AXP(R)
Research
Opportunities
Fund
Annual Report
for the Period Ended
July 31, 2003
AXP Research Opportunities Fund seeks to provide shareholders with long-term
capital growth.
- --------------------------------------------------------------------------------
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
- --------------------------------------------------------------------------------
Table of Contents
Fund Snapshot 3
Questions & Answers
with Portfolio Management 4
The Fund's Long-term Performance 7
Investments in Securities 8
Financial Statements (Portfolio) 11
Notes to Financial Statements (Portfolio) 13
Independent Auditors' Report (Portfolio) 17
Financial Statements (Fund) 18
Notes to Financial Statements (Fund) 21
Independent Auditors' Report (Fund) 28
Board Members and Officers 29
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Fund Snapshot
AS OF JULY 31, 2003
PORTFOLIO MANAGERS
Portfolio manager Joan Kampmeyer, CFA
Since 1/02
Years in industry 17
Portfolio manager Tom Mahowald, CFA
Since 6/02
Years in industry 13
FUND OBJECTIVE
For investors seeking long-term growth of capital.
Inception dates
A: 8/19/96 B: 8/19/96 C: 6/26/00 Y: 8/19/96
Ticker symbols
A: IRDAX B: IROBX C: -- Y: --
Total net assets $240.7 million
Number of holdings 107
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
SECTOR COMPOSITION
Percentage of portfolio assets
(pie chart)
Financials 20.7%
Technology 17.6%
Health care 13.7%
Consumer discretionary 13.5%
Industrials 10.7%
Consumer staples 8.1%
Energy 5.3%
Telecommunications 3.7%
Short-term securities 2.6%
Utilities 2.4%
Materials 1.7%
TOP TEN HOLDINGS
Percentage of portfolio assets
Microsoft (Computer software & services) 4.5%
General Electric (Multi-industry) 3.8
Citigroup (Finance companies) 3.5
Pfizer (Health care) 3.1
Wal-Mart Stores (Retail-general) 2.9
Bank of America (Banks and savings & loans) 2.5
Wells Fargo (Banks and savings & loans) 2.4
Intel (Electronics) 2.1
Amgen (Health care products) 1.8
Altria Group (Beverages & tobacco) 1.8
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Stock prices of established companies that pay dividends may be less volatile
than the stock market as a whole.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Q: How did AXP Research Opportunities Fund perform in fiscal year 2003?
A: AXP Research Opportunities Fund's Class A shares, excluding sales charge,
gained 6.41% for the 12 months ended July 31, 2003. In comparison, the S&P
500 Index increased 10.64% while the Lipper Large-Cap Core Funds Index,
representing the Fund's peer group, rose 8.63% over the same period.
Q: What factors most significantly affected Fund performance during the annual
period?
A: After several difficult years for the U.S. equity markets, we are
pleased to report a positive return. However, the Fund did not
achieve its goal this past year largely due to stock selection. The
Fund held relatively conservative stocks that did not rally as much
as more aggressive, high-risk stocks amid an equity rebound that
began last fall. In addition, the Fund emphasized
large-capitalization stocks in an environment in which small- and
medium-capitalization stocks performed better. The Fund's holdings in
banks, telecom services and equipment, and computer-related stocks
also hurt performance. Several stocks that were especially weak
included TXU Corp., Tenet Healthcare and Baxter International.
We did have a number of successes. Selected retailing, pharmaceutical and
electric utility stocks boosted performance. In terms of specific stocks,
medical device maker Boston Scientific rose on strong anticipated demand
for the company's drug-coated stents. After a two-year slump in demand,
KLA-Tencor, a semiconductor equipment company, benefited from increased
orders. Also, eBay was up dramatically on stellar earnings and market share
gains in the online auction market.
(bar chart)
PERFORMANCE COMPARISON
For the period ended July 31, 2003
12% (bar 2)
+10.64%
10% (bar 3)
+8.63%
8%
(bar 1)
6% +6.41%
4%
2%
0%
(bar 1) AXP Research Opportunities Fund Class A (excluding sales charge)
(bar 2) S&P 500 Index (unmanaged)
(bar 3) Lipper Large-Cap Core Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
Past performance is no guarantee of future results. The 5.75% sales charge
applicable to Class A shares of the Fund is not reflected in the bar chart; if
reflected, returns would be lower than those shown. The performance of Class B,
Class C and Class Y may vary from that shown above because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- --------------------------------------------------------------------------------
4 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Questions & Answers
(begin callout quote)> The Fund held relatively conservative stocks that did
not rally as much as more aggressive high risk stocks. (end callout quote)
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: Most of the changes that occur in the Fund are the result of
adjustments in how stocks are rated by our in-house research
analysts. We eliminated foreign-based holdings, consistent with the
changes in the S&P 500 Index. This effectively trimmed the Fund's
energy position. We initiated positions in several health care
stocks, including medical device makers and health maintenance
organizations, based on improving fundamentals. We purchased media
stocks to gain exposure to a recovering advertising market. We added
personal computer hardware and storage stocks, as technology demand
showed signs of improvement.
AVERAGE ANNUAL TOTAL RETURNS
as of July 31, 2003
Class A Class B Class C Class Y
(Inception dates) (8/19/96) (8/19/96) (6/26/00) (8/19/96)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
1 year +6.41% +0.29% +5.69% +1.69% +5.96% +5.96% +6.87% +6.87%
5 years -3.89% -5.02% -4.63% -4.76% N/A N/A -3.70% -3.70%
Since inception +3.24% +2.37% +2.46% +2.46% -14.61% -14.61% +3.44% +3.44%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than the original cost. The performance shown for each class of
shares will vary due to differences in sales charges and fees. Short term
performance may be higher or lower than the figures shown. Visit
americanexpress.com/funds for current information.
- --------------------------------------------------------------------------------
5 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Questions & Answers
During the second half of the fiscal year, we reduced the number of Fund
holdings in order to increase the Fund's exposure to selected stocks. We
also added a small number of non-S&P 500 Index stocks that were among our
research analysts' favorite ideas. Finally, we shifted a portion of Fund
assets within our biggest large-capitalization holdings to several
small-capitalization stocks in an effort to take advantage of anticipated
strong performance in those names. For the 12 months ended July 31, 2003,
we reduced the Fund's portfolio turnover to levels significantly below last
year's.
At the end of the fiscal year, the Fund had 107 holdings representing a
broad cross section of growth and value stocks. The Fund had meaningful
exposure to health care products and services companies and industrial
conglomerates. By contrast, the Fund had limited exposure to pharmaceutical
stocks due to political risks and had no exposure to telecommunications
equipment and chemical stocks.
Q: How do you intend to manage the Fund in the coming months?
A: We are optimistic about the U.S. equity market because there are
definite signs of an economic upturn. Corporate earnings have in turn
been improving. Interest rates are low. There has been a huge amount
of fiscal and monetary stimulus pumped into the economy. Mergers and
acquisition activity has revived. Equity valuations, while not at
historic lows as measured by price-to-earnings ratios, are currently
more attractive than in recent years. Of course, risk always exists.
Investors will likely be paying close attention to employment trends,
commodity prices, geopolitical events, currencies and inflation in
the coming months.
Our focus will remain on seeking long-term growth of capital. We intend to
continue to position the Fund in stocks that we believe offer the best
potential over the long term while maintaining sector weights similar to
the S&P 500 Index. As we emphasize individual stock selection, our research
analysts carefully seek solid companies that are innovators and industry
leaders with stable to improving fundamentals, strong management teams,
superior growth potential and attractive stock valuations.
- --------------------------------------------------------------------------------
6 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
The Fund's Long-term Performance
This chart illustrates the total value of an assumed $10,000 investment in AXP
Research Opportunities Fund Class A shares (from 9/1/96 to 7/31/03) as compared
to the performance of two widely cited performance indices, the S&P 500 Index
and the Lipper Large-Cap Core Funds Index. In comparing the Fund's Class A
shares to these indices, you should take into account the fact that the Fund's
performance reflects the maximum sales charge of 5.75%, while such charges are
not reflected in the performance of the indices. Returns for the Fund include
the reinvestment of any distribution paid during each period.
Past performance is no guarantee of future results. Your investment and return
values fluctuate so that your shares, when redeemed, may be worth more or less
than the original cost. Returns do not reflect taxes payable on distributions
and redemptions. Also see "Past Performance" in the Fund's current prospectus.
(line chart)
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT
IN AXP RESEARCH OPPORTUNITIES FUND
$26,000
$19,500
(dotted line) S&P 500 Index(1)
$13,000 (dashed line) Lipper Large-Cap Core Funds Index(2)
(solid line) AXP Research Opportunities Fund Class A
$6,500
9/1/96 7/97 7/98 7/99 7/00 7/01 7/02 7/03
(solid line) AXP Large Cap Equity Fund Class A $11,764
(dotted line) S&P 500 Index(1) $16,850
(dashed line) Lipper Large-Cap Core Funds Index(2) $15,621
(1) S&P 500 Index, an unmanaged index of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of
all distributions and changes in market prices, but excludes brokerage
commissions or other fees. However, the S&P 500 companies may be generally
larger than those in which the Fund invests.
(2) The Lipper Large-Cap Core Funds Index, published by Lipper Inc., includes
the 30 largest funds that are generally similar to the Fund, although some
funds in the index may have somewhat different investment policies or
objectives.
Average Annual Total Returns
Class A with Sales Charge as of July 31, 2003
1 year +0.29%
5 years -5.02%
Since inception (8/19/96) +2.37%
Results for other share classes can be found on page 5.
- --------------------------------------------------------------------------------
7 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Investments in Securities
Aggressive Growth Portfolio
July 31, 2003
(Percentages represent value of investments compared to net assets)
Common stocks (96.9%)
Issuer Shares Value(a)
Aerospace & defense (2.3%)
Lockheed Martin 50,100 $2,622,234
Northrop Grumman 18,500 1,706,440
United Technologies 14,700 1,105,881
Total 5,434,555
Automotive & related (0.6%)
Johnson Controls 14,500 1,400,845
Banks and savings & loans (7.8%)
Bank of America 71,800 5,928,526
KeyCorp 47,300 1,272,843
TCF Financial 36,100 1,647,965
U.S. Bancorp 174,300 4,273,836
Wells Fargo 112,500 5,684,625
Total 18,807,795
Beverages & tobacco (3.4%)
Altria Group 106,900 4,277,069
PepsiCo 85,800 3,952,806
Total 8,229,875
Broker dealers (1.3%)
Merrill Lynch 36,100 1,962,757
Morgan Stanley 25,900 1,228,696
Total 3,191,453
Cable (0.4%)
Comcast CL A 29,600(b) 897,472
Cellular telecommunications (0.7%)
Vodafone Group ADR 89,600(c) 1,700,608
Computer hardware (2.8%)
Dell Computer 88,500(b) 2,980,680
EMC 57,000(b) 606,480
Hewlett-Packard 151,400 3,205,138
Total 6,792,298
Computer software & services (9.4%)
Adobe Systems 37,500 1,225,500
Autodesk 110,100 1,647,096
Electronic Arts 33,600(b,e) 2,822,400
Fiserv 38,200(b) 1,491,328
Intl Business Machines 43,700 3,550,625
Microsoft 405,000 10,692,000
SunGard Data Systems 47,900(b) 1,256,896
Total 22,685,845
Electronics (5.3%)
Applied Materials 46,500(b) 906,750
Flextronics Intl 113,200(b,c) 1,245,200
Intel 200,300 4,997,485
Jabil Circuit 53,500(b) 1,233,175
KLA-Tencor 22,900(b) 1,182,785
Linear Technology 24,400(e) 899,872
Maxim Integrated Products 17,500 683,900
Novellus Systems 41,700(b) 1,493,277
Total 12,642,444
Energy (3.6%)
Apache 23,325 1,445,217
BP ADR 102,500(c) 4,258,875
ChevronTexaco 41,900 3,021,409
Total 8,725,501
Energy equipment & services (1.6%)
Nabors Inds 37,400(b,c) 1,338,920
Schlumberger 28,700 1,293,509
Weatherford Intl 33,800(b) 1,225,926
Total 3,858,355
Finance companies (3.4%)
Citigroup 185,100 8,292,480
Financial services (2.8%)
Capital One Financial 41,000 1,964,310
Fannie Mae 33,800 2,164,552
MBNA 115,850 2,582,297
Total 6,711,159
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
8 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Food (1.3%)
Dean Foods 39,900(b) $1,194,207
Kellogg 53,200 1,826,356
Total 3,020,563
Health care products (9.7%)
Amgen 62,100(b) 4,320,918
Baxter Intl 71,900 1,985,159
Boston Scientific 35,700(b) 2,257,311
Johnson & Johnson 63,400 3,283,486
Medtronic 46,500 2,394,750
Pfizer 220,000 7,339,199
St. Jude Medical 31,500(b) 1,689,975
Total 23,270,798
Health care services (4.0%)
Aetna 29,500 1,817,790
Anthem 23,000(b) 1,736,730
Cardinal Health 28,500 1,560,375
Patterson Dental 27,100(b) 1,449,850
UnitedHealth Group 45,800 2,385,722
WellPoint Health Networks 8,600(b) 719,390
Total 9,669,857
Household products (2.7%)
Colgate-Palmolive 22,100 1,206,660
Kimberly-Clark 46,900 2,269,960
Procter & Gamble 35,300 3,101,811
Total 6,578,431
Industrial transportation (0.3%)
Union Pacific 9,900 603,306
Insurance (5.2%)
AFLAC 79,100 2,537,528
Aon 47,900 1,151,995
Lincoln Natl 34,100 1,273,294
Marsh & McLennan 14,200 704,604
Montpelier Re Holdings 40,600(b,c) 1,306,914
Principal Financial Group 36,500 1,189,900
St. Paul Companies 38,300 1,347,011
UnumProvident 108,400 1,472,072
XL Capital Cl A 18,700(c) 1,486,650
Total 12,469,968
Leisure time & entertainment (1.7%)
Viacom Cl B 93,100(b) 4,051,712
Machinery (2.0%)
Caterpillar 43,700 2,948,439
Illinois Tool Works 27,800 1,936,270
Total 4,884,709
Media (3.8%)
Cendant 114,900(b) 2,062,455
Clear Channel Communications 58,100(b) 2,379,195
eBay 9,200(b) 986,240
Knight-Ridder 36,000 2,470,680
Univision Communications Cl A 39,900(b) 1,244,880
Total 9,143,450
Metals (1.3%)
Alcoa 92,700 2,574,279
Phelps Dodge 14,300(b) 603,317
Total 3,177,596
Multi-industry (6.1%)
3M 20,800 2,916,160
Danaher 19,700 1,422,340
General Electric 316,000 8,987,040
Tyco Intl 75,500(c) 1,404,300
Total 14,729,840
Paper & packaging (0.4%)
Intl Paper 22,000 860,640
Restaurants (1.0%)
Darden Restaurants 77,700 1,453,767
Starbucks 38,600(b) 1,054,938
Total 2,508,705
Retail -- general (6.0%)
Best Buy 39,950(b) 1,743,818
Family Dollar Stores 17,300 648,923
Lowe's Companies 65,800 3,129,448
Target 50,900 1,950,488
Wal-Mart Stores 123,800 6,921,658
Total 14,394,335
Retail -- grocery (0.6%)
SUPERVALU 65,800 1,549,590
Telecom equipment & services (1.1%)
Corning 140,500(b) 1,143,670
Nokia ADR 104,600(c) 1,600,380
Total 2,744,050
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
9 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Utilities -- electric (2.4%)
Dominion Resources 44,400 $2,668,440
Exelon 35,100 2,017,197
Public Service Enterprise Group 28,200 1,149,150
Total 5,834,787
Utilities -- telephone (1.9%)
BellSouth 31,900 812,493
Verizon Communications 106,700 3,719,562
Total 4,532,055
Total common stocks
(Cost: $234,146,731) $233,395,077
Short-term securities (2.6%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agency (2.0%)
Federal Natl Mtge Assn Disc Nts
09-30-03 1.04% $1,800,000 $1,796,940
10-01-03 0.97 1,000,000 998,255
10-15-03 1.00 800,000 798,283
10-22-03 1.00 500,000 498,827
10-29-03 1.06 800,000 797,963
Total 4,890,268
Commercial paper (0.5%)
Barton Capital
08-01-03 1.12 1,300,000(d) 1,299,960
Total short-term securities
(Cost: $6,190,343) $6,190,228
Total investments in securities
(Cost: $240,337,074)(f) $239,585,305
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 July 31, 2003,
the value of foreign securities represented 6.0% of net assets.
(d) 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.
(e) At July 31, 2003, securities valued at $1,796,800 were held to cover open
call options written as follows (see Note 4 to the financial statements):
Issuer Contracts Exercise Expiration Value(a)
price date
Electronic Arts 170 $90.00 Sept. 2003 $29,750
Linear Technology 100 40.00 Aug. 2003 2,000
-------
Total value $31,750
-------
(f) At July 31, 2003, the cost of securities for federal income tax purposes
was $241,649,455 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $ 15,970,753
Unrealized depreciation (18,034,903)
-----------
Net unrealized depreciation $ (2,064,150)
------------
- --------------------------------------------------------------------------------
10 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Aggressive Growth Portfolio
July 31, 2003
Assets
Investments in securities, at value (Note 1)
(identified cost $240,337,074) $239,585,305
Dividends and accrued interest receivable 216,950
Receivable for investment securities sold 3,306,688
---------
Total assets 243,108,943
-----------
Liabilities
Disbursements in excess of cash on demand deposit 14,991
Payable for investment securities purchased 2,166,574
Accrued investment management services fee 4,291
Other accrued expenses 22,608
Options contracts written, at value (premiums received $25,579) (Note 4) 31,750
------
Total liabilities 2,240,214
---------
Net assets $240,868,729
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Statement of operations
Aggressive Growth Portfolio
Year ended July 31, 2003
Investment income
Income:
Dividends $ 4,459,453
Interest 100,218
Fee income from securities lending (Note 3) 114
---
Total income 4,559,785
---------
Expenses (Note 2):
Investment management services fee 1,484,028
Compensation of board members 8,383
Custodian fees 23,204
Audit fees 21,000
Other 7,032
-----
Total expenses 1,543,647
Earnings credits on cash balances (Note 2) (7)
--
Total net expenses 1,543,640
---------
Investment income (loss) -- net 3,016,145
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (54,102,469)
Options contracts written (Note 4) 14,289
------
Net realized gain (loss) on investments (54,088,180)
Net change in unrealized appreciation (depreciation) on investments 65,040,858
----------
Net gain (loss) on investments 10,952,678
----------
Net increase (decrease) in net assets resulting from operations $ 13,968,823
============
Statements of changes in net assets
Aggressive Growth Portfolio
Year ended July 31, 2003 2002
Operations
Investment income (loss) -- net $ 3,016,145 $ 3,496,349
Net realized gain (loss) on investments (54,088,180) (113,496,294)
Net change in unrealized appreciation (depreciation) on investments 65,040,858 (28,602,926)
---------- -----------
Net increase (decrease) in net assets resulting from operations 13,968,823 (138,602,871)
---------- ------------
Proceeds from contributions 280,192 4,397,176
Fair value of withdrawals (82,264,696) (157,127,612)
----------- ------------
Net contributions (withdrawals) from partners (81,984,504) (152,730,436)
----------- ------------
Total increase (decrease) in net assets (68,015,681) (291,333,307)
Net assets at beginning of year 308,884,410 600,217,717
----------- -----------
Net assets at end of year $240,868,729 $ 308,884,410
============ =============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Notes to Financial Statements
Aggressive Growth Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Aggressive 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. Aggressive Growth
Portfolio invests primarily in equity securities of companies that comprise the
S&P 500 Index. 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 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.
- --------------------------------------------------------------------------------
13 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
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.
- --------------------------------------------------------------------------------
14 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium and discount using the effective interest
method, is accrued daily.
2. FEES AND EXPENSES
The Trust on behalf of the Portfolio, has an Investment Management Services
Agreement with American Express Financial Corporation (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 0.65% to 0.50% 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 Research
Opportunities Fund to the Lipper Large-Cap Core Funds Index. Prior to Dec.1,
2002, the maximum adjustment was 0.12% of the Portfolio's average daily net
assets after deducting 1% from the performance difference. If the performance
difference was less than 1%, the adjustment was zero. On Nov. 13, 2002,
shareholders approved modification of the performance incentive adjustment
calculation by adjusting the performance difference intervals, while retaining
the previous maximum adjustment and reducing the amount of the performance
difference for which no adjustment is made to 0.50%. The effect of the
modifications began Dec. 1, 2002. The adjustment decreased the fee by $181,188
for the year ended July 31, 2003.
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 year ended July 31, 2003, the Portfolio's custodian fees were reduced
by $7 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.
- --------------------------------------------------------------------------------
15 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $205,274,935 and $281,945,714, respectively, for the
year ended July 31, 2003. For the same period, the portfolio turnover rate was
82%. Realized gains and losses are determined on an identified cost basis.
Brokerage clearing fees paid to brokers affiliated with AEFC were $46,054 for
the year ended July 31, 2003.
Income from securities lending amounted to $114 for the year ended July 31,
2003. The risks to the Portfolio of securities lending are that the borrower may
not provide additional collateral when required or return the securities when
due.
4. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as follows:
Year ended July 31, 2003
Calls
Contracts Premiums
Balance July 31, 2002 -- $ --
Opened 764 88,434
Closed -- --
Exercised (264) (48,566)
Expired (230) (14,289)
---- -------
Balance July 31, 2003 270 $ 25,579
--- --------
See "Summary of significant accounting policies."
- --------------------------------------------------------------------------------
16 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Independent Auditors' Report
THE BOARD OF TRUSTEES AND UNITHOLDERS
GROWTH TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Aggressive Growth Portfolio (a
series of Growth Trust) as of July 31, 2003, the related statement of operations
for the year then ended and the statements of changes in net assets for each of
the years in the two-year period ended July 31, 2003. These financial statements
are the responsibility of portfolio management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 2003, by correspondence with the custodian and brokers or by other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aggressive Growth Portfolio as
of July 31, 2003, and the results of its operations and the changes in its net
assets for each of the periods stated in the first paragraph above, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
Minneapolis, Minnesota
September 12, 2003
- --------------------------------------------------------------------------------
17 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Research Opportunities Fund
July 31, 2003
Assets
Investment in Portfolio (Note 1) $ 240,807,347
Capital shares receivable 933
---
Total assets 240,808,280
-----------
Liabilities
Capital shares payable 31,155
Accrued distribution fee 3,530
Accrued transfer agency fee 1,852
Accrued administrative services fee 395
Other accrued expenses 68,280
------
Total liabilities 105,212
-------
Net assets applicable to outstanding capital stock $ 240,703,068
=============
Represented by
Capital stock -- $.01 par value (Note 1) $ 593,484
Additional paid-in capital 514,070,863
Undistributed net investment income 338,450
Accumulated net realized gain (loss) (Note 5) (273,542,013)
Unrealized appreciation (depreciation) on investments (757,716)
--------
Total -- representing net assets applicable to outstanding capital stock $ 240,703,068
=============
Net assets applicable to outstanding shares: Class A $ 149,101,302
Class B $ 91,325,311
Class C $ 275,194
Class Y $ 1,261
Net asset value per share of outstanding capital stock: Class A shares 35,889,959 $ 4.15
Class B shares 23,387,745 $ 3.90
Class C shares 70,413 $ 3.91
Class Y shares 300 $ 4.20
--- -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Statement of operations
AXP Research Opportunities Fund
Year ended July 31, 2003
Investment income
Income:
Dividends $ 4,458,482
Interest 100,196
Fee income from securities lending 114
---
Total income 4,558,792
---------
Expenses (Note 2):
Expenses allocated from Portfolio 1,543,302
Distribution fee
Class A 392,605
Class B 990,618
Class C 2,630
Transfer agency fee 796,870
Incremental transfer agency fee
Class A 55,639
Class B 55,748
Class C 146
Service fee -- Class Y 50
Administrative services fees and expenses 154,538
Compensation of board members 8,150
Printing and postage 179,445
Registration fees 30,250
Audit fees 7,000
Other 7,628
-----
Total expenses 4,224,619
Earnings credits on cash balances (Note 2) (4,277)
------
Total net expenses 4,220,342
---------
Investment income (loss) -- net 338,450
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (54,095,224)
Options contracts written 14,286
------
Net realized gain (loss) on investments (54,080,938)
Net change in unrealized appreciation (depreciation) on investments 65,030,053
----------
Net gain (loss) on investments 10,949,115
----------
Net increase (decrease) in net assets resulting from operations $ 11,287,565
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets
AXP Research Opportunities Fund
Year ended July 31, 2003 2002
Operations and distributions
Investment income (loss) -- net $ 338,450 $ (700,665)
Net realized gain (loss) on investments (54,080,938) (113,481,022)
Net change in unrealized appreciation (depreciation) on investments 65,030,053 (28,596,657)
---------- -----------
Net increase (decrease) in net assets resulting from operations 11,287,565 (142,778,344)
---------- ------------
Distributions to shareholders from:
Net investment income
Class A -- (548,089)
Class C -- (96)
Class Y -- (693)
---------- ------------
Total distributions -- (548,878)
---------- ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 10,144,239 43,870,066
Class B shares 4,732,632 10,812,283
Class C shares 67,130 159,554
Class Y shares 4,652 9,017
Reinvestment of distributions at net asset value
Class A shares -- 543,290
Class C shares -- 95
Class Y shares -- 689
Payments for redemptions
Class A shares (57,637,339) (133,571,180)
Class B shares (Note 2) (36,351,756) (69,710,542)
Class C shares (Note 2) (91,096) (48,509)
Class Y shares (198,402) (37,131)
-------- -------
Increase (decrease) in net assets from capital share transactions (79,329,940) (147,972,368)
----------- ------------
Total increase (decrease) in net assets (68,042,375) (291,299,590)
Net assets at beginning of year 308,745,443 600,045,033
----------- -----------
Net assets at end of year $240,703,068 $ 308,745,443
============ =============
Undistributed net investment income $ 338,450 $ --
------------ -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Notes to Financial Statements
AXP Research Opportunities Fund
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, 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 Aggressive Growth Portfolio
The Fund invests all of its assets in Aggressive 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
equity securities of companies that comprise the S&P 500 Index.
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 July 31, 2003, was 99.97%.
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.
- --------------------------------------------------------------------------------
21 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
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.
The tax character of distributions paid for the years indicated is as follows:
Year ended July 31, 2003 2002
Class A
Distributions paid from:
Ordinary income $-- $548,089
Long-term capital gain -- --
Class B
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class C
Distributions paid from:
Ordinary income -- 96
Long-term capital gain -- --
Class Y
Distributions paid from:
Ordinary income -- 693
Long-term capital gain -- --
As of July 31, 2003, the components of distributable earnings on a tax basis are
as follows:
Undistributed ordinary income $ 338,450
Accumulated long-term gain (loss) $(272,229,915)
Unrealized appreciation (depreciation) $ (2,069,814)
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.
- --------------------------------------------------------------------------------
22 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
in reducing percentages from 0.06% 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 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 $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
In addition, there is an annual closed-account fee of $5 per inactive account,
charged on a pro rata basis from the date the account becomes inactive until the
date the account is purged from the transfer agent system generally within one
year.
Under terms of a prior agreement that ended April 30, 2003, the Fund paid a
transfer agency fee at an annual rate per shareholder account of $19 for Class
A, $20 for Class B, $19.50 for Class C and $17 for Class Y.
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 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
$202,452 for Class A, $92,648 for Class B and $24 for Class C for the year ended
July 31, 2003.
- --------------------------------------------------------------------------------
23 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
For the year ended July 31, 2003, AEFC and American Express Financial Advisors
Inc. waived certain fees and expenses to 1.35% for Class A, 2.11% for Class B,
2.11% for Class C and 1.13% for Class Y. In addition, AEFC and American Express
Financial Advisors Inc. have agreed to waive certain fees and expenses until
July 31, 2004. Under this agreement, total expenses will not exceed 1.35% for
Class A, 2.11% for Class B, 2.11% for Class C and 1.18% for Class Y of the
Fund's average daily net assets.
During the year ended July 31, 2003, the Fund's transfer agency fees were
reduced by $4,277 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2003
Class A Class B Class C Class Y
Sold 2,606,091 1,322,189 18,719 1,227
Issued for reinvested distributions -- -- -- --
Redeemed (15,298,541) (10,145,114) (24,738) (53,135)
----------- ----------- ------- -------
Net increase (decrease) (12,692,450) (8,822,925) (6,019) (51,908)
----------- ---------- ------ -------
Year ended July 31, 2002
Class A Class B Class C Class Y
Sold 9,259,194 2,412,020 35,293 1,898
Issued for reinvested distributions 110,287 -- 20 139
Redeemed (28,644,747) (16,048,196) (10,730) (7,914)
----------- ----------- ------- ------
Net increase (decrease) (19,275,266) (13,636,176) 24,583 (5,877)
----------- ----------- ------ ------
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
Deutsche Bank, whereby the Fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The agreement
went into effect Sept. 24, 2002. The Fund must maintain asset coverage for
borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the LIBOR plus 0.50%, the IBOR plus 0.50%
or the higher of the Federal Funds Rate plus 0.25% and the Prime Lending Rate.
Borrowings are payable within 60 days after such loan is executed. The Fund also
pays a commitment fee equal to its pro rata share of the amount of the credit
facility at a rate of 0.09% per annum. Prior to this agreement, the Fund had a
revolving credit agreement that permitted borrowings up to $200 million with
U.S. Bank, N.A. The Fund had no borrowings outstanding during the year ended
July 31, 2003.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund has a capital loss carry-over of
$272,229,915 as of July 31, 2003, that will expire in 2009 through 2012 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.
- --------------------------------------------------------------------------------
24 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended July 31, 2003 2002 2001 2000 1999
Net asset value, beginning of period $3.90 $ 5.37 $ 7.61 $7.94 $6.98
Income from investment operations:
Net investment income (loss) .02 -- .02 -- (.01)
Net gains (losses) (both realized and unrealized) .23 (1.46) (1.27) .66 1.32
Total from investment operations .25 (1.46) (1.25) .66 1.31
Less distributions:
Dividends from net investment income -- (.01) -- -- --
Distributions from realized gains -- -- (.99) (.99) (.35)
Total distributions -- (.01) (.99) (.99) (.35)
Net asset value, end of period $4.15 $ 3.90 $ 5.37 $7.61 $7.94
Ratios/supplemental data
Net assets, end of period (in millions) $149 $189 $365 $540 $481
Ratio of expenses to average daily net assets(c) 1.35% 1.22% 1.16% 1.14% 1.12%
Ratio of net investment income (loss) to average daily net assets .43% .15% .37% .02% .04%
Portfolio turnover rate (excluding short-term securities) 82% 144% 234% 160% 143%
Total return(e) 6.41% (27.24%) (17.54%) 7.73% 19.21%
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2003 2002 2001 2000 1999
Net asset value, beginning of period $3.69 $ 5.12 $ 7.36 $7.76 $6.88
Income from investment operations:
Net investment income (loss) (.02) (.01) (.02) (.05) (.02)
Net gains (losses) (both realized and unrealized) .23 (1.42) (1.23) .64 1.25
Total from investment operations .21 (1.43) (1.25) .59 1.23
Less distributions:
Distributions from realized gains -- -- (.99) (.99) (.35)
Net asset value, end of period $3.90 $ 3.69 $ 5.12 $7.36 $7.76
Ratios/supplemental data
Net assets, end of period (in millions) $91 $119 $235 $336 $276
Ratio of expenses to average daily net assets(c) 2.11% 1.98% 1.92% 1.91% 1.88%
Ratio of net investment income (loss) to average daily net assets (.33%) (.62%) (.39%) (.73%) (.72%)
Portfolio turnover rate (excluding short-term securities) 82% 144% 234% 160% 143%
Total return(e) 5.69% (27.93%) (18.19%) 7.03% 18.31%
See accompanying notes to financial highlights.
- --------------------------------------------------------------------------------
25 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2003 2002 2001 2000(b)
Net asset value, beginning of period $3.69 $ 5.13 $ 7.36 $7.50
Income from investment operations:
Net investment income (loss) (.01) (.02) (.02) .02
Net gains (losses) (both realized and unrealized) .23 (1.42) (1.22) (.16)
Total from investment operations 0.22 (1.44) (1.24) (.14)
Less distributions:
Distributions from realized gains -- -- (.99) --
Net asset value, end of period $3.91 $ 3.69 $ 5.13 $7.36
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $--
Ratio of expenses to average daily net assets(c) 2.11% 1.99% 1.92% 1.91%(d)
Ratio of net investment income (loss) to average daily net assets (.34%) (.61%) (.36%) (.50%)(d)
Portfolio turnover rate (excluding short-term securities) 82% 144% 234% 160%
Total return(e) 5.96% (28.05%) (18.03%) (1.87%)(f)
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2003 2002 2001 2000 1999
Net asset value, beginning of period $3.93 $ 5.42 $ 7.65 $7.96 $7.01
Income from investment operations:
Net investment income (loss) .04 -- .04 .01 --
Net gains (losses) (both realized and unrealized) .23 (1.48) (1.28) .67 1.32
Total from investment operations 0.27 (1.48) (1.24) .68 1.32
Less distributions:
Dividends from net investment income -- (.01) -- -- (.02)
Distributions from realized gains -- -- (.99) (.99) (.35)
Total distributions -- (.01) (.99) (.99) (.37)
Net asset value, end of period $4.20 $ 3.93 $ 5.42 $7.65 $7.96
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $-- $--
Ratio of expenses to average daily net assets(c) 1.13% 1.04% 1.00% .97% 1.02%
Ratio of net investment income (loss) to average daily net assets .64% .33% .54% .17% .12%
Portfolio turnover rate (excluding short-term securities) 82% 144% 234% 160% 143%
Total return(e) 6.87% (27.30%) (17.29%) 7.99% 19.34%
See accompanying notes to financial highlights.
- --------------------------------------------------------------------------------
26 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL 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) Not annualized.
- --------------------------------------------------------------------------------
27 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Independent Auditors' Report
THE BOARD AND SHAREHOLDERS
AXP GROWTH SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP
Research Opportunities Fund (a series of AXP Growth Series, Inc.) as of July 31,
2003, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended July 31, 2003, and the financial highlights for each of the years in the
five-year period ended July 31, 2003. These financial statements and the
financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Research Opportunities Fund as of July 31, 2003, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
September 12, 2003
- --------------------------------------------------------------------------------
28 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. Each member oversees 15
Master Trust portfolios and 83 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the board.
Independent Board Members
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards). Former Governor of
Age 68 Minnesota
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc.
Minneapolis, MN 55402 construction) since 1998 (construction
Age 65 materials/chemicals)
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated
30 Seventh Street East since 2001 Chief Executive Officer, Minnesota (commodity merchants and
Suite 3050 Mining and Manufacturing (3M) processors), General Mills,
St. Paul, MN 55101-4901 Inc. (consumer foods), Vulcan
Age 69 Materials Company (construction
materials/ chemicals), Milliken
& Company (textiles and
chemicals), and Nexia
Biotechnologies, Inc.
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
Heinz F. Hutter* Board member Retired President and Chief
901 S. Marquette Ave. since 1994 Operating Officer, Cargill,
Minneapolis, MN 55402 Incorporated (commodity merchants
Age 74 and processors)
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 68
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
Stephen R. Lewis, Jr.** Board member Retired President and Professor of Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 Economics, Carleton College (manufactures irrigation
Minneapolis, MN 55402 systems)
Age 64
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
Alan G. Quasha Board member President, Quadrant Management, Compagnie Financiere Richemont
901 S. Marquette Ave. since 2002 Inc. (management of private AG (luxury goods), Harken
Minneapolis, MN 55402 equities) Energy Corporation (oil and gas
Age 53 exploration) and SIRIT Inc.
(radio frequency identification
technology)
- ---------------------------------- ------------------ ------------------------------------- ---------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund and
AXP Partners Aggressive Growth Fund by reason of being a security holder of
J P Morgan Chase & Co., which has a 45% interest in American Century
Companies, Inc., the parent company of the subadviser of two of the AXP
Partners Funds, American Century Investment Management, Inc.
** Interested person of AXP Partners International Aggressive Growth Fund by
reason of being a security holder of FleetBoston Financial Corporation,
parent company of Liberty Wanger Asset Management, L.P., one of the fund's
subadvisers.
- --------------------------------------------------------------------------------
29 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Alan K. Simpson Board member Former three-term United States Biogen, Inc.
1201 Sunshine Ave. since 1997 Senator for Wyoming (biopharmaceuticals)
Cody, WY 82414
Age 71
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Alison Taunton-Rigby Board member President, Forester Biotech since
901 S. Marquette Ave. since 2002 2000. Former President and CEO,
Minneapolis, MN 55402 Aquila Biopharmaceuticals, Inc.
Age 59
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Board Members Affiliated with AEFC***
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Barbara H. Fraser Board member Executive Vice President - AEFA
1546 AXP Financial Center since 2002 Products and Corporate Marketing of
Minneapolis, MN 55474 AEFC since 2002. President -
Age 53 Travelers Check Group, American
Express Company, 2001-2002.
Management Consultant, Reuters,
2000-2001. Managing Director -
International Investments, Citibank
Global, 1999-2000. Chairman and
CEO, Citicorp Investment Services
and Citigroup Insurance Group,
U.S., 1998-1999
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Stephen W. Roszell Board member Senior Vice President -
50238 AXP Financial Center since 2002, Vice Institutional Group of AEFC
Minneapolis, MN 55474 President since
Age 54 2002
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
William F. Truscott Board member Senior Vice President - Chief
53600 AXP Financial Center since 2001, Vice Investment Officer of AEFC since
Minneapolis, MN 55474 President since 2001. Former Chief Investment
Age 42 2002 Officer and Managing Director,
Zurich Scudder Investments
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
*** Interested person by reason of being an officer, director and/or employee of
AEFC.
- --------------------------------------------------------------------------------
30 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Roszell, who is vice president, and
Mr. Truscott, who is vice president, the Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Jeffrey P. Fox Treasurer since Vice President - Investment
50005 AXP Financial Center 2002 Accounting, AEFC, since 2002; Vice
Minneapolis, MN 55474 President - Finance, American
Age 48 Express Company, 2000-2002; Vice
President - Corporate Controller,
AEFC, 1996-2000
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Paula R. Meyer President since Senior Vice President and General
596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC, since
Minneapolis, MN 55474 2002; Vice President and Managing
Age 49 Director - American Express Funds,
AEFC, 2000-2002; Vice President,
AEFC, 1998-2000
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
Leslie L. Ogg Vice President, President of Board Services
901 S. Marquette Ave. General Counsel, Corporation
Minneapolis, MN 55402 and Secretary
Age 64 since 1978
- --------------------------------- ------------------- ------------------------------------- ---------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
- --------------------------------------------------------------------------------
31 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 ANNUAL REPORT
The policies and procedures that the Fund uses to determine how to vote proxies
relating to portfolio securities can be found in the Fund's Statement of
Additional Information (SAI) which is available (i) without charge, upon
request, by calling toll-free (800) 862-7919; (ii) on the American Express
Company Web site at americanexpress.com/funds; and (iii) on the Securities and
Exchange Commission Web site at http://www.sec.gov.
- --------------------------------------------------------------------------------
(logo)
AMERICAN
EXPRESS
(R)
- --------------------------------------------------------------------------------
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
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.