N-CSR 1 dimensions-ncsr.txt AXP DIMENSIONS SERIES, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR 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) 50606 Ameriprise 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) New Dimensions Fund(R) Annual Report for the Period Ended July 31, 2005 AXP New Dimensions Fund seeks to provide shareholders with long-term growth of capital. (This annual report is intended only for the information of shareholders or those who have received the offering prospectus of the Fund, which contains information about the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) Table of Contents Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 5 The Fund's Long-term Performance 8 Investments in Securities 10 Financial Statements (Portfolio) 14 Notes to Financial Statements (Portfolio) 17 Report of Independent Registered Public Accounting Firm (Portfolio) 22 Financial Statements (Fund) 23 Notes to Financial Statements (Fund) 26 Report of Independent Registered Public Accounting Firm (Fund) 37 Federal Income Tax Information 38 Fund Expenses Example 40 Board Members and Officers 42 Approval of Investment Management Services Agreement 45 Proxy Voting 47 [DALBAR LOGO] 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. CORPORATE REORGANIZATION On Feb. 1, 2005, American Express Company (American Express) announced plans to pursue a spin off of Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) to American Express shareholders. The separation from American Express is expected to be completed on Sept. 30, 2005. After the separation from American Express, Ameriprise Financial will no longer be affiliated with American Express. Ameriprise Financial provides administrative services to the Fund and, through Sept. 30, 2005, investment management services to the Fund. Effective Oct. 1, 2005, RiverSource Investments, LLC, a wholly owned subsidiary of Ameriprise Financial, will provide investment management services to the Fund. In addition, Ameriprise Financial is the parent company of the Fund's distributor, Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.); the Fund's transfer agent, RiverSource Service Corporation (formerly American Express Client Service Corporation); and the Fund's custodian, Ameriprise Trust Company (formerly American Express Trust Company). Effective Oct. 1, 2005, the Fund will change its name such that it no longer bears the American Express brand and instead will bear the RiverSource(SM) brand. Information regarding the new name of the Fund and other changes will be separately communicated to shareholders. -------------------------------------------------------------------------------- 2 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Fund Snapshot AT JULY 31, 2005 PORTFOLIO MANAGERS Portfolio managers Since Years in industry Gordon Fines 1/91 38 Michael Nance 2/05 12 Trisha Schuster, CFA 2/05 12 FUND OBJECTIVE For investors seeking long-term growth of capital. Inception dates by class A: 8/1/68 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95 Ticker symbols by class A: INNDX B: INDBX C: ANDCX I: ANDIX Y: IDNYX Total net assets $11.521 billion Number of holdings 99 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] Information Technology 24.2% Health Care 18.6% Consumer Discretionary 14.8% Energy 10.5% Industrials 10.0% Consumer Staples 8.0% Financials 6.1% Short-Term Securities* 3.1% Utilities 2.0% Materials 1.8% Telecommunication Services 0.9% * Of the 3.1%, 0.6% is due to security lending activity and 2.5% is the Portfolio's cash equivalent position. TOP TEN HOLDINGS Percentage of portfolio assets Procter & Gamble (Household Products) 3.2% General Electric (Industrial Conglomerates) 3.2 Boeing (Aerospace & Defense) 3.1 Target (Multiline Retail) 3.0 Intel (Semiconductors & Semiconductor Equipment) 3.0 Motorola (Communications Equipment) 2.9 UnitedHealth Group (Health Care Providers & Services) 2.6 Johnson & Johnson (Pharmaceuticals) 2.5 EMC (Computers & Peripherals) 2.5 Microsoft (Software) 2.5 For further detail about these holdings, please refer to the section entitled "Investments in Securities." The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. 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 -- 2005 ANNUAL REPORT Performance Summary [BAR CHART] PERFORMANCE COMPARISON For the year ended July 31, 2005 +7.77% +14.05% +13.04% +15.89% +7.77% = AXP New Dimensions Fund Class A (excluding sales charge) +14.05% = S&P 500 Index (unmanaged) +13.04% = Russell 1000 Growth Index (unmanaged) +15.89% = Lipper Large-Cap Growth Funds Index (see "The Fund`s Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919 or visiting www.riversource.com/investments. 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 other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class I Class Y (Inception dates) (8/1/68) (3/20/95) (6/26/00) (3/4/04) (3/20/95) After After NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) at July 31, 2005 1 year +7.77% +1.57% +6.93% +1.93% +6.89% +5.89% +8.24% +7.95% 3 years +6.91% +4.82% +6.07% +4.88% +6.06% +6.06% N/A +7.09% 5 years -5.33% -6.45% -6.06% -6.39% -6.07% -6.07% N/A -5.18% 10 years +8.15% +7.51% +7.32% +7.32% N/A N/A N/A +8.31% Since inception +11.22% +11.04% +8.65% +8.65% -6.11% -6.11% +0.77% +9.64% at June 30, 2005 1 year -0.70% -6.41% -1.45% -6.34% -1.45% -2.43% -0.22% -0.49% 3 years +3.42% +1.39% +2.61% +1.33% +2.60% +2.60% N/A +3.60% 5 years -6.21% -7.32% -6.93% -7.26% -6.94% -6.94% N/A -6.05% 10 years +8.31% +7.67% +7.49% +7.49% N/A N/A N/A +8.47% Since inception +11.15% +10.97% +8.40% +8.40% -6.79% -6.79% -1.59% +9.39%
(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 eligible investors only, currently limited to AXP Portfolio Builder Funds, six affiliated funds-of-funds. (6) Sales charge is not applicable to these shares. Shares available to institutional investors only. -------------------------------------------------------------------------------- 4 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT AXP New Dimensions Fund's Class A shares advanced 7.77%, excluding sales charge, for the fiscal year ended July 31, 2005. The Fund underperformed its primary benchmark, the Standard & Poor's 500 Composite Index (S&P 500 Index), which increased 14.05% during the period. During the fiscal year, the Russell 1000 Growth Index was added as a secondary unmanaged benchmark for the Fund. For the 12-month period, the Fund underperformed the Russell 1000 Growth Index, which rose 13.04%. The Fund's peer group, the Lipper Large-Cap Growth Funds Index, gained 15.89% during the same time frame. On Feb. 11, 2005, Michael Nance and Trisha Schuster joined the Fund's portfolio management team as associate portfolio managers. In July 2005, Portfolio Manager Gordon Fines announced his retirement effective Jan. 6, 2006. Michael Nance assumed management of 50% of the Fund's portfolio effective Aug. 1, 2005. Below, the Fund's portfolio managers discuss the Fund's performance for the annual period ended July 31, 2005. Q: What factors most significantly contributed to the Fund's underperformance for the period? A: In our view, there were several factors that contributed to the Fund's underperformance. o We didn't have enough exposure to companies with lower market capitalizations. Companies with market capitalizations between $2 billion and $10 billion continued to outperform larger market capitalization stocks for most of the period. The Fund's fiscal period results were negatively affected by the larger market cap positioning of the portfolio. Because mid-cap stocks are an element of the S&P 500 Index, the Fund's smaller-than-S&P 500 Index position in mid-cap stocks caused the Fund's performance to lag relative to the benchmark. o The Fund's higher-than-S&P 500 Index position in mega-cap stocks detracted during the period. The Fund held large positions in mega-cap stocks such as Citigroup, Pfizer and Wal-Mart resulting in a higher median market capitalization than our peer group. This decision detracted from performance in this fiscal year. o Our stock selection efforts were not as effective as we would have liked. Our stock selection, specifically in the consumer discretionary and health care sectors, hurt performance. Biotechnology company Biogen Idec was a sizeable position in the Fund and the stock was hit very hard during the first quarter of the calendar year as the company faced product safety concerns. In addition, media company Time Warner detracted from performance. o Value stocks outperformed growth stocks, which hurt performance relative to the S&P 500 Index. Since the Fund has a distinct and consistent growth focus, and the S&P 500 Index has both -------------------------------------------------------------------------------- 5 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Questions & Answers [BEGIN CALLOUT QUOTE] > Our stock selection, specifically in the consumer discretionary and health care sectors, hurt performance. [END CALLOUT QUOTE] growth and value stocks, it has been a challenging period for growth funds relative to that benchmark. However, the Fund also underperformed our growth fund peer group due to the other factors noted above. We do not believe this style trend can be sustained indefinitely. We firmly believe this imbalance in the equity markets will correct itself at some point. In this environment, we believe it makes sense for investors to maintain their exposure to growth stocks in order to benefit when the market again begins to favor growth stocks. Q: What were the success stories during the period? A: The Fund's large position in the energy industry, which performed well throughout the period, contributed positively to performance. In addition, the Fund's low exposure to the consumer staples industry also contributed. Stocks that helped performance included computer giant Apple Computer, retailer Target and cell phone maker Motorola. Although the Fund's sizeable health care position in Biogen Idec and Pfizer negatively impacted Fund performance as previously mentioned, Fund holdings in health care service company UnitedHealth Group and Amgen helped offset some of the negative returns in the sector. Q: What changes did you make to the portfolio and how is it currently positioned? A: The annual period encompassed the addition of two associate portfolio managers to the management team, which provides the Fund with additional resources. Both managers bring a combined 24 years of investment experience that we believe will add value for shareholders and can help enhance results. With the additional managers, the Fund remains focused on providing shareholders with long-term growth of capital. In addition, the Fund's managers believe that minimizing volatility in the portfolio will help preserve capital for shareholders. Portfolio changes during the annual period include increasing the Fund's exposure to the technology sector as we have started seeing some strong companies emerge in the market. As a result of adding to some of our technology positions, we have more technology companies in the Fund's Top Ten holdings such as Intel, Microsoft, Motorola and EMC Corporation. -------------------------------------------------------------------------------- 6 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Questions & Answers [BEGIN CALLOUT QUOTE] > Overall, we emphasize companies that we think are well managed, healthy growing companies in terms of balance sheet and income characteristics. [END CALLOUT QUOTE] Overall, we emphasize companies that we think are well managed, healthy growing companies in terms of balance sheet and income characteristics. We try to find companies that show not only earnings and sales growth, but the ability to generate sustainable levels of free cash flow. In our view, dividend yield and dividend growth are very important themes in this market cycle. Q: How do you intend to manage the Fund in the coming months? A: We are going to be very stock specific in terms of what we seek to add to the portfolio. We continue to have a preference for select energy stocks, and we are also focusing the health care segment of the portfolio. Companies that best reflect growth at reasonable prices. In the technology sector, we are focusing on those unique offerings that demonstrate above average growth potential. We feel that an overwhelming driver right now in the marketplace is energy. With gasoline at the pump now approaching $3.00 per gallon, we believe this will start to have an impact on people's behavior and thinking. This is likely a long-term phenomenon. The plus for us of course is to be on the right side of the energy sector and we think we are. Our experience has taught us that during periods of rising interest rates and slowing economic growth, when corporate earnings are nearing a peak, higher quality companies generally perform better than lower quality companies. In fact, a shift in the market emphasis toward quality growth companies with sound balance sheets -- the kind of companies that dominate the Fund's portfolio -- will provide an excellent opportunity for the Fund to regain ground. We express our gratitude for shareholders' patience, and we are optimistic that investors who have expressed long-term confidence in our strategy will be rewarded. -------------------------------------------------------------------------------- 7 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT The Fund's Long-term Performance The chart on the facing page illustrates the total value of an assumed $10,000 investment in AXP New Dimensions Fund Class A shares (from 8/1/95 to 7/31/05) as compared to the performance of three widely cited performance indices, the Standard & Poor's 500 Index (S&P 500 Index), the Russell 1000(R) Growth 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. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919 or visiting www.riversource.com/investments. Also see "Past Performance" in the Fund's current prospectus. DISTRIBUTION SUMMARY The table below details the Fund's income and capital gain distributions for the fiscal years shown. More information on the other classes can be found in the Financial Highlights section of this report's Notes to Financial Statements. Class A Short-term Long-term Fiscal year ended Income capital gains capital gains Total July 31, 2005 $0.16 $-- $0.18 $0.34 July 31, 2004 0.11 -- -- 0.11 July 31, 2003 0.03 -- -- 0.03 July 31, 2002 -- -- 0.02 0.02 July 31, 2001 0.02 -- 3.46 3.48 -------------------------------------------------------------------------------- 8 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP NEW DIMENSIONS FUND AXP New Dimensions Fund Class A (includes sales charge) $ 9,425 $10,983 $15,795 $18,352 $22,030 $27,132 $21,407 $16,882 $18,481 $19,144 $20,631 S&P 500 Index(1) $10,000 $11,657 $17,735 $21,154 $25,427 $27,708 $23,737 $18,128 $20,057 $22,699 $25,888 Russell 1000(R) Growth Index(2) $10,000 $11,552 $17,542 $21,036 $26,093 $32,454 $21,076 $15,017 $16,765 $18,192 $20,564 Lipper Large-Cap Growth Funds Index(3) $10,000 $11,139 $16,494 $19,819 $24,363 $29,737 $19,507 $14,049 $15,309 $16,249 $18,831 `95 `96 `97 `98 `99 `00 `01 `02 `03 `04 `05
COMPARATIVE RESULTS Results at July 31, 2005 Since 1 year 3 years 5 years 10 years inception(4) AXP New Dimensions Fund (includes sales charge) Class A Cumulative value of $10,000 $10,157 $11,517 $7,165 $20,631 $481,521 Average annual total return +1.57% +4.82% -6.45% +7.51% +11.04% Standard & Poor's 500 Index(1) Cumulative value of $10,000 $11,405 $14,280 $9,343 $25,888 N/A Average annual total return +14.05% +12.61% -1.35% +9.98% N/A Russell 1000(R) Growth Index(2) Cumulative value of $10,000 $11,304 $13,695 $6,337 $20,564 N/A Average annual total return +13.04% +11.05% -8.72% +7.48% N/A Lipper Large-Cap Growth Funds Index(3) Cumulative value of $10,000 $11,589 $13,405 $6,333 $18,831 N/A Average annual total return +15.89% +10.26% -8.73% +6.53% N/A
Results for other share classes can be found on page 4. (1) The 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. (2) The Russell 1000(R) Growth Index, an unmanaged index, measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. (3) The Lipper Large-Cap Growth Funds Index includes the 30 largest large-cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. (4) Fund data is from Aug. 1, 1968. The Fund began operating before the inception of the S&P 500 Index, Russell 1000 Growth Index and Lipper peer group. -------------------------------------------------------------------------------- 9 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Investments in Securities Growth Trends Portfolio July 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (97.5%) Issuer Shares Value(a) Aerospace & Defense (6.6%) Boeing 5,439,893 $359,087,337 Lockheed Martin 2,057,720 128,401,728 Northrop Grumman 1,000,000 55,450,000 United Technologies 4,368,984 221,507,489 Total 764,446,554 Beverages (2.4%) PepsiCo 5,000,000 272,650,000 Biotechnology (4.9%) Amgen 3,463,407(b) 276,206,708 Biogen Idec 800,000(b,d) 31,432,000 Genentech 1,000,000(b,d) 89,330,000 Genzyme 1,100,000(b) 81,851,000 Gilead Sciences 1,800,000(b) 80,658,000 Total 559,477,708 Building Products (0.1%) American Standard Companies 361,948 16,027,057 Capital Markets (2.1%) Charles Schwab 17,272,001 236,626,414 Chemicals (1.8%) EI du Pont de Nemours & Co 4,829,004 206,101,891 Commercial Banks (2.3%) Bank of America 5,000,000 218,000,000 Commerce Bancorp 842,027(e) 28,569,976 US Bancorp 522,018 15,691,861 Total 262,261,837 Commercial Services & Supplies (0.1%) Waste Management 424,994 11,950,831 Communications Equipment (4.8%) Cisco Systems 10,912,340(b) 208,971,311 Motorola 15,843,471 335,564,715 Nokia ADR 756,166(c) 12,060,848 Total 556,596,874 Common Stocks (continued) Issuer Shares Value(a) Computers & Peripherals (8.0%) Apple Computer 5,500,000(b,d) $234,575,000 Dell 5,163,772(b) 208,977,853 EMC 21,116,129(b) 289,079,806 NCR 5,371,843(b) 186,456,671 SanDisk 429,661(b) 14,531,135 Total 933,620,465 Diversified Financial Services (1.9%) CapitalSource 1,200,151(b,e) 23,498,957 Citigroup 4,393,640 191,123,340 Total 214,622,297 Diversified Telecommunication Services (0.9%) Sprint 4,000,000 107,600,000 Energy Equipment & Services (3.4%) GlobalSantaFe 295,746 13,305,613 Halliburton 2,000,000 112,100,000 Schlumberger 1,500,000 125,610,000 Transocean 2,500,000(b) 141,075,000 Total 392,090,613 Food & Staples Retailing (1.6%) Safeway 5,718,860 138,968,298 Whole Foods Market 300,000 40,953,000 Total 179,921,298 Health Care Equipment & Supplies (2.4%) Alcon 550,000(c,d) 63,002,500 Medtronic 2,809,717 151,556,135 St. Jude Medical 1,300,000(b) 61,633,000 Total 276,191,635 Health Care Providers & Services (4.3%) Caremark Rx 2,996,491(b) 133,583,569 HCA 1,037,600 51,101,800 UnitedHealth Group 5,866,983 306,843,211 Total 491,528,580 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Common Stocks (continued) Issuer Shares Value(a) Hotels, Restaurants & Leisure (2.4%) Carnival Unit 3,600,000 $188,640,000 Royal Caribbean Cruises 593,200 26,960,940 Starbucks 1,200,000(b) 63,060,000 Total 278,660,940 Household Durables (2.3%) DR Horton 424,590 17,442,157 Pulte Homes 2,637,442 246,917,320 Total 264,359,477 Household Products (3.3%) Procter & Gamble 6,771,048 376,673,400 Industrial Conglomerates (3.2%) General Electric 10,698,829 369,109,601 Internet & Catalog Retail (1.0%) Amazon.com 300,000(b) 13,551,000 eBay 2,364,395(b) 98,784,423 Total 112,335,423 Internet Software & Services (2.0%) Google Cl A 331,914(b) 95,511,573 Yahoo! 4,183,556(b,e) 139,479,757 Total 234,991,330 IT Services (0.9%) First Data 500,000 20,570,000 Fiserv 239,216(b) 10,614,014 Infosys Technologies ADR 1,000,000(c,e) 71,180,000 Total 102,364,014 Media (2.2%) Comcast Special Cl A 7,914,044(b) 237,421,320 DreamWorks Animation SKG Cl AF 538,415(b) 12,679,673 Total 250,100,993 Multi-Utilities & Unregulated Power (2.0%) Dominion Resources 3,100,000 228,966,000 Multiline Retail (5.5%) Federated Dept Stores 1,319,845 100,136,640 Nordstrom 4,800,000 177,648,000 Target 6,000,000 352,500,000 Total 630,284,640 Common Stocks (continued) Issuer Shares Value(a) Office Electronics (0.2%) Xerox 1,517,773(b) $20,049,781 Oil & Gas (7.1%) Apache 3,151,001 215,528,468 Burlington Resources 400,000 25,644,000 Chesapeake Energy 1,020,682 26,650,007 ConocoPhillips 2,942,107 184,146,477 Exxon Mobil 4,408,270 258,985,863 Murphy Oil 1,200,000 63,648,000 Suncor Energy 1,000,000(c) 48,900,000 Total 823,502,815 Pharmaceuticals (7.1%) Abbott Laboratories 2,500,000 116,575,000 Eli Lilly & Co 600,000 33,792,000 Johnson & Johnson 4,544,890 290,691,164 Novartis ADR 2,500,000(c) 121,775,000 Pfizer 5,394,772 142,961,458 Schering-Plough 3,200,084 66,625,749 Sepracor 1,000,000(b) 52,350,000 Total 824,770,371 Semiconductors & Semiconductor Equipment (4.4%) Intel 12,847,325 348,676,401 Texas Instruments 5,000,000 158,800,000 Total 507,476,401 Software (3.9%) Amdocs 380,295(b,c) 11,290,959 Autodesk 2,500,000 85,475,000 Microsoft 11,239,975 287,855,759 Symantec 2,880,000(b) 63,273,600 Total 447,895,318 Specialty Retail (1.6%) Advance Auto Parts 561,009(b) 38,687,181 Lowe's Companies 2,218,498 146,908,937 Total 185,596,118 Tobacco (0.9%) Altria Group 1,500,000 100,440,000 Total Common Stocks (Cost: $9,757,875,423) $11,239,290,676 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Short-Term Securities (3.1%)(f) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper Alpine Securitization 08-04-05 3.27% $20,000,000(g) $19,989,100 Barton Capital 08-03-05 3.27 43,500,000(g) 43,480,243 08-10-05 3.28 30,000,000(g) 29,967,200 08-11-05 3.28 25,000,000(g) 24,970,389 Beta Finance 08-10-05 3.28 20,000,000 19,978,133 CAFCO LLC 08-01-05 3.30 13,300,000(g) 13,296,343 Citibank Credit Card Dakota Nts 08-01-05 3.30 12,200,000(g) 12,196,645 Citigroup Funding 08-01-05 3.31 24,500,000 24,493,242 HSBC Finance 08-01-05 3.31 30,000,000 29,991,724 Natl Australia Funding 08-09-05 3.26 30,000,000(g) 29,970,116 Short-Term Securities (continued) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper (cont.) Park Avenue Receivables 08-25-05 3.42% $30,000,000(g) $29,923,275 Scaldis Capital LLC 08-15-05 3.36 25,000,000(g) 24,960,452 Sheffield Receivables 08-01-05 3.30 11,700,000(g) 11,696,783 Societe Generale North America 08-12-05 3.28 25,000,000 24,968,111 Windmill Funding 08-23-05 3.41 20,000,000(g) 19,952,778 Total Short-Term Securities (Cost: $359,867,609) $359,834,534 Total Investments in Securities (Cost: $10,117,743,032)(h) $11,599,125,210 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP NEW DIMENSIONS FUND -- 2005 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. At July 31, 2005, the value of foreign securities represented 2.8% of net assets. (d) At July 31, 2005, securities valued at $213,766,821 were held to cover open call options written as follows (see Note 5 to the financial statements): Issuer Contracts Exercise Expiration Value(a) price date Alcon 3,000 $120.00 Aug. 2005 $ 232,500 Apple Computer 13,750 47.50 Sept. 2005 687,500 Biogen Idec 7,999 35.00 Aug. 2005 3,559,555 Genentech 10,000 85.00 Aug. 2005 5,050,000 ------ ----- ---------- --------- Total value $9,529,555 ---------- (e) At July 31, 2005, security was partially or fully on loan. See Note 4 to the financial statements. (f) Cash collateral received from security lending activity is invested in short-term securities and represents 0.6% of net assets. See Note 4 to the financial statements. 2.5% of net assets is the Portfolio's cash equivalent position. (g) 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 Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified insititutional buyers. At July 31, 2005, the value of these securities amounted to $260,403,324 or 2.3% of net assets. (h) At July 31, 2005, the cost of securities for federal income tax purposes was $10,140,479,002 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $1,673,893,157 Unrealized depreciation (215,246,949) ------------ Net unrealized appreciation $1,458,646,208 The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. -------------------------------------------------------------------------------- 13 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Financial Statements
Statement of assets and liabilities Growth Trends Portfolio July 31, 2005 Assets Investments in securities, at value (Note 1)* (identified cost $10,117,743,032) $11,599,125,210 Foreign currency holdings (identified cost $5,524) (Note 1) 6,033 Dividends and accrued interest receivable 6,564,354 Receivable for investment securities sold 134,154,375 ----------- Total assets 11,739,849,972 -------------- Liabilities Disbursements in excess of cash on demand deposit 3,209,640 Payable for investment securities purchased 139,725,305 Payable upon return of securities loaned (Note 4) 64,420,000 Accrued investment management services fee 167,912 Other accrued expenses 453,781 Options contracts written, at value (premiums received $6,283,053) (Note 5) 9,529,555 --------- Total liabilities 217,506,193 ----------- Net assets $11,522,343,779 =============== * Including securities on loan, at value (Note 4) $ 60,816,856 ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statement of operations Growth Trends Portfolio Year ended July 31, 2005 Investment income Income: Dividends $ 233,045,584 Interest 12,013,702 Fee income from securities lending (Note 4) 320,446 Less foreign taxes withheld (442,238) -------- Total income 244,937,494 ----------- Expenses (Note 2): Investment management services fee 60,896,353 Compensation of board members 61,737 Custodian fees 1,042,579 Audit fees 37,500 Other 499,088 ------- Total expenses 62,537,257 Earnings credits on cash balances (Note 2) (3,398) ------ Total net expenses 62,533,859 ---------- Investment income (loss) -- net 182,403,635 ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 757,406,599 Foreign currency transactions (554,424) Futures contracts (1,726,848) Options contracts written (Note 5) (427,452) -------- Net realized gain (loss) on investments 754,697,875 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 158,660,856 ----------- Net gain (loss) on investments and foreign currencies 913,358,731 ----------- Net increase (decrease) in net assets resulting from operations $1,095,762,366 ==============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets Growth Trends Portfolio Year ended July 31, 2005 2004 Operations Investment income (loss) -- net $ 182,403,635 $ 153,163,075 Net realized gain (loss) on investments 754,697,875 1,326,193,728 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 158,660,856 (740,840,157) ----------- ------------ Net increase (decrease) in net assets resulting from operations 1,095,762,366 738,516,646 ------------- ----------- Proceeds from contributions 75,006,308 588,788,643 Fair value of withdrawals (4,968,829,051) (3,075,163,840) In-kind contributions in connection with fund mergers (Note 1) -- 221,872,382 -------------- -------------- Net contributions (withdrawals) from partners (4,893,822,743) (2,264,502,815) -------------- -------------- Total increase (decrease) in net assets (3,798,060,377) (1,525,986,169) Net assets at beginning of year 15,320,404,156 16,846,390,325 -------------- -------------- Net assets at end of year $11,522,343,779 $15,320,404,156 =============== ===============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP NEW DIMENSIONS FUND -- 2005 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. On June 25, 2004, AXP New Dimensions Fund acquired the assets and assumed the identified liabilities of AXP Focused Growth Fund and AXP Growth Dimensions Fund. Upon receipt of these assets and liabilities, AXP New Dimensions Fund made an in-kind contribution of $221,872,382 to Growth Trends Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to U.S generally accepted accounting principles 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. Pursuant to procedures adopted by the Board of Trustees of the portfolios, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. 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. -------------------------------------------------------------------------------- 17 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. 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. At July 31, 2005, foreign currency holdings were entirely comprised of Taiwan dollars. -------------------------------------------------------------------------------- 18 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT 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. Guarantees and indemnifications Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue 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 RiverSource Investments, LLC to manage its portfolio. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. Under this agreement, RiverSource Investments, LLC (the Investment Manager) determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets that declines from 0.6% to 0.48% annually as the Portfolio's assets increase. 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. In certain circumstances, the board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the fee by $10,062,023 for the year ended July 31, 2005. 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. -------------------------------------------------------------------------------- 19 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. During the year ended July 31, 2005, the Portfolio's custodian fees were reduced by $3,398 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. According to a Placement Agency Agreement, Ameriprise Financial Services, Inc. (formerly 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 $9,859,997,873 and $14,214,122,048, respectively, for the year ended July 31, 2005. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with Ameriprise Financial were $108,435 for the year ended July 31, 2005. 4. LENDING OF PORTFOLIO SECURITIES At July 31, 2005, securities valued at $60,816,856 were on loan to brokers. For collateral, the Portfolio received $64,420,000 in cash. Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending amounted to $320,446 for the year ended July 31, 2005. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. -------------------------------------------------------------------------------- 20 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT 5. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows: Year ended July 31, 2005 Puts Contracts Premiums Balance July 31, 2004 -- $ -- Opened 85,749 10,928,881 Closed (48,000) (4,486,835) Expired (3,000) (158,993) ------ ----------- Balance July 31, 2005 34,749 $ 6,283,053 ------ ----------- See "Summary of significant accounting policies." 6. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
Ratios/supplemental data Fiscal period ended July 31, 2005 2004 2003 2002 2001 Ratio of expenses to average daily net assets(a) .46% .45% .58% .61% .59% Ratio of net investment income (loss) to average daily net assets 1.34% .91% .92% .64% .52% Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29% Total return(b) 8.30% 4.05% 10.01% (20.76%) (20.77%)
(a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 21 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Report of Independent Registered Public Accounting Firm 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, 2005, 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, 2005, and the financial highlights for each of the years in the five-year period ended July 31, 2005. These financial statements and the financial highlights are the responsibility of portfolio 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2005, 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 Growth Trends Portfolio as of July 31, 2005, 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 U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota September 20, 2005 -------------------------------------------------------------------------------- 22 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP New Dimensions Fund July 31, 2005 Assets Investment in Portfolio (Note 1) $11,522,269,040 Capital shares receivable 936,935 ------- Total assets 11,523,205,975 -------------- Liabilities Capital shares payable 975,810 Accrued distribution fee 104,227 Accrued service fee 7,072 Accrued transfer agency fee 7,488 Accrued administrative services fee 11,218 Other accrued expenses 737,043 ------- Total liabilities 1,842,858 --------- Net assets applicable to outstanding capital stock $11,521,363,117 =============== Represented by Capital stock -- $.01 par value (Note 1) $ 4,847,114 Additional paid-in capital 9,354,954,421 Undistributed net investment income 19,084,775 Accumulated net realized gain (loss) (Note 6) 664,348,286 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,478,128,521 ------------- Total -- representing net assets applicable to outstanding capital stock $11,521,363,117 =============== Net assets applicable to outstanding shares: Class A $ 6,845,241,780 Class B $ 2,003,569,556 Class C $ 45,662,322 Class I $ 69,748,064 Class Y $ 2,557,141,395 Net asset value per share of outstanding capital stock: Class A shares 285,315,473 $ 23.99 Class B shares 88,486,457 $ 22.64 Class C shares 2,019,120 $ 22.61 Class I shares 2,889,590 $ 24.14 Class Y shares 106,000,741 $ 24.12 ----------- ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 23 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statement of operations AXP New Dimensions Fund Year ended July 31, 2005 Investment income Income: Dividends $ 233,044,387 Interest 12,020,030 Fee income from securities lending 320,444 Less foreign taxes withheld (442,235) -------- Total income 244,942,626 ----------- Expenses (Note 2): Expenses allocated from Portfolio 62,533,534 Distribution fee Class A 20,565,923 Class B 24,839,333 Class C 559,396 Transfer agency fee 22,354,541 Incremental transfer agency fee Class A 1,352,830 Class B 1,005,784 Class C 26,158 Service fee -- Class Y 2,800,648 Administrative services fees and expenses 4,756,123 Compensation of board members 32,620 Printing and postage 3,426,659 Registration fees 92,530 Audit fees 12,500 Other 233,261 ------- Total expenses 144,591,840 Earnings credits on cash balances (Note 2) (522,229) -------- Total net expenses 144,069,611 ----------- Investment income (loss) -- net 100,873,015 ----------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 757,404,472 Foreign currency transactions (554,419) Futures contracts (1,726,839) Options contracts written (427,448) -------- Net realized gain (loss) on investments 754,695,766 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 158,658,167 ----------- Net gain (loss) on investments and foreign currencies 913,353,933 ----------- Net increase (decrease) in net assets resulting from operations $1,014,226,948 ==============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 24 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets AXP New Dimensions Fund Year ended July 31, 2005 2004 Operations and distributions Investment income (loss) -- net $ 100,873,015 $ 53,646,007 Net realized gain (loss) on investments 754,695,766 1,326,188,766 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 158,658,167 (740,837,241) ----------- ------------ Net increase (decrease) in net assets resulting from operations 1,014,226,948 638,997,532 ------------- ----------- Distributions to shareholders from: Net investment income Class A (59,843,080) (46,364,316) Class I (402,754) (24,173) Class Y (25,264,241) (22,183,807) Net realized gain Class A (66,368,786) -- Class B (21,459,161) -- Class C (480,445) -- Class I (279,703) -- Class Y (22,415,431) -- ------------ ----------- Total distributions (196,513,601) (68,572,296) ------------ ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 309,583,153 957,437,754 Class B shares 135,535,176 289,864,944 Class C shares 6,964,606 15,172,920 Class I shares 70,265,265 18,590,210 Class Y shares 249,749,841 649,466,427 Fund merger (Note 5) Class A shares -- 145,036,482 Class B shares -- 71,825,421 Class C shares -- 4,985,482 Class Y shares -- 24,997 Reinvestment of distributions at net asset value Class A shares 122,902,169 45,072,267 Class B shares 21,266,905 -- Class C shares 472,693 -- Class I shares 682,371 24,152 Class Y shares 46,516,684 21,742,867 Payments for redemptions Class A shares (3,400,714,842) (2,032,028,533) Class B shares (Note 2) (1,148,602,856) (1,071,801,488) Class C shares (Note 2) (28,365,050) (17,016,745) Class I shares (21,759,503) (10,876) Class Y shares (978,758,913) (1,196,861,524) ------------ -------------- Increase (decrease) in net assets from capital share transactions (4,614,262,301) (2,098,475,243) -------------- -------------- Total increase (decrease) in net assets (3,796,548,954) (1,528,050,007) Net assets at beginning of year 15,317,912,071 16,845,962,078 -------------- -------------- Net assets at end of year $11,521,363,117 $15,317,912,071 =============== =============== Undistributed net investment income $ 19,084,775 $ 4,276,254 --------------- ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 25 -- AXP NEW DIMENSIONS FUND -- 2005 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. 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 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. The Fund offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares have no sales charge and are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. At July 31, 2005, Ameriprise Financial and the AXP Portfolio Builder Series funds owned 100% of Class I shares, which represents 0.61% of the Fund's net assets. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees 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 at July 31, 2005 was 99.99%. -------------------------------------------------------------------------------- 26 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT All securities held by the Portfolio 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. Pursuant to procedures adopted by the Board of Trustees of the portfolios, Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. 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. Use of estimates Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Guarantees and indemnifications Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. 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. -------------------------------------------------------------------------------- 27 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $554,419 and accumulated net realized gain has been increased by $558,085 resulting in a net reclassification adjustment to decrease paid-in capital by $3,666. The tax character of distributions paid for the years indicated is as follows: Year ended July 31, 2005 2004 Class A Distributions paid from: Ordinary income $59,843,080 $46,364,316 Long-term capital gain 66,368,786 -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain 21,459,161 -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain 480,445 -- Class I* Distributions paid from: Ordinary income 402,754 24,173 Long-term capital gain 279,703 -- Class Y Distributions paid from: Ordinary income 25,264,241 22,183,807 Long-term capital gain 22,415,431 -- * Inception date is March 4, 2004 At July 31, 2005, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 19,018,739 Accumulated long-term gain (loss) $ 760,246,989 Unrealized appreciation (depreciation) $1,382,295,854 Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with Ameriprise Financial to provide administrative services. Under the current Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net that declines from 0.05% to 0.02% annually as the Fund's assets increase. It is expected that the fee schedule to the agreement will be revised effective Oct. 1, 2005. Under the new agreement, the fee percentage of the Fund's average daily net assets will decline from 0.06% to 0.03% annually as the Fund's assets increase. A minor portion of additional -------------------------------------------------------------------------------- 28 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT 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 Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, RiverSource Service Corporation (formerly American Express Client Service Corporation) (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent 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 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. Beginning May 20, 2005, the Transfer Agent implemented an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees were insignificant for the year ended July 31, 2005 and are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.) (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, 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 $8,545,696 for Class A, $2,954,578 for Class B and $9,351 for Class C for the year ended July 31, 2005. During the year ended July 31, 2005, the Fund's transfer agency fees were reduced by $522,229 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 29 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2005 Class A Class B Class C Class I Class Y Sold 13,297,974 6,165,871 317,163 2,992,981 10,687,122 Issued for reinvested distributions 5,161,787 941,848 20,962 28,563 1,945,491 Redeemed (145,856,804) (52,123,835) (1,290,278) (930,034) (41,820,066) ------------ ----------- ---------- -------- ----------- Net increase (decrease) (127,397,043) (45,016,116) (952,153) 2,091,510 (29,187,453) ------------ ----------- -------- --------- ----------- Year ended July 31, 2004 Class A Class B Class C Class I* Class Y Sold 41,994,227 13,241,759 694,168 797,528 27,893,281 Fund merger 6,143,014 3,220,859 223,688 -- 1,053 Issued for reinvested distributions 1,922,552 -- -- 1,014 922,930 Redeemed (87,457,046) (49,430,022) (773,898) (462) (51,317,577) ----------- ----------- -------- ---- ----------- Net increase (decrease) (37,397,253) (32,967,404) 143,958 798,080 (22,500,313) ----------- ----------- ------- ------- -----------
* Inception date is March 4, 2004. 4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by The Bank of New York, whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective Rate plus 0.50% or 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 $500 million with Deutsche Bank. The Fund had no borrowings outstanding during the year ended July 31, 2005. 5. FUND MERGER At the close of business on June 25, 2004, AXP New Dimensions Fund acquired the assets and assumed the identified liabilities of AXP Focused Growth Fund and AXP Growth Dimensions Fund. Upon receipt of the investments and related assets and liabilities from AXP Focused Growth Fund and AXP Growth Dimensions Fund, AXP New Dimensions Fund made an in-kind contribution of $221,872,382 to Growth Trends Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of AXP New Dimensions Fund immediately before the acquisition were $16,149,643,433 and the combined net assets immediately after the acquisition were $16,371,515,815. -------------------------------------------------------------------------------- 30 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT The merger was accomplished by a tax-free exchange of the following: Shares Value AXP Focused Growth Fund 23,415,522 $ 42,348,160 AXP Growth Dimensions Fund 74,295,087 179,524,222 In exchange for the AXP Focused Growth Fund and AXP Growth Dimensions Fund shares and net assets, AXP New Dimensions Fund issued the following number of shares: Shares Class A 6,143,014 Class B 3,220,859 Class C 223,688 Class Y 1,053 AXP Focused Growth Fund's and AXP Growth Dimensions Fund's net assets after adjustments for any permanent book-to-tax differences at the merger date were as follows, which include the following amounts of capital stock, unrealized appreciation, accumulated net realized loss and temporary book-to-tax differences.
Temporary Total net Capital Unrealized Accumulated book-to-tax assets stock appreciation net realized loss differences AXP Focused Growth Fund $ 42,348,160 $ 47,925,406 $ 5,187,878 $(10,453,291) $(311,833) AXP Growth Dimensions Fund 179,524,222 234,495,050 18,406,183 (72,853,762) (523,249)
6. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $61,551,685, that if not offset by future capital gains realized after July 31, 2005 will expire as follows: 2008 2009 2010 2011 $5,869,455 $42,999,536 $8,294,019 $4,388,675 As a result of the merger on June 25, 2004, the Fund acquired capital loss carry-overs and unrealized capital gains. The yearly utilization of the acquired capital losses as well as the utilization of the acquired unrealized losses is limited by the Internal Revenue Code. 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. -------------------------------------------------------------------------------- 31 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT 7. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended July 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $22.58 $21.90 $20.04 $25.43 $36.26 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .20 .08 .07 .05 .02 Net gains (losses) (both realized and unrealized) 1.55 .71 1.82 (5.42) (7.37) ------ ------ ------ ------ ------ Total from investment operations 1.75 .79 1.89 (5.37) (7.35) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.16) (.11) (.03) (.02) (.01) Excess distributions from net investment income -- -- -- -- (.01) Distributions from realized gains (.18) -- -- -- (3.46) ------ ------ ------ ------ ------ Total distributions (.34) (.11) (.03) (.02) (3.48) ------ ------ ------ ------ ------ Net asset value, end of period $23.99 $22.58 $21.90 $20.04 $25.43 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $6,845 $9,319 $9,859 $9,863 $13,857 Ratio of expenses to average daily net assets(b) .95% .91% 1.08% 1.06% 1.00% Ratio of net investment income (loss) to average daily net assets .85% .45% .42% .19% .12% Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29% Total return(c) 7.77% 3.59% 9.47% (21.14%) (21.10%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 32 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended July 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $21.34 $20.77 $19.12 $24.44 $35.22 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .01 (.10) (.04) (.14) (.13) Net gains (losses) (both realized and unrealized) 1.47 .67 1.69 (5.16) (7.19) ------ ------ ------ ------ ------ Total from investment operations 1.48 .57 1.65 (5.30) (7.32) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income -- -- -- (.02) -- Distributions from realized gains (.18) -- -- -- (3.46) ------ ------ ------ ------ ------ Total distributions (.18) -- -- (.02) (3.46) ------ ------ ------ ------ ------ Net asset value, end of period $22.64 $21.34 $20.77 $19.12 $24.44 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $2,004 $2,849 $3,457 $3,728 $5,169 Ratio of expenses to average daily net assets(b) 1.73% 1.68% 1.85% 1.83% 1.76% Ratio of net investment income (loss) to average daily net assets .08% (.32%) (.35%) (.57%) (.65%) Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29% Total return(c) 6.93% 2.74% 8.63% (21.71%) (21.69%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 33 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $21.32 $20.74 $19.10 $24.42 $35.23 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .01 (.09) (.04) (.14) (.13) Net gains (losses) (both realized and unrealized) 1.46 .67 1.68 (5.16) (7.19) ------ ------ ------ ------ ------ Total from investment operations 1.47 .58 1.64 (5.30) (7.32) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income -- -- -- (.02) (.02) Excess distributions from net investment income -- -- -- -- (.01) Distributions from realized gains (.18) -- -- -- (3.46) ------ ------ ------ ------ ------ Total distributions (.18) -- -- (.02) (3.49) ------ ------ ------ ------ ------ Net asset value, end of period $22.61 $21.32 $20.74 $19.10 $24.42 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $46 $63 $59 $44 $30 Ratio of expenses to average daily net assets(b) 1.73% 1.69% 1.87% 1.85% 1.76% Ratio of net investment income (loss) to average daily net assets .07% (.33%) (.38%) (.60%) (.75%) Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29% Total return(c) 6.89% 2.80% 8.59% (21.73%) (21.70%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 34 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Class I Per share income and capital changes(a) Fiscal period ended July 31, 2005 2004(b) Net asset value, beginning of period $22.71 $24.37 ------ ------ Income from investment operations: Net investment income (loss) .31 .06 Net gains (losses) (both realized and unrealized) 1.56 (1.67) ------ ------ Total from investment operations 1.87 (1.61) ------ ------ Less distributions: Dividends from net investment income (.26) (.05) Distributions from realized gains (.18) -- ------ ------ Total distributions (.44) (.05) ------ ------ Net asset value, end of period $24.14 $22.71 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $70 $18 Ratio of expenses to average daily net assets(c) .52% .50%(d) Ratio of net investment income (loss) to average daily net assets 1.08% .87%(d) Portfolio turnover rate (excluding short-term securities) 75% 49% Total return(e) 8.24% (6.61%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is March 4, 2004. (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. -------------------------------------------------------------------------------- 35 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $22.70 $22.02 $20.14 $25.51 $36.33 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .25 .11 .11 .09 .07 Net gains (losses) (both realized and unrealized) 1.55 .72 1.83 (5.44) (7.38) ------ ------ ------ ------ ------ Total from investment operations 1.80 .83 1.94 (5.35) (7.31) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.20) (.15) (.06) (.02) (.02) Excess distributions from net investment income -- -- -- -- (.03) Distributions from realized gains (.18) -- -- -- (3.46) ------ ------ ------ ------ ------ Total distributions (.38) (.15) (.06) (.02) (3.51) ------ ------ ------ ------ ------ Net asset value, end of period $24.12 $22.70 $22.02 $20.14 $25.51 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $2,557 $3,068 $3,472 $3,222 $4,677 Ratio of expenses to average daily net assets(b) .78% .75% .91% .90% .84% Ratio of net investment income (loss) to average daily net assets 1.00% .61% .59% .36% .28% Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29% Total return(c) 7.95% 3.75% 9.64% (21.00%) (20.97%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 36 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Report of Independent Registered Public Accounting Firm 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, 2005, 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, 2005, and the financial highlights for each of the years in the five-year period ended July 31, 2005. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2005, 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 U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota September 20, 2005 -------------------------------------------------------------------------------- 37 -- AXP NEW DIMENSIONS FUND -- 2005 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, 2005 Class A Income distributions -- taxable as dividend income: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 100% Payable date Per share Dec. 20, 2004 $0.16182 Capital gain distribution -- taxable as long-term capital gain. Payable date Per share Dec. 20, 2004 $0.17948 Total distributions $0.34130 Class B Capital gain distribution -- taxable as long-term capital gain. Payable date Per share Dec. 20, 2004 $0.17948 Class C Capital gain distribution -- taxable as long-term capital gain. Payable date Per share Dec. 20, 2004 $0.17948 -------------------------------------------------------------------------------- 38 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Class I Income distributions -- taxable as dividend income: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 100% Payable date Per share Dec. 20, 2004 $0.25844 Capital gain distribution -- taxable as long-term capital gain. Payable date Per share Dec. 20, 2004 $0.17948 Total distributions $0.43792 Class Y Income distributions -- taxable as dividend income: Qualified Dividend Income for individuals 100% Dividends Received Deduction for corporations 100% Payable date Per share Dec. 20, 2004 $0.20227 Capital gain distribution -- taxable as long-term capital gain. Payable date Per share Dec. 20, 2004 $0.17948 Total distributions $0.38175 -------------------------------------------------------------------------------- 39 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Fund Expenses Example (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2005. Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- 40 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Beginning Ending Expenses account value account value paid during Annualized Feb. 1, 2005 July 31, 2005 the period(a) expense ratio Class A Actual(b) $1,000 $1,025.60 $4.67(c) .94% Hypothetical (5% return before expenses) $1,000 $1,019.91 $4.66(c) .94% Class B Actual(b) $1,000 $1,021.70 $8.53(c) 1.72% Hypothetical (5% return before expenses) $1,000 $1,016.09 $8.50(c) 1.72% Class C Actual(b) $1,000 $1,021.70 $8.53(c) 1.72% Hypothetical (5% return before expenses) $1,000 $1,016.09 $8.50(c) 1.72% Class I Actual(b) $1,000 $1,028.10 $2.54(c) .51% Hypothetical (5% return before expenses) $1,000 $1,022.02 $2.53(c) .51% Class Y Actual(b) $1,000 $1,026.40 $3.83(c) .77% Hypothetical (5% return before expenses) $1,000 $1,020.74 $3.82(c) .77%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2005: +2.56% for Class A, +2.17% for Class B, +2.17% for Class C, +2.81% for Class I and +2.64% for Class Y. (c) Pending final approval from the Fund's Board of Directors, it is expected that, effective Oct. 1, 2005, the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund will be revised. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended July 31, 2005, the actual expenses paid would have been $4.72 for Class A, $8.58 for Class B, $8.58 for Class C, $2.59 for Class I and $3.88 for Class Y; the hypothetical expenses paid would have been $4.71 for Class A, $8.55 for Class B, $8.55 for Class C, $2.58 for Class I and $3.86 for Class Y. -------------------------------------------------------------------------------- 41 -- AXP NEW DIMENSIONS FUND -- 2005 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 14 Master Trust portfolios and 90 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 Other directorships with Fund and during past five length of years service --------------------------------------- ----------------- ---------------------- -------------------------------- Arne H. Carlson Board member Chair, Board 901 S. Marquette Ave. since 1999 Services Corporation Minneapolis, MN 55402 (provides Age 70 administrative services to boards). Former Governor of Minnesota --------------------------------------- ----------------- ---------------------- -------------------------------- Philip J. Carroll, Jr. Board member Retired Chairman and Scottish Power PLC, Vulcan 901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Materials Company, Inc. Minneapolis, MN 55402 (engineering and (construction Age 67 construction) since materials/chemicals) 1998 --------------------------------------- ----------------- ---------------------- -------------------------------- Livio D. DeSimone* Board member Retired Chair of the Cargill, Incorporated 30 Seventh Street East since 2001 Board and (commodity merchants and Suite 3050 St. Paul, MN Chief Executive processors), General Mills, 55101-4901 Officer, Minnesota Inc. (consumer foods), Vulcan Age 71 Mining and Materials Company (construction Manufacturing (3M) materials/chemicals), Milliken & Company (textiles and chemicals), and Nexia Biotechnologies, Inc. --------------------------------------- ----------------- ---------------------- -------------------------------- Patricia M. Flynn Board member Trustee Professor of BostonFed Bancorp, Inc. 901 S. Marquette Ave. since 2004 Economics and (holding company) and its Minneapolis, MN 55402 Management, Bentley subsidiary Boston Federal Age 54 College since 2002; Savings Bank former Dean, McCallum Graduate School of Business, Bentley College from 1999 to 2002 --------------------------------------- ----------------- ---------------------- -------------------------------- Anne P. Jones Board member Attorney and 901 S. Marquette Ave. since 1985 Consultant Minneapolis, MN 55402 Age 70 --------------------------------------- ----------------- ---------------------- -------------------------------- Stephen R. Lewis, Jr. Board member Retired President Valmont Industries, Inc. 901 S. Marquette Ave. since 2002 and Professor of (manufactures irrigation Minneapolis, MN 55402 Economics, Carleton systems) Age 66 College --------------------------------------- ----------------- ---------------------- --------------------------------
* Livio D. DeSimone retired as a member of the Board, effective Sept. 8, 2005. -------------------------------------------------------------------------------- 42 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Independent Board Members (continued) Name, address, age Position held Principal occupation Other directorships with Fund and during past five length of service years -------------------------------------- ------------------ ---------------------- -------------------------------- Catherine James Paglia Board member Director, Enterprise Strategic Distribution, Inc. 901 S. Marquette Ave. since 2004 Asset Management, (transportation, distribution Minneapolis, MN 55402 Inc. (private real and logistics consultants) Age 52 estate and asset management company) since 1999 -------------------------------------- ------------------ ---------------------- -------------------------------- Alan K. Simpson Board member Former three-term 1201 Sunshine Ave. since 1997 United States Cody, WY 82414 Senator for Wyoming Age 73 -------------------------------------- ------------------ ---------------------- -------------------------------- Alison Taunton-Rigby Board member Founder and Chief Hybridon, Inc. (biotechnology) 901 S. Marquette Ave. since 2002 Executive Officer, Minneapolis, MN 55402 RiboNovix, Inc. Age 61 since 2004; President, Forester Biotech since 2000; prior to that, President and CEO, Aquila Biopharmaceuticals, Inc. -------------------------------------- ------------------ ---------------------- -------------------------------- Board Member Affiliated with Ameriprise Financial, Inc. (formerly AEFC)** Name, address, age Position held Principal occupation Other directorships with Fund and during past five length of service years -------------------------------------- ------------------ ---------------------- -------------------------------- William F. Truscott Board member Senior Vice 53600 Ameriprise Financial Center since 2001, President - Chief Minneapolis, MN 55474 Vice President Investment Officer Age 44 since 2002 of Ameriprise Financial, Inc. and RiverSource Investments, LLC since 2001. Former Chief Investment Officer and Managing Director, Zurich Scudder Investments -------------------------------------- ------------------ ---------------------- --------------------------------
** Interested person by reason of being an officer, director and/or employee of Ameriprise Financial, Inc. (formerly American Express Financial Corporation) or of RiverSource Investments, LLC, its wholly owned subsidiary. -------------------------------------------------------------------------------- 43 -- AXP NEW DIMENSIONS FUND -- 2005 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. Truscott, who is vice president, the Fund's other officers are:
Other Officers Name, address, age Position held Principal occupation Other directorships with Fund and during past five length of service years -------------------------------------- ------------------ ---------------------- -------------------------------- Jeffrey P. Fox Treasurer Vice President - 105 Ameriprise Financial Center since 2002 Investment Minneapolis, MN 55474 Accounting, Age 50 Ameriprise Financial, Inc., since 2002; Vice President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, Inc., 1996-2000 -------------------------------------- ------------------ ---------------------- -------------------------------- Paula R. Meyer President Senior Vice President 596 Ameriprise Financial Center since 2002 and General Manager - Minneapolis, MN 55474 Mutual Funds, Age 51 Ameriprise Financial, Inc., since 2002 and Senior Vice President, RiverSource Investments, LLC since 2004; Vice President and Managing Director - American Express Funds, Ameriprise Financial, Inc., 2000-2002; Vice President, Ameriprise Financial, Inc., 1998-2000 -------------------------------------- ------------------ ---------------------- -------------------------------- Leslie L. Ogg Vice President, President of Board 901 S. Marquette Ave. General Counsel, Services Corporation Minneapolis, MN 55402 and Secretary Age 66 since 1978 -------------------------------------- ------------------ ---------------------- -------------------------------- Beth E. Weimer Chief Compliance Vice President and 172 Ameriprise Financial Center Officer since Chief Compliance Minneapolis, MN 55474 2004 Officer, Ameriprise Age 52 Financial, Inc., since 2001 and Chief Compliance Officer, RiverSource Investments, LLC since 2005; Vice President and Chief Compliance Officer, Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors), 2001-2005; Partner, Arthur Andersen Regulatory Risk Services, 1998-2001 -------------------------------------- ------------------ ---------------------- --------------------------------
The SAI has additional information about the Fund's directors and is available, without charge, upon request by calling (800) 862-7919. -------------------------------------------------------------------------------- 44 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Approval of Investment Management Services Agreement Ameriprise Financial, Inc. (formerly American Express Financial Corporation or AEFC) (the investment manager) is a wholly-owned subsidiary of American Express Company. Under an Investment Management Services Agreement (the Agreement), the investment manager provides investment advice and other services to the Fund. Throughout the year, the Funds' Board of Directors and the Board's Investment Review Committee monitor these services. Each year the Board determines whether to continue the Agreement by evaluating the quality and level of service received and the costs associated with those services. The investment manager prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations to assist the Board in making this determination. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the Agreement. On February 1, 2005, American Express Company announced its intention to pursue a spin-off of AEFC by distributing shares of the common stock of AEFC to shareholders of American Express Company. At a meeting held in person on April 14, 2005, the Board, including a majority of the independent members, approved the continuation of the Agreement for an interim period, not to exceed one year, ending on the later of (i) the effective date of the spin-off or (ii) the approval by the Fund's shareholders of a new investment management services agreement with the investment manager (the Interim Period). The spin-off will not result in an "assignment" of the Agreement under the Investment Company Act of 1940 and, therefore, will not cause the termination of the Agreement according to its terms. In connection with the spin-off the investment manager has proposed that going forward, services under the Agreement be provided by an affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel advised the Board that it would be prudent, in connection with the spin-off, to consider a new agreement with RiverSource and to seek shareholder approval of that agreement as soon as practical thereafter. Investment performance is a major factor in the evaluation process, and the Board reviewed the Fund's performance over a range of different periods by comparing its performance to relevant Lipper and broader market indices. The Board considered that over time the Fund's investment performance should be above median for a peer group of funds with similar investment goals and noted that although the Fund's investment performance in 2004 was below median, Ameriprise Financial has taken steps to address the below median performance. The Board noted that, in addition to portfolio management and investment research, the investment manager provides portfolio trading, daily net asset value calculation, management of cash flow, product development, administration of its compliance and legal departments, access to distribution, accounting and recordkeeping, and reporting to the Board and shareholders. To evaluate these services, the Board referred to surveys and benchmarks established by commercial providers, trade associations and the investment manager's internal processes. The Board concluded that the services provided were consistent with services provided by investment managers to comparable mutual funds. -------------------------------------------------------------------------------- 45 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT The Board also evaluated the price paid for the services provided by the investment manager, noting the existence of a pricing philosophy, established by the Board and the investment manager, that seeks to maintain total Fund expenses within a range of the median expenses charged to comparable funds sold through financial advisors. The Board considered detailed information set forth in an annual report on fees and expenses, including, among other things, data showing a comparison of the Fund's expenses with median expenses paid by funds in its comparison group and data showing the Fund's contribution to the investment manager's profitability. The Board determined that the total expense ratio of the Fund is below the median of its comparison group. The Board considered the economies of scale that might be realized by the investment manager as the Fund grew and took note of the extent to which Fund shareholders also might benefit from such growth. The Board considered that the Agreement provided for lower fees as assets increase at pre-established breakpoints and concluded that the Agreement satisfactorily provided for sharing these economies of scale. The Board took into account the Contracts Committee's discussion comparing the fees the investment manager charges to the Fund with those it charges to institutional clients, noting that the relatively higher fees paid by the Fund were principally attributable to the additional services required to manage a regulated mutual fund, like the Fund, and the operation of a large mutual fund family. The Board also considered the profitability realized by the investment manager and its affiliates from its relationship with the Fund. The Board took into account the services acquired by the investment manager through the use of commission dollars paid by the Fund on portfolio transactions. The Board concluded that the investment manager's overall costs and profitability were appropriate, although profitability may be too low on an ongoing basis. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. Based on the foregoing, the Board concluded that the fees paid to the investment manager under the Agreement were fair and reasonable and determined to approve renewal of the Agreement for the Interim Period. -------------------------------------------------------------------------------- 46 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website www.riversource.com/investments; or by searching the website of the Securities and Exchange Commission (SEC) at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283; through the investment manager's website, www.riversource.com/investments; or by searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 47 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT American Express Funds 70100 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by Ameriprise Financial Services, Inc. (formerly known as American Express Financial Advisors Inc.). Member NASD. 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 and Anne P. Jones, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services Fund - Related Fees* (a) Audit Fees. The fees paid for the years ended July 31, to KPMG LLP for professional services rendered for the audits of the annual financial statements for AXP Dimensions Series, Inc. were as follows: 2005 - $12,000; 2004 - $32,115 (b) Audit - Related Fees. The fees paid for the years ended July 31, to KPMG LLP for additional professional services rendered in connection with the registrant's security count pursuant to Rule 17f-2 for AXP Dimensions Series, Inc. were as follows: 2005 - $2,781; 2004 - $3,524 (c) Tax Fees. The fees paid for the years ended July 31, to KPMG LLP for tax compliance related services for AXP Dimensions Series, Inc. were as follows: 2005 - $4,339; 2004 - $4,550 (d) All Other Fees. The fees paid for the years ended July 31, to KPMG LLP for additional professional services rendered in connection to proxy filing for AXP Dimensions Series, Inc. were as follows: 2005 - $3,803; 2004 - None (e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by KPMG LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2005 and 2004 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees paid for the years ended July 31, by the registrant for non-audit services to KPMG LLP were as follows: 2005 - None; 2004 - None The fees paid for the years ended July 31, to KPMG LLP by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows: 2005 - $38,450; 2004 - $88,450 (h) 100% of the services performed in item (g) above during 2005 and 2004 were pre-approved by the audit committee. *2004 represents bills paid 8/1/03 - 7/31/04 2005 represents bills paid 8/1/04 - 7/31/05 Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. 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. (a)(3) Not applicable. (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 Oct. 3, 2005 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 Oct. 3, 2005 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date Oct. 3, 2005