-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OUsETmLTaxkVF/SNy5ZI6RHBMut5yd5fie/QCr0SUgsSFqrXXwG2LfTn9oAPfiGr ADloJ/IKPGMGYvboeTq8Ew== 0000820027-02-000206.txt : 20020415 0000820027-02-000206.hdr.sgml : 20020415 ACCESSION NUMBER: 0000820027-02-000206 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20020321 EFFECTIVENESS DATE: 20020321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GROWTH SERIES INC/MN CENTRAL INDEX KEY: 0000049702 IRS NUMBER: 410329910 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-38355 FILM NUMBER: 02580595 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GROWTH SERIES INC/MN CENTRAL INDEX KEY: 0000049702 IRS NUMBER: 410329910 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02111 FILM NUMBER: 02580596 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 485BPOS 1 partabc.txt AXP LARGE CAP EQUITY FUND SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. ______ [ ] Post-Effective Amendment No. 69 (File No. 2-38355) [X] ------- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 45 (File No. 811-2111) [X] --------- AXP GROWTH SERIES, INC. 200 AXP Financial Center Minneapolis, Minnesota 55474 Leslie L. Ogg - 901 Marquette Ave. So., Suite 2810, Minneapolis, MN 55402-3268 (612) 330-9283 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [ X ] on March 21, 2002 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485 If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. AXP(R) Large Cap Equity Fund PROSPECTUS MARCH 21, 2002 American Express Funds (icon of ) ruler AXP Large Cap Equity Fund seeks to provide shareholders with long-term growth of capital. Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 4p Performance 4p Fees and Expenses 4p Investment Manager 5p Other Securities and Investment Strategies 6p Buying and Selling Shares 6p Valuing Fund Shares 6p Investment Options 6p Purchasing Shares 8p Transactions Through American Express Brokerage or Third Parties 10p Sales Charges 10p Exchanging/Selling Shares 13p Distributions and Taxes 17p - ----------------------------------------------------------------------------- 2p AXP LARGE CAP EQUITY FUND -- PROSPECTUS The Fund GOAL AXP Large Cap Equity Fund (the Fund) seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, achieving this goal cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets, including the amount of any borrowings for investment purposes, are invested in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. Many of the companies in which the Fund invests have a history of paying dividends and are expected to continue to pay dividends in the future. The Fund may invest in income-producing equity securities, such as convertible securities and preferred stocks. The selection of equity securities is the primary decision in building the investment portfolio. In pursuit of the Fund's goal, American Express Financial Corporation (AEFC), the Fund's investment manager, chooses investments by: o identifying companies with -- attractive valuations and -- the potential for earnings growth; o identifying securities that AEFC believes have good potential for capital appreciation; o evaluating opportunities and risks by reviewing interest rates and economic forecasts; and o buying a diversified portfolio of securities. AEFC may weight certain sectors more heavily based on its expectations about growth and market trends. In evaluating whether to sell a security, AEFC considers, among other factors, whether o the security is overvalued relative to other potential investments; o the security has reached AEFC's price objective; o the company has met AEFC's earnings and/or growth expectations; o political, economic or other events could affect the company's performance; o potential losses such as, in a market down-turn, can be minimized; and o a more attractive opportunity has been identified. During unusual market conditions, the Fund may invest more of its assets in money market securities. Although investing in these securities would serve primarily to avoid losses, this type of investing could prevent the Fund from achieving its investment objective. During these times, the Fund may trade its portfolio securities more frequently. Frequent trading could result in increased fees, expenses, and taxes. - ----------------------------------------------------------------------------- 3p AXP LARGE CAP EQUITY FUND -- PROSPECTUS PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Style Risk Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Style Risk The Fund's management strategy will influence performance significantly. Large capitalization stocks as a group could fall out of favor with the market, causing the Fund to underperform funds that invest primarily in small or medium capitalization stocks. If the manager's stock selection strategy does not perform as expected, the Fund could underperform its peers. PERFORMANCE The bar chart and past performance table are not presented because the Fund did not begin operations until March 28, 2002. FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none Annual Fund operating expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 0.60% 0.60% 0.60% 0.60% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.46% 0.47% 0.47% 0.53% Total 1.31% 2.07% 2.07% 1.13% Fee waiver/expense reimbursement 0.06% 0.06% 0.06% 0.06% Net expenses 1.25% 2.01% 2.01% 1.07%
(a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $500,000 on which the sales charge is waived, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Other expenses are based on estimated amounts for the current fiscal year. AEFC has contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2003. Under this agreement, total expenses will not exceed 1.25% for Class A, 2.01% for Class B, 2.01% for Class C and 1.07% for Class Y. (e) The Fund's management fee may be increased or decreased due to the effect of a performance incentive adjustment. (f) Other expenses include an administrative services fee, a shareholder services fee for Class Y, a transfer agency fee and other nonadvisory expenses. - ----------------------------------------------------------------------------- 4p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return. The operating expenses remain the same each year. If you hold your shares until the end of the years shown, your costs would be: 1 year 3 years Class A(a) $695 $961 Class B(b) $604 $943 Class B(c) $204 $643 Class C $204 $643 Class Y $109 $353 (a) Includes a 5.75% sales charge. (b) Assumes you sold your Class B shares at the end of the period and incurred the applicable CDSC. (c) Assumes you did not sell your Class B shares at the end of the period. (d) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. This example does not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER Doug Chase, who joined AEFC in 2002, is portfolio manager for AXP Large Cap Equity Fund. Prior to joining AEFC, he worked as an analyst and portfolio manager at Fidelity Investments where he managed the Fidelity Export and Multinational Fund and was a member of the team that managed several other funds. He joined Fidelity Investments in 1992. The Fund pays AEFC a fee for managing its assets. Under the Investment Management Services Agreement, the fee will be equal to 0.600% on the first $1 billion, gradually reducing to 0.480% as assets increase, including an adjustment under the terms of a performance incentive arrangement between AEFC and the Fund. Under the agreement, the Fund also pays taxes, brokerage commissions and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Fund, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, MN 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, NY 10285. The Fund has applied for an order from the Securities and Exchange Commission to permit AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisery agreement for the Fund without first obtaining shareholder approval. If the order is received, the Fund will be able to add or change subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated without obtaining shareholder approval of the change. There is no assurance the order will be granted, and no changes will be made until that time. - ----------------------------------------------------------------------------- 5p AXP LARGE CAP EQUITY FUND -- PROSPECTUS OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities, and may utilize investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as money market securities, debt securities and foreign securities. Additionally, the Fund may utilize derivative instruments such as futures, options and forward contracts to produce incremental earnings, to hedge existing positions and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, AEFC is not required to use derivatives. While not a principal investment strategy, investing in derivative instruments could have a negative impact on the Fund's performance. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and the annual/semiannual reports. Buying and Selling Shares VALUING FUND SHARES The public offering price for Class A is the net asset value (NAV) adjusted for the sales charge. For Class B, Class C and Class Y, it is the NAV. The NAV is the value of a single Fund share. The NAV usually changes daily, and is calculated at the close of business of the New York Stock Exchange, normally 3 p.m. Central Time (CT), each business day (any day the New York Stock Exchange is open). Fund shares may be purchased through various third-party organizations, including 401(k) plans, banks, brokers and investment advisers. Where authorized by the Fund, orders will be priced at the NAV next computed after receipt by the organization or their selected agent. Investments are valued based on market quotations, or where market quotations are not readily available, based on methods selected in good faith by the board. If the Fund's investment policies permit it to invest in securities that are listed on foreign stock exchanges that trade on weekends or other days when the Fund does not price its shares, the value of those investments may change on days when you could not buy or sell shares of the Fund. Please see the SAI for further information. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. - ----------------------------------------------------------------------------- 6p AXP LARGE CAP EQUITY FUND - PROSPECTUS Investment options summary: The Fund offers four different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y - --------------- ---------------- -------------- --------------- ---------------- Availability Available to Available to Available to Limited to all investors. all all investors. qualifying investors. institutional investors. - --------------- ---------------- -------------- --------------- ---------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase price purchase. price is price is is invested in Lower sales invested in invested in shares of the charge for shares of shares of the Fund. larger the Fund. Fund. investments. - --------------- ---------------- -------------- --------------- ---------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over $500,000, CDSC during applies if 1% CDSC the first you sell your applies if you year shares less sell your decreasing than one year shares less to 0% after after than one year six years. purchase. after purchase. - --------------- ---------------- -------------- --------------- ---------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee - --------------- ---------------- -------------- --------------- ---------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. - --------------- ---------------- -------------- --------------- ---------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. - ----------------------------------------------------------------------------- 7p AXP LARGE CAP EQUITY FUND -- PROSPECTUS PURCHASING SHARES To purchase shares through an American Express Brokerage Account or entities other than American Express Financial Advisors Inc., please refer to the American Express Brokerage Web site or consult your selling agent. The following section explains how you can purchase shares from American Express Financial Advisors (the Distributor). If you do not have a mutual fund account, you need to establish one. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase shares for a new or existing account, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 30% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: - ------------------------------------ ---------------------------------------- Individual or joint account The individual or one of the owners listed on the joint account - ------------------------------------ ---------------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) - ------------------------------------ ---------------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) - ------------------------------------ ---------------------------------------- An irrevocable trust, pension The legal entity (not the personal trust or estate representative or trustee, unless no legal entity is designated in the account title) - ------------------------------------ ---------------------------------------- Sole proprietorship The owner - ------------------------------------ ---------------------------------------- Partnership The partnership - ------------------------------------ ---------------------------------------- Corporate The corporation - ------------------------------------ ---------------------------------------- Association, club or tax-exempt The organization organization - ------------------------------------ ---------------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (http://www.irs.gov/). - ----------------------------------------------------------------------------- 8p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Three ways to invest 1 By mail: Once your account has been established, send your check with the account number on it to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000 Additional investments: $100 Account balances: $300 Qualified accounts: none If your account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. 2 By scheduled investment plan: Contact your financial advisor for assistance in setting up one of the following scheduled plans: o automatic payroll deduction, o bank authorization, o direct deposit of Social Security check, or o other plan approved by the Fund. Minimum amounts Initial investment: $100 Additional investments: $50 per payment for qualified accounts; $100 per payment for nonqualified accounts Account balances: none (on a scheduled investment plan with monthly payments) If your account balance is below $2,000, you must make payments at least monthly. 3 By wire or electronic funds transfer: If you have an established account, you may wire money to: Wells Fargo Bank Minnesota, N.A. Minneapolis, MN 55479 Routing Transit No. 091000019 Give these instructions: Credit American Express Financial Advisors Account #0000030015 for personal account # (your account number) for (your name). Please be sure to include all 10 digits of the American Express Financial Advisors account number, including the zeros. If this information is not included, the order may be rejected, and all money received by the Fund, less any costs the Fund or American Express Client Service Corporation (AECSC) incurs, will be returned promptly. Minimum amounts Each wire investment: $1,000 - ----------------------------------------------------------------------------- 9p AXP LARGE CAP EQUITY FUND -- PROSPECTUS TRANSACTIONS THROUGH AMERICAN EXPRESS BROKERAGE OR THIRD PARTIES You may buy or sell shares through American Express Brokerage, certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through American Express Brokerage or third parties or to determine if there are policy differences, please consult the American Express Brokerage Web site or your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.75 3.90 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00** 2.04** $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. ** The sales charge will be waived until Dec. 31, 2002. The sales charge on Class A shares may be lower than 5.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds that have a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges. - ----------------------------------------------------------------------------- 10p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Other Class A sales charge policies: o IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar group, may be added together to reduce sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. (Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%.) o shareholders who have at least $1 million in American Express mutual funds. Until Dec. 31, 2002, the sales charge does not apply to shareholders who have at least $500,000 in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of shares (up to the amount sold): -- of American Express mutual funds in a qualified plan subject to a deferred sales charge, or -- in a qualified plan or account where American Express Trust Company has a recordkeeping, trustee, investment management, or investment servicing relationship. Send the Fund a written request along with your payment, indicating the date and the amount of the sale. - ----------------------------------------------------------------------------- 11p AXP LARGE CAP EQUITY FUND -- PROSPECTUS o purchases made: -- with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, -- through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, -- within the University of Texas System ORP, -- within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, -- within the University of Massachusetts After-Tax Savings Program, or -- through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 15 months, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 4% because the sale was made during the second year after the purchase. - ----------------------------------------------------------------------------- 12p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: -- at least 59 1/2 years old AND -- taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR -- selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, AECSC and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgment has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until AECSC receives written approval from the secured party. - ----------------------------------------------------------------------------- 13p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Selling Shares You can sell your shares at any time. The payment will be mailed within seven days after accepting your request. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is accepted by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held through an American Express Brokerage Account or with entities other than American Express Financial Advisors, please consult your selling agent. The following section explains how you can exchange or sell shares held with American Express Financial Advisors. Requests to sell shares of the Fund are not allowed within 30 days of a telephoned-in address change. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. (Payment may be made earlier if your bank provides evidence satisfactory to the Fund and AECSC that your check has cleared.) - ----------------------------------------------------------------------------- 14p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Two ways to request an exchange or sale of shares 1 By letter: Include in your letter: o the name of the fund(s), o the class of shares to be exchanged or sold, o your mutual fund account number(s) (for exchanges, both funds must be registered in the same ownership), o your Social Security number or Employer Identification number, o the dollar amount or number of shares you want to exchange or sell, o signature(s) of all registered account owners, o for sales, indicate how you want your money delivered to you, and o any paper certificates of shares you hold. Regular or express mail: American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 2 By telephone: American Express Client Service Corporation Telephone Transaction Service (800) 437-3133 o The Fund and AECSC will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing AECSC. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 - ----------------------------------------------------------------------------- 15p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Four ways to receive payment when you sell shares 1 By regular or express mail: o Mailed to the address on record. o Payable to names listed on the account. o The express mail delivery charges you pay will vary depending on the courier you select. 2 By electronic funds transfer (EFT or ACH): o Minimum redemption: $100. o Funds are deposited electronically into your bank account. o No charge. o Bank account must be in the same ownership as the American Express mutual fund account. o Allow two to five business days from request to deposit. o Pre-authorization required. For instructions, contact your financial advisor or AECSC. 3 By wire: o Minimum redemption: $1,000. o Funds are wired electronically into your bank account. o Applicable wire charges will vary depending on service provided. o Bank account must be in the same ownership as the American Express mutual fund account. o Allow one to two business days from request to deposit for domestic wires. o Pre-authorization required. For instructions, contact your financial advisor or AECSC. 4 By scheduled payout plan: o Minimum payment: $50. o Contact your financial advisor or AECSC to set up regular payments on a monthly, bimonthly, quarterly, semiannual or annual basis. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. - ----------------------------------------------------------------------------- 16p AXP LARGE CAP EQUITY FUND -- PROSPECTUS Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - ----------------------------------------------------------------------------- 17p AXP LARGE CAP EQUITY FUND -- PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center, Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-2111 Ticker Symbol Class A: N/A Class B: N/A Class C: N/A Class Y: N/A (logo) AMERICAN EXPRESS S-6244-99 A (3/02) AXP(R) GROWTH SERIES, INC. STATEMENT OF ADDITIONAL INFORMATION FOR AXP(R) LARGE CAP EQUITY FUND (the Fund) March 21, 2002 This Statement of Additional Information (SAI) is not a prospectus. It should be read together with the prospectus that may be obtained from your financial advisor or by writing to American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474 or by calling (800) 862-7919. The prospectus for the Fund, dated the same date as this SAI, is also incorporated in this SAI by reference. AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- TABLE OF CONTENTS Mutual Fund Checklist p. 3 Fundamental Investment Policies p. 4 Investment Strategies and Types of Investments p. 5 Information Regarding Risks and Investment Strategies p. 6 Security Transactions p. 21 Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation p. 22 Performance Information p. 22 Valuing Fund Shares p. 23 Investing in the Fund p. 23 Selling Shares p. 25 Pay-out Plans p. 26 Taxes p. 26 Agreements p. 28 Organizational Information p. 31 Board Members and Officers p. 34 Independent Auditors p. 36 Appendix: Description of Ratings p. 37 -2- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Mutual Fund Checklist [X] Mutual funds are NOT guaranteed or insured by any bank or government agency. You can lose money. [X] Mutual funds ALWAYS carry investment risks. Some types carry more risk than others. [X] A higher rate of return typically involves a higher risk of loss. [X] Past performance is not a reliable indicator of future performance. [X] ALL mutual funds have costs that lower investment return. [X] You can buy some mutual funds by contacting them directly. Others, like this one, are sold mainly through brokers, banks, financial planners, or insurance agents. If you buy through these financial professionals, you generally will pay a sales charge. [X] Shop around. Compare a mutual fund with others of the same type before you buy. OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING: Develop a Financial Plan Have a plan -- even a simple plan can help you take control of your financial future. Review your plan with your advisor at least once a year or more frequently if your circumstances change. Dollar-Cost Averaging An investment technique that works well for many investors is one that eliminates random buy and sell decisions. One such system is dollar-cost averaging. Dollar-cost averaging involves building a portfolio through the investment of fixed amounts of money on a regular basis regardless of the price or market condition. This may enable an investor to smooth out the effects of the volatility of the financial markets. By using this strategy, more shares will be purchased when the price is low and less when the price is high. As the accompanying chart illustrates, dollar-cost averaging tends to keep the average price paid for the shares lower than the average market price of shares purchased, although there is no guarantee. While this does not ensure a profit and does not protect against a loss if the market declines, it is an effective way for many shareholders who can continue investing through changing market conditions to accumulate shares to meet long-term goals. Dollar-cost averaging: Regular Market price Shares investment of a share acquired $100 $ 6.00 16.7 100 4.00 25.0 100 4.00 25.0 100 6.00 16.7 100 5.00 20.0 $500 $25.00 103.4 Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5) The average price you paid for each share: $4.84 ($500 divided by 103.4) Diversify Diversify your portfolio. By investing in different asset classes and different economic environments you help protect against poor performance in one type of investment while including investments most likely to help you achieve your important goals. Understand Your Investment Know what you are buying. Make sure you understand the potential risks, rewards, costs, and expenses associated with each of your investments. -3- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Fundamental Investment Policies Fundamental investment policies adopted by the Fund cannot be changed without the approval of a majority of the outstanding voting securities of the Fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Notwithstanding any of the Fund's other investment policies, the Fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the Fund for the purpose of having those assets managed as part of a combined pool. The policies below are fundamental policies that apply to the Fund and may be changed only with shareholder approval. Unless holders of a majority of the outstanding voting securities agree to make the change, the Fund will not: o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Issue senior securities, except as permitted under the 1940 Act. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means that up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer except that up to 25% of the Fund's assets may be invested without regard to this 10% limitation. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Lend Fund securities in excess of 30% of its net assets. Except for the fundamental investment policies listed above, the other investment policies described in the prospectus and in this SAI are not fundamental and may be changed by the board at any time. -4- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Investment Strategies and Types of Investments This table shows various investment strategies and investments that many funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager may make on behalf of the Fund. For a description of principal risks, please see the prospectus. Notwithstanding the Fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion. Investment strategies & types of investments: Allowable for the Fund? Agency and Government Securities yes Borrowing yes Cash/Money Market Instruments yes Collateralized Bond Obligations yes Commercial Paper yes Common Stock yes Convertible Securities yes Corporate Bonds yes Debt Obligations yes Depositary Receipts yes Derivative Instruments yes Foreign Currency Transactions yes Foreign Securities yes High-Yield (High-Risk) Securities (Junk Bonds) yes Illiquid and Restricted Securities yes Indexed Securities yes Inverse Floaters no Investment Companies yes Lending of Portfolio Securities yes Loan Participations yes Mortgage- and Asset-Backed Securities yes Mortgage Dollar Rolls no Municipal Obligations yes Preferred Stock yes Real Estate Investment Trusts yes Repurchase Agreements yes Reverse Repurchase Agreements yes Short Sales no Sovereign Debt yes Structured Products yes Variable- or Floating-Rate Securities yes Warrants yes When-Issued Securities yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes -5- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- The following are guidelines that may be changed by the board at any time: o Under normal market conditions, at least 80% of the Fund's net assets (including the amount of any borrowings for investment purposes) will be invested in equity securities of companies with a market capitalization greater than $5 billion. The Fund will provide shareholders with at least 60 days notice of any change in the 80% policy. Overall, the Fund's assets are primarily invested in equity securities included in the Russell 1000(R) Index. o The Fund will not invest more than 5% of its net assets in bonds below investment grade. o The Fund may invest up to 20% of its total assets in foreign investments. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not invest more than 10% of its net assets in securities of investment companies. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in stock index futures contracts. o The Fund will not invest in a company to control or manage it. Information Regarding Risks and Investment Strategies RISKS The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). Please remember that a mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with the Fund at any time (for a description of principal risks, please see the prospectus): Call/Prepayment Risk The risk that a bond or other security might be called (or otherwise converted, prepaid, or redeemed) before maturity. This type of risk is closely related to "reinvestment risk." Company Risk The prospects for a company may vary because of a variety of factors, including the success of the company, disappointing earnings, or changes in the competitive environment. As a result, the success of the companies in which the Fund invests will affect the Fund's performance. Correlation Risk The risk that a given transaction may fail to achieve its objectives due to an imperfect relationship between markets. Certain investments may react more negatively than others in response to changing market conditions. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation (such as payments due on a bond or a note). The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Junk bonds have greater price fluctuations and are more likely to experience a default than investment grade bonds. Event Risk Occasionally, the value of a security may be seriously and unexpectedly changed by a natural or industrial accident or occurrence. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. -6- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in emerging market countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Inflation Risk Also known as purchasing power risk, inflation risk measures the effects of continually rising prices on investments. If an investment's yield is lower than the rate of inflation, your money will have less purchasing power as time goes on. Interest Rate Risk The risk of losses attributable to changes in interest rates. This term is generally associated with bond prices (when interest rates rise, bond prices fall). In general, the longer the maturity of a bond, the higher its yield and the greater its sensitivity to changes in interest rates. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Legal/Legislative Risk Congress and other governmental units have the power to change existing laws affecting securities. A change in law might affect an investment adversely. Leverage Risk Some derivative investments (such as options, futures, or options on futures) require little or no initial payment and base their price on a security, a currency, or an index. A small change in the value of the underlying security, currency, or index may cause a sizable gain or loss in the price of the instrument. Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Management Risk The risk that a strategy or selection method utilized by the investment manager may fail to produce the intended result. When all other factors have been accounted for and the investment manager chooses an investment, there is always the possibility that the choice will be a poor one. Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Reinvestment Risk The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or industry will be more susceptible to changes in price (the more you diversify, the more you spread risk). Small Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. INVESTMENT STRATEGIES The following information supplements the discussion of the Fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes many strategies that many mutual funds use and types of securities that they purchase. Please refer to the section entitled Investment Strategies and Types of Investments to see which are applicable to the Fund. -7- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Agency and Government Securities The U.S. government and its agencies issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities including mortgage pass through certificates of the Government National Mortgage Association (GNMA) are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, FHLMC, FNMA, Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and Reinvestment Risk. Borrowing The Fund may borrow money for temporary or emergency purposes and make other investments or engage in other transactions permissible under the 1940 Act that may be considered a borrowing (such as derivative instruments). Borrowings are subject to costs (in addition to any interest that may be paid) and typically reduce the Fund's total return. Except as qualified above, however, the Fund will not buy securities on margin. Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk and Management Risk. Cash/Money Market Instruments The Fund may maintain a portion of its assets in cash and cash-equivalent investments. Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. The Fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types of instruments generally offer low rates of return and subject the Fund to certain costs and expenses. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk, Inflation Risk, and Management Risk. Collateralized Bond Obligations Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments--money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, earns them investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield (High-Risk) Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, and Management Risk. Commercial Paper Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk, Liquidity Risk, and Management Risk. -8- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Common Stock Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Issuer Risk, Management Risk, Market Risk, and Small Company Risk. Convertible Securities Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Call/Prepayment Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and Reinvestment Risk. Corporate Bonds Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government agency or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield (High-Risk) Securities.) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. Debt Obligations Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a specified rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. -9- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High-Yield (High-Risk) Securities.) All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating organization or their rating systems, the Fund will attempt to use comparable ratings as standards for selecting investments. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. Depositary Receipts Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, Management Risk, and Market Risk. Derivative Instruments Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward-based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange-traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. -10- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Options on many securities are listed on options exchanges. If the Fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indices (such as the S&P 500 Index), foreign currencies and other financial instruments and indices. Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. Options on Stock Indexes. Options on stock indexes are securities traded on national securities exchanges. An option on a stock index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Tax Treatment. As permitted under federal income tax laws and to the extent the Fund is allowed to invest in futures contacts, the Fund intends to identify futures contracts as mixed straddles and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If the Fund is using short futures contracts for hedging purposes, the Fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Federal income tax treatment of gains or losses from transactions in options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, the Fund will either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The IRS has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. -11- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (the Fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last-quoted sales price on their primary exchange. Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange-traded derivatives since they often can only be closed out with the other party to the transaction. Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Leverage Risk, Liquidity Risk, and Management Risk. Foreign Currency Transactions Investments in foreign countries usually involve currencies of foreign countries. In addition, the Fund may hold cash and cash-equivalent investments in foreign currencies. As a result, the value of the Fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, the Fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing the Fund's NAV to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. Spot Rates and Derivative Instruments. The Fund conducts its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts) as a hedge against fluctuations in future foreign exchange rates. (See also Derivative Instruments). These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, the Fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. -12- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- The Fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, the Fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. The Fund also may enter into forward contracts when management of the Fund believes the currency of a particular foreign country may change in relationship to another currency. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. The Fund will not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund's securities or other assets denominated in that currency. The Fund will designate cash or securities in an amount equal to the value of the Fund's total assets committed to consummating forward contracts entered into under the second circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the Fund's commitments on such contracts. At maturity of a forward contract, the Fund may either sell the security and make delivery of the foreign currency or retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an offsetting contract with the same currency trader obligating it to buy, on the same maturity date, the same amount of foreign currency. If the Fund retains the security and engages in an offsetting transaction, the Fund will incur a gain or loss (as described below) to the extent there has been movement in forward contract prices. If the Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline between the date the Fund enters into a forward contract for selling foreign currency and the date it enters into an offsetting contract for purchasing the foreign currency, the Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell. It is impossible to forecast what the market value of securities will be at the expiration of a contract. Accordingly, it may be necessary for the Fund to buy additional foreign currency on the spot market (and bear the expense of that purchase) if the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver and a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received on the sale of the portfolio security if its market value exceeds the amount of foreign currency the Fund is obligated to deliver. The Fund's dealing in forward contracts will be limited to the transactions described above. This method of protecting the value of the Fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. Although the Fund values its assets each business day in terms of U.S. dollars, it does not intend to convert its foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. Options on Foreign Currencies. The Fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, the Fund may buy put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell the currency for a fixed amount in dollars and will offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities the Fund plans to buy, the Fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. -13- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- As in the case of other types of options, however, the benefit to the Fund derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the Fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. The Fund may write options on foreign currencies for the same types of hedging purposes. For example, when the Fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the diminution in value of securities will be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency. If rates move in the manner projected, the put option will expire unexercised and allow the Fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if the Fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting the Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Foreign Currency Futures and Related Options. The Fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. The Fund may use currency futures for the same purposes as currency forward contracts, subject to Commodity Futures Trading Commission (CFTC) limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the Fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect the Fund against price decline if the issuer's creditworthiness deteriorates. Because the value of the Fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of the Fund's investments denominated in that currency over time. The Fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The Fund will not enter into an option or futures position that exposes the Fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. -14- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Correlation Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk. Foreign Securities Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The introduction of a single currency, the euro, on January 1, 1999 for participating European nations in the Economic and Monetary Union ("EU") presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after January 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies during the transition period from January 1, 1999 to December 31, 2000 and beyond; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other EU countries such as the United Kingdom and Greece into the euro and the admission of other non-EU countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk, Issuer Risk, and Management Risk. High-Yield (High-Risk) Securities (Junk Bonds) High yield (high-risk) securities are sometimes referred to as "junk bonds." They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) The lower-quality and comparable unrated security market is relatively new and its growth has paralleled a long economic expansion. As a result, it is not clear how this market may withstand a prolonged recession or economic downturn. Such conditions could severely disrupt the market for and adversely affect the value of such securities. All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they -15- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers. Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield (high-risk) securities include: Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and Management Risk. Illiquid and Restricted Securities The Fund may invest in illiquid securities (i.e., securities that are not readily marketable). These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. To the extent the Fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for such securities. Disposing of illiquid or restricted securities may involve time-consuming negotiations and legal expense, and it may be difficult or impossible for the Fund to sell such an investment promptly and at an acceptable price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk and Management Risk. Indexed Securities The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk, Management Risk, and Market Risk. Inverse Floaters Inverse floaters are created by underwriters using the interest payment on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. The remainder, minus a servicing fee, is paid to holders of inverse floaters. As interest rates go down, the holders of the inverse floaters receive more income and an increase in the price for the inverse floaters. As interest rates go up, the holders of the inverse floaters receive less income and a decrease in the price for the inverse floaters. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with inverse floaters include: Interest Rate Risk and Management Risk. Investment Companies The Fund may invest in securities issued by registered and unregistered investment companies. These investments may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Management Risk and Market Risk. -16- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Lending of Portfolio Securities The Fund may lend certain of its portfolio securities to broker-dealers. The current policy of the Fund's board is to make these loans, either long- or short-term, to broker-dealers. In making loans, the Fund receives the market price in cash, U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the board. If the market price of the loaned securities goes up, the Fund will get additional collateral on a daily basis. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the Fund receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The Fund may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The Fund will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the lending of portfolio securities include: Credit Risk and Management Risk. Loan Participations Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk and Management Risk. Mortgage- and Asset-Backed Securities Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Asset-backed securities have structural characteristics similar to mortgage-backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset-backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, -17- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage- and asset-backed securities include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and Management Risk. Mortgage Dollar Rolls Mortgage dollar rolls are investments whereby an investor would sell mortgage-backed securities for delivery in the current month and simultaneously contract to purchase substantially similar securities on a specified future date. While an investor would forego principal and interest paid on the mortgage-backed securities during the roll period, the investor would be compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk, Interest Rate Risk, and Management Risk. Municipal Obligations Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Event Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market Risk. Preferred Stock Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk, Management Risk, and Market Risk. -18- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Real Estate Investment Trusts Real estate investment trusts (REITs) are entities that manage a portfolio of real estate to earn profits for their shareholders. REITs can make investments in real estate such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Additionally, the failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Issuer Risk, Management Risk, and Market Risk. Repurchase Agreements The Fund may enter into repurchase agreements with certain banks or non-bank dealers. In a repurchase agreement, the Fund buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk and Management Risk. Reverse Repurchase Agreements In a reverse repurchase agreement, the investor would sell a security and enter into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk, Interest Rate Risk, and Management Risk. Short Sales With short sales, an investor sells a security that it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the investor must borrow the security to make delivery to the buyer. The investor is obligated to replace the security that was borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the investor sold the security. A fund that is allowed to utilize short sales will designate cash or liquid securities to cover its open short positions. Those funds also may engage in "short sales against the box," a form of short-selling that involves selling a security that an investor owns (or has an unconditioned right to purchase) for delivery at a specified date in the future. This technique allows an investor to hedge protectively against anticipated declines in the market of its securities. If the value of the securities sold short increased between the date of the short sale and the date on which the borrowed security is replaced, the investor loses the opportunity to participate in the gain. A "short sale against the box" will result in a constructive sale of appreciated securities thereby generating capital gains to the Fund. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Management Risk and Market Risk. Sovereign Debt A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk, Foreign/Emerging Markets Risk, and Management Risk. -19- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Structured Products Structured products are over-the-counter financial instruments created specifically to meet the needs of one or a small number of investors. The instrument may consist of a warrant, an option, or a forward contract embedded in a note or any of a wide variety of debt, equity, and/or currency combinations. Risks of structured products include the inability to close such instruments, rapid changes in the market, and defaults by other parties. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured products include: Credit Risk, Liquidity Risk, and Management Risk. Variable- or Floating-Rate Securities The Fund may invest in securities that offer a variable- or floating-rate of interest. Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (e.g., daily, monthly, semi-annually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. Variable-rate demand notes include master demand notes that are obligations that permit the Fund to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the Fund as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk and Management Risk. Warrants Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Management Risk and Market Risk. When-Issued Securities and Forward Commitments When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, the Fund may lose the opportunity to obtain a price and yield considered to be advantageous. Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk and Management Risk. Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk, Interest Rate Risk, and Management Risk. -20- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Security Transactions Subject to policies set by the board, AEFC is authorized to determine, consistent with the Fund's investment goal and policies, which securities will be purchased, held, or sold. The description of policies and procedures in this section also applies to any Fund subadviser. In determining where the buy and sell orders are to be placed, AEFC has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the board. In selecting broker-dealers to execute transactions, AEFC may consider the price of the security, including commission or mark-up, the size and difficulty of the order, the reliability, integrity, financial soundness, and general operation and execution capabilities of the broker, the broker's expertise in particular markets, and research services provided by the broker. The Fund, AEFC, any subadviser and American Express Financial Advisors Inc. (the Distributor) each have a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the Fund. The Fund's securities may be traded on a principal rather than an agency basis. In other words, AEFC will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. AEFC does not pay the dealer commissions. Instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The board has adopted a policy authorizing AEFC to do so to the extent authorized by law, if AEFC determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or AEFC's overall responsibilities with respect to the Fund and the other American Express mutual funds for which it acts as investment manager. Research provided by brokers supplements AEFC's own research activities. Such services include economic data on, and analysis of, U.S. and foreign economies; information on specific industries; information about specific companies, including earnings estimates; purchase recommendations for stocks and bonds; portfolio strategy services; political, economic, business, and industry trend assessments; historical statistical information; market data services providing information on specific issues and prices; and technical analysis of various aspects of the securities markets, including technical charts. Research services may take the form of written reports, computer software, or personal contact by telephone or at seminars or other meetings. AEFC has obtained, and in the future may obtain, computer hardware from brokers, including but not limited to personal computers that will be used exclusively for investment decision-making purposes, which include the research, portfolio management, and trading functions and other services to the extent permitted under an interpretation by the SEC. When paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge, AEFC must follow procedures authorized by the board. To date, three procedures have been authorized. One procedure permits AEFC to direct an order to buy or sell a security traded on a national securities exchange to a specific broker for research services it has provided. The second procedure permits AEFC, in order to obtain research, to direct an order on an agency basis to buy or sell a security traded in the over-the-counter market to a firm that does not make a market in that security. The commission paid generally includes compensation for research services. The third procedure permits AEFC, in order to obtain research and brokerage services, to cause the Fund to pay a commission in excess of the amount another broker might have charged. AEFC has advised the Fund that it is necessary to do business with a number of brokerage firms on a continuing basis to obtain such services as the handling of large orders, the willingness of a broker to risk its own money by taking a position in a security, and the specialized handling of a particular group of securities that only certain brokers may be able to offer. As a result of this arrangement, some portfolio transactions may not be effected at the lowest commission, but AEFC believes it may obtain better overall execution. AEFC has represented that under all three procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services performed or research provided. All other transactions will be placed on the basis of obtaining the best available price and the most favorable execution. In so doing, if in the professional opinion of the person responsible for selecting the broker or dealer, several firms can execute the transaction on the same basis, consideration will be given by such person to those firms offering research services. Such services may be used by AEFC in providing advice to all American Express mutual funds even though it is not possible to relate the benefits to any particular fund. Each investment decision made for the Fund is made independently from any decision made for another portfolio, fund, or other account advised by AEFC or any of its subsidiaries. When the Fund buys or sells the same security as another portfolio, fund, or account, AEFC carries out the purchase or sale in a way the Fund agrees in advance is fair. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the Fund, the Fund hopes to gain an overall advantage in execution. On occasion, the Fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions. The review evaluates execution, operational efficiency, and research services. -21- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation Affiliates of American Express Company (of which AEFC is a wholly-owned subsidiary) may engage in brokerage and other securities transactions on behalf of the Fund according to procedures adopted by the board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. AEFC will use an American Express affiliate only if (i) AEFC determines that the Fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Fund and (ii) the affiliate charges the Fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. Performance Information The Fund may quote various performance figures to illustrate past performance. Average annual total return and current yield quotations, if applicable, used by the Fund are based on standardized methods of computing performance as required by the SEC. An explanation of the methods used by the Fund to compute performance follows below. AVERAGE ANNUAL TOTAL RETURN The Fund may calculate average annual total return for a class for certain periods by finding the average annual compounded rates of return over the period that would equate the initial amount invested to the ending redeemable value, according to the following formula: P(1 + T)(to the power of n) = ERV where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) AGGREGATE TOTAL RETURN The Fund may calculate aggregate total return for a class for certain periods representing the cumulative change in the value of an investment in the Fund over a specified period of time according to the following formula: ERV - P ----------- P where: P = a hypothetical initial payment of $1,000 ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) In its sales material and other communications, the Fund may quote, compare or refer to rankings, yields, or returns as published by independent statistical services or publishers and publications such as The Bank Rate Monitor National Index, Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund Report, Financial Services Week, Financial Times, Financial World, Forbes, Fortune, Global Investor, Institutional Investor, Investor's Business Daily, Kiplinger's Personal Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster, Newsweek, The New York Times, Personal Investor, Shearson Lehman Aggregate Bond Index, Stanger Report, Sylvia Porter's Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal, and Wiesenberger Investment Companies Service. The Fund also may compare its performance to a wide variety of indexes or averages. There are similarities and differences between the investments that the Fund may purchase and the investments measured by the indexes or averages and the composition of the indexes or averages will differ from that of the Fund. Ibbotson Associates provides historical returns of the capital markets in the United States, including common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation (based on the CPI) and combinations of various capital markets. The performance of these capital markets is based on the returns of different indexes. The Fund may use the performance of these capital markets in order to demonstrate general risk-versus-reward investment scenarios. The Fund may quote various measures of volatility in advertising. Measures of volatility seek to compare a fund's historical share price fluctuations or returns to those of a benchmark. The Distributor may provide information designed to help individuals understand their investment goals and explore various financial strategies. Materials may include discussions of asset allocation, retirement investing, brokerage products and services, model portfolios, saving for college or other goals, and charitable giving. -22- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Valuing Fund Shares In determining net assets before shareholder transactions, the Fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): o Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. o Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. o Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. o Securities included in the NASDAQ National Market System for which a last-quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. o Futures and options traded on major exchanges are valued at the last-quoted sales price on their primary exchange. o Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars at the current rate of exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange that will not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, these securities will be valued at their fair value according to procedures decided upon in good faith by the board. o Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. o Securities without a readily available market price and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When possible, bonds are valued by a pricing service independent from the Fund. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. Investing in the Fund SALES CHARGE Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the CDSC and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of the Fund. Shares of the Fund are sold at the public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C and Class Y, there is no initial sales charge so the public offering price is the same as the NAV. The sales charge is paid to the Distributor by the person buying the shares. Class A -- Calculation of the Sales Charge Sales charges are determined as follows: Sales charge as a percentage of: Total market value Public offering price Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.75 3.90 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00* 2.04* $1,000,000 or more 0.00 0.00 * The sales charge will be waived until Dec. 31, 2002. -23- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- The initial sales charge is waived for certain qualified plans. Participants in these qualified plans may be subject to a deferred sales charge on certain redemptions. The Fund will waive the deferred sales charge on certain redemptions if the redemption is a result of a participant's death, disability, retirement, attaining age 591/2, loans, or hardship withdrawals. The deferred sales charge varies depending on the number of participants in the qualified plan and total plan assets as follows: Deferred Sales Charge Number of participants Total plan assets 1-99 100 or more Less than $1 million 4% 0% $1 million or more 0% 0% Class A -- Reducing the Sales Charge The market value of your investments in the Fund determines your sales charge. For example, suppose you have made an investment that now has a value of $20,000 and you later decide to invest $40,000 more. The value of your investments would be $60,000. As a result, your $40,000 investment qualifies for the lower 4.75% sales charge that applies to investments of more than $50,000 and up to $100,000. If you qualify for a reduced sales charge and purchase shares through different channels (for example, in a brokerage account and also directly from the Fund), you must inform the Distributor of your total holdings when placing any purchase orders. Class A -- Letter of Intent (LOI) If you intend to invest more than $50,000 over a period of time, you can reduce the sales charge in Class A by filing a LOI and committing to invest a certain amount. The agreement can start at any time and you will have up to 13 months to fulfill your commitment. The LOI start date can be backdated by up to 90 days. Your holdings in American Express funds acquired more than 90 days before receipt of your signed LOI in the home office will not be counted towards the completion of the LOI. Your investments will be charged the sales charge that applies to the amount you have committed to invest. Five percent of the commitment amount will be placed in escrow. If your commitment amount is reached within the 13-month period, the LOI will end and the shares will be released from escrow. Once the LOI has ended, future sales charges will be determined by the total value of the new investment combined with the market value of the existing American Express mutual fund investments. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. The commitment amount does not include purchases in any class of American Express funds other than Class A; purchases in American Express funds held within a wrap product; and purchases of AXP Cash Management Fund and AXP Tax-Free Money Fund unless they are subsequently exchanged to Class A shares of an American Express mutual fund within the 13 month period. A LOI is not an option (absolute right) to buy shares. If you purchase shares in an American Express brokerage account or through a third party, you must inform the Distributor about the LOI when placing any purchase orders during the period of the LOI. Class Y Shares Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC and are not subject to a distribution fee. The following investors are eligible to purchase Class Y shares: o Qualified employee benefit plans* if the plan: -- uses a daily transfer recordkeeping service offering participants daily access to American Express mutual funds and has -- at least $10 million in plan assets or -- 500 or more participants; or -- does not use daily transfer recordkeeping and has -- at least $3 million invested in American Express mutual funds or -- 500 or more participants. o Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code.* These institutions must have at least $10 million in American Express mutual funds. o Nonqualified deferred compensation plans* whose participants are included in a qualified employee benefit plan described above. o State sponsored college savings plans established under Section 529 of the Internal Revenue Code. * Eligibility must be determined in advance. To do so, contact your financial advisor. SYSTEMATIC INVESTMENT PROGRAMS After you make your initial investment of $100 or more, you must make additional payments of $100 or more on at least a monthly basis until your balance reaches $2,000. These minimums do not apply to all systematic investment programs. You decide how often to make payments -- monthly, quarterly, or semiannually. You are not obligated to make any payments. You can omit payments or discontinue the investment program altogether. The Fund also can change the program or end it at any time. -24- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- AUTOMATIC DIRECTED DIVIDENDS Dividends, including capital gain distributions, paid by another American Express mutual fund may be used to automatically purchase shares in the same class of this Fund. Dividends may be directed to existing accounts only. Dividends declared by a fund are exchanged to this Fund the following day. Dividends can be exchanged into the same class of another American Express mutual fund but cannot be split to make purchases in two or more funds. Automatic directed dividends are available between accounts of any ownership except: o Between a non-custodial account and an IRA, or 401(k) plan account or other qualified retirement account of which American Express Trust Company acts as custodian; o Between two American Express Trust Company custodial accounts with different owners (for example, you may not exchange dividends from your IRA to the IRA of your spouse); and o Between different kinds of custodial accounts with the same ownership (for example, you may not exchange dividends from your IRA to your 401(k) plan account, although you may exchange dividends from one IRA to another IRA). Dividends may be directed from accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA or UTMA accounts with identical ownership. The Fund's investment goal is described in its prospectus along with other information, including fees and expense ratios. Before exchanging dividends into another fund, you should read that fund's prospectus. You will receive a confirmation that the automatic directed dividend service has been set up for your account. REJECTION OF BUSINESS The Fund or AECSC reserves the right to reject any business, in its sole discretion. Selling Shares You have a right to sell your shares at any time. For an explanation of sales procedures, please see the prospectus. During an emergency, the board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of the Fund to redeem shares for more than seven days. Such emergency situations would occur if: o The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or o Disposal of the Fund's securities is not reasonably practicable or it is not reasonably practicable for the Fund to determine the fair value of its net assets, or o The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should the Fund stop selling shares, the board may make a deduction from the value of the assets held by the Fund to cover the cost of future liquidations of the assets so as to distribute fairly these costs among all shareholders. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the Fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the Fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the Fund as determined by the board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should the Fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash. -25- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Pay-out Plans You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you are redeeming a tax-qualified plan account for which American Express Trust Company acts as custodian, you can elect to receive your dividends and other distributions in cash when permitted by law. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of the Fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please consult your selling agent or write American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474, or call (800) 437-3133. Your authorization must be received at least five days before the date you want your payments to begin. The initial payment must be at least $50. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it. The following pay-out plans are designed to take care of the needs of most shareholders in a way AEFC can handle efficiently and at a reasonable cost. If you need a more irregular schedule of payments, it may be necessary for you to make a series of individual redemptions, in which case you will have to send in a separate redemption request for each pay-out. The Fund reserves the right to change or stop any pay-out plan and to stop making such plans available. Plan #1: Pay-out for a fixed period of time If you choose this plan, a varying number of shares will be redeemed at regular intervals during the time period you choose. This plan is designed to end in complete redemption of all shares in your account by the end of the fixed period. Plan #2: Redemption of a fixed number of shares If you choose this plan, a fixed number of shares will be redeemed for each payment and that amount will be sent to you. The length of time these payments continue is based on the number of shares in your account. Plan #3: Redemption of a fixed dollar amount If you decide on a fixed dollar amount, whatever number of shares is necessary to make the payment will be redeemed in regular installments until the account is closed. Plan #4: Redemption of a percentage of net asset value Payments are made based on a fixed percentage of the net asset value of the shares in the account computed on the day of each payment. Percentages range from 0.25% to 0.75%. For example, if you are on this plan and arrange to take 0.5% each month, you will get $50 if the value of your account is $10,000 on the payment date. Taxes For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For example: You purchase 100 shares of one fund having a public offering price of $10.00 per share. With a sales load of 5.75%, you pay $57.50 in sales load. With a NAV of $9.425 per share, the value of your investment is $942.50. Within 91 days of purchasing that fund, you decide to exchange out of that fund, now at a NAV of $11.00 per share, up from the original NAV of $9.425, and purchase into a second fund, at a NAV of $15.00 per share. The value of your investment is now $1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load when calculating your tax gain or loss in the sale of the first fund shares. So instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50 gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the basis of your shares in the second fund. -26- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- If you have a nonqualified investment in the Fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the Fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged plus the amount of the initial sales charge applied to the amount exchanged exceeds annual contribution limitations. For example: If you were to exchange $2,000 in Class A shares from a nonqualified account to an IRA without considering the 5.75% ($115) initial sales charge applicable to that $2,000, you may be deemed to have exceeded current IRA annual contribution limitations. You should consult your tax advisor for further details about this complex subject. Net investment income dividends received should be treated as dividend income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of the Fund's dividend that is attributable to dividends the Fund received from domestic (U.S.) securities. The Fund may be subject to U.S. taxes resulting from holdings in a passive foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. Income earned by the Fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the Fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the Fund will be eligible to file an election with the Internal Revenue Service under which shareholders of the Fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the Fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes. Capital gain distributions, if any, received by shareholders should be treated as long-term capital gains regardless of how long they owned their shares. Short-term capital gains earned by the Fund are paid to shareholders as part of their ordinary income dividend and are taxable. A special 28% rate on capital gains may apply to sales of precious metals, if any, owned directly by the Fund. A special 25% rate on capital gains may apply to investments in REITs. Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition also are treated as ordinary gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders as ordinary income. Under federal tax law, by the end of a calendar year the Fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. The Fund intends to comply with federal tax law and avoid any excise tax. The Internal Revenue Code imposes two asset diversification rules that apply to the Fund as of the close of each quarter. First, as to 50% of its holdings, the Fund may hold no more than 5% of its assets in securities of one issuer and no more than 10% of any one issuer's outstanding voting securities. Second, the Fund cannot have more than 25% of its assets in any one issuer. For purposes of the excise tax distributions, "section 988" ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end. If a mutual fund is the holder of record of any share of stock on the record date for any dividend payable with respect to the stock, the dividend will be included in gross income by the Fund as of the later of (1) the date the share became ex-dividend or (2) the date the Fund acquired the share. Because the dividends on some foreign equity investments may be received some time after the stock goes ex-dividend, and in certain rare cases may never be received by the Fund, this rule may cause the Fund to take into income dividend income that it has not received and pay that income to its shareholders. To the extent that the dividend is never received, the Fund will take a loss at the time that a determination is made that the dividend will not be received. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to Fund distributions. -27- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Agreements INVESTMENT MANAGEMENT SERVICES AGREEMENT AEFC, a wholly-owned subsidiary of American Express Company, is the investment manager for the Fund. Under the Investment Management Services Agreement, AEFC, subject to the policies set by the board, provides investment management services. For its services, AEFC is paid a fee based on the following schedule. Each class of the Fund pays its proportionate share of the fee. Assets (billions) Annual rate at each asset level First $ 1.0 0.600% Next 1.0 0.575 Next 1.0 0.550 Next 3.0 0.525 Next 6.0 0.500 Next 12.0 0.490 Over 24.0 0.480 The fee is calculated for each calendar day on the basis of net assets as of the close of business two business days prior to the day for which the calculation is made. AEFC has agreed to certain fee waivers and expense reimbursements as discussed in the Fund's prospectus. Before the fee based on the asset charge is paid, it is adjusted for investment performance. The adjustment, determined monthly, will be calculated using the percentage point difference between the change in the net asset value of one Class A share of the Fund and the change in the Lipper Large-Cap Core Funds Index (Index). The performance of one Class A share of the Fund is measured by computing the percentage difference between the opening and closing net asset value of one Class A share of the Fund, as of the last business day of the period selected for comparison, adjusted for dividend or capital gain distributions which are treated as reinvested, but without adjustment for expenses related to a particular class of shares. The performance of the Index for the same period is established by measuring the percentage difference between the beginning and ending Index for the comparison period, with dividends or capital distributions on the securities which compromise the Index being treated as reinvested. One percentage point will be subtracted from the calculation to help assure that incentive adjustments are attributable to AEFC's management abilities rather than random fluctuations and the result multiplied by 0.01%. That number will be multiplied times the Fund's average net assets for the comparison period and then divided by the number of months in the comparison period to determine the monthly adjustment. Where the Fund's Class A share performance exceeds that of the Index, the base fee will be increased. Where the performance of the Index exceeds the performance of the Fund's Class A share, the base fee will be decreased. The maximum monthly increase or decrease will be 0.12% of the Fund's average net assets on an annual basis. The first adjustment will be made on Oct. 1,2002 and will cover the six-month period beginning April 1, 2002. The comparison period will increase by one month each month until it reaches 12 months. The 12-month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. The management fee is paid monthly. Under the agreement, the Fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees; audit and certain legal fees; fidelity bond premiums; registration fees for shares; office expenses; postage of confirmations except purchase confirmations; consultants' fees; compensation of board members, officers and employees; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; and expenses properly payable by the Fund, approved by the board. Basis for board approving the investment advisory contract The independent board members determined to approve the Investment Management Services Agreement based on: o management fees that provide shareholders with benefits of economy of scale as assets of the Fund increase and assess penalties if performance fails to meet agreed-to standards and that are considered to be reasonable in light of the fees paid by similar funds in the industry, o total expenses projected to be incurred by the Fund either at or only slightly above the median expenses of comparable funds, o AEFC's objectives for an expanded fund group offering a wider range of investment options, o the scope and quality of services received by shareholders from their personal financial advisors, and o the reasonableness of the profitability AEFC derives from its mutual fund operations. -28- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- ADMINISTRATIVE SERVICES AGREEMENT The Fund has an Administrative Services Agreement with AEFC. Under this agreement, the Fund pays AEFC for providing administration and accounting services. The fee is calculated as follows: Assets (billions) Annual rate at each asset level First $ 1.0 0.050% Next 1.0 0.045 Next 1.0 0.040 Next 3.0 0.035 Next 6.0 0.030 Next 12.0 0.025 Over 24.0 0.020 The fee is calculated for each calendar day on the basis of net assets as of the close of business two business days prior to the day for which the calculation is made. Third parties with which AEFC contracts to provide services for the Fund or its shareholders may pay a fee to AEFC to help defray the cost of providing administrative and accounting services. The amount of any such fee is negotiated separately with each service provider and does not constitute compensation for investment advisory, distribution, or other services. Payment of any such fee neither increases nor reduces fees or expenses paid by shareholders of the Fund. TRANSFER AGENCY AGREEMENT The Fund has a Transfer Agency Agreement with American Express Client Service Corporation (AECSC). This agreement governs AECSC's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the Fund's shares. Under the agreement, AECSC will earn a fee from the Fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The rate for Class A is $19 per year, for Class B is $20 per year, for Class C is $19.50 per year and for Class Y is $17 per year. The fees paid to AECSC may be changed by the board without shareholder approval. DISTRIBUTION AGREEMENT American Express Financial Advisors Inc. is the Fund's principal underwriter (the Distributor). The Fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing Fund shares are paid to the Distributor daily. Part of the sales charge may be paid to selling dealers who have agreements with the Distributor. The Distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. SHAREHOLDER SERVICE AGREEMENT With respect to Class Y shares, 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 average daily net assets. -29- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- PLAN AND AGREEMENT OF DISTRIBUTION For Class A, Class B and Class C shares, to help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, the Fund and the Distributor entered into a Plan and Agreement of Distribution (Plan) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund pays a fee up to actual expenses incurred at an annual rate of 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. Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material change to expenses charged under the Class A plan. Expenses covered under this Plan include sales commissions; business, employee and financial advisor expenses charged to distribution of Class A, Class B and Class C shares; and overhead appropriately allocated to the sale of Class A, Class B and Class C shares. These expenses also include costs of providing personal service to shareholders. A substantial portion of the costs are not specifically identified to any one of the American Express mutual funds. The Plan must be approved annually by the board, including a majority of the disinterested board members, if it is to continue for more than a year. At least quarterly, the board must review written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of board members who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the Distributor. The Plan (or any agreement related to it) will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the board members, including a majority of the board members who are not interested persons of the Fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested board members is the responsibility of the other disinterested board members. No board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement. The fee is not allocated to any one service (such as advertising, payments to underwriters, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. CUSTODIAN AGREEMENT The Fund's securities and cash are held by American Express Trust Company, 200 AXP Financial Center, Minneapolis, MN 55474, through a custodian agreement. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. For its services, the Fund pays the custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. The custodian has entered into a sub-custodian agreement with the Bank of New York, 90 Washington Street, New York, NY 10286. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of Bank of New York or in other financial institutions as permitted by law and by the Fund's sub-custodian agreement. -30- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Organizational Information The Fund is an open-end management investment company. The Fund headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The shares of the Fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of the Fund would have the same rights to dividends and assets as every other share of that Fund. VOTING RIGHTS As a shareholder in the Fund, you have voting rights over the Fund's management and fundamental policies. You are entitled to one vote for each share you own. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. All shares have cumulative voting rights with respect to the election of board members. This means that you have as many votes as the number of shares you own, including fractional shares, multiplied by the number of members to be elected. DIVIDEND RIGHTS Dividends paid by the Fund, if any, with respect to each class of shares, if applicable, will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures. AMERICAN EXPRESS FINANCIAL CORPORATION AEFC has been a provider of financial services since 1894. Its family of companies offers not only mutual funds but also insurance, annuities, investment certificates and a broad range of financial management services. In addition to managing assets of more than $79 billion for the American Express Funds, AEFC manages investments for itself and its subsidiaries, American Express Certificate Company and IDS Life Insurance Company. Total assets owned and managed as of the end of the most recent fiscal year were more than $217 billion. The Distributor serves individuals and businesses through its nationwide network of more than 600 supervisory offices, more than 3,800 branch offices and more than 10,200 financial advisors. -31- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - -----------------------------------------------------------------------------
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS* Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) Bond Fund, Inc. 6/27/74, 6/31/86*** Corporation NV/MN 8/31 Yes AXP(R) California Tax-Exempt Trust 4/7/86 Business Trust**** MA 6/30 AXP(R) California Tax-Exempt Fund No AXP(R) Discovery Fund, Inc. 4/29/81, 6/13/86*** Corporation NV/MN 7/31 Yes AXP(R) Equity Select Fund, Inc.** 3/18/57, 6/13/86*** Corporation NV/MN 11/30 Yes AXP(R) Extra Income Fund, Inc. 8/17/83 Corporation MN 5/31 Yes AXP(R) Federal Income Fund, Inc. 3/12/85 Corporation MN 5/31 Yes AXP(R) U.S. Government Mortgage Fund Yes AXP(R) Global Series, Inc. 10/28/88 Corporation MN 10/31 AXP(R) Emerging Markets Fund Yes AXP(R) Global Balanced Fund Yes AXP(R) Global Bond Fund No AXP(R) Global Growth Fund Yes AXP(R) Global Technology Fund*** Yes AXP(R) Growth Series, Inc. 5/21/70, 6/13/86*** Corporation NV/MN 7/31 AXP(R) Growth Fund Yes AXP(R) Research Opportunities Fund Yes AXP(R) High Yield Tax-Exempt Fund, Inc. 12/21/78, 6/13/86*** Corporation NV/MN 11/30 Yes AXP(R) International Fund, Inc. 7/18/84 Corporation MN 10/31 AXP(R) European Equity Fund No AXP(R) International Fund Yes AXP(R) Investment Series, Inc. 1/18/40, 6/13/86*** Corporation NV/MN 9/30 AXP(R) Diversified Equity Income Fund Yes AXP(R) MidCap Value Fund Yes AXP(R) Mutual Yes AXP(R) Managed Series, Inc. 10/9/84 Corporation MN 9/30 AXP(R) Managed Allocation Fund Yes AXP(R) Market Advantage Series, Inc. 8/25/89 Corporation MN 1/31 AXP(R) Blue Chip Advantage Fund Yes AXP(R) International Equity Index Fund No AXP(R) Mid Cap Index Fund No AXP(R) Nasdaq 100 Index Fund No AXP(R) S&P 500 Index Fund No AXP(R) Small Company Index Fund Yes AXP(R) Total Stock Market Index Fund No AXP(R) Money Market Series, Inc. 8/22/75, 6/13/86*** Corporation NV/MN 7/31 AXP(R) Cash Management Fund Yes AXP(R) New Dimensions Fund, Inc. 2/20/68, 6/13/86*** Corporation NV/MN 7/31 AXP(R) Growth Dimensions Fund Yes AXP(R) New Dimensions Fund Yes AXP(R) Precious Metals Fund, Inc. 10/5/84 Corporation MN 3/31 No AXP(R) Progressive Fund, Inc. 4/23/68, 6/13/86*** Corporation NV/MN 9/30 Yes AXP(R) Selective Fund, Inc. 2/10/45, 6/13/86*** Corporation NV/MN 5/31 Yes AXP(R) Stock Fund, Inc. 2/10/45, 6/13/86*** Corporation NV/MN 9/30 Yes
-32- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - -----------------------------------------------------------------------------
Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) Partners International Series, Inc. 5/9/01 Corporation MN 10/31 AXP(R) Partners International Aggressive Growth Fund Yes AXP(R) Partners International Select Value Fund Yes AXP(R) Partners Series, Inc. 3/20/01 Corporation MN 5/31 AXP(R) Partners Fundamental Value Fund Yes AXP(R) Partners Select Value Fund Yes AXP(R) Partners Small Cap Core Fund Yes AXP(R) Partners Small Cap Value Fund No AXP(R) Partners Value Fund Yes AXP(R) Special Tax-Exempt Series Trust 4/7/86 Business Trust**** MA 6/30 AXP(R) Insured Tax-Exempt Fund Yes AXP(R) Massachusetts Tax-Exempt Fund No AXP(R) Michigan Tax-Exempt Fund No AXP(R) Minnesota Tax-Exempt Fund No AXP(R) New York Tax-Exempt Fund No AXP(R) Ohio Tax-Exempt Fund No AXP(R) Strategy Series, Inc. 1/24/84 Corporation MN 3/31 AXP(R) Equity Value Fund Yes AXP(R) Focused Growth Fund*** No AXP(R) Partners Small Cap Growth Fund*** Yes AXP(R) Small Cap Advantage Fund Yes AXP(R) Strategy Aggressive Fund** Yes AXP(R) Tax-Exempt Series, Inc. 9/30/76, 6/13/86*** Corporation NV/MN 11/30 AXP(R) Intermediate Tax-Exempt Fund Yes AXP(R) Tax-Exempt Bond Fund Yes AXP(R) Tax-Free Money Fund, Inc. 2/29/80, 6/13/86*** Corporation NV/MN 12/31 Yes AXP(R) Utilities Income Fund, Inc. 3/25/88 Corporation MN 6/30 AXP(R) Utilities Fund Yes
* Date merged into a Minnesota corporation incorporated on 4/7/86. ** Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the trust itself is unable to meet its obligations. *** Effective February 7, 2002, AXP(R) Focus 20 Fund changed its name to AXP(R) Focused Growth Fund, AXP(R) Innovations Fund changed its name to AXP(R) Global Technology Fund, AXP(R) Small Cap Growth Fund changed its name to AXP(R) Partners Small Cap Growth Fund and AXP(R) Utilities Income Fund, Inc. created a series, AXP(R) Utilities Fund. -33- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- 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 76 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, age Position held Principal occupations during Other directorships Committee with past 5 years memberships Registrant and length of service - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- H. Brewster Atwater, Jr. Board member Retired chair and chief Board 4900 IDS Tower since 1996 executive officer, General Effectiveness, Minneapolis, MN 55402 Mills, Inc. (consumer foods) Executive, Born in 1931 Investment Review - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Arne H. Carlson Chair of the Chair, Board Services Joint Audit, 901 S. Marquette Ave. Board since Corporation (provides Contracts, Minneapolis, MN 55402 1999 administrative services to Executive, Born in 1934 boards), former Governor of Investment Minnesota Review, Board Effectiveness - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Lynne V. Cheney Board member Distinguished Fellow, AEI The Reader's Digest Association Joint Audit, American Enterprise since 1994 Inc. Contracts Institute for Public Policy Research (AEI) 1150 17th St., N.W. Washington, D.C. 20036 Born in 1941 - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Livio D. DeSimone Board member Retired chair of the board and Cargill, Incorporated Joint Audit, 30 Seventh Street East since 2001 chief executive officer, (commodity merchants and Contracts Suite 3050 Minnesota Mining and processors), Target Corporation St. Paul, MN 55101-4901 Manufacturing (3M) (department stores), General Born in 1936 Mills, Inc. (consumer foods), Vulcan Materials Company (construction materials/ chemicals) and Milliken & Company (textiles and chemicals) - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Ira D. Hall Board member Private investor; formerly with Contracts, Texaco, Inc. since 2001 Texaco Inc., treasurer, Investment 2000 Westchester Avenue 1999-2001 and general manager, Review White Plains, NY 10650 alliance management operations, Born in 1944 1998-1999. Prior to that, director, International Operations IBM Corp. - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Heinz F. Hutter Board member Retired president and chief Board P.O. Box 2187 since 1994 operating officer, Cargill, Effectiveness, Minneapolis, MN 55402 Incorporated (commodity Executive, Born in 1929 merchants and processors) Investment Review - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Anne P. Jones Board member Attorney and consultant Motorola, Inc. (electronics) Joint Audit, 5716 Bent Branch Rd. since 1985 Board Bethesda, MD 20816 Effectiveness, Born in 1935 Executive - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Stephen R. Lewis, Jr. Board member President and professor of Contracts, Carlton College since 2002 economics, Carlton College Investment One North College Street Review Northfield, MN 55057 Born in 1939 - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- William R. Pearce Board member RII Weyerhaeuser World Executive, 2050 One Financial Plaza since 1980 Timberfund, L.P. (develops Investment Minneapolis, MN 55402 timber resources)-- management Review, Board Born in 1927 committee; former chair, Effectiveness American Express Funds - ----------------------------- --------------- --------------------------------- ---------------------------------- -----------------
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Independent Board Members (continued) Name, address, age Position held Principal occupations during Other directorships Committee with past 5 years memberships Registrant and length of service - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Alan K. Simpson Board member Former three-term United States Biogen, Inc. Joint Audit, 1201 Sunshine Ave. since 1997 Senator for Wyoming (bio-pharmaceuticals) Contracts Cody, WY 82414 Born in 1931 - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- C. Angus Wurtele Board member Retired chair of the board and Bemis Corporation (packaging) Contracts, 4900 IDS Tower since 1994 chief executive officer, The Executive, Minneapolis, MN 55402 Valspar Corporation Investment Born in 1934 Review - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Board Members Affiliated with American Express Financial Corporation (AEFC) Name, address, age Position held Principal occupations during Other directorships Committee with past 5 years memberships Registrant and length of service - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- David R. Hubers Board member Retired chief executive officer Chronimed Inc. (specialty 50643 AXP Financial Center since 1993 and director of AEFC pharmaceutical distribution), Minneapolis, MN 55474 RTW Inc. (manages worker's Born in 1943 compensation programs), Lawson Software, Inc. (technology based business applications) - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- John R. Thomas Board member Senior vice president - 50652 AXP Financial Center since 1987, information and technology of Minneapolis, MN 55474 president AEFC Born in 1937 since 1997 - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- William F. Truscott Board member Senior vice president - chief 53600 AXP Financial Center since 2001, investment officer of AEFC; Minneapolis, MN 55474 vice former chief investment officer Born in 1960 president and managing director, Zurich since 2002 Scudder Investments - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- 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, and Mr. Truscott, who is vice president, the Fund's other officers are: Other Officers Name, address, age Position held Principal occupations during Other directorships Committee with past 5 years memberships Registrant and length of service - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- John M. Knight Treasurer Vice president - investment 50005 AXP Financial Center since 1999 accounting of AEFC Minneapolis, MN 55474 Born in 1952 - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Leslie L. Ogg Vice President of Board Services 901 S. Marquette Ave. president, Corporation Minneapolis, MN 55402 general Born in 1938 counsel, and secretary since 1978 - ----------------------------- --------------- --------------------------------- ---------------------------------- ----------------- Stephen W. Roszell Vice Senior vice president - 50239 AXP Financial Center president institutional group of AEFC Minneapolis, MN 55474 since 2002 Born in 1949 - ----------------------------- --------------- --------------------------------- ---------------------------------- -----------------
-35- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Directors' holdings The following table shows the Fund Directors' ownership of American Express Funds.
Dollar range of equity securities beneficially owned on Dec. 31, 2001 Based on net asset values as of Dec. 31, 2001 Aggregate dollar range of equity securities of all Dollar range of American Express Funds equity securities [Registered Investment Companies] in AXP Large Cap Equity Fund overseen by Director Range Range H. Brewster Atwater, Jr. none over $100,000 Arne H. Carlson none $50,001-$100,000 Lynne V. Cheney none over $100,000 Livio D. DeSimone none over $100,000 Ira D. Hall none over $100,000 David R. Hubers none over $100,000 Heinz F. Hutter none over $100,000 Anne P. Jones none over $100,000 William R. Pearce none over $100,000 Alan K. Simpson none over $100,000 John R. Thomas none over $100,000 C. Angus Wurtele none over $100,000
Responsibilities of board with respect to Fund's management The board initially approves an Investment Management Services Agreement and other contracts with American Express Financial Corporation (AEFC), one of AEFC's subsidiaries, and other service providers. Once the contracts are approved, the board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and AEFC's profitability in order to determine whether to continue existing contracts or negotiate new contracts. Several committees facilitate its work Executive Committee -- Acts for the board between meetings of the board. Joint Audit Committee -- Meets with the independent public accountant, internal auditors and corporate officers to review financial statements, reports, issues, and compliance matters. Reports significant issues to the board and makes recommendations to the independent directors regarding the selection of the independent public accountant. Investment Review Committee -- Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the board. Board Effectiveness Committee -- Recommends to the board the size, structure and composition for the board; the compensation to be paid to members of the board; and a process for evaluating the board's performance. The committee also reviews candidates for board membership including candidates recommended by shareholders. To be considered, recommendations must include a curriculum vita and be mailed to the Chairman of the Board, American Express Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. Contracts Committee -- Receives and analyzes reports covering the level and quality of services provided under contracts with the Fund and advises the board regarding actions taken on these contracts during the annual review process. Independent Auditors The financial statements contained in the Annual Report will be audited by independent auditors, KPMG LLP, 4200 Wells Fargo Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The independent auditors also provide other accounting and tax-related services as requested by the Fund. -36- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Appendix DESCRIPTION OF RATINGS Standard & Poor's Debt Ratings A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: o Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. o Nature of and provisions of the obligation. o Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. Investment Grade Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. Speculative grade Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. -37- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- Moody's Long-Term Debt Ratings Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A -- Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds that are rated Ba are judged to have speculative elements -- their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. -38- AXP(R) Growth Series, Inc. AXP(R) Large Cap Equity Fund - ----------------------------------------------------------------------------- SHORT-TERM RATINGS Standard & Poor's Commercial Paper Ratings A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. Standard & Poor's Note Ratings An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Moody's Short-Term Ratings Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. -39- Moody's & S&P's Short-Term Muni Bonds and Notes Short-term municipal bonds and notes are rated by Moody's and by S&P. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody' s MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. S-6244-20 A (3/02) PART C. OTHER INFORMATION Item 23. Exhibits. (a)(1) Articles of Incorporation, as amended November 10, 1988, filed as Exhibit 1 to Post-Effective Amendment No. 38 to Registration Statement No. 2-38355, are incorporated by reference. (a)(2) Articles of Amendment to the Articles of Incorporation, dated June 16, 1999, filed electronically as Exhibit (a)(2) to Post-Effective Amendment No. 67 to Registration Statement No. 2-38355, are incorporated by reference. (b) By-laws, as amended January 11, 2001 filed electronically as Exhibit (b) to Post-Effective Amendment No. 67 to Registration Statement No. 2-38355, are incorporated by reference. (c) Stock certificate, filed as Exhibit No. 3 to Registrant's Amendment No. 1 to Registration Statement No. 2-38355, dated Feb. 2, 1971, is incorporated by reference. (d)(1) Investment Management and Services Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995, filed electronically as Exhibit 5 to Registrant's Post-Effective Amendment No. 54 to Registration Statement No. 2-38355, is incorporated by reference. The Agreement was assumed by the Portfolio when IDS Growth Fund adopted the master/feeder structure. (d)(2) Investment Management Services Agreement between Growth Trust, on behalf of Aggressive Growth Portfolio, and American Express Financial Corporation, dated July 1, 1999, filed as Exhibit (d)(2) to Registrant's Post-Effective Amendment No. 63 to Registration Statement No. 2-38355, is incorporated by reference. (d)(3) Amendment to Investment Management Services Agreement dated March 9, 1999 between Growth Trust on behalf of its underlying Series Portfolios, Growth Portfolio and Growth Trends Portfolio and American Express Financial Corporation is incorporated by reference to Exhibit (d)(3) to Registrant's Post-Effective Amendment No. 66 filed on or about Sept. 29, 2001. (d)(4) Investment Management Services Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Corporation is filed electronically herewith as Exhibit (d)(4). (e)(1) Distribution Agreement, dated July 8, 1999, between AXP Utilities Income Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (e) to AXP Utilities Income Fund, Inc. Post-Effective Amendment No. 22, to Registration Statement File No. 33-20872 filed on or about August 27, 1999. Registrant's Distribution Agreement differs from the one incorporated by reference only by the fact that Registrant is one executing party. (e)(2) Distribution Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Corporation is filed electronically herewith as Exhibit (e)(2). (f) All employees are eligible to participate in a profit sharing plan. Entry into the plan is Jan. 1 or July 1. The Registrant contributes each year an amount up to 15 percent of their annual salaries, the maximum deductible amount permitted under Section 404(a) of the Internal Revenue Code. (g)(1) Custodian Agreement between Registrant and American Express Trust Company, dated March 20, 1995, filed electronically as Exhibit 8(a) to Registrant's Post-Effective Amendment No. 54 to Registration Statement No. 2-38355, is incorporated by reference. (g)(2) Addendum to the Custodian Agreement, dated March 20, 1995, between IDS Growth Fund, Inc. and American Express Trust Company executed on May 13, 1996, filed electronically as Exhibit 8(c) to Registrant's Post-Effective Amendment No. 60 to Registration Statement No. 2-38355, is incorporated by reference. (g)(3) Custodian Agreement between Registrant, on behalf of IDS Research Opportunities Fund, and American Express Trust Company, dated August 19, 1996, filed electronically as Exhibit No. 8 to Post Effective Amendment No. 58 to Registration Statement No. 2-38355, is incorporated by reference. (g)(4) Addendum to the Custodian Agreement, dated August 19, 1996, between Registrant, on behalf of IDS Research Opportunities Fund, and American Express Trust Company, filed electronically as Exhibit 8(c) to Registrant's Post-Effective Amendment No. 61 to Registration Statement No. 2-38355, is incorporated by reference. (g)(5) Custodian Agreement dated May 13, 1999 between American Express Trust Company and The Bank of New York is incorporated by reference to Exhibit (g)(3) to IDS Precious Metals Fund, Inc. Post-Effective Amendment No. 33, File No. 2-93745 filed on or about May 24, 1999. (g)(6) Custodian Agreement Amendment between IDS International Fund, Inc. and American Express Trust Company, dated October 9, 1997, filed electronically on or about December 23, 1997 as Exhibit 8(c) to IDS International Fund, Inc.'s Post-Effective Amendment No. 26 to Registration Statement No. 2-92309, is incorporated by reference. Registrant's Custodian Agreement Amendment differs from the one incorporated by reference only by the fact that Registrant is one executing party. (g)(7) Custodian Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Trust Company is filed electronically herewith as Exhibit (g)(7). (h)(1) Administrative Services Agreement between Registrant and American Express Financial Corporation, dated March 20, 1995, filed electronically as Exhibit 9(e) to Registrant's Post-Effective Amendment No. 54 to Registration Statement No. 2-38355, is incorporated by reference. (h)(2) Amendment to Administrative Services Agreement dated March 9, 1999 between AXP Growth Fund and American Express Financial Corporation is incorporated by reference to Exhibit (h)(2) to Registrant's Post-Effective Amendment No. 66 filed on or about Sept. 29, 2000. (h)(3) Administrative Services Agreement between Registrant, on behalf of IDS Research Opportunities Fund, and American Express Financial corporation, dated August 19, 1996, filed electronically as Exhibit No. 9(e) to Post-Effective Amendment No. 58 to Registration Statement No. 2-38355, is incorporated by reference. (h)(4) Agreement of Merger, dated April 10, 1986, filed as Exhibit No. 9 to Post-Effective Amendment No. 33 to Registration Statement No. 2-38355, is incorporated by reference. (h)(5) Agreement and Plan of Reorganization, dated March 10, 2000, between Strategist Growth Fund, Inc. on behalf of Strategist Growth Fund and AXP Growth Series, Inc. on behalf of AXP Growth Fund is incorporated by reference to Exhibit (h)(11), to Registrant's Post-Effective Amendment No. 66 filed on or about Sept. 29, 2000. (h)(6) Agreement and Plan of Reorganization, dated March 10, 2000, between Strategist Growth Fund, Inc. on behalf of Strategist Special Growth Fund and AXP Growth Series, Inc. on behalf of AXP Research Opportunities Fund is incorporated by reference to Exhibit (h)(12), to Registrant's Post-Effective Amendment No. 66 filed on or about Sept. 29, 2000. (h)(7) License Agreement between Registrant and IDS Financial Corporation, dated January 25, 1988, filed as Exhibit 9(c) to Post-Effective Amendment No. 38 to Registration Statement No. 2-38355, is incorporated by reference. (h)(8) License Agreement between Registrant, on behalf of IDS Research Opportunities Fund, and American Express Financial Corporation, dated August 19, 1996, filed electronically as Exhibit No. 9(c) to Post-Effective Amendment No. 58 to Registration Statement No. 2-38355, is incorporated by reference. (h)(9) License Agreement, dated June 17, 1999, between the American Express Funds and American Express Company, filed electronically on or about September 23, 1999 as Exhibit (h)(4) to AXP Stock Fund, Inc.'s Post-Effective Amendment No. 98 to Registration Statement No. 2-11358, is incorporated by reference. (h)(10) Class Y Shareholder Service Agreement between IDS Precious Metals Fund, Inc. and American Express Financial Advisors Inc., dated May 9, 1997, filed electronically on or about May 27, 1997 as Exhibit 9(e) to IDS Precious Metals Fund, Inc.'s Amendment No. 30 to Registration Statement No. 2-93745, is incorporated by reference. Registrant's Class Y Shareholder Service Agreement differs from the one incorporated by reference only by the fact that Registrant is one executing party. (h)(11) Transfer Agency Agreement, dated May 10, 2001 between Registrant on behalf of AXP Growth Fund and AXP Research Opportunities Fund and American Express Client Service Corporation filed electronically as Exhibit (h)(11) to Registrant's Post-Effective Amendment No. 67 to Registration Statement No. 2-38355, on or about September 28, 2001, is incorporated by reference. (h)(12) Administrative Services Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Corporation is filed electronically herewith as Exhibit (h)(12). (h)(13) Class Y Shareholer Service Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Advisors Inc. is filed electronically herewith as Exhibit (h)(13). (h)(14) Transfer Agency Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Client Service Corporation is filed electronically herewith as Exhibit (h)(14). (i) Opinion and Consent of Counsel is filed electronically herewith as Exhibit (i). (j) Independent Auditors' Consent: Not Applicable. (k) Omitted Financial Statements: None (l) Initial Capital Agreements: Not Applicable. (m)(1) Plan and Agreement of Distribution dated July 1, 1999 between Registrant on behalf of its underlying series funds and American Express Financial Advisors Inc., is incorporated by reference to Exhibit (m) to AXP Discovery Fund, Inc.'s Post-Effective Amendment No. 36, file No. 2-72174 filed on or about July 30, 1999. (m)(2) Plan and Agreement of Distribution For Class C Shares dated March 9, 2000 between AXP Bond Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (m)(2) to AXP Bond Fund, Inc.'s Post-Effective Amendment No. 51 to Registration Statement File No. 2-51586 filed on or about June 26, 2000. Registrant's Plan and Agreement of Distribution for Class C Shares differs from the one incorporated by reference only by the fact that Registrant is one executing party. (m)(3) Plan and Agreement of Distribution dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Advisors, Inc. is filed electronically herewith as Exhibit (m)(3). (m)(4) Plan and Agreement For Class C Shares dated January 10, 2002, between Registrant on behalf of AXP Large Cap Equity Fund, and American Express Financial Advisors, Inc. is filed electronically herewith as Exhibit (m)(4). (n) Rule 18f-3 Plan dated March 9, 2000, as Exhibit (n) to AXP Bond Fund Inc.'s Post-Effective Amendment No. 51 to Registration Statement File No. 2-51586, filed on or about June 26, 2000, is incorporated by reference. (o) Reserved. (p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about March 30, 2000 as Exhibit (p)(1) to AXP Market Advantage Series, Inc.'s Post-Effective Amendment No. 24 to Registration Statement No. 33-30770 is incorporated by reference. (p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's investment advisor and principal underwriter filed electronically on or about March 30, 2000 as Exhibit (p)(2) to AXP Market Advantage Series, Inc.'s Post-Effective Amendment No. 24 to Registration Statement No. 33-30770 is incorporated by reference. (q)(1) Directors' Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002, is filed electronically herewith as Exhibit (q)(1). (q)(2) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002, is filed electronically herewith as Exhibit (q)(2). (q)(3) Trustees Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002, is filed electronically herewith as Exhibit (q)(3). (q)(4) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002, is filed electronically herewith as Exhibit (q)(4). Item 24. Persons Controlled by or Under Common Control with Registrant. None. Item 25. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940.
Item 26. Business and Other Connections of Investment Adviser (American Express Financial Corporation) Directors and officers of American Express Financial Corporation who are directors and/or officers of one or more other companies: Name and Title Other company(s) Address Title within other company(s) - ------------------------- ----------------------- ------------------------- ----------------------- Ruediger Adolf American Express Financial 70100 AXP Financial Center Senior Vice President Senior Vice President Advisors Inc. Minneapolis, MN 55474 Gumer C. Alvero American Centurion Life 20 Madison Ave. Extension Director Vice President - Variable Assurance Company P.O. Box 5555 Annuities Albany, NY 12205-0555 American Enterprise Life 829 AXP Financial Center Director and Chairman of the Board Insurance Company Minneapolis, MN 55474 American Express Financial 70100 AXP Financial Center Vice President - Annuities Advisors Inc. Minneapolis, MN 55474 American Partners Life 1751 AXP Financial Center Director, President Insurance Company Minneapolis MN 55474 and Chief Executive Officer IDS Life Insurance Company 70100 AXP Financial Center Director and Executive Vice President - Minneapolis, MN 55474 Assured Assets IDS Life Insurance Company P.O. Box 5144 Director of New York Albany, NY 12205 IDS Life Series Fund, Inc. Director, Chairman of the Board, President and Chief Executive Officer IDS Life Variable Annuity Manager, Chairman of the Board, Funds A & B President and Chief Executive Officer Ward D. Armstrong American Express Financial 70100 AXP Financial Center Senior Vice President - Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Retirement Services Retirement Services American Express Service Vice President - Workplace Corporation Financial Services American Express Trust Director and Chairman of Company the Board John M. Baker American Express Financial 70100 AXP Financial Center Vice President - Plan Vice President - Plan Sponsor Advisors Inc. Minneapolis, MN 55474 Sponsor Services Services American Express Trust Senior Vice President Company Dudley Barksdale American Express Financial 70100 AXP Financial Center Vice President - Service Vice President - Service Advisors Inc. Minneapolis, MN 55474 Development Development Joseph M. Barsky III American Express Financial 70100 AXP Financial Center Vice President - Mutual Vice President - Mutual Fund Advisors Inc. Minneapolis, MN 55474 Fund Equities Equities Timothy V. Bechtold American Centurion Life 20 Madison Ave. Extension Director and President Vice President - Risk Assurance Company P.O. Box 5555 Management Products Albany, NY 12205-0555 American Express Financial 70100 AXP Financial Center Vice President - Risk Advisors Inc. Minneapolis, MN 55474 Management Products American Express Insurance Director, President and Chief Agency of Alabama Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Arizona Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Idaho Inc. Executive Officer American Express Insurance Director and President Agency of Indiana Inc. American Express Insurance Director, President and Chief Agency of Massachusetts Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Nevada Inc. Executive Officer American Express Insurance Director, President and Chief Agency of New Mexico Inc. Executive Officer American Express Insurance Director and President Agency of Oklahoma Inc. American Express Insurance Director, President and Chief Agency of Oregon Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Wyoming Inc. Executive Officer American Partners Life Director and Chairman of the Board Insurance Company IDS Insurance Agency of Director, President and Chief Arkansas Inc. Executive Officer IDS Insurance Agency of Director, President and Chief Ohio Inc. Executive Officer IDS Life Insurance Company 70100 AXP Financial Center Director and President Minneapolis, MN 55474 IDS Life Insurance Company P.O. Box 5144 Director, President and Chief of New York Albany, NY 12205 Executive Officer IDS Life Series Fund, Inc. 70100 AXP Financial Center Director Minneapolis, MN 55474 IDS Life Variable Annuity 70100 AXP Financial Center Manager Funds A & B Minneapolis, MN 55474 Walter S. Berman American Express Financial 70100 AXP Financial Center Director, Senior Vice President Director, Senior Vice President Advisors Inc. Minneapolis, MN 55474 and Chief Financial Officer and Chief Financial Officer Douglas W. Brewers American Express Financial 70100 AXP Financial Center Vice President - Sales Vice President - Sales Support Advisors Inc. Minneapolis, MN 55474 Support Mike Burton American Express Financial 70100 AXP Financial Center Vice President - Compliance Vice President - Compliance Advisors Inc. Minneapolis, MN 55474 Kenneth I. Chenaut American Express Company American Express Tower President and Chief Director World Financial Center Operating Officer New York, NY 10285 Kenneth J. Ciak AMEX Assurance Company 70100 AXP Financial Center Director, President and Chief Vice President and General Minneapolis, MN 55474 Executive Officer Manager - IDS Property Casualty American Express Financial 70100 AXP Financial Center Vice President and General Advisors Inc. Minneapolis, MN 55474 Manager - IDS Property Casualty American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Kentucky Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Maryland Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Pennsylvania Inc. IDS Property Casualty 1 WEG Blvd. Director and President Insurance Company DePere, WI 54115 Paul A. Connolly American Express Financial 70100 AXP Financial Center Vice President - Relationship Leader Vice President - Retail Advisors Inc. Minneapolis, MN 55474 Retail Distribution Services Distribution Services James M. Cracchiolo American Express Financial 70100 AXP Financial Center Director, Chairman, President and Director, Chairman of Advisors Inc. Minneapolis, MN 55474 Chief Executive Officer the Board, President and Chief Executive Officer Colleen Curran American Express Financial 70100 AXP Financial Center Vice President and Vice President and Assistant Advisors Inc. Minneapolis, MN 55474 Assistant General Counsel General Counsel American Express Financial Executive Representative Advisors Japan Inc. American Express Service Vice President and Chief Corporation Legal Counsel Luz Maria Davis American Express Financial 70100 AXP Financial Center Vice President - Vice President - Advisors Inc. Minneapolis, MN 55474 Communications Communications Gordon M. Fines American Express Asset 70100 AXP Financial Center Senior Vice President and Vice President - Mutual Fund Management Group Inc. Minneapolis, MN 55474 Chief Investment Officer Equity Investments American Express Financial 70100 AXP Financial Center Vice President - Mutual Advisors Inc. Minneapolis, MN 55474 Fund Equity Investments Peter A. Gallus American Express Financial 70100 AXP Financial Center Vice President - Vice President - Investment Advisors Inc. Minneapolis, MN 55474 Investment Administration Administration American Express Financial 70100 AXP Financial Center Vice President and Chief Advisors Japan Inc. Minneapolis, MN 55474 Financial Officer IDS Capital Holdings, Inc. Vice President and Controller Derek M. Gledhill American Express Financial 70100 AXP Financial Center Vice President - Vice President - Integrated Advisors Inc. Minneapolis, MN 55474 Integrated Financial Financial Services Field Services Field Implementation Implementation Teresa A. Hanratty American Express Financial 70100 AXP Financial Center Senior Vice Senior Vice President - Advisors Inc. Minneapolis, MN 55474 President - Field Management Field Management Lorraine R. Hart AMEX Assurance Company 70100 AXP Financial Center Vice President - Vice President - Insurance Minneapolis, MN 55474 Investments Investments American Centurion Life 20 Madison Ave. Extension Vice President Assurance Company P.O. Box 5555 Albany, NY 12205-0555 American Enterprise Life 829 AXP Financial Center Vice President Insurance Company Minneapolis, MN 55474 American Express Director, President and Chief Corporation Executive Officer American Express Financial 70100 AXP Financial Center Vice President - Insurance Advisors Inc. Minneapolis, MN 55474 Investments American Partners Life 1751 AXP Financial Center Director and Vice Insurance Company Minneapolis, MN 55474 President American Express Certificate Vice President - Investments Company IDS Life Insurance Company 70100 AXP Financial Center Vice President - Investments Minneapolis, MN 55474 IDS Life Series Fund, Inc. 70100 AXP Financial Center Vice President - Investments Minneapolis, MN 55474 IDS Life Variable Annuity 70100 AXP Financial Center Vice President - Investments Funds A and B Minneapolis, MN 55474 Investors Syndicate Director and Vice Development Corp. President - Investments IDS Life Insurance Company P.O. Box 5144 Vice President of New York Albany, NY 12205 IDS Property Casualty 1 WEG Blvd. Vice President - Investment Officer Insurance Company DePere, WI 54115 Janis K. Heaney American Express Financial 70100 AXP Financial Center Vice President - Incentive Vice President - Incentive Advisors Inc. Minneapolis, MN 55474 Management Management Brian M. Heath American Express Financial 70100 AXP Financial Center Senior Vice President and Senior Vice President Advisors Inc. Minneapolis, MN 55474 General Sales Manager and General Sales Manager Carol A. Holton American Centurion Life 20 Madison Ave. Extension Director Vice President - Third Party Assurance Company Albany, NY 12205-0555 Distribution American Express Financial 70100 AXP Financial Center Vice President - Third Advisors Inc. Minneapolis, MN 55474 Party Distribution American Enterprise Life 829 AXP Financial Center Director, President and Insurance Company Minneapolis, MN 55474 Chief Executive Officer IDS Life Insurance Company 20 Madison Ave. Extension Director of New York P.O. Box 5555 Albany, NY 12205-0555 Darryl G. Horsman American Express Trust 70100 AXP Financial Center Director, President and Chief Vice President - Product Company Minneapolis, MN 55474 Executive Officer Development and Technology, American Express Retirement American Express Asset Vice President Services Management International Inc. Claire Huang American Express Financial 70100 AXP Financial Center Senior Vice President - Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Retail Marketing Retail Marketing Debra A. Hutchinson American Express Financial 70100 AXP Financial Center Vice President - Vice President - Relationship Advisors Inc. Minneapolis, MN 55474 Relationship Leader Leader James M. Jensen American Express Financial 70100 AXP Financial Center Vice President - Advice Vice President - Advice and Advisors Inc. Minneapolis, MN 55474 and Retail Distribution Retail Distribution Group, Group, Product, Product, Compensation and Compensation and Field Field Administration Administration Greg Johnson American Express Financial 70100 AXP Financial Center Vice President - Advisory Vice President - Advisory Advisors Inc. Minneapolis, MN 55474 Planning and Analysis Planning and Analysis Nancy E. Jones American Express Financial 70100 AXP Financial Center Vice President - Business Vice President - Business Advisors Inc. Minneapolis, MN 55474 Development Development American Express Service Vice President - Business Corporation Development John C. Junek American Express Financial 70100 AXP Financial Center Senior Vice President and Senior Vice President Advisors Inc. Minneapolis, MN 55474 General Counsel and General Counsel American Express Financial 70100 AXP Financial Center Vice President Advisors Japan Inc. Minneapolis, MN 55474 American Express Insurance Director and Vice President Agency of Alabama Inc. American Express Insurance Director and Vice President Agency of Arizona Inc. American Express Insurance Director and Vice President Agency of Idaho Inc. American Express Insurance Director and Vice President Agency of Indiana Inc. American Express Insurance Director and Vice President Agency of Massachusetts Inc. American Express Insurance Director and Vice President Agency of Nevada Inc. American Express Insurance Director and Vice President Agency of New Mexico Inc. American Express Insurance Director and Vice President Agency of Oklahoma Inc. American Express Insurance Director and Vice President Agency of Oregon Inc. American Express Insurance Director and Vice President Agency of Wyoming Inc. American Express Property Director and Vice President Casualty Insurance Agency of Kentucky Inc. American Express Property Director and Vice President Casualty Insurance Agency of Maryland Inc. American Express Property Director and Vice President Casualty Insurance Agency of Pennsylvania Inc. IDS Insurance Agency of Director and Vice President Arkansas Inc. IDS Insurance Agency of Director and Vice President Ohio Inc. IDS Real Estate Vice President Services, Inc. Investors Syndicate Director Development Corp. Ora J. Kaine American Express Financial 70100 AXP Financial Center Vice President - Retail Vice President - Retail Advisors Inc. Minneapolis, MN 55474 Distribution Services and Distribution Services and Chief of Staff Chief of Staff John M. Knight American Express Financial 70100 AXP Financial Center Vice President - Vice President - Investment Advisors Minneapolis, MN 55474 Investment Accounting Accounting Claire Kolmodin American Express Financial 70100 AXP Financial Center Vice President - Service Vice President - Service Advisors Inc. Minneapolis, MN 55474 Quality Quality Bruce G. Lamo American Express Financial 70100 AXP Financial Center Vice President - Vice President - Advisors Inc. Minneapolis, MN 55474 Institutional Products Institutional Products Lori J. Larson American Express Financial 70100 AXP Financial Center Vice President - Brokerage Vice President - Brokerage Advisors Inc. Minneapolis, MN 55474 and Direct Services and Direct Services Daniel E. Laufenberg American Express Financial 70100 AXP Financial Center Vice President and Chief Vice President and Chief Advisors Inc. Minneapolis, MN 55474 U.S. Economist U.S. Economist David C. Laurent American Express Financial 70100 AXP Financial Center Vice President - Compliance Vice President - Compliance Advisors Inc. Minneapolis, MN 55474 Shared Services Shared Services Jane W. Lee American Express Financial 70100 AXP Financial Center Vice President - New Vice President - New Business Advisors Inc. Minneapolis, MN 55474 Business Development and Development and Marketing Marketing Steve Lobo American Express Financial 70100 AXP Financial Center Vice President - Investment Vice President - Investment Advisors Inc. Minneapolis, MN 55474 Risk Products Risk Management Advisory Capital 70100 AXP Financial Center Vice President and Treasurer Partners LLC Minneapolis, MN 55474 Advisory Capital Strategies 70100 AXP Financial Center Vice President and Treasurer Group Inc. Minneapolis, MN 55474 Diane D. Lyngstad American Express Financial 70100 AXP Financial Center Vice President - Lead Vice President - Lead Advisors Inc. Minneapolis, MN 55474 Financial Officer, Financial Officer, U.S. Retail U.S. Retail Tom Mahowald American Express Financial 70100 AXP Financial Center Vice President and Director of Vice President and Director of Advisors Inc. Minneapolis, MN 55474 Equity Research Equity Research Timothy J. Masek American Express Financial 70100 AXP Financial Center Vice President and Director Vice President and Director Advisors Inc. Minneapolis, MN 55474 of Fixed Income Research of Fixed Income Research Penny Mazal American Express Financial 70100 AXP Financial Center Vice President - Business Vice President - Business Advisors Inc. Minneapolis, MN 55474 Transformation Transformation Sarah M. McKenzie American Express Financial 70100 AXP Financial Center Vice President - Vice President - Advisors Inc. Minneapolis, MN 55474 Wrap and Trust Products Wrap and Trust Products American Express Personal Director Trust Services, FSB Paula R. Meyer American Express Financial 70100 AXP Financial Center Vice President - Mutual Vice President - Mutual Funds Advisors Inc. Minneapolis, MN 55474 Funds American Express Certificate Director, President and Chief Company Executive Officer Investors Syndicate Director, President and Chief Development Corp. Executive Officer Barry J. Murphy American Express Client 70100 AXP Financial Center Director, Chairman, President Executive Vice President - Service Corporation Minneapolis, MN 55474 and Chief Executive Officer U.S. Retail Group American Express Financial 70100 AXP Financial Center Executive Vice President - Advisors Inc. Minneapolis, MN 55474 U.S. Retail Group IDS Life Insurance Company 70100 AXP Financial Center Director Minneapolis, MN 55474 Francois B. Odouard American Express Financial 70100 AXP Financial Center Vice President Vice President Advisors Inc. Minneapolis, MN 55474 Michael J. O'Keefe American Express Financial 70100 AXP Financial Center Vice President - Advisory Vice President - Advisory Advisors Inc. Minneapolis, MN 55474 Business Systems Business Systems Carla P. Pavone American Express Financial 70100 AXP Financial Center Vice President - Vice President - Product Advisors Inc. Minneapolis, MN 55474 Business Development Business Development Kris Petersen American Express Financial 70100 AXP Financial Center Vice President - Vice President - Advisors Inc. Minneapolis, MN 55474 Non-proprietary Products Non-proprietary Products IDS Cable Corporation Director, President and Chief Executive Officer IDS Cable II Corporation Director, President and Chief Executive Officer IDS Futures Corporation Director and President IDS Management Corporation Director, President and Chief Executive Officer IDS Partnership Services Director, President and Chief Corporation Executive Officer IDS Realty Corporation Director, President and Chief Executive Officer Ronald W. Powell American Express Financial 70100 AXP Financial Center Vice President and Vice President and Assistant Advisors Inc. Minneapolis, MN 55474 Assistant General Counsel General Counsel IDS Cable Corporation Vice President and Assistant Secretary IDS Cable II Corporation Vice President and Assistant Secretary IDS Management Corporation Vice President and Assistant Secretary IDS Partnership Services Vice President and Corporation Assistant Secretary IDS Realty Corporation Vice President and Assistant Secretary Teresa J. Rasmussen American Express Financial 70100 AXP Financial Center Vice President and Vice President and Assistant Advisors Inc. Minneapolis, MN 55474 Assistant General Counsel General Counsel American Enterprise Life 829 AXP Financial Center Director, Vice President, General Insurance Company Minneapolis, MN 55474 Counsel and Secretary American Express Corporation 70100 AXP Financial Center Director, Vice President and Secretary Minneapolis, MN 55474 American Partners Life 70100 AXP Financial Center Director, Vice President, General Insurance Company Minneapolis, MN 55474 Counsel and Secretary IDS Life Insurance Company 70100 AXP Financial Center Vice President and General Counsel Minneapolis, MN 55474 IDS Life Insurance Company 20 Madison Ave. Extension Assistant General Counsel and of New York Albany, NY 12205-0555 Assistant Secretary IDS Life Series Fund, Inc. 70100 AXP Financial Center General Counsel and Assistant Secretary Minneapolis, MN 55474 IDS Life Variable Annuity 70100 AXP Financial Center General Counsel and Assistant Secretary Funds A & B Minneapolis, MN 55474 ReBecca K. Roloff American Express Financial 70100 AXP Financial Center Senior Vice President - Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Field Management and Field Management Financial Advisory Services and Financial Advisory Services Stephen W. Roszell Advisory Capital 70100 AXP Financial Center Director Senior Vice President - Strategies Group Inc. Minneapolis, MN 55474 Institutional Group American Express Asset Director, President and Management Group Inc. Chief Executive Officer American Express Asset Director Management International, Inc. American Express Asset Director Management Ltd. American Express Financial 70100 AXP Financial Center Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Institutional American Express Trust Director Company Erven A. Samsel American Express Financial 70100 AXP Financial Center Senior Vice President - Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Field Management Field Management American Express Insurance Vice President Agency of Alabama Inc. American Express Insurance Vice President Agency of Idaho Inc. American Express Insurance Vice President Agency of Indiana Inc. American Express Insurance Vice President Agency of Massachusetts Inc. American Express Insurance Vice President Agency of Nevada Inc. American Express Insurance Vice President Agency of New Mexico Inc. American Express Insurance Vice President Agency of Oklahoma Inc. American Express Insurance Vice President Agency of Oregon Inc. American Express Insurance Vice President Agency of Wyoming Inc. American Express Property Vice President Casualty Insurance Agency of Kentucky Inc. American Express Property Vice President Casualty Insurance Agency of Maryland Inc. American Express Property Vice President Casualty Insurance Agency of Pennsylvania Inc. IDS Insurance Agency of Vice President Arkansas Inc. IDS Insurance Agency of Vice President Ohio Inc. Theresa M. Sapp American Express Financial 70100 AXP Financial Center Vice President - Vice President - Relationship Advisors Inc. Minneapolis, MN 55474 Relationship Leader Leader Andy Schell American Express Financial 70100 AXP Financial Center Vice President - Client Vice President - Client Advisors Inc. Minneapolis, MN 55474 Development and Migration Development and Migration Judy P. Skoglund American Express Financial 70100 AXP Financial Center Vice President - Quality Vice President - Quality and Advisors Inc. Minneapolis, MN 55474 and Service Support Service Support Dave Smith American Express Financial 70100 AXP Financial Center Vice President - Vice President - Advisors Inc. Minneapolis, MN 55474 Advisor Group Compliance Advisor Group Compliance Bridget Sperl American Enterprise Director Senior Vice President - Investment Services Inc. Client Service American Express Client 70100 AXP Financial Center Vice President Service Corporation Minneapolis, MN 55474 American Express Financial 70100 AXP Financial Center Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Client Service IDS Life Insurance Company Executive Vice President - Client Service IDS Property Casualty Director Insurance Company Public Employee Payment Director, President and Chief Company Executive Officer Lisa A. Steffes American Express Financial 70100 AXP Financial Center Vice President - Marketing Vice President - Marketing Advisors Inc. Minneapolis, MN 55474 Offer Development Offer Development AMEX Assurance Company 70100 AXP Financial Center Director Minneapolis, MN 55474 IDS Property Casualty 1 WEG Blvd. Director Insurance Company DePere, WI 54115 James J. Strauss American Express Financial 70100 AXP Financial Center Vice President and General Vice President and General Advisors Inc. Minneapolis, MN 55474 Auditor Auditor Jeffrey J. Stremcha American Express Financial 70100 AXP Financial Center Vice President - Vice President - Information Advisors Inc. Minneapolis, MN 55474 Information Resource Resource Management/ISD Management/ISD John T. Sweeney American Express Financial 70100 AXP Financial Center Vice President - Lead Vice President - Lead Advisors Inc. Minneapolis, MN 55474 Financial Officer, Products Financial Officer, Products John R. Thomas American Express Financial 70100 AXP Financial Center Senior Vice President - Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Information and Technology Information and Technology William F. Truscott American Express Financial 70100 AXP Financial Center Senior Vice President - Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Chief Investment Officer Chief Investment Officer Advisory Capital Strategies Director Group Inc. IDS Capital Holdings Inc. Director, President Beth E. Weimer American Express Financial 70100 AXP Financial Center Chief Compliance Officer Chief Compliance Officer Advisors Inc. Minneapolis, MN 55474 American Enterprise Chief Compliance Officer Investment Services Inc. American Express Asset Chief Compliance Officer Management Group Inc. American Express Asset Chief Compliance Officer Management International Inc. IDS Insurance Agency of Chief Compliance Officer Arkansas Inc. IDS Life Insurance Company Chief Compliance Officer Michael D. Wolf American Express Asset 70100 AXP Financial Center Executive Vice President Vice President - Senior Management Group Inc. Minneapolis, MN 55474 and Senior Portfolio Portfolio Manager Manager American Express Financial 70100 AXP Financial Center Vice President - Senior Advisors Inc. Minneapolis, MN 55474 Portfolio Manager Michael R. Woodward American Express Financial 70100 AXP Financial Center Senior Vice President - Senior Vice President - Advisors Inc. Minneapolis, MN 55474 Field Management Field Management American Centurion Life 20 Madison Ave. Extension Director Assurance Company Albany, NY 12205-0555 American Express Insurance Vice President Agency of Alabama Inc. American Express Insurance Vice President Agency of Idaho Inc. American Express Insurance Vice President Agency of Indiana Inc. American Express Insurance Vice President Agency of Massachusetts Inc. American Express Insurance Vice President Agency of Nevada Inc. American Express Insurance Vice President Agency of New Mexico Inc. American Express Insurance Vice President Agency of Oklahoma Inc. American Express Insurance Vice President Agency of Oregon Inc. American Express Insurance Vice President Agency of Wyoming Inc. American Express Property Vice President Casualty Insurance Agency of Kentucky Inc. American Express Property Vice President Casualty Insurance Agency of Maryland Inc. American Express Property Vice President Casualty Insurance Agency of Pennsylvania Inc. IDS Insurance Agency of Vice President Arkansas Inc. IDS Insurance Agency of Vice President Ohio Inc. IDS Life Insurance Company P.O. Box 5144 Director of New York Albany, NY 12205 Doretta R. Wright American Express Financial Vice President Vice President Advisors Inc. David L. Yowan American Centurion Life 20 Madison Ave. Extension Vice President and Treasurer Vice President and Corporate Assurance Company Albany, NY 12205-0555 Treasurer American Enterprise Vice President and Investment Services Treasurer American Enterprise Life 829 AXP Financial Center Vice President and Insurance Company Minneapolis, MN 55474 Treasurer American Express Asset Vice President and Management Group Inc. Treasurer American Express Asset Vice President and Management International Treasurer Inc. American Express Vice President and Certificate Company Treasurer American Express Client 70100 AXP Financial Center Vice President and Service Corporation Minneapolis, MN 55474 Treasurer American Express Vice President and Corporation Treasurer American Express Financial 70100 AXP Financial Center Vice President and Advisors Inc. Minneapolis, MN 55474 Treasurer American Express Financial Vice President and Advisors Japan Inc. Treasurer American Express Insurance Vice President and Agency of Alabama Inc. Treasurer American Express Insurance Vice President and Agency of Arizona Inc. Treasurer American Express Insurance Vice President and Agency of Idaho Inc. Treasurer American Express Insurance Vice President and Agency of Indiana Inc. Treasurer American Express Insurance Vice President and Agency of Massachusetts Inc. Treasurer American Express Insurance Vice President and Agency of Nevada Inc. Treasurer American Express Insurance Vice President and Agency of New Mexico Inc. Treasurer American Express Insurance Vice President and Agency of Oklahoma Inc. Treasurer American Express Insurance Vice President and Agency of Oregon Inc. Treasurer American Express Insurance Vice President and Agency of Wyoming Inc. Treasurer American Express Personal Treasurer Trust Services, FSB American Express Property Vice President and Casualty Insurance Agency Treasurer of Kentucky Inc. American Express Property Vice President and Casualty Insurance Agency Treasurer of Maryland Inc. American Express Property Vice President and Casualty Insurance Agency Treasurer of Pennsylvania Inc. American Partners Life 1751 AXP Financial Center Vice President and Insurance Company Minneapolis, MN 55474 Treasurer IDS Cable Corporation Director, Vice President and Treasurer IDS Cable II Corporation Director, Vice President and Treasurer IDS Capital Holdings Inc. Vice President, Treasurer and Assistant Secretary IDS Insurance Agency of Vice President and Arkansas Inc. Treasurer IDS Insurance Agency of Vice President and Ohio Inc. Treasurer IDS Life Insurance Company 70100 AXP Financial Center Vice President, Treasurer Minneapolis, MN 55474 and Assistant Secretary IDS Life Insurance Company P.O. Box 5144 Vice President and of New York Albany, NY 12205 Treasurer IDS Life Series Fund, Inc. 70100 AXP Financial Center Vice President and Minneapolis, MN 55474 Treasurer IDS Life Variable Annuity 70100 AXP Financial Center Vice President and Funds A & B Minneapolis, MN 55474 Treasurer IDS Management Corporation Director, Vice President and Treasurer IDS Partnership Services Vice President and Corporation Treasurer IDS Property Casualty 1 WEG Blvd. Vice President, Treasurer Insurance Company DePere, WI 54115 and Assistant Secretary IDS Real Estate Services, Vice President and Inc. Treasurer IDS Realty Corporation Vice President and Treasurer Investors Syndicate Vice President and Development Corporation Treasurer Public Employee Payment Vice President and Company Treasurer
Item 27. Principal Underwriters. (a) American Express Financial Advisors acts as principal underwriter for the following investment companies: AXP Bond Fund, Inc.; AXP California Tax-Exempt Trust; AXP Discovery Fund, Inc.; AXP Equity Select Fund, Inc.; AXP Extra Income Fund, Inc.; AXP Federal Income Fund, Inc.; AXP Global Series, Inc.; AXP Growth Series, Inc.; AXP High Yield Tax-Exempt Fund, Inc.; AXP International Fund, Inc.; AXP Investment Series, Inc.; AXP Managed Series, Inc.; AXP Market Advantage Series, Inc.; AXP Money Market Series, Inc.; AXP New Dimensions Fund, Inc.; AXP Partners Series, Inc.; AXP Precious Metals Fund, Inc.; AXP Progressive Fund, Inc.; AXP Selective Fund, Inc.; AXP Special Tax-Exempt Series Trust; AXP Stock Fund, Inc.; AXP Strategy Series, Inc.; AXP Tax-Exempt Series, Inc.; AXP Tax-Free Money Fund, Inc.; AXP Utilities Income Fund, Inc., Growth Trust; Growth and Income Trust; Income Trust; Tax-Free Income Trust; World Trust; American Express Certificate Company. (b) As to each director, officer or partner of the principal underwriter: Name and Principal Position and Offices with Offices with Registrant Business Address Underwriter Ruediger Adolf Senior Vice President None 70100 AXP Financial Center Minneapolis, MN 55474 Gumer C. Alvero Vice President - None 70100 AXP Financial Center Annuities Minneapolis, MN 55474 Ward D. Armstrong Senior Vice President - None 70100 AXP Financial Center Retirement Services Minneapolis, MN 55474 John M. Baker Vice President - Plan None 70100 AXP Financial Center Sponsor Services Minneapolis, MN 55474 Dudley Barksdale Vice President - Service None 70100 AXP Financial Center Development Minneapolis, MN 55474 Joseph M. Barsky III Vice President - Mutual None 70100 AXP Financial Center Fund Equities Minneapolis, MN 55474 Timothy V. Bechtold Vice President - Risk None 70100 AXP Financial Center Management Products Minneapolis, MN 55474 Walter S. Berman Director, Senior Vice President - None 70100 AXP Financial Center and Chief Financial Officer Minneapolis, MN 55474 Brent L. Bisson Group Vice President - None Suite 900, E. Westside Twr Los Angeles Metro 11835 West Olympic Blvd. Los Angeles, CA 90064 Walter K. Booker Group Vice President - None Suite 200, 3500 Market New Jersey Street Camp Hill, NJ 17011 Bruce J. Bordelon Group Vice President - None 1333 N. California Blvd., San Francisco Bay Area Suite 200 Walnut Creek, CA 94596 Charles R. Branch Group Vice President - None Suite 200 Northwest West 111 North River Dr. Spokane, WA 99201 Douglas W. Brewers Vice President - Sales None 70100 AXP Financial Center Support Minneapolis, MN 55474 Mike Burton Vice President - Compliance None 70100 AXP Financial Center Minneapolis, MN 55474 Kenneth J. Ciak Vice President and None IDS Property Casualty General Manager - IDS 1400 Lombardi Avenue Property Casualty Green Bay, WI 54304 Paul A. Connolly Vice President - Relationship None 70100 AXP Financial Center Leader Retail Distribution Services Minneapolis, MN 55474 Henry J. Cormier Group Vice President - None Commerce Center One Connecticut 333 East River Drive East Hartford, CT 06108 James M. Cracchiolo Director, Chairman, President and None 70100 AXP Financial Center Chief Executive Officer Minneapolis, MN 55474 Kevin F. Crowe Group Vice President - None Suite 312 Carolinas/Eastern Georgia 7300 Carmel Executive Pk Charlotte, NC 28226 Colleen Curran Vice President and None 70100 AXP Financial Center Assistant General Counsel Minneapolis, MN 55474 Luz Maria Davis Vice President - None 70100 AXP Financial Center Communications Minneapolis, MN 55474 Arthur E. DeLorenzo Group Vice President - None 4 Atrium Drive, #100 Upstate New York Albany, NY 12205 Scott M. DiGiammarino Group Vice President - None Suite 500, 8045 Leesburg Washington/Baltimore Pike Vienna, VA 22182 Bradford L. Drew Group Vice President - None Two Datran Center Eastern Florida Penthouse One B 9130 S. Dadeland Blvd. Miami, FL 33156 Douglas K. Dunning Vice President - Assured None 70100 AXP Financial Center Assets Product Minneapolis, MN 55474 Development and Management James P. Egge Group Vice President - None 4305 South Louise, Western Iowa, Nebraska, Suite 202 Dakotas Sioux Falls, SD 57103 Gordon M. Fines Vice President - Mutual None 70100 AXP Financial Center Fund Equity Investments Minneapolis, MN 55474 Judy Forker Vice President - Relationship None 70100 AXP Financial Center Leader Investments Minneapolis, MN 55474 William P. Fritz Group Vice President - Gateway None 12323 Olive Blvd/Westview Place #200 Creve Couer, MO 63141 Peter A. Gallus Vice President - None 70100 AXP Financial Center Investment Minneapolis, MN 55474 Administration Derek M. Gledhill Vice President - None 70100 AXP Financial Center Integrated Financial Minneapolis, MN 55474 Services Field Implementation Teresa A. Hanratty Senior Vice President - None Suites 6&7 Field Management 169 South River Road Bedford, NH 03110 Lorraine R. Hart Vice President - None 70100 AXP Financial Center Insurance Investments Minneapolis, MN 55474 Janis K. Heaney Vice President - None 70100 AXP Financial Center Incentive Management Minneapolis, MN 55474 Brian M. Heath Senior Vice President None Suite 150 and General Sales Manager 801 E. Campbell Road Richardson, TX 75081 Jon E. Hjelm Group Vice President - None 319 Southbridge Street Rhode Island/Central - Auburn, MA 01501 Western Massachusetts David J. Hockenberry Group Vice President - None 30 Burton Hills Blvd. Tennessee Valley Suite 175 Nashville, TN 37215 ` Carol A. Holton Vice President - Third None 70100 AXP Financial Center Party Distribution Minneapolis, MN 55474 Claire Huang Senior Vice President - Retail None 70100 AXP Financial Center Marketing Minneapolis, MN 55474 Debra A. Hutchinson Vice President - None 70100 AXP Financial Center Relationship Leader Minneapolis, MN 55474 Diana R. Iannarone Group Vice President - None 3030 N.W. Expressway Kansas/Oklahoma Suite 900 Oklahoma City, OK 73112 Theodore M. Jenkin Group Vice President - None 70100 AXP Financial Center Cleveland Metro Minneapolis, MN 55474 James M. Jensen Vice President - None 70100 AXP Financial Center Advice and Minneapolis, MN 55474 Retail Distribution Group, Product, Compensation and Field Administration Greg Johnson Vice President - Advisory Planning None 70100 AXP Financial Center Anaylsis Minneapolis, MN 55474 Nancy E. Jones Vice President - None 70100 AXP Financial Center Business Development Minneapolis, MN 55474 John C. Junek Senior Vice President, None 70100 AXP Financial Center General Counsel Minneapolis, MN 55474 Ora J. Kaine Vice President - None 70100 AXP Financial Center Retail Distribution Services Minneapolis, MN 55474 and Chief of Staff Raymond G. Kelly Group Vice President - None Suite 250 North Texas 801 East Campbell Road Richardson, TX 75081 John M. Knight Vice President - Treasurer 70100 AXP Financial Center Investment Accounting Minneapolis, MN 55474 Claire Kolmodin Vice President - Service None 70100 AXP Financial Center Quality Minneapolis, MN 55474 Mitre Kutanovski Group Vice President - None Suite 680 Chicago Metro 8585 Broadway Merrillville, IN 48410 Bruce G. Lamo Vice President - None 70100 AXP Financial Center Institutional Products Minneapolis, MN 55474 Lori J. Larson Vice President - None 70100 AXP Financial Center Brokerage and Direct Minneapolis, MN 55474 Services Daniel E. Laufenberg Vice President and Chief None 70100 AXP Financial Center U.S. Economist Minneapolis, MN 55474 David C. Laurent Vice President - Compliance None 70100 AXP Financial Center Shared Services Minneapolis, MN 55474 Jane W. Lee Vice President - New None 70100 AXP Financial Center Business Development and Minneapolis, MN 55474 Marketing Steve Lobo Vice President - Investment None 70100 AXP Financial Center Risk Management Minneapolis, MN 55474 Diane D. Lyngstad Vice President - Lead Financial None 70100 AXP Financial Center Officer, U.S. Retail Minneapolis, MN 55474 Tom Mahowald Vice President and Director of None 70100 AXP Financial Center Equity Research Minneapolis, MN 55474 Timothy J. Masek Vice President and None 70100 AXP Financial Center Director of Fixed Income Minneapolis, MN 55474 Research Penny Mazal Vice President - Business None 70100 AXP Financial Center Transformation Minneapolis, MN 55474 Sarah M. McKenzie Vice President - Wrap and Trust None 70100 AXP Financial Center Products Minneapolis, MN 55474 Paula R. Meyer Vice President - Mutual None 70100 AXP Financial Center Funds Minneapolis, MN 55474 Barry J. Murphy Executive Vice President - None 70100 AXP Financial Center U.S. Retail Group Minneapolis, MN 55474 Scott M. Nelson Vice President - None 70100 AXP Financial Center Alternative Investments Minneapolis, MN 55474 Thomas V. Nicolosi Group Vice President - None Suite 220 New York Metro Area 500 Mamaroneck Ave. Harrison, NY 10528 Francois B. Odouard Vice President None 70100 AXP Financial Center Minneapolis, MN 55474 Michael J. O'Keefe Vice President - None 70100 AXP Financial Center Advisory Business Systems Minneapolis, MN 55474 Carla P. Pavone Vice President - None 70100 AXP Financial Center Business Development Minneapolis, MN 55474 Kris Petersen Vice President - None 70100 AXP Financial Center Non-proprietary Products Minneapolis, MN 55474 Larry M. Post Group Vice President - None One Tower Bridge Philadelphia Metro and 100 Front Street 8th Fl Northern New England West Conshohocken, PA 19428 Ronald W. Powell Vice President and None 70100 AXP Financial Center Assistant General Counsel Minneapolis, MN 55474 Teresa J. Rasmussen Vice President and None 70100 AXP Financial Center Assistant General Counsel Minneapolis, MN 55474 Ralph D. Richardson III Group Vice President - None Suite 800 Southern Texas Arboretum Plaza One 9442 Capital of Texas Hyw. N. Austin, TX 78759 ReBecca K. Roloff Senior Vice President - None 70100 AXP Financial Center Field Management and Minneapolis, MN 55474 Financial Advisory Services Stephen W. Roszell Senior Vice President - Vice President 70100 AXP Financial Center Institutional Minneapolis, MN 55474 Max G. Roth Group Vice President - None Suite 201 S. IDS Ctr Wisconsin/Upper Michigan 1400 Lombardi Avenue Green Bay, WI 54304 Diane M. Ruebling Group Vice President - None 70100 AXP Financial Center Central Minneapolis, MN 55474 California/Western Nevada Erven A. Samsel Senior Vice President - None 45 Braintree Hill Park Field Management Suite 402 Braintree, MA 02184 Theresa M. Sapp Vice President - None 70100 AXP Financial Center Relationship Leader Minneapolis, MN 55474 Russell L. Scalfano Group Vice President - None Suite 201 Illinois/Indiana/Kentucky 101 Plaza East Blvd. Evansville, IN 47715 Andy Schell Vice President - Client Development None 70100 AXP Financial Center and Migration Minneapolis, MN 55474 William G. Scholz Group Vice President - None Suite 205 Arizona/Las Vegas 7333 E. Doubletree Ranch Rd. Scottsdale AZ. 85258 Judy P. Skoglund Vice President - Quality None 70100 AXP Financial Center and Service Support Minneapolis, MN 55474 Dave Smith Vice President - U.S. Advisor None 70100 AXP Financial Center Group Compliance Minneapolis, MN 55474 Bridget Sperl Senior Vice President - None 70100 AXP Financial Center Client Service Minneapolis, MN 55474 Paul J. Stanislaw Group Vice President - None Suite 1100 Southern California Two Park Plaza Irvine, CA 92714 Lisa A. Steffes Vice President - None 70100 AXP Financial Center Marketing Offer Minneapolis, MN 55474 Development Lois A. Stilwell Group Vice President - None Suite 433 Outstate Minnesota 9900 East Bren Rd. Area/North Dakota/ Minnetonka, MN 55343 Western Wisconsin James J. Strauss Vice President and None 70100 AXP Financial Center General Auditor Minneapolis, MN 55474 Jeffrey J. Stremcha Vice President - None 70100 AXP Financial Center Information Resource Minneapolis, MN 55474 Management/ISD Barbara Stroup Stewart Vice President - Channel None 70100 AXP Financial Center Development Minneapolis, MN 55474 John T. Sweeney Vice President - Lead Financial None 70100 AXP Financial Center Officer, Products Minneapolis, MN 55474 Craig P. Taucher Group Vice President - None Suite 150 Orlando/Jacksonville 4190 Belfort Rd. Jackonville, FL 32216 Neil G. Taylor Group Vice President - None Suite 425 Seattle/Tacoma/Hawaii 101 Elliot Avenue West Seattle, WA 98119 John R. Thomas Senior Vice President - Board Member 70100 AXP Financial Center Information and and President Minneapolis, MN 55474 Technology William F. Truscott Senior Vice President - Board Member and 70100 AXP Financial Center Chief Investment Officer Vice President Minneapolis, MN 55474 Janet M. Vandenbark Group Vice President - None 3951 Westerre Parkway, Suite 250 Virginia Richmond, VA 23233 Peter S. Velardi Group Vice President - None Suite 180 Atlanta/Birmingham 1200 Ashwood Parkway Atlanta, GA 30338 Charles F. Wachendorfer Group Vice President - None Suite 100 Detroit Metro Stanford Plaza II 7979 East Tufts Ave. Pkwy. Denver, CO 80237 Donald F. Weaver Group Vice President - None 3500 Market Street, Greater Pennsylvania Suite 200 Camp Hill, PA 17011 Beth E. Weimer Chief Compliance Officer None 70100 AXP Financial Center Minneapolis, MN 55474 William J. Williams Group Vice President - None 70100 AXP Financial Center Twin Cities Metro Minneapolis, MN 55474 Michael D. Wolf Vice President - Senior None 70100 AXP Financial Center Portfolio Manager Minneapolis, MN 55474 Michael R. Woodward Senior Vice President - None 32 Ellicott St Field Management Suite 100 Batavia, NY 14020 Doretta R. Wright Vice President None 70100 AXP Financial Center Minneapolis, MN 55474 David L. Yowan Vice President and None American Express Company Treasurer New York Rande L. Zellers Group Vice President - None 1 Galleria Blvd., Suite 1900 Gulf States Metairie, LA 70001
Item 27 (c). Not Applicable. Item 28. Location of Accounts and Records American Express Financial Corporation 70100 AXP Financial Center Minneapolis, MN 55474 Item 29. Management Services Not Applicable. Item 30. Undertakings Not Applicable. SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, AXP Growth Series, Inc. certifies that it meets all of the requirements for effectiveness of this amendment to its Registration Statement under Rule 485(b) under the Securities Act and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis and State of Minnesota on the 21st day of March, 2002. AXP GROWTH SERIES, INC. By /s/ John R. Thomas** ---------------------- John R. Thomas, President By /s/ John M. Knight -------------------- John M. Knight, Treasurer Pursuant to the requirements of the Securities Act, this Amendment to its Registration Statement has been signed below by the following persons in the capacities indicated on the 21st day of March, 2002. Signature Capacity /s/ H. Brewster Atwater, Jr.* Director - ------------------------------ H. Brewster Atwater, Jr. /s/ Arne H. Carlson* Chair of the Board - -------------------- Arne H. Carlson /s/ Lynne V. Cheney* Director - --------------------- Lynne V. Cheney /s/ Livio D. DeSimone* Director - ----------------------- Livio D. DeSimone /s/ Ira D. Hall* Director - ----------------- Ira D. Hall /s/ David R. Hubers* Director - --------------------- David R. Hubers /s/ Heinz F. Hutter* Director - --------------------- Heinz F. Hutter /s/ Anne P. Jones* Director - ------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.* Director - --------------------------- Stephen R. Lewis, Jr. /s/ William R. Pearce* Director - ----------------------- William R. Pearce /s/ Alan K. Simpson* Director - --------------------- Alan K. Simpson /s/ John R. Thomas* Director - -------------------- John R. Thomas /s/ William F. Truscott* Director - ------------------------- William F. Truscott /s/ C. Angus Wurtele* Director - ---------------------- C. Angus Wurtele * Signed pursuant to Directors' Power of Attorney, dated Jan. 9, 2002, filed electronically herewith as Exhibit (q)(1) to Registrant's Post-Effective Amendment No. 69, by: /s/ Leslie L. Ogg - ----------------- Leslie L. Ogg ** Signed pursuant to Officers' Power of Attorney, dated Jan. 9, 2002, filed electronically herewith as Exhibit (q)(2) to Registrant's Post-Effective Amendment No. 69, by: /s/ Leslie L. Ogg - ----------------- Leslie L. Ogg CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 69 TO REGISTRATION STATEMENT NO. 2-38355 This Post-Effective Amendment contains the following papers and documents: The facing sheet. Part A. The Prospectus for AXP Large Cap Equity Fund. Part B. Statement of Additional Information for AXP Large Cap Equity Fund. Part C. Other information. The signatures. EX-99 3 ex-index.txt EXHIBIT INDEX EXHIBIT INDEX (d)(4) Investment Management Services Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Corporation. (e)(2) Distribution Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Corporation. (g)(7) Custodian Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Trust Company. (h)(12) Administrative Services Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Corporation. (h)(13) Class Y Shareholer Service Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Advisors Inc. (h)(14) Transfer Agency Agreement dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Client Service Corporation. (i) Opinion and Consent of Counsel. (m)(3) Plan and Agreement of Distribution dated January 10, 2002, between Registrant, on behalf of AXP Large Cap Equity Fund, and American Express Financial Advisors, Inc. (m)(4) Plan and Agreement For Class C Shares dated January 10, 2002, between Registrant on behalf of AXP Large Cap Equity Fund, and American Express Financial Advisors, Inc. (q)(1) Directors' Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002. (q)(2) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002. (q)(3) Trustees Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002. (q)(4) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002. EX-99.D4 IMS AGMNT 4 d4-imsagmt.txt INVESTMENT MANAGEMENT SERVICES AGREEMENT INVESTMENT MANAGEMENT SERVICES AGREEMENT This Agreement dated as of January 10, 2002, is by and between AXP Growth Series, Inc., a Minnesota Corporation, (the "Corporation") on behalf of its underlying series AXP Large Cap Equity Fund, (the "Fund") and American Express Financial Corporation, a Delaware corporation ("AEFC"). Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES (1) The Corporation hereby retains AEFC, and AEFC hereby agrees, for the period of this Agreement and under the terms and conditions hereinafter set forth, to furnish the Corporation continuously with suggested investment planning; to determine, consistent with the Fund's investment objectives and policies, which securities in AEFC's discretion shall be purchased, held or sold, and to execute or cause the execution of purchase or sell orders; to prepare and make available to the Fund all necessary research and statistical data in connection therewith; to furnish all other services of whatever nature required in connection with the management of the Fund as provided under this Agreement; and to pay such expenses as may be provided for in Part Three; subject always to the direction and control of the Board of Directors (the "Board"), the Executive Committee and the authorized officers of the Corporation. AEFC agrees to maintain an adequate organization of competent persons to provide the services and to perform the functions herein mentioned. AEFC agrees to meet with any persons at such times as the Board deems appropriate for the purpose of reviewing AEFC's performance under this Agreement. (2) AEFC agrees that the investment planning and investment decisions will be in accordance with general investment policies of the Fund as disclosed to AEFC from time to time by the Fund and as set forth in its prospectus and registration statement filed with the United States Securities and Exchange Commission (the "SEC"). (3) AEFC agrees that it will maintain all required records, memoranda, instructions or authorizations relating to the acquisition or disposition of securities for the Fund. (4) The Corporation agrees that it will furnish to AEFC any information that the latter may reasonably request with respect to the services performed or to be performed by AEFC under this Agreement. (5) AEFC is authorized to select the brokers or dealers that will execute the purchases and sales of portfolio securities for the Fund and is directed to use its best efforts to obtain the best available price and most favorable execution, except as prescribed herein. Subject to prior authorization by the Board of appropriate policies and procedures, and subject to termination at any time by the Board, AEFC may also be authorized to effect individual securities transactions at commission rates in excess of the minimum commission rates available, to the extent authorized by law, if AEFC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or AEFC's overall responsibilities with respect to the Fund and other funds for which it acts as investment adviser. (6) It is understood and agreed that in furnishing the Fund with the services as herein provided, neither AEFC, nor any officer, director or agent thereof shall be held liable to the Fund or its creditors or shareholders for errors of judgment or for anything except willful misfeasance, bad faith, or gross negligence in the performance of its duties, or reckless disregard of its obligations and duties under the terms of this Agreement. It is further understood and agreed that AEFC may rely upon information furnished to it reasonably believed to be accurate and reliable. Part Two: COMPENSATION TO INVESTMENT MANAGER (1) The Fund agrees to pay to AEFC, and AEFC covenants and agrees to accept from the Fund in full payment for the services furnished, a fee composed of an asset charge and a performance incentive adjustment. (a) The asset charge (i) The asset charge for each calendar day of each year shall be equal to the total of 1/365th (1/366th in each leap year) of the amount computed in accordance with paragraph (ii) below. The computation shall be made for each day on the basis of net assets as of the close of business of the full business day prior to the day for which the computation is being made. In the case of the suspension of the computation of net asset value, the asset charge for each day during such suspension shall be computed as of the close of business on the last full business day on which the net assets were computed. Net assets as of the close of a full business day shall include all transactions in shares of the Fund recorded on the books of the Fund for that day. (ii) The asset charge shall be based on the net assets of the Fund as set forth in the following table. Asset Charge Assets Annual Rate At (Billions) Each Asset Level First $1.0 0.600% Next 1.0 0.575 Next 1.0 0.550 Next 3.0 0.525 Next 6.0 0.500 Next 12.0 0.490 Over 24.0 0.480 (b) The performance incentive adjustment (i) The performance incentive adjustment, determined monthly, shall be computed by measuring the percentage point difference between the performance of one Class A share of the Fund and the performance of the Lipper Large-Cap Core Fund Index (the "Index"). The performance of one Class A share of the Fund shall be measured by computing the percentage difference, carried to two decimal places, between the opening net asset value of one share of the Fund and the closing net asset value of such share as of the last business day of the period selected for comparison, adjusted for dividends or capital gain distributions treated as reinvested, but without adjustment for expenses related to a particular class of shares. The performance of the Index will then be established by measuring the percentage difference, carried to two decimal places, between the beginning and ending Index for the comparison period, with dividends or capital gain distributions on the securities which comprise the Index being treated as reinvested. (ii) In computing the adjustment, one percentage point shall be deducted from the difference, as determined in (b)(i) above. The result shall be converted to a decimal value (e.g., 2.38% to 0.0238), multiplied by .01 and then multiplied by the Fund's average net assets for the comparison period. This product next shall be divided by 12 to put the adjustment on a monthly basis. Where the performance of the Fund exceeds the Index, the amount so determined shall be an increase in fees as computed under paragraph (a). Where Fund performance is exceeded by the Index, the amount so determined shall be a decrease in such fees. The percentage point difference between the performance of the Fund and that of the Index, as determined above, is limited to a maximum of 0.0012 per year. (iii) The first adjustment will be made on October 1, 2002, and will cover the six-month period beginning April 1, 2002. The comparison period will increase by one month each month, until it reaches 12 months. The 12 month comparison period will roll over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. (iv) If the Index ceases to be published for a period of more than 90 days, changes in any material respect or otherwise becomes impracticable to use for purposes of the adjustment, no adjustment will be made under this paragraph (b) until such time as the Board approves a substitute index. (2) The fee shall be paid on a monthly basis and, in the event of the termination of this Agreement, the fee accrued shall be prorated on the basis of the number of days that this Agreement is in effect during the month with respect to which such payment is made. (3) The fee provided for hereunder shall be paid in cash by the Fund to AEFC within five business days after the last day of each month. Part Three: ALLOCATION OF EXPENSES (1) The Corporation agrees to pay: (a) Fees payable to AEFC for its services under the terms of this Agreement. (b) Taxes. (c) Brokerage commissions and charges in connection with the purchase and sale of assets. (d) Custodian fees and charges. (e) Fees and charges of its independent certified public accountants for services the Funds request. (f) Premium on the bond required by Rule 17g-1 under the Investment Company Act of 1940. (g) Fees and expenses of attorneys (i) it employs in matters not involving the assertion of a claim by a third party against the Corporation, its directors and officers, (ii) it employs in conjunction with a claim asserted by the Board against AEFC, except that AEFC shall reimburse the Corporation for such fees and expenses if it is ultimately determined by a court of competent jurisdiction, or AEFC agrees, that it is liable in whole or in part to the Corporation, and (iii) it employs to assert a claim against a third party. (h) Fees paid for the qualification and registration for public sale of the securities of the Fund under the laws of the United States and of the several states in which such securities shall be offered for sale. (i) Fees of consultants employed by the Fund. (j) Directors, officers and employees expenses which shall include fees, salaries, memberships, dues, travel, seminars, pension, profit sharing, and all other benefits paid to or provided for directors, officers and employees, directors and officers liability insurance, errors and omissions liability insurance, worker's compensation insurance and other expenses applicable to the directors, officers and employees, except the Corporation will not pay any fees or expenses of any person who is an officer or employee of AEFC or its affiliates. (k) Filing fees and charges incurred by the Corporation in connection with filing any amendment to its articles of incorporation, or incurred in filing any other document with the State of Minnesota or its political subdivisions. (l) Organizational expenses of the Corporation. (m) Expenses incurred in connection with lending portfolio securities of the Fund. (n) Expenses properly payable by the Fund, approved by the Board. (2) AEFC agrees to pay all expenses associated with the services it provides under the terms of this Agreement. Further, AEFC agrees that if, at the end of any month, the expenses of the Fund under this Agreement and any other agreement between the Fund and AEFC, but excluding those expenses set forth in (1)(b) and (1)(c) of this Part Three, exceed the most restrictive applicable state expenses limitation, the Fund shall not pay those expenses set forth in (1)(a) and (d) through (n) of this Part Three to the extent necessary to keep the Fund's expenses from exceeding the limitation, it being understood that AEFC will assume all unpaid expenses and bill the Fund for them in subsequent months but in no event can the accumulation of unpaid expenses or billing be carried past the end of the Fund's fiscal year. Part Four: MISCELLANEOUS (1) AEFC shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act for or represent the Fund. (2) A "full business day" shall be as defined in the By-laws of the Corporation. (3) The Fund recognizes that AEFC now renders and may continue to render investment advice and other services to other investment companies and persons which may or may not have investment policies and investments similar to those of the Fund and that AEFC manages its own investments and/or those of its subsidiaries. AEFC shall be free to render such investment advice and other services and the Fund hereby consents thereto. (4) Neither this Agreement nor any transaction had pursuant hereto shall be invalidated or in any way affected by the fact that directors, officers, agents and/or shareholders of the Fund are or may be interested in AEFC or any successor or assignee thereof, as directors, officers, stockholders or otherwise; that directors, officers, stockholders or agents of AEFC are or may be interested in the Fund as directors, officers, shareholders, or otherwise; or that AEFC or any successor or assignee, is or may be interested in the Fund as shareholder or otherwise, provided, however, that neither AEFC, nor any officer, director or employee thereof or of the Fund, shall sell to or buy from the Fund any property or security other than shares issued by the Fund, except in accordance with applicable regulations or orders of the SEC. (5) Any notice under this Agreement shall be given in writing, addressed, and delivered, or mailed postpaid, to the party to this Agreement entitled to receive such, at such party's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other. (6) AEFC agrees that no officer, director or employee of AEFC will deal for or on behalf of the Funds with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit: (a) Officers, directors or employees of AEFC from having a financial interest in the Fund or in AEFC. (b) The purchase of securities for the Fund, or the sale of securities owned by the Fund, through a security broker or dealer, one or more of whose partners, officers, directors or employees is an officer, director or employee of AEFC, provided such transactions are handled in the capacity of broker only and provided commissions charged do not exceed customary brokerage charges for such services. (c) Transactions with the Fund by a broker-dealer affiliate of AEFC as may be allowed by rule or order of the SEC and if made pursuant to procedures adopted by the Board. (7) AEFC agrees that, except as herein otherwise expressly provided or as may be permitted consistent with the use of a broker-dealer affiliate of AEFC under applicable provisions of the federal securities laws, neither it nor any of its officers, directors or employees shall at any time during the period of this Agreement, make, accept or receive, directly or indirectly, any fees, profits or emoluments of any character in connection with the purchase or sale of securities (except shares issued by the Fund) or other assets by or for the Fund. (8) The Agreement shall be governed by the laws of the State of Minnesota. Part Five: RENEWAL AND TERMINATION (1) This Agreement shall continue in effect until March 13, 2004, or until a new agreement is approved by a vote of the majority of the outstanding shares of the Fund and by vote of the Fund's Board, including the vote required by (b) of this paragraph, and if no new agreement is so approved, this Agreement shall continue from year to year thereafter unless and until terminated by either party as hereinafter provided, except that such continuance shall be specifically approved at least annually (a) by the Board or by a vote of the majority of the outstanding shares of the Fund and (b) by the vote of a majority of the directors who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. As used in this paragraph, the term "interested person" shall have the same meaning as set forth in the Investment Company Act of 1940, as amended (the "1940 Act"). (2) This Agreement may be terminated by either the Fund or AEFC at any time by giving the other party 60 days' written notice of such intention to terminate, provided that any termination shall be made without the payment of any penalty, and provided further that termination may be effected either by the Board or by a vote of the majority of the outstanding voting shares of the Fund. The vote of the majority of the outstanding voting shares of the Fund for the purpose of this Part Five shall be the vote at a shareholders' regular meeting, or a special meeting duly called for the purpose, of 67% or more of the Fund's shares present at such meeting if the holders of more than 50% of the outstanding voting shares are present or represented by proxy, or more than 50% of the outstanding voting shares of the Fund, whichever is less. (3) This Agreement shall terminate in the event of its assignment, the term "assignment" for this purpose having the same meaning as set forth in the 1940 Act. IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written. AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund By /s/ Leslie L. Ogg ----------------- Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By /s/ Paula R. Meyer ------------------ Paula R. Meyer Vice President- Mutual Funds EX-99.E2 DIST AGMNT 5 e2-distagmt.txt DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT The Agreement dated as of January 10, 2002, is by and between AXP(R) Growth Series, Inc. a Minnesota corporation, (the "Corporation"), for and on behalf of its underlying series AXP(R) Large Cap Equity Fund (the "Fund"), and American Express Financial Advisors Inc., a Delaware corporation ("AEFA"). Part One: DISTRIBUTION OF SECURITIES (1) The Corporation covenants and agrees that, during the term of this agreement and any renewal or extension, AEFA shall have the exclusive right to act as principal underwriter for the Fund and to offer for sale and to distribute any and all shares of each class of capital stock issued or to be issued by the Fund. The exclusive right to act as principal underwriter will not apply to transactions by the Fund at net asset value as permitted by the currently effective prospectus and statement of additional information (the "prospectus") or to transactions by the Fund that do not involve sales to the general public, including transactions between the Fund and its shareholders only, transactions involving the reorganization of the Fund and transactions involving the merger, consolidation or acquisition of assets with another corporation or trust. (2) AEFA hereby covenants and agrees to act as the principal underwriter of each class of capital shares issued and to be issued by the Fund during the period of this agreement and agrees to offer for sale such shares as long as such shares remain available for sale, unless AEFA is unable or unwilling to make such offer for sale or sales or solicitations therefor legally because of any federal, state, provincial or governmental law, rule or agency or for any financial reason. AEFA agrees to devote reasonable time and effort to effect sales of shares of the Fund but is not obligated to sell any specific number of shares. (3) With respect to the offering for sale and sale of shares of each class to be issued by the Fund, it is mutually understood and agreed that such shares are to be sold on the following terms: (a) AEFA has the right, as principal, to buy from the Fund the shares needed to fill unconditional orders placed with AEFA by investors or selling dealers (as defined below). The price AEFA will pay to the Fund is the net asset value, determined as set forth in the currently effective prospectus. (b) The shares will be resold by AEFA to investors at the public offering price, determined as set forth in the currently effective prospectus, or to selling dealers having agreements with AEFA upon the terms and conditions set forth in section 3(f). Shares may be sold to certain groups or in certain transactions without a sales charge or at a reduced sales charge, as described in the currently effective prospectus. (c) AEFA also has the right, as agent for the Fund, to sell shares at the public offering price or at net asset value to certain persons and upon certain conditions as the Fund may from time to time determine. (d) The Fund or its transfer agent shall be promptly advised of all orders received. (e) The net asset value of the shares will be determined by the Fund or any agent of the Fund in accordance with the method set forth in the currently effective prospectus. In the event of a period of emergency, the computation of the net asset value for the purpose of determining the number of shares or fractional shares to be acquired may be deferred until the close of business on the first full business day following the termination of the period of emergency. A period of emergency shall have the definition given thereto in the Investment Company Act of 1940. (f) AEFA is authorized to enter into agreements with broker-dealers that are lawfully registered under federal law and any applicable state law or with other institutions lawfully able to distribute securities ("Selling Dealers") providing for the Selling Dealers to obtain unconditional orders for purchases of the Fund's shares from investors, provided, however, that AEFA may in its discretion refuse to accept orders for shares from any particular applicant and may provide similar discretion to Selling Dealers. AEFA will determine the portion of the sales charge that may be allocated to the Selling Dealers. Shares sold to Selling Dealers are for resale only at the public offering price determined as set forth in the currently effective prospectus. (4) The Corporation agrees to make prompt and reasonable effort to do any and all things necessary, in the opinion of AEFA to have and to keep the Fund and the shares properly registered or qualified in all appropriate jurisdictions and, as to shares, in such amounts as AEFA may from time to time designate in order that the Fund's shares may be offered or sold in such jurisdictions. (5) The Corporation agrees that it will furnish AEFA with information with respect to the affairs and accounts of the Fund, and in such form as AEFA may from time to time reasonably require and further agrees that AEFA, at all reasonable times, shall be permitted to inspect the books and records of the Fund. (6) AEFA agrees to indemnify and hold harmless the Fund and each person who has been, is, or may hereafter be a director of the Fund against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact, or out of any alleged misrepresentation or omission to state a material fact, on the part of AEFA or any agent or employee of AEFA or any other person for whose acts AEFA is responsible or is alleged to be responsible, unless such misrepresentation or omission was made in reliance upon information furnished by the Fund. AEFA also agrees likewise to indemnify and hold harmless the Fund and each such person in connection with any claim or in connection with any action, suit or proceeding which arises out of or is alleged to arise out of AEFA's (or an affiliate of AEFA's) failure to exercise reasonable care and diligence with respect to its services rendered. The term "expenses" includes amounts paid in satisfaction of judgments or in settlements which are made with AEFA's consent. The foregoing rights of indemnification shall be in addition to any other rights to which the Fund or a director may be entitled as a matter of law. (7) AEFA agrees to cause to be delivered to each purchaser a prospectus or circular to be furnished by the Fund in the form required by the applicable federal laws or by the acts or statutes of any applicable state, province or country. (8) In connection with the repurchase of shares, AEFA will act as agent of the Fund. Any outstanding shares may be tendered for redemption at any time, and the Fund agrees to repurchase or redeem the shares in accordance with the terms and conditions of the currently effective prospectus. The Fund will pay the amount of the redemption price to shareholders on or before the seventh business day after receiving the notice of redemption in proper form. Any applicable contingent deferred sales charge will be paid to AEFA and the balance will be paid to or for the account of the shareholder. (9) AEFA and the Fund agree to use their best efforts to conform with all applicable state and federal laws and regulations relating to any rights or obligations under the terms of this agreement. Part Two: ALLOCATION OF EXPENSES AND COMPENSATION (1) Except as provided by the Plan and Agreement of Distribution or any other agreement between the parties, AEFA covenants and agrees that during the period of this agreement it will pay or cause to be paid all expenses incurred by AEFA in the offering for sale or sale of each class of the Fund's shares. (2) AEFA's compensation as principal underwriter shall be (a) that part of the sales charge retained by AEFA and (b) amounts payable as contingent deferred sales charges on certain redemptions of shares. Part Three: MISCELLANEOUS (1) AEFA shall be deemed to be an independent contractor and, except as expressly provided or authorized in this agreement, shall have no authority to act for or represent the Corporation. (2) AEFA shall be free to render to others services similar to those rendered under this agreement. (3) Neither this agreement nor any transaction had pursuant hereto shall be invalidated or in any way affected by the fact that directors, officers, agents and/or shareholders of the Fund are or may be interested in AEFA as directors, officers, shareholders or otherwise; that directors, officers, shareholders or agents of AEFA are or may be interested in the Fund as directors, officers, shareholders or otherwise; or that AEFA is or may be interested in the Fund as shareholder or otherwise, provided, however, that neither AEFA nor any officer or director of AEFA or any officers or directors of the Fund shall sell to or buy from the Fund any property or security other than a security issued by the Fund, except in accordance with a rule, regulation or order of the Securities and Exchange Commission. (4) For the purposes of this agreement, a "business day" shall have the same meaning as is given to the term in the By-laws of the Corporation. (5) Any notice under this agreement shall be given in writing, addressed and delivered, or mailed postpaid, to the parties to this agreement at each company's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other. (6) AEFA agrees that no officer, director or employee of AEFA will deal for or on behalf of the Fund with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit: (a) Officers, directors and employees of AEFA from having a financial interest in the Fund or in AEFA. (b) The purchase of securities for the Fund, or the sale of securities owned by the Fund, through a security broker or dealer, one or more of whose partners, officers, directors or employees is an officer, director or employee of AEFA, provided such transactions are handled in the capacity of broker only and provided commissions charged do not exceed customary brokerage charges for such services. (c) Transactions with the Fund by a broker-dealer affiliate of AEFA if allowed by rule or order of the SEC and if made pursuant to procedures adopted by the Board of Directors. (7) AEFA agrees that, except as otherwise provided in this agreement or in the Plan and Agreement of Distribution, or as may be permitted consistent with the use of a broker-dealer affiliate of AEFA under applicable provisions of the federal securities laws, neither it nor any of its officers, directors or employees shall at any time during the period of this agreement make, accept or receive, directly or indirectly, any fees, profits or emoluments of any character in connection with the purchase or sale of securities (except securities issued by the Fund) or other assets by or for the Fund. (8) This agreement may not be amended or modified in any manner except by a written agreement executed by both parties. (9) This agreement is governed by the laws of the State of Minnesota. Part Four: TERMINATION (1) This agreement shall continue from year to year unless and until terminated by AEFA or the Fund, except that such continuance shall be specifically approved at least annually by a vote of a majority of the Board of Directors who are not parties to this agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and by a majority of the Board of Directors or by vote of a majority of the outstanding voting securities of the Fund. As used in this paragraph, the term "interested person" shall have the meaning as set forth in the 1940 Act. (2) This agreement may be terminated by AEFA or the Fund at any time by giving the other party sixty (60) days written notice of such intention to terminate. (3) This agreement shall terminate in the event of its assignment, the term "assignment" for this purpose having the same meaning as set forth in the 1940 Act. IN WITNESS WHEREOF, The parties hereto have executed the foregoing agreement on the date and year first above written. AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund By /s/ Leslie L. Ogg ------------------ Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL ADVISORS INC. By /s/ Paula R. Meyer ------------------ Paula R. Meyer Vice President -- Mutual Funds EX-99.G7 CUST AGMNT 6 g7-custagmnt.txt CUSTODIAN AGREEMENT CUSTODIAN AGREEMENT This Agreement dated as of January 10, 2002, is between AXP(R) Growth Series, Inc., a Minnesota corporation, (the "Corporation"), on behalf of its underlying series AXP(R) Large Cap Equity Fund (the "Fund"), and American Express Trust Company, a corporation organized under the laws of the State of Minnesota with its principal place of business at Minneapolis, Minnesota (the "Custodian"). WHEREAS, the Corporation desires that its securities and cash be hereafter held and administered by Custodian pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein made, the Corporation and the Custodian agree as follows: Section 1. Definitions The word "securities" as used herein shall be construed to include, without being limited to, shares, stocks, treasury stocks, including any stocks of this Fund, notes, bonds, debentures, evidences of indebtedness, options to buy or sell stocks or stock indexes, certificates of interest or participation in any profit-sharing agreements, collateral trust certificates, preorganization certificates or subscriptions, transferable shares, investment contracts, voting trust certificates, certificates of deposit for a security, fractional or undivided interests in oil, gas or other mineral rights, or any certificates of interest or participation in, temporary or interim certificates for, receipts for, guarantees of, or warrants or rights to subscribe to or purchase any of the foregoing, acceptances and other obligations and any evidence of any right or interest in or to any cash, property or assets and any interest or instrument commonly known as a security. In addition, for the purpose of this Custodian Agreement, the word "securities" also shall include other instruments in which the Fund may invest including currency forward contracts and commodities such as interest rate or index futures contracts, margin deposits on such contracts or options on such contracts. The words "custodian order" shall mean a request for direction, including a computer printout directed to the Custodian and signed in the name of the Corporation on behalf of the Fund by any two individuals designated in the current certified list referred to in Section 2. The word "facsimile" shall mean an exact copy or likeness which is electronically transmitted for instant reproduction. Section 2. Names, Titles and Signatures of Authorized Persons The Corporation will certify to the Custodian the names and signatures of its present officers and other designated persons authorized on behalf of the Corporation to direct the Custodian by custodian order as herein before defined. The Corporation agrees that whenever any change occurs in this list it will file with the Custodian a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation as having been duly adopted by the Corporation's board of directors (the "Board") or the Executive Committee of the Board designating those persons currently authorized on behalf of the Corporation to direct the Custodian by custodian order and upon such filing (to be accompanied by the filing of specimen signatures of the designated persons) the persons so designated in such resolution shall constitute the current certified list. The Custodian is authorized to rely and act upon the names and signatures of the individuals as they appear in the most recent certified list from the Corporation which has been delivered to the Custodian as herein above provided. Section 3. Use of Subcustodians The Custodian may make arrangements, where appropriate, with other banks having not less than two million dollars aggregate capital, surplus and undivided profits for the custody of securities. Any such bank selected by the Custodian to act as subcustodian shall be deemed to be the agent of the Custodian. The Custodian also may enter into arrangements for the custody of securities entrusted to its care through foreign branches of U.S. banks; through foreign banks, banking institutions or trust companies; through foreign subsidiaries of U.S. banks or bank holding companies; or through foreign securities depositories or clearing agencies (hereinafter also called, collectively, the "Foreign Subcustodian") or indirectly through an agent, established under the first paragraph of this section, if and to the extent permitted by Section 17(f) of the Investment Company Act of 1940 (the "1940 Act") and the rules promulgated by the Securities and Exchange Commission (the "SEC") thereunder, or any "no-action" letter received from the staff of the SEC. To the extent the existing provisions of the Custodian Agreement are consistent with the requirements of such Section, rules, order or no-action letter, they shall apply to all such foreign custodianships. To the extent such provisions are inconsistent with or additional requirements are established by such section, rules, order or no-action letter, the requirements of such section, rules, order or no-action letter will prevail and the parties will adhere to such requirements; provided, however, in the absence of notification from the Corporation of any changes or additions to such requirements, the Custodian shall have no duty or responsibility to inquire as to any such changes or additions. Section 4. Receipt and Disbursement of Money (1) The Custodian shall open and maintain a separate account or accounts in the name of the Fund or cause its agent to open and maintain such account or accounts subject only to checks, drafts or directives by the Custodian pursuant to the terms of this Agreement. The Custodian or its agent shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund. The Custodian or its agent shall make payments of cash to or for the account of the Fund from such cash only: (a) for the purchase of securities for the portfolio of the Fund upon the receipt of such securities by the Custodian or its agent unless otherwise instructed on behalf of the Fund; (b) for the purchase or redemption of shares of capital stock of the Fund; (c) for the payment of interest, dividends, taxes, management fees, or operating expenses (including, without limitation thereto, fees for legal, accounting and auditing services); (d) for payment of distribution fees, commissions, or redemption fees, if any; (e) for payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Fund held by, or to be delivered to, the Custodian; (f) for payments in connection with the return of securities loaned by the Fund upon receipt of such securities or the reduction of collateral upon receipt of proper notice; (g) for payments for other proper corporate purposes; or (h) upon the termination of this Agreement. Before making any such payment for the purposes permitted under these items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1) of this section, the Custodian shall receive and may rely upon a custodian order directing such payment and stating that the payment is for such a purpose permitted under these items (a), (b), (c), (d), (e), (f) or (g) or, where appropriate, a trade affirmation report, and that in respect to item (g), a copy of a resolution of the Board or of the Executive Committee signed by an officer of the Corporation and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is made. Notwithstanding the above, for the purposes permitted under items (a) or (f) of paragraph (1) of this section, the Custodian may rely upon a facsimile order. (2) The Custodian is hereby appointed the attorney-in-fact of the Corporation to endorse and collect all checks, drafts or other orders for the payment of money received by the Custodian for the account of the Fund and drawn on or to the order of the Fund and to deposit same to the account of the Fund pursuant to this Agreement. Section 5. Receipt of Securities Except as permitted by the second paragraph of this section, the Custodian or its agent shall hold in a separate account or accounts, and physically segregated at all times from those of any other persons, firms or corporations, pursuant to the provisions hereof, all securities received by it for the account of the Fund. The Custodian shall record and maintain a record of all certificate numbers. Securities so received shall be held in the name of the Fund, in the name of an exclusive nominee duly appointed by the Custodian or in bearer form, as appropriate. Subject to such rules, regulations or guidelines as the SEC may adopt, the Custodian may deposit all or any part of the securities owned by the Fund in a "securities depository" which includes any system for the central handling of securities established by a national securities exchange or a national securities association registered with the SEC under the Securities Exchange Act of 1934, or such other person as may be permitted by the Commission, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities. All securities are to be held or disposed of by the Custodian for, and subject at all times to the instructions of, the Corporation pursuant to the terms of this Agreement. The Custodian shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such securities, except pursuant to the directive of the Fund and only for the account of the Fund as set forth in Section 6 of this Agreement. Section 6. Transfer, Exchange, and Delivery of Securities The Custodian shall have sole power to release or deliver any securities of the Fund held by it pursuant to this Agreement. The Custodian agrees to transfer, exchange or deliver securities held by it or its agent hereunder only: (a) for sales of such securities for the account of the Fund, upon receipt of payment therefor; (b) when such securities are called, redeemed, retired or otherwise become payable; (c) for examination upon the sale of any such securities in accordance with "street delivery" custom which would include delivery against interim receipts or other proper delivery receipts; (d) in exchange for or upon conversion into other securities alone or other securities and cash whether pursuant to any plan of; (e) merger, consolidation, reorganization, recapitalization or readjustment, or otherwise; (f) for the purpose of exchanging interim receipts or temporary certificates for permanent certificates; (g) upon conversion of such securities pursuant to their terms into other securities; (h) upon exercise of subscription, purchase or other similar rights represented by such securities; for loans of such securities by the Fund upon receipt of collateral; or (i) for other proper corporate purposes. As to any deliveries made by the Custodian pursuant to items (a), (b), (c), (d), (e), (f), (g) and (h), securities or cash received in exchange therefore shall be delivered to the Custodian, its agent, or to a securities depository. Before making any such transfer, exchange or delivery, the Custodian shall receive a custodian order or a facsimile from the Corporation requesting such transfer, exchange or delivery and stating that it is for a purpose permitted under Section 6, or where appropriate, a trade affirmation report, (whenever a facsimile is utilized, the Fund will also deliver an original signed custodian order) and, in respect to item (i), a copy of a resolution of the Board or of the Executive Committee of the Board of Directors signed by an officer of the Corporation and certified by its Secretary or an Assistant Secretary, specifying the securities, setting forth the purpose for which such payment, transfer, exchange or delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such transfer, exchange or delivery of such securities shall be made. Section 7. Custodian's Acts Without Instructions Unless and until the Custodian receives a contrary custodian order from the Fund, the Custodian shall or shall cause its agent to: (a) present for payment all coupons and other income items held by the Custodian or its agent for the account of the Fund which call for payment upon presentation and hold all cash received by it upon such payment for the account of the Fund; (b) present for payment all securities held by it or its agent which mature or when called, redeemed, retired or otherwise become payable; (c) ascertain all stock dividends, rights and similar securities to be issued with respect to any securities held by the Custodian or its agent hereunder, and to collect and hold for the account of the Fund all such securities; and (d) ascertain all interest and cash dividends to be paid to security holders with respect to any securities held by the Custodian or its agent, and to collect and hold such interest and cash dividends for the account of the Fund. Section 8. Voting and Other Action Neither the Custodian nor any nominee of the Custodian shall vote any of the securities held hereunder by or for the account of the Fund. The Custodian shall promptly deliver to the Corporation all notices, proxies and proxy soliciting materials with relation to such securities such proxies to be executed by the registered holder of such securities (if registered otherwise than in the name of the Corporation) but without indicating the manner in which such proxies are to be voted. Custodian shall transmit promptly to the Corporation all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Corporation all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. Section 9. Transfer Taxes The Corporation shall, on behalf of the Fund, pay or reimburse the Custodian for any transfer taxes payable upon transfers of securities made hereunder, including transfers resulting from the termination of this Agreement. The Custodian shall execute such certificates in connection with securities delivered to it under this Agreement as may be required, under any applicable law or regulation, to exempt from taxation any transfers and/or deliveries of any such securities which may be entitled to such exemption. Section 10. Custodian's Reports The Custodian shall, on behalf of the Fund, furnish the Corporation as of the close of business each day a statement showing all transactions and entries for the account of the Fund. The books and records of the Custodian pertaining to its actions as Custodian under this Agreement and securities held hereunder by the Custodian shall be open to inspection and audit by officers of the Corporation, internal auditors employed by the Corporation's investment adviser, and independent auditors employed by the Corporation. The Custodian shall furnish the Corporation in such form as may reasonably be requested by the Corporation a report, including a list of the securities held by it in custody for the account of the Fund, and identification of any subcustodian and identification of such securities held by such subcustodian, as of the close of business of the last business day of each month, which shall be certified by a duly authorized officer of the Custodian. It is further understood that additional reports may from time to time be requested by the Corporation. Should any report ever be filed with any governmental authority pertaining to lost or stolen securities, the Custodian will concurrently provide the Corporation with a copy of that report. The Custodian also shall furnish such reports on its systems of internal accounting control as the Corporation may reasonably request from time to time. Section 11. Concerning Custodian For its services hereunder the Custodian shall be paid such compensation at such times as may from time to time be agreed on in writing by the parties hereto in a Custodian Fee Agreement. The Custodian shall not be liable for any action taken in good faith upon any custodian order or facsimile herein described, trade affirmation report, or certified copy of any resolution of the Board or of the Executive Committee of the Board, and may rely on the genuineness of any such document which it may, in good faith, believe to have been validly prepared or executed. The Corporation, on behalf of the Fund, agrees to indemnify and hold harmless the Custodian and its nominee from all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) incurred or assessed against it or its nominee in connection with the performance of this Agreement, except such as may arise from the Custodian's or its nominee's own negligent action, negligent failure to act or willful misconduct. The Custodian is authorized to charge any account of the Corporation for such items. In the event of any advance of cash for any purpose made by the Custodian resulting from orders or instructions of the Corporation, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefore. The Custodian shall maintain a standard of care equivalent to that which would be required of a bailee for hire and shall not be liable for any loss or damage to the Corporation resulting from participation in a securities depository unless such loss or damage arises by reason of any negligence, misfeasance, or willful misconduct of officers or employees of the Custodian, or from its failure to enforce effectively such rights as it may have against any securities depository or from use of an agent, unless such loss or damage arises by reason of any negligence, misfeasance, or willful misconduct of officers or employees of the Custodian, or from its failure to enforce effectively such rights as it may have against any agent. Section 12. Termination and Amendment of Agreement The Corporation and the Custodian mutually may agree from time to time in writing to amend, to add to, or to delete from, any provision of this Agreement. The Custodian may terminate this Agreement by giving the Corporation ninety days' written notice of such termination by registered mail addressed to the Corporation at its principal place of business. The Corporation may terminate this Agreement at any time by written notice thereof delivered, together with a copy of the resolution of the Board authorizing such termination and certified by the Secretary of the Corporation, by registered mail to the Custodian. Upon such termination of this Agreement, assets of the Fund held by the Custodian shall be delivered by the Custodian to a successor custodian, if one has been appointed by the Corporation, upon receipt by the Custodian of a copy of the resolution of the Board certified by the Secretary, showing appointment of the successor custodian, and provided that such successor custodian is a bank or trust company, organized under the laws of the United States or of any State of the United States, having not less than two million dollars aggregate capital, surplus and undivided profits. Upon the termination of this Agreement as a part of the transfer of assets, either to a successor custodian or otherwise, the Custodian will deliver Securities held by it hereunder, when so authorized and directed by resolution of the Board, to a duly appointed agent of the successor custodian or to the appropriate transfer agents for transfer of registration and delivery as directed. Delivery of assets on termination of this Agreement shall be effected in a reasonable, expeditious and orderly manner; and in order to accomplish an orderly transition from the Custodian to the successor custodian, the Custodian shall continue to act as such under this Agreement as to assets in its possession or control. Termination as to each security shall become effective upon delivery to the successor custodian, its agent, or to a transfer agent for a specific security for the account of the successor custodian, and such delivery shall constitute effective delivery by the Custodian to the successor under this Agreement. In addition to the means of termination herein before authorized, this Agreement may be terminated at any time by the vote of a majority of the outstanding shares of the Fund and after written notice of such action to the Custodian. Section 13. General Nothing expressed or mentioned in or to be implied from any provision of this Agreement is intended to, or shall be construed to give any person or corporation other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement, or any covenant, condition or provision herein contained, this Agreement and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors and assigns. This Agreement shall be governed by the laws of the State of Minnesota. This Agreement supersedes all prior agreements between the parties. IN WITNESS WHEREOF, the Corporation and the Custodian have caused this agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund By: /s/ Leslie L. Ogg ----------------- Leslie L. Ogg Vice President AMERICAN EXPRESS TRUST COMPANY By: /s/ Chandrakant A. Patel ------------------------ Chandrakant A. Patel Vice President EX-99.H12 ADM AGMNT 7 h12-admin.txt ADMINISTRATIVE SERVICES AGREEMENT ADMINISTRATIVE SERVICES AGREEMENT This Agreement, dated as of January 10, 2002, is by and between AXP(R) Growth Series, Inc., a Minnesota corporation (the "Corporation"), on behalf of its underlying series AXP(R) Large Cap Equity Fund (the "Fund"), and American Express Financial Corporation, ("AEFC"), a Delaware corporation. Part One: SERVICES (1) The Corporation hereby retains AEFC, and AEFC hereby agrees, for the period of this Agreement and under the terms and conditions hereinafter set forth, to furnish the Corporation continuously with all administrative, accounting, clerical, statistical, correspondence, corporate and all other services of whatever nature required in connection with the administration of the Fund as provided under this Agreement; and to pay such expenses as may be provided for in Part Three hereof; subject always to the direction and control of the Board of Directors, the Executive Committee and the authorized officers of the Fund. AEFC agrees to maintain an adequate organization of competent persons to provide the services and to perform the functions herein mentioned. AEFC agrees to meet with any persons at such times as the Board of Directors deems appropriate for the purpose of reviewing AEFC's performance under this Agreement. (2) The Corporation agrees that it will furnish to AEFC any information that the latter may reasonably request with respect to the services performed w or to be performed by AEFC under this Agreement. (3) It is understood and agreed that in furnishing the Fund with the services as herein provided, neither AEFC, nor any officer, director or agent thereof shall be held liable to the Corporation and/or the Fund or its creditors or shareholders for errors of judgment or for anything except willful misfeasance, bad faith, or gross negligence in the performance of its duties, or reckless disregard of its obligations and duties under the terms of this Agreement. It is further understood and agreed that AEFC may rely upon information furnished to it reasonably believed to be accurate and reliable. Part Two: COMPENSATION FOR SERVICES (1) The Corporation agrees to pay to AEFC, on behalf of the Fund, and AEFC covenants and agrees to accept from the Corporation in full payment for the services furnished, based on the net assets of the Fund as set forth in the following table: ----------------------------- ------------------------------ Assets Annual Rate At (Billions) Each Asset Level ----------------------------- ------------------------------ First $1.0 0.050% ----------------------------- ------------------------------ Next $1.0 0.045% ----------------------------- ------------------------------ Next $1.0 0.040% ----------------------------- ------------------------------ Next $3.0 0.035% ----------------------------- ------------------------------ Next $6.0 0.030% ----------------------------- ------------------------------ Next $12.0 0.025% ----------------------------- ------------------------------ Over $24.0 0.020% ----------------------------- ------------------------------ The administrative fee for each calendar day of each year shall be equal to 1/365th (1/366th in each leap year) of the total amount computed. The computation shall be made for each such day on the basis of net assets as of the close of business of the full business day prior to the day for which the computation is being made. In the case of the suspension of the computation of net asset value, the administrative fee for each day during such suspension shall be computed as of the close of business on the last full business day on which the net assets were computed. As used herein, "net assets" as of the close of a full business day shall include all transactions in shares of the Fund recorded on the books of the Fund for that day. (2) The administrative fee shall be paid on a monthly basis and, in the event of the termination of this Agreement, the administrative fee accrued shall be prorated on the basis of the number of days that this Agreement is in effect during the month with respect to which such payment is made. (3) The administrative fee provided for hereunder shall be paid in cash by the Corporation to AEFC within five (5) business days after the last day of each month. Part Three: ALLOCATION OF EXPENSES (1) The Corporation, on behalf of the Fund, agrees to pay: (a) Administrative fees payable to AEFC for its services under the terms of this Agreement. (b) Taxes. (c) Fees and charges of its independent certified public accountants for services the Corporation requests. (d) Fees and expenses of attorneys (i) it employs in matters not involving the assertion of a claim by a third party against the Corporation and/or the Fund, its directors and officers, (ii) it employs in conjunction with a claim asserted by the Board of Directors against AEFC, except that AEFC shall reimburse the Corporation and/or the Fund for such fees and expenses if it is ultimately determined by a court of competent jurisdiction, or AEFC agrees, that it is liable in whole or in part to the Corporation and/or the Fund, and (iii) it employs to assert a claim against a third party. (e) Fees paid for the qualification and registration for public sale of the securities of the Fund under the laws of the United States and of the several states in which such securities shall be offered for sale. (f) Office expenses which shall include a charge for occupancy, insurance on the premises, furniture and equipment, telephone, telegraph, electronic information services, books, periodicals, published services, and office supplies used by the Fund, equal to the cost of such incurred by AEFC. (g) Fees of consultants employed by the Corporation. (h) Directors, officers and employees expenses which shall include fees, salaries, memberships, dues, travel, seminars, pension, profit sharing, and all other benefits paid to or provided for directors, officers and employees, directors and officers liability insurance, errors and omissions liability insurance, worker's compensation insurance and other expenses applicable to the directors, officers and employees, except the Corporation will not pay any fees or expenses of any person who is an officer or employee of AEFC or its affiliates. (i) Filing fees and charges incurred by the Corporation in connection with filing any amendment to its articles of incorporation, or incurred in filing any other document with the State of Minnesota or its political subdivisions. (j) Organizational expenses of the Fund. (k) One-half of the Investment Company Institute membership dues charged jointly to the AMERICAN EXPRESS(R) FUNDS and AEFC. (l) Expenses properly payable by the Corporation, approved by the Board of Directors. (2) AEFC agrees to pay all expenses associated with the services it provides under the terms of this Agreement. Further, AEFC agrees that if, at the end of any month, the expenses of the Fund under this Agreement and any other agreement between the Fund and AEFC, but excluding those expenses set forth in (1)(b) of this Part Three, exceed the most restrictive applicable state expenses limitation, the Fund shall not pay those expenses set forth in (1)(a) and (c) through (m) of this Part Three to the extent necessary to keep the Fund's expenses from exceeding the limitation, it being understood that AEFC will assume all unpaid expenses and bill the Fund for them in subsequent months but in no event can the accumulation of unpaid expenses or billing be carried past the end of the Fund's fiscal year. Part Four: MISCELLANEOUS (1) AEFC shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act for or represent the Corporation and/or the Fund. (2) A "full business day" shall be as defined in the By-laws of the Corporation. (3) The Corporation recognizes that AEFC now renders and may continue to render investment advice and other services to other investment companies and persons which may or may not have investment policies and investments similar to those of the Fund and that AEFC manages its own investments and/or those of its subsidiaries. AEFC shall be free to render such investment advice and other services and the Corporation hereby consents thereto. (4) Neither this Agreement nor any transaction had pursuant hereto shall be invalidated or in anyway affected by the fact that directors, officers, agents and/or shareholders of the Corporation and/or the Fund are or may be interested in AEFC or any successor or assignee thereof, as directors, officers, stockholders or otherwise; that directors, officers, stockholders or agents of AEFC are or may be interested in the Corporation and/or the Fund as directors, officers, shareholders, or otherwise; or that AEFC or any successor or assignee, is or may be interested in the Corporation and/or the Fund as shareholder or otherwise, provided, however, that neither AEFC, nor any officer, director or employee thereof or of the Corporation and/or the Fund, shall sell to or buy from the Fund any property or security other than shares issued by the Fund, except in accordance with applicable regulations or orders of the United States Securities and Exchange Commission. (5) Any notice under this Agreement shall be given in writing, addressed, and delivered, or mailed postpaid, to the party to this Agreement entitled to receive such, at such party's principal place of business in Minneapolis, Minnesota, or to such other address as either party may designate in writing mailed to the other. (6) AEFC agrees that no officer, director or employee of AEFC will deal for or on behalf of the Corporation and/or the Fund with himself as principal or agent, or with any corporation or partnership in which he may have a financial interest, except that this shall not prohibit officers, directors or employees of AEFC from having a financial interest in the Fund or in AEFC. (7) The Corporation agrees that AEFC may subcontract for certain of the services described under this Agreement with the understanding that there shall be no diminution in the quality or level of the services and that AEFC remains fully responsible for the services. (8) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable without the written consent of the other party. This Agreement shall be governed by the laws of the State of Minnesota. Part Five: RENEWAL AND TERMINATION (1) This Agreement shall become effective on the date first set forth above and shall continue in effect from year to year thereafter as the parties may mutually agree; provided that either party may terminate this Agreement by giving the other party notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice. (2) This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as of the day and year first above written. AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund By: /s/ Leslie L. Ogg ----------------- Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By: /s/ Paula R. Meyer ------------------ Paula R. Meyer Vice President - Mutual Funds EX-99.H13 SER AGMNT 8 h13-classyagmt.txt CLASS Y SHAREHOLDER SERVICE AGREEMENT CLASS Y SHAREHOLDER SERVICE AGREEMENT This agreement, dated as of January 10, 2002, is by and between AXP(R) Growth Series, Inc., a Minnesota corporation, on behalf of its underlying series AXP(R) Large Cap Equity Fund (the "Fund"), and American Express Financial Advisors Inc. ("AEFA"), the principal underwriter of the Fund, for services to be provided to shareholders of Class Y of the Fund by AEFA and other servicing agents. AEFA represents that shareholders consider personal service a significant factor in their satisfaction with their investment. AEFA represents that fees paid by the Fund will be used to help shareholders thoughtfully consider their investment goals and objectively monitor how well the goals are being achieved. The Fund agrees to pay AEFA 0.10 percent of the net asset value of Class Y. The Fund agrees to pay AEFA in cash within five (5) business days after the last day of each month. AEFA agrees to provide the Fund annually a budget covering its expected costs and a quarterly report of its actual expenditures. AEFA agrees to meet with representatives of the Fund at their request to provide information as may be reasonably necessary to evaluate its performance under the terms of this agreement. This agreement shall continue in effect for a period of more than one year so long as it is reapproved at least annually at a meeting called for the purpose of voting on the agreement by a vote, in person, of the members of the Board who are not interested persons of the Fund and have no financial interest in the operation of the agreement, and of all the members of the Board. This agreement may be terminated at any time without payment of any penalty by a vote of a majority of the members of the Board who are not interested persons of the Fund and have no financial interest in the operation of the agreement, or by AEFA. The agreement will terminate automatically in the event of its assignment, as that term is defined in the Investment Company Act of 1940. This agreement may be amended at any time provided the amendment is approved in the same manner the agreement was initially approved and the amendment is agreed to by AEFA. This agreement shall be governed by the laws of the State of Minnesota. AXP GROWTH SERIES, INC. AMERICAN EXPRESS AXP Large Cap Equity Fund FINANCIAL ADVISORS INC. /s/ Leslie L. Ogg /s/ Ward D. Armstrong - ----------------- ------------------------ Leslie L. Ogg Ward D. Armstrong Vice President Senior Vice President -- Retirement Services EX-99.H14 TRAN AGMNT 9 h14-transferagmt.txt TRANSFER AGENCY AGREEMENT TRANSFER AGENCY AGREEMENT This Agreement, dated as of January 10, 2002, is between AXP(R) Growth Series, Inc., a Minnesota corporation, (the "Corporation") on behalf of its underlying series AXP(R) Large Cap Equity Fund (the "Fund"), and American Express Client Service Corporation (the "Transfer Agent"), a Minnesota corporation. In consideration of the mutual promises set forth below, the Corporation and the Transfer Agent agree as follows: 1. Appointment of the Transfer Agent. The Corporation hereby appoints the Transfer Agent, as transfer agent for the shares of and as shareholder servicing agent for the Fund, and the Transfer Agent accepts such appointment and agrees to perform the duties set forth below. 2. Compensation. (a) The Corporation will compensate the Transfer Agent for the performance of its obligations as set forth in Schedule A. Schedule A does not include out-of-pocket disbursements of the Transfer Agent for which the Transfer Agent shall be entitled to bill the Corporation separately. (b) The Transfer Agent will bill the Corporation monthly. The fee provided for hereunder shall be paid in cash by the Corporation to the Transfer Agent within five (5) business days after the last day of each month. (c) Out-of-pocket disbursements shall include, but shall not be limited to, the items specified in Schedule B. Reimbursement by the Corporation for expenses incurred by the Transfer Agent in any month shall be made as soon as practicable after the receipt of an itemized bill from the Transfer Agent. (d) Any compensation jointly agreed to hereunder may be adjusted from time to time by attaching to this Agreement a revised Schedule A, dated and signed by an officer of each party. 3. Documents. The Corporation will furnish from time to time such certificates, documents or opinions as the Transfer Agent deems to be appropriate or necessary for the proper performance of its duties. 4. Representations of the Corporation and the Transfer Agent. (a) The Corporation represents to the Transfer Agent that all outstanding shares are validly issued, fully paid and non-assessable by the Corporation. When shares are hereafter issued in accordance with the terms of the Corporation's Articles of Incorporation and its By-laws, such shares shall be validly issued, fully paid and non-assessable by the Corporation. (b) The Transfer Agent represents that it is registered under Section 17A(c) of the Securities Exchange Act of 1934. The Transfer Agent agrees to maintain the necessary facilities, equipment and personnel to perform its duties and obligations under this agreement and to comply with all applicable laws. 5. Duties of the Transfer Agent. The Transfer Agent shall be responsible, separately and through its subsidiaries or affiliates, for the following functions: (a) Sale of Fund Shares. (1) On receipt of an application and payment, wired instructions and payment, or payment identified as being for the account of a shareholder, the Transfer Agent will deposit the payment, prepare and present the necessary report to the Custodian and record the purchase of shares in a timely fashion in accordance with the terms of the Fund's prospectus. All shares shall be held in book entry form, and no certificate shall be issued unless the Fund is permitted to do so by its prospectus and the purchaser so requests. (2) On receipt of notice that payment was dishonored, the Transfer Agent shall stop redemptions of all shares owned by the purchaser related to that payment, place a stop payment on any checks that have been issued to redeem shares of the purchaser and take such other action as it deems appropriate. (b) Redemption of Fund Shares. On receipt of instructions to redeem shares in accordance with the terms of the Fund's prospectus, the Transfer Agent will record the redemption of shares of the Fund, prepare and present the necessary report to the Custodian and pay the proceeds of the redemption to the shareholder, an authorized agent or legal representative upon the receipt of the monies from the Custodian. (c) Transfer or Other Change Pertaining to Fund Shares. On receipt of instructions or forms acceptable to the Transfer Agent to transfer the shares to the name of a new owner, change the name or address of the present owner or take other legal action, the Transfer Agent will take such action as is requested. (d) Exchange of Fund Shares. On receipt of instructions to exchange the shares of the Fund for the shares of another American Express(R) Fund or other American Express Financial Corporation product in accordance with the terms of the prospectus, the Transfer Agent will process the exchange in the same manner as a redemption and sale of shares. (e) Right to Seek Assurance. The Transfer Agent may refuse to transfer, exchange or redeem shares of the Fund or take any action requested by a shareholder until it is satisfied that the requested transaction or action is legally authorized or until it is satisfied there is no basis for any claims adverse to the transaction or action. It may rely on the provisions of the Uniform Act for the Simplification of Fiduciary Security Transfers or the Uniform Commercial Code. The Corporation shall indemnify the Transfer Agent for any act done or omitted to be done in reliance on such laws or for refusing to transfer, exchange or redeem shares or taking any requested action if it acts on a good faith belief that the transaction or action is illegal or unauthorized. (f) Shareholder Records, Reports and Services. (1) The Transfer Agent shall maintain all shareholder accounts, which shall contain all required tax, legally imposed and regulatory information; shall provide shareholders, and file with federal and state agencies, all required tax and other reports pertaining to shareholder accounts; shall prepare shareholder mailing lists; shall cause to be printed and mailed all required prospectuses, annual reports, semiannual reports, statements of additional information (upon request), proxies and other mailings to shareholders; and shall cause proxies to be tabulated. (2) The Transfer Agent shall respond to all valid inquiries related to its duties under this Agreement. (3) The Transfer Agent shall create and maintain all records in accordance with all applicable laws, rules and regulations, including, but not limited to, the records required by Section 31(a) of the Investment Company Act of 1940. (g) Dividends and Distributions. The Transfer Agent shall prepare and present the necessary report to the Custodian and shall cause to be prepared and transmitted the payment of income dividends and capital gains distributions or cause to be recorded the investment of such dividends and distributions in additional shares of the Fund or as directed by instructions or forms acceptable to the Transfer Agent. (h) Confirmations and Statements. The Transfer Agent shall confirm each transaction either at the time of the transaction or through periodic reports as may be legally permitted. (i) Lost or Stolen Checks. The Transfer Agent will replace lost or stolen checks issued to shareholders upon receipt of proper notification and will maintain any stop payment orders against the lost or stolen checks as it is economically desirable to do. (j) Reports to Company. The Transfer Agent will provide reports pertaining to the services provided under this Agreement as the Corporation may request to ascertain the quality and level of services being provided or as required by law. (k) Other Duties. The Transfer Agent may perform other duties for additional compensation if agreed to in writing by the parties to this Agreement. 6. Ownership and Confidentiality of Records. (a) General. The Transfer Agent agrees that all records prepared or maintained by it relating to the services to be performed by it under the terms of this Agreement are the property of the Corporation and may be inspected by the Corporation or any person retained by the Corporation at reasonable times. The Corporation and Transfer Agent agree to protect the confidentiality of those records. (b) Regulation S-P. 1) In accordance with Regulation S-P of the Securities and Exchange Commission "Nonpublic Personal Information" includes (1) all personally identifiable financial information; (2) any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived using any personally identifiable financial information that is not publicly available information; and (3) any information derived therefrom. 2) The Transfer Agent must not use or disclose Nonpublic Personal Information for any purpose other than to carry out the purpose for which Nonpublic Personal Information was provided to the Transfer Agent as set forth in this Agreement, and agrees to cause the Transfer Agent, and its employees, agents, representatives, or any other party to whom the Transfer Agent may provide access to or disclose Nonpublic Personal Information to limit the use and disclosure of Nonpublic Personal Information to that purpose. 3) The Transfer Agent agrees to implement appropriate measures designed to ensure the security and confidentiality of Nonpublic Personal Information, to protect such information against any anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to, or use of, Nonpublic Personal Information that could result in substantial harm or inconvenience to any customer of the Fund; the Transfer Agent further agrees to cause all its agents, representatives, subcontractors, or any other party to whom the Transfer Agent may provide access to, or disclose, Nonpublic Personal Information to implement appropriate measures designed to meet the objectives set forth in this paragraph. 4) With respect only to the provisions of this Section 6(b), the Transfer Agent agrees to indemnify and hold harmless the Corporation and/or the Fund, and any officer or director of the Corporation, against losses, claims, damages, expenses, or liabilities to which the Corporation and/or the Fund, or any officer or director of the Corporation, may become subject as the result of (1) a material breach of the provisions of this section of the Agreement or (2) any acts or omissions of the Transfer Agent, or of any of its officers, directors, employees, or agents, that are not in substantial accordance with this Agreement, including, but not limited to, any violation of any federal statute or regulation. Notwithstanding the foregoing, no party shall be entitled to indemnification pursuant to this Section 6(b)(4) if such loss, claim, damage, expense, or liability is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard of duty by the party seeking indemnification. 7. Action by Board and Opinion of Counsel. The Transfer Agent may rely on resolutions of the Board of Directors (the "Board") or the Executive Committee of the Board and on opinion of counsel for the Corporation. 8. Duty of Care. It is understood and agreed that, in furnishing the Fund with the services as herein provided, neither the Transfer Agent, nor any officer, director or agent thereof shall be held liable for any loss arising out of or in connection with their actions under this Agreement so long as they act in good faith and with due diligence, and are not negligent or guilty of any willful misconduct. It is further understood and agreed that the Transfer Agent may rely upon information furnished to it reasonably believed to be accurate and reliable. In the event the Transfer Agent is unable to perform its obligations under the terms of this Agreement because of an act of God, strike or equipment or transmission failure reasonably beyond its control, the Transfer Agent shall not be liable for any damages resulting from such failure. 9. Term and Termination. This Agreement shall become effective on the date first set forth above and shall continue in effect from year to year thereafter as the parties may mutually agree; provided that either party may terminate this Agreement by giving the other party notice in writing specifying the date of such termination, which shall be not less than 60 days after the date of receipt of such notice. In the event such notice is given by the Corporation, it shall be accompanied by a vote of the Board, certified by the Secretary, electing to terminate this Agreement and designating a successor transfer agent or transfer agents. Upon such termination and at the expense of the Corporation, the Transfer Agent will deliver to such successor a certified list of shareholders of the Fund (with name, address and taxpayer identification or Social Security number), a historical record of the account of each shareholder and the status thereof, and all other relevant books, records, correspondence, and other data established or maintained by the Transfer Agent under this Agreement in the form reasonably acceptable to the Corporation, and will cooperate in the transfer of such duties and responsibilities, including provisions for assistance from the Transfer Agent's personnel in the establishment of books, records and other data by such successor or successors. 10. Amendment. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. 11. Subcontracting. The Corporation agrees that the Transfer Agent may subcontract for certain of the services described under this Agreement with the understanding that there shall be no diminution in the quality or level of the services and that the Transfer Agent remains fully responsible for the services. Except for out-of-pocket expenses identified in Schedule B, the Transfer Agent shall bear the cost of subcontracting such services, unless otherwise agreed by the parties. 12. Miscellaneous. (a) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable without the written consent of the other party. (b) This Agreement shall be governed by the laws of the State of Minnesota. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the day and year written above. AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund By: /s/ Leslie L. Ogg ----------------- Leslie L. Ogg Vice President AMERICAN EXPRESS CLIENT SERVICE CORPORATION By: /s/ Bridget Sperl ----------------- Bridget Sperl Senior Vice President Schedule A AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund FEE The annual per account fee for services under this agreement, accrued daily and payable monthly, is as follows: Class A Class B Class C Class Y $19.00 $20.00 $19.50 $17.00 Schedule B OUT-OF-POCKET EXPENSES The Corporation shall reimburse the Transfer Agent monthly for the following out-of-pocket expenses: o typesetting, printing, paper, envelopes, postage and return postage for proxy soliciting material, and proxy tabulation costs o printing, paper, envelopes and postage for dividend notices, dividend checks, records of account, purchase confirmations, exchange confirmations and exchange prospectuses, redemption confirmations, redemption checks, confirmations on changes of address and any other communication required to be sent to shareholders o typesetting, printing, paper, envelopes and postage for prospectuses, annual and semiannual reports, statements of additional information, supplements for prospectuses and statements of additional information and other required mailings to shareholders o stop orders o outgoing wire charges o other expenses incurred at the request or with the consent of the Corporation EX-99.I OPIN COUNCEL 10 i-opcon.txt OPINION AND CONSENT OF COUNSEL March 21, 2002 AXP Growth Series, Inc. 200 AXP Financial Center Minneapolis, Minnesota 55474 Gentlemen: I have examined the Articles of Incorporation and the By-Laws of AXP Growth Series, Inc. (the Company) and all necessary certificates, permits, minute books, documents and records of the Company, and the applicable statutes of the State of Minnesota, and it is my opinion that the shares sold in accordance with applicable federal and state securities laws will be legally issued, fully paid, and nonassessable. This opinion may be used in connection with the Post-Effective Amendment. Sincerely, /s/ Leslie L. Ogg - ------------------ Leslie L. Ogg Attorney at Law 901 S. Marquette Ave., Suite 2810 Minneapolis, Minnesota 55402-3268 EX-99.M3 DIST AGMNT 11 m3-planagmnt.txt PLAN AND AGREEMENT OF DISTRIBUTION PLAN AND AGREEMENT OF DISTRIBUTION This plan and agreement, dated as of January 10, 2002, is between AXP(R) Growth Series, Inc., on behalf of its underlying series AXP(R) Large Cap Equity Fund (the "Fund"), and American Express Financial Advisors Inc. ("AEFA"), the principal underwriter of the Fund, for distribution services to the Fund. The plan and agreement has been approved by members of the Board of Directors (the "Board") of the Fund who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the plan or any related agreement, and all of the members of the Board, in person, at a meeting called for the purpose of voting on the plan and agreement. The plan and agreement provides that: 1. The Fund will reimburse AEFA for expenses incurred in connection with distributing the Fund's shares and providing personal service to shareholders. These expenses include sales commissions; business, employee and financial advisor expenses charged to distribution of Class A and Class B shares; and overhead appropriately allocated to the sale of Class A and Class B shares. 2. A portion of the fee under the agreement will be used to compensate AEFA, financial advisors and other servicing agents for personal service to shareholders. Fees paid will be used to help shareholders thoughtfully consider their investment goals and objectively monitor how well the goals are being achieved. AEFA represents that it will continue to provide the same level of service as was provided under the previous shareholder service agreement. 3. AEFA agrees to monitor the services it provides, to measure the level and quality of services and to provide training and support to financial advisors and servicing agents. AEFA will use its best efforts to assure that other distributors provide comparable services to shareholders. 4. For Class A shares, the fee under this agreement will be equal on an annual basis to 0.25% of the average daily net assets of the Fund attributable to Class A shares. The amount so determined shall be paid to AEFA in cash within five (5) business days after the last day of each month. 5. For Class B shares, the fee under this agreement will be equal on an annual basis to 1.00% of the average daily net assets of the Fund attributable to Class B shares. Of that amount, 0.75% shall be reimbursed for distribution expenses. The additional 0.25% shall be paid to AEFA to compensate AEFA, financial advisors and servicing agents for personal service to shareholders and maintenance of shareholder accounts. The amount so determined shall be paid to AEFA in cash within five (5) business days after the last day of each month. 6. For each purchase of Class B shares, the Class B shares will be converted to Class A shares in the ninth year of ownership. 7. The Fund understands that if a shareholder redeems Class B shares before they are converted to Class A shares, AEFA will impose a sales charge directly on the redemption proceeds to cover those expenses it has previously incurred on the sale of those shares. 8. AEFA agrees to provide at least quarterly an analysis of expenses under this agreement and to meet with representatives of the Fund as reasonably requested to provide additional information. 9. The plan and agreement shall continue in effect for a period of more than one year provided it is reapproved at least annually in the same manner in which it was initially approved. 10. The plan and agreement may not be amended to increase materially the amount that may be paid by the Fund without the approval of a least a majority of the outstanding shares of the relevant class. Any other amendment must be approved in the manner in which the plan and agreement was initially approved. 11. This agreement may be terminated as to Class A or Class B at any time without payment of any penalty by a vote of a majority of the members of the Board who are not interested persons of the Fund and have no financial interest in the operation of the plan and agreement, or by vote of a majority of the outstanding shares of the relevant class, or by AEFA. The plan and agreement will terminate automatically in the event of its assignment as that term is defined in the Investment Company Act of 1940. 12. This plan and agreement shall be governed by the laws of the State of Minnesota. AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund /s/ Leslie L. Ogg - --------------------------- Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL ADVISORS INC. /s/ Paula R. Meyer - -------------------------- Paula R. Meyer Vice President - Mutual Funds EX-99.M4 DIST AGMNT 12 m4-planagmnt_c.txt PLAN AND AGREEMENT OF DISTRIBUTION FOR CLASS C SHARES PLAN AND AGREEMENT OF DISTRIBUTION FOR CLASS C SHARES This plan and agreement, dated as of January 10, 2002, is by and between AXP(R) Growth Series, Inc., a Minnesota Corporation, on behalf of its underlying series AXP(R) Large Cap Equity Fund (the "Fund") and American Express Financial Advisors Inc., a Delaware Corporation, ("AEFA") the principal underwriter of the Fund, for distribution services to the Fund. The plan and agreement has been approved by members of the Board of Directors (the "Board") of the Fund who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the plan or any related agreement, and all of the members of the Board, in person, at a meeting called for the purpose of voting on the plan and agreement. The plan and agreement provides that: 1. The Fund will reimburse AEFA for expenses incurred in connection with the distribution of the Fund's shares and providing personal service to shareholders. These expenses include sales commissions; business, employee and financial advisor expenses charged to distribution of Class C shares; and overhead appropriately allocated to the sale of Class C shares. 2. A portion of the fee under the agreement will be used to compensate AEFA, financial advisors and other servicing agents for personal service to shareholders. Fees paid will be used to help shareholders thoughtfully consider their investment goals and objectively monitor how well the goals are being achieved. 3. AEFA agrees to monitor the services it provides, to measure the level and quality of services, and to provide training and support to financial advisors and servicing agents. AEFA will use its best efforts to assure that other distributors provide comparable services to shareholders. 4. The fee under this agreement will be equal on an annual basis to 1.00% of the average daily net assets of the Fund attributable to Class C shares. Of that amount, 0.75% shall be reimbursed for distribution expenses. The additional 0.25% shall be paid to AEFA to compensate AEFA, financial advisors and servicing agents for personal service to shareholders and maintenance of shareholder accounts. The amount so determined shall be paid to AEFA in cash within five (5) business days after the last day of each month. 5. The Fund understands that if a shareholder redeems Class C shares in the first year of ownership, AEFA will impose a sales charge directly on the redemption proceeds to cover those expenses it has previously incurred on the sale of those shares. 6. AEFA agrees to provide at least quarterly an analysis of expenses under this agreement and to meet with representatives of the Fund as reasonably requested to provide additional information. 7. The plan and agreement shall continue in effect for a period of more than one year provided it is reapproved at least annually in the same manner in which it was initially approved. 8. The plan and agreement may not be amended to increase materially the amount that may be paid by the Fund without the approval of a least a majority of the outstanding shares of the relevant class. Any other amendment must be approved in the manner in which the plan and agreement was initially approved. 9. This agreement may be terminated at any time without payment of any penalty by a vote of a majority of the members of the Board who are not interested persons of the Fund and have no financial interest in the operation of the plan and agreement, or by vote of a majority of the outstanding shares of the relevant class, or by AEFA. The plan and agreement will terminate automatically in the event of its assignment as that term is defined in the Investment Company Act of 1940. AXP GROWTH SERIES, INC. AXP Large Cap Equity Fund /s/ Leslie L. Ogg - ----------------- Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL ADVISORS INC. /s/ Paula R. Meyer - ----------------------------------- Paula R. Meyer Vice President -- Mutual Funds EX-99.Q1 PWR OF ATTY 13 q1-dirpoa.txt DIRECTORS/TRUSTEES POWER OF ATTORNEY DIRECTORS/TRUSTEES POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as directors and trustees of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission: 1933 Act 1940 Act Reg. Number Reg. Number AXP Bond Fund, Inc. 2-51586 811-2503 AXP California Tax-Exempt Trust 33-5103 811-4646 AXP Discovery Fund, Inc. 2-72174 811-3178 AXP Equity Select Fund, Inc. 2-13188 811-772 AXP Extra Income Fund, Inc. 2-86637 811-3848 AXP Federal Income Fund, Inc. 2-96512 811-4260 AXP Global Series, Inc. 33-25824 811-5696 AXP Growth Series, Inc. 2-38355 811-2111 AXP High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901 AXP International Fund, Inc. 2-92309 811-4075 AXP Investment Series, Inc. 2-11328 811-54 AXP Managed Series, Inc. 2-93801 811-4133 AXP Market Advantage Series, Inc. 33-30770 811-5897 AXP Money Market Series, Inc. 2-54516 811-2591 AXP New Dimensions Fund, Inc. 2-28529 811-1629 AXP Precious Metals Fund, Inc. 2-93745 811-4132 AXP Progressive Fund, Inc. 2-30059 811-1714 AXP Selective Fund, Inc. 2-10700 811-499 AXP Special Tax-Exempt Series Trust 33-5102 811-4647 AXP Stock Fund, Inc. 2-11358 811-498 AXP Strategy Series, Inc. 2-89288 811-3956 AXP Tax-Exempt Series, Inc. 2-57328 811-2686 AXP Tax-Free Money Fund, Inc. 2-66868 811-3003 AXP Utilities Income Fund, Inc. 33-20872 811-5522 hereby constitutes and appoints Arne H. Carlson and Leslie L. Ogg or either one of them, as her or his attorney-in-fact and agent, to sign for her or him in her or his name, place and stead any and all further amendments to said registration statements filed pursuant to said Acts and any rules and regulations thereunder, and to file such amendments with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting to either of them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. Dated the 9th day of January, 2002. /s/ H. Brewster Atwater, Jr. /s/ Anne P. Jones - ----------------------------- ---------------------------- H. Brewster Atwater, Jr. Anne P. Jones /s/ Arne H. Carlson /s/ Stephen R. Lewis, Jr. - ----------------------------- ---------------------------- Arne H. Carlson Stephen R. Lewis, Jr. /s/ Lynne V. Cheney /s/ William R. Pearce - ----------------------------- ---------------------------- Lynne V. Cheney William R. Pearce /s/ Livio D. DeSimone /s/ Alan K. Simpson - ----------------------------- ---------------------------- Livio D. DeSimone Alan K. Simpson /s/ Ira D. Hall /s/ John R. Thomas - ---------------------------- ---------------------------- Ira D. Hall John R. Thomas /s/ David R. Hubers /s/ William F. Truscott - --------------------------- ---------------------------- David R. Hubers William F. Truscott /s/ Heinz F. Hutter /s/ C. Angus Wurtele - ----------------------------- ---------------------------- Heinz F. Hutter C. Angus Wurtele EX-99.Q2 PWR OF ATTY 14 q2-offspoa.txt OFFICERS' POWER OF ATTORNEY OFFICERS' POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as officers of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission: 1933 Act 1940 Act Reg. Number Reg. Number AXP Bond Fund, Inc. 2-51586 811-2503 AXP California Tax-Exempt Trust 33-5103 811-4646 AXP Discovery Fund, Inc. 2-72174 811-3178 AXP Equity Select Fund, Inc. 2-13188 811-772 AXP Extra Income Fund, Inc. 2-86637 811-3848 AXP Federal Income Fund, Inc. 2-96512 811-4260 AXP Global Series, Inc. 33-25824 811-5696 AXP Growth Series, Inc. 2-38355 811-2111 AXP High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901 AXP International Fund, Inc. 2-92309 811-4075 AXP Investment Series, Inc. 2-11328 811-54 AXP Variable Portfolio-Investment Series, Inc. 2-73115 811-3218 AXP Variable Portfolio-Managed Series, Inc. 2-96367 811-4252 AXP Variable Portfolio-Money Market Series, Inc. 2-72584 811-3190 AXP Variable Portfolio-Income Series, Inc. 2-73113 811-3219 AXP Managed Series, Inc. 2-93801 811-4133 AXP Market Advantage Series, Inc. 33-30770 811-5897 AXP Money Market Series, Inc. 2-54516 811-2591 AXP New Dimensions Fund, Inc. 2-28529 811-1629 AXP Precious Metals Fund, Inc. 2-93745 811-4132 AXP Progressive Fund, Inc. 2-30059 811-1714 AXP Selective Fund, Inc. 2-10700 811-499 AXP Special Tax-Exempt Series Trust 33-5102 811-4647 AXP Stock Fund, Inc. 2-11358 811-498 AXP Strategy Series, Inc. 2-89288 811-3956 AXP Tax-Exempt Series, Inc. 2-57328 811-2686 AXP Tax-Free Money Fund, Inc. 2-66868 811-3003 AXP Utilities Income Fund, Inc. 33-20872 811-5522 hereby constitutes and appoints the other as his attorney-in-fact and agent, to sign for him in his name, place and stead any and all further amendments to said registration statements filed pursuant to said Acts and any rules and regulations thereunder, and to file such amendments with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting to either of them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. Dated the 9th day of January, 2002. /s/ Arne H. Carlson /s/ Leslie L. Ogg - -------------------------- --------------------------- Arne H. Carlson Leslie L. Ogg /s/ John R. Thomas /s/ John M. Knight - -------------------------- --------------------------- John R. Thomas John M. Knight /s/ William F. Truscott /s/ Stephen W. Roszell - -------------------------- --------------------------- William F. Truscott Stephen W. Roszell EX-99.Q3 PWR OF ATTY 15 q3-trustpoa.txt TRUSTEES POWER OF ATTORNEY TRUSTEES POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as trustees of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Investment Company Act of 1940 with the Securities and Exchange Commission: 1940 Act Reg. Number Growth Trust 811-07395 Growth and Income Trust 811-07393 Income Trust 811-07307 Tax-Free Income Trust 811-07397 World Trust 811-07399 hereby constitutes and appoints Arne H. Carlson and Leslie L. Ogg or either one of them, as her or his attorney-in-fact and agent, to sign for her or him in her or his name, place and stead any and all further amendments to said registration statements filed pursuant to said Act and any rules and regulations thereunder, and to file such amendments with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting to either of them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. Dated the 9th day of January, 2002. /s/ H. Brewster Atwater, Jr. /s/ Anne P. Jones - ----------------------------- ---------------------------- H. Brewster Atwater, Jr. Anne P. Jones /s/ Arne H. Carlson /s/ Stephen R. Lewis, Jr. - ----------------------------- ---------------------------- Arne H. Carlson Stephen R. Lewis, Jr. /s/ Lynne V. Cheney /s/ William R. Pearce - ----------------------------- ---------------------------- Lynne V. Cheney William R. Pearce /s/ Livio D. DeSimone /s/ Alan K. Simpson - ----------------------------- ---------------------------- Livio D. DeSimone Alan K. Simpson /s/ Ira D. Hall /s/ John R. Thomas - ---------------------------- ---------------------------- Ira D. Hall John R. Thomas /s/ David R. Hubers /s/ William F. Truscott - --------------------------- ---------------------------- David R. Hubers William F. Truscott /s/ Heinz F. Hutter /s/ C. Angus Wurtele - ----------------------------- ---------------------------- Heinz F. Hutter C. Angus Wurtele EX-99.Q4 PWR OF ATTY 16 q4-trustpoa.txt OFFICERS' POWER OF ATTORNEY OFFICERS' POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as officers of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission: 1940 Act Reg. Number Growth Trust 811-07395 Growth and Income Trust 811-07393 Income Trust 811-07307 Tax-Free Income Trust 811-07397 World Trust 811-07399 hereby constitutes and appoints the other as his attorney-in-fact and agent, to sign for him in his name, place and stead any and all further amendments to said registration statements filed pursuant to said Acts and any rules and regulations thereunder, and to file such amendments with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting to either of them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. Dated the 9th day of January, 2002. /s/ Arne H. Carlson /s/ Leslie L. Ogg - -------------------------- --------------------------- Arne H. Carlson Leslie L. Ogg /s/ John R. Thomas /s/ John M. Knight - -------------------------- --------------------------- John R. Thomas John M. Knight /s/ William F. Truscott /s/ Stephen W. Roszell - -------------------------- --------------------------- William F. Truscott Stephen W. Roszell -----END PRIVACY-ENHANCED MESSAGE-----