0000820027-01-500460.txt : 20011009
0000820027-01-500460.hdr.sgml : 20011009
ACCESSION NUMBER: 0000820027-01-500460
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: 1747079
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-6455v.txt
AXP GROWTH FUND
AXP(R)
Growth Fund
2001 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
(icon of) ruler
AXP Growth 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.)
Going for Growth
In the long run, a company's stock price usually reflects its business fortunes.
Therefore, if a company thrives, its stock tends to follow suit. That's why many
long-term investors, including AXP Growth Fund, focus on growth stocks -- those
of companies that enjoy rising sales and profits. While there will be
interruptions along the way, patient investors look forward to sharing in that
same prosperity.
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 Managers 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 10
Independent Auditors' Report (Fund) 12
Financial Statements (Fund) 13
Notes to Financial Statements (Fund) 16
Independent Auditors' Report
(Portfolio) 22
Financial Statements (Portfolio) 23
Notes to Financial Statements
(Portfolio) 25
Investments in Securities 28
Federal Income Tax Information 31
--------------------------------------------------------------------------------
2 AXP GROWTH 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
From the Portfolio Managers
Large-capitalization growth stocks, particularly technology-related issues, were
under severe selling pressure for much of the past 12 months. AXP Growth Fund's
performance reflected the unfavorable environment, as its Class A shares
experienced a loss of 42.14% (excluding the sales charge) for the past fiscal
year -- August 2000 through July 2001.
At the outset of the period, there was little indication of the pitfalls that
lay ahead. The stock market was surging, and the Fund would go on to record a
strong gain in August 2000.
But within days, concerns that a slowdown in the economy might lead to weaker
corporate profits began to cast a pall over the market. Much of investors'
anxiety centered on technology stocks, whose generally lofty prices required
that their respective companies continue to generate exceptional profit growth.
The result was a wave of selling that continued largely unabated from September
through May. Illustrating the force of the downturn, the Nasdaq Composite, a
group of stocks that includes many leading technology names, declined by more
than 60% during that time.
--------------------------------------------------------------------------------
3 AXP GROWTH FUND -- ANNUAL REPORT
PROFIT CONCERNS RETURN
Some optimism returned to the market in the spring, as a series of cuts in
short-term interest rates by the Federal Reserve got investors thinking that the
economy and, thus, corporate profits might improve before long. But, after a
brief rally, disappointing economic data and weak profit reports quickly put a
lid on further market advances.
Because technology stocks comprised the Fund's largest area of investment (about
40% of the portfolio at the peak), the market downturn took a substantial toll
on performance. Fortunately, gains from health care and financial services
stocks, which together made up about 30% of the portfolio, picked up some of the
slack.
Looking at changes to the portfolio, while we reduced technology holdings
overall, we added to investments in software stocks. They performed quite well
during the final months of the period. We also weeded out the more vulnerable
tech stocks, concentrating the bulk of tech investments in companies with
leadership positions in their market segments. Also working to the Fund's
benefit was its lack of utilities and energy stocks, which were especially weak
performers late in the period.
As the new fiscal year begins, the biggest question confronting the stock market
continues to be when the economy and corporate profits will pick up. If we are
right in expecting an upturn in the fourth quarter of 2001, stocks should begin
performing better before the year is out. Meanwhile, we plan to keep the bulk of
portfolio invested in technology, health care and financial services -- the
three business sectors that we believe continue to offer the best long-term
growth prospects.
Lisa A. Costa
Senior portfolio manager
Scott Mullinix
Portfolio manager
--------------------------------------------------------------------------------
4 AXP GROWTH FUND -- ANNUAL REPORT
Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $29.68
July 31, 2000 $54.36
Decrease $24.68
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $ --
From long-term capital gains $ 2.20
Total distributions $ 2.20
Total return* -42.14%
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $28.11
July 31, 2000 $52.02
Decrease $23.91
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $ --
From long-term capital gains $ 2.20
Total distributions $ 2.20
Total return* -42.57%
Class C -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $28.12
July 31, 2000 $52.03
Decrease $23.91
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $ --
From long-term capital gains $ 2.20
Total distributions $ 2.20
Total return* -42.56%
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2001 $29.96
July 31, 2000 $54.75
Decrease $24.79
Distributions -- Aug. 1, 2000 - July 31, 2001
From income $ --
From long-term capital gains $ 2.20
Total distributions $ 2.20
Total return* -42.04%
* 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 GROWTH FUND -- ANNUAL REPORT
The 10 Largest Holdings
Percent Value
(of net assets) (as of July 31, 2001)
Citigroup 5.86% $371,554,000
Pfizer 5.85 370,980,000
Microsoft 4.54 287,926,500
Texas Instruments 4.13 262,200,000
Home Depot 3.18 201,480,000
Cisco Systems 3.03 192,200,000
Zions Bancorp 2.84 180,370,855
Intl Business Machines 2.82 178,857,000
AOL Time Warner 2.72 172,710,000
Maxim Integrated Products 2.55 161,595,000
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 37.52% of net assets
--------------------------------------------------------------------------------
6 AXP GROWTH 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 GROWTH FUND -- ANNUAL REPORT
The Fund's Long-term Performance
Value of your $10,000 in AXP Growth Fund
$60,000
$50,000
$40,000
$30,000
S&P 500 Index $30,588
$20,000 AXP Growth
Lipper Large-Cap Fund Class A
$9,425 Growth Index Russell 1000(R)
Growth Index
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01
Average Annual Total Returns (as of July 31, 2001)
1 year 5 years 10 years Since inception
Class A -45.47% +7.52% +11.83% N/A
Class B -44.73% +7.83% N/A +11.33%*
Class C -43.10% N/A N/A -40.36%**
Class Y -42.04% +8.94% N/A +12.33%*
* Inception date was March 20, 1995.
** Inception date was June 26, 2000.
Assumes: Holding period from 8/1/91 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 $15,610. Also see "Past
Performance" in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to three
widely cited unmanaged performance indexes, the Standard & Poor's 500 Index
(S&P 500 Index), Russell 1000(R) Growth Index and the Lipper Large-Cap Growth
Index. In comparing AXPGrowth Fund (Class A) to these three indexes, you should
take into account the fact that the Fund's performancereflects the maximum sales
charge of 5.75%, while suchcharges 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.
--------------------------------------------------------------------------------
8 AXP GROWTH FUND -- ANNUAL REPORT
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies may be generally larger than those
in which the Fund invests.
Russell 1000(R) Growth Index, an unmanaged index, measures the performance of
those companies among the 1,000 largest companies included in the Russell
3000(R) Index with higher price-to-book ratios and higher forecasted growth
values.
Lipper Large-Cap Growth 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.
--------------------------------------------------------------------------------
9 AXP GROWTH 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 director,
White Plains, NY International
10650 Born in Operations IBM
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 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
----------------- ---------------- ----------------- -------------------------
--------------------------------------------------------------------------------
10 AXP GROWTH 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
Suite 1700, and chief Corporation (packaging)
Foshay Tower executive
Minneapolis, MN officer, The
55402 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.
--------------------------------------------------------------------------------
11 AXP GROWTH 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
Growth 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 five-year
period ended July 31, 2001. 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 Growth 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
--------------------------------------------------------------------------------
12 AXP GROWTH FUND -- ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Growth Fund
July 31, 2001
Assets
Investment in Growth Portfolio (Note 1) $6,344,602,347
Captial shares receivable 61,831
------
Total assets 6,344,664,178
-------------
Liabilities
Capital shares payable 274,561
Accrued distribution fee 68,022
Accrued service fee 2,658
Accrued transfer agency fee 30,523
Accrued administrative services fee 6,862
Other accrued expenses 603,529
-------
Total liabilities 986,155
-------
Net assets applicable to outstanding capital stock $6,343,678,023
==============
Represented by
Capital stock -- $.01 par value (Note 1) $ 2,162,803
Additional paid-in capital 6,182,863,386
Accumulated net realized gain (loss) (Note 7) (988,875,680)
Unrealized appreciation (depreciation) on investments 1,147,527,514
-------------
Total -- representing net assets applicable to outstanding capital stock $6,343,678,023
==============
Net assets applicable to outstanding shares: Class A $3,851,155,705
Class B $1,510,173,533
Class C $ 8,798,341
Class Y $ 973,550,444
Net asset value per share of outstanding capital stock: Class A shares 129,745,372 $ 29.68
Class B shares 53,731,152 $ 28.11
Class C shares 312,923 $ 28.12
Class Y shares 32,490,892 $ 29.96
---------- --------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
13 AXP GROWTH FUND -- ANNUAL REPORT
Statement of operations
AXP Growth Fund
Year ended July 31, 2001
Investment income
Income:
Dividends $ 33,660,208
Interest 21,287,289
Less foreign taxes withheld (196,561)
--------
Total income 54,750,936
----------
Expenses (Note 2):
Expenses allocated from Growth Portfolio 47,082,352
Distribution fee
Class A 13,034,501
Class B 20,253,042
Class C 70,471
Transfer agency fee 9,844,523
Incremental transfer agency fee
Class A 644,200
Class B 556,742
Class C 3,855
Service fee -- Class Y 1,259,734
Administrative services fees and expenses 3,193,208
Compensation of board members 17,675
Printing and postage 1,252,174
Registration fees 608,465
Audit fees 9,500
Other 36,715
------
Total expenses 97,867,157
Earnings credits on cash balances (Note 2) (318,650)
--------
Total net expenses 97,548,507
----------
Investment income (loss) -- net (42,797,571)
-----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (835,378,279)
Options contracts written 19,707,300
----------
Net realized gain (loss) on investments (815,670,979)
Net change in unrealized appreciation (depreciation) on investments (3,839,599,804)
--------------
Net gain (loss) on investments (4,655,270,783)
--------------
Net increase (decrease) in net assets resulting from operations $(4,698,068,354)
===============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
14 AXP GROWTH FUND -- ANNUAL REPORT
Statements of changes in net assets
AXP Growth Fund
Year ended July 31, 2001 2000
Operations and distributions
Investment income (loss) -- net $ (42,797,571) $ (40,646,714)
Net realized gain (loss) on investments (815,670,979) 282,481,456
Net change in unrealized appreciation (depreciation) on investments (3,839,599,804) 2,000,202,891
-------------- -------------
Net increase (decrease) in net assets resulting from operations (4,698,068,354) 2,242,037,633
-------------- -------------
Distributions to shareholders from:
Net realized gain
Class A (275,937,694) (87,059,276)
Class B (112,812,229) (31,046,847)
Class C (393,960) --
Class Y (66,853,330) (17,842,638)
----------- -----------
Total distributions (455,997,213) (135,948,761)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Notes 2 and 5) 1,814,580,315 2,328,546,079
Class B shares 458,556,597 766,835,307
Class C shares 13,298,672 1,181,005
Class Y shares 742,021,470 838,486,439
Reinvestment of distributions at net asset value
Class A shares 267,787,656 81,857,352
Class B shares 111,916,442 30,846,821
Class C shares 392,962 --
Class Y shares 54,657,205 17,838,677
Payments for redemptions
Class A shares (1,726,848,684) (1,719,179,723)
Class B shares (Note 2) (278,484,800) (240,842,800)
Class C shares (Note 2) (1,416,128) --
Class Y shares (615,784,347) (502,331,403)
------------ ------------
Increase (decrease) in net assets from capital share transactions 840,677,360 1,603,237,754
----------- -------------
Total increase (decrease) in net assets (4,313,388,207) 3,709,326,626
Net assets at beginning of year 10,657,066,230 6,947,739,604
-------------- -------------
Net assets at end of year $ 6,343,678,023 $10,657,066,230
=============== ===============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
15 AXP GROWTH FUND -- ANNUAL REPORT
Notes to Financial Statements
AXP Growth 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 36 shares of
capital stock at $54.97 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 Growth Portfolio
The Fund invests all of its assets in 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 stocks of U.S. and
foreign companies that appear to offer growth opportunities.
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.
--------------------------------------------------------------------------------
16 AXP GROWTH 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, undistributed net investment income has been increased by
$42,797,571 and accumulated net realized loss has been increased by $341,441
resulting in a net reclassification adjustment to decrease paid-in capital by
$43,139,012.
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 0.05% to 0.02% 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.
--------------------------------------------------------------------------------
17 AXP GROWTH FUND -- ANNUAL REPORT
Sales charges received by the Distributor for distributing Fund shares were
$12,669,734 for Class A, $1,585,932 for Class B and $4,327 for Class C for the
year ended July 31, 2001.
During the year ended July 31, 2001, the Fund's transfer agency fees were
reduced by $318,650 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 45,406,835 11,151,197 319,605 18,291,747
Issued for reinvested distributions 7,266,962 3,192,141 11,202 1,470,465
Redeemed (45,033,906) (8,057,822) (39,744) (15,592,053)
----------- ---------- ------- -----------
Net increase (decrease) 7,639,891 6,285,516 291,063 4,170,159
--------- --------- ------- ---------
Year ended July 31, 2000
Class A Class B Class C* Class Y
Sold 46,185,191 15,828,819 21,860 16,314,629
Issued for reinvested distributions 1,627,914 638,655 -- 352,892
Redeemed (34,302,245) (4,884,036) -- (9,918,250)
----------- ---------- ------ ----------
Net increase (decrease) 13,510,860 11,583,438 21,860 6,749,271
---------- ---------- ------ ---------
* 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.
--------------------------------------------------------------------------------
18 AXP GROWTH FUND -- ANNUAL REPORT
5. FUND MERGER
As of the close of business on July 14, 2000, AXP Growth Fund acquired the
assets and assumed the identified liabilities of Strategist Growth Fund.
The aggregate net assets of AXP Growth Fund immediately before the acquisition
were $11,413,475,167.
The merger was accomplished by a tax-free exchange of 535,806 shares of
Strategist Growth Fund valued at $33,112,239.
In exchange for the Strategist Growth Fund shares and net assets, AXP Growth
Fund issued the following number of shares:
Shares Net assets
Class A 564,295 $33,112,239
Strategist Growth Fund's net assets at that date consisted of capital stock of
$11,047,368 and unrealized appreciation of $22,064,871.
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
$949,420,217 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.
--------------------------------------------------------------------------------
19 AXP GROWTH 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
Net asset value, beginning of period $ 54.36 $42.14 $36.58 $35.47 $23.16
------- ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (.14) (.14) (.03) (.07) (.05)
Net gains (losses) (both realized and unrealized) (22.34) 13.14 7.29 2.14 13.04
------ ----- ---- ---- -----
Total from investment operations (22.48) 13.00 7.26 2.07 12.99
------ ----- ---- ---- -----
Less distributions:
Distributions from realized gains (2.20) (.78) (1.70) (.96) (.68)
----- ---- ----- ---- ----
Net asset value, end of period $ 29.68 $54.36 $42.14 $36.58 $35.47
------- ------ ------ ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $3,851 $6,637 $4,576 $3,681 $3,215
------ ------ ------ ------ ------
Ratio of expenses to average daily net assets(c) .99% .99% .89% .87% .97%
--- --- --- --- ---
Ratio of net investment income (loss)
to average daily net assets (.34%) (.30%) (.08%) (.22%) (.18%)
---- ---- ---- ---- ----
Portfolio turnover rate
(excluding short-term securities) 41% 23% 17% 28% 24%
-- -- -- -- --
Total return(e) (42.14%) 31.01% 20.49% 6.32% 57.00%
------ ----- ----- ---- -----
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2001 2000 1999 1998 1997
Net asset value, beginning of period $ 52.02 $40.65 $35.61 $34.82 $22.92
------- ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (.42) (.46) (.28) (.29) (.22)
Net gains (losses) (both realized and unrealized) (21.29) 12.61 7.02 2.04 12.80
------ ----- ---- ---- -----
Total from investment operations (21.71) 12.15 6.74 1.75 12.58
------ ----- ---- ---- -----
Less distributions:
Distributions from realized gains (2.20) (.78) (1.70) (.96) (.68)
----- ---- ----- ---- ----
Net asset value, end of period $ 28.11 $52.02 $40.65 $35.61 $34.82
------- ------ ------ ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $1,510 $2,468 $1,458 $1,021 $713
------ ------ ------ ------ ----
Ratio of expenses to average daily net assets(c) 1.75% 1.75% 1.65% 1.63% 1.74%
---- ---- ---- ---- ----
Ratio of net investment income (loss)
to average daily net assets (1.11%) (1.06%) (.85%) (.97%) (.94%)
----- ----- ---- ---- ----
Portfolio turnover rate
(excluding short-term securities) 41% 23% 17% 28% 24%
-- -- -- -- --
Total return(e) (42.57%) 30.02% 19.58% 5.52% 55.81%
------ ----- ----- ---- -----
See accompanying notes to financial highlights.
--------------------------------------------------------------------------------
20 AXP GROWTH FUND -- ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2001 2000(b)
Net asset value, beginning of period $ 52.03 $52.65
------- ------
Income from investment operations:
Net investment income (loss) (.42) (.04)
Net gains (losses) (both realized and unrealized) (21.29) (.58)
------ ----
Total from investment operations (21.71) (.62)
------ ----
Less distributions:
Distributions from realized gains (2.20) --
----- ----
Net asset value, end of period $ 28.12 $52.03
------- ------
Ratios/supplemental data
Net assets, end of period (in millions) $9 $1
-- --
Ratio of expenses to average daily net assets(c) 1.75% 1.75%(d)
---- ----
Ratio of net investment income (loss)
to average daily net assets (1.10%) (1.30%)(d)
----- -----
Portfolio turnover rate
(excluding short-term securities) 41% 23%
-- --
Total return(e) (42.56%) (1.18%)
------ -----
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2001 2000 1999 1998 1997
Net asset value, beginning of period $ 54.75 $42.37 $36.74 $35.60 $23.21
------- ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (.07) (.06) -- (.04) (.01)
Net gains (losses) (both realized and unrealized) (22.52) 13.22 7.33 2.14 13.08
------ ----- ---- ---- -----
Total from investment operations (22.59) 13.16 7.33 2.10 13.07
------ ----- ---- ---- -----
Less distributions:
Distributions from realized gains (2.20) (.78) (1.70) (.96) (.68)
----- ---- ----- ---- ----
Net asset value, end of period $ 29.96 $54.75 $42.37 $36.74 $35.60
------- ------ ------ ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $974 $1,551 $914 $582 $179
---- ------ ---- ---- ----
Ratio of expenses to average daily net assets(c) .83% .83% .80% .80% .85%
--- --- --- --- ---
Ratio of net investment income (loss)
to average daily net assets (.18%) (.14%) --% (.12%) (.07%)
---- ---- ---- ---- ----
Portfolio turnover rate
(excluding short-term securities) 41% 23% 17% 28% 24%
-- -- -- -- --
Total return(e) (42.04%) 31.20% 20.59% 6.40% 57.23%
------ ----- ----- ---- -----
Notes to financial highlights
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
--------------------------------------------------------------------------------
21 AXP GROWTH 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 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 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
--------------------------------------------------------------------------------
22 AXP GROWTH FUND -- ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Growth Portfolio
July 31, 2001
Assets
Investments in securities, at value (Note 1)
(identified cost $5,286,583,796) $6,434,120,695
Dividends and accrued interest receivable 461,530
Receivable for investment securities sold 21,724,322
----------
Total assets 6,456,306,547
-------------
Liabilities
Disbursements in excess of cash on demand deposit 423,234
Payable for investment securities purchased 36,427,931
Payable upon return of securities loaned (Note 4) 74,615,000
Accrued investment management services fee 95,247
Other accrued expenses 87,907
------
Total liabilities 111,649,319
-----------
Net assets $6,344,657,228
==============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
23 AXP GROWTH FUND -- ANNUAL REPORT
Statement of operations
Growth Portfolio
Year ended July 31, 2001
Investment income Income:
Dividends $ 33,660,496
Interest 21,286,383
Less foreign taxes withheld (196,562)
--------
Total income 54,750,317
----------
Expenses (Note 2):
Investment management services fee 46,332,635
Compensation of board members 28,725
Custodian fees 563,377
Audit fees 28,500
Other 146,484
-------
Total expenses 47,099,721
Earnings credits on cash balances (Note 2) (16,966)
-------
Total net expenses 47,082,755
----------
Investment income (loss) -- net 7,667,562
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (including loss of $1,474,339 on sale of affiliated
issuers) (Note 3) (835,426,595)
Options contracts written (Note 5) 19,707,363
----------
Net realized gain (loss) on investments (815,719,232)
Net change in unrealized appreciation (depreciation) on investments (3,839,591,149)
--------------
Net gain (loss) on investments (4,655,310,381)
--------------
Net increase (decrease) in net assets resulting from operations $(4,647,642,819)
===============
Statements of changes in net assets
Growth Portfolio
Year ended July 31, 2001 2000
Operations
Investment income (loss) -- net $ 7,667,562 $ 8,205,713
Net realized gain (loss) on investments (815,719,232) 283,936,086
Net change in unrealized appreciation (depreciation) on investments (3,839,591,149) 2,008,602,545
-------------- -------------
Net increase (decrease) in net assets resulting from operations (4,647,642,819) 2,300,744,344
Net contributions (withdrawals) from partners 334,889,696 1,384,517,514
----------- -------------
Total increase (decrease) in net assets (4,312,753,123) 3,685,261,858
Net assets at beginning of year 10,657,410,351 6,972,148,493
-------------- -------------
Net assets at end of year $ 6,344,657,228 $10,657,410,351
=============== ===============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
24 AXP GROWTH FUND -- ANNUAL REPORT
Notes to Financial Statements
Growth Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Growth Portfolio invests
primarily in stocks of U.S. and foreign companies that appear to offer growth
opportunities. 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 an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
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
--------------------------------------------------------------------------------
25 AXP GROWTH 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 0.6% to 0.48% 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 the AXP Growth Fund to the Lipper Large-Cap
Growth 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 increased the fee by $770,306 for the year ended July 31, 2001.
--------------------------------------------------------------------------------
26 AXP GROWTH 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 $16,966 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 $3,875,180,128 and $3,386,967,512, respectively, for the
year ended July 31, 2001. For the same period, the portfolio turnover rate was
41%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $147,507 for the
year ended July 31, 2001.
4. LENDING OF PORTFOLIO SECURITIES
As of July 31, 2001, securities valued at $74,591,360 were on loan to brokers.
For collateral, the Portfolio received $74,615,000 in cash. Income from
securities lending amounted to $928,549 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 the securities when due.
5. 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 10,000 $ 6,625,000
Opened 35,000 21,099,447
Closed (15,000) (10,625,000)
Exercised (13,096) (7,392,084)
Expired (16,904) (9,707,363)
------- ----------
Balance July 31, 2001 -- $ --
------- -----------
See "Summary of significant accounting policies."
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.
--------------------------------------------------------------------------------
27 AXP GROWTH FUND -- ANNUAL REPORT
Investments in Securities
Growth Portfolio
July 31, 2001
(Percentages represent value of investments compared to net assets)
Common stocks (93.4%)
Issuer Shares Value(a)
Airlines (2.1%)
Southwest Airlines 6,750,000 $135,067,500
Banks and savings & loans (4.3%)
State Street 1,750,000 94,097,500
Zions Bancorp 3,085,900 180,370,855
Total 274,468,355
Communications equipment & services (3.5%)
Brocade Communications
Systems 2,000,000(b) 65,880,000
CIENA 1,000,000(b) 33,140,000
Ericsson (LM) ADR Cl B 2,000,000(c) 10,720,000
Nokia ADR Cl A 4,000,000(c) 87,240,000
Sonus Networks 1,200,000(b,e) 26,328,000
Total 223,308,000
Computer software & services (9.8%)
BEA Systems 3,000,000(b) 66,150,000
Microsoft 4,350,000(b) 287,926,500
Peregrine Systems 2,250,000(b) 61,537,500
Siebel Systems 2,000,000(b) 68,920,000
VeriSign 1,000,000(b,e) 54,610,000
VERITAS Software 2,000,000(b) 84,820,000
Total 623,964,000
Computers & office equipment (14.5%)
AOL Time Warner 3,800,000(b) 172,710,000
Check Point
Software Technologies 1,000,000(b,c) 44,240,000
Cisco Systems 10,000,000(b) 192,200,000
EMC 7,400,000(b) 145,928,000
Extreme Networks 1,500,000(b) 42,045,000
First Data 750,000 51,990,000
Intl Business Machines 1,700,000 178,857,000
Juniper Networks 1,000,000(b) 25,690,000
Mercury Interactive 1,000,000(b) 38,660,000
Openwave Systems 1,000,000(b) 25,560,000
Total 917,880,000
Electronics (14.6%)
Applied Materials 3,190,400(b) 146,311,744
Broadcom Cl A 1,500,000(b) 65,445,000
Intel 5,000,000 149,050,000
Maxim Integrated Products 3,500,000(b) 161,595,000
PMC-Sierra 1,000,000(b) 30,310,000
STMicroelectronics 1,800,000(c) 57,312,000
Symbol Technologies 4,100,000 50,881,000
Texas Instruments 7,600,000 262,200,000
Total 923,104,744
Energy (0.9%)
Anadarko Petroleum 1,000,000 56,800,000
Energy equipment & services (3.0%)
Halliburton 3,000,000 105,030,000
Schlumberger 1,600,000 86,000,000
Total 191,030,000
Financial services (11.7%)
Citigroup 7,400,000 371,554,000
Fannie Mae 1,000,000 83,250,000
Merrill Lynch 2,975,000 161,364,000
Providian Financial 2,500,000 123,425,000
Total 739,593,000
Health care (13.3%)
Amgen 2,000,000(b) 125,420,000
Biomet 497,500 24,153,625
Genentech 3,500,000(b) 148,050,000
Medtronic 3,000,000 144,090,000
Pfizer 9,000,000 370,980,000
Stryker 550,000 32,989,000
Total 845,682,625
Health care services (0.5%)
Applera-Celera
Genomics Group 1,100,000(b) 33,693,000
Leisure time & entertainment (2.4%)
Harley-Davidson 3,000,000 154,830,000
Media (2.8%)
Omnicom Group 900,000 78,633,000
Sony ADR 2,000,000(c) 99,040,000
Total 177,673,000
Miscellaneous (1.3%)
Nasdaq-100 Shares 1,900,000(b,e) 79,344,000
Restaurants & lodging (2.3%)
Marriott Intl Cl A 3,000,000 143,250,000
See accompanying notes to investments in securities.
--------------------------------------------------------------------------------
28 AXP GROWTH FUND -- ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Retail (5.2%)
Home Depot 4,000,000 $201,480,000
Kohl's 1,000,000(b) 57,280,000
Tiffany 1,000,000 35,300,000
Walgreen 1,100,000 37,070,000
Total 331,130,000
Utilities -- telephone (1.2%)
Sprint (PCS Group) 3,000,000(b) 77,760,000
Total common stocks
(Cost: $4,772,884,704) $5,928,578,224
Bonds (2.9%)
Issuer Coupon Principal Value(a)
rate amount
Resolution Funding Corp
Zero Coupon
07-15-20 5.93% $400,000,000(f) $125,836,000
10-15-20 6.03 185,000,000(e,f) 57,318,550
Total bonds
(Cost: $191,244,743) $183,154,550
Short-term securities (5.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (3.4%)
Federal Home Loan Bank Disc Nts
08-03-01 3.79% $17,700,000 $17,694,234
08-22-01 3.60 13,500,000 13,469,308
09-19-01 3.55 6,600,000 6,565,991
09-21-01 3.57 39,900,000 39,688,391
09-21-01 3.68 9,400,000 9,347,974
10-19-01 3.55 35,100,000 34,813,740
Federal Home Loan Mtge Corp Disc Nts
08-07-01 3.74 5,800,000 5,795,782
08-24-01 3.63 40,000,000 39,903,464
09-18-01 3.59 3,600,000 3,582,507
Federal Natl Mtge Assn Disc Nts
08-09-01 3.89 12,000,000 11,988,077
08-13-01 3.60 4,400,000 4,394,280
10-04-01 3.60 23,600,000 23,443,617
10-11-01 3.59 2,400,000 2,382,384
Total 213,069,749
Commercial paper (1.7%)
Bayer
09-18-01 3.65 2,200,000(d) 2,189,130
BellSouth
08-20-01 3.64 1,100,000(d) 1,097,782
09-25-01 3.65 4,700,000(d) 4,672,875
Coca-Cola
10-12-01 3.67 600,000 595,535
Gannett
08-22-01 3.72 13,900,000(d) 13,868,485
08-22-01 3.74 4,000,000(d) 3,990,882
Intl Lease Finance
08-17-01 3.72 12,000,000 11,978,976
Morgan Stanley, Dean Witter, Discover & Co
08-28-01 3.73 15,700,000 15,654,573
Natl Rural Utilities
08-21-01 3.73 6,500,000 6,485,895
08-28-01 3.71 21,300,000 21,238,702
Scripps (EW)
09-18-01 3.67 3,200,000(d) 3,183,666
Sheffield Receivables
08-24-01 3.75 6,500,000(d) 6,483,793
Southern Company Funding
09-24-01 3.65 17,982,000(d) 17,877,878
Total 109,318,172
Total short-term securities
(Cost: $322,454,349) $322,387,921
Total investments in securities
(Cost: $5,286,583,796)(g,h) $6,434,120,695
See accompanying notes to investments in securities.
--------------------------------------------------------------------------------
29 AXP GROWTH 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 4.71% 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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(f) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(g) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that were affiliates during the
year ended July 31, 2001 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
MasTec* $66,123,100 $-- $66,123,100 $-- $-- $--
* Issuer was not an affiliate for the entire year ended July 31, 2001.
(h) At July 31, 2001, the cost of securities for federal income tax purposes
was $5,329,648,915 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $1,761,078,144
Unrealized depreciation (656,606,364)
------------
Net unrealized appreciation $1,104,471,780
--------------
--------------------------------------------------------------------------------
30 AXP GROWTH 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 Growth Fund
Fiscal year ended July 31, 2001
Class A
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $2.20154
Total distribution $2.20154
Class B
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $2.20154
Total distribution $2.20154
Class C
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $2.20154
Total distribution $2.20154
Class Y
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 21, 2000 $2.20154
Total distribution $2.20154
--------------------------------------------------------------------------------
31 AXP GROWTH FUND -- ANNUAL REPORT
AXP Growth Fund PRSRT STD AUTO
70100 AXP Financial Center U.S. POSTAGE
Minneapolis, MN 55474 PAID
AMERICAN
americanexpress.com EXPRESS
Ticker Symbol
Class A: INIDX Class B: IGRBX
Class C: AXGCX Class Y: IGRYX
(logo)
American
Express
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.
S-6455 V (9/01)