N-CSR/A 1 dimensions-ncsr.txt AXP DIMENSIONS SERIES, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR AMENDMENT TO CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-1629 ------------ AXP DIMENSIONS SERIES, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 200 AXP Financial Center, Minneapolis, Minnesota 55474 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (612) 330-9283 ----------------- Date of fiscal year end: 7/31 -------------- Date of reporting period: 7/31 -------------- AXP(R) Growth Dimensions Fund Annual Report for the Period Ended July 31, 2003 AXP Growth Dimensions Fund seeks to provide shareholders with long-term capital growth. -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- Table of Contents Fund Snapshot 3 Questions & Answers with Portfolio Management 4 The Fund's Long-term Performance 8 Investments in Securities 9 Financial Statements 12 Notes to Financial Statements 15 Independent Auditors' Report 26 Board Members and Officers 27 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- 2 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Fund Snapshot AS OF JULY 31, 2003 PORTFOLIO MANAGER Portfolio manager Gordon Fines Since 6/00 Years in industry 36 FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates A: 6/26/00 B: 6/26/00 C: 6/26/00 Y: 6/26/00 Ticker symbols A: AXDAX B: ABGDX C: AXGDX Y: -- Total net assets $202.6 million Number of holdings 85 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL SECTOR COMPOSITION Percentage of portfolio assets (pie chart) Consumer discretionary 24.2% Technology 17.0% Health care 16.4% Financials 14.6% Industrials 11.9% Energy 7.2% Consumer staples 4.3% Utilities 2.8% Short-term securities 0.6% Materials 0.5% Telecommunications 0.5% TOP TEN HOLDINGS Percentage of portfolio assets Bank of America (Banks and savings & loans) 4.1% Microsoft (Computer software & services) 3.9 Wal-Mart Stores (Retail -- general) 3.6 Amgen (Health care products) 3.5 Citigroup (Finance companies) 3.3 Viacom Cl B (Leisure time & entertainment) 3.3 3M (Multi-industry) 3.0 Anthem (Health care services) 2.6 ConocoPhillips (Energy) 2.6 Medtronic (Health care products) 2.6 For further detail about these holdings, please refer to the section entitled "Investments in Securities." Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did AXP Growth Dimensions Fund perform for fiscal year 2003? A: AXP Growth Dimensions Fund's Class A shares, excluding sales charge, gained 7.88% for the 12 months ended July 31, 2003. The Fund underperformed the 8.97% return of the Lipper Large-Cap Growth Funds Index, representing the Fund's peer group. The S&P 500 Index increased 10.64% over the same time frame. Q: What factors most significantly affected Fund performance during the annual period? A: The portfolio's conservative stance, including an emphasis on consumer cyclical companies and other sectors, helped performance during most of the annual period. However, when the equity market rose sharply in the autumn and again in the second calendar quarter, the Fund's relatively conservative stocks did not rally as much as more aggressive, less well-capitalized companies. The Fund was also underweighted in the strong performing information technology sector relative to the S&P 500 Index. Thus, while producing positive returns, the Fund underperformed its peer group and its benchmark index for the fiscal year. Among the Fund's specific stock disappointments were Microsoft and Viacom. Microsoft was a top performer during the first half of the fiscal year, but experienced a slowdown in growth during the second half along with much of the personal computer industry. Entertainment company Viacom lost ground primarily due to a slowdown in advertising spending. However, we continued to hold both of these companies in the Fund's portfolio, as each is clearly a leader in its respective industry, and we are optimistic about their prospects going forward. Northrop Grumman in the defense industry was PERFORMANCE COMPARISON For the period ended July 31, 2003 12% (bar 2) +10.64% 10% (bar 3) +8.97% 8% (bar 1) +7.88% 6% 4% 2% 0% (bar 1) AXP Growth Dimensions Fund Class A (excluding sales charge) (bar 2) S&P 500 Index (unmanaged) (bar 3) Lipper Large-Cap Growth Funds Index (see "The Fund's Long-term Performance" for Index descriptions) Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 4 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers (begin callout qoute)> The Fund has a low turnover rate compared to many of its peers, as we are focused on finding growth-oriented companies to buy and hold for the long term. (end callout qoute) another disappointment, as the high level of government spending anticipated by many was not fully realized. We reduced the Fund's holding in this stock. We did have some success, however. Fund performance was boosted by effective stock selection. For example, WalMart, Citigroup and Bank of America were strong performers for the year overall. Johnson & Johnson and 3M held up well during the first half; Amgen and Target were among the Fund's best performers during the second half. JetBlue Airways; pasta maker American Italian Pasta; auto insurance company Progressive, Brinker International (parent of Chili's restaurants), and some smaller healthcare firms like GenProbe offered compelling growth stories and benefited the Fund's yearly results.
AVERAGE ANNUAL TOTAL RETURNS as of July 31, 2003 Class A Class B Class C Class Y (Inception dates) (6/26/00) (6/26/00) (6/26/00) (6/26/00) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) 1 year +7.88% +1.67% +7.00% +3.00% +7.00% +7.00% +8.37% +8.37% Since inception -23.00% -24.46% -23.58% -24.33% -23.58% -23.58% -22.89% -22.89%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost. The performance shown for each class of shares will vary due to differences in sales charges and fees. Short term performance may be higher or lower than the figures shown. Visit americanexpress.com/funds for current information. -------------------------------------------------------------------------------- 5 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers The equity market was exceptionally volatile during fiscal year 2003. In the summer of 2002, stock markets reached four-year lows, depressing stocks of every style and capitalization, including large-cap and mid-cap growth stocks. October and November marked a vigorous market rally, led by the most beaten-up sectors of the past three years, including telecommunications and technology. After starting the new year on a positive note, the equity market then began a sustained decline, as fears surrounding the likely war with Iraq heightened and economic activity subsequently slowed. By the beginning of March, a "war relief" rally took place, as investors grew optimistic that the war would not last very long. The second calendar quarter marked the largest single quarterly gain for the S&P 500 Index in nearly five years. A significant number of corporate earnings announcements met or exceeded expectations, and earnings estimates were revised up going forward. Furthermore, the low interest rate environment and declining yields on bond investments drew more attention to equities, as investors sought higher returns. The case for owning equities was additionally strengthened by a $350 billion U.S. tax cut, an accommodative Federal Reserve Board and a declining dollar that benefited U.S. companies distributing products and services overseas. Finally, while the transition to democracy in Iraq is by no means at an end, the conclusion of active military operations provided the equity markets with a degree of geopolitical stability not seen for some time. July was a relatively neutral month for the marketplace, with the S&P 500 Index rising a modest 1.76%. Q: What changes did you make to the portfolio, and how is it currently positioned? A: AXP Growth Dimensions Fund has a low turnover rate compared to many of its peers, as we are focused on finding growth-oriented companies to buy and hold for the long term. Indeed, for most of the fiscal year, the bulk of the Fund's assets remained relatively constant. Still, we did make some opportunistic changes. Besides adding some healthy mid-cap stocks with high growth potential to the Fund, we increased our positions in the energy sector in anticipation of improving stock prices. We reduced the Fund's technology weighting, as we believed that this sector had yet to overcome the twin hurdles of low demand and overcapacity. The technology stocks that the Fund continued to hold were software-related rather than service-driven. Within the healthcare sector, we shifted away from hospitals and distribution companies -------------------------------------------------------------------------------- 6 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers toward a focus on biotechnology and medical device companies. For example, we eliminated the Fund's position in HCA, the nation's largest hospital chain, and bought Amgen, a leading biotechnology company in the fight against cancer. We also added Genzyme, Boston Scientific, St. Jude Medical and Alcon to the portfolio. Genzyme is a biotechnology company focused on rare genetic disorders, renal disease and osteoarthritis. The latter three are each medical device manufacturers. In June, we repositioned the Fund a bit, shifting the portfolio's stance to take advantage of the less risk-averse market environment. We reduced the Fund's weighting in the more defensive consumer staples sector, by cutting back on such positions as Procter & Gamble. We then redeployed those assets into industrial-related and business services companies that we believe may benefit from the eventual upturn in the economy. One such addition to the portfolio was Caterpillar, the manufacturer of construction, agricultural, mining and forestry machinery. Q: How do you intend to manage the Fund in the coming months? A: We are optimistic about the direction of the equity market going forward. A great deal of fiscal and monetary stimulus is currently in the pipeline, including tax cuts and dividend and capital gains tax reform. Such stimulus should help boost economic growth in the months ahead. What is missing so far is job growth, which is key to improving consumer confidence and consumer spending. Also, capital spending remains flat. Our focus will remain on seeking long-term growth of capital. We will continue to broadly diversify the Fund's holdings, looking for opportunities that display good fundamentals and a better-than-average potential for growth. We are particularly looking at opportunities in the casual dining segment of the restaurant industry, as we believe current supply/demand dynamics put this area in an early cycle of momentum. -------------------------------------------------------------------------------- 7 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT The Fund's Long-term Performance This chart illustrates the total value of an assumed $10,000 investment in AXP Growth Dimensions Fund Class A shares (from 7/1/00 to 7/31/03) as compared to the performance of two widely cited performance indices, the Standard & Poor's 500 Index (S&P 500 Index) and the Lipper Large-Cap Growth Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. Past performance is no guarantee of future results. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Returns do not reflect taxes payable on distributions and redemptions. Also see "Past Performance" in the Fund's current prospectus. (line chart) VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP GROWTH DIMENSIONS FUND $12,000 $9,000 (dotted line) S&P 500 Index(1) $6,000 (dashed line) Lipper Large-Cap Growth Funds Index(2) (solid line) AXP Growth Dimensions Fund Class A $3,000 7/01/00 7/00 7/01 7/02 7/03 (solid line) AXP Growth Dimensions Fund Class A $4,195 (dotted line) S&P 500 Index(1) $7,125 (dashed line) Lipper Large-Cap Growth Funds Index(2) $5,044 (1) 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. (2) The Lipper Large-Cap Growth Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Average Annual Total Returns Class A with Sales Charge as of July 31, 2003 1 year +1.67% Since inception (6/26/00) -24.46% Results for other share classes can be found on page 5. -------------------------------------------------------------------------------- 8 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Investments in Securities AXP Growth Dimensions Fund July 31, 2003 (Percentages represent value of investments compared to net assets) Common stocks (98.4%) Issuer Shares Value(a) Aerospace & defense (0.3%) Northrop Grumman 5,600 $516,544 Airlines (2.1%) JetBlue Airways 31,900(b) 1,453,364 Ryanair Holdings ADR 12,000(b,c) 514,680 Southwest Airlines 140,000 2,297,400 Total 4,265,444 Banks and savings & loans (6.3%) Bank of America 100,000 8,257,000 Wells Fargo 90,000 4,547,700 Total 12,804,700 Beverages & tobacco (3.6%) Altria Group 100,000 4,001,000 PepsiCo 70,000 3,224,900 Total 7,225,900 Broker dealers (0.5%) Lehman Brothers Holdings 17,400 1,100,898 Cellular telecommunications (0.5%) Vodafone Group ADR 50,600(c) 960,388 Chemicals (0.5%) Engelhard 42,000 1,103,760 Computer hardware (2.5%) Dell 120,000(b) 4,041,600 Hewlett-Packard 46,100 975,937 Total 5,017,537 Computer software & services (9.5%) Autodesk 65,000 972,400 Electronic Arts 6,500(b) 546,000 Intl Business Machines 36,200 2,941,250 Microsoft 300,000 7,920,000 Oracle 120,000(b) 1,440,000 Paychex 25,000 813,250 Symantec 45,000(b) 2,104,650 Synopsys 8,000(b) 500,080 VERITAS Software 66,000(b) 2,032,800 Total 19,270,430 Electronics (4.8%) Applied Materials 100,000(b) 1,950,000 Intel 150,000 3,742,500 Maxim Integrated Products 30,000 1,172,400 Teradyne 60,000(b) 987,000 Texas Instruments 100,000 1,887,000 Total 9,738,900 Energy (5.3%) Burlington Resources 10,000 461,700 ConocoPhillips 100,000 5,234,000 Devon Energy 62,100 2,941,677 EnCana 60,000(c) 2,072,400 Total 10,709,777 Energy equipment & services (1.8%) Nabors Inds 13,400(b,c) 479,720 Schlumberger 50,000 2,253,500 Weatherford Intl 25,000(b) 906,750 Total 3,639,970 Finance companies (3.3%) Citigroup 150,000 6,720,000 Financial services (0.6%) SLM 30,000 1,243,800 Food (0.7%) American Italian Pasta Cl A 34,300(b) 1,375,087 Health care products (13.7%) Alcon 25,000(c) 1,274,250 Amgen 100,000(b) 6,958,000 Barr Laboratories 8,000(b) 540,400 Boston Scientific 32,300(b) 2,042,329 Gen-Probe 22,000(b) 1,210,000 Genzyme-General Division 24,000(b) 1,210,560 Johnson & Johnson 60,000 3,107,400 Medtronic 100,000 5,150,000 Pfizer 150,000 5,004,000 St. Jude Medical 21,400(b) 1,148,110 Total 27,645,049 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Health care services (2.6%) Anthem 70,000(b) $5,285,700 Industrial transportation (0.5%) GATX 45,000 986,400 Insurance (3.7%) American Intl Group 17,300 1,110,660 Axis Capital Holdings 80,000(b,c) 2,094,400 Marsh & McLennan 20,000 992,400 Progressive 50,000 3,297,000 Total 7,494,460 Leisure time & entertainment (4.8%) Carnival 61,000 2,092,910 Harley-Davidson 25,000 1,172,000 Viacom Cl B 150,000(b) 6,528,000 Total 9,792,910 Lodging & gaming (1.0%) Intl Game Technology 80,800 2,056,360 Machinery (2.0%) Caterpillar 60,000 4,048,200 Media (7.5%) Amazon.com 60,000(b) 2,503,200 Cendant 125,000(b) 2,243,750 Citadel Broadcasting 12,500(b) 237,500 eBay 20,000(b) 2,144,000 Gannett 14,000 1,075,620 InterActiveCorp 108,700(b) 4,399,089 Liberty Media Cl A 45,000(b) 499,050 Scripps (EW) Cl A 12,200 1,012,112 Univision Communications Cl A 35,100(b) 1,095,120 Total 15,209,441 Multi-industry (6.9%) 3M 43,100 6,042,620 Danaher 15,500 1,119,100 General Electric 160,000 4,550,400 Harman Intl Inds 14,500 1,212,200 Tyco Intl 60,000(c) 1,116,000 Total 14,040,320 Restaurants (2.6%) Brinker Intl 57,700(b) 2,019,500 McDonald's 54,700 1,258,647 Outback Steakhouse 26,000 971,100 Starbucks 40,000(b) 1,093,200 Total 5,342,447 Retail -- general (8.0%) Best Buy 45,000(b) 1,964,250 Home Depot 50,000 1,560,000 Target 130,000 4,981,600 Wal-Mart Stores 130,000 7,268,300 Williams-Sonoma 12,700(b) 358,775 Total 16,132,925 Utilities -- electric (2.8%) Dominion Resources 60,000 3,606,000 Public Service Enterprise Group 50,000 2,037,500 Total 5,643,500 Total common stocks (Cost: $194,691,832) $199,370,847 Short-term securities (0.6%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Natl Mtge Assn Disc Nts 08-15-03 0.98% $800,000 $799,673 08-27-03 0.90 500,000 499,672 Total short-term securities (Cost: $1,299,370) $1,299,345 Total investments in securities (Cost: $195,991,202)(d) $200,670,192 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP GROWTH DIMENSIONS FUND -- 2003 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, 2003, the value of foreign securities represented 4.2% of net assets. (d) At July 31, 2003, the cost of securities for federal income tax purposes was $199,018,842 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 15,868,129 Unrealized depreciation (14,216,779) ----------- Net unrealized appreciation $ 1,651,350 ------------ -------------------------------------------------------------------------------- 11 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Growth Dimensions Fund July 31, 2003 Assets Investments in securities, at value (Note 1) (identified cost $195,991,202) $ 200,670,192 Cash in bank on demand deposit 40,300 Capital shares receivable 2,538 Dividends and accrued interest receivable 141,110 Receivable for investment securities sold 2,569,278 --------- Total assets 203,423,418 ----------- Liabilities Capital shares payable 15,907 Payable for investment securities purchased 695,100 Accrued investment management services fee 2,847 Accrued distribution fee 2,745 Accrued transfer agency fee 1,703 Accrued administrative services fee 177 Other accrued expenses 55,064 ------ Total liabilities 773,543 ------- Net assets applicable to outstanding capital stock $ 202,649,875 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 931,568 Additional paid-in capital 449,249,821 Accumulated net realized gain (loss) (Note 6) (252,210,504) Unrealized appreciation (depreciation) on investments 4,678,990 --------- Total -- representing net assets applicable to outstanding capital stock $ 202,649,875 ============= Net assets applicable to outstanding shares: Class A $ 135,984,753 Class B $ 62,297,656 Class C $ 4,340,427 Class Y $ 27,039 Net asset value per share of outstanding capital stock: Class A shares 62,022,743 $ 2.19 Class B shares 29,094,696 $ 2.14 Class C shares 2,027,041 $ 2.14 Class Y shares 12,296 $ 2.20 ------ -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 12 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT
Statement of operations AXP Growth Dimensions Fund Year ended July 31, 2003 Investment income Income: Dividends $ 2,473,571 Interest 158,293 Fee income from securities lending (Note 3) 3,808 Less foreign taxes withheld (10,739) ------- Total income 2,624,933 --------- Expenses (Note 2): Investment management services fee 1,061,017 Distribution fee Class A 328,802 Class B 623,677 Class C 40,386 Transfer agency fee 653,697 Incremental transfer agency fee Class A 46,616 Class B 40,560 Class C 3,240 Service fee -- Class Y 30 Administrative services fees and expenses 67,761 Compensation of board members 8,383 Custodian fees 20,700 Printing and postage 100,532 Registration fees 24,406 Audit fees 18,000 Other 12,455 ------ Total expenses 3,050,262 Expenses waived/reimbursed by AEFC (Note 2) (269,194) -------- 2,781,068 Earnings credits on cash balances (Note 2) (3,754) ------ Total net expenses 2,777,314 --------- Investment income (loss) -- net (152,381) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (32,419,276) Options contracts written (Note 5) 11,000 ------ Net realized gain (loss) on investments (32,408,276) Net change in unrealized appreciation (depreciation) on investments 46,531,710 ---------- Net gain (loss) on investments 14,123,434 ---------- Net increase (decrease) in net assets resulting from operations $ 13,971,053 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets AXP Growth Dimensions Fund Year ended July 31, 2003 2002 Operations Investment income (loss) -- net $ (152,381) $ (1,333,138) Net realized gain (loss) on investments (32,408,276) (115,630,156) Net change in unrealized appreciation (depreciation) on investments 46,531,710 30,045,770 ---------- ---------- Net increase (decrease) in net assets resulting from operations 13,971,053 (86,917,524) ---------- ----------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 31,462,802 60,095,890 Class B shares 11,102,284 29,255,612 Class C shares 946,436 1,991,039 Class Y shares 52,827 -- Payments for redemptions Class A shares (47,121,296) (93,339,189) Class B shares (Note 2) (20,999,702) (41,489,853) Class C shares (Note 2) (1,213,685) (1,923,169) Class Y shares (53,609) (7,084) ------- ------ Increase (decrease) in net assets from capital share transactions (25,823,943) (45,416,754) ----------- ----------- Total increase (decrease) in net assets (11,852,890) (132,334,278) Net assets at beginning of year 214,502,765 346,837,043 ----------- ----------- Net assets at end of year $202,649,875 $ 214,502,765 ============ =============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Notes to Financial Statements AXP Growth Dimensions Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Dimensions Series, Inc. (formerly 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 Dimensions Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund invests primarily in equity securities 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. -------------------------------------------------------------------------------- 15 -- AXP GROWTH DIMENSIONS FUND -- 2003 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. -------------------------------------------------------------------------------- 16 -- AXP GROWTH DIMENSIONS FUND -- 2003 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 $152,381 resulting in a net reclassification adjustment to decrease paid-in capital by $152,381. The tax character of distributions paid for the years indicated is as follows: Year ended July 31, 2003 2002 Class A Distributions paid from: Ordinary income $-- $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- As of July 31, 2003, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated long-term gain (loss) $(249,177,951) Unrealized appreciation (depreciation) $ 1,646,437 -------------------------------------------------------------------------------- 17 -- AXP GROWTH DIMENSIONS FUND -- 2003 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 amortization of premium and discount using the effective interest method, 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. Prior to Dec. 1, 2002, the maximum adjustment was 0.12% of the Fund's average daily net assets after deducting 1% from the performance difference. If the performance difference was less than 1%, the adjustment was zero. On Nov. 13, 2002, shareholders approved modification of the performance incentive adjustment calculation by adjusting the performance difference intervals, while retaining the previous maximum adjustment and reducing the amount of the performance difference for which no adjustment is made to 0.50%. The effect of the modifications began Dec. 1, 2002. The adjustment increased the fee by $39,400 for the year ended July 31, 2003. 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 based on the combined net assets of the Fund and AXP New Dimensions Fund. 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. -------------------------------------------------------------------------------- 18 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT 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 $19.50 o Class B $20.50 o Class C $20.00 o Class Y $17.50 In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. Under terms of a prior agreement that ended April 30, 2003, the Fund paid a transfer agency fee at an annual rate per shareholder account of $19 for Class A, $20 for Class B, $19.50 for Class C and $17 for Class Y. In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the account is purged from the transfer agent system generally within one year. 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 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 $402,887 for Class A, $112,853 for Class B and $716 for Class C for the year ended July 31, 2003. For the year ended July 31, 2003, AEFC and American Express Financial Advisors Inc. waived certain fees and expenses to 1.15% for Class A, 1.91% for Class B, 1.91% for Class C and 0.95% for Class Y of the Fund's average daily net assets. Beginning Aug. 1, 2003, AEFC and American Express Financial Advisors Inc. have agreed to waive certain fees and expenses until July 31, 2004. Under this agreement, total expenses will not exceed 1.35% for Class A, 2.11% for Class B, 2.11% for Class C and 1.19% for Class Y of the Fund's average daily net assets. During the year ended July 31, 2003, the Fund's custodian and transfer agency fees were reduced by $3,754 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. -------------------------------------------------------------------------------- 19 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $97,315,228 and $103,152,994, respectively, for the year ended July 31, 2003. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $54,276 for the year ended July 31, 2003. Income from securities lending amounted to $3,808 for the year ended July 31, 2003. 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, 2003 Class A Class B Class C Class Y Sold 15,693,438 5,672,236 483,044 25,567 Issued for reinvested distributions -- -- -- -- Redeemed (23,726,742) (10,728,324) (625,035) (25,567) ----------- ----------- -------- ------- Net increase (decrease) (8,033,304) (5,056,088) (141,991) -- ----------- ----------- -------- ------- 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) ----------- ---------- ------ ------
5. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows: Year ended July 31, 2003 Calls Contracts Premiums Balance July 31, 2002 -- $ -- Opened 110 11,000 Closed -- -- Exercised -- -- Expired (110) (11,000) ---- ------- Balance July 31, 2003 -- $ -- ---- -------- -------------------------------------------------------------------------------- 20 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT 6. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $249,177,951 as of July 31, 2003, that will expire in 2008 through 2012 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. 7. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The agreement went into effect Sept. 24, 2002. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the LIBOR plus 0.50%, the IBOR plus 0.50% or the higher of the Federal Funds Rate plus 0.25% and the Prime Lending Rate. Borrowings are payable within 60 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 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $200 million with U.S. Bank, N.A. The Fund had no borrowings outstanding during the year ended July 31, 2003. -------------------------------------------------------------------------------- 21 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT 8. 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, 2003 2002 2001 2000(b) Net asset value, beginning of period $2.03 $2.75 $ 4.87 $4.92 Income from investment operations: Net investment income (loss) -- (.01) (.01) -- Net gains (losses) (both realized and unrealized) .16 (.71) (2.11) (.05) Total from investment operations .16 (.72) (2.12) (.05) Net asset value, end of period $2.19 $2.03 $ 2.75 $4.87 Ratios/supplemental data Net assets, end of period (in millions) $136 $142 $232 $22 Ratio of expenses to average daily net assets(c) 1.15%(d) 1.10% 1.12%(d) 1.10%(d),(h) Ratio of net investment income (loss) to average daily net assets .18% (.20%) (.16%) .37%(h) Portfolio turnover rate (excluding short-term securities) 52% 69% 67% 2% Total return(i) 7.88% (26.18%) (43.53%) (1.02%)(j)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 22 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended July 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $2.00 $2.73 $ 4.87 $4.92 Income from investment operations: Net investment income (loss) (.01) (.03) (.02) -- Net gains (losses) (both realized and unrealized) .15 (.70) (2.12) (.05) Total from investment operations .14 (.73) (2.14) (.05) Net asset value, end of period $2.14 $2.00 $ 2.73 $4.87 Ratios/supplemental data Net assets, end of period (in millions) $62 $68 $109 $11 Ratio of expenses to average daily net assets(c) 1.91%(e) 1.88% 1.89%(e) 1.91%(e),(h) Ratio of net investment income (loss) to average daily net assets (.58%) (.97%) (.92%) (.48%)(h) Portfolio turnover rate (excluding short-term securities) 52% 69% 67% 2% Total return(i) 7.00% (26.74%) (43.94%) (1.02%)(j)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 23 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $2.00 $2.73 $ 4.87 $4.92 Income from investment operations: Net investment income (loss) (.01) (.03) (.02) -- Net gains (losses) (both realized and unrealized) .15 (.70) (2.12) (.05) Total from investment operations .14 (.73) (2.14) (.05) Net asset value, end of period $2.14 $2.00 $ 2.73 $4.87 Ratios/supplemental data Net assets, end of period (in millions) $4 $4 $6 $1 Ratio of expenses to average daily net assets(c) 1.91%(f) 1.88% 1.89%(f) 1.91%(f),(h) Ratio of net investment income (loss) to average daily net assets (.59%) (.97%) (.94%) (.48%)(h) Portfolio turnover rate (excluding short-term securities) 52% 69% 67% 2% Total return(i) 7.00% (26.74%) (43.94%) (1.02%)(j)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 24 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $2.03 $2.76 $ 4.88 $4.92 Income from investment operations: Net investment income (loss) .01 -- -- -- Net gains (losses) (both realized and unrealized) .16 (.73) (2.12) (.04) Total from investment operations .17 (.73) (2.12) (.04) Net asset value, end of period $2.20 $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) .95%(g) .94% .95%(g) .81%(g),(h) Ratio of net investment income (loss) to average daily net assets .34% .01% (.03%) .58%(h) Portfolio turnover rate (excluding short-term securities) 52% 69% 67% 2% Total return(i) 8.37% (26.45%) (43.44%) (.81%)(j)
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 waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class A would have been 1.28%, 1.16% and 2.32% for the periods ended July 31, 2003, 2001 and 2000, respectively. (e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class B would have been 2.04%, 1.92% and 3.40% for the periods ended July 31, 2003, 2001 and 2000, respectively. (f) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class C would have been 2.04%, 1.92% and 3.40% for the periods ended July 31, 2003, 2001 and 2000, respectively. (g) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class Y would have been 1.12%, 1.00% and 2.12% for the periods ended July 31, 2003, 2001 and 2000, respectively. (h) Adjusted to an annual basis. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. -------------------------------------------------------------------------------- 25 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Independent Auditors' Report THE BOARD AND SHAREHOLDERS AXP DIMENSIONS SERIES, 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 Dimensions Series, Inc.) as of July 31, 2003, 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, 2003 and the financial highlights for each of the years in the three-year period ended July 31, 2003 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, 2003, 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 and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Growth Dimensions Fund as of July 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 26 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT Board Members and Officers Shareholders elect a board that oversees the Fund's operations. The board appoints officers who are responsible for day-to-day business decisions based on policies set by the board. The following is a list of the Fund's board members. Each member oversees 15 Master Trust portfolios and 83 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, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service ---------------------------------- ------------------ ------------------------------------- --------------------------------- Arne H. Carlson Board member Chair, Board Services Corporation 901 S. Marquette Ave. since 1999 (provides administrative services Minneapolis, MN 55402 to boards). Former Governor of Age 68 Minnesota ---------------------------------- ------------------ ------------------------------------- --------------------------------- Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan 901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc. Minneapolis, MN 55402 construction) since 1998 (construction Age 65 materials/chemicals) ---------------------------------- ------------------ ------------------------------------- --------------------------------- Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated 30 Seventh Street East since 2001 Chief Executive Officer, Minnesota (commodity merchants and Suite 3050 Mining and Manufacturing (3M) processors), General Mills, St. Paul, MN 55101-4901 Inc. (consumer foods), Vulcan Age 69 Materials Company (construction materials/ chemicals), Milliken & Company (textiles and chemicals), and Nexia Biotechnologies, Inc. ---------------------------------- ------------------ ------------------------------------- --------------------------------- Heinz F. Hutter* Board member Retired President and Chief 901 S. Marquette Ave. since 1994 Operating Officer, Cargill, Minneapolis, MN 55402 Incorporated (commodity merchants Age 74 and processors) ---------------------------------- ------------------ ------------------------------------- --------------------------------- Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 68 ---------------------------------- ------------------ ------------------------------------- --------------------------------- Stephen R. Lewis, Jr.** Board member Retired President and Professor of Valmont Industries, Inc. 901 S. Marquette Ave. since 2002 Economics, Carleton College (manufactures irrigation Minneapolis, MN 55402 systems) Age 64 ---------------------------------- ------------------ ------------------------------------- --------------------------------- Alan G. Quasha Board member President, Quadrant Management, Compagnie Financiere Richemont 901 S. Marquette Ave. since 2002 Inc. (management of private AG (luxury goods), Harken Minneapolis, MN 55402 equities) Energy Corporation (oil and gas Age 53 exploration) and SIRIT Inc. (radio frequency identification technology) ---------------------------------- ------------------ ------------------------------------- ---------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund and AXP Partners Aggressive Growth Fund by reason of being a security holder of J P Morgan Chase & Co., which has a 45% interest in American Century Companies, Inc., the parent company of the subadviser of two of the AXP Partners Funds, American Century Investment Management, Inc. ** Interested person of AXP Partners International Aggressive Growth Fund by reason of being a security holder of FleetBoston Financial Corporation, parent company of Liberty Wanger Asset Management, L.P., one of the fund's subadvisers. -------------------------------------------------------------------------------- 27 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT
Independent Board Members (continued) Name, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service --------------------------------- ------------------- ------------------------------------- --------------------------------- Alan K. Simpson Board member Former three-term United States Biogen, Inc. 1201 Sunshine Ave. since 1997 Senator for Wyoming (biopharmaceuticals) Cody, WY 82414 Age 71 --------------------------------- ------------------- ------------------------------------- --------------------------------- Alison Taunton-Rigby Board member President, Forester Biotech since 901 S. Marquette Ave. since 2002 2000. Former President and CEO, Minneapolis, MN 55402 Aquila Biopharmaceuticals, Inc. Age 59 --------------------------------- ------------------- ------------------------------------- --------------------------------- Board Members Affiliated with AEFC*** Name, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service --------------------------------- ------------------- ------------------------------------- --------------------------------- Barbara H. Fraser Board member Executive Vice President - AEFA 1546 AXP Financial Center since 2002 Products and Corporate Marketing of Minneapolis, MN 55474 AEFC since 2002. President - Age 53 Travelers Check Group, American Express Company, 2001-2002. Management Consultant, Reuters, 2000-2001. Managing Director - International Investments, Citibank Global, 1999-2000. Chairman and CEO, Citicorp Investment Services and Citigroup Insurance Group, U.S., 1998-1999 --------------------------------- ------------------- ------------------------------------- --------------------------------- Stephen W. Roszell Board member Senior Vice President - 50238 AXP Financial Center since 2002, Vice Institutional Group of AEFC Minneapolis, MN 55474 President since Age 54 2002 --------------------------------- ------------------- ------------------------------------- --------------------------------- William F. Truscott Board member Senior Vice President - Chief 53600 AXP Financial Center since 2001, Vice Investment Officer of AEFC since Minneapolis, MN 55474 President since 2001. Former Chief Investment Age 42 2002 Officer and Managing Director, Zurich Scudder Investments --------------------------------- ------------------- ------------------------------------- ---------------------------------
*** Interested person by reason of being an officer, director and/or employee of AEFC. -------------------------------------------------------------------------------- 28 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Roszell, who is vice president, and Mr. Truscott, who is vice president, the Fund's other officers are:
Other Officers Name, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service --------------------------------- ------------------- ------------------------------------- --------------------------------- Jeffrey P. Fox Treasurer since Vice President - Investment 50005 AXP Financial Center 2002 Accounting, AEFC, since 2002; Vice Minneapolis, MN 55474 President - Finance, American Age 48 Express Company, 2000-2002; Vice President - Corporate Controller, AEFC, 1996-2000 --------------------------------- ------------------- ------------------------------------- --------------------------------- Paula R. Meyer President since Senior Vice President and General 596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC, since Minneapolis, MN 55474 2002; Vice President and Managing Age 49 Director - American Express Funds, AEFC, 2000-2002; Vice President, AEFC, 1998-2000 --------------------------------- ------------------- ------------------------------------- --------------------------------- Leslie L. Ogg Vice President, President of Board Services 901 S. Marquette Ave. General Counsel, Corporation Minneapolis, MN 55402 and Secretary Age 64 since 1978 --------------------------------- ------------------- ------------------------------------- ---------------------------------
The SAI has additional information about the Fund's directors and is available, without charge, upon request by calling (800) 862-7919. -------------------------------------------------------------------------------- 29 -- AXP GROWTH DIMENSIONS FUND -- 2003 ANNUAL REPORT The policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities can be found in the Fund's Statement of Additional Information (SAI) which is available (i) without charge, upon request, by calling toll-free (800) 862-7919; (ii) on the American Express Company Web site at americanexpress.com/funds; and (iii) on the Securities and Exchange Commission Web site at http://www.sec.gov. -------------------------------------------------------------------------------- (logo) AMERICAN EXPRESS (R) -------------------------------------------------------------------------------- American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) New Dimensions(R) Fund Annual Report for the Period Ended July 31, 2003 AXP New Dimensions Fund seeks to provide shareholders with long-term growth of capital. -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- Table of Contents Fund Snapshot 3 Questions & Answers with Portfolio Management 4 The Fund's Long-term Performance 8 Investments in Securities 9 Financial Statements (Portfolio) 12 Notes to Financial Statements (Portfolio) 15 Independent Auditors' Report (Portfolio) 19 Financial Statements (Fund) 20 Notes to Financial Statements (Fund) 23 Independent Auditors' Report (Fund) 31 Federal Income Tax Information 32 Board Members and Officers 33 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- 2 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Fund Snapshot AS OF JULY 31, 2003 PORTFOLIO MANAGER Portfolio manager Gordon Fines Since 1/91 Years in industry 36 FUND OBJECTIVE For investors seeking long-term growth of capital. Inception dates A: 8/1/68 B: 3/20/95 C: 6/26/00 Y: 3/20/95 Ticker symbols A: INNDX B: INDBX C: ANDCX Y: IDNYX Total net assets $16.846 billion Number of holdings 108 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL SECTOR COMPOSITION Percentage of portfolio assets (pie chart) Consumer discretionary 20.1% Technology 17.0% Financials 15.8% Health care 13.8% Industrials 12.1% Energy 6.9% Consumer staples 4.9% Short-term securities 3.3% Utilities 2.1% Telecommunications 1.0% Other 1.5% TOP TEN HOLDINGS Percentage of portfolio assets Bank of America (Banks and savings & loans) 4.0% Wal-Mart Stores (Retail -- general) 4.0 Microsoft (Computer software & services) 3.7 Amgen (Health care products) 3.5 Viacom Cl B (Leisure time & entertainment) 3.4 Citigroup (Finance companies) 3.3 3M (Multi-industry) 2.9 UnitedHealth Group (Health care services) 2.8 Pfizer (Health care products) 2.5 Target (Retail -- general) 2.4 For further detail about these holdings, please refer to the section entitled "Investments in Securities." Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did AXP New Dimensions Fund perform for fiscal year 2003? A: AXP New Dimensions Fund's Class A shares (excluding sales charge) gained 9.47% for the 12 months ended July 31, 2003, outperforming the 8.97% return of Lipper Large-Cap Growth Funds Index, representing the Fund's peer group. The S&P 500 Index increased 10.64% over the same period. Q: What factors most significantly affected Fund performance during the annual period? A: Effective stock selection helped the Fund outpace its peer group for the 2003 fiscal year. For example, WalMart, Citigroup and Bank of America were strong performers for the year overall. Johnson & Johnson and 3M held up well during the first half; Amgen and Target were among the Fund's best performers during the second half. The portfolio's conservative stance, including an emphasis on consumer cyclical companies, also helped performance during most of the annual period. However, when the equity market rose sharply in the autumn and again in the second calendar quarter, the Fund's relatively conservative stocks did not rally as much as more aggressive, smaller companies. The Fund was also underweighted in the strongly performing information technology sector relative to the S&P 500 Index. Thus, the Fund underperformed its benchmark index. The equity market was exceptionally volatile during fiscal year 2003. During the summer, stock markets reached four-year lows, depressing stocks of every style and capitalization, including large-cap growth stocks. October and November marked a vigorous market rally, led by the most beaten-up sectors of the past three years, including PERFORMANCE COMPARISON For the period ended July 31, 2003 12% (bar 2) (bar 1) +10.64% 10% +9.47% (bar 3) +8.97% 8% 6% 4% 2% 0% (bar 1) AXP New Dimensions Fund Class A (excluding sales charge) (bar 2) S&P 500 Index (unmanaged) (bar 3) Lipper Large-Cap Growth Funds Index (see "The Fund's Long-term Performance" for Index descriptions) Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 4 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers (being callout quote)> We will continue to look for dividend-paying stocks of companies that can maintain earnings growth through varying market cycles.(end callout quote) telecommunications and technology. After starting the new year on a positive note, the equity market then began a sustained decline, as fears surrounding the likely war with Iraq heightened and economic activity subsequently slowed. By the beginning of March, the market rallied as investors grew optimistic about a military victory. The second calendar quarter marked the largest single quarterly gain for the S&P 500 Index in nearly five years. A significant number of corporate earnings announcements met or exceeded expectations, and earnings estimates were revised upward. Furthermore, the low interest rate environment and declining yields on bond investments drew more attention to equities, as investors sought higher returns. The case for
AVERAGE ANNUAL TOTAL RETURNS as of July 31, 2003 Class A Class B Class C Class Y (Inception dates) (8/1/68) (3/20/95) (6/26/00) (3/20/95) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) 1 year +9.47% +3.18% +8.63% +4.63% +8.59% +8.59% +9.64% +9.64% 5 years +0.14% -1.04% -0.62% -0.78% N/A N/A +0.29% +0.29% 10 years +9.89% +9.24% N/A N/A N/A N/A N/A N/A Since inception N/A N/A +9.58% +9.58% -12.56% -12.56% +10.58% +10.58%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost. The performance shown for each class of shares will vary due to differences in sales charges and fees. Short term performance may be higher or lower than the figures shown. Visit americanexpress.com/funds for current information. -------------------------------------------------------------------------------- 5 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers owning equities was additionally strengthened by a $350 billion U.S. tax cut, an accommodative Federal Reserve Board, and a declining dollar that benefited U.S. companies distributing products and services overseas. Finally, while the transition to democracy in Iraq is by no means at an end, the conclusion of active military operations provided the equity markets with a degree of geopolitical stability not seen for some time. July was a relatively neutral month for the marketplace, with the S&P 500 Index rising a modest 1.76%. Among the Fund's specific stock disappointments were Microsoft and Viacom. Microsoft was a top performer during the first half of the fiscal year, but experienced a slowdown in growth during the second half along with much of the personal computer industry. Entertainment company Viacom lost ground primarily due to a slowdown in advertising spending. However, we continued to hold both of these companies in the Fund's portfolio, as each is clearly a leader in its respective industry, and we are optimistic about their prospects going forward. Lockheed Martin in the defense industry was another disappointment, as the high level of government spending anticipated by many was not fully realized. We reduced the Fund's holding in this stock. Q: What changes did you make to the portfolio and how is it currently positioned? A: The Fund has historically had a low turnover rate compared to many of its large-cap growth peers, and we upheld this tradition in fiscal year 2003. Indeed, for most of the fiscal year, the bulk of the Fund's assets remained relatively constant. However, we slightly increased our positions in the energy sector in anticipation of improving stock prices. Within the healthcare sector, we shifted away from hospitals and distribution companies toward a focus on biotechnology and medical device companies. For example, we eliminated the Fund's position in HCA, the nation's largest hospital chain, and bought Amgen, a leading biotechnology company in the fight against cancer. We also added Genzyme and Stryker to the portfolio. -------------------------------------------------------------------------------- 6 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Questions & Answers Genzyme is a biotechnology company focused on rare genetic disorders, renal disease and osteoarthritis. Stryker is a surgical and medical device manufacturer. In June, we repositioned the Fund a bit, shifting the portfolio's stance to take advantage of the less risk-averse market environment. We moderately increased the Fund's weighting in the technology sector, with a focus on software-related companies. We also reduced the Fund's weighting in the more defensive consumer staples sector, by cutting back on such positions as Procter & Gamble and eliminating Budweiser. We then redeployed those assets into industrial-related and business services companies that we believe may benefit from the eventual upturn in the economy. One such addition to the portfolio was Caterpillar, the manufacturer of construction, agricultural, mining and forestry machinery. Q: How do you intend to manage the Fund in the coming months? A: We are optimistic about the equity market going forward. A great deal of fiscal and monetary stimulus is currently in the pipeline, including low interest rates, tax cuts and dividend and capital gains tax reform. Such stimulus should help boost economic growth in the months ahead. What is missing so far is job growth, which is key to improving consumer confidence and consumer spending. Also, capital spending remains flat, as businesses remain reluctant to hire or invest aggressively. Our focus will remain on seeking long-term growth of capital. We will continue to broadly diversify the Fund's holdings, looking for large-cap opportunities that display good fundamentals and a better-than-average potential for growth. We will also continue to look for dividend-paying stocks of companies that can maintain earnings growth through varying market cycles. -------------------------------------------------------------------------------- 7 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT The Fund's Long-term Performance This chart illustrates the total value of an assumed $10,000 investment in AXP New Dimensions Fund Class A shares (from 8/1/93 to 7/31/03) as compared to the performance of two widely cited performance indices, the Standard & Poor's 500 Index (S&P 500 Index) and the Lipper Large-Cap Growth Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. Past performance is no guarantee of future results. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Returns do not reflect taxes payable on distributions and redemptions. Also see "Past Performance" in the Fund's current prospectus. (line chart) VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP NEW DIMENSIONS FUND $42,000 $31,500 (dotted line) S&P 500 Index(1) (solid line) AXP New Dimensions Fund Class A $21,000 (dashed line) Lipper Large-Cap Growth Funds Index(2) $10,500 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 (solid line) AXP New Dimensions Fund Class A $24,211 (dotted line) S&P 500 Index(1) $26,601 (dashed line) Lipper Large-Cap Growth Funds Index(2) $20,678 (1) 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. (2) The Lipper Large-Cap Growth Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Average Annual Total Returns Class A with Sales Charge as of July 31, 2003 1 year +3.18% 5 years -1.04% 10 years +9.24% Results for other share classes can be found on page 5. -------------------------------------------------------------------------------- 8 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Investments in Securities Growth Trends Portfolio July 31, 2003 (Percentages represent value of investments compared to net assets) Common stocks (97.0%) Issuer Shares Value(a) Aerospace & defense (0.5%) Lockheed Martin 100,000 $5,234,000 United Technologies 1,000,000 75,230,000 Total 80,464,000 Airlines (1.3%) Southwest Airlines 13,300,000 218,253,000 Banks and savings & loans (5.8%) Bank of America 8,200,000 677,074,000 Wells Fargo 6,000,000 303,180,000 Total 980,254,000 Beverages & tobacco (3.9%) Altria Group 9,000,000 360,090,000 Anheuser-Busch 2,000,000 103,640,000 PepsiCo 4,100,000 188,887,000 Total 652,617,000 Broker dealers (0.6%) Morgan Stanley 2,200,000 104,368,000 Cellular telecommunications (0.5%) Vodafone Group ADR 4,500,000(c) 85,410,000 Chemicals (0.6%) Air Products & Chemicals 2,000,000 92,960,000 Computer hardware (3.7%) Cisco Systems 12,000,000(b) 234,240,000 Dell 9,200,000(b) 309,856,000 Hewlett-Packard 3,820,000 80,869,400 Total 624,965,400 Computer software & services (8.8%) Electronic Arts 200,000(b) 16,800,000 Intl Business Machines 2,990,000 242,937,500 Microsoft 24,000,000 633,600,000 Oracle 8,000,000(b) 96,000,000 Paychex 2,000,000 65,060,000 State Street 4,000,000 183,600,000 Symantec 1,800,000(b) 84,186,000 VERITAS Software 5,000,000(b) 154,000,000 Total 1,476,183,500 Electronics (4.5%) Analog Devices 1,200,000(b) 45,540,000 Applied Materials 7,500,000(b) 146,250,000 Intel 11,000,000 274,450,000 Maxim Integrated Products 2,600,000 101,608,000 Texas Instruments 10,000,000 188,700,000 Total 756,548,000 Energy (5.6%) Burlington Resources 1,000,000 46,170,000 ChevronTexaco 5,500,000 396,605,000 ConocoPhillips 4,000,000 209,360,000 Exxon Mobil 8,000,000 284,640,000 Total 936,775,000 Energy equipment & services (1.4%) Schlumberger 4,300,000 193,801,000 Weatherford Intl 1,000,000(b) 36,270,000 Total 230,071,000 Finance companies (3.3%) Citigroup 912,500,000 560,000,000 Financial services (3.1%) Fannie Mae 1,000,000 64,040,000 MBNA 4,000,000 89,160,000 SLM 9,000,000 373,140,000 Total 526,340,000 Health care products (11.2%) Amgen 8,500,000(b) 591,430,000 Forest Laboratories 1,800,000(b) 86,184,000 Genzyme-General Division 1,000,000(b) 50,440,000 Johnson & Johnson 5,000,000 258,950,000 Medtronic 7,000,000 360,500,000 Pfizer 12,500,000 417,000,000 Stryker 700,000 53,564,000 Teva Pharmaceutical Inds ADR 800,000(c) 45,872,000 Total 1,863,940,000 Health care services (2.8%) UnitedHealth Group 9,000,000 468,810,000 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Household products (1.0%) Procter & Gamble 2,000,000 $175,740,000 Indexes (1.5%) Nasdaq-100 Index Tracking 8,000,000(b) 254,240,000 Industrial transportation (1.2%) Union Pacific 2,500,000 152,350,000 United Parcel Service Cl B 700,000 44,156,000 Total 196,506,000 Insurance (3.0%) American Intl Group 4,000,000 256,800,000 Marsh & McLennan 5,000,000 248,100,000 Total 504,900,000 Leisure time & entertainment (3.4%) Viacom Cl B 13,100,000(b) 570,112,000 Lodging & gaming (2.2%) Intl Game Technology 6,800,000 173,060,000 Marriott Intl Cl A 5,000,000 205,500,000 Total 378,560,000 Machinery (3.5%) Caterpillar 5,664,800 382,204,056 Illinois Tool Works 3,000,000 208,950,000 Total 591,154,056 Media (5.1%) Cendant 9,000,000(b) 161,550,000 eBay 1,800,000(b) 192,960,000 Gannett 2,000,000 153,660,000 InterActiveCorp 8,700,000(b) 351,759,000 Total 859,929,000 Metals (0.6%) Nucor 2,000,000 98,640,000 Multi-industry (5.7%) 3M 3,500,000 490,700,000 General Electric 14,000,000 398,160,000 Tyco Intl 4,000,000(c) 74,400,000 Total 963,260,000 Paper & packaging (0.3%) Intl Paper 1,500,000 58,680,000 Restaurants (0.8%) McDonald's 6,000,000 138,060,000 Retail -- general (8.6%) Best Buy 2,400,000(b) 104,760,000 Costco Wholesale 3,000,000(b) 111,150,000 Home Depot 4,000,000 124,800,000 Target 10,700,000 410,024,000 Wal-Mart Stores 12,000,000 670,920,000 Williams-Sonoma 1,000,000(b) 28,250,000 Total 1,449,904,000 Utilities -- electric (2.1%) Dominion Resources 6,000,000 360,600,000 Utilities -- telephone (0.5%) Verizon Communications 2,500,000 87,150,000 Total common stocks (Cost: $14,308,655,782) $16,345,393,956 Short-term securities (3.4%) Issuer Coupon Principal Value(a) rate amount U.S. government agencies (0.7%) Federal Home Loan Bank Disc Nt 09-26-03 1.02% $50,000,000 $49,916,601 Federal Natl Mtge Assn Disc Nts 08-06-03 1.16 48,100,000 48,091,693 08-20-03 0.96 25,000,000 24,988,248 Total 122,996,542 Commercial paper (2.6%) AEGON Funding 10-15-03 1.03 17,400,000(d) 17,361,797 Amsterdam Funding 08-08-03 1.05 12,500,000(d) 12,497,084 Barton Capital 08-14-03 1.03 6,600,000(d) 6,597,356 CAFCO LLC 08-25-03 1.03 18,600,000(d) 18,586,695 09-09-03 1.04 25,000,000(d) 24,971,112 Charta LLC 09-18-03 1.07 10,700,000(d) 10,684,417 Ciesco LLC 09-03-03 1.04 10,500,000 10,489,687 Corporate Receivables 08-01-03 0.94 11,600,000(d) 11,599,697 Credit Agricole Indosuez Yankee 08-05-03 1.02 20,700,000 20,697,068 CXC 08-07-03 0.98 22,800,000(d) 22,795,655 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Short-term securities (continued) Issuer Coupon Principal Value(a) rate amount Commercial paper (cont.) Danske 08-13-03 1.05% $28,000,000 $27,989,385 Delaware Funding 08-14-03 1.03 3,089,000(d) 3,087,763 Dexia Bank (Delaware) LLC 08-22-03 1.05 17,400,000 17,388,835 Edison Asset Securitization 10-09-03 1.03 17,644,000(d) 17,608,320 Fairway Finance 08-15-03 1.04 15,679,000(d) 15,672,206 08-22-03 1.04 14,400,000(d) 14,390,848 Falcon Asset Securitization 08-29-03 1.07 17,358,000(d) 17,343,038 Galaxy Funding 08-05-03 1.06 18,000,000(d) 17,997,350 Greyhawk Funding 09-04-03 1.03 12,500,000(d) 12,487,482 Northern Rock 08-04-03 1.23 7,000,000(d) 6,999,043 Old Line Funding 09-05-03 1.04 5,400,000(d) 5,394,384 Park Avenue Receivables 08-12-03 1.02 24,100,000(d) 24,091,805 08-15-03 1.03 8,200,000(d) 8,196,481 Preferred Receivables Funding 08-11-03 1.03 18,800,000(d) 18,794,083 08-26-03 1.05 6,300,000(d) 6,295,223 Receivables Capital 08-06-03 0.95 16,100,000(d) 16,097,451 Sigma Finance 08-18-03 1.05 15,800,000(d) 15,791,705 10-29-03 1.05 15,000,000(d) 14,961,000 Societe Generale North America LLC 09-02-03 1.05 26,200,000 26,174,783 Total 443,041,753 Total short-term securities (Cost: $566,055,119) $566,038,295 Total investments in securities (Cost: $14,874,710,901)(e) $16,911,432,251 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, 2003, the value of foreign securities represented 1.2% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (e) At July 31, 2003, the cost of securities for federal income tax purposes was $14,881,184,324 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $2,855,581,196 Unrealized depreciation (825,333,269) ------------ Net unrealized appreciation $2,030,247,927 -------------- -------------------------------------------------------------------------------- 11 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Financial Statements Statement of assets and liabilities Growth Trends Portfolio July 31, 2003 Assets Investments in securities, at value (Note 1)* (identified cost $14,874,710,901) $16,911,432,251 Foreign currency holdings (identified cost $6,948) (Note 1) 7,022 Dividends and accrued interest receivable 14,025,070 Receivable for investment securities sold 112,342,417 U.S. government securities held as collateral (Note 4) 134,622,034 ----------- Total assets 17,172,428,794 -------------- Liabilities Disbursements in excess of cash on demand deposit 1,246,612 Payable for investment securities purchased 28,388,201 Payable upon return of securities loaned (Note 4) 295,943,334 Accrued investment management services fee 236,910 Other accrued expenses 223,412 ------- Total liabilities 326,038,469 ----------- Net assets $16,846,390,325 =============== * Including securities on loan, at value (Note 4) $ 291,164,377 --------------- See accompanying notes to financial statements. -------------------------------------------------------------------------------- 12 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Statement of operations Growth Trends Portfolio Year ended July 31, 2003 Investment income Income: Dividends $ 232,038,970 Interest 5,913,103 Fee income from securities lending (Note 4) 274,512 Less foreign taxes withheld (148,570) -------- Total income 238,078,015 ----------- Expenses (Note 2): Investment management services fee 90,852,746 Compensation of board members 69,316 Custodian fees 869,029 Audit fees 36,000 Other 284,043 ------- Total expenses 92,111,134 ---------- Investment income (loss) -- net 145,966,881 ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (478,774,954) Foreign currency transactions (1,464,357) Options contracts written (Note 5) 1,213,909 --------- Net realized gain (loss) on investments (479,025,402) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,817,357,987 ------------- Net gain (loss) on investments and foreign currencies 1,338,332,585 ------------- Net increase (decrease) in net assets resulting from operations $1,484,299,466 ==============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets Growth Trends Portfolio Year ended July 31, 2003 2002 Operations Investment income (loss) -- net $ 145,966,881 $ 133,998,848 Net realized gain (loss) on investments (479,025,402) (78,725,757) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,817,357,987 (4,792,265,331) ------------- -------------- Net increase (decrease) in net assets resulting from operations 1,484,299,466 (4,736,992,240) ------------- -------------- Proceeds from contributions 151,515,494 1,102,314,218 Fair value of withdrawals (1,647,547,388) (3,241,842,538) -------------- -------------- Net contributions (withdrawals) from partners (1,496,031,894) (2,139,528,320) -------------- -------------- Total increase (decrease) in net assets (11,732,428) (6,876,520,560) Net assets at beginning of year 16,858,122,753 23,734,643,313 -------------- -------------- Net assets at end of year $16,846,390,325 $16,858,122,753 =============== ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP NEW DIMENSIONS FUND -- 2003 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 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. -------------------------------------------------------------------------------- 15 -- AXP NEW DIMENSIONS FUND -- 2003 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, 2003, foreign currency holdings were entirely 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. 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. -------------------------------------------------------------------------------- 16 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium and discount using the effective interest method, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with American Express Financial Corporation (AEFC) to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.6% to 0.48% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of AXP New Dimensions Fund to the Lipper Large-Cap Growth Funds Index. Prior to Dec. 1, 2002, the maximum adjustment was 0.12% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference was less than 1%, the adjustment was zero. On Nov. 13, 2002, shareholders approved modification of the performance incentive adjustment calculation by adjusting the performance difference intervals, while retaining the previous maximum adjustment and reducing the amount of the performance difference for which no adjustment is made to 0.50%. The effect of the modifications began Dec. 1, 2002. The adjustment increased the fee by $8,699,236 for the year ended July 31, 2003. 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. The Portfolio 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 $3,148,724,089 and 4,655,242,662, respectively, for the year ended July 31, 2003. For the same period, the portfolio turnover rate was 20%. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $324,088 for the year ended July 31, 2003. -------------------------------------------------------------------------------- 17 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT 4. LENDING OF PORTFOLIO SECURITIES As of July 31, 2003, securities valued at $291,164,377 were on loan to brokers. For collateral, the Portfolio received $161,321,300 in cash and U.S. government securities valued at $134,622,034. Income from securities lending amounted to $274,512 for the year ended July 31, 2003. 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, 2003 Puts Calls Contracts Premiums Contracts Premiums Balance July 31, 2002 1,000 $ 186,994 1,000 $ 156,995 Opened -- -- 10,000 1,000,000 Closed (1,000) (186,994) -- -- Expired -- -- (11,000) (1,156,995) ----- --------- ------- ----------- Balance July 31, 2003 -- $ -- -- $ -- ----- --------- ----- ----------- -------------------------------------------------------------------------------- 18 -- AXP NEW DIMENSIONS FUND -- 2003 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, 2003, 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, 2003. 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, 2003, 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, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 19 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP New Dimensions Fund July 31, 2003 Assets Investment in Portfolio (Note 1) $16,846,324,007 Capital shares receivable 1,554,161 --------- Total assets 16,847,878,168 -------------- Liabilities Capital shares payable 1,155,716 Accrued distribution fee 163,239 Accrued service fee 9,467 Accrued transfer agency fee 63,692 Accrued administrative services fee 14,782 Other accrued expenses 509,194 ------- Total liabilities 1,916,090 --------- Net assets applicable to outstanding capital stock $16,845,962,078 =============== Represented by Capital stock -- $.01 par value (Note 1) $ 7,770,956 Additional paid-in capital 16,004,223,715 Undistributed net investment income 19,172,686 Accumulated net realized gain (loss) (Note 5) (1,221,918,813) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 2,036,713,534 ------------- Total -- representing net assets applicable to outstanding capital stock $16,845,962,078 =============== Net assets applicable to outstanding shares: Class A $ 9,858,532,685 Class B $ 3,456,870,379 Class C $ 58,640,193 Class Y $ 3,471,918,821 Net asset value per share of outstanding capital stock: Class A shares 450,109,769 $ 21.90 Class B shares 166,469,977 $ 20.77 Class C shares 2,827,315 $ 20.74 Class Y shares 157,688,507 $ 22.02 ----------- ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 20 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Statement of operations AXP New Dimensions Fund Year ended July 31, 2003 Investment income Income: Dividends $ 232,038,094 Interest 5,912,075 Fee income from securities lending 274,511 Less foreign taxes withheld (148,569) -------- Total income 238,076,111 ----------- Expenses (Note 2): Expenses allocated from Portfolio 92,110,787 Distribution fee Class A 23,058,929 Class B 34,895,375 Class C 487,807 Transfer agency fee 27,953,542 Incremental transfer agency fee Class A 1,611,457 Class B 1,396,563 Class C 29,979 Service fee -- Class Y 3,142,520 Administrative services fees and expenses 5,277,428 Compensation of board members 139,482 Printing and postage 2,845,629 Registration fees 2,342 Audit fees 12,000 Other 188,961 ------- Total expenses 193,152,801 Earnings credits on cash balances (Note 2) (212,253) -------- Total net expenses 192,940,548 ----------- Investment income (loss) -- net 45,135,563 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (478,773,091) Foreign currency transactions (1,464,352) Options contracts written 1,213,905 --------- Net realized gain (loss) on investments (479,023,538) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,817,350,639 ------------- Net gain (loss) on investments and foreign currencies 1,338,327,101 ------------- Net increase (decrease) in net assets resulting from operations $1,383,462,664 ==============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 21 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets AXP New Dimensions Fund Year ended July 31, 2003 2002 Operations and distributions Investment income (loss) -- net $ 45,135,563 $ 11,088,460 Net realized gain (loss) on investments (479,023,538) (78,716,798) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,817,350,639 (4,792,258,031) ------------- -------------- Net increase (decrease) in net assets resulting from operations 1,383,462,664 (4,859,886,369) ------------- -------------- Distributions to shareholders from: Net investment income Class A (15,823,968) (6,092,513) Class B -- (2,401,369) Class C -- (18,358) Class Y (8,674,557) (2,048,495) Tax return of capital Class A -- (2,538,856) Class B -- (1,003,750) Class C -- (7,646) Class Y -- (854,555) ----------- ----------- Total distributions (24,498,525) (14,965,542) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 952,976,869 2,430,324,703 Class B shares 406,346,628 675,994,508 Class C shares 20,596,860 31,832,064 Class Y shares 850,965,146 1,040,580,252 Reinvestment of distributions at net asset value Class A shares 15,366,526 8,375,379 Class B shares -- 3,370,269 Class C shares -- 25,864 Class Y shares 8,566,223 2,894,340 Payments for redemptions Class A shares (1,761,464,006) (3,608,500,396) Class B shares (Note 2) (955,150,455) (997,820,871) Class C shares (Note 2) (10,578,609) (7,489,197) Class Y shares (898,578,735) (1,580,185,126) ------------ -------------- Increase (decrease) in net assets from capital share transactions (1,370,953,553) (2,000,598,211) -------------- -------------- Total increase (decrease) in net assets (11,989,414) (6,875,450,122) Net assets at beginning of year 16,857,951,492 23,733,401,614 -------------- -------------- Net assets at end of year $16,845,962,078 $16,857,951,492 =============== =============== Undistributed net investment income $ 19,172,686 $ -- --------------- ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Notes to Financial Statements AXP New Dimensions Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Dimensions Series, Inc. (formerly 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 Dimensions Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The 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, 2003, 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. -------------------------------------------------------------------------------- 23 -- AXP NEW DIMENSIONS FUND -- 2003 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 $1,464,352 and accumulated net realized loss has been decreased by $1,464,352. The tax character of distributions paid for the years indicated is as follows: Year ended July 31, 2003 2002 Class A Distributions paid from: Ordinary income $15,823,968 $6,092,513 Tax return of capital -- 2,538,856 Class B Distributions paid from: Ordinary income -- 2,401,369 Tax return of capital -- 1,003,750 Class C Distributions paid from: Ordinary income -- 18,358 Tax return of capital -- 7,646 Class Y Distributions paid from: Ordinary income 8,674,557 2,048,495 Tax return of capital -- 854,555 As of July 31, 2003, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 19,172,686 Accumulated long-term gain (loss) $(1,193,208,675) Unrealized appreciation (depreciation) $ 2,008,003,396 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. -------------------------------------------------------------------------------- 24 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.05% to 0.02% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.50 o Class B $20.50 o Class C $20.00 o Class Y $17.50 In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. Under terms of a prior agreement that ended April 30, 2003, the Fund paid a transfer agency fee at an annual rate per shareholder account of $19 for Class A, $20 for Class B, $19.50 for Class C and $17 for Class Y. 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 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 $16,451,736 for Class A, $3,936,838 for Class B and $17,441 for Class C for the year ended July 31, 2003. During the year ended July 31, 2003, the Fund's transfer agency fees were reduced by $212,253 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 25 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2003 Class A Class B Class C Class Y Sold 46,758,227 21,445,445 1,090,406 42,498,051 Issued for reinvested distributions 792,467 -- -- 441,558 Redeemed (89,554,929) (50,020,413) (567,925) (45,281,669) ----------- ----------- -------- ----------- Net increase (decrease) (42,004,235) (28,574,968) 522,481 (2,342,060) ----------- ----------- ------- ---------- 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) ----------- ----------- --------- -----------
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The agreement went into effect Sept. 24, 2002. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the LIBOR plus 0.50%, the IBOR plus 0.50% or the higher of the Federal Funds Rate plus 0.25% and the Prime Lending Rate. Borrowings are payable within 60 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 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $200 million with U.S. Bank, N.A. The Fund had no borrowings outstanding during the year ended July 31, 2003. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $1,193,208,675 as of July 31, 2003, that will expire in 2010 through 2012 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. -------------------------------------------------------------------------------- 26 -- AXP NEW DIMENSIONS FUND -- 2003 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, 2003 2002 2001 2000 1999 Net asset value, beginning of period $20.04 $25.43 $36.26 $31.21 $27.59 Income from investment operations: Net investment income (loss) .07 .05 .02 .02 .06 Net gains (losses) (both realized and unrealized) 1.82 (5.42) (7.37) 7.14 5.31 Total from investment operations 1.89 (5.37) (7.35) 7.16 5.37 Less distributions: Dividends from net investment income (.03) (.02) (.01) (.05) (.06) Excess distributions from net investment income -- -- (.01) -- -- Distributions from realized gains -- -- (3.46) (2.06) (1.69) Total distributions (.03) (.02) (3.48) (2.11) (1.75) Net asset value, end of period $21.90 $20.04 $25.43 $36.26 $31.21 Ratios/supplemental data Net assets, end of period (in millions) $9,859 $9,863 $13,857 $17,777 $13,568 Ratio of expenses to average daily net assets(c) 1.08% 1.06% 1.00% .90% .86% Ratio of net investment income (loss) to average daily net assets .42% .19% .12% .19% .24% Portfolio turnover rate (excluding short-term securities) 20% 27% 29% 34% 34% Total return(e) 9.47% (21.14%) (21.10%) 23.16% 20.04%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 27 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended July 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $19.12 $24.44 $35.22 $30.54 $27.19 Income from investment operations: Net investment income (loss) (.04) (.14) (.13) (.24) (.10) Net gains (losses) (both realized and unrealized) 1.69 (5.16) (7.19) 6.98 5.14 Total from investment operations 1.65 (5.30) (7.32) 6.74 5.04 Less distributions: Dividends from net investment income -- (.02) -- -- -- Distributions from realized gains -- -- (3.46) (2.06) (1.69) Total distributions -- (.02) (3.46) (2.06) (1.69) Net asset value, end of period $20.77 $19.12 $24.44 $35.22 $30.54 Ratios/supplemental data Net assets, end of period (in millions) $3,457 $3,728 $5,169 $6,252 $4,070 Ratio of expenses to average daily net assets(c) 1.85% 1.83% 1.76% 1.66% 1.63% Ratio of net investment income (loss) to average daily net assets (.35%) (.57%) (.65%) (.57%) (.53%) Portfolio turnover rate (excluding short-term securities) 20% 27% 29% 34% 34% Total return(e) 8.63% (21.71%) (21.69%) 22.20% 19.13%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 28 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $19.10 $24.42 $35.23 $35.52 Income from investment operations: Net investment income (loss) (0.04) (.14) (.13) (.01) Net gains (losses) (both realized and unrealized) 1.68 (5.16) (7.19) (.28) Total from investment operations 1.64 (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 $20.74 $19.10 $24.42 $35.23 Ratios/supplemental data Net assets, end of period (in millions) $59 $44 $30 $2 Ratio of expenses to average daily net assets(c) 1.87% 1.85% 1.76% 1.66%(d) Ratio of net investment income (loss) to average daily net assets (.38%) (.60%) (.75%) (.74%)(d) Portfolio turnover rate (excluding short-term securities) 20% 27% 29% 34% Total return(e) 8.59% (21.73%) (21.70%) (.82%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 29 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $20.14 $25.51 $36.33 $31.24 $27.62 Income from investment operations: Net investment income (loss) .11 .09 .07 .05 .09 Net gains (losses) (both realized and unrealized) 1.83 (5.44) (7.38) 7.19 5.30 Total from investment operations 1.94 (5.35) (7.31) 7.24 5.39 Less distributions: Dividends from net investment income (.06) (.02) (.02) (.09) (.08) Excess distributions from net investment income -- -- (.03) -- -- Distributions from realized gains -- -- (3.46) (2.06) (1.69) Total distributions (.06) (.02) (3.51) (2.15) (1.77) Net asset value, end of period $22.02 $20.14 $25.51 $36.33 $31.24 Ratios/supplemental data Net assets, end of period (in millions) $3,472 $3,222 $4,677 $6,328 $5,513 Ratio of expenses to average daily net assets(c) .91% .90% .84% .74% .77% Ratio of net investment income (loss) to average daily net assets .59% .36% .28% .35% .33% Portfolio turnover rate (excluding short-term securities) 20% 27% 29% 34% 34% Total return(e) 9.64% (21.00%) (20.97%) 23.35% 20.12%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. -------------------------------------------------------------------------------- 30 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Independent Auditors' Report THE BOARD AND SHAREHOLDERS AXP DIMENSIONS SERIES, INC. We have audited the accompanying statement of assets and liabilities of AXP New Dimensions Fund (a series of AXP Dimensions Series, Inc.) as of July 31, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended July 31, 2003. 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 and financial highlights referred to above present fairly, in all material respects, the financial position of AXP New Dimensions Fund as of July 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 31 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Federal Income Tax Information (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. AXP New Dimensions Fund Fiscal year ended July 31, 2003 Class A Income distributions -- taxable as dividend income: Qualified Dividend Income for individuals (effective for distributions made after Jan. 1, 2003) 0.00% Dividends Received Deduction for corporations 100% Payable date Per share Dec. 19, 2002 $0.03382 Class Y Income distributions -- taxable as dividend income: Qualified Dividend Income for individuals (effective for distributions made after Jan. 1, 2003) 0.00% Dividends Received Deduction for corporations 100% Payable date Per share Dec. 19, 2002 $0.05517 -------------------------------------------------------------------------------- 32 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT Board Members and Officers Shareholders elect a board that oversees the Fund's operations. The board appoints officers who are responsible for day-to-day business decisions based on policies set by the board. The following is a list of the Fund's board members. Each member oversees 15 Master Trust portfolios and 83 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, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service ---------------------------------- ------------------ ------------------------------------- --------------------------------- Arne H. Carlson Board member Chair, Board Services Corporation 901 S. Marquette Ave. since 1999 (provides administrative services Minneapolis, MN 55402 to boards). Former Governor of Age 68 Minnesota ---------------------------------- ------------------ ------------------------------------- --------------------------------- Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan 901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc. Minneapolis, MN 55402 construction) since 1998 (construction Age 65 materials/chemicals) ---------------------------------- ------------------ ------------------------------------- --------------------------------- Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated 30 Seventh Street East since 2001 Chief Executive Officer, Minnesota (commodity merchants and Suite 3050 Mining and Manufacturing (3M) processors), General Mills, St. Paul, MN 55101-4901 Inc. (consumer foods), Vulcan Age 69 Materials Company (construction materials/ chemicals), Milliken & Company (textiles and chemicals), and Nexia Biotechnologies, Inc. ---------------------------------- ------------------ ------------------------------------- --------------------------------- Heinz F. Hutter* Board member Retired President and Chief 901 S. Marquette Ave. since 1994 Operating Officer, Cargill, Minneapolis, MN 55402 Incorporated (commodity merchants Age 74 and processors) ---------------------------------- ------------------ ------------------------------------- --------------------------------- Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 68 ---------------------------------- ------------------ ------------------------------------- --------------------------------- Stephen R. Lewis, Jr.** Board member Retired President and Professor of Valmont Industries, Inc. 901 S. Marquette Ave. since 2002 Economics, Carleton College (manufactures irrigation Minneapolis, MN 55402 systems) Age 64 ---------------------------------- ------------------ ------------------------------------- --------------------------------- Alan G. Quasha Board member President, Quadrant Management, Compagnie Financiere Richemont 901 S. Marquette Ave. since 2002 Inc. (management of private AG (luxury goods), Harken Minneapolis, MN 55402 equities) Energy Corporation (oil and gas Age 53 exploration) and SIRIT Inc. (radio frequency identification technology) ---------------------------------- ------------------ ------------------------------------- ---------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund and AXP Partners Aggressive Growth Fund by reason of being a security holder of J P Morgan Chase & Co., which has a 45% interest in American Century Companies, Inc., the parent company of the subadviser of two of the AXP Partners Funds, American Century Investment Management, Inc. ** Interested person of AXP Partners International Aggressive Growth Fund by reason of being a security holder of FleetBoston Financial Corporation, parent company of Liberty Wanger Asset Management, L.P., one of the fund's subadvisers. -------------------------------------------------------------------------------- 33 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT
Independent Board Members (continued) Name, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service --------------------------------- ------------------- ------------------------------------- --------------------------------- Alan K. Simpson Board member Former three-term United States Biogen, Inc. 1201 Sunshine Ave. since 1997 Senator for Wyoming (biopharmaceuticals) Cody, WY 82414 Age 71 --------------------------------- ------------------- ------------------------------------- --------------------------------- Alison Taunton-Rigby Board member President, Forester Biotech since 901 S. Marquette Ave. since 2002 2000. Former President and CEO, Minneapolis, MN 55402 Aquila Biopharmaceuticals, Inc. Age 59 --------------------------------- ------------------- ------------------------------------- --------------------------------- Board Members Affiliated with AEFC*** Name, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service --------------------------------- ------------------- ------------------------------------- --------------------------------- Barbara H. Fraser Board member Executive Vice President - AEFA 1546 AXP Financial Center since 2002 Products and Corporate Marketing of Minneapolis, MN 55474 AEFC since 2002. President - Age 53 Travelers Check Group, American Express Company, 2001-2002. Management Consultant, Reuters, 2000-2001. Managing Director - International Investments, Citibank Global, 1999-2000. Chairman and CEO, Citicorp Investment Services and Citigroup Insurance Group, U.S., 1998-1999 --------------------------------- ------------------- ------------------------------------- --------------------------------- Stephen W. Roszell Board member Senior Vice President - 50238 AXP Financial Center since 2002, Vice Institutional Group of AEFC Minneapolis, MN 55474 President since Age 54 2002 --------------------------------- ------------------- ------------------------------------- --------------------------------- William F. Truscott Board member Senior Vice President - Chief 53600 AXP Financial Center since 2001, Vice Investment Officer of AEFC since Minneapolis, MN 55474 President since 2001. Former Chief Investment Age 42 2002 Officer and Managing Director, Zurich Scudder Investments --------------------------------- ------------------- ------------------------------------- ---------------------------------
*** Interested person by reason of being an officer, director and/or employee of AEFC. -------------------------------------------------------------------------------- 34 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Roszell, who is vice president, and Mr. Truscott, who is vice president, the Fund's other officers are:
Other Officers Name, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service --------------------------------- ------------------- ------------------------------------- --------------------------------- Jeffrey P. Fox Treasurer since Vice President - Investment 50005 AXP Financial Center 2002 Accounting, AEFC, since 2002; Vice Minneapolis, MN 55474 President - Finance, American Age 48 Express Company, 2000-2002; Vice President - Corporate Controller, AEFC, 1996-2000 --------------------------------- ------------------- ------------------------------------- --------------------------------- Paula R. Meyer President since Senior Vice President and General 596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC, since Minneapolis, MN 55474 2002; Vice President and Managing Age 49 Director - American Express Funds, AEFC, 2000-2002; Vice President, AEFC, 1998-2000 --------------------------------- ------------------- ------------------------------------- --------------------------------- Leslie L. Ogg Vice President, President of Board Services 901 S. Marquette Ave. General Counsel, Corporation Minneapolis, MN 55402 and Secretary Age 64 since 1978 --------------------------------- ------------------- ------------------------------------- ---------------------------------
The SAI has additional information about the Fund's directors and is available, without charge, upon request by calling (800) 862-7919. -------------------------------------------------------------------------------- 35 -- AXP NEW DIMENSIONS FUND -- 2003 ANNUAL REPORT The policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities can be found in the Fund's Statement of Additional Information (SAI) which is available (i) without charge, upon request, by calling toll-free (800) 862-7919; (ii) on the American Express Company Web site at americanexpress.com/funds; and (iii) on the Securities and Exchange Commission Web site at http://www.sec.gov. -------------------------------------------------------------------------------- (logo) AMERICAN EXPRESS(R) -------------------------------------------------------------------------------- American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. Item 2. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as an exhibit to this form N-CSR. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a). Item 3. The Registrant's board of directors has determined that independent directors Livio D. DeSimone, Anne P. Jones, and Alan G. Quasha, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services. Not applicable. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures. (a) The registrant's Principal Executive Officer and Principal Financial Officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the registrant's disclosure controls and procedures by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) At the date of filing this Form N-CSR, the registrant's Principal Executive Officer and Principal Financial Officer are aware of no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 10. Exhibits. (a)(1) Code of ethics as applies to the Registrant's principal executive officer and principal financial officer, as required to be disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) AXP Dimensions Series, Inc. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date November 6, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date November 6, 2003 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date November 6, 2003