-----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, RIEfL5EuJdaHqZpegCviwLme+y3AWH8l8uBFsNpUgGUQcLWUTrupekbcgddE7vsO O2H4WgGJBXKKCcP1edMOvA== 0000820027-02-000235.txt : 20020415 0000820027-02-000235.hdr.sgml : 20020415 ACCESSION NUMBER: 0000820027-02-000235 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020404 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: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02111 FILM NUMBER: 02601759 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 MAIL ADDRESS: STREET 1: 80 S. 8TH STREET CITY: MINNEAPOLIS STATE: MN ZIP: 55440 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH FUND INC DATE OF NAME CHANGE: 20000829 FORMER COMPANY: FORMER CONFORMED NAME: IDS GROWTH FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 s-6359g.txt AXP RESEARCH OPPORTUNITIES FUND AXP(R) Research Opportunities Fund 2002 SEMIANNUAL REPORT American Express(R) Funds (icon of) ruler AXP Research Opportunities Fund seeks to provide shareholders with long-term capital growth. The Rewards of Research Behind every decision to buy or sell a stock is information -- in most cases, informationgathered by a research analyst. AXPResearch Opportunities Fund is designed to make the most of that research by investing only in Standard & Poor's 500 stocks that carry our analysts' highest rating. The intention is to construct a portfolio that has the potential to outperform the stock market as a whole. CONTENTS From the Chairman 3 Portfolio Manager Q & A 3 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 15 Notes to Financial Statements (Portfolio) 17 Investments in Securities 20 - -------------------------------------------------------------------------------- 2 AXP RESEARCH OPPORTUNITIES 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 Manager Q & A Q: How did the Fund perform for the six-month period ended January 31, 2002? A: During a difficult period for the equity markets, the Fund declined 10.26% over the six months (Class A shares excluding sales charges). The unmanaged Standard & Poor's 500 Index (S&P 500 Index) return(e)d -6.04% over the same period. Q: What factors affected the Fund's performance during the six months? A: The market was extremely volatile as investors fretted over the economy and corporate profits. The events of September 11 exacerbated investors' concerns. In the days that followed the terrorist attacks, the S&P 500 Index reached its low point for the year. Then stocks moved higher as investors' fears eased on early signs of an economic pickup. However, events surrounding the Enron collapse shook the market's confidence early this year, and stocks again moved lower as the six-month period ended. In general, the Fund benefited from performance of its holdings in more growth-oriented stocks among technology, health care and consumer - -------------------------------------------------------------------------------- 3 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT cyclical holdings. These stocks performed particularly well in the closing months of 2001. The Fund lost ground due to weakness among its energy, utilities, financial and industrial stocks. Q: Did any significant changes take place in the Fund during the period? A: Since assuming management of the Fund in January 2002, I've implemented selected enhancements to the portfolio. These enhancements were designed to showcase our analysts' stock picking acumen while muting the effect of other factors that can impact performance. Most notably, the Fund is now sector neutral, meaning that its sector weights are similar to those of the S&P 500 Index. For example, if the financial sector represents 18% of the Index, the Fund's weight will be similar. What has not changed is that the Fund owns stocks based on recommendations from American Express Financial Advisors' in-house investment research team. Q: What approach do the research analysts take in reviewing stocks? A: They conduct what I call "grass roots," fundamental research into individual companies. Such research involves delving into what makes a company tick, which includes getting to know management, meeting the company's customers and suppliers, understanding the industry dynamics and digging into its financial statements. In a post-Enron world, all of these factors are incredibly important. Then, with a thorough understanding of the company's fundamentals and the stock's valuation, the analyst will assign a buy, hold or sell rating. Only those stocks that have a buy rating and, in selected cases, a hold rating will be owned in the portfolio. Q: What is the outlook for the Fund for the next six months? A: I am very optimistic that the changes we've implemented will prove beneficial to investors in the period ahead. In an environment of some uncertainty, and in light of an increasing emphasis on understanding the true nature of companies before investments are made (particularly after the collapse of Enron), our focus on fundamental analysis seems particularly timely. In addition, I anticipate more favorable market conditions as the year progresses. In an environment that features low inflation, low interest rates and a fair amount of liquidity (money available to invest in stocks), the market should be ready to begin a recovery from the difficulties it faced in 2000 and 2001. With the support of our experienced research analysts, I anticipate that the Fund has the potential to enjoy solid returns that exceed those of the stock market as a whole (as measured by the S&P 500 Index) in the next six months. Joan M. Kampmeyer Note to shareholders: In January 2002, Joan M. Kampmeyer succeeded James M. Johnson, Jr. as portfolio manager of AXP Research Opportunities Fund. - -------------------------------------------------------------------------------- 4 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $4.81 July 31, 2001 $5.37 Decrease $0.56 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $0.01 From long-term capital gains $ -- Total distributions $0.01 Total return* -10.26% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $4.58 July 31, 2001 $5.12 Decrease $0.54 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $ -- From long-term capital gains $ -- Total distributions $ -- Total return* -10.55% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $4.58 July 31, 2001 $5.13 Decrease $0.55 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $ -- From long-term capital gains $ -- Total distributions $ -- Total return* -10.70% Class Y -- 6-month performance (All figures per share) Net asset value (NAV) Jan. 31, 2002 $4.85 July 31, 2001 $5.42 Decrease $0.57 Distributions -- Aug. 1, 2001 - Jan. 31, 2002 From income $0.01 From long-term capital gains $ -- Total distributions $0.01 Total return* -10.28% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - -------------------------------------------------------------------------------- 5 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT The 10 Largest Holdings Percent Value (of net assets) (as of Jan. 31, 2002) General Electric 3.9% $18,303,805 Microsoft 3.3 15,354,110 Wal-Mart Stores 3.0 14,335,220 Pfizer 2.8 13,026,042 Exxon Mobil 2.5 11,953,205 Intel 2.4 11,352,960 Citigroup 2.3 10,920,960 American Intl Group 2.3 10,892,635 Johnson & Johnson 1.9 9,149,841 Verizon Communications 1.9 8,746,245 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 26.3% of net assets - -------------------------------------------------------------------------------- 6 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Research Opportunities Fund Jan. 31, 2002 (Unaudited) Assets Investment in Portfolio (Note 1) $ 470,343,280 Capital shares receivable 1,223 ----- Total assets 470,344,503 ----------- Liabilities Capital shares payable 2,175 Accrued distribution fee 6,838 Accrued service fee 1 Accrued transfer agency fee 491 Accrued administrative services fee 724 Other accrued expenses 133,016 ------- Total liabilities 143,245 ------- Net assets applicable to outstanding capital stock $ 470,201,258 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 996,649 Additional paid-in capital 674,567,695 Excess of distributions over net investment income (548,899) Accumulated net realized gain (loss) (Note 5) (179,124,071) Unrealized appreciation (depreciation) on investments (25,690,116) ----------- Total -- representing net assets applicable to outstanding capital stock $ 470,201,258 ============== Net assets applicable to outstanding shares: Class A $ 285,211,868 Class B $ 184,412,333 Class C $ 321,589 Class Y $ 255,468 Net asset value per share of outstanding capital stock: Class A shares 59,247,401 $ 4.81 Class B shares 40,294,602 $ 4.58 Class C shares 70,205 $ 4.58 Class Y shares 52,665 $ 4.85 ------ --------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 7 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT
Statement of operations AXP Research Opportunities Fund Six months ended Jan. 31, 2002 (Unaudited) Investment income Income: Dividends $ 3,001,256 Interest 359,637 Less foreign taxes withheld (5,903) ------ Total income 3,354,990 --------- Expenses (Note 2): Expenses allocated from Portfolio 1,555,526 Distribution fee Class A 388,878 Class B 1,003,028 Class C 1,369 Transfer agency fee 573,008 Incremental transfer agency fee Class A 39,909 Class B 41,143 Class C 67 Service fee -- Class Y 136 Administrative services fees and expenses 147,202 Compensation of board members 5,518 Printing and postage 109,471 Registration fees 37,843 Audit fees 3,000 Other 5,267 ----- Total expenses 3,911,365 Earnings credits on cash balances (Note 2) (6,601) ------ Total net expenses 3,904,764 --------- Investment income (loss) -- net (549,774) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (73,514,222) Futures contracts 422,533 ------- Net realized gain (loss) on investments (73,091,689) Net change in unrealized appreciation (depreciation) on investments 11,500,996 ---------- Net gain (loss) on investments (61,590,693) ----------- Net increase (decrease) in net assets resulting from operations $(62,140,467) ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 8 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT
Statements of changes in net assets AXP Research Opportunities Fund Jan. 31, 2002 July 31, 2001 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ (549,774) $ 548,546 Net realized gain (loss) on investments (73,091,689) (103,085,570) Net change in unrealized appreciation (depreciation) on investments 11,500,996 (38,537,820) ---------- ----------- Net increase (decrease) in net assets resulting from operations (62,140,467) (141,074,844) ----------- ------------ Distributions to shareholders from: Net investment income Class A (546,886) -- Class B -- -- Class C (96) -- Class Y (689) -- Net realized gain Class A -- (63,547,161) Class B -- (42,332,023) Class C -- (27,210) Class Y -- (37,723) ----- ------- Total distributions (547,671) (105,944,117) -------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 26,791,414 60,791,841 Class B shares 6,552,780 24,966,464 Class C shares 102,747 265,362 Class Y shares 3,818 110,852 Reinvestment of distributions at net asset value Class A shares 543,290 62,625,709 Class B shares -- 41,987,018 Class C shares 95 27,210 Class Y shares 689 37,724 Payments for redemptions Class A shares (69,048,397) (150,872,613) Class B shares (Note 2) (32,054,578) (69,396,656) Class C shares (Note 2) (17,651) (14,432) Class Y shares (29,844) (26,197) ------- ------- Increase (decrease) in net assets from capital share transactions (67,155,637) (29,497,718) ----------- ----------- Total increase (decrease) in net assets (129,843,775) (276,516,679) Net assets at beginning of period 600,045,033 876,561,712 ----------- ----------- Net assets at end of period $ 470,201,258 $ 600,045,033 ============= ============= Undistributed (excess of distributions over) net investment income $ (548,899) $ 548,546 ------------- -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 9 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Notes to Financial Statements AXP Research Opportunities 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 Aggressive Growth Portfolio The Fund invests all of its assets in Aggressive Growth Portfolio (the Portfolio), a series of Growth Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of companies that comprise the S&P 500. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of Jan. 31, 2002, 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. 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 - -------------------------------------------------------------------------------- 10 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT 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 0.06% to 0.03% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The 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 $213,446 for Class A and $96,110 for Class B 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 $6,601 as a result of earnings credits from overnight cash balances. - -------------------------------------------------------------------------------- 11 AXP RESEARCH OPPORTUNITIES 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 5,528,046 1,423,054 22,083 785 Issued for reinvested distributions 110,287 -- 20 139 Redeemed (14,248,607) (6,975,298) (3,747) (6,344) ----------- ---------- ------ ------ Net increase (decrease) (8,610,274) (5,552,244) 18,356 (5,420) ---------- ---------- ------ ------ Year ended July 31, 2001 Class A Class B Class C Class Y Sold 9,614,169 3,961,702 41,810 17,678 Issued for reinvested distributions 10,668,858 7,468,880 4,841 6,383 Redeemed (23,350,130) (11,279,771) (2,624) (4,028) ----------- ----------- ------ ------ Net increase (decrease) (3,067,103) 150,811 44,027 20,033 ---------- ------- ------ ------
4. BANK BORROWINGS The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had no borrowings outstanding during the six months ended Jan. 31, 2002. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $100,482,475 as of July 31, 2001, that if not offset by subsequent capital gains, will expire in 2010. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 12 AXP RESEARCH OPPORTUNITIES 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 $5.37 $ 7.61 $7.94 $6.98 $6.86 Income from investment operations: Net investment income (loss) -- .02 -- (.01) .02 Net gains (losses) (both realized and unrealized) (.55) (1.27) .66 1.32 .65 Total from investment operations (.55) (1.25) .66 1.31 .67 Less distributions: Dividends from net investment income (.01) -- -- -- -- Distributions from realized gains -- (.99) (.99) (.35) (.55) Total distributions (.01) (.99) (.99) (.35) (.55) Net asset value, end of period $4.81 $ 5.37 $7.61 $7.94 $6.98 Ratios/supplemental data Net assets, end of period (in millions) $285 $365 $540 $481 $337 Ratio of expenses to average daily net assets(c) 1.23%(d) 1.16% 1.14% 1.12% 1.12% Ratio of net investment income (loss) to average daily net assets .09%(d) .37% .02% .04% .30% Portfolio turnover rate (excluding short-term securities) 100% 234% 160% 143% 148% Total return(e) (10.26%) (17.54%) 7.73% 19.21% 10.76% 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 $5.12 $ 7.36 $7.76 $6.88 $6.82 Income from investment operations: Net investment income (loss) (.02) (.02) (.05) (.02) (.02) Net gains (losses) (both realized and unrealized) (.52) (1.23) .64 1.25 .63 Total from investment operations (.54) (1.25) .59 1.23 .61 Less distributions: Distributions from realized gains -- (.99) (.99) (.35) (.55) Net asset value, end of period $4.58 $ 5.12 $7.36 $7.76 $6.88 Ratios/supplemental data Net assets, end of period (in millions) $184 $235 $336 $276 $184 Ratio of expenses to average daily net assets(c) 1.99%(d) 1.92% 1.91% 1.88% 1.88% Ratio of net investment income (loss) to average daily net assets (.68%)(d) (.39%) (.73%) (.72%) (.46%) Portfolio turnover rate (excluding short-term securities) 100% 234% 160% 143% 148% Total return(e) (10.55%) (18.19%) 7.03% 18.31% 9.92%
See accompanying notes to financial highlights. - -------------------------------------------------------------------------------- 13 AXP RESEARCH OPPORTUNITIES 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 $5.13 $ 7.36 $7.50 Income from investment operations: Net investment income (loss) (.02) (.02) .02 Net gains (losses) (both realized and unrealized) (.53) (1.22) (.16) Total from investment operations (.55) (1.24) (.14) Less distributions: Distributions from realized gains -- (.99) -- Net asset value, end of period $4.58 $ 5.13 $7.36 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.99%(d) 1.92% 1.91%(d) Ratio of net investment income (loss) to average daily net assets (.66%)(d) (.36%) (.50%)(d) Portfolio turnover rate (excluding short-term securities) 100% 234% 160% Total return(e) (10.70%) (18.03%) (1.87%)
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 $5.42 $ 7.65 $7.96 $7.01 $6.88 Income from investment operations: Net investment income (loss) .01 .04 .01 -- .03 Net gains (losses) (both realized and unrealized) (.57) (1.28) .67 1.32 .65 Total from investment operations (.56) (1.24) .68 1.32 .68 Less distributions: Dividends from net investment income (.01) -- -- (.02) -- Distributions from realized gains -- (.99) (.99) (.35) (.55) Total distributions (.01) (.99) (.99) (.37) (.55) Net asset value, end of period $4.85 $ 5.42 $7.65 $7.96 $7.01 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.05%(d) 1.00% .97% 1.02% .87% Ratio of net investment income (loss) to average daily net assets .26%(d) .54% .17% .12% .40% Portfolio turnover rate (excluding short-term securities) 100% 234% 160% 143% 148% Total return(e) (10.28%) (17.29%) 7.99% 19.34% 10.93%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Jan. 31, 2002 (Unaudited). - -------------------------------------------------------------------------------- 14 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities Aggressive Growth Portfolio Jan. 31, 2002 (Unaudited) Assets Investments in securities at value, (Note 1) (identified cost $489,259,046 ) $463,640,764 Cash in bank on demand deposit 69,041 Dividends and accrued interest receivable 435,176 Receivable for investment securities sold 14,229,190 ---------- Total assets 478,374,171 ----------- Liabilities Payable for investment securities purchased 7,930,615 Accrued investment management services fee 8,023 Other accrued expenses 21,888 ------ Total liabilities 7,960,526 --------- Net assets $470,413,645 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT
Statement of operations Aggressive Growth Portfolio Six months ended Jan. 31, 2002 (Unaudited) Investment income Income: Dividends $ 3,001,678 Interest 360,895 Less foreign taxes withheld (5,904) ------ Total income 3,356,669 --------- Expenses (Note 2): Investment management services fee 1,505,272 Compensation of board members 5,893 Custodian fees 34,649 Audit fees 9,000 Other 1,565 ----- Total expenses 1,556,379 Earnings credits on cash balances (Note 2) (635) ---- Total net expenses 1,555,744 --------- Investment income (loss) -- net 1,800,925 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (73,523,153) Futures contracts 422,533 ------- Net realized gain (loss) on investments (73,100,620) Net change in unrealized appreciation (depreciation) on investments 11,501,861 ---------- Net gain (loss) on investments (61,598,759) ----------- Net increase (decrease) in net assets resulting from operations $(59,797,834) ============
Statements of changes in net assets Aggressive Growth Portfolio Jan. 31, 2002 July 31, 2001 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 1,800,925 $ 6,747,835 Net realized gain (loss) on investments (73,100,620) (103,099,047) Net change in unrealized appreciation (depreciation) on investments 11,501,861 (38,541,226) ---------- ----------- Net increase (decrease) in net assets resulting from operations (59,797,834) (134,892,438) ----------- ------------ Proceeds from contributions 3,231,240 5,054,931 Fair value of withdrawals (73,237,478) (146,750,384) ----------- ------------ Net contributions (withdrawals) from partners (70,006,238) (141,695,453) ----------- ------------ Total increase (decrease) in net assets (129,804,072) (276,587,891) Net assets at beginning of period 600,217,717 876,805,608 ----------- ----------- Net assets at end of period $ 470,413,645 $ 600,217,717 ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Notes to Financial Statements Aggressive Growth Portfolio (Unaudited as to Jan. 31, 2002) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Aggressive Growth Portfolio invests primarily in equity securities of companies that comprise the S&P 500. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by independent pricing service. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. - -------------------------------------------------------------------------------- 17 AXP RESEARCH OPPORTUNITIES 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. - -------------------------------------------------------------------------------- 18 AXP RESEARCH OPPORTUNITIES 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 0.65% to 0.50% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of AXP Research Opportunities Fund to the Lipper Large-Cap Core Index. The maximum adjustment is 0.12% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference is less than 1%, the adjustment will be zero. The adjustment decreased the fee by $126,251 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 $635 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 $481,809,587 and $557,903,097, respectively, for the six months ended Jan. 31, 2002. For the same period, the portfolio turnover rate was 100%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $31,218 for the six months ended Jan. 31, 2002. Income from securities lending amounted to $1,745 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. 4. STOCK INDEX FUTURES CONTRACTS As of Jan. 31, 2002, investments in securities included securities valued at $1,176,060 that were pledged as collateral to cover initial margin deposits on 25 open purchase contracts. The market value of the open purchase contracts as of Jan. 31, 2002 was $7,065,000 with a net unrealized loss of $75,729. - -------------------------------------------------------------------------------- 19 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Investments in Securities Aggressive Growth Portfolio Jan. 31, 2002 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (95.8%) Issuer Shares Value(a) Aerospace & defense (0.6%) Northrop Grumman 24,300 $2,712,123 Automotive & related (0.5%) Genuine Parts 70,100 2,489,952 Banks and savings & loans (6.3%) Bank of America 70,600 4,449,918 Fifth Third Bancorp 26,100 1,650,825 FleetBoston Financial 49,000 1,647,380 J.P. Morgan Chase 149,500 5,090,475 Synovus Financial 106,700 2,949,188 U.S. Bancorp 202,600 4,218,132 Wachovia 61,300 2,038,225 Washington Mutual 43,400 1,489,488 Wells Fargo 130,100 6,035,339 Total 29,568,970 Beverages & tobacco (2.9%) Anheuser-Busch 86,300 4,079,401 Philip Morris 141,900 7,110,609 UST 70,400 2,460,480 Total 13,650,490 Chemicals (1.8%) Air Products & Chemicals 51,100 2,363,375 du Pont (EI) de Nemours 89,000 3,931,130 Ecolab 51,900 2,220,801 Total 8,515,306 Communications equipment & services (2.3%) Tellabs 130,400(b) 2,015,984 Verizon Communications 188,700 8,746,245 Total 10,762,229 Computer software & services (1.0%) Intuit 56,700(b) 2,225,475 VERITAS Software 57,700(b) 2,455,135 Total 4,680,610 Computers & office equipment (11.4%) Cisco Systems 376,800(b) 7,453,104 Compaq Computer 160,100 1,977,235 Dell Computer 180,500(b) 4,954,725 Intl Business Machines 74,400 8,027,016 Microsoft 241,000(b) 15,354,110 Oracle 307,200(b) 5,302,272 Solectron 195,100(b) 2,286,572 State Street 56,600 3,043,948 Sun Microsystems 283,700(b) 3,052,612 Yahoo! 117,000(b) 2,017,080 Total 53,468,674 Electronics (6.4%) Advanced Micro Devices 111,600(b) 1,791,180 Altera 57,700(b) 1,449,424 Analog Devices 55,700(b,d) 2,439,660 Applied Materials 77,600(b) 3,387,240 Broadcom Cl A 49,200(b) 2,089,524 Intel 324,000 11,352,960 Maxim Integrated Products 32,400(b) 1,797,876 Micron Technology 79,400(b) 2,679,750 Waters 39,700(b) 1,373,620 Xilinx 38,200(b) 1,655,970 Total 30,017,204 Energy (6.5%) Apache 50,720 2,459,413 ChevronTexaco 71,600 6,000,080 Conoco 102,600 2,889,216 Exxon Mobil 306,100 11,953,205 FirstEnergy 53,400 1,986,480 Kerr-McGee 44,100 2,335,095 Phillips Petroleum 52,200 3,052,134 Total 30,675,623 Financial services (4.1%) Citigroup 230,400 10,920,960 Fannie Mae 44,800 3,626,560 Freddie Mac 31,200 2,094,144 Morgan Stanley, Dean Witter & Co 49,300 2,711,500 Total 19,353,164 Food (1.2%) General Mills 60,500 2,997,775 Heinz (HJ) 68,700 2,844,180 Total 5,841,955 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 20 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Health care (12.6%) Abbott Laboratories 92,200 $5,319,940 Allergan 23,300 1,555,275 American Home Products 79,300 5,127,538 Applera-Applied Biosystem Group 45,200 1,009,316 Baxter Intl 50,500 2,819,415 Biogen 29,400(b) 1,594,068 Biomet 55,200 1,782,408 Genzyme-General Division 33,300(b) 1,518,813 Guidant 41,100(b) 1,974,855 Johnson & Johnson 159,100 9,149,841 MedImmune 38,200(b) 1,618,534 Medtronic 79,900 3,936,673 Pfizer 312,600 13,026,042 Pharmacia 88,500 3,584,250 Schering-Plough 101,900 3,299,522 Stryker 32,400 1,903,176 Total 59,219,666 Health care services (1.4%) AmerisourceBergen 26,200 1,695,926 Cardinal Health 41,100 2,708,901 HCA 54,800 2,329,000 Total 6,733,827 Household products (2.3%) Gillette 113,900 3,792,870 Procter & Gamble 85,700 6,999,976 Total 10,792,846 Industrial equipment & services (1.0%) Caterpillar 51,900 2,609,532 Parker-Hannifin 45,700 2,241,128 Total 4,850,660 Insurance (6.2%) American Intl Group 146,900 10,892,635 Hartford Financial Services Group 49,200 3,256,548 John Hancock Financial Services 70,500 2,705,790 Lincoln Natl 54,400 2,801,600 Marsh & McLennan 34,900 3,554,565 St. Paul Companies 66,650 2,979,255 XL Capital Cl A 31,900(c) 2,811,028 Total 29,001,421 Leisure time & entertainment (1.7%) Mattel 140,200 2,663,800 Viacom Cl B 129,600(b) 5,182,704 Total 7,846,504 Media (2.1%) AOL Time Warner 270,000(b,d) 7,103,700 McGraw-Hill Companies 44,700 2,864,376 Total 9,968,076 Metals (1.2%) Alcan 66,300(c) 2,576,418 Alcoa 90,100 3,230,085 Total 5,806,503 Miscellaneous (0.4%) Convergys 60,500(b) 1,917,245 Multi-industry conglomerates (5.2%) Danaher 41,100 2,619,714 General Electric 492,700 18,303,805 Minnesota Mining & Mfg 33,800 3,745,040 Total 24,668,559 Paper & packaging (0.6%) Intl Paper 66,900(d) 2,795,082 Real estate investment trust (0.6%) Starwood Hotels & Resorts Worldwide 79,300 2,716,025 Retail (10.3%) Best Buy 39,900(b) 2,952,600 Circuit City Stores- Circuit City Group 86,900 2,593,096 Family Dollar Stores 85,300(d) 2,877,169 Home Depot 148,600 7,443,374 Kroger 140,200(b) 2,888,120 Lowe's Companies 87,300 4,021,911 Safeway 76,200(b) 3,082,290 Target 95,200 4,227,832 Wal-Mart Stores 239,000 14,335,220 Walgreen 107,900 3,914,612 Total 48,336,224 Utilities -- electric (1.3%) Dominion Resources 35,300 2,078,111 Duke Energy 70,900 2,472,283 Sempra Energy 64,700 1,549,565 Total 6,099,959 Utilities -- gas (0.8%) Dynegy Cl A 69,000 1,645,650 El Paso 56,000 2,125,200 Total 3,770,850 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 21 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Utilities -- telephone (3.1%) BellSouth 170,600 $6,824,000 Sprint (FON Group) 215,200 3,809,040 WorldCom-WorldCom Group 374,700(b) 3,765,735 Total 14,398,775 Total common stocks (Cost: $476,276,456) $450,658,522 Short-term securities (2.8%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Home Loan Bank Disc Nt 02-15-02 1.61% $5,000,000 $4,996,646 Federal Home Loan Mtge Corp Disc Nts 02-05-02 1.67 1,000,000 999,768 02-19-02 1.74 2,700,000 2,697,521 04-18-02 1.72 1,400,000 1,394,975 04-25-02 1.68 900,000 896,473 Federal Natl Mtge Assn Disc Nt 03-07-02 1.70 2,000,000 1,996,859 Total short-term securities (Cost: $12,982,590) $12,982,242 Total investments in securities (Cost: $489,259,046)(e) $463,640,764 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 22 AXP RESEARCH OPPORTUNITIES 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 1.1% of net assets. (d) Partially pledged as initial margin deposit on the following open stock index futures contracts (see Note 4 to the financial statements): Type of security Contracts Purchase contracts S&P 500 Index, March 2002 25 (e) At Jan. 31, 2002, the cost of securities for federal income tax purposes was approximately $489,259,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 21,045,000 Unrealized depreciation (46,663,000) ----------- Net unrealized depreciation $(25,618,000) ------------ - -------------------------------------------------------------------------------- 23 AXP RESEARCH OPPORTUNITIES FUND -- SEMIANNUAL REPORT AXP Research Opportunities Fund 70100 AXP Financial Center Minneapolis, MN 55474 americanexpress.com Ticker Symbol Class A: IRDAX Class B: IROBX Class C: N/A Class Y: N/A This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. (logo) American Express S-6359 G (4/02) -----END PRIVACY-ENHANCED MESSAGE-----