AXPSM
Growth Fund
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
(icon of) ruler
AXP Growth Fund seeks to provide shareholders with long-term capital growth.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send
money.)
AMERICAN EXPRESS (R) (logo)
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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 AXPGrowth 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.
AXP GROWTH FUND
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Table of Contents
2000 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
The 10 Largest Holdings 8
Making the Most of the Fund 9
The Fund's Long-term Performance 10
Independent Auditors' Report (Fund) 12
Financial Statements (Fund) 13
Notes to Financial Statements (Fund) 16
Independent Auditors' Report (Portfolio) 25
Financial Statements (Portfolio) 26
Notes to Financial Statements (Portfolio) 29
Investments in Securities 34
Federal Income Tax Information 41
ANNUAL REPORT - 2000
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(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 markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue this year,
accompanied by a modest rise in long-term interest rates. 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 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 last fall and winter
to post a strong gain for the fiscal year. For the 12 months -- August 1999
through July 2000 -- the Fund's Class A shares generated a total return
(excluding the sales charge) of 31.01%. This compares with a gain of 8.97% for
the Standard & Poor's 500 (an unmanaged group of stocks commonly used to measure
the performance of the stock market as a whole).
AXP GROWTH FUND
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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. The mood in the market changed in October, 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. Soon, the
market's moderate advance had turned into a spectacular rally that culminated in
all-time high for the market in mid-March.
SPRING SLUMP
But by that time, a variety of concerns had also risen regarding the outlook for
interest rates, corporate profits, economic growth and the sustainability of
sky-high prices on many stocks. The market responded by going into a steady
retreat until late May, which was followed by a moderate recovery over the rest
of the period.
The driving force for much of the 12 months was technology-related stocks. While
they were extremely volatile, many of them recorded sharp gains. The tech trend
worked to the 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 late 1999
because of rising prices among those stocks. Among the largest and most
productive holdings for the Fund were names such as Cisco Systems, EMC
Corporation, Texas Instruments, Intel, Applied Materials, and Maxim Integrated
Products. Most of the rest of the portfolio was concentrated in the health care
and financial services areas, with Pfizer and Citigroup, respectively, providing
some of the best performance later in the fiscal year.
As the new fiscal year begins, the stock market is being kept off balance as
investors try to sort out what the future holds for inflation, interest rates,
the economy and corporate profits. Before 2000 ends, though, I think the scales
will tip toward the positive side, allowing the market to begin making progress.
More specifically, I look for stocks of companies with robust and comparatively
predictable profit-growth prospects to benefit most from a market upturn. Most
of those names continue to be found in the technology area, and that remains the
primary investment focus of the Fund.
Lisa A. Costa
ANNUAL REPORT - 2000
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2000 $54.36
July 31, 1999 $42.14
Increase $12.22
Distributions -- Aug. 1, 1999 - July 31, 2000
From income $ --
From capital gain $ 0.78
Total distributions $ 0.78
Total return** +31.01%***
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2000 $52.02
July 31, 1999 $40.65
Increase $11.37
Distributions -- Aug. 1, 1999 - July 31, 2000
From income $ --
From capital gains $ 0.78
Total distributions $ 0.78
Total return** +30.02%***
AXP GROWTH FUND
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Class C -- June 26, 2000* - July 31, 2000
(All figures per share)
Net asset value (NAV)
July 31, 2000 $52.03
June 26, 2000* $52.65
Decrease $ 0.62
Distributions -- June 26, 2000* - July 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return** -1.18***
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2000 $54.75
July 31, 1999 $42.37
Increase $12.38
Distributions -- Aug. 1, 1999 - July 31, 2000
From income $ --
From capital gains $ 0.78
Total distributions $ 0.78
Total return** +31.20%***
* Inception date.
** Returns do not include sales load. The prospectus discusses the effect of
sales charge, if any, on the various classes.
*** The total return is a hypothetical investment in the Fund with all
distributions reinvested.
ANNUAL REPORT - 2000
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The 10 Largest Holdings
Percent Value
(of net assets) (as of July 31, 2000)
Cisco Systems 6.57% $700,181,249
EMC 5.91 629,925,000
Texas Instruments 4.46 475,368,750
Pfizer 4.45 473,835,937
Applied Materials 3.92 417,312,500
Citigroup 3.67 391,621,875
Microsoft 3.44 366,515,625
Intel 3.13 333,750,000
Maxim Integrated Products 2.98 317,100,000
Yahoo! 2.66 283,112,500
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 41.19% of net assets
AXP GROWTH FUND
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Making the Most of the Fund
BUILD YOUR ASSETS SYSTEMATICALLY
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares falls or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Jan Feb Mar Apr May Jun
$15 $16 $18 $20
$10 $10 $12 $14
$ 5
Accumulated shares* Average market Your average
price per share cost per share
42.25 $15 $14.20
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Jan Feb Mar Apr May Jun
$15
$10 $10 $10
$ 5 $8 $5 $5 $8
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $6 $7
$ 5 $4 $4
Accumulated shares* Average market Your average
price per share cost per share
103.5 $6.50 $5.80
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$100 invested per month. Total invested: $600.
*Shares purchased is determined by dividing the amount invested per month by the
current share price.
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by the Fund
exceed losses
o you receive income when the Fund's stock dividends, interest and short-term
gains exceed its expenses.
All three make up your total return. You potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another fund.
ANNUAL REPORT - 2000
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The Fund's Long-term Performance
How your $10,000 has grown in AXP Growth Fund
$70.000
X $59,406
AXP Growth
Fund Class A
$60,000
X S&P 500 Index
$50,000
X Russell 1000(R)
Growth Index
$40,000
X Lipper Large-Cap
Growth Index
$30,000
$9,425
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00
(The printed version of this chart contains a line graph with 4 lines
corresponding to the 3 indexes and Fund noted above.)
Average Annual Total Returns (as of July 31, 2000)
1 year 5 years 10 years (A) Since inception (B&Y)
Class A +23.48% +22.98% +19.51% --%
Class B +26.02% +23.42% --% +25.89%*
Class Y +31.20% +24.60% --% +27.07%*
* Inception date was March 20, 1995.
Assumes: Holding period from 8/1/90 to 7/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $40,432. Also see "Past Performance"
in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to three
widely cited unmanaged performance indexes, the Standard & Poor's 500 Index
(S&P500 Index), Russell 1000(R) Growth Index and the Lipper Large-Cap Growth
Index. In comparing AXPGrowth Fund (Class A) to these three indexes, you should
take into account the fact that the Fund's performancereflects the maximum sales
charge of 5.75%, while suchcharges are not reflected in the performance of the
indexes. Class C went effective June 26, 2000 and therefore performance
information is not presented.
Your investment and return values fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Average annual total return
figures reflect the impact of the applicable sales charge up to a maximum of
5.75%. This was a period of widely fluctuating security prices. Past performance
is no guarantee of future results.
AXP GROWTH FUND
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S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies may be generally larger than those
in which the Fund invests.
Russell 1000(R) Growth Index, an unmanaged index, measures the performance of
those Russell 1000 companies in the Russell 3000 Index, which represents 92% of
the total market capitalization of the Russell 3000 Index. These companies have
higher price-to-book ratios and higher forecasted growth values.
Lipper Large-Cap Growth Index, an unmanaged index published by Lipper Inc.,
includes the 30 largest funds that are generally similar to this fund, although
some funds in the index may have somewhat different investment policies or
objectives.
ANNUAL REPORT - 2000
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The financial statements contained in Post-Effective Amendment #66 to
Registration Statement No. 2-38355 filed on or about September 27, 2000.
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Federal Income Tax Information
(Unaudited)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Growth Fund Fiscal year ended July 31, 2000
Class A
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 23, 1999 $0.77899
Total distribution $0.77899
Class B
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 23, 1999 $0.77899
Total distribution $0.77899
Class Y
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 23, 1999 $0.77899
Total distribution $0.77899
ANNUAL REPORT - 2000
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American
Express (R)
Funds
AXP Growth Fund
70100 AXP Financial Center
Minneapolis, MN 55474
AMERICAN
EXPRESS (R) (logo)
S-6455 U (9/00)
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.
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) There are pictures, icons 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
