AXP(SM)
Growth Fund
2000 SEMIANNUAL REPORT
American Epresss (R) Funds
(icon of) ruler
AXP Growth Fund seeks to provide shareholders with long-term capital growth.
<PAGE>
Going for Growth
In the long run, a company's stock price usually reflects its business fortunes.
Therefore, if a company thrives, its stock tends to follow suit. That's why many
long-term investors, including AXP Growth Fund, focus on growth stocks -- those
of companies that enjoy rising sales and profits. While there will be
interruptions along the way, patient investors look forward to sharing in that
same prosperity.
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) 16
Notes to Financial Statements (Portfolio) 19
Investments in Securities 23
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
We are in an extraordinary period for investing in financial assets, with many
stocks at their all-time highs. Looking at year 2000, 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. This is a great time to
take a close look at your goals and investments. We encourage you to:
o Consult a professional investment adviser who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through retirement
plans 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 annual 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.
On behalf of the Board,
Arne H. Carlson
(picture of) Lisa A Costa
Lisa A Costa
Portfolio manager
From the Portfolio Manager
AXP Growth Fund took good advantage of a stock-market surge to post a strong
gain for the first half of the fiscal year. For the six months -- August 1999
through January 2000 -- the Fund's Class A shares generated a total return
(excluding the sales charge) of 20.07%. (A portion of the return came in the
form of a capital gain, which was paid to shareholders in December and reduced
the Fund's net asset value by the same amount.)
The period got off to a shaky start, as the stock market struggled in the face
of higher interest rates, concerns that the robust economy might soon spawn a
run-up in the inflation rate, and uncertainty regarding the potential effect of
the Y2K computer bug. Although the Fund held up relatively well in the negative
environment, it lost about 2% through September.
MOOD SWINGS
The mood in the stock market changed quickly, though, as fresh reports of
still-tame inflation and healthy corporate profits arrived and excitement about
the impact of the burgeoning Internet began to build. By November, the market's
moderate advance had turned into a roaring rally that continued to gather
momentum through the end of December. Given the strength of the run-up, it
wasn't surprising that the period ended with the market retreating moderately in
January.
While stocks of virtually all stripes benefited from the late-1999 surge, it was
clearly the technology stocks that were the big winners, especially those
related to the growth of the Internet. The tech trend worked to the particular
advantage of the Fund, as about half of the portfolio's assets was concentrated
in that sector, a level that rose to more than 60% in December because of rising
prices among those stocks. Among the largest and most productive holdings for
the Fund were technology names such as Cisco Systems, Microsoft, EMC
Corporation, Texas Instruments, Yahoo and Tellabs. Most of the rest of the
portfolio was concentrated in the health care, financial services, retailing and
utilities sectors. While there were some positive performers within these
groups, on the whole their results were mixed.
Before closing, I want to note that credit for the Fund's excellent performance
during the past six months and, in fact, the past few years, belongs to Mitzi
Malevich, who managed the Fund during that time and whom I succeeded upon her
retirement in January 2000. While no two portfolio managers do their jobs in
identical fashion, I think it's important to point out that I intend to follow
the same investment strategy that Mitzi employed so successfully: hold a
relatively small number of stocks (an average of about 50 for this Fund in
recent years) representing large companies with strong growth prospects, keep
trading to a minimum, and keep the portfolio virtually fully invested (almost
all the assets in stocks, leaving very little in cash reserves) at all times. I
look forward to putting that approach to work for you in the years ahead.
Lisa A. Costa
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 2000 $49.82
July 31, 1999 $42.14
Increase $ 7.68
Distributions -- Aug. 1, 1999 - Jan. 31, 2000
From income $ --
From capital gains $ 0.78
Total distributions $ 0.78
Total return* +20.07%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 2000 $47.85
July 31, 1999 $40.65
Increase $ 7.20
Distributions -- Aug. 1, 1999 - Jan. 31, 2000
From income $ --
From capital gains $ 0.78
Total distributions $ 0.78
Total return* +19.60%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 2000 $50.14
July 31, 1999 $42.37
Increase $ 7.77
Distributions -- Aug. 1, 1999 - Jan. 31, 2000
From income $ --
From capital gains $ 0.78
Total distributions $ 0.78
Total return* +20.16%**
*Returns do not include sales load, the prospectus discusses the effect of
sales charge, if any, on the various classes.
**The total return is ahypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Jan. 31, 2000)
Cisco Systems 6.95% $624,149,999
EMC 6.17 553,800,000
Texas Instruments 5.53 496,225,000
Applied Materials 4.59 411,750,000
Microsoft 4.58 411,075,000
Yahoo! 3.95 354,268,750
Tellabs 3.73 334,800,000
Citigroup 3.55 318,778,125
Intl Business Machines 3.25 291,687,500
MCI WorldCom 2.99 268,734,375
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) pie chart
The 10 holdings listed here
make up 45.29% of net assets
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<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Growth Fund
Jan. 31, 2000 (Unaudited)
Assets
<S> <C>
Investments in Growth Portfolio (Note 1) $8,947,575,424
--------------
Liabilities
Accrued distribution fee 283,046
Accrued service fee 9,912
Accrued transfer agency fee 42,515
Accrued administrative services fee 26,999
Other accrued expenses 233,719
-------
Total liabilities 596,191
-------
Net assets applicable to outstanding capital stock $8,946,979,233
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,811,030
Additional paid-in capital 4,540,081,791
Net operating loss (19,648,089)
Accumulated net realized gain (loss) (155,623,640)
Unrealized appreciation (depreciation) on investments 4,580,358,141
-------------
Total -- representing net assets applicable to outstanding capital stock $8,946,979,233
==============
Net assets applicable to outstanding shares: Class A $5,733,020,508
Class B $2,007,809,665
Class Y $1,206,149,060
Net asset value per share of outstanding capital stock: Class A shares 115,085,340 $ 49.82
Class B shares 41,961,148 $ 47.85
Class Y shares 24,056,523 $ 50.14
---------- --------------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
AXP Growth Fund
Six months ended Jan. 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 16,026,825
Interest 9,641,662
---------
Total income 25,668,487
----------
Expenses (Note 2):
Expenses allocated from Growth Portfolio 24,133,045
Distribution fee
Class A 6,381,806
Class B 8,527,227
Transfer agency fee 3,764,508
Incremental transfer agency fee
Class A 254,850
Class B 197,941
Service fee-- Class Y 521,360
Administrative services fees and expenses 1,493,751
Compensation of board members 6,809
Registration fees 128,132
Audit fees 4,500
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Total expenses 45,413,929
Earnings credits on cash balances (Note 2) (97,353)
-------
Total net expenses 45,316,576
----------
Investment income (loss) -- net (19,648,089)
-----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (155,603,227)
Net change in unrealized appreciation (depreciation) on investments 1,615,498,585
-------------
Net gain (loss) on investments 1,459,895,358
-------------
Net increase (decrease) in net assets resulting from operations $1,440,247,269
==============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Growth Fund
Jan. 31, 2000 July 31, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ (19,648,089) $ (13,305,154)
Net realized gain (loss) on security transactions (155,603,227) 135,947,987
Net change in unrealized appreciation (depreciation) on investments 1,615,498,585 1,009,565,309
------------- -------------
Net increase (decrease) in net assets resulting from operations 1,440,247,269 1,132,208,142
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Distributions to shareholders from:
Net realized gain
Class A (87,052,918) (172,407,217)
Class B (31,043,233) (52,235,570)
Class Y (17,842,638) (29,774,192)
----------- -----------
Total distributions (135,938,789) (254,416,979)
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 984,793,051 1,593,251,466
Class B shares 328,865,166 381,473,406
Class Y shares 308,997,865 461,488,618
Reinvestment of distributions at net asset value
Class A shares 81,851,637 162,883,602
Class B shares 30,843,207 51,981,272
Class Y shares 17,838,677 29,774,192
Payments for redemptions
Class A shares (760,924,694) (1,455,485,776)
Class B shares (Note 2) (88,246,588) (167,880,843)
Class Y shares (209,087,172) (271,060,330)
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Increase (decrease) in net assets from capital share transactions 694,931,149 786,425,607
----------- -----------
Total increase (decrease) in net assets 1,999,239,629 1,664,216,770
Net assets at beginning of period 6,947,739,604 5,283,522,834
------------- -------------
Net assets at end of period $8,946,979,233 $6,947,739,604
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Growth Fund
(Unaudited as to Jan. 31, 2000)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B 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 and
automatically convert to Class A shares during the ninth calendar year of
ownership.
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) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
Investment in Growth Portfolio
The Fund invests all of its assets in Growth Portfolio (the Portfolio), a series
of Growth Trust (the Trust), an open-end investment company that has the same
objectives as the Fund. The Portfolio invests primarily in stocks of U.S. and
foreign companies that appear to offer growth opportunities.
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 Jan. 31, 2000 was 99.68%.
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 generally accepted accounting
principles requires management to make estimates (e.g., on 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.
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
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with American Express Financial Corporation (AEFC) to
provide administrative services. Under an Administrative Services Agreement, the
Fund pays AEFC a fee for administration and accounting services at a percentage
of the Fund's average daily net assets in reducing percentages from 0.05% to
0.03% 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
o Class B $20
o Class Y $17
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 shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay 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
$14,929,475 for Class A and $1,137,678 for Class B for the six months ended Jan.
31, 2000.
During the six months ended Jan. 31, 2000, the Fund's transfer agency fees were
reduced by $97,353 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Jan. 31, 2000
Class A Class B Class Y
Sold 21,697,537 7,460,529 6,717,279
Issued for reinvested distributions 1,627,791 638,575 352,892
Redeemed (16,834,609) (2,000,154) (4,585,110)
----------- ---------- ----------
Net increase (decrease) 6,490,719 6,098,950 2,485,061
Year ended July 31, 1999
Class A Class B Class Y
Sold 42,090,006 10,280,610 12,052,825
Issued for reinvested distributions 4,405,749 1,450,211 801,761
Redeemed (38,533,190) (4,540,479) (7,109,224)
----------- ---------- ----------
Net increase (decrease) 7,962,565 7,190,342 5,745,362
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
Jan. 31, 2000.
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<CAPTION>
5. FINANCIAL HIGHLIGHTS
The tables below show certain important finanicial information for evaluating
the Fund's results.
Fiscal period ended July 31,
Per share income and capital changesa
Class A
2000b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $42.14 $36.58 $35.47 $23.16 $21.50
Income from investment operations:
Net investment income (loss) (.08) (.03) (.07) (.05) --
Net gains (losses) (both realized and unrealized) 8.54 7.29 2.14 13.04 2.81
Total from investment operations 8.46 7.26 2.07 12.99 2.81
Less distributions:
Dividends from net investment income -- -- -- -- (.01)
Distributions from realized gains (.78) (1.70) (.96) (.68) (1.14)
Total distributions (.78) (1.70) (.96) (.68) (1.15)
Net asset value, end of period $49.82 $42.14 $36.58 $35.47 $23.16
Ratios/supplemental data
Net assets, end of period (in millions) $5,733 $4,576 $3,681 $3,215 $1,871
Ratio of expenses to average daily net assetsc 1.01%d .89% .87% .97% 1.04%
Ratio of net investment income (loss)
to average daily net assets (.35%)d (.08%) (.22%) (.18%) --%
Portfolio turnover rate
(excluding short-term securities) 6% 17% 28% 24% 22%
Total returne 20.07% 20.49% 6.32% 57.00% 13.29%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Jan. 31, 2000 (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.
</TABLE>
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<CAPTION>
Fiscal period ended July 31,
Per share income and capital changesa
Class B Class Y
2000b 1999 1998 1997 1996 2000b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $40.65 $35.61 $34.82 $22.92 $21.45 $42.37 $36.74 $35.60 $23.21 $21.51
Income from investment operations:
Net investment income (loss) (.23) (.28) (.29) (.22) (.02) (.04) -- (.04) (.01) .01
Net gains (losses) (both realized
and unrealized) 8.21 7.02 2.04 12.80 2.63 8.59 7.33 2.14 13.08 2.85
Total from investment operations 7.98 6.74 1.75 12.58 2.61 8.55 7.33 2.10 13.07 2.86
Less distributions:
Dividends from net investment income -- -- -- -- -- -- -- -- -- (.02)
Distributions from realized gains (.78) (1.70) (.96) (.68) (1.14) (.78) (1.70) (.96) (.68) (1.14)
Total distributions (.78) (1.70) (.96) (.68) (1.14) (.78) (1.70) (.96) (.68) (1.16)
Net asset value, end of period $47.85 $40.65 $35.61 $34.82 $22.92 $50.14 $42.37 $36.74 $35.60 $23.21
Ratios/supplemental data
Net assets, end of period (in millions) $2,008 $1,458 $1,021 $713 $281 $1,206 $914 $582 $179 $29
Ratio of expenses to average
daily net assetsc 1.78%d 1.65% 1.63% 1.74% 1.82% .85%d .80% .80% .85% .88%
Ratio of net investment income
(loss) to average daily net assets (1.12%)d (.85%) (.97%) (.94%) (.80%) (.20%)d --% (.12%) (.07%) .13%
Portfolio turnover rate
(excluding short-term securities) 6% 17% 28% 24% 22% 6% 17% 28% 24% 22%
Total returne 19.60% 19.58% 5.52% 55.81% 12.43% 20.16% 20.59% 6.40% 57.23% 13.40%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Jan. 31, 2000 (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.
</TABLE>
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<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Growth Portfolio
Jan. 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1):
<S> <C>
Investment in securities of unaffiliated issuers (identified cost $4,304,068,580) $8,880,440,006
Investment in securities of affiliated issuers (identified cost $60,266,600) 83,137,500
----------
Total investments in securities (identified cost $4,364,335,180) 8,963,577,506
Cash in bank on demand deposit 579,419
Dividends and accrued interest receivable 905,500
Receivable for investment securities sold 24,417,470
U.S. government securities held as collateral (Note 4) 27,818,455
----------
Total assets 9,017,298,350
-------------
Liabilities
Payable for investment securities purchased 13,028,448
Payable upon return of securities loaned (Note 4) 27,818,455
Accrued investment management services fee 393,942
Other accrued expenses 110,165
-------
Total liabilities 41,351,010
----------
Net assets $8,975,947,340
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Growth Portfolio
Six months ended Jan. 31, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 16,080,080
Interest 9,653,224
---------
Total income 25,733,304
----------
Expenses (Note 2):
Investment management services fee 23,924,023
Compensation of board members 10,519
Custodian fees 230,650
Audit fees 13,500
Other 37,735
------
Total expenses 24,216,427
Earnings credits on cash balances (Note 2) (3,600)
------
Total net expenses 24,212,827
----------
Investment income (loss) -- net 1,520,477
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (156,008,939)
Net change in unrealized appreciation (depreciation) on investments 1,620,716,823
-------------
Net gain (loss) on investments 1,464,707,884
-------------
Net increase (decrease) in net assets resulting from operations $1,466,228,361
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Growth Portfolio
Jan. 31, 2000 July 31, 1999
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss) -- net $ 1,520,477 $ 15,869,412
Net realized gain (loss) on security transactions (156,008,939) 136,823,917
Net change in unrealized appreciation (depreciation) on investments 1,620,716,823 1,012,968,938
------------- -------------
Net increase (decrease) in net assets resulting from operations 1,466,228,361 1,165,662,267
Net contributions (withdrawals) from partners 537,570,486 500,388,589
----------- -----------
Total increase (decrease) in net assets 2,003,798,847 1,666,050,856
Net assets at beginning of period 6,972,148,493 5,306,097,637
------------- -------------
Net assets at end of period $8,975,947,340 $6,972,148,493
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Growth Portfolio
(Unaudited as to Jan. 31, 2000)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is
registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. Growth Portfolio invests
primarily in stocks of U.S. and foreign companies that appear to offer growth
opportunities. 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 generally accepted accounting
principles requires management to make estimates (e.g., on 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.
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 0.6% to 0.5% annually. The fees may be increased or decreased
by a performance adjustment based on a comparison of the performance of Class A
shares of the AXP Growth Fund to the Lipper Growth Fund Index. The maximum
adjustment is 0.12% of the Portfolio's average daily net assets on an annual
basis. The adjustment increased the fee by $2,696,174 for the six months ended
Jan. 31, 2000.
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 Jan. 31, 2000, the Portfolio's custodian fees were
reduced by $3,600 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 $858,528,056 and $471,902,924, respectively, for the six
months ended Jan. 31, 2000. For the same period, the portfolio turnover rate was
6%. Realized gains and losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $187,140 for the
six months ended Jan. 31, 2000.
4. LENDING OF PORTFOLIO SECURITIES
As of Jan. 31, 2000, securities valued at $29,465,625 were on loan to brokers.
For collateral, the Portfolio received U.S. government securities valued at
$27,818,455. Income from securities lending amounted to $142,598 for the six
months ended Jan. 31, 2000. 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.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Growth Portfolio
Jan. 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (94.9%)
Issuer Shares Value(a)
Airlines (0.8%)
<S> <C> <C>
Southwest Airlines 4,500,000 $71,718,750
Automotive & related (0.4%)
Gentex 1,335,000(b) 40,050,000
Banks and savings & loans (2.3%)
Bank of America 2,157,920 104,524,250
FleetBoston Financial 3,161,000 99,373,938
Total 203,898,188
Beverages & tobacco (2.1%)
Coca-Cola 3,281,700 188,492,644
Chemicals (0.6%)
Monsanto 1,600,000 56,500,000
Communications equipment & services (7.9%)
Andrew Corp 1,100,000(b) 25,300,000
MasTec 1,800,000(b,d) 83,137,500
Nokia Oyj ADR Cl A 1,420,000(c) 259,860,000
Tellabs 6,200,000(b) 334,800,000
Total 703,097,500
Computer software (4.6%)
Microsoft 4,200,000(b) 411,075,000
Computers & office equipment (25.6%)
America Online 2,000,000(b) 113,875,000
Cisco Systems 5,700,000(b) 624,149,999
EMC 5,200,000(b) 553,800,000
Hewlett-Packard 1,000,000 108,250,000
Intl Business Machines 2,600,000 291,687,500
Keane 2,800,000(b) 75,600,000
Lexmark Intl Group Cl A 1,200,000(b) 113,100,000
Solectron 925,000(b) 67,178,125
Yahoo! 1,100,000(b) 354,268,750
Total 2,301,909,374
Electronics (20.1%)
Applied Materials 3,000,000(b) 411,750,000
ASM Lithography Holding 500,000(b) 61,468,750
Broadcom Cl A 600,000(b) 173,587,500
Intel 2,500,000 247,343,750
Maxim Integrated Products 4,800,000(b) 240,600,000
STMicroelectronics 1,000,000(c,f) 168,375,000
Texas Instruments 4,600,000 496,225,000
Total 1,799,350,000
Energy (1.1%)
Anadarko Petroleum 3,000,000 98,437,500
Energy equipment & services (2.5%)
Halliburton 1,800,000 64,800,000
Schlumberger 2,400,000 146,550,000
Transocean Sedco Forex 464,640 14,781,360
Total 226,131,360
Financial services (5.5%)
Citigroup 5,550,000 318,778,125
Merrill Lynch & Co 2,000,000 173,500,000
Total 492,278,125
Furniture & appliances (0.5%)
Ethan Allen Interiors 1,921,000 48,025,000
Health care (7.1%)
Bausch & Lomb 1,000,000 62,000,000
Johnson & Johnson 700,000 60,243,750
Medtronic 1,600,000 73,200,000
Mylan Laboratories 2,880,800 76,701,300
Pfizer 5,350,000 194,606,250
Warner-Lambert 1,800,000 170,887,500
Total 637,638,800
Household products (0.4%)
ServiceMaster 2,650,000 37,928,125
Industrial equipment & services (0.6%)
Deere & Co 1,200,000 52,425,000
Leisure time & entertainment (0.9%)
Harley-Davidson 1,200,000 84,225,000
Multi-industry conglomerates (2.0%)
Apollo Group Cl A 491,300(b) 10,624,363
Tyco Intl 4,000,000(c) 171,000,000
Total 181,624,363
Restaurants & lodging (0.9%)
Marriott Intl Cl A 2,600,000 80,762,500
Retail (3.9%)
Home Depot 4,400,000 249,150,000
Tandy 2,000,000 97,750,000
Total 346,900,000
Utilities -- telephone (5.1%)
AT&T 3,600,000 189,900,000
MCI WorldCom 5,850,000(b) 268,734,375
Total 458,634,375
Total common stocks
(Cost: $3,892,489,507) $8,521,101,604
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bond (1.6%)
Issuer Coupon Principal Value(a)
rate amount
U.S. government obligations
Resolution Funding Corp
Zero Coupon
<S> <C> <C> <C>
07-15-20 5.93% $400,000,000(g) $100,262,040
10-15-20 6.03 185,000,000(g) 45,593,620
Total bond
(Cost: $175,127,997) $145,855,660
Short-term securities (3.3%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (2.5%)
Federal Home Loan Bank Disc Nts
03-24-00 5.64% $20,800,000 $20,628,821
04-26-00 5.84 25,000,000 24,646,445
Federal Home Loan Mtge Corp Disc Nts
02-08-00 5.61 13,700,000 13,681,519
02-15-00 5.65 18,700,000 18,651,690
02-17-00 5.63 3,000,000 2,990,929
02-29-00 5.60 17,000,000 16,923,721
03-09-00 5.73 700,000 695,667
03-21-00 5.66 30,000,000 29,765,832
Federal Natl Mtge Assn Disc Nts
03-02-00 5.63 10,000,000 9,949,674
03-02-00 5.64 2,100,000 2,089,432
03-16-00 5.81 3,500,000 3,474,298
03-30-00 5.76 14,500,000 14,357,011
04-20-00 5.82 50,000,000 49,342,221
04-27-00 5.91 20,000,000 19,718,217
Total 226,915,477
Commercial paper (0.8%)
Bell Atlantic Network Funding
03-07-00 5.74 3,600,000 3,579,444
03-16-00 5.82 9,500,000 9,431,363
CAFCO
04-03-00 5.84 6,400,000(e) 6,333,696
Cargill
02-01-00 5.83 10,500,000(e) 10,498,300
Corporate Receivables
02-07-00 5.88 5,000,000(e) 4,994,098
GTE Funding
02-22-00 6.00 5,000,000 4,980,750
02-29-00 5.70 6,300,000 6,271,225
Natl Australia Finance (Delaware)
02-02-00 5.95 5,000,000(e) 4,998,347
Preferred Receivables
03-08-00 5.77 3,400,000(e) 3,379,942
Procter & Gamble
03-02-00 5.71 9,100,000 9,055,490
SBC Communications
02-28-00 5.73 2,900,000(e) 2,887,143
Sheffield Receivables
02-09-00 5.94 3,300,000(e) 3,294,967
Total 69,704,765
Total short-term securities
(Cost: $296,717,676) $296,620,242
Total investments in securities
(Cost: $4,364,335,180)(h) $8,963,577,506
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
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 Jan. 31, 2000, the
value of foreign securities represented 6.68% of net assets.
(d) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
six months ended Jan. 31, 2000 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
MasTec $60,266,600 $-- $-- $60,266,600 $-- $83,137,500
(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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(g) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(h) At Jan. 31, 2000, the cost of securities for federal income tax purposes was
approximately $4,364,335,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $4,846,561,000
Unrealized depreciation (247,318,000)
------------
Net unrealized appreciation $4,599,243,000
<PAGE>
American Express (R) Funds
PRSRT STD AUTO
U.S. POSTAGE
PAID
SPENCER, IA
PERMIT NO. 85
S-6456 N (3/00)
TICKER SYMBOL Class A: INIDX Class B: IGRBX Class Y: IGRYX
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AXP Growth Fund
200 AXP Financial Center
Minneapolis, MN 55474
