N-30D 1 s6455w.txt AXP GROWTH FUND AXP(R) Growth Fund 2002 ANNUAL REPORT (Prospectus Enclosed) AXP Growth Fund seeks to provide shareholders with long-term capital growth. (This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) -------------------------------------------------------------------------------- (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 The Fund's Long-term Performance 10 Investments in Securities 11 Financial Statements (Portfolio) 15 Notes to Financial Statements (Portfolio) 18 Independent Auditors' Report (Portfolio) 22 Financial Statements (Fund) 23 Notes to Financial Statements (Fund) 26 Independent Auditors' Report (Fund) 32 Federal Income Tax Information 33 Board Members and Officers 34 -------------------------------------------------------------------------------- 2 -- AXP GROWTH 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 GROWTH 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 GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Fund Snapshot AS OF JULY 31, 2002 PORTFOLIO MANAGER Portfolio manager Nick Thakore Tenure/since 4/1/02 Years in industry 9 FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates A: 3/1/72 B: 3/20/95 C: 6/26/00 Y: 3/20/95 Ticker symbols A: INIDX B: IGRBX C: AXGCX Y: IGRYX Total net assets $3.546 billion Number of holdings approximately 180 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 95.8% Cash equivalents 3.7% Other 0.5% TOP FIVE SECTORS Percentage of portfolio assets Health care 20.6% Computers & office equipment 12.5 Retail 8.2 Health care services 8.1 Multi-industry congolmerates 6.4 TOP TEN HOLDINGS Percentage of portfolio assets Pfizer 5.6% Wyeth 4.3 General Electric 3.8 AOL Time Warner 3.5 Hewlett-Packard 3.1 Home Depot 2.8 USA Interactive 2.5 Citigroup 2.1 Philip Morris 2.0 Dell Computer 1.6 Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Thee are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Fund holdings are subject to change. -------------------------------------------------------------------------------- 5 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did the Fund perform for the 12-month period ended July 31, 2002? A: The Fund's performance for its fiscal year was disappointing relative to its peers and benchmark. For the period under review, AXP Growth Fund returned -29.59% (Class A shares, excluding sales charges), while the Russell 1000 Growth Index returned -28.75%, and the Lipper Large-Cap Growth Funds Index returned -27.98%. The S&P 500 Index returned -23.63% for the same period. Q: What market conditions characterized the Fund's fiscal year? A: For the first six months of the Fund's fiscal year, the U.S. equity markets continued to struggle with a bear market environment that began back in March 2000. The difficulties were particularly pronounced for growth stocks, many of whose companies were not living up to earnings expectations amidst a weakening U.S. economy. The situation worsened in the immediate wake of the tragic terrorist attacks of September 11, 2001, when investors reacted with a dramatic sell-off of stocks. However, from late September through December, stocks rallied. Growth stocks enjoyed particular strength during that period, especially those in the technology and consumer cyclical sectors, which benefited from expectations that the U.S. economy was on the verge of recovery. The second half of the period was characterized by extreme volatility and dropping equity prices across the board. Unsettling news questioning corporate accounting practices, corporate governance, and specifically, allegations of fraudulent accounting practices at Worldcom, Enron and a handful of other firms exacerbated already low investor confidence in the financial markets. As a result, by the end of June, virtually all of the major stock market indices were (bar graph) PERFORMANCE COMPARISON For the year ended July 31, 2002 0% -5% -10% -15% -20% (bar 1) (bar 2) (bar 3) (bar 4) -25% -29.59% -23.63% -28.75% -27.98% -30% (bar 1) AXP Growth Fund Class A (excluding sales charge) (bar 2) S&P 500 Index (unmanaged) (bar 3) Russell 1000 Growth Index (unmanaged) (bar 4) Lipper Large-Cap Growth Funds Index (see "The Fund's Long-term Performance" for Index descriptions) 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. You cannot invest in an index. -------------------------------------------------------------------------------- 6 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Questions & Answers (begin callout quote) > We are pleased to offer an optimistic outlook for AXP Growth Fund, given its new management and what we believe are encouraging opportunities due to our new research and stock-picking capabilities. (end callout quote) down sharply, despite some signs of encouragement regarding the economy as a whole. However, it is important to note that by historic standards, most stocks remained expensive during this time. Investors continued to cling to perceived safe havens, helping Treasuries and high-quality fixed-income securities sustain their strength versus stocks. In July, although extreme volatility prevailed, the month offered some respite from the continual drop in equity prices. Q: What factors most significantly impacted performance? A: Early in the period, the Fund suffered from its exposure to "defensive" growth stocks, such as pharmaceutical and consumer staple stocks, which suffered across the board late in 2001. However, the portfolio's technology and consumer cyclical stocks added to performance overall, as many of these stocks enjoyed a rally as the year ended. Overall, though, since the Fund's performance was not favorable on either a relative or absolute basis, we introduced a new portfolio management team in April 2002. The results are encouraging. From July 31, 2001 through March 31, 2002, the Fund returned -14.35% AVERAGE ANNUAL TOTAL RETURNS as of July 31, 2002 At Net Asset Value (NAV)(1) Class A Class B Class C Class Y 1 year -29.59% -30.18% -30.17% -29.48% 5 years -7.32% -8.03% N/A -7.20% 10 years +7.11% N/A N/A N/A Since inception N/A +4.50%(2) -35.69%(3) +5.45%(2) With Sales Charge Class A Class B Class C Class Y 1 year -33.64% -32.97% -30.17% -29.48% 5 years -8.41% -8.19% N/A -7.20% 10 years +6.47% N/A N/A N/A Since inception N/A +4.50%(2) -35.69%(3) +5.45%(2) (1) Excluding sales charge. (2) Inception date was March 20, 1995. (3) Inception date was June 26, 2000. 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 GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Questions & Answers (Class A shares, excluding sales charges) underperforming the Russell 1000 Growth Index, which returned -7.29%, and underperforming the Lipper Large-Cap Growth Funds Index, which returned -7.48%. However, from March 31, 2002 through July 31, 2002, the Fund outperformed both its benchmark and its peer group*. In the second half of the Fund's fiscal year, stocks we avoided purchasing proved to be the key to favorable performance. Overall extreme volatility in the equity markets at large was difficult to avoid, and provided a negative backdrop for the Fund, detracting from performance. On the positive side, the fact that the Fund successfully avoided exposure to some of the major suffering stocks of 2002, as well as the portfolio's exposure to hospital and HMO-related stocks, a sub-set of the healthcare industry sector, also benefited performance. Q: What changes did you make to the portfolio? A: The most significant change to the portfolio occurred on April 1, 2002, when management of the Fund's securities changed and a new team took the helm. Initially, we improved the valuation profile of the Fund, eliminating growth stocks which we believe were too expensive. Second, we bought more stable growth names, such as consumer staples and healthcare, and eliminated the cyclical bias or "bent" of the Fund. Likewise, we also added to our pharmaceutical stock holdings, since we believe many of these companies represent good value currently, and maintain favorable long-term growth potential. * From March 31, 2002 through July 31, 2002, the Fund returned -17.72% (Class A shares, excluding sales charges) outperforming the Russell 1000 Growth Index, which returned -23.14%, and outperforming the Lipper Large-Cap Growth Funds Index, which returned -22.16%. -------------------------------------------------------------------------------- 8 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Questions & Answers Q: What is your outlook for the months ahead? A: In general, we are pleased to offer an optimistic outlook for AXP Growth Fund, given its new management and what we believe are encouraging opportunities due to our new research and stock-picking capabilities. For example, we have actively raised the growth profile of the Fund throughout the quarter. We did so because we believe current market conditions present opportunities in the growth segment of the market -- even in technology. What's more, we believe the reward for taking slightly more risk has increased, making the potential for gains even greater. This is in line with our overall strategy for the Fund: To primarily seek to identify stocks that are growing faster than the market, at below-market prices. This formula is simple, but not easy to execute. Ideally, we look to keep the P/E of the Fund lower or in line with the benchmark, but the growth rate higher. It's this approach -- focused on bottom-up stock picking -- that should deliver long-term total return potential to our shareholders. -------------------------------------------------------------------------------- 9 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- The Fund's Long-term Performance This chart illustrates the total value of an assumed $10,000 investment in AXP Growth Fund Class A shares (from 8/1/92 to 7/31/02) as compared to the performance of three widely cited performance indices, the Russell 1000(R) Growth Index, the Lipper Large-Cap Growth Funds Index and the Standard & Poor's 500 Index (S&P 500 Index). Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from the Standard & Poor's 500 Index to the Russell 1000(R) Growth Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indices in this transition year. In the future, however, only the Russell 1000(R) Growth Index will be included. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. Past performance is no guarantee of future results. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Returns do not reflect taxes payable on distributions and redemptions. Also see "Past Performance" in the Fund's current prospectus. (line graph) VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP GROWTH FUND $50,000 $40,000 (solid line) AXP Growth Fund Class A $30,000 (dotted line) S&P 500 Index $20,000 (dashed line) Russell 1000 Growth Index $10,000 (large dashed line) Lipper Large-Cap Growth Funds Index '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 (solid line) AXP Growth Fund Class A $18,731 (dotted line) S&P 500 Index(1) $26,139 (dashed line) Russell 1000 Growth Index(2) $21,225 (large dashed line) Lipper Large-Cap Growth Funds Index(3) $21,154 (1) The Russell 1000(R) Growth Index, an unmanaged index, measures the performance of those companies among the 1,000 largest companies included in the Russell 3000(R) Index with higher price-to-book ratios and higher forecasted growth values. (2) The Lipper Large-Cap Growth 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. (3) S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the S&P 500 companies may be generally larger than those in which the Fund invests. Average Annual Total Returns Class A with Sales Charge as of July 31, 2002 1 year -33.64% 5 years -8.41% 10 years +6.47% Since inception N/A Results for other share classes can be found on page 7. -------------------------------------------------------------------------------- 10 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Investments in Securities Growth Portfolio July 31, 2002 (Percentages represent value of investments compared to net assets) Common stocks (97.6%) Issuer Shares Value(a) Automotive & related (0.3%) Dana 220,000 $3,537,600 Sonic Automotive 305,000(b) 6,093,900 Total 9,631,500 Banks and savings & loans (0.9%) FleetBoston Financial 1,185,000 27,492,000 Mitsubishi Tokyo Financial Group 600(c) 4,068,136 Total 31,560,136 Beverages & tobacco (3.7%) Coca-Cola 560,000 27,966,400 Coca-Cola Enterprises 560,000 10,427,200 Pepsi Bottling Group 305,000 7,539,600 PepsiCo 330,000 14,170,200 Philip Morris 1,555,000 71,607,750 Total 131,711,150 Building materials & construction (0.4%) Centex 150,000 7,192,500 Technip-Coflexip 85,000(c) 6,066,714 Total 13,259,214 Chemicals (0.3%) Akzo Nobel 140,000(b,c) 4,967,294 Dow Chemical 110,000 3,175,700 Eastman Chemical 75,000 3,324,000 Total 11,466,994 Communications equipment & services (3.3%) EchoStar Communications Cl A 2,420,000(b) 39,470,200 Finisar 1,800,000(b) 3,006,000 Marvell Technology Group 1,010,000(b,c) 19,341,500 Motorola 2,755,000 31,958,000 Nokia ADR Cl A 860,000(c) 10,664,000 Polycom 775,000(b) 8,873,750 QUALCOMM 125,000(b) 3,435,000 Total 116,748,450 Computer software & services (4.3%) Adobe Systems 160,000 3,833,600 Ariba 3,927,000(b) 9,385,530 Brocade Communications Systems 1,030,000(b) 19,312,500 Check Point Software Technologies 355,000(b,c) 5,956,900 Microsoft 1,020,000(b) 48,909,000 Network Associates 2,625,000(b) 31,893,750 Oracle 1,740,000(b) 17,415,660 VERITAS Software 1,030,000(b) 17,334,900 Total 154,041,840 Computers & office equipment (12.8%) Apple Computer 1,710,000(b) 26,094,600 BEA Systems 4,670,000(b) 25,918,500 Cisco Systems 3,265,000(b) 43,065,350 Citrix Systems 402,100(b) 2,215,571 Computer Associates Intl 957,400 8,942,116 Comverse Technology 1,245,000(b) 9,910,200 Dell Computer 2,365,000(b) 58,959,450 EMC 3,575,800(b) 26,818,500 Emulex 145,000(b) 3,358,200 Hewlett-Packard 7,925,000 112,138,750 Legato Systems 2,555,000(b) 6,898,500 Macromedia 1,862,850(b) 14,809,658 Mercury Interactive 270,000(b) 6,917,400 Netegrity 95,000(b) 215,650 Sanmina-SCI 2,800,000(b) 11,396,000 Siebel Systems 2,995,000(b) 28,153,000 Sun Microsystems 12,280,000(b) 48,137,600 TIBCO Software 1,365,000(b) 7,398,300 Unisys 1,590,000(b) 11,956,800 Total 453,304,145 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Common stocks (continued) Issuer Shares Value(a) Electronics (4.2%) Altera 290,000(b) $3,430,700 Analog Devices 60,000(b) 1,446,000 Applied Materials 1,435,000(b) 21,338,450 AVX 202,000 2,650,240 Celestica 135,000(b,c) 2,895,750 Flextronics Intl 1,025,000(b,c) 8,118,000 Intel 2,615,000 49,135,850 KLA-Tencor 390,000(b) 15,362,100 Micron Technology 400,000(b) 7,796,000 Natl Semiconductor 355,000(b) 6,429,050 Novellus Systems 185,000(b) 4,993,150 Taiwan Semiconductor Mfg ADR 1,195,000(c) 10,898,400 Texas Instruments 320,000 7,408,000 Vishay Intertechnology 200,000(b) 3,410,000 Xilinx 275,000(b) 5,277,250 Total 150,588,940 Energy (1.0%) Apache 85,000 4,377,500 Conoco 165,000 3,979,800 Devon Energy 185,000 7,710,800 Grant Prideco 230,900(b) 2,306,691 Lukoil Holding ADR 80,000(c) 4,494,400 Phillips Petroleum 85,000 4,398,750 Tatneft ADR 150,000(c) 1,843,500 YUKOS ADR 40,000(c) 5,310,000 Total 34,421,441 Energy equipment & services (1.4%) BJ Services 235,000(b) 7,494,150 ENSCO Intl 210,000 5,428,500 Nabors Inds 105,000(b,c) 3,204,600 Schlumberger 430,000 18,455,600 Transocean 640,000 16,320,000 Total 50,902,850 Financial services (5.1%) CIT Group 80,000 1,796,800 Citigroup 2,300,000 77,142,000 Daiwa Securities Group 300,000(c) 1,610,721 Doral Financial 90,000(c) 3,450,600 Fannie Mae 205,000 15,352,450 Freddie Mac 160,000 9,912,000 MBNA 445,000 8,628,550 Merrill Lynch 540,000 19,251,000 Morgan Stanley 460,000 18,561,000 Nomura Holdings 735,000(c) 9,825,777 SLM 185,000 16,835,000 Total 182,365,898 Furniture & appliances (0.4%) Matsushita Electric Industrial 310,000(c) 3,849,115 Mohawk Inds 235,000(b) 11,162,500 Total 15,011,615 Health care (21.0%) Abbott Laboratories 1,335,000 55,282,350 Amgen 905,000(b) 41,304,200 Barr Laboratories 650,000(b) 39,650,000 Bristol-Myers Squibb 460,000 10,777,800 Enzon 235,000(b) 5,311,000 Forest Laboratories 265,000(b) 20,529,550 Genzyme-General Division 1,070,000(b) 24,374,600 Gilead Sciences 70,000(b) 2,132,900 Laboratory Corp America Holdings 485,000(b) 16,635,500 MedImmune 1,035,000(b) 30,780,900 Merck & Co 1,060,000 52,576,000 Pfizer 6,295,000 203,643,249 Pharmacia 935,000 41,831,900 Quest Diagnostics 185,000(b) 11,172,150 Schering-Plough 365,000 9,307,500 Takeda Chemical Inds 150,000(c) 6,237,475 Waters 840,000(b) 19,076,400 Wyeth 3,865,000 154,213,500 Total 744,836,974 Health care services (8.3%) AdvancePCS 1,355,000(b) 30,379,100 AmerisourceBergen 290,000 19,427,100 Anthem 240,000(b) 16,291,200 Cardinal Health 705,000 40,608,000 Caremark Rx 2,890,000(b) 45,373,000 HCA 280,000 13,160,000 Humana 795,000(b) 9,786,450 McKesson 1,360,000 44,771,200 Tenet Healthcare 175,400(b) 8,357,810 Trigon Healthcare 65,000(b) 6,611,150 UnitedHealth Group 440,000 38,570,400 Wellpoint Health Networks 290,000(b) 20,735,000 Total 294,070,410 Household products (1.0%) Energizer Holdings 135,000(b) 3,624,750 Gillette 925,000 30,414,000 Newell Rubbermaid 80,000 2,406,400 Total 36,445,150 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Common stocks (continued) Issuer Shares Value(a) Insurance (1.6%) ACE 90,000(c) $2,850,300 American Intl Group 865,000 55,290,800 Total 58,141,100 Leisure time & entertainment (4.8%) AOL Time Warner 10,940,000(b) 125,810,000 Hotels.com Cl A 590,000(b) 25,193,000 Ticketmaster Cl B 360,000(b) 5,817,600 Viacom Cl B 355,000(b) 13,816,600 Total 170,637,200 Media (5.1%) American Greetings Cl A 150,000 2,410,500 Clear Channel Communications 560,000(b) 14,588,000 Comcast Cl A 2,130,000(b) 44,517,000 Cox Communications Cl A 490,000(b) 13,548,500 Interpublic Group of Companies 600,000 12,546,000 Reader's Digest Assn Cl A 225,000 3,757,500 USA Interactive 4,145,000(b) 91,393,105 Total 182,760,605 Multi-industry conglomerates (6.5%) Cendant 2,785,000(b) 38,488,700 General Electric 4,220,000 135,884,000 Honeywell Intl 520,000 16,827,200 Tyco Intl 512,800(c) 6,563,840 Xerox 4,755,000(b) 33,047,250 Total 230,810,990 Paper & packaging (0.1%) Intl Paper 85,000 3,384,700 Retail (8.3%) Albertson's 235,000 6,622,300 AnnTaylor Stores 300,000(b) 7,452,000 AutoNation 270,000(b) 3,642,300 AutoZone 345,000(b) 25,443,750 Circuit City Stores-Circuit City Group 1,795,000 30,604,750 CVS 525,000 15,015,000 Dollar General 1,035,000 17,760,600 Expedia Cl A 505,000(b) 24,553,100 Family Dollar Stores 120,000 3,634,800 Home Depot 3,235,000 99,896,800 Limited Brands 190,000 3,414,300 Lowe's Companies 200,000 7,570,000 PETsMART 50,000(b) 722,000 Safeway 205,000(b) 5,703,100 Seven-Eleven 105,000(c) 3,945,391 Staples 1,280,000(b) 21,363,200 Wal-Mart Stores 355,000 17,458,900 Total 294,802,291 Utilities -- electric (0.1%) Calpine 805,000(b) 4,000,850 Utilities -- gas (1.1%) Kinder Morgan 835,000 34,744,350 Kinder Morgan Management LLC 120,000 3,300,002 Total 38,044,352 Utilities -- telephone (1.4%) AT&T 2,670,000 27,180,600 Nextel Communications Cl A 590,000(b) 3,380,700 Qwest Communications Intl 2,600,000(b) 3,328,000 Sprint (FON Group) 740,000 6,919,000 Sprint (PCS Group) 2,000,000(b) 8,200,000 Total 49,008,300 Total common stocks (Cost: $3,911,562,374) $3,461,957,095 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 13 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Options purchased (0.5%) Issuer Contracts Exercise Expiration Value(a) price date Calls Nasdaq 100 56,295 $23 Sept. 2002 $12,384,900 Semiconductor Index 2,077 340 Sept. 2002 5,732,520 Total options purchased (Cost: $16,968,991) $18,117,420 Short-term securities (3.8%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (2.3%) Federal Home Loan Mtge Corp Disc Nts 09-17-02 1.71% $8,000,000 $7,981,760 09-24-02 1.70 30,000,000 29,922,083 Federal Natl Mtge Assn Disc Nts 08-16-02 1.71 500,000 499,620 08-21-02 1.67 11,300,000 11,288,992 08-30-02 1.70 20,000,000 19,971,667 10-16-02 1.74 10,000,000 9,964,320 Total 79,628,442 Commercial paper (1.5%) Amsterdam Funding 08-01-02 1.84 8,900,000(d) 8,899,545 Barclays U.S. Funding 08-08-02 1.79 18,100,000 18,089,141 Intl Lease Finance 08-02-02 1.79 4,000,000 3,999,559 Pfizer 08-06-02 1.72 13,500,000(d) 13,496,130 Sheffield Receivables 08-01-02 1.84 6,000,000(d) 5,999,693 Southern Co Funding 08-16-02 1.75 3,400,000(d) 3,397,356 Total 53,881,424 Total short-term securities (Cost: $133,518,686) $133,509,866 Total investments in securities (Cost: $4,062,050,051)(e) $3,613,584,381 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 3.6% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (e) At July 31, 2002, the cost of securities for federal income tax purposes was $4,239,881,008 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 66,296,893 Unrealized depreciation (692,593,520) ------------ Net unrealized depreciation $(626,296,627) ------------- -------------------------------------------------------------------------------- 14 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Financial Statements
Statement of assets and liabilities Growth Portfolio July 31, 2002 Assets Investments in securities, at value (Note 1)* (identified cost $4,062,050,051) $3,613,584,381 Cash in bank on demand deposit 95,374 Dividends and accrued interest receivable 1,485,083 Receivable for investment securities sold 231,877,284 U.S. government securities held as collateral (Note 4) 4,571,190 --------- Total assets 3,851,613,312 ------------- Liabilities Payable for investment securities purchased 187,038,715 Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 5) 1,047 Payable upon return of securities loaned (Note 4) 118,205,490 Accrued investment management services fee 55,333 Other accrued expenses 85,341 ------ Total liabilities 305,385,926 ----------- Net assets $3,546,227,386 ============== * Including securities on loan, at value (Note 4) $ 107,457,390 --------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT --------------------------------------------------------------------------------
Statement of operations Growth Portfolio Year ended July 31, 2002 Investment income Income: Dividends $ 34,294,520 Interest 7,507,019 Less foreign taxes withheld (319,919) -------- Total income 41,481,620 ---------- Expenses (Note 2): Investment management services fee 22,975,222 Compensation of board members 30,606 Custodian fees 315,662 Audit fees 28,500 Other 87,058 ------ Total expenses 23,437,048 Earnings credits on cash balances (Note 2) (4,761) ------ Total net expenses 23,432,287 ---------- Investment income (loss) -- net 18,049,333 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (136,177,374) Foreign currency transactions (214,889) Futures contracts 820,800 ------- Net realized gain (loss) on investments (135,571,463) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,595,978,419) -------------- Net gain (loss) on investments and foreign currencies (1,731,549,882) -------------- Net increase (decrease) in net assets resulting from operations $(1,713,500,549) ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT --------------------------------------------------------------------------------
Statements of changes in net assets Growth Portfolio Year ended July 31, 2002 2001 Operations Investment income (loss) -- net $ 18,049,333 $ 7,667,562 Net realized gain (loss) on investments (135,571,463) (815,719,232) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,595,978,419) (3,839,591,149) -------------- -------------- Net increase (decrease) in net assets resulting from operations (1,713,500,549) (4,647,642,819) -------------- -------------- Proceeds from contributions 1,077,212,062 1,392,698,912 Fair value of withdrawals (2,162,141,355) (1,057,809,216) -------------- -------------- Net contributions (withdrawals) from partners (1,084,929,293) 334,889,696 -------------- ----------- Total increase (decrease) in net assets (2,798,429,842) (4,312,753,123) Net assets at beginning of year 6,344,657,228 10,657,410,351 ------------- -------------- Net assets at end of year $ 3,546,227,386 $ 6,344,657,228 =============== ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 17 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Notes to Financial Statements Growth Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Growth Portfolio invests primarily in stocks of U.S. and foreign companies that appear to offer growth opportunities. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. -------------------------------------------------------------------------------- 18 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. -------------------------------------------------------------------------------- 19 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with American Express Financial Corporation (AEFC) to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.6% to 0.48% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the AXP Growth Fund to the Lipper Large-Cap Growth Funds Index. The maximum adjustment is 0.12% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference is less than 1%, the adjustment will be zero. The adjustment decreased the fee by $4,449,348 for the year ended July 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 year ended July 31, 2002, the Portfolio's custodian fees were reduced by $4,761 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 $10,514,657,473 and $11,422,150,335, respectively, for the year ended July 31, 2002. For the same period, the portfolio turnover rate was 225%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $809,983 for the year ended July 31, 2002. 4. LENDING OF PORTFOLIO SECURITIES As of July 31, 2002, securities valued at $107,457,390 were on loan to brokers. For collateral, the Portfolio received $113,634,300 in cash and U.S. government securities valued at $4,571,190. Income from securities lending amounted to $128,329 for the year ended July 31, 2002. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. -------------------------------------------------------------------------------- 20 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- 5. FOREIGN CURRENCY CONTRACTS As of July 31, 2002, the Portfolio has a foreign currency exchange contract that obligates it to deliver currency at a specified future date. The unrealized appreciation and/or depreciation on this contract is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contract are as follows:
Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation -------------------------------------------------------------------------------------------------- Aug. 1, 2002 8,737,148 8,564,852 $-- $1,047 European Monetary Unit U.S. Dollar -------------------------------------------------------------------------------------------------- Total $-- $1,047 --------------------------------------------------------------------------------------------------
6. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows: Year ended July 31, 2002 Calls Contracts Premium Balance July 31, 2001 -- $ -- Opened 10,000 1,347,980 Exercised (10,000) (1,347,980) ------- ---------- Balance July 31, 2002 -- $ -- ------- ---------- See "Summary of significant accounting policies." -------------------------------------------------------------------------------- 21 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Independent Auditors' Report THE BOARD OF TRUSTEES AND UNITHOLDERS GROWTH TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of Growth Portfolio (a series of Growth Trust) as of July 31, 2002, the related statement of operations for the year then ended and the statements of changes in net assets for each of the years in the two-year period ended July 31, 2002. These financial statements are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Growth Portfolio as of July 31, 2002, and the results of its operations and the changes in its net assets for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota September 6, 2002 -------------------------------------------------------------------------------- 22 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Financial Statements
Statement of assets and liabilities AXP Growth Fund July 31, 2002 Assets Investment in Portfolio (Note 1) $ 3,546,188,541 Capital shares receivable 69,869 ------ Total assets 3,546,258,410 ------------- Liabilities Capital shares payable 68,141 Accrued distribution fee 38,677 Accrued service fee 1,313 Accrued transfer agency fee 20,266 Accrued administrative services fee 4,234 Other accrued expenses 403,726 ------- Total liabilities 536,357 ------- Net assets applicable to outstanding capital stock $ 3,545,722,053 =============== Represented by Capital stock -- $.01 par value (Note 1) $ 1,722,087 Additional paid-in capital 5,120,165,304 Accumulated net realized gain (loss) (Note 5) (1,127,728,577) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (448,436,761) ------------ Total -- representing net assets applicable to outstanding capital stock $ 3,545,722,053 =============== Net assets applicable to outstanding shares: Class A $ 2,213,078,582 Class B $ 844,755,636 Class C $ 7,203,661 Class Y $ 480,684,174 Net asset value per share of outstanding capital stock: Class A shares 106,004,127 $ 20.88 Class B shares 43,067,715 $ 19.61 Class C shares 367,213 $ 19.62 Class Y shares 22,769,676 $ 21.11 ---------- ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 23 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT --------------------------------------------------------------------------------
Statement of operations AXP Growth Fund Year ended July 31, 2002 Investment income Income: Dividends $ 34,294,193 Interest 7,505,719 Less foreign taxes withheld (319,915) -------- Total income 41,479,997 ---------- Expenses (Note 2): Expenses allocated from Portfolio 23,432,067 Distribution fee Class A 7,495,510 Class B 11,762,874 Class C 82,213 Transfer agency fee 9,402,791 Incremental transfer agency fee Class A 602,983 Class B 520,989 Class C 5,848 Service fee -- Class Y 753,697 Administrative services fees and expenses 2,052,472 Compensation of board members 20,190 Printing and postage 725,270 Registration fees 66,352 Audit fees 9,500 Other 22,114 ------ Total expenses 56,954,870 Earnings credits on cash balances (Note 2) (74,956) ------- Total net expenses 56,879,914 ---------- Investment income (loss) -- net (15,399,917) ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (136,175,304) Foreign currency transactions (214,886) Futures contracts 820,792 ------- Net realized gain (loss) on investments (135,569,398) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,595,964,275) -------------- Net gain (loss) on investments and foreign currencies (1,731,533,673) -------------- Net increase (decrease) in net assets resulting from operations $(1,746,933,590) ===============
See accompanying notes to financial statements -------------------------------------------------------------------------------- 24 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT --------------------------------------------------------------------------------
Statements of changes in net assets AXP Growth Fund Year ended July 31, 2002 2001 Operations and distributions Investment income (loss) -- net $ (15,399,917) $ (42,797,571) Net realized gain (loss) on investments (135,569,398) (815,670,979) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,595,964,275) (3,839,599,804) -------------- -------------- Net increase (decrease) in net assets resulting from operations (1,746,933,590) (4,698,068,354) -------------- -------------- Distributions to shareholders from: Net realized gain Class A (2,135,273) (275,937,694) Class B (888,287) (112,812,229) Class C (5,132) (393,960) Class Y (580,590) (66,853,330) Tax return of capital Class A (529,673) -- Class B (220,504) -- Class C (1,506) -- Class Y (143,905) -- -------- ------- Total distributions (4,504,870) (455,997,213) ---------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 1,467,991,732 1,814,580,315 Class B shares 130,290,043 458,556,597 Class C shares 4,063,109 13,298,672 Class Y shares 423,221,812 742,021,470 Reinvestment of distributions at net asset value Class A shares 2,597,294 267,787,656 Class B shares 1,098,608 111,916,442 Class C shares 6,584 392,962 Class Y shares 724,495 54,657,205 Payments for redemptions Class A shares (2,050,219,864) (1,726,848,684) Class B shares (Note 2) (369,829,910) (278,484,800) Class C shares (Note 2) (2,689,402) (1,416,128) Class Y shares (653,772,011) (615,784,347) ------------ ------------ Increase (decrease) in net assets from capital share transactions (1,046,517,510) 840,677,360 -------------- ----------- Total increase (decrease) in net assets (2,797,955,970) (4,313,388,207) Net assets at beginning of year 6,343,678,023 10,657,066,230 ------------- -------------- Net assets at end of year $ 3,545,722,053 $ 6,343,678,023 =============== ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 25 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Notes to Financial Statements AXP Growth Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Growth Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Growth Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Growth Portfolio The Fund invests all of its assets in Growth Portfolio (the Portfolio), a series of Growth Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in stocks of U.S. and foreign companies that appear to offer growth opportunities. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of July 31, 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. -------------------------------------------------------------------------------- 26 -- AXP GROWTH 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 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 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 $15,399,917 and accumulated net realized loss has been decreased by $325,783 resulting in a net reclassification adjustment to decrease paid-in capital by $15,725,700. The tax character of distributions paid for the years indicated is as follows: Year ended July 31 2002 2001 Class A Distributions paid from: Ordinary income $ -- $ -- Long-term capital gain 2,135,273 275,937,694 Tax return of capital 529,673 -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain 888,287 112,812,229 Tax return of capital 220,504 -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain 5,132 393,960 Tax return of capital 1,506 -- Class Y Distributions paid from: Ordinary income -- -- Long-term capital gain 580,590 66,853,330 Tax return of capital 143,905 -- As of July 31, 2002, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated gain (loss) $(948,750,770) Unrealized appreciation (depreciation) $(627,414,568) 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. -------------------------------------------------------------------------------- 27 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.05% to 0.02% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees, and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The 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 $5,329,307 for Class A, $1,415,836 for Class B and $4,291 for Class C for the year ended July 31, 2002. During the year ended July 31, 2002, the Fund's transfer agency fees were reduced by $74,956 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 28 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2002 Class A Class B Class C Class Y Sold 58,268,502 5,484,859 172,227 16,631,804 Issued for reinvested distributions 97,106 43,514 271 26,813 Redeemed (82,106,853) (16,191,810) (118,208) (26,379,833) ----------- ----------- -------- ----------- Net increase (decrease) (23,741,245) (10,663,437) 54,290 (9,721,216) ----------- ----------- ------ ---------- Year ended July 31, 2001 Class A Class B Class C Class Y Sold 45,406,835 11,151,197 319,605 18,291,747 Issued for reinvested distributions 7,266,962 3,192,141 11,202 1,470,465 Redeemed (45,033,906) (8,057,822) (39,744) (15,592,053) ----------- ---------- ------- ----------- Net increase (decrease) 7,639,891 6,285,516 291,063 4,170,159 --------- --------- ------- ---------
4. BANK BORROWINGS The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had borrowings of $1,200,000 at a weighted average interest rate of 3.80% for the period from Sept. 13, 2001 to Sept. 14, 2001. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $948,750,770 as of July 31, 2002, that will expire in 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. -------------------------------------------------------------------------------- 29 -- AXP GROWTH FUND -- 2002 ANNUAL 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 2001 2000 1999 1998 Net asset value, beginning of period $29.68 $ 54.36 $42.14 $36.58 $35.47 Income from investment operations: Net investment income (loss) (.04) (.14) (.14) (.03) (.07) Net gains (losses) (both realized and unrealized) (8.74) (22.34) 13.14 7.29 2.14 Total from investment operations (8.78) (22.48) 13.00 7.26 2.07 Less distributions: Distributions from realized gains (.02) (2.20) (.78) (1.70) (.96) Net asset value, end of period $20.88 $ 29.68 $54.36 $42.14 $36.58 Ratios/supplemental data Net assets, end of period (in millions) $2,213 $3,851 $6,637 $4,576 $3,681 Ratio of expenses to average daily net assets(c) .99% .99% .99% .89% .87% Ratio of net investment income (loss) to average daily net assets (.15%) (.34%) (.30%) (.08%) (.22%) Portfolio turnover rate (excluding short-term securities) 225% 41% 23% 17% 28% Total return(e) (29.59%) (42.14%) 31.01% 20.49% 6.32% Class B Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000 1999 1998 Net asset value, beginning of period $28.11 $ 52.02 $40.65 $35.61 $34.82 Income from investment operations: Net investment income (loss) (.25) (.42) (.46) (.28) (.29) Net gains (losses) (both realized and unrealized) (8.23) (21.29) 12.61 7.02 2.04 Total from investment operations (8.48) (21.71) 12.15 6.74 1.75 Less distributions: Distributions from realized gains (.02) (2.20) (.78) (1.70) (.96) Net asset value, end of period $19.61 $ 28.11 $52.02 $40.65 $35.61 Ratios/supplemental data Net assets, end of period (in millions) $845 $1,510 $2,468 $1,458 $1,021 Ratio of expenses to average daily net assets(c) 1.77% 1.75% 1.75% 1.65% 1.63% Ratio of net investment income (loss) to average daily net assets (.93%) (1.11%) (1.06%) (.85%) (.97%) Portfolio turnover rate (excluding short-term securities) 225% 41% 23% 17% 28% Total return(e) (30.18%) (42.57%) 30.02% 19.58% 5.52%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 30 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT --------------------------------------------------------------------------------
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $28.12 $ 52.03 $52.65 Income from investment operations: Net investment income (loss) (.21) (.42) (.04) Net gains (losses) (both realized and unrealized) (8.27) (21.29) (.58) Total from investment operations (8.48) (21.71) (.62) Less distributions: Distributions from realized gains (.02) (2.20) -- Net asset value, end of period $19.62 $ 28.12 $52.03 Ratios/supplemental data Net assets, end of period (in millions) $7 $9 $1 Ratio of expenses to average daily net assets(c) 1.80% 1.75% 1.75%(d) Ratio of net investment income (loss) to average daily net assets (.96%) (1.10%) (1.30%)(d) Portfolio turnover rate (excluding short-term securities) 225% 41% 23% Total return(e) (30.17%) (42.56%) (1.18%)
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000 1999 1998 Net asset value, beginning of period $29.96 $ 54.75 $42.37 $36.74 $35.60 Income from investment operations: Net investment income (loss) -- (.07) (.06) -- (.04) Net gains (losses) (both realized and unrealized) (8.83) (22.52) 13.22 7.33 2.14 Total from investment operations (8.83) (22.59) 13.16 7.33 2.10 Less distributions: Distributions from realized gains (.02) (2.20) (.78) (1.70) (.96) Net asset value, end of period $21.11 $ 29.96 $54.75 $42.37 $36.74 Ratios/supplemental data Net assets, end of period (in millions) $481 $974 $1,551 $914 $582 Ratio of expenses to average daily net assets(c) .82% .83% .83% .80% .80% Ratio of net investment income (loss) to average daily net assets .02% (.18%) (.14%) --% (.12%) Portfolio turnover rate (excluding short-term securities) 225% 41% 23% 17% 28% Total return(e) (29.48%) (42.04%) 31.20% 20.59% 6.40%
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. -------------------------------------------------------------------------------- 31 -- AXP GROWTH 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 of AXP Growth Fund (a series of AXP Growth Series, Inc.) as of July 31, 2002, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended July 31, 2002, and the financial highlights for each of the years in the five-year period ended 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AXP Growth Fund as of July 31, 2002, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota September 6, 2002 -------------------------------------------------------------------------------- 32 -- AXP GROWTH FUND -- 2002 ANNUAL REPORT -------------------------------------------------------------------------------- Federal Income Tax Information (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. AXP Growth Fund Fiscal year ended July 31, 2002 Class A Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 21, 2001 $0.02204 Total distribution* $0.02204 Class B Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 21, 2001 $0.02204 Total distribution* $0.02204 Class C Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 21, 2001 $0.02204 Total distribution* $0.02204 Class Y Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 21, 2001 $0.02204 Total distribution* $0.02204 * $0.004 per share represents a tax return of capital. -------------------------------------------------------------------------------- 33 -- AXP GROWTH 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 -------------------------------------- ------------------------------ --------------------------- ----------------------------
-------------------------------------------------------------------------------- 34 -- AXP GROWTH 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 technology Minneapolis, MN 55474 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 -------------------------------------- ------------------------------ ---------------------------- ---------------------------
-------------------------------------------------------------------------------- 35 -- AXP GROWTH 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 AEFC Minneapolis, MN 55474 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. -------------------------------------------------------------------------------- 36 -- AXP GROWTH 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 Growth 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-6455 W (9/02)