-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JL77nU4QdRTLpzvMDXvRQ4mPjcNPeUcDhtCpufo9G728VQ+//4kd265zeSkqGF5S Z1R3y2b5fmdSslSec2ZFFA== 0000820027-01-500215.txt : 20010517 0000820027-01-500215.hdr.sgml : 20010517 ACCESSION NUMBER: 0000820027-01-500215 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP STOCK FUND INC CENTRAL INDEX KEY: 0000052423 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410839317 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00498 FILM NUMBER: 1641342 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH ST STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712727 FORMER COMPANY: FORMER CONFORMED NAME: IDS STOCK FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INVESTORS STOCK FUND INC DATE OF NAME CHANGE: 19831221 N-30D 1 s6365r.txt AXP STOCK FUND AXP(R) Stock Fund 2001 SEMIANNUAL REPORT (icon of) magnifying glass American Express(R) Funds AXP Stock Fund seeks to provide shareholders with current income and growth of capital. Big Names, Big Business While some investors like to strive for the potentially outstanding returns that can be generated by stocks of newer companies, others are more comfortable with the usually steadier performance provided by stocks of more established businesses. AXP Stock Fund focuses on stocks in the latter group, many of which long ago made their marks in American enterprise and, in some cases, also have a strong international business presence. These stocks offer the potential dual benefit of growth along with a steady stream of dividend income. CONTENTS From the Chairman 3 From the Portfolio Manager 3 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 17 Notes to Financial Statements (Portfolio) 20 Investments in Securities 23 - ------------------------------------------------------------------------------ - -2- AXP STOCK FUND (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board From the Chairman The financial markets have always had their ups and downs, but in recent months volatility has become more frequent and intense. While no one can say with certainty what the market will do, American Express Financial Corporation, the Fund's investment manager, expects the economy to continue to grow and long-term interest rates to rise only slightly. But no matter what transpires, this is a great time to take a close look at your goals and investments. We encourage you to: o Consult a professional investment advisor who can help you cut through mountains of data. o Set financial goals that extend beyond those achievable through the retirement plan of your employer. o Learn as much as you can about your current investments. The portfolio manager's letter that follows provides a review of the Fund's investment strategies and performance. The semiannual report contains other valuable information as well. The Fund's prospectus describes its investment objectives and how it intends to achieve those objectives. As experienced investors know, information is vital to making good investment decisions. So, take a moment and decide again whether the Fund's investment objectives and management style fit with your other investments to help you reach your financial goals. And make it a practice on a regular basis to assess your investment options. Arne H. Carlson (picture of) G. Michael Kennedy G. Michael Kennedy Portfolio manager From the Portfolio Manager A conservative investment approach allowed AXP Stock Fund to hold up relatively well during a steep decline in the stock market over the past six months. Still, the Fund's Class A shares did experience a loss of 15.47% (excluding the sales charge) for the first half of the fiscal year -- October 2000 through March 2001. The stock market was already in a downturn when the period began, as indications of a slowing economy fueled concerns among investors that corporate profits would suffer a similar slump. The selling pressure finally leveled off in late December, by which time the market was down nearly 12%. - ------------------------------------------------------------------------------ - -3- SEMIANNUAL REPORT -- 2001 SURPRISE RATE CUT The new year brought some welcome relief, as in early January the Federal Reserve surprised investors with an interest-rate cut that spurred the market to a sharp rally. But it proved to be short-lived. Profit worries quickly resurfaced, driving the market back into a steady retreat during February and March. Although the Fund was certainly not immune to the market's troubles, it did manage to avoid the worst of them. This was most evident in the case of the technology sector, where a number of leading stocks saw their prices cut in half and, in some cases, much more over the six months. To the Fund's benefit, I substantially reduced the tech holdings last December, given what seemed to be unreasonably high prices for many issues. I kept the bulk of the proceeds from the tech sales in cash reserves, which also helped mitigate the impact of the market's struggles on the Fund in the ensuing months. On the positive side, a heavy exposure to utility stocks paid off well during the first three months of the period before tailing off. To shore up the Fund's dividend, I added to holdings among electric utility stocks. Among other prominent sectors, financial services helped performance early in the period, while investments in health care, capital goods and retailing stocks provided mixed overall results. Looking toward the second half of the fiscal year, while I don't expect a rapid turnaround in the stock market, I think we'll see the groundwork being laid for an improving investment environment. The cornerstone will be the likelihood of additional interest-rate reductions by the Federal Reserve, which should result in stronger economic growth and, consequently, a pick-up in corporate profits. Assuming that outlook is reasonably accurate, I would also expect stocks to perform better. In the meantime, I plan to stay with a somewhat cautious approach that centers on reasonably priced stocks that appear best able to weather short-term economic uncertainty. G. Michael Kennedy - ------------------------------------------------------------------------------ - -4- AXP STOCK FUND Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2001 $20.19 Sept. 30, 2000 $27.12 Decrease $ 6.93 Distributions -- Oct. 1, 2000 - March 31, 2001 From income $ 0.97 From long-term capital gains $ 1.93 Total distributions $ 2.90 Total return* -15.47% Class B -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2001 $19.99 Sept. 30, 2000 $26.90 Decrease $ 6.91 Distributions -- Oct. 1, 2000 - March 31, 2001 From income $ 0.89 From long-term capital gains $ 1.93 Total distributions $ 2.82 Total return* -15.84% Class C -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2001 $19.96 Sept. 30, 2000 $26.88 Decrease $ 6.92 Distributions -- Oct. 1, 2000 - March 31, 2001 From income $ 0.90 From long-term capital gains $ 1.93 Total distributions $ 2.83 Total return* -15.85% Class Y -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2001 $20.19 Sept. 30, 2000 $27.13 Decrease $ 6.94 Distributions -- Oct. 1, 2000 - March 31, 2001 From income $ 0.99 From long-term capital gains $ 1.93 Total distributions $ 2.92 Total return* -15.43% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - ------------------------------------------------------------------------------ - -5- SEMIANNUAL REPORT -- 2001 The 10 Largest Holdings Percent Value (of net assets) (as of March 31, 2001) Wal-Mart Stores 2.35% $90,900,000 USA Networks 2.11 81,387,500 Williams Companies 1.89 72,845,000 General Electric 1.84 71,162,000 Baxter Intl 1.71 65,897,999 McGraw-Hill Companies 1.70 65,615,000 Exxon Mobil 1.68 64,800,000 Wells Fargo 1.67 64,311,000 Safeway 1.57 60,665,000 Bank of America 1.56 60,225,000 For further detail about these holdings, please refer to the section entitled "Investments in Securities." (picture of) pie chart The 10 holdings listed here make up 18.08% of net assets - ------------------------------------------------------------------------------ - -6- AXP STOCK FUND Financial Statements Statement of assets and liabilities AXP Stock Fund, Inc. March 31, 2001 (Unaudited) Assets Investment in Equity Portfolio (Note 1) $3,860,162,035 -------------- Liabilities Accrued distribution fee 28,307 Accrued service fee 2,168 Accrued transfer agency fee 11,324 Accrued administrative services fee 2,993 Other accrued expenses 114,952 ------- Total liabilities 159,744 ------- Net assets applicable to outstanding capital stock $3,860,002,291 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 1,913,696 Additional paid-in capital 3,507,369,707 Undistributed net investment income 3,617,007 Accumulated net realized gain (loss) 142,067,138 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 205,034,743 ----------- Total -- representing net assets applicable to outstanding capital stock $3,860,002,291 ============== Net assets applicable to outstanding shares: Class A $2,698,024,546 Class B $ 363,201,697 Class C $ 1,429,550 Class Y $ 797,346,498 Net asset value per share of outstanding capital stock: Class A shares 133,640,064 $ 20.19 Class B shares 18,165,339 $ 19.99 Class C shares 71,606 $ 19.96 Class Y shares 39,492,611 $ 20.19
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ - -7- SEMIANNUAL REPORT -- 2001 Statement of operations AXP Stock Fund, Inc. Six months ended March 31, 2001 (Unaudited) Investment income Income: Dividends $ 28,679,448 Interest 8,204,188 --------- Total income 36,883,636 ---------- Expenses (Note 2): Expenses allocated from Equity Portfolio 10,212,275 Distribution fee Class A 3,791,584 Class B 2,016,926 Class C 5,518 Transfer agency fee 1,924,889 Incremental transfer agency fee Class A 113,089 Class B 47,496 Class C 211 Service fee -- Class Y 448,620 Administrative services fees and expenses 604,697 Compensation of board members 5,800 Printing and postage 217,894 Registration fees 49,181 Audit fees 5,250 Other 9,832 ----- Total expenses 19,453,262 Earnings credits on cash balances (Note 2) (134,747) -------- Total net expenses 19,318,515 ---------- Investment income (loss) -- net 17,565,121 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 174,944,275 Foreign currency transactions 106,434 Futures contracts 2,715,540 --------- Net realized gain (loss) on investments 177,766,249 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (923,227,032) ------------ Net gain (loss) on investments and foreign currencies (745,460,783) ------------ Net increase (decrease) in net assets resulting from operations $(727,895,662) =============
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ - -8- AXP STOCK FUND Statements of changes in net assets AXP Stock Fund, Inc.
March 31, 2001 Sept. 30, 2000 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 17,565,121 $ 31,154,331 Net realized gain (loss) on investments 177,766,249 465,006,097 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (923,227,032) 240,595,471 ------------ ----------- Net increase (decrease) in net assets resulting from operations (727,895,662) 736,755,899 ------------ ----------- Distributions to shareholders from: Net investment income Class A (11,279,539) (22,686,570) Class B (106,921) -- Class C (1,187) (896) Class Y (4,054,109) (8,286,582) Net realized gain Class A (342,402,971) (366,196,061) Class B (45,710,431) (42,601,785) Class C (118,787) -- Class Y (101,769,580) (112,206,614) ------------ ------------ Total distributions (505,443,525) (551,978,508) ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Notes 2 and 5) 58,579,864 193,617,322 Class B shares 32,798,679 102,884,487 Class C shares 1,059,192 717,414 Class Y shares 97,376,162 203,076,715 Reinvestment of distributions at net asset value Class A shares 324,711,038 356,019,142 Class B shares 45,232,169 42,094,823 Class C shares 115,662 896 Class Y shares 96,864,351 108,039,801 Payments for redemptions Class A shares (180,092,764) (421,488,122) Class B shares (Note 2) (35,893,842) (69,976,434) Class C shares (Note 2) (132,628) (58) Class Y shares (122,993,939) (440,975,392) ------------ ------------ Increase (decrease) in net assets from capital share transactions 317,623,944 74,010,594 ----------- ---------- Total increase (decrease) in net assets (915,715,243) 258,787,985 Net assets at beginning of period 4,775,717,534 4,516,929,549 ------------- ------------- Net assets at end of period $3,860,002,291 $4,775,717,534 ============== ============== Undistributed net investment income $ 3,617,007 $ 1,493,642 -------------- --------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ - -9- SEMIANNUAL REPORT -- 2001 Notes to Financial Statements AXP Stock Fund, Inc. (Unaudited as to March 31, 2001) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Fund has 10 billion authorized shares of capital stock. Class C shares of the Fund were offered to the public on June 26, 2000. Prior to this date, American Express Financial Corporation (AEFC) purchased 74 shares of capital stock at $27.21 per share, which represented the initial capital in Class C. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Equity Portfolio The Fund invests all of its assets in Equity Portfolio (the Portfolio), a series of Growth and Income Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in common stocks and securities convertible into common stocks. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of March 31, 2001 was 99.99%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. - ------------------------------------------------------------------------------ - -10- AXP STOCK FUND 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. Dividends to shareholders Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.04% to 0.02% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.00 o Class B $20.00 o Class C $19.50 o Class Y $17.00 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $901,216 for Class A, $130,672 for Class B and $209 for Class C for the six months ended March 31, 2001. During the six months ended March 31, 2001, the Fund's transfer agency fees were reduced by $134,747 as a result of earnings credits from overnight cash balances. - ------------------------------------------------------------------------------ - -11- SEMIANNUAL REPORT -- 2001 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended March 31, 2001 Class A Class B Class C Class Y Sold 2,506,685 1,402,476 45,268 4,247,896 Issued for reinvested distributions 15,128,090 2,125,572 5,443 4,513,772 Redeemed (7,779,923) (1,576,140) (5,354) (5,439,559) ---------- ---------- ------ ---------- Net increase (decrease) 9,854,852 1,951,908 45,357 3,322,109 --------- --------- ------ ---------
Year ended Sept. 30, 2000 Class A Class B Class C* Class Y Sold 7,079,589 3,781,123 26,218 7,402,862 Issued for reinvested distributions 13,183,078 1,573,879 33 4,003,458 Redeemed (15,265,905) (2,565,981) (2) (15,921,278) ----------- ---------- -- ----------- Net increase (decrease) 4,996,762 2,789,021 26,249 (4,514,958) --------- --------- ------ ----------
* Inception date was June 26, 2000. 4. BANK BORROWINGS The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.05% per annum. The Fund had no borrowings outstanding during the six months ended March 31, 2001. 5. FUND MERGER As of the close of business on July 14, 2000, AXP Stock Fund acquired the assets and assumed the identified liabilities of Strategist Equity Fund. The aggregate net assets of AXP Stock Fund immediately before the acquisition were $4,955,658,598. The merger was accomplished by a tax-free exchange of 41,539 shares of Strategist Equity Fund valued at $1,323,229. In exchange for the Strategist Equity Fund shares and net assets, AXP Stock Fund issued the following number of shares: Shares Net assets Class A 47,435 $1,323,229 Strategist Equity Fund's net assets at that date consisted of capital stock of $1,047,426 and unrealized appreciation of $275,803. - ------------------------------------------------------------------------------ - -12- AXP STOCK FUND 6. NEW ACCOUNTING PRONOUNCEMENT In November 2000, the AICPA issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after Dec. 15, 2000. Adopting the revised Guide is not expected to have a significant impact on the Fund's financial position, results of operations or changes in its net assets. 7. FINANCIAL HIGHLIGHTS The tables below show certain important finanicial information for evaluating the Fund's results. Class A Per share income and capital changes(a)
Fiscal period ended Sept. 30, 2001(b) 2000 1999 1998 1997 Net asset value, beginning of period $27.12 $26.14 $24.18 $27.44 $22.49 Income from investment operations: Net investment income (loss) .10 .19 .24 .29 .39 Net gains (losses) (both realized and unrealized) (4.13) 4.11 4.00 .22 6.11 Total from investment operations (4.03) 4.30 4.24 .51 6.50 Less distributions: Dividends from net investment income (.09) (.18) (.24) (.30) (.43) Distributions from realized gains (2.81) (3.14) (2.04) (3.47) (1.12) Total distributions (2.90) (3.32) (2.28) (3.77) (1.55) Net asset value, end of period $20.19 $27.12 $26.14 $24.18 $27.44 Ratios/supplemental data Net assets, end of period (in millions) $2,698 $3,358 $3,105 $2,783 $2,877 Ratio of expenses to average daily net assets(c) .86%(d) .84% .82% .77% .78% Ratio of net investment income (loss) to average daily net assets .85%(d) .67% .90% 1.14% 1.58% Portfolio turnover rate (excluding short-term securities) 43% 53% 76% 79% 82% Total return(e) (15.47%) 16.59% 17.71% 2.04% 30.22%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended March 31, 2001 (Unaudited). (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. - ------------------------------------------------------------------------------ - -13- SEMIANNUAL REPORT -- 2001 Class B Per share income and capital changes(a)
Fiscal period ended Sept. 30, 2001(b) 2000 1999 1998 1997 Net asset value, beginning of period $26.90 $25.97 $24.05 $27.32 $22.42 Income from investment operations: Net investment income (loss) .01 -- .06 .10 .22 Net gains (losses) (both realized and unrealized) (4.10) 4.07 3.96 .21 6.05 Total from investment operations (4.09) 4.07 4.02 .31 6.27 Less distributions: Dividends from net investment income (.01) -- (.06) (.11) (.25) Distributions from realized gains (2.81) (3.14) (2.04) (3.47) (1.12) Total distributions (2.82) (3.14) (2.10) (3.58) (1.37) Net asset value, end of period $19.99 $26.90 $25.97 $24.05 $27.32 Ratios/supplemental data Net assets, end of period (in millions) $363 $436 $349 $258 $203 Ratio of expenses to average daily net assets(c) 1.62%(d) 1.60% 1.59% 1.53% 1.55% Ratio of net investment income (loss) to average daily net assets .08%(d) (.09%) .12% .39% .85% Portfolio turnover rate (excluding short-term securities) 43% 53% 76% 79% 82% Total return(e) (15.84%) 15.73% 16.81% 1.27% 29.23%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended March 31, 2001 (Unaudited). (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. - ------------------------------------------------------------------------------ - -14- AXP STOCK FUND Class C Per share income and capital changes(a) Fiscal period ended Sept. 30, 2001(b) 2000(c) Net asset value, beginning of period $26.88 $26.70 Income from investment operations: Net investment income (loss) .02 .05 Net gains (losses) (both realized and unrealized) (4.11) .17 Total from investment operations (4.09) .22 Less distributions: Dividends from net investment income (.02) (.04) Distributions from realized gains (2.81) -- Total distributions (2.83) (.04) Net asset value, end of period $19.96 $26.88 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 Ratio of expenses to average daily net assets(d) 1.62%(e) 1.60%(e) Ratio of net investment income (loss) to average daily net assets .16%(e) .02%(e) Portfolio turnover rate (excluding short-term securities) 43% 53% Total return(f) (15.85%) .81% (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended March 31, 2001 (Unaudited). (c) Inception date was June 26, 2000. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. - ------------------------------------------------------------------------------ - -15- SEMIANNUAL REPORT -- 2001 Class Y Per share income and capital changes(a)
Fiscal period ended Sept. 30, 2001(b) 2000 1999 1998 1997 Net asset value, beginning of period $27.13 $26.14 $24.18 $27.44 $22.49 Income from investment operations: Net investment income (loss) .12 .23 .27 .31 .42 Net gains (losses) (both realized and unrealized) (4.14) 4.13 4.00 .22 6.11 Total from investment operations (4.02) 4.36 4.27 .53 6.53 Less distributions: Dividends from net investment income (.11) (.23) (.27) (.32) (.46) Distributions from realized gains (2.81) (3.14) (2.04) (3.47) (1.12) Total distributions (2.92) (3.37) (2.31) (3.79) (1.58) Net asset value, end of period $20.19 $27.13 $26.14 $24.18 $27.44 Ratios/supplemental data Net assets, end of period (in millions) $797 $981 $1,063 $1,027 $1,082 Ratio of expenses to average daily net assets(c) .70%(d) .69% .72% .70% .66% Ratio of net investment income (loss) to average daily net assets 1.01%(d) .82% 1.00% 1.21% 1.71% Portfolio turnover rate (excluding short-term securities) 43% 53% 76% 79% 82% Total return(e) (15.43%) 16.80% 17.81% 2.12% 30.38%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Six months ended March 31, 2001 (Unaudited). (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. - ------------------------------------------------------------------------------ - -16- AXP STOCK FUND Financial Statements Statement of assets and liabilities Equity Portfolio March 31, 2001 (Unaudited) Assets Investments in securities, at value (Note 1): (identified cost $3,649,980,790) $3,855,032,473 Dividends and accrued interest receivable 3,012,124 Receivable for investment securities sold 45,219,034 ---------- Total assets 3,903,263,631 ------------- Liabilities Disbursements in excess of cash on demand deposit 42,600 Payable for investment securities purchased 42,834,063 Accrued investment management services fee 49,682 Other accrued expenses 92,095 ------ Total liabilities 43,018,440 ---------- Net assets $3,860,245,191 ============== See accompanying notes to financial statements. - ------------------------------------------------------------------------------ - -17- SEMIANNUAL REPORT -- 2001 Statement of operations Equity Portfolio Six months ended March 31, 2001 (Unaudited) Investment income Income: Dividends $ 28,680,049 Interest 8,198,434 --------- Total income 36,878,483 ---------- Expenses (Note 2): Investment management services fee 10,025,626 Compensation of board members 8,200 Custodian fees 145,937 Audit fees 15,750 Other 23,529 ------ Total expenses 10,219,042 Earnings credits on cash balances (Note 2) (6,553) ------ Total net expenses 10,212,489 ---------- Investment income (loss) -- net 26,665,994 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 174,929,828 Foreign currency transactions 106,211 Futures contracts 2,715,540 --------- Net realized gain (loss) on investments 177,751,579 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (923,227,982) ------------ Net gain (loss) on investments and foreign currencies (745,476,403) ------------ Net increase (decrease) in net assets resulting from operations $(718,810,409) =============
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ - -18- AXP STOCK FUND Statements of changes in net assets Equity Portfolio
March 31, 2001 Sept. 30, 2000 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 26,665,994 $ 50,409,731 Net realized gain (loss) on investments 177,751,579 465,117,393 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (923,227,982) 240,698,409 ------------ ----------- Net increase (decrease) in net assets resulting from operations (718,810,409) 756,225,533 Net contributions (withdrawals) from partners (196,949,546) (499,984,692) ------------ ------------ Total increase (decrease) in net assets (915,759,955) 256,240,841 Net assets at beginning of period 4,776,005,146 4,519,764,305 ------------- ------------- Net assets at end of period $3,860,245,191 $4,776,005,146 ============== ==============
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ - -19- SEMIANNUAL REPORT -- 2001 Notes to Financial Statements Equity Portfolio (Unaudited as to March 31, 2001) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Equity Portfolio (the Portfolio) is a series of Growth and Income Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Equity Portfolio invests primarily in common stocks and securities convertible into common stocks. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. - ------------------------------------------------------------------------------ - -20- AXP STOCK FUND Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. - ------------------------------------------------------------------------------ - -21- SEMIANNUAL REPORT -- 2001 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with AEFC to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.53% to 0.4% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of AXP Stock Fund to the Lipper Large-Cap Core Index. The maximum adjustment is 0.08% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference is less than 1%, the adjustment will be zero. The adjustment decreased the fee by $114,926 for the six months ended March 31, 2001. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. During the six months ended March 31, 2001, the Portfolio's custodian fees were reduced by $6,553 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to American Express Trust Company, an affiliate of AEFC. According to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,747,660,609 and $2,224,359,165, respectively, for the six months ended March 31, 2001. For the same period, the portfolio turnover rate was 43%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $228,750 for the six months ended March 31, 2001. Income from securities lending amounted to $26,264 for the six months ended March 31, 2001. 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. 4. NEW ACCOUNTING PRONOUNCEMENT In November 2000, the AICPA issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after Dec. 15, 2000. Adopting the revised Guide is not expected to have a significant impact on the Portfolio's financial position, results of operations or changes in its net assets. - ------------------------------------------------------------------------------ - -22- AXP STOCK FUND Investments in Securities Equity Portfolio March 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (83.3%)
Issuer Shares Value(a) Aerospace & defense (3.0%) Boeing 700,000 $38,997,000 Lockheed Martin 700,000 24,955,000 United Technologies 700,000 51,310,000 Total 115,262,000 Airlines (0.5%) Southwest Airlines 1,050,000 18,637,500 Automotive & related (0.6%) Ford Motor 800,000 22,496,000 Banks and savings & loans (4.7%) Bank of America 1,100,000 60,225,000 FleetBoston Financial 1,000,000 37,750,000 U.S. Bancorp 885,500 20,543,600 Wells Fargo 1,300,000 64,311,000 Total 182,829,600 Beverages & tobacco (2.5%) Anheuser-Busch 1,000,000 45,930,000 Coca-Cola 1,100,000 49,676,000 Total 95,606,000 Chemicals (1.8%) Dow Chemical 900,000 28,413,000 du Pont (EI) de Nemours 1,000,000 40,700,000 Total 69,113,000 Communications equipment & services (0.5%) CIENA 200,000(b) 8,325,000 Corning 200,000 4,138,000 JDS Uniphase 300,000(b) 5,531,250 Total 17,994,250 Computer software & services (1.4%) Electronic Arts 800,000(b) 43,400,000 VERITAS Software 200,000(b) 9,248,000 Total 52,648,000 Computers & office equipment (2.9%) AOL Time Warner 600,000(b) 24,090,000 Automatic Data Processing 500,000 27,190,000 Cisco Systems 2,000,000(b) 31,625,000 First Data 500,000 29,855,000 Total 112,760,000 Electronics (2.6%) Applied Materials 1,100,000(b) 47,850,000 Intel 1,000,000 26,312,500 Texas Instruments 900,000 27,882,000 Total 102,044,500 Energy (6.1%) BP Amoco ADR 800,000(c) 39,696,000 Chevron 500,000 43,900,000 Conoco Cl A 1,700,000 47,770,000 Exxon Mobil 800,000 64,800,000 Kerr-McGee 600,000 38,940,000 Total 235,106,000 Energy equipment & services (3.1%) Halliburton 1,300,000 47,775,000 Schlumberger 525,000 30,245,250 Transocean Sedco Forex 400,000 17,340,000 Weatherford Intl 500,000(b) 24,675,000 Total 120,035,250 Financial services (3.3%) Citigroup 1,200,000 53,976,000 Fannie Mae 700,000 55,720,000 Lehman Brothers Holdings 300,000 18,810,000 Total 128,506,000 Food (3.0%) ConAgra 1,700,000 31,008,000 General Mills 1,300,000 55,913,000 Kellogg 1,000,000 27,030,000 Total 113,951,000 Health care (9.2%) American Home Products 1,000,000 58,750,000 Amgen 300,000(b) 18,056,250 Baxter Intl 700,000 65,897,999 Guidant 800,000(b) 35,992,000 Immunex 1,500,000(b) 21,468,750 Medtronic 1,000,000 45,740,000 Merck & Co 300,000 22,770,000 Pfizer 1,325,000 54,258,750 Schering-Plough 900,000 32,877,000 Total 355,810,749
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ - -23- SEMIANNUAL REPORT -- 2001 Common stocks (continued)
Issuer Shares Value(a) Household products (2.3%) Colgate-Palmolive 850,000 $46,971,000 Gillette 1,400,000 43,638,000 Total 90,609,000 Industrial equipment & services (1.1%) Caterpillar 1,000,000 44,380,000 Insurance (3.5%) Allstate 1,200,000 50,328,000 American General 1,200,000 45,900,000 American Intl Group 500,000 40,250,000 Total 136,478,000 Leisure time & entertainment (0.9%) Viacom Cl B 779,664(b) 34,281,826 Media (7.1%) Comcast Special Cl A 1,200,000(b) 50,325,000 Cox Communications Cl A 800,000(b) 35,592,000 Hispanic Broadcasting 600,000(b) 11,460,000 McGraw-Hill Companies 1,100,000 65,615,000 Sony ADR 400,000(c) 28,900,000 USA Networks 3,400,000(b) 81,387,500 Total 273,279,500 Metals (2.0%) Alcan Aluminium 1,000,000(c) 36,000,000 Alcoa 1,100,000 39,545,000 Total 75,545,000 Multi-industry conglomerates (4.7%) General Electric 1,700,000 71,162,000 Minnesota Mining & Mfg 500,000 51,950,000 Textron 1,000,000 56,840,000 Total 179,952,000 Paper & packaging (0.9%) Intl Paper 1,000,000 36,080,000 Retail (6.5%) Federated Dept Stores 800,000(b) 33,240,000 Home Depot 750,000 32,325,000 Safeway 1,100,000(b) 60,665,000 Wal-Mart Stores 1,800,000 90,900,000 Walgreen 800,000 32,640,000 Total 249,770,000 Transportation (1.0%) CSX 1,100,000 37,070,000 Utilities -- electric (4.1%) Dominion Resources 700,000 45,129,000 Duke Energy 600,000 25,644,000 Exelon 650,000 42,640,000 Xcel Energy 1,500,000 45,165,000 Total 158,578,000 Utilities -- gas (3.1%) El Paso 730,000 47,669,000 Williams Companies 1,700,000 72,845,000 Total 120,514,000 Utilities -- telephone (0.9%) SBC Communications 807,304 36,029,978 Total common stocks (Cost: $3,001,959,283) $3,215,367,153 Preferred stocks (3.9%) Issuer Shares Value(a) AT&T 7.00% Cv 675,000 $20,594,250 Coastal 6.63% Cv PRIDES 339,700(h) 14,989,263 CVS 6.00% Cv 200,000 19,000,000 Georgia-Pacific Group 7.50% Cm Cv 925,000 32,375,000 Metlife Capital 8.00% Cm Cv 300,000 28,350,000 Pharmacia 6.50% Cv ACES 400,000(g) 18,800,000 Wendys Financing 5.00% Cm Cv Series A 340,000 16,388,000 Total preferred stocks (Cost: $151,870,045) $150,496,513
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ - -24- AXP STOCK FUND Bonds (1.3%)
Issuer Coupon Principal Value(a) rate amount Costco Wholesale Zero Coupon Cv 08-19-17 3.50% $21,000,000(d,f) $19,614,000 Devon Energy Cv 08-15-08 4.90 15,000,000 14,850,000 Exodus Communications Cv Sub Nts 07-15-08 4.75 25,100,000(d) 13,875,280 Total bonds (Cost: $55,196,698) $48,339,280 Short-term securities (11.4%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (6.7%) Federal Home Loan Bank Disc Nts 04-06-01 5.26% $3,600,000 $3,596,325 06-01-01 4.93 7,300,000 7,236,764 06-08-01 4.80 50,000,000 49,518,749 06-22-01 4.62 34,500,000 34,101,525 Federal Home Loan Mtge Corp Disc Nts 05-01-01 4.97 25,000,000 24,890,000 05-22-01 4.73 43,100,000 42,801,771 Federal Natl Mtge Assn Disc Nts 04-02-01 5.08 20,000,000 19,991,533 04-16-01 5.30 27,600,000 27,529,357 04-19-01 5.20 200,000 199,385 04-26-01 4.98 27,000,000 26,899,558 05-18-01 4.74 21,200,000 21,059,634 Total 257,824,601 Commercial paper (4.7%) Alabama Power 06-21-01 4.75 4,700,000 4,646,361 CAFCO 06-06-01 4.76 7,200,000(e) 7,132,680 Commerzbank U.S. Finance 05-01-01 5.22 10,600,000 10,551,474 Gannett 04-18-01 5.01 5,400,000(e) 5,385,750 04-20-01 4.96 12,800,000(e) 12,763,040 04-23-01 4.99 7,800,000(e) 7,774,156 Heinz (HJ) 05-07-01 4.98 18,000,000 17,905,950 Kimberly-Clark 05-02-01 4.87 10,000,000(e) 9,955,541 May Dept Stores 04-24-01 4.96 11,000,000 10,962,263 05-03-01 4.92 8,000,000 7,962,978 Merrill Lynch 05-11-01 5.05 8,700,000 8,646,538 Natl Rural Utilities 04-02-01 5.05 3,900,000 3,898,359 Paccar Financial 04-27-01 5.03 10,700,000 10,658,306 Salomon Smith Barney 05-16-01 4.93 11,800,000 11,724,512 SBC Communications 04-23-01 4.95 6,800,000(e) 6,777,651 04-23-01 5.11 15,000,000(e) 14,949,099 Toyota Motor Credit 04-19-01 4.99 9,800,000(e) 9,772,887 04-19-01 5.11 9,000,000(e) 8,974,499 04-20-01 5.06 12,600,000(e) 12,562,882 Total 183,004,926 Total short-term securities (Cost: $440,954,764) $440,829,527 Total investments in securities (Cost: $3,649,980,790)(i) $3,855,032,473
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ - -25- SEMIANNUAL REPORT -- 2001 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. For debt securities, principal amounts are denominated in the currency indicated. As of March 31, 2001, the value of foreign securities represented 2.71% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the board. (e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (f) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (g) ACES (Automatically Convertible Equity Securities) are structured as convertible preferred securities. Investors receive an enhanced yield but based upon a specific formula, potential appreciation is limited. ACES pay dividends, have voting rights, are noncallable for at least three years and upon maturity, convert into shares of common stock. (h) PRIDES (Preferred Redeemable Increased Dividend Equity Securities) are structured as convertible preferred securities. Investors receive an enhanced yield but based upon a specific formula, potential appreciation is limited. PRIDES pay dividends, have voting rights, are noncallable for three years and upon maturity, convert into shares of common stock. (i) At March 31, 2001, the cost of securities for federal income tax purposes was approximately $3,649,981,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 471,750,000 Unrealized depreciation (266,699,000) ------------ Net unrealized appreciation $ 205,051,000 ------------- - ------------------------------------------------------------------------------ - -26- AXP STOCK FUND AXP Stock Fund 70100 AXP Financial Center Minneapolis, MN 55474 Ticker Symbol Class A: INSTX Class B: IDSBX Class C: N/A Class Y: IDSYX PRSRT STD AUTO U.S. POSTAGE PAID AMERICAN EXPRESS This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. S-6365 R (5/01) -----END PRIVACY-ENHANCED MESSAGE-----