- ---- ---- ----
Portfolio turnover rate
(excluding short-term securities) 234% 160% 143% 148% 171%
--- --- --- --- ---
Total return(f) (18.19%) 7.03% 18.31% 9.92% 36.48%
------ ---- ----- ---- -----
See accompanying notes to financial highlights.
--------------------------------------------------------------------------------
19 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2001 2000(c)
Net asset value, beginning of period $ 7.36 $7.50
------ -----
Income from investment operations:
Net investment income (loss) (.02) .02
Net gains (losses) (both realized and unrealized) (1.22) (.16)
----- ----
Total from investment operations (1.24) (.14)
----- ----
Less distributions:
Distributions from realized gains (.99) --
---- -----
Net asset value, end of period $ 5.13 $7.36
------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $--
--- ---
Ratio of expenses to average daily net assets(d) 1.92% 1.91%(e)
---- ----
Ratio of net investment income (loss)
to average daily net assets (.36%) (.50%)(e)
---- ----
Portfolio turnover rate
(excluding short-term securities) 234% 160%
--- ---
Total return(f) (18.03%) (1.87%)
------ -----
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2001 2000 1999 1998 1997(b)
Net asset value, beginning of period $ 7.65 $7.96 $7.01 $6.88 $5.00
------ ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .04 .01 -- .03 .01
Net gains (losses) (both realized and unrealized) (1.28) .67 1.32 .65 1.88
----- --- ---- --- ----
Total from investment operations (1.24) .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 $ 5.42 $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) 1.00% .97% 1.02% .87% 1.45%(e)
---- --- ---- --- ----
Ratio of net investment income (loss)
to average daily net assets .54% .17% .12% .40% .33%(e)
--- --- --- --- ---
Portfolio turnover rate
(excluding short-term securities) 234% 160% 143% 148% 171%
--- --- --- --- ---
Total return(f) (17.29%) 7.99% 19.34% 10.93% 37.66%
------ ---- ----- ----- -----
Notes to financial highlights
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was Aug. 19, 1996.
(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.
--------------------------------------------------------------------------------
20 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Independent Auditors' Report
THE BOARD OF TRUSTEES AND UNITHOLDERS
GROWTH TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Aggressive Growth Portfolio (a
series of Growth Trust) as of July 31, 2001, the related statement of operations
for the year then ended and the statements of changes in net assets for each of
the years in the two-year period ended July 31, 2001. These financial statements
are the responsibility of portfolio management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 2001, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aggressive Growth Portfolio as
of July 31, 2001 and the results of its operations and the changes in its net
assets for each of the periods stated in the first paragraph above, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
Minneapolis, Minnesota
September 7, 2001
--------------------------------------------------------------------------------
21 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Aggressive Growth Portfolio
July 31, 2001
Assets
Investments in securities, at value (Note 1)
(identified cost $629,807,159) $592,529,339
Cash in bank on demand deposit 149,435
Dividends receivable 401,086
Receivable for investment securities sold 25,026,506
----------
Total assets 618,106,366
-----------
Liabilities
Payable for investment securities purchased 12,745,670
Payable upon return of securities loaned (Note 4) 5,109,000
Accrued investment management services fee 10,400
Other accrued expenses 23,579
------
Total liabilities 17,888,649
----------
Net assets $600,217,717
============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
22 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Statement of operations
Aggressive Growth Portfolio
Year ended July 31, 2001
Investment income
Income:
Dividends $ 6,758,672
Interest 4,551,410
Less foreign taxes withheld (2,952)
------
Total income 11,307,130
----------
Expenses (Note 2):
Investment management services fee 4,445,702
Compensation of board members 8,850
Custodian fees 78,475
Audit fees 18,000
Other 14,733
------
Total expenses 4,565,760
Earnings credits on cash balances (Note 2) (6,465)
------
Total net expenses 4,559,295
---------
Investment income (loss) -- net 6,747,835
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (73,682,590)
Futures contracts (29,716,150)
Options contracts written (Note 6) 299,693
-------
Net realized gain (loss) on investments (103,099,047)
Net change in unrealized appreciation (depreciation) on investments (38,541,226)
-----------
Net gain (loss) on investments (141,640,273)
------------
Net increase (decrease) in net assets resulting from operations $(134,892,438)
=============
Statements of changes in net assets
Aggressive Growth Portfolio
Year ended July 31, 2001 2000
Operations
Investment income (loss) -- net $ 6,747,835 $ 4,657,284
Net realized gain (loss) on investments (103,099,047) 124,551,441
Net change in unrealized appreciation
(depreciation) on investments (38,541,226) (60,287,301)
----------- -----------
Net increase (decrease)
in net assets resulting from operations (134,892,438) 68,921,424
Net contributions (withdrawals) from partners (141,695,453) 48,785,614
------------ ----------
Total increase (decrease) in net assets (276,587,891) 117,707,038
Net assets at beginning of year 876,805,608 759,098,570
----------- -----------
Net assets at end of year $ 600,217,717 $876,805,608
============= ============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
23 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Notes to Financial Statements
Aggressive Growth Portfolio
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, liabilities and contingent 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
--------------------------------------------------------------------------------
24 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
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 0.50% 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 $191,412 for the year ended July 31, 2001.
--------------------------------------------------------------------------------
25 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
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 year ended July 31, 2001, the Portfolio's custodian fees were reduced
by $6,465 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 $1,548,667,962 and $1,605,039,501, respectively, for the
year ended July 31, 2001. For the same period, the portfolio turnover rate was
234%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $40,815 for the
year ended July 31, 2001.
4. LENDING OF PORTFOLIO SECURITIES
As of July 31, 2001, securities valued at $4,913,810 were on loan to brokers.
For collateral, the Portfolio received $5,109,000 in cash. Income from
securities lending amounted to $621 for the year ended July 31, 2001. The risks
to the Portfolio of securities lending are that the borrower may not provide
additional collateral when required or return securities when due.
5. STOCK INDEX FUTURES CONTRACTS
As of July 31, 2001, investments in securities included securities valued at
$2,264,600 that were pledged as collateral to cover initial margin deposits on
36 open purchase contracts. The market value of the open purchase contracts as
of July 31, 2001 was $10,937,700 with a net unrealized gain of $81,947.
6. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Year ended July 31, 2001
Calls
Contracts Premium
Balance July 31, 2000 -- $ --
Opened 3,380 421,175
Closed (3,380) (421,175)
------ --------
Balance July 31, 2001 -- $ --
------ --------
7. 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.
--------------------------------------------------------------------------------
26 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Investments in Securities
Aggressive Growth Portfolio
July 31, 2001
(Percentages represent value of investments compared to net assets)
Common stocks (98.1%)
Issuer Shares Value(a)
Airlines (1.3%)
AMR 66,900(b) $2,351,535
Delta Air Lines 129,200 5,733,896
Total 8,085,431
Banks and savings & loans (9.8%)
Bank of America 175,000 11,133,500
Bank of New York 158,500 7,110,310
FleetBoston Financial 209,500 7,860,440
Mellon Financial 173,200 6,585,064
State Street 115,800 6,226,566
U.S. Bancorp 389,100 9,237,234
Washington Mutual 258,750 10,484,550
Total 58,637,664
Beverages & tobacco (4.9%)
Anheuser-Busch 159,200 6,894,952
Coca-Cola 232,900 10,387,340
Philip Morris 169,600 7,716,800
UST 135,400 4,190,630
Total 29,189,722
Chemicals (2.4%)
Dow Chemical 201,700 7,341,880
du Pont (EI) de Nemours 166,200 7,116,684
Total 14,458,564
Communications equipment & services (0.7%)
Brocade Communications
Systems 36,900(b,d) 1,215,486
Tellabs 180,300(b) 2,969,541
Total 4,185,027
Computer software & services (1.2%)
Citrix Systems 207,300(b) 6,938,331
Computers & office equipment (11.8%)
AOL Time Warner 328,700(b) 14,939,415
Cabletron Systems 266,700(b) 4,952,619
Cisco Systems 574,500(b) 11,041,890
Compaq Computer 535,500 8,000,370
EMC 401,800(b) 7,923,496
Equifax 167,200 3,955,952
First Data 114,700 7,951,004
Juniper Networks 53,200(b) 1,366,708
Palm 1,253,000(b) 6,728,610
Solectron 237,900(b) 4,158,492
Total 71,018,556
Electronics (5.8%)
Applied Materials 192,000(b) 8,805,120
Intel 394,500 11,760,045
PMC-Sierra 73,300(b) 2,221,723
Texas Instruments 236,700 8,166,150
Xilinx 102,300(b) 4,092,000
Total 35,045,038
Energy (4.2%)
Apache 139,400 7,241,830
Chevron 99,700 9,111,583
Kerr-McGee 56,200 3,550,716
Mirant 173,500(b) 5,366,355
Total 25,270,484
Energy equipment & services (3.3%)
Halliburton 197,900 6,928,479
Schlumberger 144,700 7,777,625
Transocean Sedco Forex 164,900 5,324,621
Total 20,030,725
Financial services (4.9%)
Fannie Mae 107,400 8,941,050
Lehman Brothers Holdings 91,300 6,573,600
MBNA 225,900 7,996,860
Providian Financial 114,500 5,652,865
Total 29,164,375
Food (0.2%)
ConAgra 48,800 1,048,712
Health care (12.4%)
Allergan 61,300 4,615,277
Amgen 71,100(b) 4,458,681
Baxter Intl 195,200 9,720,960
Biomet 145,600 7,068,880
Johnson & Johnson 220,300 11,918,230
See accompanying notes to investments in securities.
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27 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Health care (cont.)
Medtronic 183,800 $8,827,914
Pfizer 457,900 18,874,637
Pharmacia 197,300 8,803,526
Total 74,288,105
Health care services (2.2%)
UnitedHealth Group 144,000 9,708,480
Wellpoint Health Networks 32,400(b) 3,465,504
Total 13,173,984
Insurance (5.7%)
Allstate 211,500 7,394,040
American Intl Group 159,400 13,270,050
Marsh & McLennan 70,800 7,108,320
St. Paul Companies 144,350 6,329,748
Total 34,102,158
Leisure time & entertainment (1.5%)
Viacom Cl B 181,792(b) 9,053,242
Media (1.6%)
Clear Channel Communications 98,800(b) 5,789,680
Univision Communications
Cl A 99,700(b,d) 3,806,546
Total 9,596,226
Metals (2.1%)
Alcan Aluminum 131,200(c,e) 4,921,312
Alcoa 197,200 7,736,156
Total 12,657,468
Miscellaneous (0.9%)
Convergys 177,300(b) 5,522,895
Multi-industry conglomerates (8.9%)
Danaher 100,000 5,659,000
General Electric 641,400 27,900,900
Minnesota Mining & Mfg 68,600 7,674,968
Robert Half Intl 40,200(b) 1,047,210
Textron 53,200 2,996,224
Tyco Intl 156,700(c) 8,336,440
Total 53,614,742
Paper & packaging (0.1%)
Intl Paper 14,300 584,298
Real estate investment trust (1.4%)
Starwood Hotels &
Resorts Worldwide 227,200 8,108,768
Retail (4.2%)
Gap 282,500 7,715,075
Home Depot 216,200 10,889,994
Kroger 258,300(b) 6,808,788
Total 25,413,857
Utilities -- electric (0.9%)
Calpine 151,800(b) 5,463,282
Utilities -- gas (0.6%)
Dynegy Cl A 80,600 3,738,228
Utilities -- telephone (5.0%)
BellSouth 159,600 6,495,720
SBC Communications 228,900 10,307,367
Sprint (FON Group) 150,400 3,510,336
Verizon Communications 183,500 9,936,525
Total 30,249,948
Total common stocks
(Cost: $625,917,003) $588,639,830
Short-term securities (0.6%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (0.1%)
Federal Natl Mtge Assn Disc Nts
08-30-01 3.77% $500,000 $498,404
09-20-01 3.51 400,000 397,863
Total 896,267
Commercial paper (0.5%)
UBS Finance (Delaware)
09-06-01 3.78 700,000 697,229
Verizon Network Funding
08-17-01 3.68 2,300,000 2,296,013
Total 2,993,242
Total short-term securities
(Cost: $3,890,156) $3,889,509
Total investments in securities
(Cost: $629,807,159)(f) $592,529,339
See accompanying notes to investments in securities.
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28 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
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 July 31, 2001,
the value of foreign securities represented 2.21% of net assets.
(d) Partially pledged as initial margin deposit on the following open stock
index futures contracts (see Note 5 to the financial statements):
Type of security Contracts
Purchase contracts
S&P 500 Index, Sept. 2001 36
(e) Security is partially or fully on loan. See Note 4 to the financial
statements.
(f) At July 31, 2001, the cost of securities for federal income tax purposes
was $635,275,535 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $ 23,758,086
Unrealized depreciation (66,504,282)
-----------
Net unrealized depreciation $(42,746,196)
------------
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29 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
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 Research Opportunities Fund
Fiscal year ended July 31, 2001
Class A
Income distribution taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
Dec. 21, 2000 $0.89653
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $0.09299
Total distributions $0.98952
The distributions of $0.98952 per share, payable Dec. 21, 2000, consisted of
$0.89653 from net short-term capital gains and $0.09299 from net long-term
capital gains.
Class B
Income distribution taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
Dec. 21, 2000 $0.89653
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $0.09299
Total distributions $0.98952
The distributions of $0.98952 per share, payable Dec. 21, 2000, consisted of
$0.89653 from net short-term capital gains and $0.09299 from net long-term
capital gains.
--------------------------------------------------------------------------------
30 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
Class C
Income distribution taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
Dec. 21, 2000 $0.89653
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $0.09299
Total distributions $0.98952
The distributions of $0.98952 per share, payable Dec. 21, 2000, consisted of
$0.89653 from net short-term capital gains and $0.09299 from net long-term
capital gains.
Class Y
Income distribution taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
Dec. 21, 2000 $0.89653
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $0.09299
Total distributions $0.98952
The distributions of $0.98952 per share, payable Dec. 21, 2000, consisted of
$0.89653 from net short-term capital gains and $0.09299 from net long-term
capital gains.
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31 AXP RESEARCH OPPORTUNITIES FUND -- ANNUAL REPORT
AXP Research Opportunities Fund PRSRT STD AUTO
70100 AXP Financial Center U.S. POSTAGE
Minneapolis, MN 55474 PAID
AMERICAN
americanexpress.com EXPRESS
Ticker Symbol
Class A: IRDAX Class B: IROBX
Class C: N/A Class Y: N/A
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.
(logo)
American
Express
S-6356 J (9/01)