-----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, P/Xj4GMoWjzC/n/wFO/klQNIdK/T2FFI9Of/mEKJxnP/iBwz38DNkdH5/oUVra98 lQCV3aUwj7v9roD49UmTXg== 0000820027-02-000401.txt : 20020523 0000820027-02-000401.hdr.sgml : 20020523 20020523093122 ACCESSION NUMBER: 0000820027-02-000401 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP STOCK FUND INC CENTRAL INDEX KEY: 0000052423 IRS NUMBER: 410839317 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00498 FILM NUMBER: 02660402 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 s6365t.txt AXP STOCK FUND, INC. AXP(R) Stock Fund 2002 SEMIANNUAL REPORT American Express(R) Funds (icon of) magnifying glass AXP Stock Fund seeks to provide shareholders with current income and growth of capital. Big Names, Big Business These are the names you know. They are the movers and shakers of today's business world. Whether representing established U.S. firms or companies that have made their mark overseas, the securities found in AXP Stock Fund make up a veritable who's who in the financial market. These stocks offer a dual benefit of ongoing growth potential along with a steady stream of dividend income. And as we move toward a more global economy, these blue chip, multinational companies are well-positioned to prosper in the 21st century. CONTENTS From the Chairman 3 Portfolio Manager Q & A 3 Fund Facts 5 The 10 Largest Holdings 6 Financial Statements (Fund) 7 Notes to Financial Statements (Fund) 10 Financial Statements (Portfolio) 16 Notes to Financial Statements (Portfolio) 18 Investments in Securities 21 - -------------------------------------------------------------------------------- 2 AXP STOCK FUND -- SEMIANNUAL REPORT (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board From the Chairman For most of us investors, the past several months proved to be an extremely trying time. More recently, the events of this past September and the prospect of what may follow have added to our collective concern. While nothing can change what has happened, we can control how we respond. In broad terms, I would strongly advise that you keep a focus on your long-term financial goals and not let specific events dictate your investment decisions. Ultimately, it is where you finish, not where you are at the moment, that matters most. Your financial advisor plays an essential role in this process, so please let him or her help you by reviewing your situation and plotting the proper investment course. As I have indicated in the past, the role our Board plays in your financial future is to monitor and confirm that each American Express mutual fund meets its investment objective and that its management style stays on target. We want each fund to be able to deliver to you, the shareholder, the type of performance you expect and the best results that can be obtained. Toward that end, American Express has made significant changes in its investment management capability, and will continue to make changes as it strives to provide a consistent standard of excellence. On behalf of the Board, Arne H. Carlson (picture of) G. Michael Kennedy G. Michael Kennedy Portfolio manager Portfolio Manager Q & A Q: How did AXP Stock Fund perform over the six-month period ended March 31, 2002? A: Despite significant volatility in the equity markets during the six-month period, AXP Stock Fund returned 9.19% (Class A shares excluding sales charges). By comparison, the unmanaged Standard & Poor's 500 Index and the Lipper Large-Cap Core Funds Index returned 10.97% and 10.37%, respectively, for the same period. Q: What factors affected the Fund's performance during the six months? A: The period began with the stock market trying to shake off the effects of the September 11th terrorist attacks. Stocks managed to perform quite well from the beginning of October through the end of 2001. The Fund was able to capitalize on much of the market's - -------------------------------------------------------------------------------- 3 AXP STOCK FUND -- SEMIANNUAL REPORT positive movement, but we were caught off guard by the sudden surge in technology stocks that took place particularly in November. We held a slightly smaller-than-average position in technology stocks during that time, and missed some of the opportunities that quickly developed there. However, our broad-based focus on the market proved to be more effective after November. Stocks did well in December, but struggled in the first two months of 2002. Finally in March, we saw a healthier market environment, as investors continued to focus on clear signals that the U.S. economy was on the mend. However, as the period came to an end, there were still concerns hanging over the market. Among them were issues related to company accounting practices tied to the Enron debacle and heightened tensions in the Middle East. Q: What changes did you make to the portfolio during the period? A: Throughout the period, we maintained a rather conservative structure in the portfolio, emphasizing large-cap stocks that represented a wide cross-section of the market. As it became clear that the economy would quickly emerge from the recessionary environment of 2001, we looked for selected opportunities among stocks that could benefit from the early stages of a recovery. These included a number of basic materials and industrial stocks, such as Boeing, Dow Chemical and Weyerhaeuser. We also added some attractively-valued technology companies to the Fund, although we were selective with our stock picking in this industry. Overall, technology stocks continued to represent a smaller-than-average weighting. Because we still had a cautious view toward the economic recovery, we continued to favor more defensive industries such as health care, consumer staples and insurance. In addition, we focused on reasonably priced stocks and companies that showed the ability to generate solid earnings. Q: What is your outlook for the coming months? A: Even though economic news has been mildly positive, we continue to anticipate a rather slow recovery as the year unfolds. We look for leadership in the stock market to come primarily from basic materials and industrial stocks, and are maintaining a strong emphasis in those sectors. Technology stocks should rebound as well, but many companies will continue to face a challenge in meeting profit expectations as a number of them appear greatly overvalued. We are particularly focused on companies that have a strong balance sheet and solid free cash flow. This may be critical in separating the winners from the losers in what appears to be a very selective operating and profit environment for stocks. While in general, the environment of an improving economy and continued low inflation should be positive for stocks, we anticipate continued market volatility throughout the rest of the Fund's fiscal year. The Fund's more defensive approach to stock selection should prove beneficial in that kind of environment. G. Michael Kennedy - -------------------------------------------------------------------------------- 4 AXP STOCK FUND -- SEMIANNUAL REPORT Fund Facts Class A -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2002 $19.40 Sept. 30, 2001 $17.86 Increase $ 1.54 Distributions -- Oct. 1, 2001 - March 31, 2002 From income $ 0.10 From long-term capital gains $ -- Total distributions $ 0.10 Total return* +9.19% Class B -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2002 $19.22 Sept. 30, 2001 $17.70 Increase $ 1.52 Distributions -- Oct. 1, 2001 - March 31, 2002 From income $ 0.03 From long-term capital gains $ -- Total distributions $ 0.03 Total return* +8.76% Class C -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2002 $19.17 Sept. 30, 2001 $17.66 Increase $ 1.51 Distributions -- Oct. 1, 2001 - March 31, 2002 From income $ 0.03 From long-term capital gains $ -- Total distributions $ 0.03 Total return* +8.76% Class Y -- 6-month performance (All figures per share) Net asset value (NAV) March 31, 2002 $19.40 Sept. 30, 2001 $17.86 Increase $ 1.54 Distributions -- Oct. 1, 2001 - March 31, 2002 From income $ 0.11 From long-term capital gains $ -- Total distributions $ 0.11 Total return* +9.27% * 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 AXP STOCK FUND -- SEMIANNUAL REPORT The 10 Largest Holdings Percent Value (of net assets) (as of March 31, 2002) General Electric 3.4% $116,095,000 McGraw-Hill Companies 2.6 88,725,000 Wal-Mart Stores 2.5 85,806,000 USA Networks 2.5 85,779,000 Microsoft 2.5 84,434,000 Baxter Intl 2.5 83,328,000 Caterpillar 2.4 79,590,000 Wyeth 2.3 78,780,000 Pfizer 2.1 71,532,000 Exxon Mobil 2.1 70,128,000 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 24.9% of net assets - -------------------------------------------------------------------------------- 6 AXP STOCK FUND -- SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP Stock Fund, Inc. March 31, 2002 (Unaudited) Assets Investment in Portfolio (Note 1) $3,386,206,447 Capital shares receivable 4,713 ----- Total assets 3,386,211,160 ------------- Liabilities Accrued distribution fee 24,969 Accrued service fee 1,928 Accrued transfer agency fee 294 Accrued administrative services fee 2,733 Other accrued expenses 129,558 ------- Total liabilities 159,482 ------- Net assets applicable to outstanding capital stock $3,386,051,678 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 1,747,356 Additional paid-in capital 3,188,198,981 Excess of distributions over net investment income (538,902) Accumulated net realized gain (loss) (Note 5) (127,995,634) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 324,639,877 ----------- Total -- representing net assets applicable to outstanding capital stock $3,386,051,678 ============== Net assets applicable to outstanding shares: Class A $2,347,456,616 Class B $ 328,641,624 Class C $ 2,595,855 Class Y $ 707,357,583 Net asset value per share of outstanding capital stock: Class A shares 121,030,270 $ 19.40 Class B shares 17,100,015 $ 19.22 Class C shares 135,437 $ 19.17 Class Y shares 36,469,880 $ 19.40 ---------- --------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 7 AXP STOCK FUND -- SEMIANNUAL REPORT
Statement of operations AXP Stock Fund, Inc. Six months ended March 31, 2002 (Unaudited) Investment income Income: Dividends $ 26,329,688 Interest 3,690,092 Less foreign taxes withheld (30,260) ------- Total income 29,989,520 ---------- Expenses (Note 2): Expenses allocated from Portfolio 8,214,300 Distribution fee Class A 2,893,372 Class B 1,592,149 Class C 10,858 Transfer agency fee 1,797,278 Incremental transfer agency fee Class A 105,685 Class B 45,795 Class C 466 Service fee -- Class Y 347,318 Administrative services fees and expenses 502,870 Compensation of board members 7,350 Printing and postage 158,274 Registration fees 47,437 Audit fees 5,375 Other 8,515 ----- Total expenses 15,737,042 Earnings credits on cash balances (Note 2) (13,272) ------- Total net expenses 15,723,770 ---------- Investment income (loss) -- net 14,265,750 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (95,142,461) Options contracts written 2,091,929 --------- Net realized gain (loss) on investments (93,050,532) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 371,571,740 ----------- Net gain (loss) on investments and foreign currencies 278,521,208 ----------- Net increase (decrease) in net assets resulting from operations $292,786,958 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 8 AXP STOCK FUND -- SEMIANNUAL REPORT
Statements of changes in net assets AXP Stock Fund, Inc. March 31, 2002 Sept. 30, 2001 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 14,265,750 $ 34,220,246 Net realized gain (loss) on investments (93,050,532) (1,571,000) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 371,571,740 (1,175,193,638) ----------- -------------- Net increase (decrease) in net assets resulting from operations 292,786,958 (1,142,544,392) ----------- -------------- Distributions to shareholders from: Net investment income Class A (12,061,636) (22,908,683) Class B (512,003) (128,550) Class C (3,964) (2,956) Class Y (4,118,633) (8,211,333) Net realized gain Class A (170,708) (342,402,971) Class B (23,793) (45,710,431) Class C (157) (118,787) Class Y (51,115) (101,769,580) ------- ------------ Total distributions (16,942,009) (521,253,291) ----------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 62,438,635 105,362,503 Class B shares 29,730,360 54,166,817 Class C shares 832,073 1,915,657 Class Y shares 60,311,056 154,851,512 Reinvestment of distributions at net asset value Class A shares 11,040,735 335,208,053 Class B shares 526,131 45,253,410 Class C shares 4,026 117,399 Class Y shares 3,872,623 100,711,162 Payments for redemptions Class A shares (195,070,196) (359,608,863) Class B shares (Note 2) (33,306,743) (74,452,177) Class C shares (Note 2) (193,591) (398,828) Class Y shares (108,248,811) (196,776,065) ------------ ------------ Increase (decrease) in net assets from capital share transactions (168,063,702) 166,350,580 ------------ ----------- Total increase (decrease) in net assets 107,781,247 (1,497,447,103) Net assets at beginning of period 3,278,270,431 4,775,717,534 ------------- ------------- Net assets at end of period $3,386,051,678 $ 3,278,270,431 ============== =============== Undistributed (excess of distributions over) net investment income $ (538,902) $ 1,891,584 -------------- ---------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 9 AXP STOCK FUND -- SEMIANNUAL REPORT Notes to Financial Statements AXP Stock Fund, Inc. (Unaudited as to March 31, 2002) 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. 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, 2002 was 99.99%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. 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 -- SEMIANNUAL REPORT 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 American Express Financial Corporation (AEFC) to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.04% 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 incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.00 o Class B $20.00 o Class C $19.50 o Class Y $17.00 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $606,028 for Class A, $121,380 for Class B and $385 for Class C for the six months ended March 31, 2002. During the six months ended March 31, 2002, the Fund's transfer agency fees were reduced by $13,272 as a result of earnings credits from overnight cash balances. - -------------------------------------------------------------------------------- 11 AXP STOCK FUND -- SEMIANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Six months ended March 31, 2002 Class A Class B Class C Class Y Sold 3,317,167 1,595,823 44,801 3,200,453 Issued for reinvested distributions 576,159 27,960 214 202,330 Redeemed (10,368,980)(1,790,104) (10,387) (5,786,185) ----------- ---------- ------- ---------- Net increase (decrease) (6,475,654) (166,321) 34,628 (2,383,402) ---------- -------- ------ ---------- Year ended Sept. 30, 2001 Class A Class B Class C Class Y Sold 4,825,308 2,471,218 88,031 7,103,795 Issued for reinvested distributions 15,679,368 2,126,797 5,533 4,716,026 Redeemed (16,783,964)(3,545,110) (19,004) (9,137,041) ----------- ---------- ------- ---------- Net increase (decrease) 3,720,712 1,052,905 74,560 2,682,780 --------- --------- ------ ---------
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, 2002. 5. CAPITAL LOSS CARRY-OVER For federal income purposes, the Fund has a capital loss carry-over of $22,659,099 as of Sept. 30, 2001, that will expire in 2010 if not offset by capital gains. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 12 AXP STOCK FUND -- SEMIANNUAL REPORT 6. 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, 2002(f) 2001 2000 1999 1998 Net asset value, beginning of period $17.86 $27.12 $26.14 $24.18 $27.44 Income from investment operations: Net investment income (loss) .08 .20 .19 .24 .29 Net gains (losses) (both realized and unrealized) 1.56 (6.47) 4.11 4.00 .22 Total from investment operations 1.64 (6.27) 4.30 4.24 .51 Less distributions: Dividends from net investment income (.10) (.18) (.18) (.24) (.30) Distributions from realized gains -- (2.81) (3.14) (2.04) (3.47) Total distributions (.10) (2.99) (3.32) (2.28) (3.77) Net asset value, end of period $19.40 $17.86 $27.12 $26.14 $24.18 Ratios/supplemental data Net assets, end of period (in millions) $2,347 $2,277 $3,358 $3,105 $2,783 Ratio of expenses to average daily net assets(c) .90%(d) .87% .84% .82% .77% Ratio of net investment income (loss) to average daily net assets .90%(d) .88% .67% .90% 1.14% Portfolio turnover rate (excluding short-term securities) 47% 87% 53% 76% 79% Total return(e) 9.19% (24.87%) 16.59% 17.71% 2.04% Class B Per share income and capital changes(a) Fiscal period ended Sept. 30, 2002(f) 2001 2000 1999 1998 Net asset value, beginning of period $17.70 $26.90 $25.97 $24.05 $27.32 Income from investment operations: Net investment income (loss) .02 .01 -- .06 .10 Net gains (losses) (both realized and unrealized) 1.53 (6.39) 4.07 3.96 .21 Total from investment operations 1.55 (6.38) 4.07 4.02 .31 Less distributions: Dividends from net investment income (.03) (.01) -- (.06) (.11) Distributions from realized gains -- (2.81) (3.14) (2.04) (3.47) Total distributions (.03) (2.82) (3.14) (2.10) (3.58) Net asset value, end of period $19.22 $17.70 $26.90 $25.97 $24.05 Ratios/supplemental data Net assets, end of period (in millions) $329 $306 $436 $349 $258 Ratio of expenses to average daily net assets(c) 1.67%(d) 1.64% 1.60% 1.59% 1.53% Ratio of net investment income (loss) to average daily net assets .13%(d) .11% (.09%) .12% .39% Portfolio turnover rate (excluding short-term securities) 47% 87% 53% 76% 79% Total return(e) 8.76% (25.48%) 15.73% 16.81% 1.27%
See accompanying notes to financial highlights. - -------------------------------------------------------------------------------- 13 AXP STOCK FUND -- SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Sept. 30, 2002(f) 2001 2000(b) Net asset value, beginning of period $17.66 $26.88 $26.70 Income from investment operations: Net investment income (loss) .02 .04 .05 Net gains (losses) (both realized and unrealized) 1.52 (6.41) .17 Total from investment operations 1.54 (6.37) .22 Less distributions: Dividends from net investment income (.03) (.04) (.04) Distributions from realized gains -- (2.81) -- Total distributions (.03) (2.85) (.04) Net asset value, end of period $19.17 $17.66 $26.88 Ratios/supplemental data Net assets, end of period (in millions) $3 $2 $1 Ratio of expenses to average daily net assets(c) 1.69%(d) 1.64% 1.60%(d) Ratio of net investment income (loss) to average daily net assets .11%(d) .16% .02%(d) Portfolio turnover rate (excluding short-term securities) 47% 87% 53% Total return(e) 8.76% (25.47%) .81%
Class Y Per share income and capital changes(a) Fiscal period ended Sept. 30, 2002(f) 2001 2000 1999 1998 Net asset value, beginning of period $17.86 $27.13 $26.14 $24.18 $27.44 Income from investment operations: Net investment income (loss) .10 .23 .23 .27 .31 Net gains (losses) (both realized and unrealized) 1.55 (6.47) 4.13 4.00 .22 Total from investment operations 1.65 (6.24) 4.36 4.27 .53 Less distributions: Dividends from net investment income (.11) (.22) (.23) (.27) (.32) Distributions from realized gains -- (2.81) (3.14) (2.04) (3.47) Total distributions (.11) (3.03) (3.37) (2.31) (3.79) Net asset value, end of period $19.40 $17.86 $27.13 $26.14 $24.18 Ratios/supplemental data Net assets, end of period (in millions) $707 $694 $981 $1,063 $1,027 Ratio of expenses to average daily net assets(c) .74%(d) .71% .69% .72% .70% Ratio of net investment income (loss) to average daily net assets 1.05%(d) 1.04% .82% 1.00% 1.21% Portfolio turnover rate (excluding short-term securities) 47% 87% 53% 76% 79% Total return(e) 9.27% (24.77%) 16.80% 17.81% 2.12%
See accompanying notes to financial highlights. - -------------------------------------------------------------------------------- 14 AXP STOCK FUND -- SEMIANNUAL REPORT Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended March 31, 2002 (Unaudited). - -------------------------------------------------------------------------------- 15 AXP STOCK FUND -- SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities Equity Portfolio March 31, 2002 (Unaudited) Assets Investments in securities at value, (Note 1)* (identified cost $3,092,076,407) $3,416,735,602 Dividends and accrued interest receivable 2,682,502 --------- Total assets 3,419,418,104 ------------- Liabilities Disbursements in excess of cash on demand deposit 28,554 Payable upon return of securities loaned (Note 4) 32,992,500 Accrued investment management services fee 44,088 Other accrued expenses 65,508 ------ Total liabilities 33,130,650 ---------- Net assets $3,386,287,454 ============== *Including securities on loan, at value (Note 4) $ 31,028,993 --------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 AXP STOCK FUND -- SEMIANNUAL REPORT
Statement of operations Equity Portfolio Six months ended March 31, 2002 (Unaudited) Investment income Income: Dividends $ 26,330,300 Interest 3,685,751 Less foreign taxes withheld (30,261) ------- Total income 29,985,790 ---------- Expenses (Note 2): Investment management services fee 8,067,134 Compensation of board members 10,425 Custodian fees 99,281 Audit fees 16,250 Other 23,640 ------ Total expenses 8,216,730 Earnings credits on cash balances (Note 2) (2,241) ------ Total net expenses 8,214,489 --------- Investment income (loss) -- net 21,771,301 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (95,144,633) Options contracts written (Note 5) 2,091,929 --------- Net realized gain (loss) on investments (93,052,704) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilitites in foreign currencies 371,580,358 ----------- Net gain (loss) on investments and foreign currencies 278,527,654 ----------- Net increase (decrease) in net assets resulting from operations $300,298,955 ============
Statements of changes in net assets Equity Portfolio March 31, 2002 Sept. 30, 2001 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 21,771,301 $ 51,514,327 Net realized gain (loss) on investments (93,052,704) (1,591,366) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilitites in foreign currencies 371,580,358 (1,175,198,544) ----------- -------------- Net increase (decrease) in net assets resulting from operations 300,298,955 (1,125,275,583) ----------- -------------- Proceeds from contributions 22,635,840 14,412,855 Fair value of withdrawals (215,424,995) (386,364,764) ------------ ------------ Net contributions (withdrawals) from partners (192,789,155) (371,951,909) ------------ ------------ Total increase (decrease) in net assets 107,509,800 (1,497,227,492) Net assets at beginning of period 3,278,777,654 4,776,005,146 ------------- ------------- Net assets at end of period $3,386,287,454 $ 3,278,777,654 ============== ===============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 AXP STOCK FUND -- SEMIANNUAL REPORT Notes to Financial Statements Equity Portfolio (Unaudited as to March 31, 2002) 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. - -------------------------------------------------------------------------------- 18 AXP STOCK FUND -- SEMIANNUAL REPORT Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including level-yield amortization of premium and discount, is accrued daily. 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 0.40% 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 Funds Index. The maximum - -------------------------------------------------------------------------------- 19 AXP STOCK FUND -- SEMIANNUAL REPORT 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 increased the fee by $98,089 for the six months ended March 31, 2002. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. During the six months ended March 31, 2002, the Portfolio's custodian fees were reduced by $2,241 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 $1,665,554,727 and $1,443,981,969, respectively, for the six months ended March 31, 2002. For the same period, the portfolio turnover rate was 47%. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with AEFC were $431,793 for the six months ended March 31, 2002. 4. LENDING OF PORTFOLIO SECURITIES As of March 31, 2002, securities valued at $31,028,993 were on loan to brokers. For collateral, the Portfolio received $32,992,500 in cash. Income from securities lending amounted to $37,967 for the six months ended March 31, 2002. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 5. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows: Six months ended March 31, 2002 Calls Contracts Premiums Balance Sept. 30, 2001 10,000 $ 2,091,929 Opened -- -- Expired (10,000) (2,091,929) ------- ---------- Balance March 31, 2002 -- $ -- ------- ---------- See "Summary of significant accounting policies." - -------------------------------------------------------------------------------- 20 AXP STOCK FUND -- SEMIANNUAL REPORT Investments in Securities Equity Portfolio March 31, 2002 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (92.7%) Issuer Shares Value(a) Aerospace & defense (5.4%) Boeing 1,400,000 $67,550,000 Lockheed Martin 800,000 46,064,000 Northrop Grumman 400,000 45,220,000 Raytheon 600,000 24,630,000 Total 183,464,000 Airlines (0.6%) Southwest Airlines 1,050,000 20,317,500 Automotive & related (0.4%) General Motors 200,000 12,090,000 Banks and savings & loans (4.3%) Bank of America 700,000 47,614,000 Comerica 500,000 31,285,000 U.S. Bancorp 1,400,000 31,598,000 Wells Fargo 700,000 34,580,000 Total 145,077,000 Beverages & tobacco (1.8%) Anheuser-Busch 1,200,000 62,640,000 Building materials & construction (1.5%) Weyerhaeuser 800,000 50,288,000 Chemicals (2.2%) Dow Chemical 1,200,000 39,264,000 Rohm & Haas 800,000 33,816,000 Total 73,080,000 Communications equipment & services (1.5%) Motorola 2,200,000 31,240,000 Nokia ADR Cl A 1,000,000(c) 20,740,000 Total 51,980,000 Computers & office equipment (5.6%) Cisco Systems 2,000,000(b) 33,860,000 Intl Business Machines 200,000 20,800,000 Microsoft 1,400,000(b) 84,434,000 SAP ADR 900,000(c) 33,480,000 Sun Microsystems 2,000,000(b) 17,640,000 Total 190,214,000 Electronics (5.6%) Analog Devices 500,000(b) 22,520,000 Intel 2,000,000 60,820,000 KLA-Tencor 700,000(b) 46,550,000 Taiwan Semiconductor Mfg ADR 2,000,000(b,c) 41,500,000 Texas Instruments 600,000 19,860,000 Total 191,250,000 Energy (2.9%) Conoco 1,000,000 29,180,000 Exxon Mobil 1,600,000 70,128,000 Total 99,308,000 Energy equipment & services (1.6%) Transocean Sedco Forex 900,000 29,907,000 Weatherford Intl 500,000(b) 23,815,000 Total 53,722,000 Financial services (2.1%) Citigroup 1,200,000 59,424,000 MBNA 300,000 11,571,000 Total 70,995,000 Food (2.7%) General Mills 700,000 34,195,000 Kraft Foods Cl A 700,000 27,055,000 Tyson Foods Cl A 2,500,000 31,200,000 Total 92,450,000 Health care (17.9%) Abbott Laboratories 800,000 42,080,000 Baxter Intl 1,400,000 83,328,000 Genentech 600,000(b) 30,270,000 IDEC Pharmaceuticals 500,000(b) 32,150,000 Johnson & Johnson 1,000,000 64,950,000 Laboratory Corp America Holdings 450,000(b) 43,137,000 MedImmune 900,000(b) 35,397,000 Medtronic 1,000,000 45,210,000 Pfizer 1,800,000 71,532,000 Pharmacia 1,000,000 45,080,000 Stryker 500,000 30,165,000 Wyeth 1,200,000 78,780,000 Total 602,079,000 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 21 AXP STOCK FUND -- SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Household products (2.6%) Gillette 1,300,000 $44,213,000 Procter & Gamble 500,000 45,045,000 Total 89,258,000 Industrial equipment & services (2.4%) Caterpillar 1,400,000 79,590,000 Insurance (3.7%) American Intl Group 600,000 43,284,000 Jefferson-Pilot 600,000 30,048,000 Lincoln Natl 700,000 35,511,000 Travelers Property Casualty Cl A 900,000(b) 18,000,000 Total 126,843,000 Leisure time & entertainment (1.0%) Mattel 1,700,000 35,428,000 Media (7.9%) Clear Channel Communications 400,000(b) 20,564,000 Gannett 400,000 30,440,000 McGraw-Hill Companies 1,300,000 88,725,000 Omnicom Group 400,000 37,760,000 USA Networks 2,700,000(b) 85,779,000 Total 263,268,000 Metals (2.0%) Alcoa 1,800,000 67,932,000 Multi-industry conglomerates (6.1%) Emerson Electric 400,000 22,956,000 General Electric 3,100,000 116,095,000 Minnesota Mining & Mfg 600,000 69,006,000 Total 208,057,000 Paper & packaging (1.5%) Intl Paper 1,200,000 51,612,000 Retail (4.7%) Home Depot 950,000 46,179,500 Wal-Mart Stores 1,400,000 85,806,000 Walgreen 700,000 27,433,000 Total 159,418,500 Transportation (1.3%) Union Pacific 700,000 43,498,000 Utilities-- electric (3.4%) Allegheny Energy 800,000 33,080,000 Dominion Resources 700,000 45,612,000 Xcel Energy 1,500,000 38,025,000 Total 116,717,000 Total common stocks (Cost: $2,841,556,221) $3,140,576,000 Preferred stocks (4.0%) Issuer Shares Value(a) Dominion Resources 9.50% Cv 342,000 $21,009,060 Duke Energy 8.25% Cv 980,000 25,195,800 Electronic Data Systems 7.63% Cv 500,000 25,275,000 FPL Group 8.50% Cv 300,000 16,830,000 General Motors 5.25% Cv Series B 600,000 16,398,000 MetLife Capital Trust I 8.00% Cm Cv 300,000 29,355,000 Total preferred stocks (Cost: $115,315,459) $134,062,860 Bonds (1.0%) Issuer Coupon Principal Value(a) rate amount Costco Wholesale Zero Coupon Cv 08-19-17 3.50% $21,000,000(d,e) $19,320,000 Devon Energy Cv 08-15-08 4.90 15,000,000 15,018,750 Total bonds (Cost: $27,442,815) $34,338,750 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 22 AXP STOCK FUND -- SEMIANNUAL REPORT Short-term securities (3.2%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (1.7%) Federal Home Loan Bank Disc Nt 04-03-02 1.71% $6,300,000 $6,298,293 Federal Home Loan Mtge Corp Disc Nts 04-30-02 1.78 5,000,000 4,991,842 05-14-02 1.80 8,000,000 7,981,200 Federal Natl Mtge Assn Disc Nt 05-14-02 1.76 37,900,000 37,814,351 Total 57,085,686 Commercial paper (1.5%) Abbey Natl North America 04-29-02 1.93 4,600,000 4,592,190 Morgan Stanley, Dean Witter & Co 04-08-02 1.78 8,300,000 8,295,486 Nordea North America 04-02-02 1.68 5,200,000 5,198,628 Procter & Gamble 05-09-02 1.82% $2,000,000(f) $1,995,753 Salomon Smith Barney 04-08-02 1.79 10,000,000 9,994,530 Windmill Funding 04-01-02 1.87 20,600,000(f) 20,595,719 Total 50,672,306 Total short-term securities (Cost: $107,761,912) $107,757,992 Total investments in securities (Cost: $3,092,076,407)(g) $3,416,735,602 Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. As of March 31, 2002, the value of foreign securities represented 2.8% 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) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (f) 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. (g) At March 31, 2002, the cost of securities for federal income tax purposes was approximately $3,092,076,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $414,453,000 Unrealized depreciation (89,793,000) ----------- Net unrealized appreciation $324,660,000 ============ - -------------------------------------------------------------------------------- 23 AXP STOCK FUND -- SEMIANNUAL REPORT AXP Stock Fund 70100 AXP Financial Center Minneapolis, MN 55474 americanexpress.com Ticker Symbol Class A: INSTX Class B: IDSBX Class C: N/A Class Y: IDSYX 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 T (5/02) -----END PRIVACY-ENHANCED MESSAGE-----