485BPOS 1 partabc.txt AXP NEW DIMENSIONS FUND, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. _____ Post-Effective Amendment No. 66 (File No. 2-28529) [X] ------ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 41 (File No. 811-1629) [X] ------ AXP NEW DIMENSIONS FUND, INC. 200 AXP Financial Center Minneapolis, MN 55474 Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268 (612) 330-9283 Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] September 27, 2002, pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485. If appropriate, check the following box: [ ] This Post-Effective Amendment designates a new effective date for a previously filed Post -Effective Amendment. AXP(R) Growth Dimensions Fund AXP Growth Dimensions Fund seeks to provide shareholders with long-term capital growth. PROSPECTUS SEPT. 27, 2002 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 4p Past Performance 5p Fees and Expenses 7p Investment Manager 8p Other Securities and Investment Strategies 9p Buying and Selling Shares 9p Valuing Fund Shares 9p Investment Options 9p Purchasing Shares 11p Transactions Through American Express Brokerage or Third Parties 13p Sales Charges 14p Exchanging/Selling Shares 17p Distributions and Taxes 21p Financial Highlights 22p -------------------------------------------------------------------------------- 2p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- The Fund GOAL AXP Growth Dimensions Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this goal cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity securities showing potential for significant growth. These companies often operate in areas where dynamic economic and technological changes are occurring. The Fund may invest up to 30% of its total assets in foreign investments. In pursuit of long-term capital growth, American Express Financial Corporation (AEFC), the Fund's investment manager, chooses investments by: o identifying companies that AEFC believes have above-average long-term growth potential based on o effective management, o financial strength, and o competitive market or product position; as well as o considering opportunities and risks by reviewing interest rate and economic forecasts both domestically and abroad. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o the security is overvalued relative to alternative investments; o the company has met AEFC's earnings and/or growth expectations; o political, economic, or other events could affect the company's or the security's performance; o AEFC identifies a more attractive investment opportunity it believes has a better long-term growth potential based on factors described above; o AEFC wishes to minimize potential losses (for example, in a market down turn); and o the company continues to meet the other standards described above. During weak or declining markets, the Fund may invest more of its assets in money market securities. Although investing in these securities would serve primarily to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the Fund may trade its portfolio securities more frequently. Frequent trading could result in increased fees, expenses, and taxes. -------------------------------------------------------------------------------- 3p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Issuer Risk Style Risk Foreign Risk Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortage, corporate restructurings, fraudulent disclosures or other factors. Style Risk The Fund purchases growth stocks based on the expectation that the companies will have strong growth in earnings. The price paid often reflects an expected rate of growth. If that growth fails to occur, the price of the stock may decline quickly. Foreign Risk The following are all components of foreign risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood that problems will occur. -------------------------------------------------------------------------------- 4p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year that the Fund has existed, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years -5% -10% -15% -20% -25% -29.65% -30% 2001 During the period shown in the bar chart, the highest return for a calendar quarter was +17.57% (quarter ending December 2001) and the lowest return for a calendar quarter was -27.49% (quarter ending March 2001). 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 Fund's Class A year to date return as of June 30, 2002 was -21.56%. -------------------------------------------------------------------------------- 5p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Average Annual Total Returns (as of Dec. 31, 2001) 1 year Since inception Growth Dimensions Class A Return before taxes -33.69% -36.71%(a) Return after taxes on distributions -33.69% -36.71%(a) Return after taxes on distributions and sale of fund shares -20.52% -28.62%(a) Class B Return before taxes -32.88% -36.43%(a) Class C Return before taxes -30.08% -34.69%(a) Class Y Return before taxes -29.65% -34.19%(a) S&P 500 Index -11.98% -13.51%(b) Lipper Large-Cap Growth Funds Index -23.87% -28.07%(b) (a) Inception date was June 26, 2000. (b) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate (currently 39.1%) and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The Return After Taxes on Distributions for a period may be the same as the Return Before Taxes for the same period if there are no distributions or if the distributions are small. The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return Before Taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. -------------------------------------------------------------------------------- 6p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. Standard & Poor's 500 Index (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. 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. FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none
Annual Fund operating expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 0.47% 0.47% 0.47% 0.47% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.38% 0.41% 0.41% 0.47% Total 1.10% 1.88% 1.88% 0.94% (a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $500,000 on which the sales charge is waived, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Other expenses are based on estimated amounts for the current fiscal year. AEFC has contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2003. Under this agreement, total expenses will not exceed 1.15% for Class A; 1.91% for Class B; 1.91% for Class C and 0.99% for Class Y. (e) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.04% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder services fee for Class Y, a transfer agency fee and other nonadvisory expenses. -------------------------------------------------------------------------------- 7p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return. The operating expenses remain the same each year. If you hold your shares until the end of the years shown, your costs would be: 1 year 3 years 5 years 10 years Class A(a) $681 $905 $1,147 $1,843 Class B(b) $591 $891 $1,117 $2,002(d) Class B(c) $191 $591 $1,017 $2,002(d) Class C $191 $591 $1,017 $2,206 Class Y $ 96 $300 $ 521 $1,159 (a) Includes a 5.75% sales charge. (b) Assumes you sold your Class B shares at the end of the period and incurred the applicable CDSC. (c) Assumes you did not sell your Class B shares at the end of the period. (d) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. This example does not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER Gordon Fines, vice president and senior portfolio manager, joined AEFC in 1981. He has been in the investment industry since 1967. Gordon has managed the assets of AXP New Dimensions Fund since 1991. He also serves as portfolio manager of AXP Variable Portfolio - New Dimensions Fund and he leads the growth team for AEFC. The Fund pays AEFC a fee for managing its assets. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.47% of its average daily net assets, including an adjustment under the terms of a performance incentive arrangement between AEFC and the Fund. The maximum monthly adjustment (increase or decrease) will be 0.12% of the Fund's average net assets on an annual basis. Under the agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Fund, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. On July 16, 2002 the Fund received an order from the Securities and Exchange Commission to permit AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. Before the Fund may rely on the order, a majority of the Fund's outstanding voting securities will need to approve operating the Fund in this manner. If shareholder approval is received, the Fund will be able to add or change subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. There is no assurance shareholder approval will be received, and no changes will be made without shareholder approval until that time. -------------------------------------------------------------------------------- 8p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may utilize investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as money market securities, preferred stock, investment grade debt obligations (of any rating), and convertible securities. Additionally, the Fund may utilize derivative instruments such as futures, options, and forward contracts to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, AEFC is not required to use derivatives. While not a principal investment strategy, investing in derivative instruments could have a negative impact on the Fund's performance. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and the annual and semiannual reports. Buying and Selling Shares VALUING FUND SHARES The public offering price for Class A is the net asset value (NAV) adjusted for the sales charge. For Class B, Class C and Class Y, it is the NAV. The NAV is the value of a single Fund share. The NAV usually changes daily, and is calculated at the close of business of the New York Stock Exchange, normally 3 p.m. Central Time (CT), each business day (any day the New York Stock Exchange is open). Fund shares may be purchased through various third-party organizations, including 401(k) plans, banks, brokers and investment advisers. Where authorized by the Fund, orders will be priced at the NAV next computed after receipt by the organization or their selected agent. The Fund's investments are valued based on market quotations, or where market quotations are not readily available, based on methods selected in good faith by the board. If the Fund's investment policies permit it to invest in securities that are listed on foreign stock exchanges that trade on weekends or other days when the Fund does not price its shares, the value of the Fund's underlying investments may change on days when you could not buy or sell shares of the Fund. Please see the SAI for further information. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. -------------------------------------------------------------------------------- 9p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Investment options summary The Fund offers four different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y --------------- ---------------- -------------- --------------- ---------------- Availability Available to Available to Available to Limited to all investors. all all investors. qualifying investors. institutional investors. --------------- ---------------- -------------- --------------- ---------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase price purchase. price is price is is invested in Lower sales invested in invested in shares of the charge for shares of shares of the Fund. larger the Fund. Fund. investments. --------------- ---------------- -------------- --------------- ---------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over $500,000, CDSC during applies if 1% CDSC the first you sell your applies if you year shares less sell your decreasing than one year shares less to 0% after after than one year six years. purchase. after purchase. --------------- ---------------- -------------- --------------- ---------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee --------------- ---------------- -------------- --------------- ---------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. --------------- ---------------- -------------- --------------- ---------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. -------------------------------------------------------------------------------- 10p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- PURCHASING SHARES To purchase shares through an American Express Brokerage Account or entities other than American Express Financial Advisors Inc., please refer to the American Express Brokerage Web site or consult your selling agent. The following section explains how you can purchase shares from American Express Financial Advisors (the Distributor). If you do not have a mutual fund account, you need to establish one. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase shares for a new or existing account, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 30% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: ------------------------------------ ---------------------------------------- Individual or joint account The individual or one of the owners listed on the joint account ------------------------------------ ---------------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) ------------------------------------ ---------------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) ------------------------------------ ---------------------------------------- An irrevocable trust, pension The legal entity (not the personal trust or estate representative or trustee, unless no legal entity is designated in the account title) ------------------------------------ ---------------------------------------- Sole proprietorship The owner ------------------------------------ ---------------------------------------- Partnership The partnership ------------------------------------ ---------------------------------------- Corporate The corporation ------------------------------------ ---------------------------------------- Association, club or tax-exempt The organization organization ------------------------------------ ---------------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (www.irs.gov). -------------------------------------------------------------------------------- 11p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Three ways to invest 1 By mail Once your account has been established, send your check with the account number on it to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000 Additional investments: $100 Account balances: $300 Qualified accounts: none If your account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. 2 By scheduled investment plan Contact your financial advisor for assistance in setting up one of the following scheduled plans: o automatic payroll deduction, o bank authorization, o direct deposit of Social Security check, or o other plan approved by the Fund. Minimum amounts Initial investment: $100 Additional investments: $50 per payment for qualified accounts; $100 per payment for nonqualified accounts Account balances: none (on a scheduled investment plan with monthly payments) If your account balance is below $2,000, you must make payments at least monthly. -------------------------------------------------------------------------------- 12p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- 3 By wire or electronic funds transfer If you have an established account, you may wire money to: Wells Fargo Bank Minnesota, N.A. Minneapolis, MN 55479 Routing Transit No. 091000019 Give these instructions: Credit American Express Financial Advisors Account #0000030015 for personal account # (your account number) for (your name). Please be sure to include all 10 digits of the American Express Financial Advisors account number, including the zeros. If this information is not included, the order may be rejected, and all money received by the Fund, less any costs the Fund or American Express Client Service Corporation (AECSC) incurs, will be returned promptly. Minimum amounts Each wire investment: $1,000 TRANSACTIONS THROUGH AMERICAN EXPRESS BROKERAGE OR THIRD PARTIES You may buy or sell shares through American Express Brokerage, certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through American Express Brokerage or third parties or to determine if there are policy differences, please consult the American Express Brokerage Web site or your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. -------------------------------------------------------------------------------- 13p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.75 3.90 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00** 2.04** $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. ** The sales charge will be waived until Dec. 31, 2002. The sales charge on Class A shares may be lower than 5.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds that have a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges. Other Class A sales charge policies o IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar group, may be added together to reduce sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. -------------------------------------------------------------------------------- 14p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. Until Dec. 31, 2002, the sales charge does not apply to shareholders who have at least $500,000 in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of shares (up to the amount sold): o of American Express mutual funds in a qualified plan subject to a deferred sales charge, or o in a qualified plan or account where American Express Trust Company has a recordkeeping, trustee, investment management, or investment servicing relationship. Send the Fund a written request along with your payment, indicating the date and the amount of the sale. o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o within the University of Massachusetts After-Tax Savings Program, or o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. -------------------------------------------------------------------------------- 15p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 15 months, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 4% because the sale was made during the second year after the purchase. -------------------------------------------------------------------------------- 16p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, AECSC and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege, or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgement has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until AECSC receives written approval from the secured party. -------------------------------------------------------------------------------- 17p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Selling Shares You can sell your shares at any time. The payment will be mailed within seven days after accepting your request. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is accepted by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held through an American Express Brokerage Account or with entities other than American Express Financial Advisors, please consult your selling agent. The following section explains how you can exchange or sell shares held with American Express Financial Advisors. Requests to sell shares of the Fund are not allowed within 30 days of a telephoned-in address change. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and AECSC that your check has cleared. -------------------------------------------------------------------------------- 18p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Two ways to request an exchange or sale of shares 1 By letter Include in your letter: o the name of the fund(s), o the class of shares to be exchanged or sold, o your mutual fund account number(s) (for exchanges, both funds must be registered in the same ownership), o your Social Security number or Employer Identification number, o the dollar amount or number of shares you want to exchange or sell, o signature(s) of registered account owner(s), (All signatures may be required. Contact AECSC for more information.) o for sales, indicate how you want your money delivered to you, and o any paper certificates of shares you hold. Regular or express mail: American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 2 By telephone American Express Client Service Corporation Telephone Transaction Service (800) 437-3133 o The Fund and AECSC will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing AECSC. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 -------------------------------------------------------------------------------- 19p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Four ways to receive payment when you sell shares 1 By regular or express mail o Mailed to the address on record. o Payable to names listed on the account. o The express mail delivery charges you pay will vary depending on the courier you select. 2 By electronic funds transfer (EFT or ACH) o Minimum redemption: $100. o Funds are deposited electronically into your bank account. o No charge. o Bank account must be in the same ownership as the American Express mutual fund account. o Allow two to five business days from request to deposit. o Pre-authorization required. For instructions, contact your financial advisor or AECSC. 3 By wire o Minimum redemption: $1,000. o Funds are wired electronically into your bank account. o Applicable wire charges will vary depending on service provided. o Bank account must be in the same ownership as the American Express mutual fund account. o Allow one to two business days from request to deposit for domestic wires. o Pre-authorization required. For instructions, contact your financial advisor or AECSC. 4 By scheduled payout plan o Minimum payment: $50. o Contact your financial advisor or AECSC to set up regular payments on a monthly, bimonthly, quarterly, semiannual or annual basis. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. -------------------------------------------------------------------------------- 20p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. As a result of the Fund's goal and investment strategies, distributions from the Fund may consist of a significant amount of capital gains. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. -------------------------------------------------------------------------------- 21p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Financial Highlights
Class A Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $2.75 $ 4.87 $4.92 Income from investment operations: Net investment income (loss) (.01) (.01) -- Net gains (losses) (both realized and unrealized) (.71) (2.11) (.05) Total from investment operations (.72) (2.12) (.05) Net asset value, end of period $2.03 $ 2.75 $4.87 Ratios/supplemental data Net assets, end of period (in millions) $142 $232 $22 Ratio of expenses to average daily net assets(c) 1.10% 1.12%(d) 1.10%(d,h) Ratio of net investment income (loss) to average daily net assets (.20%) (.16%) .37%(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.18%) (43.53%) (1.02%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 22p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS --------------------------------------------------------------------------------
Class B Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $2.73 $ 4.87 $4.92 Income from investment operations: Net investment income (loss) (.03) (.02) -- Net gains (losses) (both realized and unrealized) (.70) (2.12) (.05) Total from investment operations (.73) (2.14) (.05) Net asset value, end of period $2.00 $ 2.73 $4.87 Ratios/supplemental data Net assets, end of period (in millions) $68 $109 $11 Ratio of expenses to average daily net assets(c) 1.88% 1.89%(e) 1.91%(e,h) Ratio of net investment income (loss) to average daily net assets (.97%) (.92%) (.48%)(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.74%) (43.94%) (1.02%) Class C Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $2.73 $ 4.87 $4.92 Income from investment operations: Net investment income (loss) (.03) (.02) -- Net gains (losses) (both realized and unrealized) (.70) (2.12) (.05) Total from investment operations (.73) (2.14) (.05) Net asset value, end of period $2.00 $ 2.73 $4.87 Ratios/supplemental data Net assets, end of period (in millions) $4 $6 $1 Ratio of expenses to average daily net assets(c) 1.88% 1.89%(f) 1.91%(f,h) Ratio of net investment income (loss) to average daily net assets (.97%) (.94%) (.48%)(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.74%) (43.94%) (1.02%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 23p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS --------------------------------------------------------------------------------
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $2.76 $ 4.88 $4.92 Income from investment operations: Net gains (losses) (both realized and unrealized) (.73) (2.12) (.04) Net asset value, end of period $2.03 $ 2.76 $4.88 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- Ratio of expenses to average daily net assets(c) .94% 0.95%(g) .81%(g,h) Ratio of net investment income (loss) to average daily net assets .01% (.03%) .58%(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.45%) (43.44%) (.81%)
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 26, 2000 (when shares became publicly available) to July 31, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class A would have been 1.16% and 2.32% for the periods ended 2001 and 2000, respectively. (e) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class B would have been 1.92% and 3.40% for the periods ended 2001 and 2000, respectively. (f) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class C would have been 1.92% and 3.40% for the periods ended 2001 and 2000, respectively. (g) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class Y would have been 1.00% and 2.12% for the periods ended 2001 and 2000, respectively. (h) Adjusted to an annual basis. (i) Total return does not reflect payment of a sales charge. The information in these tables has been audited by KPMG LLP, independent auditors. The independent auditors' report and additional information about the performance of the Fund are contained in the Fund's annual report which, if not included with this prospectus, may be obtained without charge. -------------------------------------------------------------------------------- 24p -- AXP GROWTH DIMENSIONS FUND -- 2002 PROSPECTUS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-1629 Ticker Symbol Class A: AXDAX Class B: ABGDX Class C: AXGDX Class Y: -- S-6004-99 E (9/02) AXP(R) New Dimensions(R) Fund AXP New Dimensions Fund seeks to provide shareholders with long-term growth of capital. PROSPECTUS SEPT. 27, 2002 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. American Express(R) Funds AMERICAN EXPRESS(R) Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 4p Past Performance 5p Fees and Expenses 7p Investment Manager 8p Other Securities and Investment Strategies 9p Buying and Selling Shares 9p Valuing Fund Shares 9p Investment Options 10p Purchasing Shares 11p Transactions Through American Express Brokerage or Third Parties 14p Sales Charges 14p Exchanging/Selling Shares 17p Distributions and Taxes 21p Master/Feeder Structure 22p Financial Highlights 23p -------------------------------------------------------------------------------- 2p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS The Fund GOAL AXP New Dimensions Fund (the Fund) seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund primarily invests in common stocks showing potential for significant growth. These companies often operate in areas where dynamic economic and technological changes are occurring. The Fund may invest up to 30% of its total assets in foreign investments. The selection of common stocks is the primary decision in building the investment portfolio. In pursuit of the Fund's goal, American Express Financial Corporation (AEFC), the Fund's investment manager, chooses investments by: o identifying companies that AEFC believes have above-average long-term growth potential based on o effective management, o financial strength, and o competitive market position; as well as o considering opportunities and risks by reviewing interest rate and economic forecasts both domestically and abroad. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o the security is overvalued relative to alternative investments, o the company has met AEFC's earnings and/or growth expectations, o political, economic, or other events could affect the company's performance, o AEFC wishes to minimize potential losses (for example, in a market downturn), and o AEFC identifies a more attractive opportunity. During weak or declining markets, the Fund may invest more of its assets in money market securities. Although investing in these securities would serve primarily to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, AEFC may make frequent securities trades that could result in increased fees, expenses, and taxes. -------------------------------------------------------------------------------- 3p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Issuer Risk Style Risk Foreign Risk Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortage, corporate restructurings, fraudulent disclosures or other factors. Style Risk The Fund purchases growth stocks based on the expectation that the companies will have strong growth in earnings. The price paid often reflects an expected rate of growth. If that growth fails to occur, the price of the stock may decline quickly. Foreign Risk The following are all components of foreign risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. -------------------------------------------------------------------------------- 4p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year shown on the chart below, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past does not indicate how the Fund will perform in the future.
(bar graph) CLASS A PERFORMANCE (based on calendar years) 40% (bar 4) (bar 8) 30% +35.56% (bar 5) (bar 6) (bar 7) +31.56% 20% (bar 2) +24.42% +24.62% +28.31% 10% (bar 1) +14.05% 0% +5.24% (bar 3) (bar 9) -10% -2.98% -8.82% (bar 10) -20% -15.49% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
During the period shown in the bar chart, the highest return for a calendar quarter was +24.24% (quarter ending December 1998) and the lowest return for a calendar quarter was -15.74% (quarter ending September 2001). 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 Fund's Class A year to date return as of June 30, 2002 was -12.41%. -------------------------------------------------------------------------------- 5p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Average Annual Total Returns (as of Dec. 31, 2001)
Since Since 1 year 5 years 10 years inception (B&Y) inception (C) New Dimensions: Class A Return before taxes -20.35% +8.84% +11.61% N/A N/A Return after taxes on distributions -20.37% +7.18% +9.81% N/A N/A Return after taxes on distributions and sale of fund shares -12.39% +6.98% +9.15% N/A N/A Class B Return before taxes -19.51% +9.16% N/A +13.97%(a) N/A Class C Return before taxes -16.17% N/A N/A N/A -17.59%(c) Class Y Return before taxes -15.36% +10.27% N/A +15.00%(a) N/A S&P 500 Index -11.89% +10.70% +12.94% +14.96%(b) -13.51%(d) Lipper Large-Cap Growth Funds Index -23.87% +7.50% +10.60% +12.22%(b) -28.07%(d)
(a) Inception date was March 20, 1995. (b) Measurement period started April 1, 1995. (c) Inception date was June 26, 2000. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. Past performance for Class Y for the periods prior to March 20, 1995 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, although not for other differences in expenses. After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate (currently 39.1%) and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The Return After Taxes on Distributions for a period may be the same as the Return Before Taxes for the same period if there are no distributions or if the distributions are small. The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return Before Taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. -------------------------------------------------------------------------------- 6p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. Standard & Poor's 500 Index (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. 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. FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Shareholder Fees (fees paid directly from your investment)
Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none
Annual Fund operating expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 0.61% 0.61% 0.61% 0.61% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.20% 0.22% 0.24% 0.29% Total 1.06% 1.83% 1.85% 0.90%
(a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $500,000 on which the sales charge is waived, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Management." (e) Includes the impact of a performance incentive adjustment fee that increased the management fee by 0.10% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder services fee for Class Y, a transfer agency fee and other nonadvisory expenses. -------------------------------------------------------------------------------- 7p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return. The operating expenses remain the same each year. If you hold your shares until the end of the years shown, your costs would be: 1 year 3 years 5 years 10 years Class A(a) $677 $893 $1,127 $1,799 Class B(b) $586 $876 $1,091 $1,950(d) Class B(c) $186 $576 $ 991 $1,950(d) Class C $186 $582 $1,002 $2,174 Class Y $ 92 $287 $ 499 $1,112 (a) Includes a 5.75% sales charge. (b) Assumes you sold your Class B shares at the end of the period and incurred the applicable CDSC. (c) Assumes you did not sell your Class B shares at the end of the period. (d) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. This example does not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in Growth Trends Portfolio (the Portfolio), which is managed by AEFC. Gordon Fines, vice president and senior portfolio manager, joined AEFC in 1981. He has been in the investment idustry since 1967. He has managed the assets of the Portfolio since 1991. He serves as portfolio manager of AXP Growth Dimensions Fund, AXP Variable Portfolio - New Dimensions Fund and he leads the growth team for AEFC. The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.61% of its average daily net assets, including an adjustment under the terms of a performance incentive arrangement between AEFC and the Fund. The maximum monthly adjustment (increase or decrease) will be 0.12% of the Fund's average net assets on an annual basis. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Fund, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. On July 16, 2002, the Fund received an order from the Securities and Exchange Commission to permit AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. Before the Fund may rely on the order, a majority of the Fund's outstanding voting -------------------------------------------------------------------------------- 8p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS securities will need to approve operating the Fund in this manner. If shareholder approval is received, the Fund will be able to add or change subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. There is no assurance shareholder approval will be received, and no changes will be made without shareholder approval until that time. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may utilize investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as money market securities, preferred stock, debt obligations of any rating, and convertible securities. Additionally, the Fund may utilize derivative instruments to produce incremental earnings, to hedge existing positions and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, AEFC is not required to use derivatives. While not a principal investment strategy, investing in derivative instruments could have a negative impact on the Fund's performance. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and the annual and semiannual reports. Buying and Selling Shares VALUING FUND SHARES The public offering price for Class A is the net asset value (NAV) adjusted for the sales charge. For Class B, Class C and Class Y, it is the NAV. The NAV is the value of a single Fund share. The NAV usually changes daily, and is calculated at the close of business of the New York Stock Exchange, normally 3 p.m. Central Time (CT), each business day (any day the New York Stock Exchange is open). Fund shares may be purchased through various third-party organizations, including 401(k) plans, banks, brokers and investment advisers. Where authorized by the Fund, orders will be priced at the NAV next computed after receipt by the organization or their selected agent. Investments are valued based on market quotations, or where market quotations are not readily available, based on methods selected in good faith by the board. If the Fund's investment policies permit it to invest in securities that are listed on foreign stock exchanges that trade on weekends or other days when the Fund does not price its shares, the value of those investments may change on days when you could not buy or sell shares of the Fund. Please see the SAI for further information. -------------------------------------------------------------------------------- 9p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. Investment options summary The Fund offers four different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class:
Class A Class B Class C Class Y --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Availability Available to all Available to all Available to all Limited to qualifying investors. investors. investors. institutional investors. --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Initial Sales Charge Yes. Payable at time No. Entire purchase No. Entire purchase No. Entire purchase of purchase. Lower price is invested in price is invested in price is invested in sales charge for shares of the Fund. shares of the Fund. shares of the Fund. larger investments. --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Deferred Sales Charge On purchases over Maximum 5% CDSC during 1% CDSC applies if you None. $500,000, 1% CDSC the first year sell your shares less applies if you sell decreasing to 0% after than one year after your shares less than six years. purchase. one year after purchase. --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Distribution and/or Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% Shareholder Service Fee --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Conversion to Class A N/A Yes, automatically in No. No. ninth calendar year of ownership. --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
* The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. -------------------------------------------------------------------------------- 10p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. PURCHASING SHARES To purchase shares through an American Express Brokerage Account or entities other than American Express Financial Advisors Inc., please refer to the American Express Brokerage Web site or consult your selling agent. The following section explains how you can purchase shares from American Express Financial Advisors (the Distributor). If you do not have a mutual fund account, you need to establish one. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase shares for a new or existing account, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 30% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. -------------------------------------------------------------------------------- 11p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS
How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: ------------------------------------------------- ------------------------------------------------------------------ Individual or joint account The individual or one of the owners listed on the joint account ------------------------------------------------- ------------------------------------------------------------------ Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) ------------------------------------------------- ------------------------------------------------------------------ A revocable living trust The grantor-trustee (the person who puts the money into the trust) ------------------------------------------------- ------------------------------------------------------------------ An irrevocable trust, pension trust or estate The legal entity (not the personal representative or trustee, unless no legal entity is designated in the account title) ------------------------------------------------- ------------------------------------------------------------------ Sole proprietorship The owner ------------------------------------------------- ------------------------------------------------------------------ Partnership The partnership ------------------------------------------------- ------------------------------------------------------------------ Corporate The corporation ------------------------------------------------- ------------------------------------------------------------------ Association, club or tax-exempt organization The organization ------------------------------------------------- ------------------------------------------------------------------
For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (www.irs.gov). Three ways to invest 1 By mail Once your account has been established, send your check with the account number on it to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000 Additional investments: $100 Account balances: $300 Qualified accounts: none If your account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. -------------------------------------------------------------------------------- 12p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS 2 By scheduled investment plan Contact your financial advisor for assistance in setting up one of the following scheduled plans: o automatic payroll deduction, o bank authorization, o direct deposit of Social Security check, or o other plan approved by the Fund. Minimum amounts Initial investment: $100 Additional investments: $50 per payment for qualified accounts; $100 per payment for nonqualified accounts Account balances: none (on a scheduled investment plan with monthly payments) If your account balance is below $2,000, you must make payments at least monthly. 3 By wire or electronic funds transfer If you have an established account, you may wire money to: Wells Fargo Bank Minnesota, N.A. Minneapolis, MN 55479 Routing Transit No. 091000019 Give these instructions: Credit American Express Financial Advisors Account #0000030015 for personal account # (your account number) for (your name). Please be sure to include all 10 digits of the American Express Financial Advisors account number, including the zeros. If this information is not included, the order may be rejected, and all money received by the Fund, less any costs the Fund or American Express Client Service Corporation (AECSC) incurs, will be returned promptly. Minimum amounts Each wire investment: $1,000 -------------------------------------------------------------------------------- 13p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS TRANSACTIONS THROUGH AMERICAN EXPRESS BROKERAGE OR THIRD PARTIES You may buy or sell shares through American Express Brokerage, certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through American Express Brokerage or third parties or to determine if there are policy differences, please consult the American Express Brokerage Web site or your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.75 3.90 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00** 2.04** $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. ** The sales charge will be waived until Dec. 31, 2002. The sales charge on Class A shares may be lower than 5.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds that have a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges. -------------------------------------------------------------------------------- 14p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Other Class A sales charge policies o IRA by an employer, association of employers, employee organization or other similar group, may be added together to reduce purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. Until Dec. 31, 2002, the sales charge does not apply to shareholders who have at least $500,000 in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of shares (up to the amount sold): o of American Express mutual funds in a qualified plan subject to a deferred sales charge, or o in a qualified plan or account where American Express Trust Company has a recordkeeping, trustee, investment management, or investment servicing relationship. Send the Fund a written request along with your payment, indicating the date and the amount of the sale. -------------------------------------------------------------------------------- 15p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o within the University of Massachusetts After-Tax Savings Program, or o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. -------------------------------------------------------------------------------- 16p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 15 months, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 4% because the sale was made during the second year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, AECSC and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege, or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgement has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. -------------------------------------------------------------------------------- 17p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until AECSC receives written approval from the secured party. Selling Shares You can sell your shares at any time. The payment will be mailed within seven days after accepting your request. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is accepted by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held through an American Express Brokerage Account or with entities other than American Express Financial Advisors, please consult your selling agent. The following section explains how you can exchange or sell shares held with American Express Financial Advisors. Requests to sell shares of the Fund are not allowed within 30 days of a telephoned-in address change. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and AECSC that your check has cleared. -------------------------------------------------------------------------------- 18p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Two ways to request an exchange or sale of shares 1 By letter Include in your letter: o the name of the fund(s), o the class of shares to be exchanged or sold, o your mutual fund account number(s) (for exchanges, both funds must be registered in the same ownership), o your Social Security number or Employer Identification number, o the dollar amount or number of shares you want to exchange or sell, o signature(s) of registered account owner(s), (All signatures may be required. Contact AECSC for more information.) o for sales, indicate how you want your money delivered to you, and o any paper certificates of shares you hold. Regular or express mail: American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 2 By telephone American Express Client Service Corporation Telephone Transaction Service (800) 437-3133 o The Fund and AECSC will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing AECSC. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 -------------------------------------------------------------------------------- 19p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Four ways to receive payment when you sell shares 1 By regular or express mail o Mailed to the address on record. o Payable to names listed on the account. o The express mail delivery charges you pay will vary depending on the courier you select. 2 By electronic funds transfer (EFT or ACH) o Minimum redemption: $100. o Funds are deposited electronically into your bank account. o No charge. o Bank account must be in the same ownership as the American Express mutual fund account. o Allow two to five business days from request to deposit. o Pre-authorization required. For instructions, contact your financial advisor or AECSC. 3 By wire o Minimum redemption: $1,000. o Funds are wired electronically into your bank account. o Applicable wire charges will vary depending on service provided. o Bank account must be in the same ownership as the American Express mutual fund account. o Allow one to two business days from request to deposit for domestic wires. o Pre-authorization required. For instructions, contact your financial advisor or AECSC. 4 By scheduled payout plan o Minimum payment: $50. o Contact your financial advisor or AECSC to set up regular payments on a monthly, bimonthly, quarterly, semiannual or annual basis. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. -------------------------------------------------------------------------------- 20p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains.The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. As a result of the Fund's goal and investment strategies, distributions from the Fund may consist of a significant amount of capital gains. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. -------------------------------------------------------------------------------- 21p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund The Fund buys units in the Portfolio The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. -------------------------------------------------------------------------------- 22p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS
Financial Highlights 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 $25.43 $36.26 $31.21 $27.59 $25.69 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .05 .02 .02 .06 .13 Net gains (losses) (both realized and unrealized) (5.42) (7.37) 7.14 5.31 3.67 ----- ----- ---- ---- ---- Total from investment operations (5.37) (7.35) 7.16 5.37 3.80 ----- ----- ---- ---- ---- Less distributions: Dividends from net investment income (.02) (.01) (.05) (.06) (.17) Excess distributions from net investment income -- (.01) -- -- -- Distributions from realized gains -- (3.46) (2.06) (1.69) (1.73) ----- ----- ----- ----- ----- Total distributions (.02) (3.48) (2.11) (1.75) (1.90) ---- ----- ----- ----- ----- Net asset value, end of period $20.04 $25.43 $36.26 $31.21 $27.59 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $9,863 $13,857 $17,777 $13,568 $10,559 Ratio of expenses to average daily net assets(c) 1.06% 1.00% .90% .86% .82% Ratio of net investment income (loss) to average daily net assets .19% .12% .19% .24% .55% Portfolio turnover rate (excluding short-term securities) 27% 29% 34% 34% 38% Total return(e) (21.14%) (21.10%) 23.16% 20.04% 16.19%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 23p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS 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 $24.44 $35.22 $30.54 $27.19 $25.38 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) (.14) (.13) (.24) (.10) -- Net gains (losses) (both realized and unrealized) (5.16) (7.19) 6.98 5.14 3.57 ----- ----- ---- ---- ---- Total from investment operations (5.30) (7.32) 6.74 5.04 3.57 ----- ----- ---- ---- ---- Less distributions: Dividends from net investment income (.02) -- -- -- (.03) Distributions from realized gains -- (3.46) (2.06) (1.69) (1.73) ----- ----- ----- ----- ----- Total distributions (.02) (3.46) (2.06) (1.69) (1.76) ---- ----- ----- ----- ----- Net asset value, end of period $19.12 $24.44 $35.22 $30.54 $27.19 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $3,728 $5,169 $6,252 $4,070 $2,515 Ratio of expenses to average daily net assets(c) 1.83% 1.76% 1.66% 1.63% 1.58% Ratio of net investment income (loss) to average daily net assets (.57%) (.65%) (.57%) (.53%) (.23%) Portfolio turnover rate (excluding short-term securities) 27% 29% 34% 34% 38 Total return(e) (21.71%) (21.69%) 22.20% 19.13% 15.31%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 24p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $24.42 $35.23 $35.52 ------ ------ ------ Income from investment operations: Net investment income (loss) (.14) (.13) (.01) Net gains (losses) (both realized and unrealized) (5.16) (7.19) (.28) ----- ----- ---- Total from investment operations (5.30) (7.32) (.29) ----- ----- ---- Less distributions: Dividends from net investment income (.02) (.02) -- Excess distributions from net investment income -- (.01) -- Distributions from realized gains -- (3.46) -- ---- ----- ------ Total distributions (.02) (3.49) -- ---- ----- ------ Net asset value, end of period $19.10 $24.42 $35.23 ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $44 $30 $2 Ratio of expenses to average daily net assets(c) 1.85% 1.76% 1.66%(d) Ratio of net investment income (loss) to average daily net assets (.60%) (.75%) (.74%)(d) Portfolio turnover rate (excluding short-term securities) 27% 29% 34% Total return(e) (21.73%) (21.70%) (.82%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 25p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS
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 $25.51 $36.33 $31.24 $27.62 $25.72 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .09 .07 .05 .09 .15 Net gains (losses) (both realized and unrealized) (5.44) (7.38) 7.19 5.30 3.68 ----- ----- ---- ---- ---- Total from investment operations (5.35) (7.31) 7.24 5.39 3.83 ----- ----- ---- ---- ---- Less distributions: Dividends from net investment income (.02) (.02) (.09) (.08) (.20) Excess distributions from net investment income -- (.03) -- -- -- Distributions from realized gains -- (3.46) (2.06) (1.69) (1.73) ---- ----- ----- ----- ----- Total distributions (.02) (3.51) (2.15) (1.77) (1.93) ---- ----- ----- ----- ----- Net asset value, end of period $20.14 $25.51 $36.33 $31.24 $27.62 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $3,222 $4,677 $6,328 $5,513 $4,575 Ratio of expenses to average daily net assets(c) .90% .84% .74% .77% .75% Ratio of net investment income (loss) to average daily net assets .36% .28% .35% .33% .62% Portfolio turnover rate (excluding short-term securities) 27% 29% 34% 34% 38% Total return(e) (21.00%) (20.97%) 23.35% 20.12% 16.28%
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. The information in these tables has been audited by KPMG LLP, independent auditors. The independent auditors' report and additional information about the performance of the Fund are contained in the Fund's annual report which, if not included with this prospectus, may be obtained without charge. -------------------------------------------------------------------------------- 26p -- AXP NEW DIMENSIONS FUND -- 2002 PROSPECTUS American Express(R) Funds AMERICAN EXPRESS(R) This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-1629 Ticker Symbol Class A: INNDX Class B: INDBX Class C: ANDCX Class Y: IDNYX S-6440-99 V (9/02) AXP(R) NEW DIMENSIONS FUND(R), INC. STATEMENT OF ADDITIONAL INFORMATION FOR AXP(R) GROWTH DIMENSIONS FUND (the Fund) SEPT. 27, 2002 This Statement of Additional Information (SAI) is not a prospectus. It should be read together with the prospectus and the financial statements contained in the most recent Annual Report to shareholders (Annual Report) that may be obtained from your financial advisor or by writing to American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474 or by calling (800) 862-7919. The Independent Auditors' Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities, contained in the Annual Report are incorporated in this SAI by reference. No other portion of the Annual Report, however, is incorporated by reference. The prospectus for the Fund, dated the same date as this SAI, also is incorporated in this SAI by reference. Table of Contents Mutual Fund Checklist p. 3 Fundamental Investment Policies p. 4 Investment Strategies and Types of Investments p. 5 Information Regarding Risks and Investment Strategies p. 6 Security Transactions p. 22 Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation p. 23 Performance Information p. 24 Valuing Fund Shares p. 25 Investing in the Fund p. 26 Selling Shares p. 28 Pay-out Plans p. 28 Capital Loss Carryover p. 29 Taxes p. 29 Agreements p. 30 Organizational Information p. 33 Board Members and Officers p. 36 Independent Auditors p. 39 Appendix: Description of Ratings p. 40 -------------------------------------------------------------------------------- 2 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Mutual Fund Checklist - Mutual funds are NOT guaranteed or insured by any bank or government agency. You can lose money. - Mutual funds ALWAYS carry investment risks. Some types carry more risk than others. - A higher rate of return typically involves a higher risk of loss. - Past performance is not a reliable indicator of future performance. - ALL mutual funds have costs that lower investment return. - You can buy some mutual funds by contacting them directly. Others, like this one, are sold mainly through brokers, banks, financial planners, or insurance agents. If you buy through these financial professionals, you generally will pay a sales charge. - Shop around. Compare a mutual fund with others of the same type before you buy. OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING Develop a Financial Plan Have a plan -- even a simple plan can help you take control of your financial future. Review your plan with your advisor at least once a year or more frequently if your circumstances change. Dollar-Cost Averaging An investment technique that works well for many investors is one that eliminates random buy and sell decisions. One such system is dollar-cost averaging. Dollar-cost averaging involves building a portfolio through the investment of fixed amounts of money on a regular basis regardless of the price or market condition. This may enable an investor to smooth out the effects of the volatility of the financial markets. By using this strategy, more shares will be purchased when the price is low and less when the price is high. As the accompanying chart illustrates, dollar-cost averaging tends to keep the average price paid for the shares lower than the average market price of shares purchased, although there is no guarantee. While this does not ensure a profit and does not protect against a loss if the market declines, it is an effective way for many shareholders who can continue investing through changing market conditions to accumulate shares to meet long-term goals. Dollar-cost averaging Regular Market price Shares investment of a share acquired $100 $ 6.00 16.7 100 4.00 25.0 100 4.00 25.0 100 6.00 16.7 100 5.00 20.0 $500 $25.00 103.4 Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5) The average price you paid for each share: $4.84 ($500 divided by 103.4) Diversify Diversify your portfolio. By investing in different asset classes and different economic environments you help protect against poor performance in one type of investment while including investments most likely to help you achieve your important goals. Understand Your Investment Know what you are buying. Make sure you understand the potential risks, rewards, costs, and expenses associated with each of your investments. -------------------------------------------------------------------------------- 3 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Fundamental Investment Policies Fundamental investment policies adopted by the Fund cannot be changed without the approval of a majority of the outstanding voting securities of the Fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Notwithstanding any of the Fund's other investment policies, the Fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the Fund for the purpose of having those assets managed as part of a combined pool. The policies below are fundamental policies that apply to the Fund and may be changed only with shareholder approval. Unless holders of a majority of the outstanding voting securities agree to make the change, the Fund will not: o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means that up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Except for the fundamental investment policies listed above, the other investment policies described in the prospectus and in this SAI are not fundamental and may be changed by the board at any time. -------------------------------------------------------------------------------- 4 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Investment Strategies and Types of Investments This table shows various investment strategies and investments that many funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager may make on behalf of the Fund. For a description of principal risks, please see the prospectus. Notwithstanding the Fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion. Investment strategies and types of investments Allowable for the Fund? Agency and Government Securities yes Borrowing yes Cash/Money Market Instruments yes Collateralized Bond Obligations yes Commercial Paper yes Common Stock yes Convertible Securities yes Corporate Bonds yes Debt Obligations yes Depositary Receipts yes Derivative Instruments yes Foreign Currency Transactions yes Foreign Securities yes High-Yield (High-Risk) Securities (Junk Bonds)* no Illiquid and Restricted Securities yes Indexed Securities yes Inverse Floaters no Investment Companies yes Lending of Portfolio Securities yes Loan Participations yes Mortgage- and Asset-Backed Securities yes Mortgage Dollar Rolls no Municipal Obligations yes Preferred Stock yes Real Estate Investment Trusts yes Repurchase Agreements yes Reverse Repurchase Agreements yes Short Sales yes Sovereign Debt yes Structured Products yes Variable- or Floating-Rate Securities yes Warrants yes When-Issued Securities yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes * These securities cannot be rated below investment grade at the time of purchase. -------------------------------------------------------------------------------- 5 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND The following are guidelines that may be changed by the board at any time: o The Fund may invest up to 30% of its total assets in foreign investments. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o The Fund will not buy on margin, except the Fund may make margin payments in connection with transactions in stock index futures contracts. Information Regarding Risks and Investment Strategies RISKS The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). Please remember that a mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with the Fund at any time (for a description of principal risks, please see the prospectus): Call/Prepayment Risk The risk that a bond or other security might be called (or otherwise converted, prepaid, or redeemed) before maturity. This type of risk is closely related to "reinvestment risk." Company Risk The prospects for a company may vary because of a variety of factors, including the success of the company, disappointing earnings, or changes in the competitive environment. As a result, the success of the companies in which the Fund invests will affect the Fund's performance. Correlation Risk The risk that a given transaction may fail to achieve its objectives due to an imperfect relationship between markets. Certain investments may react more negatively than others in response to changing market conditions. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation (such as payments due on a bond or a note). The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Junk bonds have greater price fluctuations and are more likely to experience a default than investment grade bonds. Event Risk Occasionally, the value of a security may be seriously and unexpectedly changed by a natural or industrial accident or occurrence. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. -------------------------------------------------------------------------------- 6 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Emerging markets risk includes the dramatic pace of change (economic, social, and political) in emerging market countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Inflation Risk Also known as purchasing power risk, inflation risk measures the effects of continually rising prices on investments. If an investment's yield is lower than the rate of inflation, your money will have less purchasing power as time goes on. Interest Rate Risk The risk of losses attributable to changes in interest rates. This term is generally associated with bond prices (when interest rates rise, bond prices fall). In general, the longer the maturity of a bond, the higher its yield and the greater its sensitivity to changes in interest rates. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Legal/Legislative Risk Congress and other governmental units have the power to change existing laws affecting securities. A change in law might affect an investment adversely. Leverage Risk Some derivative investments (such as options, futures, or options on futures) require little or no initial payment and base their price on a security, a currency, or an index. A small change in the value of the underlying security, currency, or index may cause a sizable gain or loss in the price of the instrument. Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Management Risk The risk that a strategy or selection method utilized by the investment manager may fail to produce the intended result. When all other factors have been accounted for and the investment manager chooses an investment, there is always the possibility that the choice will be a poor one. Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Reinvestment Risk The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or industry will be more susceptible to changes in price (the more you diversify, the more you spread risk). Small Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. -------------------------------------------------------------------------------- 7 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND INVESTMENT STRATEGIES The following information supplements the discussion of the Fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes many strategies that many mutual funds use and types of securities that they purchase. Please refer to the section entitled Investment Strategies and Types of Investments to see which are applicable to the Fund. Agency and Government Securities The U.S. government and its agencies issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities including mortgage pass through certificates of the Government National Mortgage Association (GNMA) are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, FHLMC, FNMA, Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and Reinvestment Risk. Borrowing The Fund may borrow money for temporary or emergency purposes and make other investments or engage in other transactions permissible under the 1940 Act that may be considered a borrowing (such as derivative instruments). Borrowings are subject to costs (in addition to any interest that may be paid) and typically reduce the Fund's total return. Except as qualified above, however, the Fund will not buy securities on margin. Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk and Management Risk. Cash/Money Market Instruments The Fund may maintain a portion of its assets in cash and cash-equivalent investments. Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. The Fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types of instruments generally offer low rates of return and subject the Fund to certain costs and expenses. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk, Inflation Risk, and Management Risk. Collateralized Bond Obligations Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, earns them investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield (High-Risk) Securities (Junk Bonds).) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, and Management Risk. -------------------------------------------------------------------------------- 8 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Commercial Paper Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk, Liquidity Risk, and Management Risk. Common Stock Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Issuer Risk, Management Risk, Market Risk, and Small Company Risk. Convertible Securities Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Call/Prepayment Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and Reinvestment Risk. Corporate Bonds Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government agency or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield (High-Risk) Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. -------------------------------------------------------------------------------- 9 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Debt Obligations Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a specified rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High-Yield (High-Risk) Securities (Junk Bonds).) All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating organization or their rating systems, the Fund will attempt to use comparable ratings as standards for selecting investments. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. Depositary Receipts Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, Management Risk, and Market Risk. Derivative Instruments Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward-based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange-traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. -------------------------------------------------------------------------------- 10 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Options on many securities are listed on options exchanges. If the Fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indices (such as the S&P 500 Index), foreign currencies and other financial instruments and indices. Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost -------------------------------------------------------------------------------- 11 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. Options on Stock Indexes. Options on stock indexes are securities traded on national securities exchanges. An option on a stock index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Tax Treatment. As permitted under federal income tax laws and to the extent the Fund is allowed to invest in futures contracts, the Fund intends to identify futures contracts as mixed straddles and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If the Fund is using short futures contracts for hedging purposes, the Fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Federal income tax treatment of gains or losses from transactions in options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, the Fund will either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The IRS has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (the Fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last-quoted sales price on their primary exchange. Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange-traded derivatives since they often can only be closed out with the other party to the transaction. Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Leverage Risk, Liquidity Risk, and Management Risk. -------------------------------------------------------------------------------- 12 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Foreign Currency Transactions Investments in foreign countries usually involve currencies of foreign countries. In addition, the Fund may hold cash and cash-equivalent investments in foreign currencies. As a result, the value of the Fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, the Fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing the Fund's NAV to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. Spot Rates and Derivative Instruments. The Fund conducts its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts) as a hedge against fluctuations in future foreign exchange rates. (See also Derivative Instruments). These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, the Fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. The Fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, the Fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. The Fund also may enter into forward contracts when management of the Fund believes the currency of a particular foreign country may change in relationship to another currency. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. The Fund will not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund's securities or other assets denominated in that currency. The Fund will designate cash or securities in an amount equal to the value of the Fund's total assets committed to consummating forward contracts entered into under the second circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the Fund's commitments on such contracts. At maturity of a forward contract, the Fund may either sell the security and make delivery of the foreign currency or retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an offsetting contract with the same currency trader obligating it to buy, on the same maturity date, the same amount of foreign currency. If the Fund retains the security and engages in an offsetting transaction, the Fund will incur a gain or loss (as described below) to the extent there has been movement in forward contract prices. If the Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline between the date the Fund enters into a forward contract for selling foreign currency and the date it enters into an offsetting contract for purchasing the foreign currency, the Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell. It is impossible to forecast what the market value of securities will be at the expiration of a contract. Accordingly, it may be necessary for the Fund to buy additional foreign currency on the spot market (and bear the expense of that purchase) if the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver and a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received on the sale of the portfolio security if its market value exceeds the amount of foreign currency the Fund is obligated to deliver. -------------------------------------------------------------------------------- 13 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND The Fund's dealing in forward contracts will be limited to the transactions described above. This method of protecting the value of the Fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. Although the Fund values its assets each business day in terms of U.S. dollars, it does not intend to convert its foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. Options on Foreign Currencies. The Fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, the Fund may buy put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell the currency for a fixed amount in dollars and will offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities the Fund plans to buy, the Fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. As in the case of other types of options, however, the benefit to the Fund derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the Fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. The Fund may write options on foreign currencies for the same types of hedging purposes. For example, when the Fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the diminution in value of securities will be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency. If rates move in the manner projected, the put option will expire unexercised and allow the Fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if the Fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting the Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. -------------------------------------------------------------------------------- 14 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Foreign Currency Futures and Related Options. The Fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. The Fund may use currency futures for the same purposes as currency forward contracts, subject to Commodity Futures Trading Commission (CFTC) limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the Fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect the Fund against price decline if the issuer's creditworthiness deteriorates. Because the value of the Fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of the Fund's investments denominated in that currency over time. The Fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The Fund will not enter into an option or futures position that exposes the Fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Correlation Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk. Foreign Securities Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). -------------------------------------------------------------------------------- 15 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The introduction of a single currency, the euro, on January 1, 1999 for participating European nations in the Economic and Monetary Union ("EU") presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after January 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies during the transition period from January 1, 1999 to December 31, 2000 and beyond; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other EU countries such as the United Kingdom and Greece into the euro and the admission of other non-EU countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk, Issuer Risk, and Management Risk. High-Yield (High-Risk) Securities (Junk Bonds) High yield (high-risk) securities are sometimes referred to as "junk bonds." They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) The lower-quality and comparable unrated security market is relatively new and its growth has paralleled a long economic expansion. As a result, it is not clear how this market may withstand a prolonged recession or economic downturn. Such conditions could severely disrupt the market for and adversely affect the value of such securities. All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers. Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield (high-risk) securities include: Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and Management Risk. -------------------------------------------------------------------------------- 16 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Illiquid and Restricted Securities The Fund may invest in illiquid securities (i.e., securities that are not readily marketable). These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. To the extent the Fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for such securities. Disposing of illiquid or restricted securities may involve time-consuming negotiations and legal expense, and it may be difficult or impossible for the Fund to sell such an investment promptly and at an acceptable price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk and Management Risk. Indexed Securities The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk, Management Risk, and Market Risk. Inverse Floaters Inverse floaters are created by underwriters using the interest payment on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. The remainder, minus a servicing fee, is paid to holders of inverse floaters. As interest rates go down, the holders of the inverse floaters receive more income and an increase in the price for the inverse floaters. As interest rates go up, the holders of the inverse floaters receive less income and a decrease in the price for the inverse floaters. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with inverse floaters include: Interest Rate Risk and Management Risk. Investment Companies The Fund may invest in securities issued by registered and unregistered investment companies. These investments may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Management Risk and Market Risk. Lending of Portfolio Securities The Fund may lend certain of its portfolio securities to broker-dealers. The current policy of the Fund's board is to make these loans, either long- or short-term, to broker-dealers. In making loans, the Fund receives the market price in cash, U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the board. If the market price of the loaned securities goes up, the Fund will get additional collateral on a daily basis. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the Fund receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The Fund may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The Fund will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the lending of portfolio securities include: Credit Risk and Management Risk. Loan Participations Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk and Management Risk. -------------------------------------------------------------------------------- 17 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Mortgage- and Asset-Backed Securities Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Asset-backed securities have structural characteristics similar to mortgage-backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset-backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage- and asset-backed securities include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and Management Risk. Mortgage Dollar Rolls Mortgage dollar rolls are investments whereby an investor would sell mortgage-backed securities for delivery in the current month and simultaneously contract to purchase substantially similar securities on a specified future date. While an investor would forego principal and interest paid on the mortgage-backed securities during the roll period, the investor would be compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk, Interest Rate Risk, and Management Risk. Municipal Obligations Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." -------------------------------------------------------------------------------- 18 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Event Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market Risk. Preferred Stock Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk, Management Risk, and Market Risk. Real Estate Investment Trusts Real estate investment trusts (REITs) are entities that manage a portfolio of real estate to earn profits for their shareholders. REITs can make investments in real estate such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Additionally, the failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Issuer Risk, Management Risk, and Market Risk. Repurchase Agreements The Fund may enter into repurchase agreements with certain banks or non-bank dealers. In a repurchase agreement, the Fund buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk and Management Risk. -------------------------------------------------------------------------------- 19 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Reverse Repurchase Agreements In a reverse repurchase agreement, the investor would sell a security and enter into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk, Interest Rate Risk, and Management Risk. Short Sales With short sales, an investor sells a security that it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the investor must borrow the security to make delivery to the buyer. The investor is obligated to replace the security that was borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the investor sold the security. A fund that is allowed to utilize short sales will designate cash or liquid securities to cover its open short positions. Those funds also may engage in "short sales against the box," a form of short-selling that involves selling a security that an investor owns (or has an unconditioned right to purchase) for delivery at a specified date in the future. This technique allows an investor to hedge protectively against anticipated declines in the market of its securities. If the value of the securities sold short increased between the date of the short sale and the date on which the borrowed security is replaced, the investor loses the opportunity to participate in the gain. A "short sale against the box" will result in a constructive sale of appreciated securities thereby generating capital gains to the Fund. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Management Risk and Market Risk. Sovereign Debt A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk, Foreign/Emerging Markets Risk, and Management Risk. Structured Products Structured products are over-the-counter financial instruments created specifically to meet the needs of one or a small number of investors. The instrument may consist of a warrant, an option, or a forward contract embedded in a note or any of a wide variety of debt, equity, and/or currency combinations. Risks of structured products include the inability to close such instruments, rapid changes in the market, and defaults by other parties. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured products include: Credit Risk, Liquidity Risk, and Management Risk. Variable- or Floating-Rate Securities The Fund may invest in securities that offer a variable- or floating-rate of interest. Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (e.g., daily, monthly, semiannually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. -------------------------------------------------------------------------------- 20 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Variable-rate demand notes include master demand notes that are obligations that permit the Fund to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the Fund as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk and Management Risk. Warrants Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Management Risk and Market Risk. When-Issued Securities and Forward Commitments When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, the Fund may lose the opportunity to obtain a price and yield considered to be advantageous. Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk and Management Risk. Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk, Interest Rate Risk, and Management Risk. -------------------------------------------------------------------------------- 21 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Security Transactions Subject to policies set by the board, AEFC is authorized to determine, consistent with the Fund's investment goal and policies, which securities will be purchased, held, or sold. The description of policies and procedures in this section also applies to any Fund subadviser. In determining where the buy and sell orders are to be placed, AEFC has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the board. In selecting broker-dealers to execute transactions, AEFC may consider the price of the security, including commission or mark-up, the size and difficulty of the order, the reliability, integrity, financial soundness, and general operation and execution capabilities of the broker, the broker's expertise in particular markets, and research services provided by the broker. The Fund, AEFC, any subadviser and American Express Financial Advisors Inc. (the Distributor) each have a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the Fund. The Fund's securities may be traded on a principal rather than an agency basis. In other words, AEFC will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. AEFC does not pay the dealer commissions. Instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The board has adopted a policy authorizing AEFC to do so to the extent authorized by law, if AEFC determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or AEFC's overall responsibilities with respect to the Fund and the other American Express mutual funds for which it acts as investment manager. Research provided by brokers supplements AEFC's own research activities. Such services include economic data on, and analysis of, U.S. and foreign economies; information on specific industries; information about specific companies, including earnings estimates; purchase recommendations for stocks and bonds; portfolio strategy services; political, economic, business, and industry trend assessments; historical statistical information; market data services providing information on specific issues and prices; and technical analysis of various aspects of the securities markets, including technical charts. Research services may take the form of written reports, computer software, or personal contact by telephone or at seminars or other meetings. AEFC has obtained, and in the future may obtain, computer hardware from brokers, including but not limited to personal computers that will be used exclusively for investment decision-making purposes, which include the research, portfolio management, and trading functions and other services to the extent permitted under an interpretation by the SEC. When paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge, AEFC must follow procedures authorized by the board. To date, three procedures have been authorized. One procedure permits AEFC to direct an order to buy or sell a security traded on a national securities exchange to a specific broker for research services it has provided. The second procedure permits AEFC, in order to obtain research, to direct an order on an agency basis to buy or sell a security traded in the over-the-counter market to a firm that does not make a market in that security. The commission paid generally includes compensation for research services. The third procedure permits AEFC, in order to obtain research and brokerage services, to cause the Fund to pay a commission in excess of the amount another broker might have charged. AEFC has advised the Fund that it is necessary to do business with a number of brokerage firms on a continuing basis to obtain such services as the handling of large orders, the willingness of a broker to risk its own money by taking a position in a security, and the specialized handling of a particular group of securities that only certain brokers may be able to offer. As a result of this arrangement, some portfolio transactions may not be effected at the lowest commission, but AEFC believes it may obtain better overall execution. AEFC has represented that under all three procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services performed or research provided. All other transactions will be placed on the basis of obtaining the best available price and the most favorable execution. In so doing, if in the professional opinion of the person responsible for selecting the broker or dealer, several firms can execute the transaction on the same basis, consideration will be given by such person to those firms offering research services. Such services may be used by AEFC in providing advice to all American Express mutual funds even though it is not possible to relate the benefits to any particular fund. -------------------------------------------------------------------------------- 22 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Each investment decision made for the Fund is made independently from any decision made for another portfolio, fund, or other account advised by AEFC or any of its subsidiaries. When the Fund buys or sells the same security as another portfolio, fund, or account, AEFC carries out the purchase or sale in a way the Fund agrees in advance is fair. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the Fund, the Fund hopes to gain an overall advantage in execution. On occasion, the Fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions. The review evaluates execution, operational efficiency, and research services. The Fund paid total brokerage commissions of $528,112 for fiscal year ended July 31, 2002, $544,485 for fiscal year 2001, and $9,334 for fiscal period from June 26, 2000 (commencement of operations) to July 31, 2000. Substantially all firms through whom transactions were executed provide research services. No transactions were directed to brokers because of research services they provided to the Fund except for the affiliates as noted below. As of the end of the most recent fiscal year, the Fund held securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below: Value of securities Name of issuer owned at end of fiscal year Bank of America $5,320,000 Citigroup 6,708,000 Goldman Sachs Group 2,194,500 Lehman Brothers Holdings 1,701,300 The portfolio turnover rate was 69% in the most recent fiscal year, and 67% in the year before. Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation Affiliates of American Express Company (of which AEFC is a wholly-owned subsidiary) may engage in brokerage and other securities transactions on behalf of the Fund according to procedures adopted by the board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. AEFC will use an American Express affiliate only if (i) AEFC determines that the Fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Fund and (ii) the affiliate charges the Fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. Information about brokerage commissions paid by the Fund for the last three fiscal years to brokers affiliated with AEFC is contained in the following table:
As of the end of fiscal year 2002 2001 2000 Percent of aggregate dollar amount of Aggregate dollar Percent of transactions Aggregate dollar Aggregate dollar amount of aggregate involving amount of amount of Nature of commissions brokerage payment of commissions commissions Broker affiliation paid to broker commissions commissions paid to broker paid to broker American Enterprise Wholly-owned $36,777 6.96% 16.33% $18,750 None Investment subsidiary of Services Inc. AEFC
-------------------------------------------------------------------------------- 23 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Performance Information The Fund may quote various performance figures to illustrate past performance. Average annual total return and current yield quotations, if applicable, used by the Fund are based on standardized methods of computing performance as required by the SEC. An explanation of the methods used by the Fund to compute performance follows below. AVERAGE ANNUAL TOTAL RETURN The Fund may calculate average annual total return for a class for certain periods by finding the average annual compounded rates of return over the period that would equate the initial amount invested to the ending redeemable value, according to the following formula: P(1 + T)(to the power of n) = ERV where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) AGGREGATE TOTAL RETURN The Fund may calculate aggregate total return for a class for certain periods representing the cumulative change in the value of an investment in the Fund over a specified period of time according to the following formula: ERV - P ------- P where: P = a hypothetical initial payment of $1,000 ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) In its sales material and other communications, the Fund may quote, compare or refer to rankings, yields, or returns as published by independent statistical services or publishers and publications such as The Bank Rate Monitor National Index, Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund Report, Financial Services Week, Financial Times, Financial World, Forbes, Fortune, Global Investor, Institutional Investor, Investor's Business Daily, Kiplinger's Personal Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster, Newsweek, The New York Times, Personal Investor, Shearson Lehman Aggregate Bond Index, Stanger Report, Sylvia Porter's Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal, and Wiesenberger Investment Companies Service. The Fund also may compare its performance to a wide variety of indexes or averages. There are similarities and differences between the investments that the Fund may purchase and the investments measured by the indexes or averages and the composition of the indexes or averages will differ from that of the Fund. Ibbotson Associates provides historical returns of the capital markets in the United States, including common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation (based on the CPI) and combinations of various capital markets. The performance of these capital markets is based on the returns of different indexes. The Fund may use the performance of these capital markets in order to demonstrate general risk-versus-reward investment scenarios. The Fund may quote various measures of volatility in advertising. Measures of volatility seek to compare a fund's historical share price fluctuations or returns to those of a benchmark. The Distributor may provide information designed to help individuals understand their investment goals and explore various financial strategies. Materials may include discussions of asset allocation, retirement investing, brokerage products and services, model portfolios, saving for college or other goals, and charitable giving. -------------------------------------------------------------------------------- 24 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Valuing Fund Shares As of the end of the most recent fiscal year, the computation looked like this:
Net assets Shares outstanding Net asset value of one share Class A $142,018,483 divided by 70,056,047 equals $2.03 Class B 68,131,351 34,150,784 2.00 Class C 4,327,935 2,169,032 2.00 Class Y 24,996 12,296 2.03
In determining net assets before shareholder transactions, the Fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): o Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. o Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. o Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. o Securities included in the NASDAQ National Market System for which a last-quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. o Futures and options traded on major exchanges are valued at the last-quoted sales price on their primary exchange. o Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars at the current rate of exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange that will not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, these securities will be valued at their fair value according to procedures decided upon in good faith by the board. o Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. o Securities without a readily available market price and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When possible, bonds are valued by a pricing service independent from the Fund. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. -------------------------------------------------------------------------------- 25 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Investing in the Fund SALES CHARGE Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the CDSC and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of the Fund. Shares of the Fund are sold at the public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C and Class Y, there is no initial sales charge so the public offering price is the same as the NAV. Using the sales charge schedule in the table below, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal year, was determined by dividing the NAV of one share, $2.03, by 0.9425 (1.00 - 0.0575) for a maximum 5.75% sales charge for a public offering price of $2.15. The sales charge is paid to the Distributor by the person buying the shares. Class A -- Calculation of the Sales Charge Sales charges are determined as follows: Sales charge as a percentage of: Total market value Public offering price Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.75 3.90 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00* 2.04* $1,000,000 or more 0.00 0.00 * The sales charge will be waived until Dec. 31, 2002. The initial sales charge is waived for certain qualified plans. Participants in these qualified plans may be subject to a deferred sales charge on certain redemptions. The Fund will waive the deferred sales charge on certain redemptions if the redemption is a result of a participant's death, disability, retirement, attaining age 591/2, loans, or hardship withdrawals. The deferred sales charge varies depending on the number of participants in the qualified plan and total plan assets as follows: Deferred Sales Charge Number of participants Total plan assets 1-99 100 or more Less than $1 million 4% 0% $1 million or more 0% 0% Class A -- Reducing the Sales Charge The market value of your investments in the Fund determines your sales charge. For example, suppose you have made an investment that now has a value of $20,000 and you later decide to invest $40,000 more. The value of your investments would be $60,000. As a result, your $40,000 investment qualifies for the lower 4.75% sales charge that applies to investments of more than $50,000 and up to $100,000. If you qualify for a reduced sales charge and purchase shares through different channels (for example, in a brokerage account and also directly from the Fund), you must inform the Distributor of your total holdings when placing any purchase orders. Class A -- Letter of Intent (LOI) If you intend to invest more than $50,000 over a period of time, you can reduce the sales charge in Class A by filing a LOI and committing to invest a certain amount. The agreement can start at any time and you will have up to 13 months to fulfill your commitment. The LOI start date can be backdated by up to 90 days. Your holdings in American Express funds acquired more than 90 days before receipt of your signed LOI in the home office will not be counted towards the completion of the LOI. Your investments will be charged the sales charge that applies to the amount you have committed to invest. Five percent of the commitment amount will be placed in escrow. If your commitment amount is reached within the 13-month period, the LOI will end and the shares will be released from escrow. Once the LOI has ended, future sales charges will be determined by the total value of the new investment combined with the market value of the existing American Express mutual fund investments. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed -------------------------------------------------------------------------------- 26 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND shares and the remaining balance released from escrow. The commitment amount does not include purchases in any class of American Express funds other than Class A; purchases in American Express funds held within a wrap product; and purchases of AXP Cash Management Fund and AXP Tax-Free Money Fund unless they are subsequently exchanged to Class A shares of an American Express mutual fund within the 13 month period. A LOI is not an option (absolute right) to buy shares. If you purchase shares in an American Express brokerage account or through a third party, you must inform the Distributor about the LOI when placing any purchase orders during the period of the LOI. Class Y Shares Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC and are not subject to a distribution fee. The following investors are eligible to purchase Class Y shares: o Qualified employee benefit plans* if the plan: o uses a daily transfer recordkeeping service offering participants daily access to American Express mutual funds and has o at least $10 million in plan assets or o 500 or more participants; or o does not use daily transfer recordkeeping and has o at least $3 million invested in American Express mutual funds or o 500 or more participants. o Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code.* These institutions must have at least $10 million in American Express mutual funds. o Nonqualified deferred compensation plans* whose participants are included in a qualified employee benefit plan described above. o State sponsored college savings plans established under Section 529 of the Internal Revenue Code. * Eligibility must be determined in advance. To do so, contact your financial advisor. SYSTEMATIC INVESTMENT PROGRAMS After you make your initial investment of $100 or more, you must make additional payments of $100 or more on at least a monthly basis until your balance reaches $2,000. These minimums do not apply to all systematic investment programs. You decide how often to make payments -- monthly, quarterly, or semiannually. You are not obligated to make any payments. You can omit payments or discontinue the investment program altogether. The Fund also can change the program or end it at any time. AUTOMATIC DIRECTED DIVIDENDS Dividends, including capital gain distributions, paid by another American Express mutual fund may be used to automatically purchase shares in the same class of this Fund. Dividends may be directed to existing accounts only. Dividends declared by a fund are exchanged to this Fund the following day. Dividends can be exchanged into the same class of another American Express mutual fund but cannot be split to make purchases in two or more funds. Automatic directed dividends are available between accounts of any ownership except: o Between a non-custodial account and an IRA, or 401(k) plan account or other qualified retirement account of which American Express Trust Company acts as custodian; o Between two American Express Trust Company custodial accounts with different owners (for example, you may not exchange dividends from your IRA to the IRA of your spouse); and o Between different kinds of custodial accounts with the same ownership (for example, you may not exchange dividends from your IRA to your 401(k) plan account, although you may exchange dividends from one IRA to another IRA). Dividends may be directed from accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA or UTMA accounts with identical ownership. The Fund's investment goal is described in its prospectus along with other information, including fees and expense ratios. Before exchanging dividends into another fund, you should read that fund's prospectus. You will receive a confirmation that the automatic directed dividend service has been set up for your account. REJECTION OF BUSINESS The Fund or AECSC reserves the right to reject any business, in its sole discretion. -------------------------------------------------------------------------------- 27 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Selling Shares You have a right to sell your shares at any time. For an explanation of sales procedures, please see the prospectus. During an emergency, the board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of the Fund to redeem shares for more than seven days. Such emergency situations would occur if: o The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or o Disposal of the Fund's securities is not reasonably practicable or it is not reasonably practicable for the Fund to determine the fair value of its net assets, or o The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should the Fund stop selling shares, the board may make a deduction from the value of the assets held by the Fund to cover the cost of future liquidations of the assets so as to distribute fairly these costs among all shareholders. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the Fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the Fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the Fund as determined by the board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should the Fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash. Pay-out Plans You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you are redeeming a tax-qualified plan account for which American Express Trust Company acts as custodian, you can elect to receive your dividends and other distributions in cash when permitted by law. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of the Fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please consult your selling agent or write American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474, or call (800) 437-3133. Your authorization must be received at least five days before the date you want your payments to begin. The initial payment must be at least $50. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it. The following pay-out plans are designed to take care of the needs of most shareholders in a way AEFC can handle efficiently and at a reasonable cost. If you need a more irregular schedule of payments, it may be necessary for you to make a series of individual redemptions, in which case you will have to send in a separate redemption request for each pay-out. The Fund reserves the right to change or stop any pay-out plan and to stop making such plans available. Plan #1: Pay-out for a fixed period of time If you choose this plan, a varying number of shares will be redeemed at regular intervals during the time period you choose. This plan is designed to end in complete redemption of all shares in your account by the end of the fixed period. Plan #2: Redemption of a fixed number of shares If you choose this plan, a fixed number of shares will be redeemed for each payment and that amount will be sent to you. The length of time these payments continue is based on the number of shares in your account. Plan #3: Redemption of a fixed dollar amount If you decide on a fixed dollar amount, whatever number of shares is necessary to make the payment will be redeemed in regular installments until the account is closed. Plan #4: Redemption of a percentage of net asset value Payments are made based on a fixed percentage of the net asset value of the shares in the account computed on the day of each payment. Percentages range from 0.25% to 0.75%. For example, if you are on this plan and arrange to take 0.5% each month, you will get $50 if the value of your account is $10,000 on the payment date. -------------------------------------------------------------------------------- 28 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Capital Loss Carryover For federal income tax purposes, the Fund had total capital loss carryovers of $214,945,244 at the end of the most recent fiscal year, that if not offset by subsequent capital gains will expire as follows: 2008 2009 2010 2011 $78,786 $3,197,409 $140,065,883 $71,603,166 It is unlikely that the board will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules. Taxes For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For example You purchase 100 shares of one fund having a public offering price of $10.00 per share. With a sales load of 5.75%, you pay $57.50 in sales load. With a NAV of $9.425 per share, the value of your investment is $942.50. Within 91 days of purchasing that fund, you decide to exchange out of that fund, now at a NAV of $11.00 per share, up from the original NAV of $9.425, and purchase into a second fund, at a NAV of $15.00 per share. The value of your investment is now $1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load when calculating your tax gain or loss in the sale of the first fund shares. So instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50 gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the basis of your shares in the second fund. If you have a nonqualified investment in the Fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the Fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged plus the amount of the initial sales charge applied to the amount exchanged exceeds annual contribution limitations. For example: If you were to exchange $2,000 in Class A shares from a nonqualified account to an IRA without considering the 5.75% ($115) initial sales charge applicable to that $2,000, you may be deemed to have exceeded current IRA annual contribution limitations. You should consult your tax advisor for further details about this complex subject. Net investment income dividends received should be treated as dividend income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of the Fund's dividend that is attributable to dividends the Fund received from domestic (U.S.) securities. The Fund may be subject to U.S. taxes resulting from holdings in a passive foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. Income earned by the Fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the Fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the Fund will be eligible to file an election with the Internal Revenue Service under which shareholders of the Fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the Fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes. Capital gain distributions, if any, received by shareholders should be treated as long-term capital gains regardless of how long they owned their shares. Short-term capital gains earned by the Fund are paid to shareholders as part of their ordinary income dividend and are taxable. A special 28% rate on capital gains may apply to sales of precious metals, if any, owned directly by the Fund. A special 25% rate on capital gains may apply to investments in REITs. -------------------------------------------------------------------------------- 29 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition also are treated as ordinary gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders as ordinary income. Under federal tax law, by the end of a calendar year the Fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. The Fund intends to comply with federal tax law and avoid any excise tax. The Internal Revenue Code imposes two asset diversification rules that apply to the Fund as of the close of each quarter. First, as to 50% of its holdings, the Fund may hold no more than 5% of its assets in securities of one issuer and no more than 10% of any one issuer's outstanding voting securities. Second, the Fund cannot have more than 25% of its assets in any one issuer. For purposes of the excise tax distributions, "section 988" ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end. If a mutual fund is the holder of record of any share of stock on the record date for any dividend payable with respect to the stock, the dividend will be included in gross income by the Fund as of the later of (1) the date the share became ex-dividend or (2) the date the Fund acquired the share. Because the dividends on some foreign equity investments may be received some time after the stock goes ex-dividend, and in certain rare cases may never be received by the Fund, this rule may cause the Fund to pay income to its shareholders that it has not actually received. To the extent that the dividend is never received, the Fund will take a loss at the time that a determination is made that the dividend will not be received. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to Fund distributions. Agreements INVESTMENT MANAGEMENT SERVICES AGREEMENT AEFC, a wholly-owned subsidiary of American Express Company, is the investment manager for the Fund. Under the Investment Management Services Agreement, AEFC, subject to the policies set by the board, provides investment management services. For its services, AEFC is paid a fee based on the combined net assets of the Fund and AXP New Dimensions Fund, determined as set forth in the following schedule. Each class of the Fund pays its proportionate share of the fee. Assets (billions) Annual rate at each asset level First $1.0 0.600% Next 1.0 0.575 Next 1.0 0.550 Next 3.0 0.525 Next 6.0 0.500 Next 12.0 0.490 Over 24.0 0.480 On the last day of the most recent fiscal year, the daily rate that applied to the Fund's net assets was equal to .600% on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Before the fee based on the asset charge is paid, it is adjusted for investment performance. The adjustment, determined monthly, will be calculated using the percentage point difference between the change in the net asset value of one Class A share of the Fund and the change in the Lipper Large Cap Growth Funds Index (Index). The performance of one Class A share of the Fund is measured by computing the percentage difference between the opening and closing net asset value of one Class A share of the Fund, as of the last business day of the period selected for comparison, adjusted for dividend or capital gain distributions which are treated as reinvested, but without adjustment for expenses related to a particular class of shares. The performance of the Index for the same period is established by measuring the percentage difference between the beginning and ending Index for the comparison period, with dividends or capital gain distributions on the securities which comprise the Index being treated as reinvested. The performance is adjusted for dividend or capital gain distributions (on the securities which comprise the Index), which are -------------------------------------------------------------------------------- 30 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND treated as reinvested at the end of the month during which the distribution was made. One percentage point will be subtracted from the calculation to help assure that incentive adjustments are attributable to AEFC's management abilities rather than random fluctuations and the result multiplied by 0.01%. That number will be multiplied times the Fund's average net assets for the comparison period and then divided by the number of months in the comparison period to determine the monthly adjustment. Where the Fund's Class A share performance exceeds that of the Index, the base fee will be increased. Where the performance of the Index exceeds the performance of the Fund's Class A share, the base fee will be decreased. The maximum monthly increase or decrease will be 0.12% of the Fund's average net assets on an annual basis. The 12-month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. The adjustment decreased the fee by $130,660 for fiscal year 2002. The management fee is paid monthly. Under the agreement, the total amount paid was $1,359,595 for fiscal year 2002, $1,354,637 for fiscal year 2001, and $9,022 for fiscal period 2000. Under the agreement, the Fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees; audit and certain legal fees; fidelity bond premiums; registration fees for shares; office expenses; postage of confirmations except purchase confirmations; consultants' fees; compensation of board members, officers and employees; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; and expenses properly payable by the Fund, approved by the board. Under the agreement, nonadvisory expenses, net of earnings credits, paid by the Fund were $197,843 for fiscal year 2002, $443,047 for fiscal year 2001, and $3,602 for fiscal period 2000. Basis for board approving the investment advisory contract Based on its work throughout the year and detailed analysis by the Contracts Committee of reports provided by AEFC, the independent board members determined to renew the Investment Management Services Agreement based on: o tangible steps AEFC has taken to improve the competitive ranking and consistency of the investment performance of the Fund, including changes in leadership, portfolio managers, compensation structures, and the implementation of management practices, o continued commitment to expand the range of investment options that it offers investors, through repositioning existing funds and creating new funds, o consistent effort to provide a management structure that imposes disciplines that ensure adherence to stated management style and expected risk characteristics, o additional time needed to evaluate the efficacy of the new AEFC management structure that has produced improved performance results in the short-term, o benefit of economy of scale that results from the graduated fee structure and the reasonableness of fees in light of the fees paid by similar funds in the industry, o competitive total expenses that are either at or only slightly above the median expenses of comparable funds, and o reasonable level of AEFC's profitability from its mutual fund operations. ADMINISTRATIVE SERVICES AGREEMENT The Fund has an Administrative Services Agreement with AEFC. Under this agreement, the Fund pays AEFC for providing administration and accounting services. The fee is calculated as follows: Assets (billions) Annual rate at each asset level First $1.0 0.050% Next 1.0 0.045 Next 1.0 0.040 Next 3.0 0.035 Next 6.0 0.030 Next 12.0 0.025 Over 24.0 0.020 On the last day of the most recent fiscal year, the daily rate applied to the Fund's net assets was equal to 0.050% on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Under the agreement, the Fund paid fees of $91,486 for fiscal year 2002, $85,654 for fiscal year 2001, and $498 for fiscal period 2000. -------------------------------------------------------------------------------- 31 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Third parties with which AEFC contracts to provide services for the Fund or its shareholders may pay a fee to AEFC to help defray the cost of providing administrative and accounting services. The amount of any such fee is negotiated separately with each service provider and does not constitute compensation for investment advisory, distribution, or other services. Payment of any such fee neither increases nor reduces fees or expenses paid by shareholders of the Fund. TRANSFER AGENCY AGREEMENT The Fund has a Transfer Agency Agreement with American Express Client Service Corporation (AECSC). This agreement governs AECSC's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the Fund's shares. Under the agreement, AECSC will earn a fee from the Fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The rate for Class A is $19 per year, for Class B is $20 per year, for Class C is $19.50 per year and for Class Y is $17 per year. The fees paid to AECSC may be changed by the board without shareholder approval. DISTRIBUTION AGREEMENT American Express Financial Advisors Inc. is the Fund's principal underwriter (the Distributor). The Fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing Fund shares are paid to the Distributor daily. These charges amounted to $941,607 for fiscal year 2002. After paying commissions to personal financial advisors, and other expenses, the amount retained was $416,283. The amounts were $2,802,522 and $220,272 for fiscal year 2001, and $134,879 and $(3,368) for fiscal period 2000. Part of the sales charge may be paid to selling dealers who have agreements with the Distributor. The Distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. SHAREHOLDER SERVICE AGREEMENT With respect to Class Y shares, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of average daily net assets. PLAN AND AGREEMENT OF DISTRIBUTION For Class A, Class B and Class C shares, to help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, the Fund and the Distributor entered into a Plan and Agreement of Distribution (Plan) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund pays a fee up to actual expenses incurred at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material change to expenses charged under the Class A plan. Expenses covered under this Plan include sales commissions; business, employee and financial advisor expenses charged to distribution of Class A, Class B and Class C shares; and overhead appropriately allocated to the sale of Class A, Class B and Class C shares. These expenses also include costs of providing personal service to shareholders. A substantial portion of the costs are not specifically identified to any one of the American Express mutual funds. The Plan must be approved annually by the board, including a majority of the disinterested board members, if it is to continue for more than a year. At least quarterly, the board must review written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of board members who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the Distributor. The Plan (or any agreement related to it) will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the board members, including a majority of the board members who are not interested persons of the Fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested board members is the responsibility of the other disinterested board members. No board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement. For the most recent fiscal year, the Fund paid fees of $484,696 for Class A shares, $931,520 for Class B shares and $53,468 for Class C shares. The fee is not allocated to any one service (such as advertising, payments to underwriters, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. -------------------------------------------------------------------------------- 32 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND CUSTODIAN AGREEMENT The Fund's securities and cash are held by American Express Trust Company, 200 AXP Financial Center, Minneapolis, MN 55474, through a custodian agreement. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. For its services, the Fund pays the custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. Organizational Information The Fund is an open-end management investment company. The Fund headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The shares of the Fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of the Fund would have the same rights to dividends and assets as every other share of that Fund. VOTING RIGHTS As a shareholder in the Fund, you have voting rights over the Fund's management and fundamental policies. You are entitled to one vote for each share you own. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. All shares have cumulative voting rights with respect to the election of board members. This means that you have as many votes as the number of shares you own, including fractional shares, multiplied by the number of members to be elected. DIVIDEND RIGHTS Dividends paid by the Fund, if any, with respect to each class of shares, if applicable, will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures. AMERICAN EXPRESS FINANCIAL CORPORATION AEFC has been a provider of financial services since 1894. Its family of companies offers not only mutual funds but also insurance, annuities, investment certificates and a broad range of financial management services. In addition to managing assets of more than $66 billion for the American Express Funds, AEFC manages investments for itself and its subsidiaries, American Express Certificate Company and IDS Life Insurance Company. Total assets owned and managed as of the end of the most recent fiscal year were more than $199 billion. The Distributor serves individuals and businesses through its nationwide network of more than 600 supervisory offices, more than 3,800 branch offices and more than 9,900 financial advisors. -------------------------------------------------------------------------------- 33 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R)Bond Fund, Inc. 6/27/74, 6/31/86* Corporation NV/MN 8/31 Yes AXP(R)California Tax-Exempt Trust 4/7/86 Business Trust** MA 6/30 AXP(R)California Tax-Exempt Fund No AXP(R)Discovery Fund, Inc. 4/29/81, 6/13/86* Corporation NV/MN 7/31 Yes AXP(R)Equity Select Fund, Inc. 3/18/57, 6/13/86* Corporation NV/MN 11/30 Yes AXP(R)Extra Income Fund, Inc. 8/17/83 Corporation MN 5/31 Yes AXP(R)Federal Income Fund, Inc. 3/12/85 Corporation MN 5/31 AXP(R)Federal Income Fund Yes AXP(R)U.S. Government Mortgage Fund Yes AXP(R)Global Series, Inc. 10/28/88 Corporation MN 10/31 AXP(R)Emerging Markets Fund Yes AXP(R)Global Balanced Fund Yes AXP(R)Global Bond Fund No AXP(R)Global Growth Fund Yes AXP(R)Global Technology Fund*** Yes AXP(R)Growth Series, Inc. 5/21/70, 6/13/86* Corporation NV/MN 7/31 AXP(R)Growth Fund Yes AXP(R)Large Cap Equity Fund Yes AXP(R)Large Cap Value Fund Yes AXP(R)Research Opportunities Fund Yes AXP(R)High Yield Tax-Exempt Fund, Inc. 12/21/78, 6/13/86* Corporation NV/MN 11/30 Yes AXP(R)International Fund, Inc. 7/18/84 Corporation MN 10/31 AXP(R)European Equity Fund No AXP(R)International Fund Yes AXP(R)Investment Series, Inc. 1/18/40, 6/13/86* Corporation NV/MN 9/30 AXP(R)Diversified Equity Income Fund Yes AXP(R)Mid Cap Value Fund Yes AXP(R)Mutual Yes AXP(R)Managed Series, Inc. 10/9/84 Corporation MN 9/30 AXP(R)Managed Allocation Fund Yes AXP(R)Market Advantage Series, Inc. 8/25/89 Corporation MN 1/31 AXP(R)Blue Chip Advantage Fund Yes AXP(R)International Equity Index Fund No AXP(R)Mid Cap Index Fund No AXP(R)Nasdaq 100 Index Fund No AXP(R)S&P 500 Index Fund No AXP(R)Small Company Index Fund Yes AXP(R)Total Stock Market Index Fund No AXP(R)Money Market Series, Inc. 8/22/75, 6/13/86* Corporation NV/MN 7/31 AXP(R)Cash Management Fund Yes AXP(R)New Dimensions Fund, Inc. 2/20/68, 6/13/86* Corporation NV/MN 7/31 AXP(R)Growth Dimensions Fund Yes AXP(R)New Dimensions Fund Yes
-------------------------------------------------------------------------------- 34 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS (continued) Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R)Partners Series, Inc. 3/20/01 Corporation MN 5/31 AXP(R)Partners Fundamental Value Fund Yes AXP(R)Partners Select Value Fund Yes AXP(R)Partners Small Cap Core Fund Yes AXP(R)Partners Small Cap Value Fund No AXP(R)Partners Value Fund Yes AXP(R)Partners International Series, Inc. 5/9/01 Corporation MN 10/31 AXP(R)Partners International Aggressive Growth Fund Yes AXP(R)Partners International Select Value Fund Yes AXP(R)Precious Metals Fund, Inc. 10/5/84 Corporation MN 3/31 No AXP(R)Progressive Fund, Inc. 4/23/68, 6/13/86* Corporation NV/MN 9/30 Yes AXP(R)Selective Fund, Inc. 2/10/45, 6/13/86* Corporation NV/MN 5/31 Yes AXP(R)Special Tax-Exempt Series Trust 4/7/86 Business Trust** MA 6/30 AXP(R)Insured Tax-Exempt Fund Yes AXP(R)Massachusetts Tax-Exempt Fund No AXP(R)Michigan Tax-Exempt Fund No AXP(R)Minnesota Tax-Exempt Fund No AXP(R)New York Tax-Exempt Fund No AXP(R)Ohio Tax-Exempt Fund No AXP(R)Stock Fund, Inc. 2/10/45, 6/13/86* Corporation NV/MN 9/30 Yes AXP(R)Strategy Series, Inc. 1/24/84 Corporation MN 3/31 AXP(R)Equity Value Fund Yes AXP(R)Focused Growth Fund*** No AXP(R)Partners Small Cap Growth Fund*** Yes AXP(R)Small Cap Advantage Fund Yes AXP(R)Strategy Aggressive Fund Yes AXP(R)Tax-Exempt Series, Inc. 9/30/76, 6/13/86* Corporation NV/MN 11/30 AXP(R)Intermediate Tax-Exempt Fund Yes AXP(R)Tax-Exempt Bond Fund Yes AXP(R)Tax-Free Money Fund, Inc. 2/29/80, 6/13/86* Corporation NV/MN 12/31 Yes AXP(R)Utilities Income Fund, Inc.*** 3/25/88 Corporation MN 6/30 AXP(R)Utilities Fund Yes
* Date merged into a Minnesota corporation incorporated on 4/7/86. ** Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the trust itself is unable to meet its obligations. *** Effective Feb. 7, 2002, AXP(R) Focus 20 Fund changed its name to AXP(R) Focused Growth Fund, AXP(R) Innovations Fund changed its name to AXP(R) Global Technology Fund, AXP(R) Small Cap Growth Fund changed its name to AXP(R) Partners Small Cap Growth Fund and AXP(R) Utilities Income Fund, Inc. created a series, AXP(R) Utilities Fund. -------------------------------------------------------------------------------- 35 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Board Members and Officers Shareholders elect a board that oversees the Fund's operations. The board appoints officers who are responsible for day-to-day business decisions based on policies set by the board. The following is a list of the Fund's board members. Each member oversees 15 Master Trust portfolios and 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 Committee address, Registrant and length during past five years directorships memberships age of service --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ H. Brewster Atwater, Jr. Board member Retired chair and Board Effectiveness, 4900 IDS Tower since 1996 chief executive Executive, Investment Minneapolis, MN 55402 officer, General Review Born in 1931 Mills, Inc. (consumer foods) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Arne H. Carlson Chair of the Board Chair, Board Services Joint Audit, 901 S. Marquette Ave. since 1999 Corporation (provides Contracts, Executive, Minneapolis, MN 55402 administrative Investment Review, Born in 1934 services to boards), Board Effectiveness former Governor of Minnesota --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Lynne V. Cheney Board member since 1994 Distinguished Fellow, The Reader's Digest Joint Audit, American Enterprise AEI Association Inc. Contracts Institute for Public Policy Research AEI) 1150 17th St., N.W. Washington, D.C. 20036 Born in 1941 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Livio D. DeSimone Board member since 2001 Retired chair of the Cargill, Incorporated Joint Audit, 30 Seventh Street East board and (commodity merchants Contracts Suite 3050 chief executive and processors), St. Paul, MN 55101-4901 officer, Minnesota Target Corporation Born in 1936 Mining and (department stores), Manufacturing (3M) 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 Contracts, Texaco, Inc. formerly with Texaco International, Inc. Investment Review 2000 Westchester Avenue Inc., treasurer, (office equipment), White Plains, NY 10650 1999-2001 and general Reynolds & Reynolds Born in 1944 manager, alliance Company (information management operations, services), TECO 1998-1999. Prior to Energy, Inc. (energy that, director, holding company), The International Williams Companies, Operations IBM Corp. Inc. (energy distribution company) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Heinz F. Hutter Board member since 1994 Retired president and Board Effectiveness, P.O. Box 2187 chief operating Executive, Investment Minneapolis, MN 55402 officer, Cargill, Review Born in 1929 Incorporated (commodity merchants and processors) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Anne P. Jones Board member since 1985 Attorney and consultant Motorola, Inc. Joint Audit, 5716 Bent Branch Rd. (electronics) Board Effectiveness, Bethesda, MD 20816 Executive Born in 1935 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Stephen R. Lewis, Jr. Board member since 2002 Retired president and Contracts, 901 S. Marquette Ave. professor of Investment Review Minneapolis, MN 55402 economics, Carleton Born in 1939 College --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ William R. Pearce Board member since 1980 RII Weyerhaeuser World Executive, 2050 One Financial Plaza Timberfund, L.P. Investment Review, Minneapolis, MN 55402 (develops timber Board Effectiveness Born in 1927 resources)-- management committee; former chair, American Express Funds --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
-------------------------------------------------------------------------------- 36 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND
Independent Board Members (continued) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Name, Position held with Principal occupations Other Committee address, Registrant and length during past five years directorships memberships age of service --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Alan G. Quasha Board member since 2002 President, Quadrant Compagnie Financiere Joint Audit, 720 Fifth Avenue Management, Inc. Richemont AG (luxury Investment Review New York, NY 10019 (management of private goods) Born in 1949 equities) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Alan K. Simpson Board member since 1997 Former three-term Biogen, Inc. Joint Audit, 1201 Sunshine Ave. United States Senator (bio-pharmaceuticals) Contracts Cody, WY 82414 for Wyoming Born in 1931 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ C. Angus Wurtele Board member since 1994 Retired chair of the Bemis Corporation Contracts, Executive, 4900 IDS Tower board and (packaging) Investment Review Minneapolis, MN 55402 chief executive Born in 1934 officer, The Valspar Corporation --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
Board Members Affiliated with American Express Financial Corporation (AEFC) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Name, Position held with Principal occupations Other Committee address, Registrant and length during past five years directorships memberships age of service --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ David R. Hubers Board member since 1993 Retired chief Chronimed Inc. 50643 AXP Financial Center executive officer and (specialty Minneapolis, MN 55474 director of AEFC pharmaceutical Born in 1943 distribution), RTW Inc. (manages worker's compensation programs), Lawson Software, Inc. (technology based business applications) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ John R. Thomas Board member since Senior vice president 50652 AXP Financial Center 1987, president since - information and Minneapolis, MN 55474 1997 technology of AEFC Born in 1937 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ William F. Truscott Board member since Senior vice president 53600 AXP Financial Center 2001, vice president - chief investment Minneapolis, MN 55474 since 2002 officer of AEFC; Born in 1960 former chief investment officer and managing director, Zurich Scudder Investments --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Thomas, who is president, and Mr. Truscott, who is vice president, the Fund's other officers are:
Other Officers ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- Name, Position held Principal occupations Other Committee address, with during past five years directorships memberships age Registrant and length of service ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- Jeffrey P. Fox Treasurer Vice president - 50005 AXP Financial Center since 2002 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 of Board 901 S. Marquette Ave. president, Services Corporation Minneapolis, MN 55402 general Born in 1938 counsel, and secretary since 1978 ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- Stephen W. Roszell Vice president Senior vice president - 50239 AXP Financial Center since 2002 institutional group of Minneapolis, MN55474 AEFC Born in 1949 ---------------------------- ---------------- --------------------------- -------------------------- --------------------------
-------------------------------------------------------------------------------- 37 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Responsibilities of board with respect to Fund's management The board initially approves an Investment Management Services Agreement and other contracts with American Express Financial Corporation (AEFC), one of AEFC's subsidiaries, and other service providers. Once the contracts are approved, the board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and AEFC's profitability in order to determine whether to continue existing contracts or negotiate new contracts. Several committees facilitate its work Executive Committee -- Acts for the board between meetings of the board. The committee held two meetings during the last fiscal year. Joint Audit Committee -- Meets with the independent public accountant, internal auditors and corporate officers to review financial statements, reports, and compliance matters. Reports significant issues to the board and makes recommendations to the independent directors regarding the selection of the independent public accountant. The committee held four meetings during the last fiscal year. Investment Review Committee -- Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the board. The committee held four meetings during the last fiscal year. Board Effectiveness Committee -- Recommends to the board the size, structure and composition for the board; the compensation to be paid to members of the board; and a process for evaluating the board's performance. The committee also reviews candidates for board membership including candidates recommended by shareholders. To be considered, recommendations must include a curriculum vita and be mailed to the Chairman of the Board, American Express Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The committee held five meetings during the last fiscal year. Contracts Committee -- Receives and analyzes reports covering the level and quality of services provided under contracts with the Fund and advises the board regarding actions taken on these contracts during the annual review process. The committee held four meetings during the last fiscal year. DIRECTORS' HOLDINGS The following table shows the Fund Directors' ownership of American Express Funds. Dollar range of equity securities beneficially owned on Dec. 31, 2001 Based on net asset values as of Dec. 31, 2001 Aggregate dollar range of Dollar range of equity securities of all equity securities American Express Funds in the Fund overseen by Director Range Range H. Brewster Atwater, Jr. None over $100,000 Arne H. Carlson None $50,001-$100,000 Lynne V. Cheney None over $100,000 Livio D. DeSimone None over $100,000 Ira D. Hall None over $100,000 David R. Hubers None over $100,000 Heinz F. Hutter $10,001-$50,000 over $100,000 Anne P. Jones None over $100,000 William R. Pearce None over $100,000 Alan K. Simpson None over $100,000 John R. Thomas None over $100,000 C. Angus Wurtele None over $100,000 -------------------------------------------------------------------------------- 38 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND COMPENSATION FOR BOARD MEMBERS During the most recent fiscal year, the independent members of the Fund and Portfolio boards, for attending up to 34 meetings, received the following compensation:
Compensation Table Total cash compensation from Aggregate American Express Funds and Board member* compensation from the Fund Preferred Master Trust Group H. Brewster Atwater, Jr. $1,347 $152,608 Lynne V. Cheney 1,025 127,558 Livio D. DeSimone 975 123,958 Ira D. Hall 1,075 131,208 Heinz F. Hutter 1,347 153,308 Anne P. Jones 1,447 161,758 Stephen R. Lewis, Jr. 558 73,825 William R. Pearce 1,275 146,958 Alan G. Quasha 433 52,225 Alan K. Simpson 975 123,708 C. Angus Wurtele 1,247 145,658
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. As of 30 days prior to the date of this SAI, the Fund's board members and officers as a group owned less than 1% of the outstanding shares of any class. Independent Auditors The financial statements contained in the Annual Report were audited by independent auditors, KPMG LLP, 4200 Wells Fargo Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The independent auditors also provide other accounting and tax-related services as requested by the Fund. -------------------------------------------------------------------------------- 39 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Appendix DESCRIPTION OF RATINGS Standard & Poor's Debt Ratings A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: o Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. o Nature of and provisions of the obligation. o Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. Investment Grade Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. Speculative Grade Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. -------------------------------------------------------------------------------- 40 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Moody's Long-Term Debt Ratings Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A -- Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds that are rated Ba are judged to have speculative elements -- their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. SHORT-TERM RATINGS Standard & Poor's Commercial Paper Ratings A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. -------------------------------------------------------------------------------- 41 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND Standard & Poor's Note Ratings An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Moody's Short-Term Ratings Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. Moody's & S&P's Short-Term Muni Bonds and Notes Short-term municipal bonds and notes are rated by Moody's and by S&P. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody' s MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. -------------------------------------------------------------------------------- 42 -- AXP NEW DIMENSIONS FUND, INC. -- AXP GROWTH DIMENSIONS FUND S-6004-20 E (9/02) AXP(R) NEW DIMENSIONS FUND(R), INC. STATEMENT OF ADDITIONAL INFORMATION FOR AXP(R) NEW DIMENSIONS FUND(R) (the Fund) SEPT. 27, 2002 This Statement of Additional Information (SAI) is not a prospectus. It should be read together with the prospectus and the financial statements contained in the most recent Annual Report to shareholders (Annual Report) that may be obtained from your financial advisor or by writing to American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474 or by calling (800) 862-7919. The Independent Auditors' Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities, contained in the Annual Report are incorporated in this SAI by reference. No other portion of the Annual Report, however, is incorporated by reference. The prospectus for the Fund, dated the same date as this SAI, also is incorporated in this SAI by reference. Table of Contents Mutual Fund Checklist p. 3 Fundamental Investment Policies p. 4 Investment Strategies and Types of Investments p. 5 Information Regarding Risks and Investment Strategies p. 6 Security Transactions p.22 Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation p.23 Performance Information p.24 Valuing Fund Shares p.25 Investing in the Fund p.25 Selling Shares p.28 Pay-out Plans p.28 Capital Loss Carryover p.29 Taxes p.29 Agreements p.30 Organizational Information p.33 Board Members and Officers p.36 Independent Auditors p.39 Appendix: Description of Ratings p.40 -------------------------------------------------------------------------------- 2 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Mutual Fund Checklist [x] Mutual funds are NOT guaranteed or insured by any bank or government agency. You can lose money. [x] Mutual funds ALWAYS carry investment risks. Some types carry more risk than others. [x] A higher rate of return typically involves a higher risk of loss. [x] Past performance is not a reliable indicator of future performance. [x] ALL mutual funds have costs that lower investment return. [x] You can buy some mutual funds by contacting them directly. Others, like this one, are sold mainly through brokers, banks, financial planners, or insurance agents. If you buy through these financial professionals, you generally will pay a sales charge. [x] Shop around. Compare a mutual fund with others of the same type before you buy. OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING Develop a Financial Plan Have a plan -- even a simple plan can help you take control of your financial future. Review your plan with your advisor at least once a year or more frequently if your circumstances change. Dollar-Cost Averaging An investment technique that works well for many investors is one that eliminates random buy and sell decisions. One such system is dollar-cost averaging. Dollar-cost averaging involves building a portfolio through the investment of fixed amounts of money on a regular basis regardless of the price or market condition. This may enable an investor to smooth out the effects of the volatility of the financial markets. By using this strategy, more shares will be purchased when the price is low and less when the price is high. As the accompanying chart illustrates, dollar-cost averaging tends to keep the average price paid for the shares lower than the average market price of shares purchased, although there is no guarantee. While this does not ensure a profit and does not protect against a loss if the market declines, it is an effective way for many shareholders who can continue investing through changing market conditions to accumulate shares to meet long-term goals. Dollar-cost averaging Regular Market price Shares investment of a share acquired $100 $ 6.00 16.7 100 4.00 25.0 100 4.00 25.0 100 6.00 16.7 100 5.00 20.0 $500 $25.00 103.4 Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5) The average price you paid for each share: $4.84 ($500 divided by 103.4) Diversify Diversify your portfolio. By investing in different asset classes and different economic environments you help protect against poor performance in one type of investment while including investments most likely to help you achieve your important goals. Understand Your Investment Know what you are buying. Make sure you understand the potential risks, rewards, costs, and expenses associated with each of your investments. -------------------------------------------------------------------------------- 3 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Fundamental Investment Policies The Fund pursues its investment objective by investing all of its assets in Growth Trends Portfolio (the Portfolio) of Growth Trust (the Trust), a separate investment company, rather than by directly investing in and managing its own portfolio of securities. The Portfolio has the same investment objectives, policies, and restrictions as the Fund. References to "Fund" in this SAI, where applicable, refer to the Fund and Portfolio, collectively, to the Fund, singularly, or to the Portfolio, singularly. Fundamental investment policies adopted by the Fund cannot be changed without the approval of a majority of the outstanding voting securities of the Fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Notwithstanding any of the Fund's other investment policies, the Fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the Fund for the purpose of having those assets managed as part of a combined pool. The policies below are fundamental policies that apply to the Fund and may be changed only with shareholder approval. Unless holders of a majority of the outstanding voting securities agree to make the change, the Fund will not: o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means that up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. Except for the fundamental investment policies listed above, the other investment policies described in the prospectus and in this SAI are not fundamental and may be changed by the board at any time. -------------------------------------------------------------------------------- 4 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Investment Strategies and Types of Investments This table shows various investment strategies and investments that many funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager may make on behalf of the Fund. For a description of principal risks, please see the prospectus. Notwithstanding the Fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion. AXP New Dimensions Investment strategies and types of investments Allowable for the Fund? Agency and Government Securities yes Borrowing yes Cash/Money Market Instruments yes Collateralized Bond Obligations yes Commercial Paper yes Common Stock yes Convertible Securities yes Corporate Bonds yes Debt Obligations yes Depositary Receipts yes Derivative Instruments yes Foreign Currency Transactions yes Foreign Securities yes High-Yield (High-Risk) Securities (Junk Bonds) yes Illiquid and Restricted Securities yes Indexed Securities yes Inverse Floaters no Investment Companies yes Lending of Portfolio Securities yes Loan Participations yes Mortgage- and Asset-Backed Securities yes Mortgage Dollar Rolls no Municipal Obligations yes Preferred Stock yes Real Estate Investment Trusts yes Repurchase Agreements yes Reverse Repurchase Agreements yes Short Sales no Sovereign Debt yes Structured Products yes Variable- or Floating-Rate Securities yes Warrants yes When-Issued Securities yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes -------------------------------------------------------------------------------- 5 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND The following are guidelines that may be changed by the board at any time: o The Fund will not invest more than 5% of its net assets in bonds below investment grade. o The Fund may invest up to 30% of its total assets in foreign investments. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in stock index futures contracts. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Information Regarding Risks and Investment Strategies RISKS The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). Please remember that a mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with the Fund at any time (for a description of principal risks, please see the prospectus): Call/Prepayment Risk The risk that a bond or other security might be called (or otherwise converted, prepaid, or redeemed) before maturity. This type of risk is closely related to "reinvestment risk." Company Risk The prospects for a company may vary because of a variety of factors, including the success of the company, disappointing earnings, or changes in the competitive environment. As a result, the success of the companies in which the Fund invests will affect the Fund's performance. Correlation Risk The risk that a given transaction may fail to achieve its objectives due to an imperfect relationship between markets. Certain investments may react more negatively than others in response to changing market conditions. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation (such as payments due on a bond or a note). The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Junk bonds have greater price fluctuations and are more likely to experience a default than investment grade bonds. Event Risk Occasionally, the value of a security may be seriously and unexpectedly changed by a natural or industrial accident or occurrence. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. -------------------------------------------------------------------------------- 6 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in emerging market countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Inflation Risk Also known as purchasing power risk, inflation risk measures the effects of continually rising prices on investments. If an investment's yield is lower than the rate of inflation, your money will have less purchasing power as time goes on. Interest Rate Risk The risk of losses attributable to changes in interest rates. This term is generally associated with bond prices (when interest rates rise, bond prices fall). In general, the longer the maturity of a bond, the higher its yield and the greater its sensitivity to changes in interest rates. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Legal/Legislative Risk Congress and other governmental units have the power to change existing laws affecting securities. A change in law might affect an investment adversely. Leverage Risk Some derivative investments (such as options, futures, or options on futures) require little or no initial payment and base their price on a security, a currency, or an index. A small change in the value of the underlying security, currency, or index may cause a sizable gain or loss in the price of the instrument. Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Management Risk The risk that a strategy or selection method utilized by the investment manager may fail to produce the intended result. When all other factors have been accounted for and the investment manager chooses an investment, there is always the possibility that the choice will be a poor one. Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Reinvestment Risk The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or industry will be more susceptible to changes in price (the more you diversify, the more you spread risk). Small Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. -------------------------------------------------------------------------------- 7 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND INVESTMENT STRATEGIES The following information supplements the discussion of the Fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes many strategies that many mutual funds use and types of securities that they purchase. Please refer to the section entitled Investment Strategies and Types of Investments to see which are applicable to the Fund. Agency and Government Securities The U.S. government and its agencies issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities including mortgage pass through certificates of the Government National Mortgage Association (GNMA) are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, FHLMC, FNMA, Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and Reinvestment Risk. Borrowing The Fund may borrow money for temporary or emergency purposes and make other investments or engage in other transactions permissible under the 1940 Act that may be considered a borrowing (such as derivative instruments). Borrowings are subject to costs (in addition to any interest that may be paid) and typically reduce the Fund's total return. Except as qualified above, however, the Fund will not buy securities on margin. Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk and Management Risk. Cash/Money Market Instruments The Fund may maintain a portion of its assets in cash and cash-equivalent investments. Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. The Fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types of instruments generally offer low rates of return and subject the Fund to certain costs and expenses. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk, Inflation Risk, and Management Risk. Collateralized Bond Obligations Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, earns them investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield (High-Risk) Securities (Junk Bonds).) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, and Management Risk. -------------------------------------------------------------------------------- 8 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Commercial Paper Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk, Liquidity Risk, and Management Risk. Common Stock Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Issuer Risk, Management Risk, Market Risk, and Small Company Risk. Convertible Securities Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Call/Prepayment Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and Reinvestment Risk. Corporate Bonds Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government agency or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield (High-Risk) Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. -------------------------------------------------------------------------------- 9 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Debt Obligations Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a specified rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High-Yield (High-Risk) Securities (Junk Bonds).) All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating organization or their rating systems, the Fund will attempt to use comparable ratings as standards for selecting investments. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. Depositary Receipts Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, Management Risk, and Market Risk. Derivative Instruments Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward-based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange-traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. -------------------------------------------------------------------------------- 10 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Options on many securities are listed on options exchanges. If the Fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indices (such as the S&P 500 Index), foreign currencies and other financial instruments and indices. Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost -------------------------------------------------------------------------------- 11 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. Options on Stock Indexes. Options on stock indexes are securities traded on national securities exchanges. An option on a stock index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Tax Treatment. As permitted under federal income tax laws and to the extent the Fund is allowed to invest in futures contracts, the Fund intends to identify futures contracts as mixed straddles and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If the Fund is using short futures contracts for hedging purposes, the Fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Federal income tax treatment of gains or losses from transactions in options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, the Fund will either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The IRS has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (the Fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last-quoted sales price on their primary exchange. Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange-traded derivatives since they often can only be closed out with the other party to the transaction. Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) -------------------------------------------------------------------------------- 12 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Leverage Risk, Liquidity Risk, and Management Risk. Foreign Currency Transactions Investments in foreign countries usually involve currencies of foreign countries. In addition, the Fund may hold cash and cash-equivalent investments in foreign currencies. As a result, the value of the Fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, the Fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing the Fund's NAV to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. Spot Rates and Derivative Instruments. The Fund conducts its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts) as a hedge against fluctuations in future foreign exchange rates. (See also Derivative Instruments). These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, the Fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. The Fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, the Fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. The Fund also may enter into forward contracts when management of the Fund believes the currency of a particular foreign country may change in relationship to another currency. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. The Fund will not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund's securities or other assets denominated in that currency. The Fund will designate cash or securities in an amount equal to the value of the Fund's total assets committed to consummating forward contracts entered into under the second circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the Fund's commitments on such contracts. At maturity of a forward contract, the Fund may either sell the security and make delivery of the foreign currency or retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an offsetting contract with the same currency trader obligating it to buy, on the same maturity date, the same amount of foreign currency. If the Fund retains the security and engages in an offsetting transaction, the Fund will incur a gain or loss (as described below) to the extent there has been movement in forward contract prices. If the Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline between the date the Fund enters into a forward contract for selling foreign currency and the date it enters into an offsetting contract for purchasing the foreign currency, the Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell. It is impossible to forecast what the market value of securities will be at the expiration of a contract. Accordingly, it may be necessary for the Fund to buy additional foreign currency on the spot market (and bear the expense of that purchase) if the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver and a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received on the sale of the portfolio security if its market value exceeds the amount of foreign currency the Fund is obligated to deliver. -------------------------------------------------------------------------------- 13 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND The Fund's dealing in forward contracts will be limited to the transactions described above. This method of protecting the value of the Fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. Although the Fund values its assets each business day in terms of U.S. dollars, it does not intend to convert its foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. Options on Foreign Currencies. The Fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, the Fund may buy put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell the currency for a fixed amount in dollars and will offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities the Fund plans to buy, the Fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. As in the case of other types of options, however, the benefit to the Fund derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the Fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. The Fund may write options on foreign currencies for the same types of hedging purposes. For example, when the Fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the diminution in value of securities will be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency. If rates move in the manner projected, the put option will expire unexercised and allow the Fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if the Fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting the Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and -------------------------------------------------------------------------------- 14 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Foreign Currency Futures and Related Options. The Fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. The Fund may use currency futures for the same purposes as currency forward contracts, subject to Commodity Futures Trading Commission (CFTC) limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the Fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect the Fund against price decline if the issuer's creditworthiness deteriorates. Because the value of the Fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of the Fund's investments denominated in that currency over time. The Fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The Fund will not enter into an option or futures position that exposes the Fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Correlation Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk. Foreign Securities Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. -------------------------------------------------------------------------------- 15 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND The introduction of a single currency, the euro, on January 1, 1999 for participating European nations in the Economic and Monetary Union ("EU") presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after January 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies during the transition period from January 1, 1999 to December 31, 2000 and beyond; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other EU countries such as the United Kingdom and Greece into the euro and the admission of other non-EU countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk, Issuer Risk, and Management Risk. High-Yield (High-Risk) Securities (Junk Bonds) High yield (high-risk) securities are sometimes referred to as "junk bonds." They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) The lower-quality and comparable unrated security market is relatively new and its growth has paralleled a long economic expansion. As a result, it is not clear how this market may withstand a prolonged recession or economic downturn. Such conditions could severely disrupt the market for and adversely affect the value of such securities. All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers. Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield (high-risk) securities include: Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and Management Risk. Illiquid and Restricted Securities The Fund may invest in illiquid securities (i.e., securities that are not readily marketable). These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. -------------------------------------------------------------------------------- 16 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND To the extent the Fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for such securities. Disposing of illiquid or restricted securities may involve time-consuming negotiations and legal expense, and it may be difficult or impossible for the Fund to sell such an investment promptly and at an acceptable price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk and Management Risk. Indexed Securities The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk, Management Risk, and Market Risk. Inverse Floaters Inverse floaters are created by underwriters using the interest payment on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. The remainder, minus a servicing fee, is paid to holders of inverse floaters. As interest rates go down, the holders of the inverse floaters receive more income and an increase in the price for the inverse floaters. As interest rates go up, the holders of the inverse floaters receive less income and a decrease in the price for the inverse floaters. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with inverse floaters include: Interest Rate Risk and Management Risk. Investment Companies The Fund may invest in securities issued by registered and unregistered investment companies. These investments may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Management Risk and Market Risk. Lending of Portfolio Securities The Fund may lend certain of its portfolio securities to broker-dealers. The current policy of the Fund's board is to make these loans, either long- or short-term, to broker-dealers. In making loans, the Fund receives the market price in cash, U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the board. If the market price of the loaned securities goes up, the Fund will get additional collateral on a daily basis. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the Fund receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The Fund may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The Fund will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the lending of portfolio securities include: Credit Risk and Management Risk. Loan Participations Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk and Management Risk. -------------------------------------------------------------------------------- 17 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Mortgage- and Asset-Backed Securities Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Asset-backed securities have structural characteristics similar to mortgage-backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset-backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage- and asset-backed securities include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and Management Risk. Mortgage Dollar Rolls Mortgage dollar rolls are investments whereby an investor would sell mortgage-backed securities for delivery in the current month and simultaneously contract to purchase substantially similar securities on a specified future date. While an investor would forego principal and interest paid on the mortgage-backed securities during the roll period, the investor would be compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk, Interest Rate Risk, and Management Risk. Municipal Obligations Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." -------------------------------------------------------------------------------- 18 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Event Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market Risk. Preferred Stock Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk, Management Risk, and Market Risk. Real Estate Investment Trusts Real estate investment trusts (REITs) are entities that manage a portfolio of real estate to earn profits for their shareholders. REITs can make investments in real estate such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Additionally, the failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Issuer Risk, Management Risk, and Market Risk. Repurchase Agreements The Fund may enter into repurchase agreements with certain banks or non-bank dealers. In a repurchase agreement, the Fund buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk and Management Risk. -------------------------------------------------------------------------------- 19 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Reverse Repurchase Agreements In a reverse repurchase agreement, the investor would sell a security and enter into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk, Interest Rate Risk, and Management Risk. Short Sales With short sales, an investor sells a security that it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the investor must borrow the security to make delivery to the buyer. The investor is obligated to replace the security that was borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the investor sold the security. A fund that is allowed to utilize short sales will designate cash or liquid securities to cover its open short positions. Those funds also may engage in "short sales against the box," a form of short-selling that involves selling a security that an investor owns (or has an unconditioned right to purchase) for delivery at a specified date in the future. This technique allows an investor to hedge protectively against anticipated declines in the market of its securities. If the value of the securities sold short increased between the date of the short sale and the date on which the borrowed security is replaced, the investor loses the opportunity to participate in the gain. A "short sale against the box" will result in a constructive sale of appreciated securities thereby generating capital gains to the Fund. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Management Risk and Market Risk. Sovereign Debt A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk, Foreign/Emerging Markets Risk, and Management Risk. Structured Products Structured products are over-the-counter financial instruments created specifically to meet the needs of one or a small number of investors. The instrument may consist of a warrant, an option, or a forward contract embedded in a note or any of a wide variety of debt, equity, and/or currency combinations. Risks of structured products include the inability to close such instruments, rapid changes in the market, and defaults by other parties. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured products include: Credit Risk, Liquidity Risk, and Management Risk. Variable- or Floating-Rate Securities The Fund may invest in securities that offer a variable- or floating-rate of interest. Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (e.g., daily, monthly, semiannually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. -------------------------------------------------------------------------------- 20 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Variable-rate demand notes include master demand notes that are obligations that permit the Fund to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the Fund as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk and Management Risk. Warrants Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Management Risk and Market Risk. When-Issued Securities and Forward Commitments When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, the Fund may lose the opportunity to obtain a price and yield considered to be advantageous. Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk and Management Risk. Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk, Interest Rate Risk, and Management Risk. -------------------------------------------------------------------------------- 21 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Security Transactions Subject to policies set by the board, AEFC is authorized to determine, consistent with the Fund's investment goal and policies, which securities will be purchased, held, or sold. The description of policies and procedures in this section also applies to any Fund subadviser. In determining where the buy and sell orders are to be placed, AEFC has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the board. In selecting broker-dealers to execute transactions, AEFC may consider the price of the security, including commission or mark-up, the size and difficulty of the order, the reliability, integrity, financial soundness, and general operation and execution capabilities of the broker, the broker's expertise in particular markets, and research services provided by the broker. The Fund, AEFC, any subadviser and American Express Financial Advisors Inc. (the Distributor) each have a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the Fund. The Fund's securities may be traded on a principal rather than an agency basis. In other words, AEFC will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. AEFC does not pay the dealer commissions. Instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The board has adopted a policy authorizing AEFC to do so to the extent authorized by law, if AEFC determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or AEFC's overall responsibilities with respect to the Fund and the other American Express mutual funds for which it acts as investment manager. Research provided by brokers supplements AEFC's own research activities. Such services include economic data on, and analysis of, U.S. and foreign economies; information on specific industries; information about specific companies, including earnings estimates; purchase recommendations for stocks and bonds; portfolio strategy services; political, economic, business, and industry trend assessments; historical statistical information; market data services providing information on specific issues and prices; and technical analysis of various aspects of the securities markets, including technical charts. Research services may take the form of written reports, computer software, or personal contact by telephone or at seminars or other meetings. AEFC has obtained, and in the future may obtain, computer hardware from brokers, including but not limited to personal computers that will be used exclusively for investment decision-making purposes, which include the research, portfolio management, and trading functions and other services to the extent permitted under an interpretation by the SEC. When paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge, AEFC must follow procedures authorized by the board. To date, three procedures have been authorized. One procedure permits AEFC to direct an order to buy or sell a security traded on a national securities exchange to a specific broker for research services it has provided. The second procedure permits AEFC, in order to obtain research, to direct an order on an agency basis to buy or sell a security traded in the over-the-counter market to a firm that does not make a market in that security. The commission paid generally includes compensation for research services. The third procedure permits AEFC, in order to obtain research and brokerage services, to cause the Fund to pay a commission in excess of the amount another broker might have charged. AEFC has advised the Fund that it is necessary to do business with a number of brokerage firms on a continuing basis to obtain such services as the handling of large orders, the willingness of a broker to risk its own money by taking a position in a security, and the specialized handling of a particular group of securities that only certain brokers may be able to offer. As a result of this arrangement, some portfolio transactions may not be effected at the lowest commission, but AEFC believes it may obtain better overall execution. AEFC has represented that under all three procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services performed or research provided. All other transactions will be placed on the basis of obtaining the best available price and the most favorable execution. In so doing, if in the professional opinion of the person responsible for selecting the broker or dealer, several firms can execute the transaction on the same basis, consideration will be given by such person to those firms offering research services. Such services may be used by AEFC in providing advice to all American Express mutual funds even though it is not possible to relate the benefits to any particular fund. -------------------------------------------------------------------------------- 22 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Each investment decision made for the Fund is made independently from any decision made for another portfolio, fund, or other account advised by AEFC or any of its subsidiaries. When the Fund buys or sells the same security as another portfolio, fund, or account, AEFC carries out the purchase or sale in a way the Fund agrees in advance is fair. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the Fund, the Fund hopes to gain an overall advantage in execution. On occasion, the Fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions. The review evaluates execution, operational efficiency, and research services. The Fund paid total brokerage commissions of $14,508,440 for fiscal year ended July 31, 2002, $14,906,575 for fiscal year 2001, and $13,244,310 for fiscal year 2000. Substantially all firms through whom transactions were executed provide research services. In fiscal year 2002, transactions amounting to $26,156,770, on which $24,000 in commissions were imputed or paid, were specifically directed to firms in exchange for research services. As of the end of the most recent fiscal year, the Fund held securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below: Value of securities Name of issuer owned at end of fiscal year Bank of America $465,500,000 Citigroup 603,720,000 Fleet Funding 41,915,556 Goldman Sachs Group 22,294,022 Morgan Stanley 201,750,000 The portfolio turnover rate was 27% in the most recent fiscal year, and 29% in the year before. Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation Affiliates of American Express Company (of which AEFC is a wholly-owned subsidiary) may engage in brokerage and other securities transactions on behalf of the Fund according to procedures adopted by the board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. AEFC will use an American Express affiliate only if (i) AEFC determines that the Fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Fund and (ii) the affiliate charges the Fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. Information about brokerage commissions paid by the Fund for the last three fiscal years to brokers affiliated with AEFC is contained in the following table:
As of the end of fiscal year 2002 2001 2000 Percent of aggregate dollar amount of Aggregate dollar Percent of transactions Aggregate dollar Aggregate dollar amount of aggregate involving amount of amount of Nature of commissions brokerage payment of commissions commissions Broker affiliation paid to broker commissions commissions paid to broker paid to broker American Enterprise Wholly-owned $1,289,960 8.89% 17.28% $1,480,185 $1,370,358 Investment subsidiary of Services Inc. AEFC
-------------------------------------------------------------------------------- 23 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Performance Information The Fund may quote various performance figures to illustrate past performance. Average annual total return and current yield quotations, if applicable, used by the Fund are based on standardized methods of computing performance as required by the SEC. An explanation of the methods used by the Fund to compute performance follows below. AVERAGE ANNUAL TOTAL RETURN The Fund may calculate average annual total return for a class for certain periods by finding the average annual compounded rates of return over the period that would equate the initial amount invested to the ending redeemable value, according to the following formula: P(1 + T)(to the power of n) = ERV where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) AGGREGATE TOTAL RETURN The Fund may calculate aggregate total return for a class for certain periods representing the cumulative change in the value of an investment in the Fund over a specified period of time according to the following formula: ERV - P ------- P where: P = a hypothetical initial payment of $1,000 ERV = ending redeemable value of a hypothetical $1,000 payment, made at the beginning of a period, at the end of the period (or fractional portion thereof) In its sales material and other communications, the Fund may quote, compare or refer to rankings, yields, or returns as published by independent statistical services or publishers and publications such as The Bank Rate Monitor National Index, Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund Report, Financial Services Week, Financial Times, Financial World, Forbes, Fortune, Global Investor, Institutional Investor, Investor's Business Daily, Kiplinger's Personal Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster, Newsweek, The New York Times, Personal Investor, Shearson Lehman Aggregate Bond Index, Stanger Report, Sylvia Porter's Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal, and Wiesenberger Investment Companies Service. The Fund also may compare its performance to a wide variety of indexes or averages. There are similarities and differences between the investments that the Fund may purchase and the investments measured by the indexes or averages and the composition of the indexes or averages will differ from that of the Fund. Ibbotson Associates provides historical returns of the capital markets in the United States, including common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation (based on the CPI) and combinations of various capital markets. The performance of these capital markets is based on the returns of different indexes. The Fund may use the performance of these capital markets in order to demonstrate general risk-versus-reward investment scenarios. The Fund may quote various measures of volatility in advertising. Measures of volatility seek to compare a fund's historical share price fluctuations or returns to those of a benchmark. The Distributor may provide information designed to help individuals understand their investment goals and explore various financial strategies. Materials may include discussions of asset allocation, retirement investing, brokerage products and services, model portfolios, saving for college or other goals, and charitable giving. -------------------------------------------------------------------------------- 24 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Valuing Fund Shares As of the end of the most recent fiscal year, the computation looked like this:
Net assets Shares outstanding Net asset value of one share Class A $9,863,130,072 divided by 492,114,004 equals $20.04 Class B 3,728,472,005 195,044,945 19.12 Class C 44,015,284 2,304,834 19.10 Class Y 3,222,334,131 160,030,567 20.14
In determining net assets before shareholder transactions, the Fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): o Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. o Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. o Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. o Securities included in the NASDAQ National Market System for which a last-quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. o Futures and options traded on major exchanges are valued at the last-quoted sales price on their primary exchange. o Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars at the current rate of exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange that will not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, these securities will be valued at their fair value according to procedures decided upon in good faith by the board. o Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. o Securities without a readily available market price and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When possible, bonds are valued by a pricing service independent from the Fund. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. Investing in the Fund SALES CHARGE Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the CDSC and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of the Fund. Shares of the Fund are sold at the public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C and Class Y, there is no initial sales charge so the public offering price is the same as the NAV. Using the sales charge schedule in the table below, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal year, was determined by dividing the NAV of one share, $20.04, by 0.9425 (1.00 - 0.0575) for a maximum 5.75% sales charge for a public offering price of $21.26. The sales charge is paid to the Distributor by the person buying the shares. -------------------------------------------------------------------------------- 25 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Class A -- Calculation of the Sales Charge Sales charges are determined as follows: Sales charge as a percentage of: Total market value Public offering price Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.75 3.90 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00* 2.04* $1,000,000 or more 0.00 0.00 * The sales charge will be waived until Dec. 31, 2002. The initial sales charge is waived for certain qualified plans. Participants in these qualified plans may be subject to a deferred sales charge on certain redemptions. The Fund will waive the deferred sales charge on certain redemptions if the redemption is a result of a participant's death, disability, retirement, attaining age 591/2, loans, or hardship withdrawals. The deferred sales charge varies depending on the number of participants in the qualified plan and total plan assets as follows: Deferred Sales Charge Number of participants Total plan assets 1-99 100 or more Less than $1 million 4% 0% $1 million or more 0% 0% Class A -- Reducing the Sales Charge The market value of your investments in the Fund determines your sales charge. For example, suppose you have made an investment that now has a value of $20,000 and you later decide to invest $40,000 more. The value of your investments would be $60,000. As a result, your $40,000 investment qualifies for the lower 4.75% sales charge that applies to investments of more than $50,000 and up to $100,000. If you qualify for a reduced sales charge and purchase shares through different channels (for example, in a brokerage account and also directly from the Fund), you must inform the Distributor of your total holdings when placing any purchase orders. Class A -- Letter of Intent (LOI) If you intend to invest more than $50,000 over a period of time, you can reduce the sales charge in Class A by filing a LOI and committing to invest a certain amount. The agreement can start at any time and you will have up to 13 months to fulfill your commitment. The LOI start date can be backdated by up to 90 days. Your holdings in American Express funds acquired more than 90 days before receipt of your signed LOI in the home office will not be counted towards the completion of the LOI. Your investments will be charged the sales charge that applies to the amount you have committed to invest. Five percent of the commitment amount will be placed in escrow. If your commitment amount is reached within the 13-month period, the LOI will end and the shares will be released from escrow. Once the LOI has ended, future sales charges will be determined by the total value of the new investment combined with the market value of the existing American Express mutual fund investments. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. The commitment amount does not include purchases in any class of American Express funds other than Class A; purchases in American Express funds held within a wrap product; and purchases of AXP Cash Management Fund and AXP Tax-Free Money Fund unless they are subsequently exchanged to Class A shares of an American Express mutual fund within the 13 month period. A LOI is not an option (absolute right) to buy shares. If you purchase shares in an American Express brokerage account or through a third party, you must inform the Distributor about the LOI when placing any purchase orders during the period of the LOI. -------------------------------------------------------------------------------- 26 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Class Y Shares Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC and are not subject to a distribution fee. The following investors are eligible to purchase Class Y shares: o Qualified employee benefit plans* if the plan: o uses a daily transfer recordkeeping service offering participants daily access to American Express mutual funds and has o at least $10 million in plan assets or o 500 or more participants; or o does not use daily transfer recordkeeping and has o at least $3 million invested in American Express mutual funds or o 500 or more participants. o Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code.* These institutions must have at least $10 million in American Express mutual funds. o Nonqualified deferred compensation plans* whose participants are included in a qualified employee benefit plan described above. o State sponsored college savings plans established under Section 529 of the Internal Revenue Code. * Eligibility must be determined in advance. To do so, contact your financial advisor. SYSTEMATIC INVESTMENT PROGRAMS After you make your initial investment of $100 or more, you must make additional payments of $100 or more on at least a monthly basis until your balance reaches $2,000. These minimums do not apply to all systematic investment programs. You decide how often to make payments -- monthly, quarterly, or semiannually. You are not obligated to make any payments. You can omit payments or discontinue the investment program altogether. The Fund also can change the program or end it at any time. AUTOMATIC DIRECTED DIVIDENDS Dividends, including capital gain distributions, paid by another American Express mutual fund may be used to automatically purchase shares in the same class of this Fund. Dividends may be directed to existing accounts only. Dividends declared by a fund are exchanged to this Fund the following day. Dividends can be exchanged into the same class of another American Express mutual fund but cannot be split to make purchases in two or more funds. Automatic directed dividends are available between accounts of any ownership except: o Between a non-custodial account and an IRA, or 401(k) plan account or other qualified retirement account of which American Express Trust Company acts as custodian; o Between two American Express Trust Company custodial accounts with different owners (for example, you may not exchange dividends from your IRA to the IRA of your spouse); and o Between different kinds of custodial accounts with the same ownership (for example, you may not exchange dividends from your IRA to your 401(k) plan account, although you may exchange dividends from one IRA to another IRA). Dividends may be directed from accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA or UTMA accounts with identical ownership. The Fund's investment goal is described in its prospectus along with other information, including fees and expense ratios. Before exchanging dividends into another fund, you should read that fund's prospectus. You will receive a confirmation that the automatic directed dividend service has been set up for your account. REJECTION OF BUSINESS The Fund or AECSC reserves the right to reject any business, in its sole discretion. -------------------------------------------------------------------------------- 27 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Selling Shares You have a right to sell your shares at any time. For an explanation of sales procedures, please see the prospectus. During an emergency, the board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of the Fund to redeem shares for more than seven days. Such emergency situations would occur if: o The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or o Disposal of the Fund's securities is not reasonably practicable or it is not reasonably practicable for the Fund to determine the fair value of its net assets, or o The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should the Fund stop selling shares, the board may make a deduction from the value of the assets held by the Fund to cover the cost of future liquidations of the assets so as to distribute fairly these costs among all shareholders. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the Fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the Fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the Fund as determined by the board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should the Fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash. Pay-out Plans You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you are redeeming a tax-qualified plan account for which American Express Trust Company acts as custodian, you can elect to receive your dividends and other distributions in cash when permitted by law. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of the Fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please consult your selling agent or write American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474, or call (800) 437-3133. Your authorization must be received at least five days before the date you want your payments to begin. The initial payment must be at least $50. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it. The following pay-out plans are designed to take care of the needs of most shareholders in a way AEFC can handle efficiently and at a reasonable cost. If you need a more irregular schedule of payments, it may be necessary for you to make a series of individual redemptions, in which case you will have to send in a separate redemption request for each pay-out. The Fund reserves the right to change or stop any pay-out plan and to stop making such plans available. Plan #1: Pay-out for a fixed period of time If you choose this plan, a varying number of shares will be redeemed at regular intervals during the time period you choose. This plan is designed to end in complete redemption of all shares in your account by the end of the fixed period. Plan #2: Redemption of a fixed number of shares If you choose this plan, a fixed number of shares will be redeemed for each payment and that amount will be sent to you. The length of time these payments continue is based on the number of shares in your account. Plan #3: Redemption of a fixed dollar amount If you decide on a fixed dollar amount, whatever number of shares is necessary to make the payment will be redeemed in regular installments until the account is closed. Plan #4: Redemption of a percentage of net asset value Payments are made based on a fixed percentage of the net asset value of the shares in the account computed on the day of each payment. Percentages range from 0.25% to 0.75%. For example, if you are on this plan and arrange to take 0.5% each month, you will get $50 if the value of your account is $10,000 on the payment date. -------------------------------------------------------------------------------- 28 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Capital Loss Carryover For federal income tax purposes, the Fund had total capital loss carryovers of $730,857,694 at the end of the most recent fiscal year, that if not offset by subsequent capital gains will expire in 2010. It is unlikely that the board will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules. Taxes For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For example You purchase 100 shares of one fund having a public offering price of $10.00 per share. With a sales load of 5.75%, you pay $57.50 in sales load. With a NAV of $9.425 per share, the value of your investment is $942.50. Within 91 days of purchasing that fund, you decide to exchange out of that fund, now at a NAV of $11.00 per share, up from the original NAV of $9.425, and purchase into a second fund, at a NAV of $15.00 per share. The value of your investment is now $1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load when calculating your tax gain or loss in the sale of the first fund shares. So instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50 gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the basis of your shares in the second fund. If you have a nonqualified investment in the Fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the Fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged plus the amount of the initial sales charge applied to the amount exchanged exceeds annual contribution limitations. For example: If you were to exchange $2,000 in Class A shares from a nonqualified account to an IRA without considering the 5.75% ($115) initial sales charge applicable to that $2,000, you may be deemed to have exceeded current IRA annual contribution limitations. You should consult your tax advisor for further details about this complex subject. Net investment income dividends received should be treated as dividend income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of the Fund's dividend that is attributable to dividends the Fund received from domestic (U.S.) securities. The Fund may be subject to U.S. taxes resulting from holdings in a passive foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. Income earned by the Fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the Fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the Fund will be eligible to file an election with the Internal Revenue Service under which shareholders of the Fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the Fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes. Capital gain distributions, if any, received by shareholders should be treated as long-term capital gains regardless of how long they owned their shares. Short-term capital gains earned by the Fund are paid to shareholders as part of their ordinary income dividend and are taxable. A special 28% rate on capital gains may apply to sales of precious metals, if any, owned directly by the Fund. A special 25% rate on capital gains may apply to investments in REITs. Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to -------------------------------------------------------------------------------- 29 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition also are treated as ordinary gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders as ordinary income. Under federal tax law, by the end of a calendar year the Fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. The Fund intends to comply with federal tax law and avoid any excise tax. The Internal Revenue Code imposes two asset diversification rules that apply to the Fund as of the close of each quarter. First, as to 50% of its holdings, the Fund may hold no more than 5% of its assets in securities of one issuer and no more than 10% of any one issuer's outstanding voting securities. Second, the Fund cannot have more than 25% of its assets in any one issuer. For purposes of the excise tax distributions, "section 988" ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end. If a mutual fund is the holder of record of any share of stock on the record date for any dividend payable with respect to the stock, the dividend will be included in gross income by the Fund as of the later of (1) the date the share became ex-dividend or (2) the date the Fund acquired the share. Because the dividends on some foreign equity investments may be received some time after the stock goes ex-dividend, and in certain rare cases may never be received by the Fund, this rule may cause the Fund to pay income to its shareholders that it has not actually received. To the extent that the dividend is never received, the Fund will take a loss at the time that a determination is made that the dividend will not be received. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to Fund distributions. Agreements INVESTMENT MANAGEMENT SERVICES AGREEMENT AEFC, a wholly-owned subsidiary of American Express Company, is the investment manager for the Fund. Under the Investment Management Services Agreement, AEFC, subject to the policies set by the board, provides investment management services. For its services, AEFC is paid a fee based on the following schedule. Each class of the Fund pays its proportionate share of the fee. Assets (billions) Annual rate at each asset level First $ 1.0 0.600% Next 1.0 0.575 Next 1.0 0.550 Next 3.0 0.525 Next 6.0 0.500 Next 12.0 0.490 Over 24.0 0.480 On the last day of the most recent fiscal year, the daily rate applied to the Fund's net assets was equal to 0.515% on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Before the fee based on the asset charge is paid, it is adjusted for investment performance. The adjustment, determined monthly, will be calculated using the percentage point difference between the change in the net asset value of one Class A share of the Fund and the change in the Lipper Large-Cap Growth Funds Index (Index). The performance of one Class A share of the Fund is measured by computing the percentage difference between the opening and closing net asset value of one Class A share of the Fund, as of the last business day of the period selected for comparison, adjusted for dividend or capital gain distributions which are treated as reinvested at the end of the month during which the distribution was made. The performance of the Index for the same period is established by measuring the percentage difference between the beginning and ending Index for the comparison period. The performance is adjusted for dividend or capital gain distributions (on the securities which comprise the Index), which are treated as reinvested at the end of the month during which the distribution was made. One percentage point will be subtracted from the calculation to help assure that incentive adjustments are attributable to AEFC's management abilities rather than random fluctuations and the result multiplied by 0.01%. That number will be multiplied times the Fund's average net assets for the comparison period and then divided by the number of months in the comparison period to determine the monthly adjustment. -------------------------------------------------------------------------------- 30 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Where the Fund's Class A share performance exceeds that of the Index, the base fee will be increased. Where the performance of the Index exceeds the performance of the Fund's Class A share, the base fee will be decreased. The maximum monthly increase or decrease will be 0.12% of the Fund's average net assets on an annual basis. The 12 month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. The adjustment increased the fee by $20,242,854 for fiscal year 2002. The management fee is paid monthly. Under the agreement, the total amount paid was $127,492,321 for fiscal year 2002, $156,837,949 for fiscal year 2001, and $140,517,529 for fiscal year 2000. Under the agreement, the Fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees; audit and certain legal fees; fidelity bond premiums; registration fees for shares; office expenses; postage of confirmations except purchase confirmations; consultants' fees; compensation of board members, officers and employees; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; and expenses properly payable by the Fund, approved by the board. Under the agreement, nonadvisory expenses, net of earnings credits, paid by the Fund were $3,869,499 for fiscal year 2002, $4,836,691 for fiscal year 2001, and $2,756,072 for fiscal year 2000. Basis for board approving the investment advisory contract Based on its work throughout the year and detailed analysis by the Contracts Committee of reports provided by AEFC, the independent board members determined to renew the Investment Management Services Agreement based on: o tangible steps AEFC has taken to improve the competitive ranking and consistency of the investment performance of the Fund, including changes in leadership, portfolio managers, compensation structures, and the implementation of management practices, o continued commitment to expand the range of investment options that it offers investors, through repositioning existing funds and creating new funds, o consistent effort to provide a management structure that imposes disciplines that ensure adherence to stated management style and expected risk characteristics, o additional time needed to evaluate the efficacy of the new AEFC management structure that has produced improved performance results in the short-term, o benefit of economy of scale that results from the graduated fee structure and the reasonableness of fees in light of the fees paid by similar funds in the industry, o competitive total expenses that are either at or only slightly above the median expenses of comparable funds, and o reasonable level of AEFC's profitability from its mutual fund operations. ADMINISTRATIVE SERVICES AGREEMENT The Fund has an Administrative Services Agreement with AEFC. Under this agreement, the Fund pays AEFC for providing administration and accounting services. The fee is calculated as follows: Assets (billions) Annual rate at each asset level First $ 1.0 0.050% Next 1.0 0.045 Next 1.0 0.040 Next 3.0 0.035 Next 6.0 0.030 Next 12.0 0.025 Over 24.0 0.020 On the last day of the most recent fiscal year, the daily rate applied to the Fund's net assets was equal to 0.032% on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Under the agreement, the Fund paid fees of $6,562,461 for fiscal year 2002, $7,911,702 for fiscal year 2001, and $8,043,990 for fiscal year 2000. Third parties with which AEFC contracts to provide services for the Fund or its shareholders may pay a fee to AEFC to help defray the cost of providing administrative and accounting services. The amount of any such fee is negotiated separately with each service provider and does not constitute compensation for investment advisory, distribution, or other services. Payment of any such fee neither increases nor reduces fees or expenses paid by shareholders of the Fund. -------------------------------------------------------------------------------- 31 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND TRANSFER AGENCY AGREEMENT The Fund has a Transfer Agency Agreement with American Express Client Service Corporation (AECSC). This agreement governs AECSC's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the Fund's shares. Under the agreement, AECSC will earn a fee from the Fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The rate for Class A is $19 per year, for Class B is $20 per year, for Class C is $19.50 per year and for Class Y is $17 per year. The fees paid to AECSC may be changed by the board without shareholder approval. DISTRIBUTION AGREEMENT American Express Financial Advisors Inc. is the Fund's principal underwriter (the Distributor). The Fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing Fund shares are paid to the Distributor daily. These charges amounted to $28,321,800 for fiscal year 2002. After paying commissions to personal financial advisors, and other expenses, the amount retained was $8,004,146. The amounts were $37,122,429 and $7,353,913 for fiscal year 2001, and $52,750,435 and $3,433,002 for fiscal year 2000. Part of the sales charge may be paid to selling dealers who have agreements with the Distributor. The Distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. SHAREHOLDER SERVICE AGREEMENT With respect to Class Y shares, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of average daily net assets. PLAN AND AGREEMENT OF DISTRIBUTION For Class A, Class B and Class C shares, to help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, the Fund and the Distributor entered into a Plan and Agreement of Distribution (Plan) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund pays a fee up to actual expenses incurred at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material change to expenses charged under the Class A plan. Expenses covered under this Plan include sales commissions; business, employee and financial advisor expenses charged to distribution of Class A, Class B and Class C shares; and overhead appropriately allocated to the sale of Class A, Class B and Class C shares. These expenses also include costs of providing personal service to shareholders. A substantial portion of the costs are not specifically identified to any one of the American Express mutual funds. The Plan must be approved annually by the board, including a majority of the disinterested board members, if it is to continue for more than a year. At least quarterly, the board must review written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of board members who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the Distributor. The Plan (or any agreement related to it) will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the board members, including a majority of the board members who are not interested persons of the Fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested board members is the responsibility of the other disinterested board members. No board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement. For the most recent fiscal year, the Fund paid fees of $30,613,503 for Class A shares, $46,621,925 for Class B shares and $389,809 for Class C shares. The fee is not allocated to any one service (such as advertising, payments to underwriters, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. -------------------------------------------------------------------------------- 32 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND CUSTODIAN AGREEMENT The Fund's securities and cash are held by American Express Trust Company, 200 AXP Financial Center, Minneapolis, MN 55474, through a custodian agreement. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. For its services, the Fund pays the custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. The custodian has entered into a sub-custodian agreement with the Bank of New York, 90 Washington Street, New York, NY 10286. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of Bank of New York or in other financial institutions as permitted by law and by the Fund's sub-custodian agreement. Organizational Information The Fund is an open-end management investment company. The Fund headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The shares of the Fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of the Fund would have the same rights to dividends and assets as every other share of that Fund. VOTING RIGHTS As a shareholder in the Fund, you have voting rights over the Fund's management and fundamental policies. You are entitled to one vote for each share you own. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. All shares have cumulative voting rights with respect to the election of board members. This means that you have as many votes as the number of shares you own, including fractional shares, multiplied by the number of members to be elected. DIVIDEND RIGHTS Dividends paid by the Fund, if any, with respect to each class of shares, if applicable, will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures. AMERICAN EXPRESS FINANCIAL CORPORATION AEFC has been a provider of financial services since 1894. Its family of companies offers not only mutual funds but also insurance, annuities, investment certificates and a broad range of financial management services. In addition to managing assets of more than $66 billion for the American Express Funds, AEFC manages investments for itself and its subsidiaries, American Express Certificate Company and IDS Life Insurance Company. Total assets owned and managed as of the end of the most recent fiscal year were more than $199 billion. The Distributor serves individuals and businesses through its nationwide network of more than 600 supervisory offices, more than 3,800 branch offices and more than 9,900 financial advisors. -------------------------------------------------------------------------------- 33 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R)Bond Fund, Inc. 6/27/74, 6/31/86* Corporation NV/MN 8/31 Yes AXP(R)California Tax-Exempt Trust 4/7/86 Business Trust** MA 6/30 AXP(R)California Tax-Exempt Fund No AXP(R)Discovery Fund, Inc. 4/29/81, 6/13/86* Corporation NV/MN 7/31 Yes AXP(R)Equity Select Fund, Inc. 3/18/57, 6/13/86* Corporation NV/MN 11/30 Yes AXP(R)Extra Income Fund, Inc. 8/17/83 Corporation MN 5/31 Yes AXP(R)Federal Income Fund, Inc. 3/12/85 Corporation MN 5/31 AXP(R)Federal Income Fund Yes AXP(R)U.S. Government Mortgage Fund Yes AXP(R)Global Series, Inc. 10/28/88 Corporation MN 10/31 AXP(R)Emerging Markets Fund Yes AXP(R)Global Balanced Fund Yes AXP(R)Global Bond Fund No AXP(R)Global Growth Fund Yes AXP(R)Global Technology Fund*** Yes AXP(R)Growth Series, Inc. 5/21/70, 6/13/86* Corporation NV/MN 7/31 AXP(R)Growth Fund Yes AXP(R)Large Cap Equity Fund Yes AXP(R)Large Cap Value Fund Yes AXP(R)Research Opportunities Fund Yes AXP(R)High Yield Tax-Exempt Fund, Inc. 12/21/78, 6/13/86* Corporation NV/MN 11/30 Yes AXP(R)International Fund, Inc. 7/18/84 Corporation MN 10/31 AXP(R)European Equity Fund No AXP(R)International Fund Yes AXP(R)Investment Series, Inc. 1/18/40, 6/13/86* Corporation NV/MN 9/30 AXP(R)Diversified Equity Income Fund Yes AXP(R)Mid Cap Value Fund Yes AXP(R)Mutual Yes AXP(R)Managed Series, Inc. 10/9/84 Corporation MN 9/30 AXP(R)Managed Allocation Fund Yes AXP(R)Market Advantage Series, Inc. 8/25/89 Corporation MN 1/31 AXP(R)Blue Chip Advantage Fund Yes AXP(R)International Equity Index Fund No AXP(R)Mid Cap Index Fund No AXP(R)Nasdaq 100 Index Fund No AXP(R)S&P 500 Index Fund No AXP(R)Small Company Index Fund Yes AXP(R)Total Stock Market Index Fund No AXP(R)Money Market Series, Inc. 8/22/75, 6/13/86* Corporation NV/MN 7/31 AXP(R)Cash Management Fund Yes AXP(R)New Dimensions Fund, Inc. 2/20/68, 6/13/86* Corporation NV/MN 7/31 AXP(R)Growth Dimensions Fund Yes AXP(R)New Dimensions Fund Yes
-------------------------------------------------------------------------------- 34 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS (continued) Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R)Partners Series, Inc. 3/20/01 Corporation MN 5/31 AXP(R)Partners Fundamental Value Fund Yes AXP(R)Partners Select Value Fund Yes AXP(R)Partners Small Cap Core Fund Yes AXP(R)Partners Small Cap Value Fund No AXP(R)Partners Value Fund Yes AXP(R)Partners International Series, Inc. 5/9/01 Corporation MN 10/31 AXP(R)Partners International Aggressive Growth Fund Yes AXP(R)Partners International Select Value Fund Yes AXP(R)Precious Metals Fund, Inc. 10/5/84 Corporation MN 3/31 No AXP(R)Progressive Fund, Inc. 4/23/68, 6/13/86* Corporation NV/MN 9/30 Yes AXP(R)Selective Fund, Inc. 2/10/45, 6/13/86* Corporation NV/MN 5/31 Yes AXP(R)Special Tax-Exempt Series Trust 4/7/86 Business Trust** MA 6/30 AXP(R)Insured Tax-Exempt Fund Yes AXP(R)Massachusetts Tax-Exempt Fund No AXP(R)Michigan Tax-Exempt Fund No AXP(R)Minnesota Tax-Exempt Fund No AXP(R)New York Tax-Exempt Fund No AXP(R)Ohio Tax-Exempt Fund No AXP(R)Stock Fund, Inc. 2/10/45, 6/13/86* Corporation NV/MN 9/30 Yes AXP(R)Strategy Series, Inc. 1/24/84 Corporation MN 3/31 AXP(R)Equity Value Fund Yes AXP(R)Focused Growth Fund*** No AXP(R)Partners Small Cap Growth Fund*** Yes AXP(R)Small Cap Advantage Fund Yes AXP(R)Strategy Aggressive Fund Yes AXP(R)Tax-Exempt Series, Inc. 9/30/76, 6/13/86* Corporation NV/MN 11/30 AXP(R)Intermediate Tax-Exempt Fund Yes AXP(R)Tax-Exempt Bond Fund Yes AXP(R)Tax-Free Money Fund, Inc. 2/29/80, 6/13/86* Corporation NV/MN 12/31 Yes AXP(R)Utilities Income Fund, Inc.*** 3/25/88 Corporation MN 6/30 AXP(R)Utilities Fund Yes
* Date merged into a Minnesota corporation incorporated on 4/7/86. ** Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the trust itself is unable to meet its obligations. *** Effective Feb. 7, 2002, AXP(R) Focus 20 Fund changed its name to AXP(R) Focused Growth Fund, AXP(R) Innovations Fund changed its name to AXP(R) Global Technology Fund, AXP(R) Small Cap Growth Fund changed its name to AXP(R) Partners Small Cap Growth Fund and AXP(R) Utilities Income Fund, Inc. created a series, AXP(R) Utilities Fund. -------------------------------------------------------------------------------- 35 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Board Members and Officers Shareholders elect a board that oversees the Fund's operations. The board appoints officers who are responsible for day-to-day business decisions based on policies set by the board. The following is a list of the Fund's board members. Each member oversees 15 Master Trust portfolios and 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 Committee address, Registrant and length during past five years directorships memberships age of service --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ H. Brewster Atwater, Jr. Board member Retired chair and Board Effectiveness, 4900 IDS Tower since 1996 chief executive Executive, Investment Minneapolis, MN 55402 officer, General Review Born in 1931 Mills, Inc. (consumer foods) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Arne H. Carlson Chair of the Board Chair, Board Services Joint Audit, 901 S. Marquette Ave. since 1999 Corporation (provides Contracts, Executive, Minneapolis, MN 55402 administrative Investment Review, Born in 1934 services to boards), Board Effectiveness former Governor of Minnesota --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Lynne V. Cheney Board member since 1994 Distinguished Fellow, The Reader's Digest Joint Audit, American Enterprise AEI Association Inc. Contracts Institute for Public Policy Research AEI) 1150 17th St., N.W. Washington, D.C. 20036 Born in 1941 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Livio D. DeSimone Board member since 2001 Retired chair of the Cargill, Incorporated Joint Audit, 30 Seventh Street East board and (commodity merchants Contracts Suite 3050 chief executive and processors), St. Paul, MN 55101-4901 officer, Minnesota Target Corporation Born in 1936 Mining and (department stores), Manufacturing (3M) 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 Contracts, Texaco, Inc. formerly with Texaco International, Inc. Investment Review 2000 Westchester Avenue Inc., treasurer, (office equipment), White Plains, NY 10650 1999-2001 and general Reynolds & Reynolds Born in 1944 manager, alliance Company (information management operations, services), TECO 1998-1999. Prior to Energy, Inc. (energy that, director, holding company), The International Williams Companies, Operations IBM Corp. Inc. (energy distribution company) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Heinz F. Hutter Board member since 1994 Retired president and Board Effectiveness, P.O. Box 2187 chief operating Executive, Investment Minneapolis, MN 55402 officer, Cargill, Review Born in 1929 Incorporated (commodity merchants and processors) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Anne P. Jones Board member since 1985 Attorney and consultant Motorola, Inc. Joint Audit, 5716 Bent Branch Rd. (electronics) Board Effectiveness, Bethesda, MD 20816 Executive Born in 1935 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Stephen R. Lewis, Jr. Board member since 2002 Retired president and Contracts, 901 S. Marquette Ave. professor of Investment Review Minneapolis, MN 55402 economics, Carleton Born in 1939 College --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ William R. Pearce Board member since 1980 RII Weyerhaeuser World Executive, 2050 One Financial Plaza Timberfund, L.P. Investment Review, Minneapolis, MN 55402 (develops timber Board Effectiveness Born in 1927 resources)-- management committee; former chair, American Express Funds --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
-------------------------------------------------------------------------------- 36 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND
Independent Board Members (continued) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Name, Position held with Principal occupations Other Committee address, Registrant and length during past five years directorships memberships age of service --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Alan G. Quasha Board member since 2002 President, Quadrant Compagnie Financiere Joint Audit, 720 Fifth Avenue Management, Inc. Richemont AG (luxury Investment Review New York, NY 10019 (management of private goods) Born in 1949 equities) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Alan K. Simpson Board member since 1997 Former three-term Biogen, Inc. Joint Audit, 1201 Sunshine Ave. United States Senator (bio-pharmaceuticals) Contracts Cody, WY 82414 for Wyoming Born in 1931 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ C. Angus Wurtele Board member since 1994 Retired chair of the Bemis Corporation Contracts, Executive, 4900 IDS Tower board and (packaging) Investment Review Minneapolis, MN 55402 chief executive Born in 1934 officer, The Valspar Corporation --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
Board Members Affiliated with American Express Financial Corporation (AEFC) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ Name, Position held with Principal occupations Other Committee address, Registrant and length during past five years directorships memberships age of service --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ David R. Hubers Board member since 1993 Retired chief Chronimed Inc. 50643 AXP Financial Center executive officer and (specialty Minneapolis, MN 55474 director of AEFC pharmaceutical Born in 1943 distribution), RTW Inc. (manages worker's compensation programs), Lawson Software, Inc. (technology based business applications) --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ John R. Thomas Board member since Senior vice president 50652 AXP Financial Center 1987, president since - information and Minneapolis, MN 55474 1997 technology of AEFC Born in 1937 --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ --------------------------- ------------------------ ------------------------ ------------------------ ------------------------ William F. Truscott Board member since Senior vice president 53600 AXP Financial Center 2001, vice president - chief investment Minneapolis, MN 55474 since 2002 officer of AEFC; Born in 1960 former chief investment officer and managing director, Zurich Scudder Investments --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Thomas, who is president, and Mr. Truscott, who is vice president, the Fund's other officers are:
Other Officers ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- Name, Position held Principal occupations Other Committee address, with during past five years directorships memberships age Registrant and length of service ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- Jeffrey P. Fox Treasurer Vice president - 50005 AXP Financial Center since 2002 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 of Board 901 S. Marquette Ave. president, Services Corporation Minneapolis, MN 55402 general Born in 1938 counsel, and secretary since 1978 ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- ---------------------------- ---------------- --------------------------- -------------------------- -------------------------- Stephen W. Roszell Vice president Senior vice president - 50239 AXP Financial Center since 2002 institutional group of Minneapolis, MN55474 AEFC Born in 1949 ---------------------------- ---------------- --------------------------- -------------------------- --------------------------
-------------------------------------------------------------------------------- 37 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Responsibilities of board with respect to Fund's management The board initially approves an Investment Management Services Agreement and other contracts with American Express Financial Corporation (AEFC), one of AEFC's subsidiaries, and other service providers. Once the contracts are approved, the board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and AEFC's profitability in order to determine whether to continue existing contracts or negotiate new contracts. Several committees facilitate its work Executive Committee -- Acts for the board between meetings of the board. The committee held two meetings during the last fiscal year. Joint Audit Committee -- Meets with the independent public accountant, internal auditors and corporate officers to review financial statements, reports, and compliance matters. Reports significant issues to the board and makes recommendations to the independent directors regarding the selection of the independent public accountant. The committee held four meetings during the last fiscal year. Investment Review Committee -- Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the board. The committee held four meetings during the last fiscal year. Board Effectiveness Committee -- Recommends to the board the size, structure and composition for the board; the compensation to be paid to members of the board; and a process for evaluating the board's performance. The committee also reviews candidates for board membership including candidates recommended by shareholders. To be considered, recommendations must include a curriculum vita and be mailed to the Chairman of the Board, American Express Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The committee held five meetings during the last fiscal year. Contracts Committee -- Receives and analyzes reports covering the level and quality of services provided under contracts with the Fund and advises the board regarding actions taken on these contracts during the annual review process. The committee held four meetings during the last fiscal year. DIRECTORS' HOLDINGS The following table shows the Fund Directors' ownership of American Express Funds. Dollar range of equity securities beneficially owned on Dec. 31, 2001 Based on net asset values as of Dec. 31, 2001 Aggregate dollar range of Dollar range of equity securities of all equity securities American Express Funds in the Fund overseen by Director Range Range H. Brewster Atwater, Jr. None over $100,000 Arne H. Carlson $50,001-100,000 $50,001-$100,000 Lynne V. Cheney over $100,000 over $100,000 Livio D. DeSimone None over $100,000 Ira D. Hall None over $100,000 David R. Hubers None over $100,000 Heinz F. Hutter over $100,000 over $100,000 Anne P. Jones over $100,000 over $100,000 William R. Pearce over $100,000 over $100,000 Alan K. Simpson $50,001-100,000 over $100,000 John R. Thomas over $100,000 over $100,000 C. Angus Wurtele None over $100,000 -------------------------------------------------------------------------------- 38 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND COMPENSATION FOR BOARD MEMBERS During the most recent fiscal year, the independent members of the Fund and Portfolio boards, for attending up to 34 meetings, received the following compensation: Compensation Table
Total cash compensation from Aggregate Aggregate American Express Funds and Board member* compensation from the Fund compensation from the Portfolio Preferred Master Trust Group H. Brewster Atwater, Jr. $5,189 $9,164 $152,608 Lynne V. Cheney 4,867 8,842 127,558 Livio D. DeSimone 4,817 8,792 123,958 Ira D. Hall 4,917 8,892 131,208 Heinz F. Hutter 5,189 9,164 153,308 Anne P. Jones 5,289 9,264 161,758 Stephen R. Lewis, Jr. 2,800 5,108 73,825 William R. Pearce 5,117 9,092 146,958 Alan G. Quasha 1,700 3,033 52,225 Alan K. Simpson 4,817 8,792 123,708 C. Angus Wurtele 5,089 9,064 145,658
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. As of 30 days prior to the date of this SAI, the Fund's board members and officers as a group owned less than 1% of the outstanding shares of any class. Independent Auditors The financial statements contained in the Annual Report were audited by independent auditors, KPMG LLP, 4200 Wells Fargo Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The independent auditors also provide other accounting and tax-related services as requested by the Fund. -------------------------------------------------------------------------------- 39 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Appendix DESCRIPTION OF RATINGS Standard & Poor's Debt Ratings A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: o Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. o Nature of and provisions of the obligation. o Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. Investment Grade Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. Speculative Grade Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. -------------------------------------------------------------------------------- 40 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND Moody's Long-Term Debt Ratings Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A -- Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds that are rated Ba are judged to have speculative elements -- their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. SHORT-TERM RATINGS Standard & Poor's Commercial Paper Ratings A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. -------------------------------------------------------------------------------- 41 -- AXP NEW DIMENSIONS FUND, INC. -- AXP NEW DIMENSIONS FUND Standard & Poor's Note Ratings An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Moody's Short-Term Ratings Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. Moody's & S&P's Short-Term Muni Bonds and Notes Short-term municipal bonds and notes are rated by Moody's and by S&P. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody' s MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. -------------------------------------------------------------------------------- 42 -- AXP NEW DIMENSIONS FUND, INC.-- AXP NEW DIMENSIONS FUND S-6440-20 V (9/02) Investments in Securities AXP Growth Dimensions Fund July 31, 2002 (Percentages represent value of investments compared to net assets) Common stocks (89.1%) Issuer Shares Value(a) Aerospace & defense (1.1%) Raytheon 70,000 $2,280,600 Airlines (1.0%) Southwest Airlines 150,000 2,071,500 Banks and savings & loans (7.0%) Bank of America 80,000 5,320,000 Fifth Third Bancorp 50,000 3,303,500 U.S. Bancorp 200,000 4,278,000 Wells Fargo 40,000 2,034,400 Total 14,935,900 Beverages & tobacco (1.6%) Coca-Cola 70,000 3,495,800 Chemicals (1.5%) Praxair 50,000 2,615,000 Waste Management 25,000 591,750 Total 3,206,750 Communications equipment & services (1.6%) Motorola 80,000 928,000 Nokia ADR Cl A 100,000(c) 1,240,000 Verizon Communications 40,000 1,320,000 Total 3,488,000 Computer software & services (6.1%) Brocade Communications Systems 90,000(b) 1,687,500 Electronic Arts 5,000(b) 300,900 Intuit 80,000(b) 3,518,400 Microsoft 160,000(b) 7,672,000 Total 13,178,800 Computers & office equipment (3.9%) BISYS Group 20,000(b) 462,000 Cisco Systems 200,000(b) 2,638,000 Dell Computer 110,000(b) 2,742,300 Intl Business Machines 35,000 2,464,000 Total 8,306,300 Electronics (6.0%) Applied Materials 90,000(b) 1,338,300 Intel 130,000 2,442,700 Jabil Circuits 60,000(b) 1,067,400 KLA-Tencor 50,000(b) 1,969,500 Maxim Integrated Products 60,000(b) 2,110,800 Texas Instruments 120,000 2,778,000 Xilinx 60,000(b) 1,151,400 Total 12,858,100 Energy (3.9%) Conoco 110,000 2,653,200 Kerr-McGee 60,000 2,806,200 Ocean Energy 150,000 2,985,000 Total 8,444,400 Energy equipment & services (2.7%) Schlumberger 50,000 2,146,000 Transocean 100,000 2,550,000 Weatherford Intl 25,000(b) 1,014,000 Total 5,710,000 Financial services (5.4%) Citigroup 200,000 6,708,000 Goldman Sachs Group 30,000 2,194,500 Kansas City Southern 50,000(b) 813,000 Lehman Brothers Holdings 30,000 1,701,300 Paychex 5,400 142,074 Total 11,558,874 Food (0.8%) General Mills 40,000 1,658,000 Health care (10.8%) Amgen 70,000(b) 3,194,800 Baxter Intl 50,000 1,995,500 Forest Laboratories 10,000(b) 774,700 Johnson & Johnson 100,000 5,300,000 MedImmune 80,000(b) 2,379,200 Medtronic 120,000 4,848,000 Pfizer 150,000 4,852,500 Total 23,344,700 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Health care services (2.8%) Anthem 20,000(b) $1,357,600 HCA 100,000 4,700,000 Total 6,057,600 Household products (1.2%) Gillette 80,000 2,630,400 Industrial equipment & services (1.3%) Deere & Co 65,000 2,731,300 Insurance (2.7%) ACE 40,000(c) 1,266,800 American Intl Group 50,000 3,196,000 Travelers Property Casualty Cl A 80,000(b) 1,304,000 Total 5,766,800 Leisure time & entertainment (4.4%) AOL Time Warner 50,000(b) 575,000 Harley-Davidson 65,000 3,078,400 Viacom Cl B 150,000(b) 5,838,000 Total 9,491,400 Media (1.6%) eBay 20,000(b) 1,141,800 USA Interactive 100,000(b) 2,204,900 Total 3,346,700 Metals (0.8%) Alcan 60,000(c) 1,668,000 Multi-industry conglomerates (6.2%) 3M 45,000 5,662,350 Accenture Cl A 60,000(b,c) 990,000 Cendant 30,000(b) 414,600 General Electric 160,000 5,152,000 Robert Half Intl 60,000(b) 1,197,000 Total 13,415,950 Paper & packaging (1.3%) Intl Paper 70,000 2,787,400 Restaurants & lodging (1.4%) Marriott Intl Cl A 90,000 3,015,000 Retail (8.3%) Bed Bath & Beyond 20,000(b) 620,000 Best Buy 45,000(b) 1,480,500 Family Dollar Stores 90,000 2,726,100 Home Depot 60,000 1,852,800 Kohl's 10,000(b) 660,000 Target 130,000 4,335,500 Wal-Mart Stores 130,000 6,393,400 Total 18,068,300 Transportation (1.0%) Norfolk Southern 110,000 2,227,500 Utilities -- electric (2.5%) Dominion Resources 90,000 5,349,600 Total common stocks (Cost: $232,946,278) $191,093,674 Short-term securities (12.4%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Home Loan Bank Disc Nts 08-14-02 1.71% $1,600,000 $1,598,942 08-16-02 1.72 5,400,000 5,395,884 09-04-02 1.71 300,000 299,529 10-25-02 1.69 1,500,000 1,494,015 Federal Home Loan Mtge Corp Disc Nts 09-10-02 1.71 500,000 499,026 09-10-02 1.72 2,000,000 1,996,094 09-24-02 1.69 400,000 398,967 Federal Natl Mtge Assn Disc Nts 08-05-02 1.85 4,400,000 4,398,972 08-08-02 1.84 900,000 899,671 08-28-02 1.70 2,200,000 2,197,091 09-11-02 1.71 5,700,000 5,689,251 09-25-02 1.72 1,800,000 1,795,527 Total short-term securities (Cost: $26,663,085 $26,662,969 Total investments in securities (Cost: $259,609,363)(d) $217,756,643 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GROWTH DIMENSIONS 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 2.4% of net assets. (d) At July 31, 2002, the cost of securities for federal income tax purposes was $264,466,347 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 3,965,357 Unrealized depreciation (50,675,061) ----------- Net unrealized depreciation $(46,709,704) ------------ -------------------------------------------------------------------------------- 12 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT Financial Statements Statement of assets and liabilities AXP Growth Dimensions Fund July 31, 2002 Assets Investments in securities, at value (Note 1) (identified cost $259,609,363) $ 217,756,643 Cash in bank on demand deposit 317,890 Capital shares receivable 1,227 Dividends and accrued interest receivable 93,350 ------ Total assets 218,169,110 ----------- Liabilities Capital shares payable 2,255 Payable for investment securities purchased 3,179,515 Accrued investment management services fee 384,919 Accrued distribution fee 2,954 Accrued transfer agency fee 1,851 Accrued administrative services fee 188 Other accrued expenses 94,663 ------ Total liabilities 3,666,345 --------- Net assets applicable to outstanding capital stock $ 214,502,765 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 1,063,882 Additional paid-in capital 475,093,831 Accumulated net realized gain (loss) (Note 5) (219,802,228) Unrealized appreciation (depreciation) on investments (41,852,720) ----------- Total -- representing net assets applicable to outstanding capital stock $ 214,502,765 ============= Net assets applicable to outstanding shares: Class A $ 142,018,483 Class B $ 68,131,351 Class C $ 4,327,935 Class Y $ 24,996 Net asset value per share of outstanding capital stock: Class A shares 70,056,047 $ 2.03 Class B shares 34,150,784 $ 2.00 Class C shares 2,169,032 $ 2.00 Class Y shares 12,296 $ 2.03 ------ ------------- See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT Statement of operations AXP Growth Dimensions Fund Year ended July 31, 2002 Investment income Income: Dividends $ 2,210,949 Interest 450,607 Less foreign taxes withheld (14,154) ------- Total income 2,647,402 --------- Expenses (Note 2): Investment management services fee 1,359,595 Distribution fee Class A 484,696 Class B 931,520 Class C 53,468 Transfer agency fee 756,361 Incremental transfer agency fee Class A 54,302 Class B 47,609 Class C 3,629 Service fee -- Class Y 31 Administrative services fees and expenses 91,486 Compensation of board members 11,706 Custodian fees 30,065 Printing and postage 60,244 Registration fees 84,828 Audit fees 15,250 Other 3,790 ----- Total expenses 3,988,580 Earnings credits on cash balances (Note 2) (8,040) ------ Total net expenses 3,980,540 --------- Investment income (loss) -- net (1,333,138) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (Note 3) (115,630,156) Net change in unrealized appreciation (depreciation) on investments 30,045,770 ---------- Net gain (loss) on investments (85,584,386) ----------- Net increase (decrease) in net assets resulting from operations $ (86,917,524) ============= See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets AXP Growth Dimensions Fund Year ended July 31, 2002 2001 Operations and distributions Investment income (loss) -- net $ (1,333,138) $ (1,178,432) Net realized gain (loss) on investments (115,630,156) (104,093,286) Net change in unrealized appreciation (depreciation) on investments 30,045,770 (70,556,768) ---------- ----------- Net increase (decrease) in net assets resulting from operations (86,917,524) (175,828,486) ----------- ------------ Distributions to shareholders from: Net investment income Class A -- (15,831) Class Y -- (1) ----- -- Total distributions -- (15,832) ----- ------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 60,095,890 391,327,318 Class B shares 29,255,612 181,122,125 Class C shares 1,991,039 9,103,911 Class Y shares -- 97,543 Reinvestment of distributions at net asset value Class A shares -- 15,759 Payments for redemptions Class A shares (93,339,189) (64,849,858) Class B shares (Note 2) (41,489,853) (27,010,710) Class C shares (Note 2) (1,923,169) (1,044,602) Class Y shares (7,084) (30,799) ------ ------- Increase (decrease) in net assets from capital share transactions (45,416,754) 488,730,687 ----------- ----------- Total increase (decrease) in net assets (132,334,278) 312,886,369 Net assets at beginning of year 346,837,043 33,950,674 ----------- ---------- Net assets at end of year $ 214,502,765 $ 346,837,043 ============= =============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT Notes to Financial Statements AXP Growth Dimensions Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP New Dimensions Fund, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP New Dimensions Fund, 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 showing potential for significant growth. 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. -------------------------------------------------------------------------------- 16 -- AXP GROWTH DIMENSIONS 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. -------------------------------------------------------------------------------- 17 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT The Fund 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 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. 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 $1,333,138 resulting in a net reclassification adjustment to decrease paid-in capital by $1,333,138. 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 $-- $15,831 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 -- 1 Long-term capital gain -- -- As of July 31, 2002, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated gain (loss) $(214,945,244) Unrealized appreciation (depreciation) $ (46,709,704) -------------------------------------------------------------------------------- 18 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT 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. 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 American Express Financial Corporation (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 based on the combined net assets of the Fund and AXP New Dimensions Fund. 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 Growth 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 adjustment decreased the fee by $130,660 for the year ended July 31, 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. -------------------------------------------------------------------------------- 19 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT 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 $747,086 for Class A, $192,147 for Class B and $2,374 for Class C for the year ended July 31, 2002. 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 1.15% for Class A, 1.91% for Class B, 1.91% for Class C and 0.99% for Class Y. For the year ended July 31, 2002, the waiver was not invoked since the Fund's expenses were below the cap amount. During the year ended July 31, 2002, the Fund's custodian and transfer agency fees were reduced by $8,040 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 $187,857,606 and $235,159,368, respectively, for the year ended July 31, 2002. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $36,777 for the year ended July 31, 2002. Income from securities lending amounted to $7,855 for the year ended July 31, 2002. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 4. 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 24,351,907 11,984,110 819,992 -- Issued for reinvested distributions -- -- -- -- Redeemed (38,649,187) (17,638,451) (809,472) (2,813) ----------- ----------- -------- ------ Net increase (decrease) (14,297,280) (5,654,341) 10,520 (2,813) ----------- ---------- ------ ------
Year ended July 31, 2001 Class A Class B Class C Class Y Sold 100,323,533 46,329,228 2,304,048 22,229 Issued for reinvested distributions 4,529 -- -- -- Redeemed (20,463,920) (8,824,909) (321,927) (8,116) ----------- ---------- -------- ------ Net increase (decrease) 79,864,142 37,504,319 1,982,121 14,113 ---------- ---------- --------- ------
-------------------------------------------------------------------------------- 20 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $214,945,244 as of July 31, 2002, that will expire in 2008 through 2011 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. 6. 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 year ended July 31, 2002. 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 2001 2000(b) Net asset value, beginning of period $2.75 $ 4.87 $4.92 ----- ------ ----- Income from investment operations: Net investment income (loss) (.01) (.01) -- Net gains (losses) (both realized and unrealized) (.71) (2.11) (.05) ---- ----- ---- Total from investment operations (.72) (2.12) (.05) ---- ----- ---- Net asset value, end of period $2.03 $ 2.75 $4.87 ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $142 $232 $22 Ratio of expenses to average daily net assets(c) 1.10% 1.12%(d) 1.10%(d,h) Ratio of net investment income (loss) to average daily net assets (.20%) (.16%) .37%(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.18%) (43.53%) (1.02%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 21 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $2.73 $ 4.87 $4.92 ----- ------ ----- Income from investment operations: Net investment income (loss) (.03) (.02) -- Net gains (losses) (both realized and unrealized) (.70) (2.12) (.05) ---- ----- ---- Total from investment operations (.73) (2.14) (.05) ---- ----- ---- Net asset value, end of period $2.00 $ 2.73 $4.87 ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $68 $109 $11 Ratio of expenses to average daily net assets(c) 1.88% 1.89%(e) 1.91%(e,h) Ratio of net investment income (loss) to average daily net assets (.97%) (.92%) (.48%)(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.74%) (43.94%) (1.02%)
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $2.73 $ 4.87 $4.92 ----- ------ ----- Income from investment operations: Net investment income (loss) (.03) (.02) -- Net gains (losses) (both realized and unrealized) (.70) (2.12) (.05) ---- ----- ---- Total from investment operations (.73) (2.14) (.05) ---- ----- ---- Net asset value, end of period $2.00 $ 2.73 $4.87 ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $4 $6 $1 Ratio of expenses to average daily net assets(c) 1.88% 1.89%(f) 1.91%(f,h) Ratio of net investment income (loss) to average daily net assets (.97%) (.94%) (.48%)(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.74%) (43.94%) (1.02%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 22 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2002 2001 2000(b) Net asset value, beginning of period $2.76 $ 4.88 $4.92 ----- ------- ----- Income from investment operations: Net gains (losses) (both realized and unrealized) (.73) (2.12) (.04) ---- ----- ---- Net asset value, end of period $2.03 $ 2.76 $4.88 ----- ------- ----- Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- Ratio of expenses to average daily net assets(c) .94% 0.95%(g) .81%(g,h) Ratio of net investment income (loss) to average daily net assets .01% (.03%) .58%(h) Portfolio turnover rate (excluding short-term securities) 69% 67% 2% Total return(i) (26.45%) (43.44%) (.81%)
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 26, 2000 (when shares became publicly available) to July 31, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class A would have been 1.16% and 2.32% for the periods ended 2001 and 2000, respectively. (e) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class B would have been 1.92% and 3.40% for the periods ended 2001 and 2000, respectively. (f) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class C would have been 1.92% and 3.40% for the periods ended 2001 and 2000, respectively. (g) AEFC reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class Y would have been 1.00% and 2.12% for the periods ended 2001 and 2000, respectively. (h) Adjusted to an annual basis. (i) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 23 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT Independent Auditors' Report THE BOARD AND SHAREHOLDERS AXP NEW DIMENSIONS FUND, INC. We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of AXP Growth Dimensions Fund (a series of AXP New Dimensions Fund, 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 two-year period ended July 31, 2002 and for the period from June 26, 2000 (when shares became publicly available) to July 31, 2000. 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. 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 AXP Growth Dimensions 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 -------------------------------------------------------------------------------- 24 -- AXP GROWTH DIMENSIONS FUND -- 2002 ANNUAL REPORT Investments in Securities Growth Trends Portfolio July 31, 2002 (Percentages represent value of investments compared to net assets) Common stocks (97.3%) Issuer Shares Value(a) Aerospace & defense (0.7%) Lockheed Martin 800,000 $51,288,000 United Technologies 1,000,000(f) 69,500,000 Total 120,788,000 Airlines (1.5%) Southwest Airlines 18,000,000 248,580,000 Automotive & related (0.3%) General Motors 1,000,000 46,550,000 Banks and savings & loans (5.0%) Bank of America 7,000,000 465,500,000 Washington Mutual 2,000,000 74,820,000 Wells Fargo 6,000,000 305,160,000 Total 845,480,000 Beverages & tobacco (4.0%) Anheuser-Busch 2,400,000 124,104,000 PepsiCo 2,600,000 111,644,000 Philip Morris 9,600,000 442,080,000 Total 677,828,000 Chemicals (1.7%) Air Products & Chemicals 2,500,000 110,625,000 du Pont (EI) de Nemours 2,200,000 92,202,000 Waste Management 3,200,000 75,744,000 Total 278,571,000 Communications equipment & services (1.1%) Motorola 5,000,000 58,000,000 Nokia ADR Cl A 2,000,000(c) 24,800,000 Verizon Communications 3,000,000 99,000,000 Total 181,800,000 Computer software & services (4.4%) Automatic Data Processing 2,500,000 93,225,000 Brocade Communications Systems 1,000,000(b) 18,750,000 Electronic Arts 500,000(b) 30,090,000 Microsoft 11,500,000(b) 551,425,000 SunGard Data Systems 1,700,000(b) 39,865,000 Total 733,355,000 Computers & office equipment (5.3%) Cisco Systems 15,000,000(b) 197,850,000 Dell Computer 5,500,000(b) 137,115,000 Fiserv 1,300,000(b) 44,733,000 Intl Business Machines 3,000,000 211,200,000 State Street 7,100,000 301,750,000 Total 892,648,000 Electronics (5.4%) Applied Materials 10,000,000(b) 148,700,000 Intel 11,000,000 206,690,000 Maxim Integrated Products 5,000,000(b) 175,900,000 Samsung Electronics 220,000(c) 61,569,410 Texas Instruments 13,600,000 314,840,000 Total 907,699,410 Energy (5.5%) ChevronTexaco 5,000,000 375,000,000 Exxon Mobil 12,000,000 441,120,000 Murphy Oil 500,000 41,575,000 Phillips Petroleum 1,500,000 77,625,000 Total 935,320,000 Energy equipment & services (1.5%) Schlumberger 4,200,000 180,264,000 Transocean 1,500,000 38,250,000 Weatherford Intl 1,000,000(b) 40,560,000 Total 259,074,000 Financial services (9.5%) Citigroup 18,000,000 603,720,000 Fannie Mae 4,000,000 299,560,000 MBNA 11,000,000 213,290,000 Morgan Stanley 5,000,000 201,750,000 Paychex 420,600 11,065,986 SLM 3,000,000 273,000,000 Total 1,602,385,986 Food (0.2%) General Mills 700,000 29,015,000 See accompanying notes to investments in securities. 10 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Health care (7.4%) Amgen 2,500,000(b) $114,100,000 Forest Laboratories 1,100,000(b) 85,217,000 Johnson & Johnson 8,200,000 434,600,000 Medtronic 7,000,000 282,800,000 Pfizer 10,000,000 323,500,000 Quest Diagnostics 200,000(b) 12,078,000 Total 1,252,295,000 Health care services (6.3%) Cardinal Health 5,000,000 288,000,000 HCA 8,000,000 376,000,000 UnitedHealth Group 4,600,000 403,236,000 Total 1,067,236,000 Household products (2.0%) Gillette 1,700,000 55,896,000 Procter & Gamble 3,200,000 284,768,000 Total 340,664,000 Indexes (1.1%) Nasdaq-100 Index Tracking 8,000,000(b) 191,040,000 Industrial equipment & services (2.7%) Caterpillar 5,000,000 223,500,000 Deere & Co 750,000 31,515,000 Illinois Tool Works 3,000,000 197,970,000 Total 452,985,000 Insurance (3.4%) American Intl Group 4,000,000 255,680,000 Marsh & McLennan 6,800,000 325,720,000 Total 581,400,000 Leisure time & entertainment (3.6%) AOL Time Warner 2,000,000(b) 23,000,000 Intl Game Technology 1,000,000(b) 58,250,000 Mattel 3,000,000 56,430,000 Viacom Cl B 12,000,000(b) 467,040,000 Total 604,720,000 Media (2.6%) eBay 2,000,000(b) 114,180,000 Gannett 2,000,000 143,820,000 Grupo Televisa ADR 760,000(b,c) 22,990,000 USA Interactive 4,800,000(b) 105,835,200 USA Networks 2,200,000(b,e) 48,507,800 Total 435,333,000 Metals (1.1%) Alcoa 4,500,000 121,725,000 Nucor 1,200,000 66,996,000 Total 188,721,000 Multi-industry conglomerates (6.6%) 3M 4,000,000 503,320,000 Accenture Cl A 1,000,000(b,c) 16,500,000 Cendant 5,500,000(b) 76,010,000 General Electric 14,000,000 450,800,000 Robert Half Intl 3,000,000(b) 59,850,000 Total 1,106,480,000 Paper & packaging (0.5%) Intl Paper 2,000,000 79,640,000 Restaurants & lodging (1.0%) Marriott Intl Cl A 5,000,000 167,500,000 Retail (9.5%) Bed Bath & Beyond 1,200,000(b) 37,200,000 Best Buy 2,400,000(b) 78,960,000 Costco Wholesale 7,000,000(b) 244,090,000 Home Depot 5,000,000 154,400,000 Kohl's 500,000(b) 33,000,000 Target 10,500,000 350,175,000 Wal-Mart Stores 12,500,000 614,750,000 Walgreen 2,400,000 84,792,000 Total 1,597,367,000 Transportation (1.1%) Union Pacific 2,500,000 146,675,000 United Parcel Service Cl B 700,000 45,738,000 Total 192,413,000 Utilities-- electric (2.3%) Dominion Resources 6,500,000 386,360,000 Total common stocks (Cost: $16,162,405,499) $16,403,248,396 Preferred stock (0.6%) Issuer Shares Value(a) TXU 8.75% Cv 2,300,000 $107,249,000 Total preferred stock (Cost: $120,371,746) $107,249,000 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT Option purchased (--%) Issuer Contracts Exercise Expiration Value(a) price date Call S&P 500 Index 3200 $950 Aug. 2002 $2,432,000 Total option purchased (Cost: $10,729,600) $2,432,000
Short-term securities (2.2%)(f) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agency (0.2%) Federal Home Loan Bank Disc Nts 10-02-02 1.71% $25,000,000 $24,926,500 10-09-02 1.74 2,400,000 2,392,226 10-11-02 1.73 9,500,000 9,468,337 Total 36,787,063 Commercial paper (2.0%) CAFCO 08-20-02 1.81 1,500,000(d) 1,498,442 09-06-02 1.80 4,200,000(d) 4,191,752 Charta 08-01-02 1.81 30,000,000(d) 29,998,021 CXC 08-22-02 1.81 25,000,000(d) 24,954,666 Edison Asset Securitization 08-16-02 1.88 25,000,000(d) 24,978,655 09-19-02 1.81 30,000,000(d) 29,888,114 10-16-02 1.81 25,000,000(d) 24,901,077 Fleet Funding 08-08-02 1.92 10,000,000(d) 9,991,956 09-03-02 1.81 2,000,000(d) 1,996,448 09-16-02 1.80 30,000,000(d) 29,927,152 GE Capital Intl Funding 08-13-02 1.92 9,100,000(d) 9,093,691 Goldman Sachs Group 08-05-02 1.93 22,300,000 22,294,022 Intl Lease Finance 08-02-02 1.79 12,300,000 12,298,645 Nordea North America 10-21-02 1.82 15,000,000 14,936,792 Park Avenue Receivables 08-07-02 1.79 5,000,000(d) 4,998,260 Preferred Receivables 08-29-02 1.81 25,000,000(d) 24,945,621 Receivables Capital 08-05-02 1.80 3,500,000(d) 3,499,062 08-12-02 1.80 25,000,000(d) 24,984,000 Sheffield Receivables 08-01-02 1.84 29,400,000(d) 29,398,497 Total 328,774,873 Total short-term securities (Cost: $365,663,563) $365,561,936 Total investments in securities (Cost: $16,659,170,408)(g) $16,878,491,332
See accompanying notes to investments in securities. 12 -- AXP NEW DIMENSIONS 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 0.7% 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) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at July 31, 2002, is as follows: Security Acquisition Cost date USA Networks 05-02-02 $62,700,000 (f) At July 31, 2002, securities valued at $6,950,000 were held to cover open call options written as follows (see Note 5 to the financial statements): Issuer Contracts Exercise price Expiration date Value(a) United Technologies 1,000 $75 Aug. 2002 $40,000 At July 31, 2002, cash or short-term securities were designated to cover open put options written as follows (see Note 5 to the financial statements): Issuer Contracts Exercise price Expiration date Value(a) United Technologies 1,000 $60 Aug. 2002 $25,000 (g) At July 31, 2002, the cost of securities for federal income tax purposes was $16,659,170,408 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 1,953,523,275 Unrealized depreciation (1,734,202,351) -------------- Net unrealized appreciation $ 219,320,924 --------------- -------------------------------------------------------------------------------- 13 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
Financial Statements Statement of assets and liabilities Growth Trends Portfolio July 31, 2002 Assets Investments in securities, at value (Note 1)* (identified cost $16,659,170,408) $16,878,491,332 Foreign currency holdings (identified cost $28,088,520) (Note 1) 27,853,018 Dividends and accrued interest receivable 10,984,760 Receivable for investment securities sold 13,510,751 ---------- Total assets 16,930,839,861 -------------- Liabilities Disbursements in excess of cash on demand deposit 1,205,799 Payable for investment securities purchased 46,072,548 Payable upon return of securities loaned (Note 4) 25,000,000 Accrued investment management services fee 236,283 Other accrued expenses 137,478 Options contracts written, at value (premiums received $343,989) (Note 5) 65,000 ------ Total liabilities 72,717,108 ---------- Net assets $16,858,122,753 =============== * Including securities on loan, at value (Note 4) $ 23,880,000 ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
Statement of operations Growth Trends Portfolio Year ended July 31, 2002 Investment income Income: Dividends $ 244,873,954 Interest 18,421,944 Less foreign taxes withheld (238,623) -------- Total income 263,057,275 ----------- Expenses (Note 2): Investment management services fee 127,492,321 Compensation of board members 89,206 Custodian fees 1,158,122 Audit fees 34,500 Other 287,977 ------- Total expenses 129,062,126 Earnings credits on cash balances (Note 2) (3,699) ------ Total net expenses 129,058,427 ----------- Investment income (loss) -- net 133,998,848 ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (86,615,657) Foreign currency transactions (527,727) Options contracts written (Note 5) 8,417,627 --------- Net realized gain (loss) on investments (78,725,757) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,792,265,331) -------------- Net gain (loss) on investments and foreign currencies (4,870,991,088) -------------- Net increase (decrease) in net assets resulting from operations $(4,736,992,240) ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets Growth Trends Portfolio Year ended July 31, 2002 2001 Operations Investment income (loss) -- net $ 133,998,848 $ 140,932,561 Net realized gain (loss) on investments (78,725,757) (396,793,889) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,792,265,331) (6,106,460,902) -------------- -------------- Net increase (decrease) in net assets resulting from operations (4,736,992,240) (6,362,322,230) -------------- -------------- Proceeds from contributions 1,102,314,218 1,408,932,058 Fair value of withdrawals (3,241,842,538) (1,673,744,904) -------------- -------------- Net contributions (withdrawals) from partners (2,139,528,320) (264,812,846) -------------- ------------ Total increase (decrease) in net assets (6,876,520,560) (6,627,135,076) Net assets at beginning of year 23,734,643,313 30,361,778,389 -------------- -------------- Net assets at end of year $16,858,122,753 $23,734,643,313 =============== ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT Notes to Financial Statements Growth Trends Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Growth Trends 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 Trends Portfolio invests primarily in common stocks of U.S. and foreign companies showing potential for significant growth and operating in areas where economic or technological changes are occurring. 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. -------------------------------------------------------------------------------- 17 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT 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. 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. As of July 31, 2002 foreign currency was comprised of Taiwan dollars. 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. Illiquid securities As of July 31, 2002, investments in securities included issues that are illiquid which the Portfolio currently limits to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities as of July 31, 2002 was $48,507,800 representing 0.29% of net assets. These securities are valued at fair value according to methods selected in good faith by the board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. -------------------------------------------------------------------------------- 18 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT 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. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with AEFC to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.6% to 0.48% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of AXP New Dimensions 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 increased the fee by $20,242,854 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 $3,699 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 $5,484,438,329 and $6,764,788,949, respectively, for the year ended July 31, 2002. For the same period, the portfolio turnover rate was 27%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $1,289,960 for the year ended July 31, 2002. -------------------------------------------------------------------------------- 19 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT 4. LENDING OF PORTFOLIO SECURITIES As of July 31, 2002, securities valued at $23,880,000 were on loan to brokers. For collateral, the Portfolio received $25,000,000 in cash. Income from securities lending amounted to $154,118 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. 5. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows: Year ended July 31, 2002 Puts Calls Contracts Premiums Contracts Premiums Balance July 31, 2001 -- $ -- 5,000 $ 777,500 Opened 16,800 2,412,707 62,500 8,492,564 Closed (6,800) (850,576) (23,500) (3,209,922) Expired (9,000) (1,375,137) (43,000) (5,903,147) ------ ---------- ------- ---------- Balance July 31, 2002 1,000 $ 186,994 1,000 $ 156,995 ----- ----------- ----- ----------- -------------------------------------------------------------------------------- 20 -- AXP NEW DIMENSIONS 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 Trends 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 Trends 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 -------------------------------------------------------------------------------- 21 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP New Dimensions Fund July 31, 2002 Assets Investment in Portfolio (Note 1) $16,858,062,470 Capital shares receivable 859,498 ------- Total assets 16,858,921,968 -------------- Liabilities Capital shares payable 245,716 Accrued distribution fee 169,714 Accrued service fee 8,747 Accrued transfer agency fee 65,629 Accrued administrative services fee 14,750 Other accrued expenses 465,920 ------- Total liabilities 970,476 ------- Net assets applicable to outstanding capital stock $16,857,951,492 =============== Represented by Capital stock -- $.01 par value (Note 1) $ 8,494,944 Additional paid-in capital 17,374,453,280 Accumulated net realized gain (loss) (Note 5) (744,359,627) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 219,362,895 ----------- Total -- representing net assets applicable to outstanding capital stock $16,857,951,492 =============== Net assets applicable to outstanding shares: Class A $ 9,863,130,072 Class B $ 3,728,472,005 Class C $ 44,015,284 Class Y $ 3,222,334,131 Net asset value per share of outstanding capital stock: Class A shares 492,114,004 $ 20.04 Class B shares 195,044,945 $ 19.12 Class C shares 2,304,834 $ 19.10 Class Y shares 160,030,567 $ 20.14 ----------- ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
Statement of operations AXP New Dimensions Fund Year ended July 31, 2002 Investment income Income: Dividends $ 244,873,140 Interest 18,417,086 Less foreign taxes withheld (238,622) -------- Total income 263,051,604 ----------- Expenses (Note 2): Expenses allocated from Portfolio 129,057,999 Distribution fee Class A 30,613,503 Class B 46,621,925 Class C 389,809 Transfer agency fee 29,132,095 Incremental transfer agency fee Class A 1,712,038 Class B 1,470,624 Class C 21,153 Service fee -- Class Y 4,078,144 Administrative services fees and expenses 6,562,461 Compensation of board members 148,705 Printing and postage 2,094,931 Registration fees 381,737 Audit fees 11,500 Other 74,003 ------ Total expenses 252,370,627 Earnings credits on cash balances (Note 2) (407,483) -------- Total net expenses 251,963,144 ----------- Investment income (loss) -- net 11,088,460 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (86,606,677) Foreign currency transactions (527,725) Options contracts written 8,417,604 --------- Net realized gain (loss) on investments (78,716,798) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,792,258,031) -------------- Net gain (loss) on investments and foreign currencies (4,870,974,829) -------------- Net increase (decrease) in net assets resulting from operations $(4,859,886,369) ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 23 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets AXP New Dimensions Fund Year ended July 31, 2002 2001 Operations and distributions Investment income (loss) -- net $ 11,088,460 $ (3,797,962) Net realized gain (loss) on investments (78,716,798) (396,765,677) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,792,258,031) (6,106,468,726) -------------- -------------- Net increase (decrease) in net assets resulting from operations (4,859,886,369) (6,507,032,365) -------------- -------------- Distributions to shareholders from: Net investment income Class A (6,092,513) (4,684,288) Class B (2,401,369) -- Class C (18,358) (5,049) Class Y (2,048,495) (3,219,986) Excess distribution of net investment income Class A -- (8,000,002) Class C -- (8,099) Class Y -- (5,165,393) Net realized gain Class A -- (1,695,350,636) Class B -- (639,365,263) Class C -- (1,669,548) Class Y -- (608,065,587) Tax return of capital Class A (2,538,856) -- Class B (1,003,750) -- Class C (7,646) -- Class Y (854,555) -- -------- ------- Total distributions (14,965,542) (2,965,533,851) ----------- -------------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Notes 2) 2,430,324,703 2,799,675,984 Class B shares 675,994,508 1,084,304,631 Class C shares 31,832,064 35,033,595 Class Y shares 1,040,580,252 1,444,980,459 Reinvestment of distributions at net asset value Class A shares 8,375,379 1,663,355,392 Class B shares 3,370,269 634,330,120 Class C shares 25,864 1,680,968 Class Y shares 2,894,340 616,450,966 Payments for redemptions Class A shares (3,608,500,396) (2,919,560,087) Class B shares (Note 2) (997,820,871) (738,588,995) Class C shares (Note 2) (7,489,197) (3,045,672) Class Y shares (1,580,185,126) (1,772,093,982) -------------- -------------- Increase (decrease) in net assets from capital share transactions (2,000,598,211) 2,846,523,379 -------------- ------------- Total increase (decrease) in net assets (6,875,450,122) (6,626,042,837) Net assets at beginning of year 23,733,401,614 30,359,444,451 -------------- -------------- Net assets at end of year $16,857,951,492 $23,733,401,614 =============== ===============
-------------------------------------------------------------------------------- 24 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT See accompanying notes to financial statements. Notes to Financial Statements AXP New Dimensions Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP New Dimensions Fund, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP New Dimensions Fund, 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 level of 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 Trends Portfolio The Fund invests all of its assets in the Growth Trends 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 common stocks of companies showing potential for significant growth and operating in areas where economic or technological changes are occurring. 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. -------------------------------------------------------------------------------- 25 -- AXP NEW DIMENSIONS 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 decreased by $527,725 and accumulated net realized loss has been decreased by $527,725. 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 $6,092,513 $ 12,684,290 Long-term capital gain -- 1,695,350,636 Tax return of capital 2,538,856 -- Class B Distributions paid from: Ordinary income 2,401,369 -- Long-term capital gain -- 639,365,263 Tax return of capital 1,003,750 -- Class C Distributions paid from: Ordinary income 18,358 13,148 Long-term capital gain -- 1,669,548 Tax return of capital 7,646 -- Class Y Distributions paid from: Ordinary income 2,048,495 8,385,379 Long-term capital gain -- 608,065,587 Tax return of capital 854,555 -- As of July 31, 2002, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated gain (loss) $(730,857,694) Unrealized appreciation (depreciation) $ 205,860,962 -------------------------------------------------------------------------------- 26 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with American Express Financial Corporation (AEFC) to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.05% to 0.02% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.00 o Class B $20.00 o Class C $19.50 o Class Y $17.00 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $23,219,973 for Class A, $5,084,683 for Class B and $17,144 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 $407,483 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 27 -- AXP NEW DIMENSIONS 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 103,405,732 30,104,630 1,423,135 44,288,672 Issued for reinvested distributions 343,417 144,220 1,107 118,222 Redeemed (156,522,877) (46,677,982) (347,238) (67,710,202) ------------ ----------- -------- ----------- Net increase (decrease) (52,773,728) (16,429,132) 1,077,004 (23,303,308) ----------- ----------- --------- -----------
Year ended July 31, 2001 Class A Class B Class C Class Y Sold 93,773,746 37,048,347 1,209,696 47,427,537 Issued for reinvested distributions 59,624,370 23,558,366 62,467 22,063,387 Redeemed (98,821,564) (26,640,422) (112,649) (60,345,820) ----------- ----------- -------- ----------- Net increase (decrease) 54,576,552 33,966,291 1,159,514 9,145,104 ---------- ---------- --------- ---------
4. BANK BORROWINGS The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had no borrowings outstanding during the year ended July 31, 2002. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $730,857,694 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. -------------------------------------------------------------------------------- 28 -- AXP NEW DIMENSIONS 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 $25.43 $36.26 $31.21 $27.59 $25.69 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .05 .02 .02 .06 .13 Net gains (losses) (both realized and unrealized) (5.42) (7.37) 7.14 5.31 3.67 ----- ----- ---- ---- ---- Total from investment operations (5.37) (7.35) 7.16 5.37 3.80 ----- ----- ---- ---- ---- Less distributions: Dividends from net investment income (.02) (.01) (.05) (.06) (.17) Excess distributions from net investment income -- (.01) -- -- -- Distributions from realized gains -- (3.46) (2.06) (1.69) (1.73) ----- ----- ----- ----- ----- Total distributions (.02) (3.48) (2.11) (1.75) (1.90) ---- ----- ----- ----- ----- Net asset value, end of period $20.04 $25.43 $36.26 $31.21 $27.59 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $9,863 $13,857 $17,777 $13,568 $10,559 Ratio of expenses to average daily net assets(c) 1.06% 1.00% .90% .86% .82% Ratio of net investment income (loss) to average daily net assets .19% .12% .19% .24% .55% Portfolio turnover rate (excluding short-term securities) 27% 29% 34% 34% 38% Total return(e) (21.14%) (21.10%) 23.16% 20.04% 16.19%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 29 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
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 $24.44 $35.22 $30.54 $27.19 $25.38 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) (.14) (.13) (.24) (.10) -- Net gains (losses) (both realized and unrealized) (5.16) (7.19) 6.98 5.14 3.57 ----- ----- ---- ---- ---- Total from investment operations (5.30) (7.32) 6.74 5.04 3.57 ----- ----- ---- ---- ---- Less distributions: Dividends from net investment income (.02) -- -- -- (.03) Distributions from realized gains -- (3.46) (2.06) (1.69) (1.73) ----- ----- ----- ----- ----- Total distributions (.02) (3.46) (2.06) (1.69) (1.76) ---- ----- ----- ----- ----- Net asset value, end of period $19.12 $24.44 $35.22 $30.54 $27.19 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $3,728 $5,169 $6,252 $4,070 $2,515 Ratio of expenses to average daily net assets(c) 1.83% 1.76% 1.66% 1.63% 1.58% Ratio of net investment income (loss) to average daily net assets (.57%) (.65%) (.57%) (.53%) (.23%) Portfolio turnover rate (excluding short-term securities) 27% 29% 34% 34% 38% Total return(e) (21.71%) (21.69%) 22.20% 19.13% 15.31%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 30 -- AXP NEW DIMENSIONS 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 $24.42 $35.23 $35.52 ------ ------ ------ Income from investment operations: Net investment income (loss) (.14) (.13) (.01) Net gains (losses) (both realized and unrealized) (5.16) (7.19) (.28) ----- ----- ---- Total from investment operations (5.30) (7.32) (.29) ----- ----- ---- Less distributions: Dividends from net investment income (.02) (.02) -- Excess distributions from net investment income -- (.01) -- Distributions from realized gains -- (3.46) -- Total distributions (.02) (3.49) -- ---- ----- ----- Net asset value, end of period $19.10 $24.42 $35.23 ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $44 $30 $2 Ratio of expenses to average daily net assets(c) 1.85% 1.76% 1.66%(d) Ratio of net investment income (loss) to average daily net assets (.60%) (.75%) (.74%)(d) Portfolio turnover rate (excluding short-term securities) 27% 29% 34% Total return(e) (21.73%) (21.70%) (.82%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 31 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT
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 $25.51 $36.33 $31.24 $27.62 $25.72 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .09 .07 .05 .09 .15 Net gains (losses) (both realized and unrealized) (5.44) (7.38) 7.19 5.30 3.68 ----- ----- ---- ---- ---- Total from investment operations (5.35) (7.31) 7.24 5.39 3.83 ----- ----- ---- ---- ---- Less distributions: Dividends from net investment income (.02) (.02) (.09) (.08) (.20) Excess distributions from net investment income -- (.03) -- -- -- Distributions from realized gains -- (3.46) (2.06) (1.69) (1.73) ----- ----- ----- ----- ----- Total distributions (.02) (3.51) (2.15) (1.77) (1.93) ---- ----- ----- ----- ----- Net asset value, end of period $20.14 $25.51 $36.33 $31.24 $27.62 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $3,222 $4,677 $6,328 $5,513 $4,575 Ratio of expenses to average daily net assets(c) .90% .84% .74% .77% .75% Ratio of net investment income (loss) to average daily net assets .36% .28% .35% .33% .62% Portfolio turnover rate (excluding short-term securities) 27% 29% 34% 34% 38% Total return(e) (21.00%) (20.97%) 23.35% 20.12% 16.28%
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. -------------------------------------------------------------------------------- 32 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT Independent Auditors' Report THE BOARD AND SHAREHOLDERS AXP NEW DIMENSIONS FUND, INC. We have audited the accompanying statement of assets and liabilities of AXP New Dimensions Fund (a series of AXP New Dimensions Fund, 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 New Dimensions 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 -------------------------------------------------------------------------------- 33 -- AXP NEW DIMENSIONS FUND -- 2002 ANNUAL REPORT PART C. OTHER INFORMATION Item 23. Exhibits (a)(1) Amended and Restated Articles of Incorporation dated Nov. 10, 1988, filed electronically as Exhibit No. 1 to Post-Effective Amendment No. 42 to Registration Statement No. 2-28529, are incorporated by reference. (a)(2) Articles of Amendment to the Articles of Incorporation dated June 16, 1999, are incorporated by reference to Exhibit (a)(2) to Registrant's Post-Effective Amendment No. 65 filed on or about Sept. 26, 2001. (b) By-Laws of AXP New Dimensions Fund, Inc. as amended January 11, 2001, are incorporated by reference to Exhibit (b) to Registrant's Post-Effective Amendment No. 65 filed on or about Sept. 26, 2001. (c) Stock certificate, filed as Exhibit 3 to Registrant's Amendment Number One to Registration Statement No. 2-28529 dated July 8, 1968, is incorporated by reference. (d)(1) Investment Management Services Agreement between Registrant, on behalf of AXP New Dimensions Fund, and American Express Financial Corporation, dated March 20, 1995, filed electronically as Exhibit 5 to Registrant's Post-Effective Amendment No. 53 to Registration Statement No. 2-28529, is incorporated by reference. The agreement was assumed by the Portfolio when the Fund adopted the master/feeder structure. (d)(2) Investment Management Services Agreement between Registrant, on behalf of AXP Growth Dimensions Fund and American Express Financial Corporation, dated March 9, 2000, is incorporated by reference to Exhibit (d)(2) to Registrant's Post-Effective Amendment No. 64 filed on or about September 27, 2000. (d)(3) Amendment to Investment Management Services Agreement between AXP Growth Series, Inc. and American Express Financial Corporation, dated June 3, 2002, filed electronically on or about June 12, 2002 as Exhibit (d)(7) to AXP Growth Series, Inc. Post-Effective Amendment No. 71 to Registration Statement No. 2-38355, is incorporated by reference. Registrant's Amendments to Investment Management Services Agreements differ from the one incorporated by reference only by the fact that Registrant is one executing party. (e)(1) Distribution Agreement dated July 8, 1999, between AXP Utilities Income Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (e) to AXP Utilities Income Fund, Inc. Post-Effective Amendment No. 22, to Registration Statement File No. 33-20872 filed on or about August 27, 1999. Registrant's Distribution Agreement for AXP New Dimensions Fund differs from the one incorporated by reference only by the fact that Registrant is one executing party. (e)(2) Distribution Agreement between Registrant, on behalf of AXP Growth Dimensions Fund and American Express Financial Advisors Inc., dated March 9, 2000, is incorporated by reference to Exhibit (e)(2) to Registrant's Post-Effective Amendment No. 61 filed on or about April 4, 2000. (f) All employees are eligible to participate in a profit sharing plan. Entry into the plan is Jan. 1 or July 1. The Registrant contributes each year an amount up to 15 percent of their annual salaries, the maximum deductible amount permitted under Section 404(a) of the Internal Revenue Code. (g)(1) Custodian Agreement between Registrant, on behalf of AXP New Dimensions Fund, and American Express Trust Company, dated March 20, 1995, filed electronically as Exhibit 8(a) to Registrant's Post-Effective Amendment No. 57 to Registration Statement No. 2-28529, is incorporated by reference. (g)(2) Addendum to the Custodian Agreement between IDS New Dimensions Fund, Inc., on behalf of AXP New Dimensions Fund, American Express Trust Company and American Express Financial Corporation, dated May 13, 1996, filed electronically as Exhibit 8(b) to Registrant's Post-Effective Amendment No. 57 to Registration Statement No. 2-28529, is incorporated by reference. (g)(3) Custodian Agreement Amendment between IDS International Fund, Inc. and American Express Trust Company, dated October 9, 1997, filed electronically on or about December 23, 1997 as Exhibit 8(c) to IDS International Fund, Inc.'s Post-Effective Amendment No. 26 to Registration Statement No. 2-92309, is incorporated by reference. Registrant's Custodian Agreement for AXP New Dimensions Fund differs from the one incorporated by reference only by the fact that Registrant is one executing party. (g)(4) Custodian Agreement dated May 13, 1999 between American Express Trust Company and The Bank of New York is incorporated by reference to Exhibit (g)(3) to IDS Precious Metals Fund Inc. Post-Effective Amendment No. 33, File No. 2-93745 filed on or about May 24, 1999. (g)(5) Custodian Agreement between Registrant, on behalf of AXP Growth Dimensions Fund, and American Express Trust Company, dated March 9, 2000, is incorporated by reference to Exhibit (g)(5) to Registrant's Post-Effective Amendment No. 61 filed on or about April 4, 2000. (g)(6) Custodian Agreement First Amendment between American Express Trust Company and The Bank of New York, dated December 1, 2000, filed electronically as Exhibit (g)(4) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002 is incorporated by reference. (g)(7) Custodian Agreement Second Amendment between American Express Trust Company and The Bank of New York, dated June 7, 2001, filed electronically as Exhibit (g)(5) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002 is incorporated by reference. (g)(8) Custodian Agreement Amendment between American Express Trust Company and The Bank of New York, dated January 31, 2002, filed electronically as Exhibit (g)(6) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002 is incorporated by reference. (h)(1) Administrative Services Agreement between Registrant, on behalf of AXP New Dimensions Fund, and American Express Financial Corporation dated March 20, 1995, filed electronically as Exhibit 9(e) to Registrant's Post-Effective Amendment No. 57 to Registration Statement No. 2-28529, is incorporated by reference. (h)(2) Amendment to Administrative Services Agreement between Registrant, on behalf of AXP New Dimensions Fund, and American Express Financial Corporation, effective November 1, 1997, is incorporated by reference to Exhibit 9(h) to Registrant's Post-Effective Amendment No. 58 filed on or about Sept. 29, 1999. (h)(3) License Agreement between Registrant and IDS Financial Corporation dated January 25, 1988, filed electronically as Exhibit 9(c) to Post-Effective Amendment No. 44 to Registration Statement No. 2-28529, is incorporated by reference. (h)(4) License Agreement dated June 17, 1999, between the American Express Funds and American Express Company, filed electronically on or about September 23, 1999, as Exhibit (h)(4) to AXP Stock Fund, Inc.'s Post-Effective Amendment No. 98 to Registration Statement No. 2-11358, is incorporated by reference. (h)(5) Plan and Agreement of Merger dated April 10, 1986, filed electronically as Exhibit No. 9 to Post-Effective Amendment No. 38 to Registration Statement No. 2-28529, is incorporated by reference. (h)(6) Agreement and Plan of Reorganization dated March 10, 2000 between Strategist Growth Fund, Inc. on behalf of Strategist Growth Trends Fund and AXP New Dimensions Fund, filed electronically on or about September 27, 2000 as Exhibit (h)(7) to Registrant's Post-Effective Amendment No. 64 to Registration Statement No. 2-28529 is incorporated by reference. (h)(7) Class Y Shareholder Service Agreement between IDS Precious Metals Fund, Inc. and American Express Financial Advisors Inc., dated May 9, 1997, filed electronically on or about May 27, 1997, as Exhibit 9(e) to IDS Precious Metals Fund, Inc.'s Post-Effective Amendment No. 30 to Registration Statement No. 2-93745, is incorporated herein by reference. Registrant's Class Y Shareholder Service Agreement for AXP New Dimensions Fund differs from the one incorporated by reference only by the fact that Registrant is one executing party. (h)(8) Administrative Services Agreement between Registrant, on behalf of AXP Growth Dimensions Fund, and American Express Financial Corporation, dated March 9, 2000, is incorporated by reference to Exhibit (h)(9) to Registrant's Post-Effective Amendment No. 61 filed on or about April 4, 2000. (h)(9) Transfer Agency Agreement between Registrant and American Express Client Service Corporation, dated May 10, 2001, is incorporated by reference to Exhibit (h)(9) to Registrant's Post-Effective Amendment No. 65 filed on or about Sept. 26, 2001. (h)(10) Amendment to Administrative Services Agreement between Registrant, on behalf of AXP New Dimensions Fund and American Express Financial Corporation, dated March 9, 1999 filed electronically on or about September 27, 2000 as Exhibit (h)(11) to Registrant's Post-Effective Amendment No. 64 to Registration Statement No. 2-28529 is incorporated by reference. (h)(11) Amendment to Administrative Services Agreement between AXP Growth Series, Inc. and American Express Financial Corporation, dated June 3, 2002, filed electronically on or about June 12, 2002 as Exhibit (h)(7) to AXP Growth Series, Inc. Post-Effective Amendment No. 71 to Registration Statement No. 2-38355, is incorporated by reference. Registrant's Amendments to Administrative Services Agreements differ from the one incorporated be reference only by the fact that Registrant is one executing party. (h)(12) Class Y Shareholder Service Agreement between Registrant, on behalf of AXP Growth Dimensions Fund, and American Express Financial Advisors Inc., dated March 9, 2000, is filed electronically herewith. (i) Opinion and consent of counsel is filed electronically herewith. (j) Independent Auditors' Consent is filed electronically herewith. (k) Omitted Financial Statements: Not Applicable. (l) Initial Capital Agreements: Not Applicable. (m)(1) Plan and Agreement of Distribution dated July 1, 1999 between AXP Discovery Fund, Inc. Registrant and American Express Financial Advisors Inc., is incorporated by reference to Exhibit (m) to AXP Discovery Fund, Inc. Post Effective Amendment No. 36 to Registration Statement No. 2-72174 filed on or about July 26, 1999. Registrant's Plan and Agreement of Distribution for AXP New Dimensions Fund differs from the one incorporated by reference only by the fact that Registrant is one executing party. (m)(2) Plan and Agreement of Distribution For Class C Shares dated March 9, 2000, between AXP Bond Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (m)(2) to AXP Bond Fund, Inc.'s Post-Effective Amendment No. 51 to Registration Statement File No. 2-51586 filed on or about June 26, 2000. Registrant's Plan and Agreement of Distribution for Class C Shares differs from the one incorporated by reference only by the fact that Registrant is one executing party. (m)(3) Plan and Agreement of Distribution between Registrant, on behalf of AXP Growth Dimensions Fund and American Express Financial Advisors, dated March 9, 2000, filed electronically on or about September 27, 2000, as Exhibit (m)(3) to Registrant's Post-Effective Amendment No. 64 to Registration Statement No. 2-28529 is incorporated by reference. (n) Rule 18f-3 Plan, dated March 9, 2000, is incorporated by reference to Exhibit (n) to AXP Bond Fund Inc.'s Post-Effective Amendment No. 51 to Registration Statement File No. 2-51586 filed on or about June 26, 2000. (o) Reserved. (p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about March 30, 2000 as Exhibit (p)(1) to AXP Market Advantage Series, Inc.'s Post-Effective Amendment No.24 to Registration Statement No. 33-30770, is incorporated by reference. (p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's investment advisor and principal underwriter filed electronically on or about March 30, 2000 as Exhibit (p)(2) to AXP Market Advantage Series, Inc.'s Post-Effective Amendment No. 24 to Registration Statement No. 33-30770, is incorporated by reference. (q)(1) Directors' Power of Attorney to sign Amendments to this Registration Statement, dated January 9, 2002, is filed electronically herewith. (q)(2) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated January 9, 2002, is filed electronically herewith. (q)(3) Trustee's Power of Attorney to sign Amendments to this Registration Statement, dated January 9, 2002, is filed electronically herewith. (q)(4) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated January 9, 2002, is filed electronically herewith. (q)(5) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated September 17, 2002, is filed electronically herewith. (q)(6) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated September 18, 2002, is filed electronically herewith. Item 24. Persons Controlled by or Under Common Control with Registrant: None. Item 25. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved(including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940.
Item 26. Business and Other Connections of Investment Adviser (American Express Financial Corporation) Directors and officers of American Express Financial Corporation who are directors and/or officers of one or more other companies: Name and Title Other company(s) Address* Title within other company(s) ------------------------- ----------------------- ------------------------- ----------------------- Ruediger Adolf American Express Financial Senior Vice President Senior Vice President Advisors Inc. Gumer C. Alvero American Centurion Life 20 Madison Ave. Extension Director and Vice President - Annuities Vice President - Variable Assurance Company P.O. Box 5555 Annuities Albany, NY 12205-0555 American Enterprise Life Director, Chairman of the Board and Insurance Company Executive Vice President - Annuities American Express Financial Vice President - Annuities Advisors Inc. American Partners Life 1751 AXP Financial Center Director, President Insurance Company Minneapolis MN 55474 and Chief Executive Officer IDS Life Insurance Company Director and Executive Vice President - Annuities IDS Life Insurance Company P.O. Box 5144 Director and Vice President - Annuities of New York Albany, NY 12205 IDS Life Series Fund, Inc. Director and Chairman of the Board IDS Life Variable Annuity Manager and Chairman of the Board Funds A & B Ward D. Armstrong American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Retirement Services and Asset Retirement Services Management and Asset Management American Express Asset Senior Vice President Management Group Inc. American Express Service Vice President - Workplace Corporation Financial Services American Express Trust Director and Chairman of Company the Board Northwinds Marketing Director Group LLC John M. Baker American Express Financial Vice President - Plan Vice President - Plan Sponsor Advisors Inc. Sponsor Services Services American Express Trust Director and Senior Vice President Company Dudley Barksdale American Express Financial Vice President - Service Vice President - Service Advisors Inc. Development Development Joseph M. Barsky III American Express Financial Vice President - Mutual Vice President - Mutual Fund Advisors Inc. Fund Equities Equities Timothy V. Bechtold American Centurion Life 20 Madison Ave. Extension Director, President and Chief Vice President - Assurance Company P.O. Box 5555 Executive Officer Insurance Products Albany, NY 12205-0555 American Express Financial Vice President - Insurance Advisors Inc. Products American Express Insurance Director, President and Chief Agency of Alabama Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Arizona Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Idaho Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Maryland Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Massachusetts Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Nevada Inc. Executive Officer American Express Insurance Director, President and Chief Agency of New Mexico Inc. Executive Officer American Express Insurance Director and President Agency of Oklahoma Inc. American Express Insurance Director, President and Chief Agency of Wyoming Inc. Executive Officer American Partners Life Director and Chairman of the Board Insurance Company IDS Insurance Agency of Director, President and Chief Arkansas Inc. Executive Officer IDS Insurance Agency of Director, President and Chief Ohio Inc. Executive Officer IDS Life Insurance Company Director and President IDS Life Insurance Company P.O. Box 5144 Director, President and Chief of New York Albany, NY 12205 Executive Officer IDS Life Series Fund, Inc. Director, President and Chief Executive Officer IDS Life Variable Annuity Manager, President and Chief Funds A & B Executive Officer IDS REO 1, LLC Director and President Walter S. Berman American Express Director Director, Senior Vice President Certificate Company and Chief Financial Officer American Express Financial 70100 AXP Financial Center Director, Senior Vice President Advisors Inc. Minneapolis, MN 55474 and Chief Financial Officer Douglas W. Brewers American Express Financial 70100 AXP Financial Center Vice President - Sales Vice President - Sales Support Advisors Inc. Minneapolis, MN 55474 Support Kenneth I. Chenault American Express Company American Express Tower Chairman and Chief Director World Financial Center Operating Officer New York, NY 10285 Kenneth J. Ciak AMEX Assurance Company Director, President and Chief Vice President and General Executive Officer Manager - IDS Property Casualty American Express Financial Vice President and General Advisors Inc. Manager - IDS Property Casualty American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Kentucky Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Maryland Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Pennsylvania Inc. IDS Property Casualty 1 WEG Blvd. Director, President and Chief Insurance Company DePere, WI 54115 Executive Officer Paul A. Connolly American Express Financial Vice President - Relationship Leader Vice President - Retail Advisors Inc. Retail Distribution Services Distribution Services James M. Cracchiolo American Express Financial Director, Chairman, President and Director, Chairman of Advisors Inc. Chief Executive Officer the Board, President and Chief Executive Officer Colleen Curran American Express Financial Vice President and Vice President and Assistant Advisors Inc. Assistant General Counsel General Counsel American Express Service Vice President and Chief Corporation Legal Counsel Luz Maria Davis American Express Financial Vice President - Vice President - Advisors Inc. Communications Communications William V. Elliott American Express Financial Vice President - Financial Vice President - Financial Advisors Inc. Planning and Advice Planning and Advice Brenda H. Fraser American Express Financial Executive Vice President - Executive Vice Advisors Inc. AEFA Products and Corporate Marketing President - AEFA Products and IDS Life Insurance Company Vice President - Variable Assets Corporate Marketing Gordon M. Fines American Express Asset Senior Vice President and Vice President - Mutual Fund Management Group Inc. Chief Investment Officer Equity Investments American Express Financial Vice President - Mutual Advisors Inc. Fund Equity Investments Peter A. Gallus American Express Financial Vice President - Vice President - Investment Advisors Inc. Investment Administration Administration American Express Asset Assistant Treasurer Management Group Inc. American Express Asset Assistant Treasurer Management International Inc. IDS Capital Holdings Inc. Vice President and Controller Steve Guida American Enterprise Vice President Vice President - New Investment Services Inc. Business and Service American Express Financial Vice President - New Advisors Inc. Business and Service Teresa A. Hanratty American Express Financial Senior Vice Senior Vice Advisors Inc. President - Field Management President - Field Management Lorraine R. Hart AMEX Assurance Company Vice President - Vice President - Insurance Investments Investments American Centurion Life 20 Madison Ave. Extension Vice President - Investments Assurance Company P.O. Box 5555 Albany, NY 12205-0555 American Enterprise Life 829 AXP Financial Center Vice President - Investments Insurance Company Minneapolis, MN 55474 American Enterprise 829 AXP Financial Center Vice President REO 1, LLC Minneapolis, MN 55474 American Express Vice President - Investments Certificate Company American Express Director, President and Chief Corporation Executive Officer American Express Financial Vice President - Insurance Advisors Inc. Investments American Express Vice President - Investments International Deposit Company American Partners Life 1751 AXP Financial Center Director and Vice Insurance Company Minneapolis, MN 55474 President - Investments IDS Life Insurance Company Vice President - Investments IDS Life Insurance Company P.O. Box 5144 Vice President - Investments of New York Albany, NY 12205 IDS Life Series Fund, Inc. Vice President - Investments IDS Life Variable Annuity Vice President - Investments Funds A and B IDS Property Casualty 1 WEG Blvd. Vice President - Investment Officer Insurance Company DePere, WI 54115 IDS REO 1, LLC Vice President Investors Syndicate Director and Vice Development Corp. President - Investments Janis K. Heaney American Express Financial Vice President - Incentive Vice President - Incentive Advisors Inc. Management Management Brian M. Heath American Express Financial Senior Vice President and Senior Vice President Advisors Inc. General Sales Manager and General Sales Manager Carol A. Holton American Centurion Life 20 Madison Ave. Extension Director Vice President - Third Party Assurance Company Albany, NY 12205-0555 Distribution American Enterprise Life 829 AXP Financial Center Director, President and Insurance Company Minneapolis, MN 55474 Chief Executive Officer American Enterprise 829 AXP Financial Center Director and President REO 1, LLC Minneapolis, MN 55474 American Express Financial Vice President - Third Advisors Inc. Party Distribution IDS Life Insurance Company 20 Madison Ave. Extension Director of New York P.O. Box 5555 Albany, NY 12205-0555 Darryl G. Horsman American Express Trust Director, President and Chief Vice President - Product Company Executive Officer Development and Technology, American Express Retirement Northwinds Marketing Director Services Group LLC Claire Huang American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Retail Marketing Retail Marketing Debra A. Hutchinson American Express Financial Vice President - Technology Vice President - Technology Advisors Inc. Relationship Leader Relationship Leader James M. Jensen American Express Financial Vice President - Advice Vice President - Advice and Advisors Inc. and Retail Distribution Retail Distribution Group, Group Product, Product, Compensation and Compensation and Field Field Administration Administration Gregory R. Johnson American Express Asset Assistant Treasurer Vice President - Advisory Management Group Inc. Planning and Analysis American Express Asset Assistant Treasurer Management International Inc. American Express Financial Director, Vice President and Advisors Japan Inc. Chief Financial Officer American Express Financial Vice President - Advisory Advisors Inc. Planning and Analysis American Express Service Vice President - Business Corporation Development John C. Junek American Express Financial Senior Vice President and Senior Vice President Advisors Inc. General Counsel and General Counsel American Express Financial Vice President Advisors Japan Inc. American Express Insurance Director and Vice President Agency of Alabama Inc. American Express Insurance Director and Vice President Agency of Arizona Inc. American Express Insurance Director and Vice President Agency of Idaho Inc. American Express Insurance Director and Vice President Agency of Maryland Inc. American Express Insurance Director and Vice President Agency of Massachusetts Inc. American Express Insurance Director and Vice President Agency of Nevada Inc. American Express Insurance Director and Vice President Agency of New Mexico Inc. American Express Insurance Director and Vice President Agency of Oklahoma Inc. American Express Insurance Director and Vice President Agency of Wyoming Inc. American Express Property Director and Vice President Casualty Insurance Agency of Kentucky Inc. American Express Property Director and Vice President Casualty Insurance Agency of Maryland Inc. American Express Property Director and Vice President Casualty Insurance Agency of Pennsylvania Inc. IDS Insurance Agency of Director and Vice President Arkansas Inc. IDS Insurance Agency of Director and Vice President Ohio Inc. Investors Syndicate Director Development Corp. Ora J. Kaine American Express Financial Vice President - Retail Vice President - Retail Advisors Inc. Distribution Services and Distribution Services and Chief of Staff Chief of Staff Claire Kolmodin American Express Financial Vice President - Service Vice President - Service Advisors Inc. Quality Quality Lori J. Larson American Express Financial Vice President - Brokerage Vice President - Brokerage Advisors Inc. and Direct Services and Direct Services Daniel E. Laufenberg American Express Financial Vice President and Chief Vice President and Chief Advisors Inc. U.S. Economist U.S. Economist Jane W. Lee American Express Financial Vice President - New Vice President - New Business Advisors Inc. Business Development and Development and Marketing Marketing Steve Lobo American Express Financial Vice President - Investment Vice President - Investment Advisors Inc. Risk Management Risk Management Diane D. Lyngstad American Express Financial Vice President - Lead Vice President - Lead Advisors Inc. Financial Officer, Financial Officer, U.S. Retail U.S. Retail American Express Client Vice President and Chief Service Corporation Financial Officer Tom Mahowald American Express Financial Vice President and Director of Vice President and Director of Advisors Inc. Equity Research Equity Research Timothy J. Masek American Express Financial Vice President and Director Vice President and Director Advisors Inc. of Fixed Income Research of Fixed Income Research Penny Mazal American Express Financial Vice President - Business Vice President - Business Advisors Inc. Transformation Transformation Mark T. McGannon American Express Financial Vice President and General Vice President and Advisors Inc. Sales Manager - AEFA Products General Sales Manager - AEFA Products Sarah M. McKenzie American Express Financial Vice President - Vice President - Advisors Inc. Managed and Brokerage Products Managed and Brokerage Products American Express Personal Director Trust Services, FSB Paula R. Meyer American Express Financial Senior Vice President and General Senior Vice President Advisors Inc. Manager - Mutual Funds and General Manager - Mutual Funds American Express Certificate Director, President Chairman of the Company Board and Chief Executive Officer American Express Director and President International Deposit Company Investors Syndicate Director, President and Chief Development Corp. Executive Officer Barry J. Murphy American Express Client Director, Chairman, President Executive Vice President - Service Corporation and Chief Executive Officer U.S. Retail Group American Express Financial Executive Vice President - Advisors Inc. U.S. Retail Group IDS Life Insurance Company Director Francois B. Odouard American Express Financial Vice President - Brokerage Vice President - Advisors Inc. Brokerage Michael J. O'Keefe American Express Financial Vice President - Advisory Vice President - Advisory Advisors Inc. Business Systems Business Systems Carla P. Pavone American Express Financial Vice President - Vice President - Product Advisors Inc. Business Development Business Development Kris Petersen American Express Financial Vice President - SPS and Vice President - SPS and Advisors Inc. External Products External Products IDS Cable Corporation Director, President and Chief Executive Officer IDS Cable II Corporation Director, President and Chief Executive Officer IDS Futures Corporation Director, President and Chief Executive Officer IDS Management Corporation Director, President and Chief Executive Officer IDS Partnership Services Director, President and Chief Executive Corporation Officer IDS Realty Corporation Director, President and Chief Executive Officer Ronald W. Powell American Express Financial Vice President and Vice President and Assistant Advisors Inc. Assistant General Counsel General Counsel Teresa J. Rasmussen American Express Financial Vice President and Vice President and Assistant Advisors Inc. Assistant General Counsel General Counsel American Centurion Life Counsel and Secretary Assurance Company American Enterprise Life Director, Vice President, General Counsel Insurance Company and Secretary American Express Corporation Director, Vice President and Secretary IDS Life Insurance Company Vice President and General Counsel IDS Life Insurance Company 20 Madison Ave. Extension Assistant General Counsel and of New York Albany, NY 12205-0555 Assistant Secretary ReBecca K. Roloff American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Field Management and Field Management Financial Advisory Services and Financial Advisory Services Stephen W. Roszell Advisory Capital Income LLC Director Senior Vice President - Institutional Advisory Capital Director Group Partners LLC Advisory Capital Director Strategies Group Inc. Advisory Select LLC Director American Express Asset Director, President and Management Group Inc. Chief Executive Officer American Express Asset Director and Executive Vice President Management International, Inc. American Express Asset Director Management International, (Japan) Ltd. American Express Asset Director Management Ltd. American Express Financial Senior Vice President - Advisors Inc. Institutional American Express Financial Director Advisors Japan Inc. American Express Trust Director Company IDS Life Insurance Company Director Northwinds Marketing Director Group LLC Erven A. Samsel American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Field Management Field Management American Express Insurance Vice President - New England Region Agency of Alabama Inc. American Express Insurance Vice President Agency of Idaho Inc. American Express Insurance Vice President - New England Region Agency of Maryland Inc. American Express Insurance Vice President Agency of Massachusetts Inc. American Express Insurance Vice President Agency of Nevada Inc. American Express Insurance Vice President Agency of New Mexico Inc. American Express Insurance Vice President Agency of Oklahoma Inc. American Express Insurance Vice President Agency of Wyoming Inc. American Express Property Vice President Casualty Insurance Agency of Kentucky Inc. American Express Property Vice President Casualty Insurance Agency of Maryland Inc. American Express Property Vice President Casualty Insurance Agency of Pennsylvania Inc. IDS Insurance Agency of Vice President Arkansas Inc. IDS Insurance Agency of Vice President Ohio Inc. Andrew C. Schell American Express Financial Vice President - Client Vice President - Client Advisors Inc. Development and Migration Development and Migration Judy P. Skoglund American Express Financial Vice President - Quality Vice President - Quality and Advisors Inc. and Service Support Service Support Bridget Sperl American Enterprise Director, President and Chief Senior Vice President - Investment Services Inc. Executive Officer Client Service American Express Client Director and Senior Vice President Service Corporation American Express Financial Senior Vice President - Advisors Inc. Client Service IDS Life Insurance Company Executive Vice President - Client Service IDS Property Casualty Director Insurance Company Lisa A. Steffes American Express Financial Vice President - Marketing Vice President - Marketing Advisors Inc. Offer Development Offer Development AMEX Assurance Company Director IDS Property Casualty 1 WEG Blvd. Director Insurance Company DePere, WI 54115 Jeffrey J. Stremcha American Express Financial Vice President - Vice President - Information Advisors Inc. Information Resource Resource Management/ISD Management/ISD John T. Sweeney American Express Financial Vice President - Lead Vice President - Lead Advisors Inc. Financial Officer, Products Financial Officer, Products AMEX Assurance Company Director IDS Cable Corporation Director IDS Cable II Corporation Director IDS Life Insurance Company Director and Executive Vice President - Finance IDS Partnership Director Services Corporation IDS Property Casualty Director Insurance Company IDS Reality Corporation Director John R. Thomas American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Information and Technology Information and Technology William F. Truscott Advisory Capital Income LLC Director Senior Vice President - Chief Investment Officer Advisory Capital Director Partners LLC Advisory Select LLC Director American Express Asset Director Management International Inc. American Express Financial Senior Vice President - Advisors Inc. Chief Investment Officer IDS Capital Holdings Inc. Director and President Beth E. Weimer American Express Financial Vice President - Chief Compliance Officer Chief Compliance Officer Advisors Inc. American Enterprise Chief Compliance Officer Investment Services Inc. American Express Asset Chief Compliance Officer Management Group Inc. American Express Asset Chief Compliance Officer Management International Inc. American Express Service Chief Compliance Officer Corporation IDS Insurance Agency of Chief Compliance Officer Arkansas Inc. IDS Life Insurance Company Chief Compliance Officer Michael D. Wolf American Express Asset Executive Vice President Vice President - Senior Management Group Inc. and Senior Portfolio Portfolio Manager Manager American Express Financial Vice President - Senior Advisors Inc. Portfolio Manager Michael R. Woodward American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Field Management Field Management American Centurion Life 20 Madison Ave. Extension Director Assurance Company Albany, NY 12205-0555 American Express Insurance Vice President - North Region Agency of Alabama Inc. American Express Insurance Vice President - North Region Agency of Idaho Inc. American Express Insurance Vice President - North Region Agency of Maryland Inc. American Express Insurance Vice President - North Region Agency of Massachusetts Inc. American Express Insurance Vice President - North Region Agency of Nevada Inc. American Express Insurance Vice President - North Region Agency of New Mexico Inc. American Express Insurance Vice President - North Region Agency of Oklahoma Inc. American Express Insurance Vice President - North Region Agency of Wyoming Inc. American Express Property Vice President - North Region Casualty Insurance Agency of Kentucky Inc. American Express Property Vice President - North Region Casualty Insurance Agency of Maryland Inc. American Express Property Vice President - North Region Casualty Insurance Agency of Pennsylvania Inc. IDS Insurance Agency of Vice President - North Region Arkansas Inc. IDS Insurance Agency of Vice President - North Region Ohio Inc. IDS Life Insurance Company P.O. Box 5144 Director of New York Albany, NY 12205 Doretta R. Wright American Express Financial Vice President - Brokerage Marketing Vice President - Brokerage Advisors Inc. Marketing David L. Yowan American Centurion Life 20 Madison Ave. Extension Vice President and Treasurer Vice President and Corporate Assurance Company Albany, NY 12205-0555 Treasurer American Enterprise Vice President and Investment Services Inc. Treasurer American Enterprise Life 829 AXP Financial Center Vice President and Insurance Company Minneapolis, MN 55474 Treasurer American Enterprise 829 AXP Financial Center Treasurer REO 1, LLC Minneapolis, MN 55474 American Express Asset Vice President and Management Group Inc. Treasurer American Express Asset Vice President and Management International Treasurer Inc. American Express Vice President and Certificate Company Treasurer American Express Client Vice President and Service Corporation Treasurer American Express Vice President and Corporation Treasurer American Express Financial Vice President and Advisors Inc. Treasurer American Express Financial Vice President and Advisors Japan Inc. Treasurer American Express Insurance Vice President and Agency of Alabama Inc. Treasurer American Express Insurance Vice President and Agency of Arizona Inc. Treasurer American Express Insurance Vice President and Agency of Idaho Inc. Treasurer American Express Insurance Vice President and Agency of Maryland Inc. Treasurer American Express Insurance Vice President and Agency of Massachusetts Inc. Treasurer American Express Insurance Vice President and Agency of Nevada Inc. Treasurer American Express Insurance Vice President and Agency of New Mexico Inc. Treasurer American Express Insurance Vice President and Agency of Oklahoma Inc. Treasurer American Express Insurance Vice President and Agency of Wyoming Inc. Treasurer American Express Personal Treasurer Trust Services, FSB American Express Property Vice President and Casualty Insurance Agency Treasurer of Kentucky Inc. American Express Property Vice President and Casualty Insurance Agency Treasurer of Maryland Inc. American Express Property Vice President and Casualty Insurance Agency Treasurer of Pennsylvania Inc. American Express Service Vice President and Treasurer Corporation American Partners Life 1751 AXP Financial Center Vice President and Insurance Company Minneapolis, MN 55474 Treasurer AMEX Assurance Company Vice President, Treasurer and Assistant Secretary IDS Cable Corporation Director, Vice President and Treasurer IDS Cable II Corporation Director, Vice President and Treasurer IDS Capital Holdings Inc. Vice President, Treasurer and Assistant Secretary IDS Insurance Agency of Vice President and Arkansas Inc. Treasurer IDS Insurance Agency of Vice President and Ohio Inc. Treasurer IDS Life Insurance Company Vice President, Treasurer and Assistant Secretary IDS Life Insurance Company P.O. Box 5144 Vice President and of New York Albany, NY 12205 Treasurer IDS Life Series Fund, Inc. Vice President and IDS Life Variable Annuity Vice President and Funds A & B Treasurer IDS Management Corporation Director, Vice President and Treasurer IDS Partnership Services Vice President and Corporation Treasurer IDS Property Casualty 1 WEG Blvd. Vice President, Treasurer Insurance Company DePere, WI 54115 and Assistant Secretary IDS Real Estate Services, Vice President and Inc. Treasurer IDS Realty Corporation Vice President and Treasurer IDS REO 1, LLC Treasurer Investors Syndicate Vice President and Development Corporation Treasurer * Unless otherwise noted, address is 70100 AXP Financial Center, Minneapolis, MN 55474.
Item 27. Principal Underwriters. (a) American Express Financial Advisors acts as principal underwriter for the following investment companies: AXP Bond Fund, Inc.; AXP California Tax-Exempt Trust; AXP Discovery Fund, Inc.; AXP Equity Select Fund, Inc.; AXP Extra Income Fund, Inc.; AXP Federal Income Fund, Inc.; AXP Global Series, Inc.; AXP Growth Series, Inc.; AXP High Yield Tax-Exempt Fund, Inc.; AXP International Fund, Inc.; AXP Investment Series, Inc.; AXP Managed Series, Inc.; AXP Market Advantage Series, Inc.; AXP Money Market Series, Inc.; AXP New Dimensions Fund, Inc.; AXP Partners Series, Inc.; AXP Partners International Series, Inc.; AXP Precious Metals Fund, Inc.; AXP Progressive Fund, Inc.; AXP Selective Fund, Inc.; AXP Special Tax-Exempt Series Trust; AXP Stock Fund, Inc.; AXP Strategy Series, Inc.; AXP Tax-Exempt Series, Inc.; AXP Tax-Free Money Fund, Inc.; AXP Utilities Income Fund, Inc., Growth Trust; Growth and Income Trust; Income Trust; Tax-Free Income Trust; World Trust; American Express Certificate Company. (b) As to each director, officer or partner of the principal underwriter: Name and Principal Position and Offices with Offices with Registrant Business Address* Underwriter Ruediger Adolf Senior Vice President None Gumer C. Alvero Vice President - None Annuities Ward D. Armstrong Senior Vice President - None Retirement Services and Asset Management John M. Baker Vice President - Plan None Sponsor Services Dudley Barksdale Vice President - Service None Development Joseph M. Barsky III Vice President - Mutual None Fund Equities Timothy V. Bechtold Vice President - None Insurance Products Walter S. Berman Director, Senior Vice President - None and Chief Financial Officer Rob Bohli Group Vice President - None 10375 Richmond Avenue #600 South Texas Houston, TX 77042 Walter K. Booker Group Vice President - None Suite 200, 3500 Market New Jersey Street Camp Hill, NJ 17011 Bruce J. Bordelon Group Vice President - None 1333 N. California Blvd., Northern California Suite 200 Walnut Creek, CA 94596 Douglas W. Brewers Vice President - Sales None Support Kenneth J. Ciak Vice President and None IDS Property Casualty General Manager - IDS 1400 Lombardi Avenue Property Casualty Green Bay, WI 54304 Paul A. Connolly Vice President - Relationship None Leader Retail Distribution Services James M. Cracchiolo Director, Chairman, President and None Chief Executive Officer Colleen Curran Vice President and None Assistant General Counsel Luz Maria Davis Vice President - None Communications Arthur E. DeLorenzo Group Vice President - None 4 Atrium Drive, #100 Upstate New York/Vermont Albany, NY 12205 Scott M. DiGiammarino Group Vice President - None Suite 500, 8045 Leesburg Washington D.C./Baltimore Pike Vienna, VA 22182 Kenneth Dykman Group Vice President - None 6000 28th Street South East Greater Michigan Suite 200 Grand Rapids, MI 49546 Bradford L. Drew Group Vice President - None Two Datran Center Eastern Florida Penthouse One B 9130 S. Dadeland Blvd. Miami, FL 33156 William V. Elliot Vice President - Financial None Planning and Advice Gordon M. Fines Vice President - Mutual None Fund Equity Investments Brenda H. Fraser Executive Vice President - None AEFA Products and Corporate Marketing Peter A. Gallus Vice President - None Investment Administration Steve Guida Vice President - None New Business and Service Teresa A. Hanratty Senior Vice President - None Suites 6&7 Field Management 169 South River Road Bedford, NH 03110 Lorraine R. Hart Vice President - None Insurance Investments Janis K. Heaney Vice President - None Incentive Management Brian M. Heath Senior Vice President None Suite 150 and General Sales Manager 801 E. Campbell Road Richardson, TX 75081 Jon E. Hjelm Group Vice President - None 319 Southbridge Street Ohio Valley Auburn, MA 01501 David J. Hockenberry Group Vice President - None 30 Burton Hills Blvd. Mid South Suite 175 Nashville, TN 37215 ` Carol A. Holton Vice President - Third None Party Distribution Claire Huang Senior Vice President - Retail None Marketing Debra A. Hutchinson Vice President - None Relationship Leader Diana R. Iannarone Group Vice President - None 3030 N.W. Expressway Great Plains Suite 900 Oklahoma City, OK 73112 Theodore M. Jenkin Group Vice President - None Steel Cities James M. Jensen Vice President - None Advice and Retail Distribution Group, Product, Compensation and Field Administration Greg R. Johnson Vice President - Advisory Planning None Anaylsis John C. Junek Senior Vice President, None General Counsel Ora J. Kaine Vice President - None Retail Distribution Services and Chief of Staff Raymond G. Kelly Group Vice President - None Suite 250 North Texas 801 East Campbell Road Richardson, TX 75081 Claire Kolmodin Vice President - Service None Quality Mitre Kutanovski Group Vice President - None Suite 680 Chicago Metro 8585 Broadway Merrillville, IN 48410 Lori J. Larson Vice President - None Brokerage and Direct Services Daniel E. Laufenberg Vice President and Chief None U.S. Economist Jane W. Lee Vice President - New None Business Development and Marketing Steve Lobo Vice President - Investment None Risk Management Diane D. Lyngstad Vice President - Lead Financial None Officer, U.S. Retail Tom Mahowald Vice President and Director of None Equity Research Timothy J. Masek Vice President and None Director of Fixed Income Research Penny Mazal Vice President - Business None Transformation Mark T. McGannon Vice President and General None Sales Manager - AEFA Products Dean O. McGill Group Vice President - None 11835 W. Olympic Blvd Los Angeles Metro Suite 900 East Los Angeles, CA 90064 Sarah M. McKenzie Vice President - Wrap and Trust None Products Timothy S. Meehan Secretary None Paula R. Meyer Senior Vice President and None General Manager - Mutual Funds Barry J. Murphy Executive Vice President - None U.S. Retail Group Thomas V. Nicolosi Group Vice President - None Suite 220 New York Metro Area 500 Mamaroneck Ave. Harrison, NY 10528 Francois B. Odouard Vice President - Brokerage None Michael J. O'Keefe Vice President - None Advisory Business Systems Carla P. Pavone Vice President - None Business Development Kris Petersen Vice President - SPS and None External Products John G. Poole Group Vice President - None Westview Place, #200 Gateway/Springfield 12323 Olive Blvd. Creve Couer, MO 63141 Larry M. Post Group Vice President - None One Tower Bridge New England 100 Front Street 8th Fl West Conshohocken, PA 19428 Ronald W. Powell Vice President and None Assistant General Counsel Teresa J. Rasmussen Vice President and None Assistant General Counsel Ralph D. Richardson III Group Vice President - None Suite 800 Carolinas Arboretum Plaza One 9442 Capital of Texas Hyw. N. Austin, TX 78759 ReBecca K. Roloff Senior Vice President - None Field Management and Financial Advisory Services Stephen W. Roszell Senior Vice President - Vice President Institutional Maximillian G. Roth Group Vice President - None Suite 201 S. IDS Ctr Wisconsin/Upper Michigan 1400 Lombardi Avenue Green Bay, WI 54304 Diane M. Ruebling Group Vice President - None Western Frontier Erven A. Samsel Senior Vice President - None 45 Braintree Hill Park Field Management Suite 402 Braintree, MA 02184 Russell L. Scalfano Group Vice President - None Suite 201 Illinois/Indiana/Kentucky 101 Plaza East Blvd. Evansville, IN 47715 Andrew C. Schell Vice President - Client Development None and Migration Judy P. Skoglund Vice President - Quality None and Service Support Bridget Sperl Senior Vice President - None Client Service Paul J. Stanislaw Group Vice President - None Suite 1100 Southern California/Hawaii Two Park Plaza Irvine, CA 92714 Lisa A. Steffes Vice President - None Marketing Offer Development Lois A. Stilwell Group Vice President - None Suite 433 Greater Minnesota 9900 East Bren Rd. Area/Iowa Minnetonka, MN 55343 Jeffrey J. Stremcha Vice President - None Information Resource Management/ISD John T. Sweeney Vice President - Lead Financial None Officer, Products Craig P. Taucher Group Vice President - None Suite 150 Georgia/North Florida 4190 Belfort Rd. Jackonville, FL 32216 Neil G. Taylor Group Vice President - None Suite 425 Pacific Northwest 101 Elliot Avenue West Seattle, WA 98119 John R. Thomas Senior Vice President - Board Member Information and and President Technology William F. Truscott Senior Vice President - Board Member and Chief Investment Officer Vice President Janet M. Vandenbark Group Vice President - None 3951 Westerre Parkway, Suite 250 Virginia Richmond, VA 23233 Charles F. Wachendorfer Group Vice President - None Suite 100 Detroit Metro Stanford Plaza II 7979 East Tufts Ave. Pkwy. Denver, CO 80237 Donald F. Weaver Group Vice President - None 3500 Market Street, Eastern Pennsylvania/ Suite 200 Delaware Camp Hill, PA 17011 Beth E. Weimer Vice President and None Chief Compliance Officer Michael D. Wolf Vice President - Senior None Portfolio Manager Michael R. Woodward Senior Vice President - None 32 Ellicott St Field Management Suite 100 Batavia, NY 14020 Doretta R. Wright Vice President - None Brokerage Marketing David L. Yowan Vice President and None 40 Wall Street Treasurer 19th Floor New York, NY 10004 Rande L. Zellers Group Vice President - None 1 Galleria Blvd., Suite 1900 Delta States Metairie, LA 70001
* Business address is: 70100 AXP Financial Center, Minneapolis, MN 55474 unless otherwise noted. Item 27 (c). Not Applicable. Item 28. Location of Accounts and Records American Express Financial Corporation 70100 AXP Financial Center Minneapolis, MN 55474 Item 29. Management Services Not Applicable. Item 30. Undertakings Not Applicable. SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, AXP New Dimensions Fund, Inc., certifies that it meets all of the requirements for the effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis and the State of Minnesota on the 25th day of September, 2002. AXP NEW DIMENSIONS FUND, INC. By /s/ Paula R. Meyer** -------------------- Paula R. Meyer, President By /s/ Paul D. Pearson -------------------- Paul D. Pearson, Assistant Treasurer Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 25th day of September, 2002. Signature Capacity /s/ H. Brewster Atwater, Jr.* Director ------------------------------ H. Brewster Atwater, Jr. /s/ Arne H. Carlson* Chairman of the Board -------------------- Arne H. Carlson /s/ Lynne V. Cheney* Director --------------------- Lynne V. Cheney /s/ Livio D. DeSimone* Director ----------------------- Livio D. DeSimone /s/ Ira D. Hall* Director ----------------- Ira D. Hall /s/ David R. Hubers* Director --------------------- David R. Hubers /s/ Heinz F. Hutter* Director --------------------- Heinz F. Hutter /s/ Anne P. Jones* Director ------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.* Director --------------------------- Stephen R. Lewis, Jr. /s/ William R. Pearce* Director ----------------------- William R. Pearce Director ------------------------ Alan G. Quasha Signature Capacity /s/ Alan K. Simpson* Director --------------------- Alan K. Simpson /s/ John R. Thomas* Director -------------------- John R. Thomas /s/ William F. Truscott* Director ------------------------- William F. Truscott /s/ C. Angus Wurtele* Director ---------------------- C. Angus Wurtele * Signed pursuant to Directors' Power of Attorney, dated January 9, 2002 filed electronically herewith as Exhibit (q)(1) by: /s/ Leslie L. Ogg ----------------- Leslie L. Ogg ** Signed pursuant to Officers' Power of Attorney dated September 17, 2002, filed electronically herewith as Exhibit (q)(5) by: /s/ Leslie L. Ogg ----------------- Leslie L. Ogg SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, GROWTH TRUST consents to the filing of this Amendment to the Registration Statement of AXP New Dimensions Fund, Inc. signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis and State of Minnesota on the 25th day of September, 2002. GROWTH TRUST By /s/ Paula R. Meyer**** ------------------------ Paula R. Meyer President By /s/ Paul D. Pearson --------------------- Paul D. Pearson Assistant Treasurer Pursuant to the requirements of the Securities Act, this Amendment to its Registration Statement has been signed below by the following persons in the capacities indicated on the 25th day of September, 2002. Signature Capacity /s/ H. Brewster Atwater, Jr.*** Trustee --------------------------------- H. Brewster Atwater, Jr. /s/ Arne H. Carlson*** Chairman of the Board ----------------------- Arne H. Carlson /s/ Lynne V. Cheney*** Trustee ----------------------- Lynne V. Cheney /s/ Livio D. DeSimone*** Trustee ------------------------- Livio D. DeSimone /s/ Ira D. Hall*** Trustee ----------------- Ira D. Hall /s/ David R. Hubers*** Trustee ----------------------- David R. Hubers /s/ Heinz F. Hutter*** Trustee ----------------------- Heinz F. Hutter /s/ Anne P. Jones*** Trustee --------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.*** Trustee --------------------------- Stephen R. Lewis, Jr. /s/ William R. Pearce*** Trustee ------------------------- William R. Pearce Trustee ------------------------ Alan G. Quasha /s/ Alan K. Simpson*** Trustee ----------------------- Alan K. Simpson Signature Capacity /s/ John R. Thomas*** Trustee ---------------------- John R. Thomas /s/ William F. Truscott*** Trustee ------------------------- William F. Truscott /s/ C. Angus Wurtele*** Trustee ------------------------ C. Angus Wurtele *** Signed pursuant to Trustees' Power of Attorney dated Jan. 9, 2002, filed electronically herewith as Exhibit (q)(3) by: /s/ Leslie L. Ogg ------------------ Leslie L. Ogg **** Signed pursuant to Officers' Power of Attorney dated September 18, 2002, filed electronically herewith as Exhibit (q)(6) by: /s/ Leslie L. Ogg ------------------ Leslie L. Ogg CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 66 TO REGISTRATION STATEMENT NO. 2-28529 This Post-Effective amendment comprises the following papers and documents: The facing sheet. Part A. The prospectus for AXP Growth Dimensions Fund The prospectus for AXP New Dimensions Fund Part B. Statement of Additional Information for AXP Growth Dimensions Fund Statement of Additional Information for AXP New Dimensions Fund Financial Statements for AXP Growth Dimensions Fund Financial Statements for AXP New Dimensions Fund Part C. Other information. The signatures. Exhibits