N-30D 1 s6456r.txt AXP GROWTH FUND AXP(R) Growth Fund 2002 SEMIANNUAL REPORT American Express(R) Funds (icon of) ruler AXP Growth Fund seeks to provide shareholders with long-term capital growth. Going for Growth In the long run, a company's stock price usually reflects its business fortunes. Therefore, if a company thrives, its stock tends to follow suit. That's why many long-term investors, including AXP Growth Fund, focus on growth stocks -- those of companies that enjoy rising sales and profits. While there will be interruptions along the way, patient investors look forward to sharing in that same prosperity. CONTENTS From the Chairman.....................................................3 Portfolio Managers' Q & A.............................................3 Market Outlook........................................................5 Fund Facts............................................................6 The 10 Largest Holdings...............................................7 Financial Statements (Fund)...........................................8 Notes to Financial Statements (Fund).................................11 Financial Statements (Portfolio).....................................16 Notes to Financial Statements (Portfolio)............................18 Investments in Securities............................................21 -------------------------------------------------------------------------------- 2 AXP GROWTH FUND -- SEMIANNUAL REPORT (picture of Arne H. Carlson) Arne H. Carlson Chairman of the board From the Chairman For most of us investors, the past several months proved to be an extremely trying time. More recently, the events of this past September and the prospect of what may follow have added to our collective concern. While nothing can change what has happened, we can control how we respond. In broad terms, I would strongly advise that you keep a focus on your long-term financial goals and not let specific events dictate your investment decisions. Ultimately, it is where you finish, not where you are at the moment, that matters most. Your financial advisor plays an essential role in this process, so please let him or her help you by reviewing your situation and plotting the proper investment course. As I have indicated in the past, the role our Board plays in your financial future is to monitor and confirm that each American Express mutual fund meets its investment objective and that its management style stays on target. We want each fund to be able to deliver to you, the shareholder, the type of performance you expect and the best results that can be obtained. Toward that end, American Express has made significant changes in its investment management capability, and will continue to make changes as it strives to provide a consistent standard of excellence. On behalf of the Board, Arne H. Carlson Portfolio Managers' Q & A Q: How did the Fund perform for the six-month period ended January 31, 2002? A: Stocks continued to experience significant volatility during the period. The Fund declined 10.94% over the six months (return for Class A shares excluding sales charges). During the same period, the Fund's competitive index, the Lipper Large-Cap Growth Funds Index, registered a return of -7.22%. The Fund's benchmark, the Standard & Poor's 500 Index, return(e)d -6.04% for the six months. Q: What factors affected the Fund's performance during the six months? A: The period started with the stock market still struggling with the bear market environment that had begun in March 2000. The difficulties were particularly pronounced for growth stocks. Many of these companies were not living up to expectations for earnings improvement due in large part to the weakened state of the U.S. economy. The situation turned even worse in the immediate wake of the tragic terrorist attacks of September 11, 2001. The initial reaction by -------------------------------------------------------------------------------- 3 AXP GROWTH FUND -- SEMIANNUAL REPORT investors was a dramatic selloff of stocks. However, beginning in late September and continuing through December, stocks rallied. Growth stocks enjoyed particular strength during that period, especially those in the technology and consumer cyclical sectors. These areas benefited from expectations that the U.S. economy was on the verge of a recovery. That helped the Fund regain some lost ground. We also benefited at that time from holding a reduced position in more defensive growth issues such as pharmaceutical and consumer staple stocks. Stocks fell back again in January 2002, as issues surrounding the collapse of Enron shook investor confidence. Q: What changes did you make to the portfolio over the past six months? A: In the early part of the period, we were in the process of adjusting the portfolio's mix. What was once a Fund heavily focused on technology stocks became one with broader diversification among growth stocks. That meant a reduced position in technology stocks (though that continues to be a prominent theme in the portfolio) and more significant holdings in other growth industries, such as health care, financial services and consumer stocks. Among the names added to the portfolio were UnitedHealth Group, Baxter International, Biogen and MedImmune (in the health care area) and Wal-Mart Stores, Costco Wholesale and Target (in the retail area). After the market's significant selloff following the September 11th attacks, the Fund did beef up its position in attractively-priced technology stocks, which proved beneficial in the closing months of 2001. Lisa A. Costa Senior portfolio manager Scott Mullinix Portfolio manager Note to shareholders: In April 2002, Nick Thakore will succeed Lisa Costa and Scott Mullinix as the portfolio manager of AXP Growth Fund. The following outlook for the Fund is provided by William F. Truscott, Chief Investment Officer. -------------------------------------------------------------------------------- 4 AXP GROWTH FUND -- SEMIANNUAL REPORT Market Outlook Q: What is your outlook for the next six months? A: There is reason for optimism as we go forward. The U.S. economy appears to be on the mend after slipping into a recession in 2001. A better economy is likely to improve the earnings outlook for many companies, and as a result stocks should be positioned to enjoy better performance in 2002 after two consecutive years of negative performance. However, it is important to maintain modest expectations. The economic backdrop does not yet appear to be in place that would indicate reason to expect stock market returns comparable to the 20% level we became accustomed to in the 1990s. If an economic recovery takes place in the months ahead, growth stocks in specific industries such as the technology, media and consumer sectors should stand to benefit. The Fund will continue to take advantage of what are considered to be the most attractive opportunities among large-cap growth stocks. William F. Truscott Chief Investment Officer -------------------------------------------------------------------------------- 5 AXP GROWTH FUND -- SEMIANNUAL REPORT Fund Facts Class A-- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $26.41 July 31, 2001 $29.68 Decrease $ 3.27 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $ -- From long-term capital gains $ 0.02 Total distributions $ 0.02 Total return* -10.94% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $24.90 July 31, 2001 $28.11 Decrease $ 3.21 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $ -- From long-term capital gains $ 0.02 Total distributions $ 0.02 Total return* -11.34% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $24.91 July 31, 2001 $28.12 Decrease $ 3.21 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $ -- From long-term capital gains $ 0.02 Total distributions $ 0.02 Total return* -11.34% Class Y -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $26.68 July 31, 2001 $29.96 Decrease $ 3.28 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $ -- From long-term capital gains $ 0.02 Total distributions $ 0.02 Total return* -10.88% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. -------------------------------------------------------------------------------- 6 AXP GROWTH FUND -- SEMIANNUAL REPORT The 10 Largest Holdings Percent Value (of net assets) (as of Jan. 31, 2002) Pfizer 6.3% $329,193,000 Microsoft 4.3 222,985,000 Home Depot 3.8 200,360,000 Cisco Systems 3.0 158,240,000 Intel 3.0 157,680,000 Citigroup 3.0 157,495,980 Intl Business Machines 3.0 156,440,500 General Electric 2.8 148,600,000 Medtronic 2.8 147,810,000 Maxim Integrated Products 2.6 138,725,000 For further detail about these holdings, please refer to the section entitled "Investments in Securities." (icon of) pie chart The 10 holdings listed here make up 34.6% of net assets -------------------------------------------------------------------------------- 7 AXP GROWTH FUND -- SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Growth Fund Jan. 31, 2002 (Unaudited) Assets Investment in Portfolio (Note 1) $ 5,242,801,292 Capital shares receivable 216,839 ------- Total assets 5,243,018,131 ------------- Liabilities Capital shares payable 49,250 Accrued distribution fee 54,591 Accrued service fee 2,130 Accrued transfer agency fee 2,692 Accrued administrative services fee 5,702 Other accrued expenses 502,757 ------- Total liabilities 617,122 ------- Net assets applicable to outstanding capital stock $ 5,242,401,009 =============== Represented by Capital stock -- $.01 par value (Note 1) $ 2,010,812 Additional paid-in capital 5,793,023,698 Net operating loss (11,571,875) Accumulated net realized gain (loss) (Note 5) (1,452,551,080) Unrealized appreciation (depreciation) on investments 911,489,454 ----------- Total -- representing net assets applicable to outstanding capital stock $ 5,242,401,009 =============== Net assets applicable to outstanding shares: Class A $ 3,185,853,785 Class B $ 1,243,980,742 Class C $ 8,830,043 Class Y $ 803,736,439 Net asset value per share of outstanding capital stock: Class A shares 120,649,939 $ 26.41 Class B shares 49,949,763 $ 24.90 Class C shares 354,468 $ 24.91 Class Y shares 30,127,073 $ 26.68
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 8 AXP GROWTH FUND -- SEMIANNUAL REPORT Statement of operations AXP Growth Fund Six months ended Jan. 31, 2002 (Unaudited) Income: Dividends $ 13,814,642 Interest 5,284,627 Less foreign taxes withheld (22,657) ------- Total income 19,076,612 ---------- Expenses (Note 2): Expenses allocated from Portfolio 12,642,458 Distribution fee Class A 4,100,637 Class B 6,419,639 Class C 41,028 Transfer agency fee 4,862,450 Incremental transfer agency fee Class A 314,739 Class B 271,649 Class C 2,870 Service fee -- Class Y 427,513 Administrative services fees and expenses 1,114,539 Compensation of board members 9,793 Printing and postage 421,898 Registration fees 51,552 Audit fees 4,750 Other 16,944 ------ Total expenses 30,702,459 Earnings credits on cash balances (Note 2) (53,972) ------- Total net expenses 30,648,487 ---------- Investment income (loss) -- net (11,571,875) ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (459,167,817) Net change in unrealized appreciation (depreciation) on investments (236,038,060) ------------ Net gain (loss) on investments (695,205,877) ------------ Net increase (decrease) in net assets resulting from operations $ (706,777,752) ============== See accompanying notes to financial statements. -------------------------------------------------------------------------------- 9 AXP GROWTH FUND -- SEMIANNUAL REPORT
Statements of changes in net assets AXP Growth Fund Jan. 31, 2002 July 31, 2001 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ (11,571,875) $ (42,797,571) Net realized gain (loss) on investments (459,167,817) (815,670,979) Net change in unrealized appreciation (depreciation) on investments (236,038,060) (3,839,599,804) ------------ -------------- Net increase (decrease) in net assets resulting from operations (706,777,752) (4,698,068,354) ------------ -------------- Distributions to shareholders from: Net realized gain Class A (2,664,881) (275,937,694) Class B (1,110,618) (112,812,229) Class C (7,589) (393,960) Class Y (724,495) (66,853,330) -------- ----------- Total distributions (4,507,583) (455,997,213) ---------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 729,018,643 1,814,580,315 Class B shares 75,589,207 458,556,597 Class C shares 2,342,199 13,298,672 Class Y shares 203,679,619 742,021,470 Reinvestment of distributions at net asset value Class A shares 2,597,230 267,787,656 Class B shares 1,100,432 111,916,442 Class C shares 7,534 392,962 Class Y shares 724,495 54,657,205 Payments for redemptions Class A shares (966,757,655) (1,726,848,684) Class B shares (Note 2) (167,934,121) (278,484,800) Class C shares (Note 2) (1,328,120) (1,416,128) Class Y shares (269,031,142) (615,784,347) ------------ ------------ Increase (decrease) in net assets from capital share transactions (389,991,679) 840,677,360 ------------ ----------- Total increase (decrease) in net assets (1,101,277,014) (4,313,388,207) Net assets at beginning of period 6,343,678,023 10,657,066,230 ------------- -------------- Net assets at end of period $ 5,242,401,009 $ 6,343,678,023 =============== ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 10 AXP GROWTH FUND -- SEMIANNUAL REPORT Notes to Financial Statements AXP Growth Fund (Unaudited as to Jan. 31, 2002) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Growth Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Growth Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Growth Portfolio The Fund invests all of its assets in Growth Portfolio (the Portfolio), a series of Growth Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in stocks of U.S. and foreign companies that appear to offer growth opportunities. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of July 31, 2001 was 99.99%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. -------------------------------------------------------------------------------- 11 AXP GROWTH FUND -- SEMIANNUAL REPORT Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with American Express Financial Corporation (AEFC) to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.05% to 0.02% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees, and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.00 o Class B $20.00 o Class C $19.50 o Class Y $17.00 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $2,937,308 for Class A, $730,008 for Class B and $2,631 for Class C for the six months ended Jan. 31, 2002. During the six months ended Jan. 31, 2002, the Fund's transfer agency fees were reduced by $53,972 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 12 AXP GROWTH FUND -- SEMIANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended Jan. 31, 2002 Class A Class B Class C Class Y Sold 27,809,107 3,069,759 96,019 7,725,085 Issued for reinvested distributions 97,100 43,570 298 26,813 Redeemed (37,001,640) (6,894,718) (54,772) (10,115,717) ----------- ---------- ------- ----------- Net increase (decrease) (9,095,433) (3,781,389) 41,545 (2,363,819) ---------- ---------- ------ ----------
Year ended July 31, 2001 Class A Class B Class C Class Y Sold 45,406,835 11,151,197 319,605 18,291,747 Issued for reinvested distributions 7,266,962 3,192,141 11,202 1,470,465 Redeemed (45,033,906) (8,057,822) (39,744) (15,592,053) ----------- ---------- ------- ----------- Net increase (decrease) 7,639,891 6,285,516 291,063 4,170,159 --------- --------- ------- ---------
4. BANK BORROWINGS The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had borrowings of $1,200,000 at a weighted average interest rate of 3.80% for the period from Sept. 13, 2001 to Sept. 14, 2001. 5. CAPITAL LOSS CARRY-OVER For federal income purposes, the Fund had a capital loss carry-over of $949,420,217 as of July 31, 2001, that if not offset by subsequent capital gains, will expire in 2010. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. -------------------------------------------------------------------------------- 13 AXP GROWTH FUND -- SEMIANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended July 31, 2002(f) 2001 2000 1999 1998 Net asset value, beginning of period $29.68 $ 54.36 $42.14 $36.58 $35.47 Income from investment operations: Net investment income (loss) (.04) (.14) (.14) (.03) (.07) Net gains (losses) (both realized and unrealized) (3.21) (22.34) 13.14 7.29 2.14 Total from investment operations (3.25) (22.48) 13.00 7.26 2.07 Less distributions: Distributions from realized gains (.02) (2.20) (.78) (1.70) (.96) Net asset value, end of period $26.41 $ 29.68 $54.36 $42.14 $36.58 Ratios/supplemental data Net assets, end of period (in millions) $3,186 $3,851 $6,637 $4,576 $3,681 Ratio of expenses to average daily net assets(c) .97%(d) .99% .99% .89% .87% Ratio of net investment income (loss) to average daily net assets (.27%)(d) (.34%) (.30%) (.08%) (.22%) Portfolio turnover rate (excluding short-term securities) 41% 41% 23% 17% 28% Total return(e) (10.94%) (42.14%) 31.01% 20.49% 6.32%
Class B Per share income and capital changes(a) Fiscal period ended July 31, 2002(f) 2001 2000 1999 1998 Net asset value, beginning of period $28.11 $ 52.02 $40.65 $35.61 $34.82 Income from investment operations: Net investment income (loss) (.13) (.42) (.46) (.28) (.29) Net gains (losses) (both realized and unrealized) (3.06) (21.29) 12.61 7.02 2.04 Total from investment operations (3.19) (21.71) 12.15 6.74 1.75 Less distributions: Distributions from realized gains (.02) (2.20) (.78) (1.70) (.96) Net asset value, end of period $24.90 $ 28.11 $52.02 $40.65 $35.61 Ratios/supplemental data Net assets, end of period (in millions) $1,244 $1,510 $2,468 $1,458 $1,021 Ratio of expenses to average daily net assets(c) 1.75%(d) 1.75% 1.75% 1.65% 1.63% Ratio of net investment income (loss) to average daily net assets (1.04%)(d) (1.11%) (1.06%) (.85%) (.97%) Portfolio turnover rate (excluding short-term securities) 41% 41% 23% 17% 28% Total return(e) (11.34%) (42.57%) 30.02% 19.58% 5.52%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 14 AXP GROWTH FUND -- SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2002(f) 2001 2000(b) Net asset value, beginning of period $28.12 $ 52.03 $52.65 Income from investment operations: Net investment income (loss) (.13) (.42) (.04) Net gains (losses) (both realized and unrealized) (3.06) (21.29) (.58) Total from investment operations (3.19) (21.71) (.62) Less distributions: Distributions from realized gains (.02) (2.20) -- Net asset value, end of period $24.91 $ 28.12 $52.03 Ratios/supplemental data Net assets, end of period (in millions) $9 $9 $1 Ratio of expenses to average daily net assets(c) 1.78%(d) 1.75% 1.75%(d) Ratio of net investment income (loss) to average daily net assets (1.08%)(d) (1.10%) (1.30%)(d) Portfolio turnover rate (excluding short-term securities) 41% 41% 23% Total return(e) (11.34%) (42.56%) (1.18%)
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2002(f) 2001 2000 1999 1998 Net asset value, beginning of period $29.96 $ 54.75 $42.37 $36.74 $35.60 Income from investment operations: Net investment income (loss) (.01) (.07) (.06) -- (.04) Net gains (losses) (both realized and unrealized) (3.25) (22.52) 13.22 7.33 2.14 Total from investment operations (3.26) (22.59) 13.16 7.33 2.10 Less distributions: Distributions from realized gains (.02) (2.20) (.78) (1.70) (.96) Net asset value, end of period $26.68 $ 29.96 $54.75 $42.37 $36.74 Ratios/supplemental data Net assets, end of period (in millions) $804 $974 $1,551 $914 $582 Ratio of expenses to average daily net assets(c) .80%(d) .83% .83% .80% .80% Ratio of net investment income (loss) to average daily net assets (.10%)(d) (.18%) (.14%) --% (.12%) Portfolio turnover rate (excluding short-term securities) 41% 41% 23% 17% 28% Total return(e) (10.88%) (42.04%) 31.20% 20.59% 6.40% Notes to financial highlights
(b) For a share outstanding throughout the period. Rounded to the nearest cent. (c) Inception date was June 26, 2000. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (f) Six months ended Jan. 31, 2002 (Unaudited). -------------------------------------------------------------------------------- 15 AXP GROWTH FUND -- SEMIANNUAL REPORT Financial Statements Statement of assets and liabilities Growth Portfolio Jan. 31, 2002 (Unaudited) Assets Investments in securities at value, (Note 1)* (identified cost $4,409,441,491) $5,320,938,941 Dividends and accrued interest receivable 1,423,537 Receivable for investment securities sold 54,021,714 ---------- Total assets 5,376,384,192 ------------- Liabilities Disbursements in excess of cash on demand deposit 299,680 Payable for investment securities purchased 36,066,655 Payable upon return of securities loaned (Note 4) 96,943,800 Accrued investment management services fee 77,374 Other accrued expenses 146,395 ------- Total liabilities 133,533,904 ----------- Net assets $5,242,850,288 ============== *Including securities on loan, at value (Note 4) $ 94,093,272 -------------- See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 AXP GROWTH FUND -- SEMIANNUAL REPORT
Statement of operations Growth Portfolio Six months ended Jan. 31, 2002 (Unaudited) Investment income Income: Dividends $ 13,814,766 Interest 5,284,173 Less foreign taxes withheld (22,657) ------- Total income 19,076,282 ---------- Expenses (Note 2): Investment management services fee 12,335,481 Compensation of board members 15,043 Custodian fees 228,448 Audit fees 14,250 Other 54,691 ------ Total expenses 12,647,913 Earnings credits on cash balances (Note 2) (5,342) ------ Total net expenses 12,642,571 ---------- Investment income (loss) -- net 6,433,711 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (Note 3) (459,172,370) Net change in unrealized appreciation (depreciation) on investments (236,039,449) ------------ Net gain (loss) on investments (695,211,819) ------------ Net increase (decrease) in net assets resulting from operations $(688,778,108) =============
Statements of changes in net assets Growth Portfolio Jan. 31, 2002 July 31, 2001 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 6,433,711 $ 7,667,562 Net realized gain (loss) on security transactions (Note 3) (459,172,370) (815,719,232) Net change in unrealized appreciation (depreciation) on investments (236,039,449) (3,839,591,149) ------------ -------------- Net increase (decrease) in net assets resulting from operations (688,778,108) (4,647,642,819) ------------ -------------- Proceeds from contributions 504,487,892 1,392,698,912 Fair value of withdrawals (917,516,724) (1,057,809,216) ------------ -------------- Net contributions (withdrawals) from partners (413,028,832) 334,889,696 ------------ ----------- Total increase (decrease) in net assets (1,101,806,940) (4,312,753,123) Net assets at beginning of period 6,344,657,228 10,657,410,351 ------------- -------------- Net assets at end of period $ 5,242,850,288 $ 6,344,657,228 =============== ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 17 AXP GROWTH FUND -- SEMIANNUAL REPORT Notes to Financial Statements Growth Portfolio (Unaudited as to Jan. 31, 2002) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Growth Portfolio invests primarily in stocks of U.S. and foreign companies that appear to offer growth opportunities. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. -------------------------------------------------------------------------------- 18 AXP GROWTH FUND -- SEMIANNUAL REPORT Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. -------------------------------------------------------------------------------- 19 AXP GROWTH FUND -- SEMIANNUAL REPORT 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with AEFC to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.6% to 0.48% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the AXP Growth Fund to the Lipper Large-Cap Growth Funds Index. The maximum adjustment is 0.12% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference is less than 1%, the adjustment will be zero. The adjustment decreased the fee by $2,671,509 for the six months ended Jan. 31, 2002. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. During the six months ended Jan. 31, 2002, the Portfolio's custodian fees were reduced by $5,342 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to American Express Trust Company, an affiliate of AEFC. According to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $2,078,509,363 and $2,455,635,780, respectively, for the six months ended Jan. 31, 2002. For the same period, the portfolio turnover rate was 41%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $192,300 for the six months ended Jan. 31, 2002. 4. LENDING OF PORTFOLIO SECURITIES As of Jan. 31, 2002, securities valued at $94,093,272 were on loan to brokers. For collateral, the Portfolio received $96,943,800 in cash. Income from securities lending amounted to $54,417 for the six months ended Jan. 31, 2002. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. -------------------------------------------------------------------------------- 20 AXP GROWTH FUND -- SEMIANNUAL REPORT Investments in Securities Growth Portfolio Jan. 31, 2002 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (96.1%) Issuer Shares Value(a) Airlines (1.4%) Southwest Airlines 4,000,000 $75,760,000 Banks and savings & loans (1.9%) Zions Bancorp 2,000,000 100,680,000 Chemicals (0.8%) Praxair 200,000 11,610,000 Waste Management 1,000,000 28,820,000 Total 40,430,000 Communications equipment & services (3.1%) Brocade Communications Systems 1,400,000(b) 50,960,000 Ericsson (LM) ADR Cl B 3,000,000(c) 13,020,000 Nokia ADR Cl A 3,000,000(c) 70,350,000 RF Micro Devices 1,500,000(b) 27,465,000 Total 161,795,000 Computer software & services (2.1%) Siebel Systems 1,000,000(b) 35,390,000 VeriSign 1,000,000(b) 30,860,000 VERITAS Software 1,000,000(b) 42,550,000 Total 108,800,000 Computers & office equipment (16.8%) Check Point Software Technologies 1,000,000(b,c) 36,500,000 Cisco Systems 8,000,000(b) 158,240,000 Dell Computer 1,600,000(b) 43,920,000 EMC 7,000,000(b) 114,800,000 Intl Business Machines 1,450,000 156,440,500 Mercury Interactive 1,000,000(b) 38,120,000 Microsoft 3,500,000(b) 222,985,000 Oracle 1,000,000(b) 17,260,000 State Street 1,750,000 94,115,000 Total 882,380,500 Electronics (13.8%) Applied Materials 3,000,000(b) 130,950,000 Broadcom Cl A 1,000,000(b) 42,470,000 Flextronics Intl 1,000,000(b,c) 22,200,000 Intel 4,500,000 157,680,000 Maxim Integrated Products 2,500,000(b) 138,725,000 Symbol Technologies 4,000,000 62,000,000 Texas Instruments 4,000,000 124,840,000 Xilinx 1,000,000(b) 43,350,000 Total 722,215,000 Energy (1.1%) Phillips Petroleum 1,000,000 58,470,000 Energy equipment & services (1.7%) Schlumberger 1,000,000 56,390,000 Transocean Sedco Forex 1,000,000 30,640,000 Total 87,030,000 Financial services (3.0%) Citigroup 3,322,700 157,495,980 Food (0.9%) General Mills 1,000,000 49,550,000 Health care (19.6%) American Home Products 1,500,000 96,990,000 Amgen 1,000,000(b) 55,500,000 Applera-Applied Biosystem Group 400,000 8,932,000 Baxter Intl 1,000,000 55,830,000 Biogen 800,000(b) 43,376,000 Biomet 1,275,000 41,169,750 Genentech 2,000,000(b) 98,900,000 Gilead Sciences 232,300(b) 15,194,743 IDEC Pharmaceuticals 1,000,000(b) 59,460,000 MedImmune 1,000,000(b) 42,370,000 Medtronic 3,000,000 147,810,000 Pfizer 7,900,000 329,193,000 Stryker 550,000 32,307,000 Total 1,027,032,493 Health care services (1.7%) UnitedHealth Group 1,200,000 89,220,000 Industrial equipment & services (1.4%) Illinois Tool Works 1,000,000 71,380,000 Insurance (4.1%) ACE 1,000,000(c) 38,850,000 American Intl Group 1,000,000 74,150,000 Marsh & McLennan 1,000,000 101,850,000 Total 214,850,000 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 21 AXP GROWTH FUND -- SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Leisure time & entertainment (2.7%) Harley-Davidson 2,000,000 $114,000,000 Viacom Cl B 700,000(b) 27,993,000 Total 141,993,000 Media (4.0%) AOL Time Warner 3,000,000(b) 78,930,000 Clear Channel Communications 1,000,000(b) 46,040,000 Omnicom Group 1,000,000 87,370,000 Total 212,340,000 Multi-industry conglomerates (2.8%) General Electric 4,000,000 148,600,000 Restaurants & lodging (0.8%) Marriott Intl Cl A 1,000,000 40,780,000 Retail (11.3%) Best Buy 400,000(b) 29,600,000 Costco Wholesale 1,500,000(b) 69,000,000 Gap 1,800,000 25,920,000 Home Depot 4,000,000 200,360,000 Kohl's 1,300,000(b) 86,177,000 Target 2,000,000 88,820,000 Wal-Mart Stores 1,500,000 89,970,000 Total 589,847,000 Utilities -- telephone (1.1%) Sprint (PCS Group) 3,500,000(b) 57,330,000 Total common stocks (Cost: $4,126,481,148) $5,037,978,973 Short-term securities (5.4%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (4.2%) Federal Home Loan Bank Disc Nts 02-01-02 1.70% $13,700,000 $13,699,353 03-06-02 1.70 25,000,000 24,962,502 04-10-02 1.68 4,100,000 4,086,835 Federal Home Loan Mtge Corp Disc Nts 02-07-02 1.94 6,700,000 6,697,833 02-22-02 1.69 34,200,000 34,164,845 02-25-02 1.69 18,600,000 18,577,893 03-05-02 1.70 2,300,000 2,296,416 03-26-02 1.72 5,000,000 4,987,138 Federal Natl Mtge Assn Disc Nts 02-21-02 1.98 20,000,000 19,980,700 03-22-02 1.58 40,200,000 40,114,689 03-28-02 1.68 4,400,000 4,388,944 04-17-02 1.72 30,000,000 29,893,740 04-24-02 1.71 18,000,000 17,930,304 Total 221,781,192 Commercial paper (1.2%) Abbey Natl North America 04-29-02 1.94 1,100,000 1,094,891 Alcoa 02-20-02 1.63 3,100,000 3,097,193 Alpine Securitization 02-01-02 1.95 25,700,000(d) 25,698,608 Cargill 02-07-02 1.65 15,000,000(d) 14,995,187 Natl Rural Utilities 02-14-02 1.73 2,800,000 2,798,116 02-20-02 1.65 3,500,000 3,496,792 Toyota Motor Credit 02-04-02 1.81 10,000,000(d) 9,997,989 Total 61,178,776 Total short-term securities (Cost: $282,960,343) $282,959,968 Total investments in securities (Cost: $4,409,441,491)(e) $5,320,938,941 -------------------------------------------------------------------------------- 22 AXP GROWTH FUND -- SEMIANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. As of Jan. 31, 2002, the value of foreign securities represented 3.5% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (e) At Jan. 31, 2002, the cost of securities for federal income tax purposes was approximately $4,409,441,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $1,150,402,000 Unrealized depreciation (238,904,000) ------------ Net unrealized appreciation $ 911,498,000 -------------- -------------------------------------------------------------------------------- 23 AXP GROWTH FUND -- SEMIANNUAL REPORT AXP Growth Fund 70100 AXP Financial Center Minneapolis, MN 55474 americanexpress.com Ticker Symbol Class A: INIDX Class B:IGRBX Class C: AXGCX Class Y:IGRYX This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. (logo) American Express S-6456 R (4/02)