-----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, CRwS1Lg37cjnzsdQCVuP2sustVhMgiEnToUpZ2nGNHhwdkwWmyte/r/o/E/QNl0l mhw1/X1bEPuh1QlbEbXfIw== 0000820027-02-000638.txt : 20021001 0000820027-02-000638.hdr.sgml : 20021001 20021001120701 ACCESSION NUMBER: 0000820027-02-000638 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020731 FILED AS OF DATE: 20021001 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GROWTH SERIES INC/MN CENTRAL INDEX KEY: 0000049702 IRS NUMBER: 410962638 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: 02777881 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: IDS GROWTH FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH FUND INC DATE OF NAME CHANGE: 20000829 N-30D 1 s6244c.txt AXP LARGE CAP EQUITY FUND AXP(R) Large Cap Equity Fund 2002 ANNUAL REPORT (Prospectus Enclosed) AXP Large Cap Equity Fund seeks to provide shareholders with long-term growth of capital. (This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) - -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) - -------------------------------------------------------------------------------- (photo of) Arne H. Carlson From the Chairman Arne H. Carlson Chairman of the board Dear Shareholders, It is a very difficult period for investors caused by corporate management misconduct and its impact on the market as well as the economy. The integrity of corporations at large is being questioned. However, there is optimism that the resulting reforms will give Americans the kind of integrity they deserve. Many corporate leaders are strongly supportive of these reforms. We all have a right to expect financial statements to be fully accurate and business leaders to place the interests of shareholders above personal desires. Your Board is truly independent, comprised of 12 members (nominated by independent members) and three recommended by American Express Financial Corporation. These individuals come from a variety of geographic areas with the diverse skill sets necessary to oversee the operations of the Fund. Investment performance is, and remains, our primary concern. The Fund's auditors, KPMG LLP, are truly independent of American Express Financial Corporation. KPMG serves the interest of shareholders by supporting the work of the Board and certifying unbiased financial reports. The Board has confidence in Ted Truscott, American Express Financial Corporation's new Chief Investment Officer, and shares his enthusiasm in the management changes he has effected to improve the investment performance of all American Express funds. These changes include the hiring of several new portfolio managers and investment leaders and the addition of eight sub-advised funds. The focus of the Board and American Express Financial Corporation is simple; we strive for consistent, competitive investment performance. If you were a shareholder of record on September 14, you will receive a proxy statement for a shareholder meeting to be held on November 13, 2002. Please take time to consider each proposal and vote promptly. On behalf of the Board, Arne H. Carlson CONTENTS From the Chairman 2 Economic and Market Update 3 Fund Snapshot 5 Questions & Answers with Portfolio Management 6 Investments in Securities 9 Financial Statements 12 Notes to Financial Statements 15 Independent Auditors' Report 23 Board Members and Officers 24 - -------------------------------------------------------------------------------- 2 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Economic and Market Update FROM CIO WILLIAM F. "TED" TRUSCOTT (photo of) William F. "Ted" Truscott William F. "Ted" Truscott Chief Investment Officer American Express Financial Corporation Dear Shareholders, Major U.S. financial markets lost ground for the three-month period ending July 31, 2002, although a late rally put them above earlier lows. The same factors that have driven markets down for most of the year so far were still in play during this period. These include concerns about the truthfulness of accounting practices and the perception that stocks remain too expensive relative to company earnings. I expect we'll need to see consistent improvement in earnings before stocks rebound significantly. If corporate revenue growth becomes apparent and widespread, it will effectively make stock valuations cheaper. Increased demand should then have a positive impact on prices. Economic fundamentals have continued to look positive despite volatility in the financial markets. Inflation and interest rates remain low, unemployment and job growth are at reasonable levels, and there are signs that business spending is beginning to pick up. In addition, a weaker dollar should help U.S. companies that export goods overseas, even though it crimps our wallets when we travel abroad. These and other factors make it highly unlikely that we will experience a so-called "double-dip" recession. I remain optimistic about the direction of the economy and believe that, eventually, markets will start paying attention to these very favorable conditions. Nevertheless, we should remember that risk still exists. For one, bonds have been experiencing their own bear market. This has created something of a credit crunch for businesses, as liquidity declines and spreads widen. Related to this has been a crisis of confidence -- the unfortunate legacy of recent corporate scandal. In some cases, investors who thought they were buying high-quality corporate bonds were actually getting riskier high-yield securities due to dishonest accounting. Everyone agrees that some type of reform is needed, but the challenge for regulators will be to discourage misleading practices without sacrificing entrepreneurial incentive. Prudent regulation will boost confidence, while misguided efforts will simply make markets less efficient. What I think all investors need to understand is that we're still working through the excess capacity and inflated demand forecasts that were created in the late `90s. This process has been painful, but it has helped to reorient expectations to levels that are more sustainable. Historically speaking, the late `90s were an aberration and will likely not be repeated soon. - -------------------------------------------------------------------------------- 3 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Economic and Market Update However, a more sober outlook need not be cause for special concern. We should all ask ourselves, "Have my goals changed in the last couple of years?" For many of us, the answer will be "no." If you're saving for long-term goals like retirement, I would still advise a substantial weighting in equities for your portfolio. Over time, stocks will probably continue to outperform bonds or other investments. And if you're in retirement or getting close, you may want to invest more heavily in bonds and cash, with a smaller portion devoted to equities. See your financial advisor or retirement plan administrator for more information about different types of securities and asset allocation. As always, thank you for investing with American Express Financial Advisors. William F. Truscott KEY POINTS - -- Economic fundamentals remain positive. - -- Credit "crunch" for business sector persists. - -- Re-evaluation of personal financial goals key. - -------------------------------------------------------------------------------- 4 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Fund Snapshot AS OF JULY 31, 2002 PORTFOLIO MANAGER Portfolio manager Doug Chase Tenure/since 3/28/02 Years in industry 10 FUND OBJECTIVE The Fund seeks to provide shareholders with long-term growth of capital. Inception dates A: 3/28/02 B: 3/28/02 C: 3/28/02 Y: 3/28/02 Ticker symbols A: ALEAX B: -- C: -- Y: -- Total net assets $16.9 million Number of holdings approximately 80 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL PORTFOLIO ASSET MIX Percentage of portfolio assets (pie graph) Common stocks 94.0% Cash equivalents 6.0% TOP FIVE SECTORS Percentage of portfolio assets Health care 20.8% Health care services 9.6 Computers & office equipment 8.7 Retail 6.2 Energy 5.4 TOP TEN HOLDINGS Percentage of portfolio assets Pfizer 7.7% Wyeth 5.7 McKesson 4.6 General Electric 4.3 Cardinal Health 3.4 AOL Time Warner 3.0 Exxon Mobil 2.8 Philip Morris 2.6 Sun Microsystems 2.3 Pharmacia 2.0 Fund holdings are subject to change. - -------------------------------------------------------------------------------- 5 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did the Fund perform for the period under review? (From March 28, 2002, when the Fund's shares became publicly available, through July 31, 2002.) A: In a volatile period, marred by accounting scandals and low investor confidence, the Fund offered investors performance that outpaced that of the majority of the Fund's industry peers and its broad market benchmarks. For the period under review, the Fund returned -17.80% (Class A shares, excluding sales charges) versus its benchmark, the Russell 1000(R) Index, which returned -19.86%, and its peer group, the Lipper Large-Cap Core Funds Index, which returned -18.92%. Q: What factors significantly impacted performance? A: For most of the period under review, the Fund's overall underweighted exposure to technology stocks, as well as individual stock selection within the technology sector, were the two most significant positive attributes to relative performance. The Fund also benefited from select positions in international oil companies and overweighted allocations to energy service stocks. The Fund was hurt by a continued underweight in the stocks of financial service companies. However, this sector has not typically outperformed both going into and coming out of a recession until now, and thus the Fund remains underweight in financial stocks. (bar graph) PERFORMANCE COMPARISON For the year ended July 31, 2002 0% -5% - -10% - -15% (bar 1) (bar 2) (bar 3) - -20% -17.80% -19.86% -18.92% (bar 1) AXP Large Cap Equity Fund Class A (excluding sales charge) (bar 2) Russell 1000(R) Index(1) (unmanaged) (bar 3) Lipper Large-Cap Core Funds Index(2) (1) The Russell 1000(R) Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, a broad measure of equity market performance. (2) Lipper Large-Cap Core Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in sales charges and fees. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 6 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Questions & Answers (begin callout quote) > The Fund's overall underweighted exposure to technology stocks, as well as individual stock selection within the technology sector, were the two most significant positive attributes to relative performance. (end callout quote) Q: What changes did you make to the portfolio? A: July proved to be an eventful month for the equity markets, as existing conditions -- volatility and investor pessimism -- became more pronounced. As we examined second quarter performance, we saw in the very beginning of July that financial stocks generally outperformed and healthcare underperformed. We selectively sold off financial stocks in order to add to healthcare holdings, a sector comprised of solid companies with strong fundamentals and favorable growth prospects, particularly given the aging demographics of our country. Keeping in mind that the period under review was marked by extreme volatility and overwhelming fears among investors -- a situation rife with opportunity to buy many stocks at "giveaway" prices -- we found it an ideal time to add growth potential to the portfolio. Likewise, earlier in July, we added some technology stocks to the portfolio at attractive prices, which have benefited the Fund's since-inception performance. During such volatile times, it can be beneficial to increase the turnover of the portfolio in order to buy stocks at dramatically reduced prices, which we did during July. TOTAL RETURNS SINCE INCEPTION as of July 31, 2002 At Net Asset Value (NAV)(1) Class A Class B Class C Class Y 1 year N/A N/A N/A N/A 5 years N/A N/A N/A N/A 10 years N/A N/A N/A N/A Total returns since inception -17.80%(2) -18.00%(2) -18.00%(2) -17.80%(2) With Sales Charge Class A Class B Class C Class Y 1 year N/A N/A N/A N/A 5 years N/A N/A N/A N/A 10 years N/A N/A N/A N/A Total returns since inception -22.53%(2) -22.10%(2) -18.82%(2) -17.80%(2) (1) Excluding sales charge. (2) Inception date was March 28, 2002. Returns are not annualized. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost. The performance shown for each class of shares will vary due to differences in sales charges and fees. Short term performance may be higher or lower than the figures shown. Visit americanexpress.com for current information. - -------------------------------------------------------------------------------- 7 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Questions & Answers Q: What is your outlook for the months ahead? A: It's clear that we're in the throes of an emotion-driven market. However, reat opportunities emerge when emotions prevail over fundamentals, both to the downside and to the upside. July was a great example of investment opportunity created as a result of emotional overreaction. We are carefully monitoring sectors like technology, where we're seeing a separation between the market-leading survivors and the second-tier players. As these second-tier players drop out, some large-cap technology companies will benefit from less competitive markets and consequently, better sales and wider profit margins. Our goal is to offer shareholders a large-cap fund that can serve as the core of a diversified investment portfolio. While small- and mid-cap stocks have outperformed larger-cap issues at times in the recent past, the large-cap segment of the market will remain essential to investor portfolios. Our investment approach consists of identifying companies with long-term business models at attractive valuations that have the ability to appreciate in value. We gauge valuations by how fast a company is growing and expanding its market share, and what is fair value for its shares based on that projected growth rate. Looking ahead, we believe large-cap stocks are well-positioned for higher returns and growth versus many other segments of the market. - -------------------------------------------------------------------------------- 8 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Investments in Securities AXP Large Cap Equity Fund July 31, 2002 (Percentages represent value of investments compared to net assets) Common stocks (92.4%) Issuer Shares Value(a) Aerospace & defense (0.2%) General Dynamics 400 $32,368 Banks and savings & loans (0.7%) FleetBoston Financial 1,966 45,611 Wachovia 2,159 77,292 Total 122,903 Beverages & tobacco (3.5%) PepsiCo 3,926 168,582 Philip Morris 9,322 429,279 Total 597,861 Building materials & construction (0.9%) Centex 3,242 155,454 Communications equipment & services (1.1%) Marvell Technology Group 1,895(b,c) 36,289 Motorola 12,391 143,736 Total 180,025 Computer software & services (2.1%) Microsoft 3,317(b) 159,050 Oracle 19,100(b) 191,172 Total 350,222 Computers & office equipment (8.6%) Apple Computer 16,184(b) 246,968 BEA Systems 32,212(b) 178,777 Cisco Systems 17,900(b) 236,101 Hewlett-Packard 22,338 316,083 Mercury Interactive 3,752(b) 96,126 Sun Microsystems 95,733(b) 375,273 Total 1,449,328 Electronics (4.1%) Applied Materials 3,800(b) 56,506 Flextronics Intl 20,122(b,c) 159,366 Intel 8,949 168,152 KLA-Tencor 1,166(b) 45,929 Micron Technology 10,877(b) 211,992 Novellus Systems 2,150(b) 58,029 Total 699,974 Energy (5.3%) ChevronTexaco 3,723 279,225 Exxon Mobil 12,646 464,867 Phillips Petroleum 2,856 147,798 Total 891,890 Energy equipment & services (2.8%) Cooper Cameron 1,200(b) 51,588 Nabors Inds 1,259(b,c) 38,425 Schlumberger 1,400 60,088 Transocean 12,396 316,098 Total 466,199 Financial services (5.2%) Citigroup 8,708 292,065 Fannie Mae 3,350 250,882 Federated Investors Cl B 21 597 Freddie Mac 3,315 205,364 MBNA 6,850 132,822 Total 881,730 Food (0.2%) Dean Foods 1,257(b) 41,908 Furniture & appliances (0.7%) Mohawk Inds 2,639(b) 125,353 Health care (20.3%) Abbott Laboratories 7,790 322,584 Biomet 7,233 187,552 Genzyme-General Division 7,253(b) 165,223 Guidant 1,566(b) 54,497 MedImmune 3,315(b) 98,588 Pfizer 39,300 1,271,355 Pharmacia 7,508 335,908 St. Jude Medical 1,964(b) 74,632 Wyeth 23,750 947,625 Total 3,457,964 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 9 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Health care services (9.4%) AmerisourceBergen 2,275 $152,402 Cardinal Health 9,683 557,741 Caremark Rx 7,398(b) 116,149 Humana 100(b) 1,231 McKesson 22,966 756,040 Oxford Health Plans 50(b) 2,151 Total 1,585,714 Household products (1.7%) Avon Products 6,084 281,446 Industrial equipment & services (1.2%) Caterpillar 4,399 196,635 Insurance (1.8%) Allstate 1,100 41,811 American Intl Group 4,043 258,429 Total 300,240 Leisure time & entertainment (5.0%) AOL Time Warner 43,991(b) 505,896 Viacom Cl B 8,564(b) 333,311 Total 839,207 Media (1.3%) Fox Entertainment Group Cl A 1,797(b) 35,850 Omnicom Group 1,800 95,958 USA Interactive 3,945(b) 86,983 Total 218,791 Metals (0.3%) Freeport-McMoRan Copper & Gold Cl B 3,696(b) 56,438 Multi-industry conglomerates (5.2%) Cendant 5,835(b) 80,640 General Electric 22,150 713,230 Honeywell Intl 2,550 82,518 Total 876,388 Paper & packaging (0.7%) Bowater 851 38,797 Intl Paper 2,041 81,273 Total 120,070 Real estate investment trust (0.6%) Starwood Hotels & Resorts Worldwide 3,987 102,466 Retail (6.1%) AutoZone 3,799(b) 280,176 Circuit City Stores-Circuit City Group 7,792 132,854 Dollar General 5,067 86,950 Home Depot 7,105 219,402 Lowe's Companies 2,811 106,396 Safeway 5,976(b) 166,252 TJX Companies 2,353 41,719 Total 1,033,749 Utilities -- electric (1.4%) Dominion Resources 2,477 147,232 Sempra Energy 4,333 91,860 Total 239,092 Utilities -- gas (0.3%) Kinder Morgan 1,021 42,484 Utilities -- telephone (1.5%) AT&T 24,837 252,841 Total common stocks (Cost: $16,881,563) $15,598,740 Short-term securities (5.9%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Home Loan Bank Disc Nt 09-13-02 1.72% $500,000 $498,927 Federal Natl Mtge Assn Disc Nt 10-16-02 1.74 500,000 498,216 Total short-term securities (Cost: $997,147) $997,143 Total investments in securities (Cost: $17,878,710)(d) $16,595,883 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. As of July 31, 2002, the value of foreign securities represented 1.4% of net assets. (d) At July 31, 2002, the cost of securities for federal income tax purposes was $18,020,525 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 250, 738 Unrealized depreciation (1,675,380) ---------- Net unrealized depreciation $(1,424,642) ----------- - -------------------------------------------------------------------------------- 11 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Large Cap Equity Fund July 31, 2002 Assets Investments in securities, at value (Note 1) (identified cost $17,878,710) $16,595,883 Cash in bank on demand deposit 340,038 Capital shares receivable 27,591 Dividends and accrued interest receivable 5,825 Receivable for investment securities sold 252,622 ------- Total assets 17,221,959 ---------- Liabilities Payable for investment securities purchased 228,661 Payable to AEFC 33,100 Accrued investment management services fee 274 Accrued distribution fee 223 Accrued transfer agency fee 116 Accrued administrative services fee 23 Other accrued expenses 77,468 ------ Total liabilities 339,865 ------- Net assets applicable to outstanding capital stock $16,882,094 =========== Represented by Capital stock -- $.01 par value (Note 1) $ 41,107 Additional paid-in capital 18,929,176 Undistributed net investment income 7 Accumulated net realized gain (loss) (Note 6) (805,369) Unrealized appreciation (depreciation) on investments (1,282,827) ---------- Total -- representing net assets applicable to outstanding capital stock $16,882,094 =========== Net assets applicable to outstanding shares: Class A $11,444,425 Class B $ 5,186,963 Class C $ 227,370 Class Y $ 23,336 Net asset value per share of outstanding capital stock: Class A shares 2,783,556 $ 4.11 Class B shares 1,266,102 $ 4.10 Class C shares 55,408 $ 4.10 Class Y shares 5,671 $ 4.11 ----- -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT
Statement of operations AXP Large Cap Equity Fund For the period from March 28, 2002* to July 31, 2002 Investment income Income: Dividends $ 34,326 Interest 4,589 Less foreign taxes withheld (205) ---- Total income 38,710 ------ Expenses (Note 2): Investment management services fee 20,304 Distribution fee Class A 5,983 Class B 9,427 Class C 385 Transfer agency fee 7,094 Incremental transfer agency fee Class A 484 Class B 485 Class C 29 Service fee -- Class Y 10 Administrative services fees and expenses 1,692 Custodian fees 6,061 Printing and postage 49,119 Registration fees 51,079 Audit fees 14,500 Other 877 --- Total expenses 167,529 Expenses waived/reimbursed by AEFC (Note 2) (117,831) -------- 49,698 Earnings credits on cash balances (Note 2) (18) --- Total net expenses 49,680 ------ Investment income (loss) -- net (10,970) ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (Note 3) (805,384) Net change in unrealized appreciation (depreciation) on investments (1,281,341) ---------- Net gain (loss) on investments (2,086,725) ---------- Net increase (decrease) in net assets resulting from operations $(2,097,695) =========== * When shares became publicly available.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT
Statement of changes in net assets AXP Large Cap Equity Fund For the period from March 28, 2002* to July 31, 2002 Operations Investment income (loss) -- net $ (10,970) Net realized gain (loss) on security transactions (805,384) Net change in unrealized appreciation (depreciation) on investments (1,281,341) ---------- Net increase (decrease) in net assets resulting from operations (2,097,695) ---------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 11,367,703 Class B shares 5,967,979 Class C shares 241,975 Class Y shares 23,000 Payments for redemptions Class A shares (434,672) Class B shares (Note 2) (181,280) Class Y shares (4,191) ------ Increase (decrease) in net assets from capital share transactions 16,980,514 ---------- Total increase (decrease) in net assets 14,882,819 Net assets at beginning of period (Note 1) 1,999,275** --------- Net assets at end of period $16,882,094 =========== Undistributed net investment income $ 7 -----------
* When shares became publicly available. ** Initial capital of $2,000,000 was contributed on March 21, 2002. The Fund had a decrease in net assets resulting from operations of $725 during the period from March 21, 2002 to March 28, 2002 (when shares became publicly available). See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Notes to Financial Statements AXP Large Cap Equity Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Growth Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Growth Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. On March 21, 2002, American Express Financial Corporation (AEFC) invested $2,000,000 in the Fund which represented 394,000 shares for Class A, 2,000 shares for Class B, Class C and Class Y, respectively, which represented the initial capital for each class at $5.00 per share. Shares of the Fund were first offered to the public on March 28, 2002. 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. The Fund'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. - -------------------------------------------------------------------------------- 15 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Option transactions To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund 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 Fund 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 Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund 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 Fund pays a premium whether or not the option is exercised. The Fund 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 Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund 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 Fund 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 Fund 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 Fund 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 Fund may enter into forward foreign currency exchange contracts for operational purposes. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. - -------------------------------------------------------------------------------- 16 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT 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 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 purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $10,216 and accumulated net realized loss has been decreased by $15 resulting in a net reclassification adjustment to decrease paid-in capital by $10,231. The tax character of distributions paid for the period indicated is as follows: For the period from March 28, 2002* to July 31, 2002 Class A Distributions paid from: Ordinary income $-- Long-term capital gain -- Class B Distributions paid from: Ordinary income -- Long-term capital gain -- Class C Distributions paid from: Ordinary income -- Long-term capital gain -- Class Y Distributions paid from: Ordinary income -- Long-term capital gain -- * When shares became publicly available. As of July 31, 2002, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated gain (loss) $ (663,547) Unrealized appreciation (depreciation) $(1,424,642) 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. - -------------------------------------------------------------------------------- 17 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. 2. EXPENSES AND SALES CHARGES The Fund has agreements with AEFC to manage its portfolio and provide administrative services. Under an Investment Management Services Agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets in reducing percentages from 0.60% 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 Fund to the Lipper Large-Cap Core Funds Index. The maximum adjustment is 0.12% of the Fund'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 first adjustment will be made on Oct. 1, 2002 and will cover the six-month period beginning April 1, 2002. 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 $71,293 for Class A the period ended July 31, 2002. - -------------------------------------------------------------------------------- 18 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT AEFC and American Express Financial Advisors Inc. have agreed to waive certain fees and to absorb certain expenses until July 31, 2003. Under this agreement, total expenses will not exceed 1.25% for Class A, 2.01% for Class B, 2.01% for Class C and 1.07% for Class Y of the Fund's average daily net assets. During the period ended July 31, 2002, the Fund's custodian and transfer agency fees were reduced by $18 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to American Express Trust Company, an affiliate of AEFC. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $24,178,336 and $8,367,893 respectively, for the period ended July 31, 2002. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the period from March 28, 2002* to July 31, 2002 are as follows:
Class A Class B Class C Class Y Sold 2,497,491 1,308,348 53,408 4,674 Issued for reinvested distributions -- -- -- -- Redeemed (107,935) (44,246) -- (1,003) --------- --------- ------ ----- Net increase (decrease) 2,389,556 1,264,102 53,408 3,671 --------- --------- ------ -----
* When shares became publicly available. 5. 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 period ended July 31, 2002. 6. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $663,547 as of July 31, 2002, that will expire in 2002 through 2010 if not offset by capital gains. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 19 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT 7. 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(b) Net asset value, beginning of period $5.00 Income from investment operations: Net gains (losses) (both realized and unrealized) (.89) Net asset value, end of period $4.11 Ratios/supplemental data Net assets, end of period (in millions) $11 Ratio of expenses to average daily net assets(c, e) 1.25%(d) Ratio of net investment income (loss) to average daily net assets (.11%)(d) Portfolio turnover rate (excluding short-term securities) 88% Total return(i) (17.80%) Class B Per share income and capital changes(a) Fiscal period ended July 31, 2002(b) Net asset value, beginning of period $5.00 Income from investment operations: Net investment income (loss) (.01) Net gains (losses) (both realized and unrealized) (.89) Total from investment operations (.90) Net asset value, end of period $4.10 Ratios/supplemental data Net assets, end of period (in millions) $5 Ratio of expenses to average daily net assets(c, f) 2.01%(d) Ratio of net investment income (loss) to average daily net assets (.86%)(d) Portfolio turnover rate (excluding short-term securities) 88% Total return(i) (18.00%) See accompanying notes to financial highlights. - -------------------------------------------------------------------------------- 20 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Class C Per share income and capital changes(a) Fiscal period ended July 31, 2002(b) Net asset value, beginning of period $5.00 Income from investment operations: Net investment income (loss) (.01) Net gains (losses) (both realized and unrealized) (.89) Total from investment operations (.90) Net asset value, end of period $4.10 Ratios/supplemental data Net assets, end of period (in millions) $-- Ratio of expenses to average daily net assets(c, g) 2.01%(d) Ratio of net investment income (loss) to average daily net assets (.92%)(d) Portfolio turnover rate (excluding short-term securities) 88% Total return(i) (18.00%) Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2002(b) Net asset value, beginning of period $5.00 Income from investment operations: Net gains (losses) (both realized and unrealized) (.89) Net asset value, end of period $4.11 Ratios/supplemental data Net assets, end of period (in millions) $-- Ratio of expenses to average daily net assets(c, h) 1.07%(d) Ratio of net investment income (loss) to average daily net assets .09%(d) Portfolio turnover rate (excluding short-term securities) 88% Total return(i) (17.80%) See accompanying notes to financial highlights. - -------------------------------------------------------------------------------- 21 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 28, 2002 (when shares became publicly available) to July 31, 2002. (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) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class A would have been 5.12% for the period ended July 31, 2002. (f) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class B would have been 5.88% for the period ended July 31, 2002. (g) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class C would have been 5.88% for the period ended July 31, 2002. (h) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class Y would have been 4.94% for the period ended July 31, 2002. (i) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 22 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Independent Auditors' Report THE BOARD AND SHAREHOLDERS AXP GROWTH SERIES, INC. We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of AXP Large Cap Equity Fund (a series of AXP Growth Series, Inc.) as of July 31, 2002, the related statements of operations, changes in net assets and the financial highlights for the period from March 28, 2002 (when shares became publicly available) to July 31, 2002. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AXP Large Cap Equity Fund as of July 31, 2002, and the results of its operations, changes in its net assets and the financial highlights for the period stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota September 6, 2002 - -------------------------------------------------------------------------------- 23 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT Board Members and Officers Shareholders elect a board that oversees the Fund's operations. The board appoints officers who are responsible for day-to-day business decisions based on policies set by the board. The following is a list of the Fund's board members. Each member oversees 15 Master Trust portfolios and 78 American Express mutual funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the board.
Independent Board Members Name, Position held with Principal occupations Other directorships address, Registrant and length of during past five years age service - -------------------------------------- ------------------------------ --------------------------- ---------------------------- H. Brewster Atwater, Jr. Board member since 1996 Retired chair and chief 4900 IDS Tower executive officer, Minneapolis, MN 55402 General Mills, Inc. Born in 1931 (consumer foods) - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Arne H. Carlson Chair of the Board since 1999 Chair, Board Services 901 S. Marquette Ave. Corporation (provides Minneapolis, MN 55402 administrative services Born in 1934 to boards), former Governor of Minnesota - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Lynne V. Cheney Board member since 1994 Distinguished Fellow, AEI The Reader's Digest American Enterprise Institute Association Inc. for Public Policy Research (AEI) 1150 17th St., N.W. Washington, D.C. 20036 Born in 1941 - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Livio D. DeSimone Board member since 2001 Retired chair of the Cargill, Incorporated 30 Seventh Street East board and chief executive (commodity merchants and Suite 3050 officer, Minnesota Mining processors), Target St. Paul, MN 55101-4901 and Manufacturing (3M) Corporation (department Born in 1936 stores), General Mills, Inc. (consumer foods), Vulcan Materials Company (construction materials/chemicals), Milliken & Company (textiles and chemicals) and Nexia Biotechnologies, Inc. - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Ira D. Hall Board member since 2001 Private investor; Imagistics International, Texaco, Inc. formerly with Texaco Inc. (office equipment), 2000 Westchester Avenue Inc., treasurer, Reynolds & Reynolds White Plains, NY 10650 1999-2001 and general Company (information Born in 1944 manager, alliance services), TECO Energy, management operations, Inc. (energy holding 1998-1999. Prior to that, company), The Williams director, International Companies, Inc. (energy Operations IBM Corp. distribution company) - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Heinz F. Hutter Board member since 1994 Retired president and P.O. Box 2187 chief operating officer, Minneapolis, MN 55402 Cargill, Incorporated Born in 1929 (commodity merchants and processors) - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Anne P. Jones Board member since 1985 Attorney and consultant Motorola, Inc. 5716 Bent Branch Rd. (electronics) Bethesda, MD 20816 Born in 1935 - -------------------------------------- ------------------------------ --------------------------- ----------------------------
- -------------------------------------------------------------------------------- 24 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT
Independent Board Members (continued) Name, Position held with Principal occupations Other directorships address, Registrant and length of during past five years age service - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Stephen R. Lewis, Jr. Board member since 2002 Retired president and 901 S. Marquette Ave. professor of economics, Minneapolis, MN 55402 Carleton College Born in 1939 - -------------------------------------- ------------------------------ --------------------------- ---------------------------- William R. Pearce Board member since 1980 RII Weyerhaeuser World 2050 One Financial Plaza Timberfund, L.P. Minneapolis, MN 55402 (develops timber Born in 1927 resources) - management committee; former chair, American Express Funds - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Alan G. Quasha Board member since 2002 President, Quadrant Compagnie Financiere 720 Fifth Avenue Management, Inc. Richemont AG (luxury goods) New York, NY 10019 (management of private Born in 1949 equities) - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Alan K. Simpson Board member since 1997 Former three-term United Biogen, Inc. 1201 Sunshine Ave. States Senator for Wyoming (bio-pharmaceuticals) Cody, WY 82414 Born in 1931 - -------------------------------------- ------------------------------ --------------------------- ---------------------------- C. Angus Wurtele Board member since 1994 Retired chair of the Bemis Corporation 4900 IDS Tower board and chief executive (packaging) Minneapolis, MN 55402 officer, The Valspar Born in 1934 Corporation - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Board Members Affiliated with American Express Financial Corporation (AEFC) Name, Position held with Principal occupations Other directorships address, Registrant and length of during past five years age service - -------------------------------------- ------------------------------ --------------------------- ---------------------------- David R. Hubers Board member since 1993 Retired chief executive Chronimed Inc. (specialty 50643 AXP Financial Center officer and director of pharmaceutical Minneapolis, MN 55474 AEFC distribution), RTW Inc. Born in 1943 (manages workers compensation programs), Lawson Software, Inc. (technology based business applications) - -------------------------------------- ------------------------------ --------------------------- ---------------------------- John R. Thomas Board member since 1987, Senior vice president - 50652 AXP Financial Center president since 1997 information and Minneapolis, MN 55474 technology of AEFC Born in 1937 - -------------------------------------- ------------------------------ --------------------------- ---------------------------- William F. Truscott Board member since 2001, Senior vice president - 53600 AXP Financial Center vice president since 2002 chief investment officer Minneapolis, MN 55474 of AEFC; former chief Born in 1960 investment officer and managing director, Zurich Scudder Investments - -------------------------------------- ------------------------------ --------------------------- ----------------------------
- -------------------------------------------------------------------------------- 25 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Thomas, who is president, and Mr. Truscott, who is vice president, the Fund's other officers are:
Other Officers Name, Position held with Principal occupations Other directorships address, Registrant and length of during past five years age service - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Jeffrey P. Fox Treasurer since 2002 Vice president - 50005 AXP Financial Center investment accounting, Minneapolis, MN 55474 AEFC, since 2002; vice Born in 1955 president - finance, American Express Company, 2000-2002; vice president - corporate controller, AEFC, 1996-2000 - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Leslie L. Ogg Vice president, general President of Board 901 S. Marquette Ave. counsel and secretary since Services Corporation Minneapolis, MN 55402 1978 Born in 1938 - -------------------------------------- ------------------------------ --------------------------- ---------------------------- Stephen W. Roszell Vice president since 2002 Senior vice president - 50239 AXP Financial Center institutional group of Minneapolis, MN 55474 AEFC Born in 1949 - -------------------------------------- ------------------------------ --------------------------- ----------------------------
The SAI has additional information about the Fund's directors and is available, without charge, upon request by calling (800) 862-7919. - -------------------------------------------------------------------------------- 26 -- AXP LARGE CAP EQUITY FUND -- 2002 ANNUAL REPORT American Express(R) Funds Growth Funds AXP(R) Emerging Markets Fund AXP Equity Select Fund AXP Focused Growth Fund AXP Global Growth Fund AXP Growth Fund AXP Growth Dimensions Fund AXP New Dimensions Fund(R) AXP Partners International Aggressive Growth Fund AXP Partners Small Cap Growth Fund AXP Strategy Aggressive Fund Blend Funds AXP Blue Chip Advantage Fund AXP Discovery Fund* AXP European Equity Fund AXP Global Balanced Fund AXP International Fund AXP International Equity Index Fund AXP Large Cap Equity Fund AXP Managed Allocation Fund AXP Mid Cap Index Fund AXP Nasdaq 100 Index(R) Fund AXP Partners Small Cap Core Fund AXP Research Opportunities Fund AXP S&P 500 Index Fund AXP Small Cap Advantage Fund AXP Small Company Index Fund AXP Stock Fund AXP Total Stock Market Index Fund Value Funds AXP Diversified Equity Income Fund AXP Equity Value Fund AXP Large Cap Value Fund AXP Mid Cap Value Fund AXP Mutual AXP Partners Fundamental Value Fund AXP Partners International Select Value Fund AXP Partners Select Value Fund AXP Partners Small Cap Value Fund AXP Partners Value Fund AXP Progressive Fund* Income/Tax-Exempt Income Funds AXP Bond Fund AXP Cash Management Fund** AXP Extra Income Fund AXP Federal Income Fund AXP Global Bond Fund AXP High Yield Tax-Exempt Fund AXP Insured Tax-Exempt Fund AXP Intermediate Tax-Exempt Fund AXP Selective Fund AXP State Tax-Exempt Funds AXP Tax-Exempt Bond Fund AXP Tax-Free Money Fund** AXP U.S. Government Mortgage Fund Sector Funds AXP Global Technology Fund AXP Precious Metals Fund AXP Utilities Fund These funds are also listed in the categories above. AXP(R) Partners Funds AXP Partners Fundamental Value Fund AXP Partners International Aggressive Growth Fund AXP Partners International Select Value Fund AXP Partners Select Value Fund AXP Partners Small Cap Core Fund AXP Partners Small Cap Growth Fund AXP Partners Small Cap Value Fund AXP Partners Value Fund International Funds AXP Emerging Markets Fund AXP European Equity Fund AXP Global Balanced Fund AXP Global Bond Fund AXP Global Growth Fund AXP International Fund AXP Partners International Aggressive Growth Fund AXP Partners International Select Value Fund * Closed to new investors. ** An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. For more complete information about our funds, including fees and expenses, please call (800) 862-7919 for prospectuses. Read them carefully before you invest. (9/02) AXP Large Cap Equity Fund 70100 AXP Financial Center Minneapolis, MN 55474 americanexpress.com - -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) - -------------------------------------------------------------------------------- This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. S-6244 C (9/02) -----END PRIVACY-ENHANCED MESSAGE-----