UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2111
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AXP GROWTH SERIES, INC.
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(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
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Date of fiscal year end: 7/31
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Date of reporting period: 7/31
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AXP(R)
Growth
Fund
Annual Report
for the Period Ended
July 31, 2005
AXP Growth Fund seeks to provide shareholders with long-term capital growth.
(This annual report is intended only for the information of shareholders or
those who have received the offering prospectus of the Fund, which contains
information about 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.)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 10
Investments in Securities 12
Financial Statements (Portfolio) 16
Notes to Financial Statements (Portfolio) 19
Report of Independent Registered
Public Accounting Firm (Portfolio) 24
Financial Statements (Fund) 25
Notes to Financial Statements (Fund) 28
Report of Independent Registered
Public Accounting Firm (Fund) 36
Fund Expenses Example 37
Board Members and Officers 39
Approval of Investment Management
Services Agreement 42
Proxy Voting 44
[DALBAR LOGO]
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.
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company (American Express) announced plans to
pursue a spin off of Ameriprise Financial, Inc. (Ameriprise Financial) (formerly
American Express Financial Corporation) to American Express shareholders. The
separation from American Express is expected to be completed on Sept. 30, 2005.
After the separation from American Express, Ameriprise Financial will no longer
be affiliated with American Express.
Ameriprise Financial provides administrative services to the Fund and, through
Sept. 30, 2005, investment management services to the Fund. Effective Oct. 1,
2005, RiverSource Investments, LLC, a wholly owned subsidiary of Ameriprise
Financial, will provide investment management services to the Fund. In addition,
Ameriprise Financial is the parent company of the Fund's distributor, Ameriprise
Financial Services, Inc. (formerly American Express Financial Advisors Inc.);
the Fund's transfer agent, RiverSource Service Corporation (formerly American
Express Client Service Corporation); and the Fund's custodian, Ameriprise Trust
Company (formerly American Express Trust Company).
Effective Oct. 1, 2005, the Fund will change its name such that it no longer
bears the American Express brand and instead will bear the RiverSource(SM)
brand. Information regarding the new name of the Fund and other changes will be
separately communicated to shareholders.
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2 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Fund Snapshot AT JULY 31, 2005
PORTFOLIO MANAGER
Portfolio manager Since Years in industry
Nick Thakore 4/02 12
FUND OBJECTIVE
For investors seeking long-term capital growth.
Inception dates by class
A: 3/1/72 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95
Ticker symbols by class
A: INIDX B: IGRBX C: AXGCX I: AGWIX Y: IGRYX
Total net assets $3.145 billion
Number of holdings 138
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]
Health Care 20.0%
Telecommunication Services 18.2%
Information Technology 17.2%
Consumer Discretionary 12.1%
Consumer Staples 9.2%
Short-term Securities* 9.0%
Financials 5.3%
Energy 3.4%
Materials 2.8%
Industrials 2.5%
Other 0.3%
* Of the 9.0%, 1.2% is due to security lending activity and 7.8% is the
Portfolio's cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
Sprint (Diversified Telecommunication Services) 8.0%
NTL (Media) 7.7
Nextel Communications Cl A
(Wireless Telecommunication Services) 4.9
Pfizer (Pharmaceuticals) 2.5
Gillette (Personal Products) 2.4
Telewest Global
(Diversified Telecommunication Services) 2.3
Dell (Computers & Peripherals) 2.3
Nokia ADR (Communications Equipment) 1.9
Intel (Semiconductors & Semiconductor Equipment) 1.7
Google Cl A (Internet Software & Services) 1.7
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
Investment products, including shares of mutual funds, are not federally or FDIC
insured, are not deposits or obligations of, or guaranteed by, any financial
institution and involve investment risks including possible loss of principal
and fluctuation in value.
Fund holdings are subject to change.
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3 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Performance Summary
[BAR CHART]
PERFORMANCE COMPARISON
For the year ended July 31, 2005
+19.43% +13.04% +15.89%
+19.43% = AXP Growth Fund Class A (excluding sales charge)
+13.04% = Russell 1000(R) Growth Index (unmanaged)
+15.89% = Lipper Large-Cap Growth Funds Index
(see "The Fund`s Long-term Performance" for Index descriptions)The performance
information shown represents past performance and is not a guarantee of future
results. The investment return and principal value of your investment will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the
performance information shown. You may obtain performance information current to
the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments.
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 other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (3/1/72) (3/20/95) (6/26/00) (3/4/04) (3/20/95)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at July 31, 2005
1 year +19.43% +12.56% +18.50% +13.50% +18.50% +17.50% +20.04% +19.69%
3 years +10.68% +8.52% +9.83% +8.72% +9.85% +9.85% N/A +10.89%
5 years -11.17% -12.22% -11.86% -12.20% -11.86% -11.86% N/A -11.02%
10 years +5.14% +4.52% +4.33% +4.33% N/A N/A N/A +5.30%
Since inception +12.05% +12.05% +6.03% +6.03% -11.86% -11.86% +9.04% +7.00%
at June 30, 2005
1 year +10.86% +4.48% +9.99% +4.99% +9.99% +8.99% +11.36% +11.02%
3 years +7.02% +4.93% +6.20% +5.00% +6.20% +6.20% N/A +7.22%
5 years -12.09% -13.13% -12.77% -13.10% -12.77% -12.77% N/A -11.94%
10 years +5.48% +4.86% +4.68% +4.68% N/A N/A N/A +5.64%
Since inception +11.99% +11.99% +5.80% +5.80% -12.52% -12.52% +7.35% +6.77%
(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
eligible investors only, currently limited to AXP Portfolio Builder Funds,
six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
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4 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager Nick Thakore discusses the Fund's positioning and
results for the 2005 fiscal year.
Q: How did AXP Growth Fund perform for the 12-month period ended July 31, 2005?
A: AXP Growth Fund's Class A shares rose 19.43%, excluding sales charge, for
the 12-month period ended July 31, 2005. The Fund outperformed the 15.89%
return of its peer group as represented by the Lipper Large-Cap Growth Funds
Index. The Fund's benchmark, the Russell 1000(R) Growth Index, advanced
13.04% for the same period.
Q: What factors influenced performance during the period?
A: Both stock selection and sector allocation contributed to the Fund's
outperformance over the fiscal period. We had a very strong stock picking
year with many stocks that helped performance and very few that detracted
meaningfully. We thoroughly researched and selected strong stocks and
avoided companies that demonstrated lackluster or damaging performance in
this annual reporting period.
The Fund showed its strongest performance in telecommunications services,
technology, energy and consumer staples and demonstrated its weakest
performance in health care. Although health care was the weakest sector for
the Fund, in reality, it was not harmful to us. The sector cost the Fund
only 50 basis points (i.e., one-half percent) of performance over the
12-month span, and this loss was primarily in Biogen Idec, a biotechnology
company. We added Biogen Idec to the Fund last year, and it had performed
well on the optimism surrounding its new multiple sclerosis treatment.
Unfortunately, the drug produced some very serious side effects and was
discontinued in 2005, which negatively impacted the company and dragged down
their stock price. We also owned Merck. In 2005, the pharmaceutical giant
pulled their arthritis drug Vioxx from the market due to increasing evidence
of potentially fatal side effects for long-term users.
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5 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > We had extreme conviction in the wireless services
subsector of the market, and this conviction was rewarded. [END CALLOUT QUOTE]
Drilling deeper within the telecommunication services sector, we had extreme
conviction in the wireless services subsector of the market, and this
conviction was rewarded. The subsector was fraught with mergers and
acquisitions, several of which benefited the Fund. Sprint, a large position
in the Fund, got closer to concluding its acquisition of Nextel
Communications, another large position in the Fund. Both companies showed
good fundamentals and the market seemed to recognize their value even more
than before. Two more strong performers were Western Wireless Corporation
and ALLTEL. Western Wireless, a regional wireless services company, was
acquired by ALLTEL, both stocks helped boost Fund performance. Another
standout, for performance reasons, was Vodafone Group, a mobile
telecommunications network company based in the United Kingdom.
Mergers and acquisitions also impacted the cable space in the Fund and
benefited performance. NTL and Telewest Global, cable communications
companies in the U.K., are both substantial positions in the Fund and plan
to merge. Both companies performed well on the back of solid fundamentals
and expectations of value creation from their pending merger. In fact, we
discussed NTL in last year's annual shareholder report. Then, the company
had rebounded from bankruptcy in 2004 and showed promise. This year, the
company was the Fund's top performing contributor for the annual reporting
period.
Within the technology sector, search engine Google is a large position in
the Fund and has been a big positive contributor to performance. Also in
technology, both Motorola and Nokia were strong performers. Information
management company Oracle was the only negative performer in technology, and
it was down only 16 basis points (0.16%) over the period.
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6 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > Mergers and acquisitions also impacted the cable space
in the Fund and benefited performance. [END CALLOUT QUOTE]
Q: What changes did you make during the 12-month period?
A: We made some significant additions to the Fund over the fiscal year. We
increased our position in Sprint during the 2005 fiscal year. We believed
that Sprint's decision to merge with Nextel Communications (discussed above)
created one of the fastest growing large cap companies in the market and at
a very attractive valuation. In our opinion, the stock price was not
reflecting the combination of growth and valuation and we took advantage of
this situation. Other significant adds to the Fund were, respectively,
Telewest Global, Google, Vivendi Universal -- a media company demonstrating
a good growth rate and attractive valuation, healthcare company HCA, and
Amgen -- a leading human therapeutics company in the biotechnology industry.
We also removed some holdings. We sold Disney, which had at one time been 3%
of the Fund. The stock had performed well. However, we became concerned
about the stock's valuation and the company's cyclicality. This was our
largest reduction. The next largest cut was AT&T Wireless. The company was
acquired and the stock price went down, so we sold our entire position.
Biogen Idec was a large position that we reduced, partly it depreciated so
much and also because the reason for owning it had completely changed.
Vodafone started as a large position, but as I found other better wireless
names, specifically Sprint, I sold off some Vodafone Group and replaced it
with Sprint.
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7 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Questions & Answers
Then in terms of sectors, the largest reduction in the Fund was in the
industrials sector. This sector does best in the early stages of economic
recovery. Now that the recovery has progressed, stock prices are more
expensive and not as compelling, so we reduced some exposure in this sector.
We also reduced our technology weighting over the course of the year. After
the market corrected early in the year, technology stocks were hit hard. We
saw this as a buying opportunity because many large growth companies were
showing reasonable valuations. The time -- and price -- was right to add
some tech stocks. However, our overall weight in that sector continues to be
less than that of the Russell Index. We have been bullish on energy for some
time. Therefore, the Fund is overweight (relative to the Russell Index) in
energy-related stocks. The record high prices of oil have supported our
position, and to date there are no significant signs it will change.
However, when opportunities arise, we have taken profits and will continue
to do so. Finally, we increased our position in telecom services because we
have such strong conviction in wireless communications, as we have discussed
previously.
Q: How do you plan to manage the Fund in the coming months given current market
conditions?
A: We have a very consistent investment approach. We identify companies with
strong growth stories where valuation is attractive. With that, we continue
to favor stocks with compelling growth stories that are more
company-specific than tied to the economic outlook, particularly when those
companies have some kind of identifiable catalyst that denotes future
appreciation.
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8 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Questions & Answers
In the near term, we believe companies within healthcare, telecom services
and consumer staples sectors that are not reliant on economic conditions
will continue to demonstrate some healthy growth. We will continue to look
for promising growth companies, and if that means paying a little more for
those stocks, we will do so -- but within reason.
We think that growth stocks are becoming more attractive versus value
stocks, and the market preference is moving to growth. We also think that
the preference pendulum is swinging to large company stocks rather than
small company stocks. We welcome this shift and are always looking for
opportunities to add to our large company names.
We see earnings growth decelerating in the economy, so it makes sense to be
invested in companies where the growth is not dependent on the economy.
Going forward, we see wireless services as a continuing growth theme that
still has significant potential and where companies still have attractive
valuations. We will likely reduce our weighting in consumer discretionary
because that sector is facing some headwinds in terms of oil prices and
interest rates.
Overall, we believe the Fund is comprised of strong companies with good
growth and reasonable valuations and feel good about the way the Fund has
performed.
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9 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Growth Fund Class A shares (from 8/1/95 to 7/31/05) as
compared to the performance of two widely cited performance indices, the Russell
1000(R) Growth Index and the Lipper Large-Cap Growth 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.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments. Also see "Past Performance" in the Fund's
current prospectus.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
July 31, 2005 $-- $-- $ -- $ --
July 31, 2004 -- -- -- --
July 31, 2003 -- -- -- --
July 31, 2002 -- -- 0.02 0.02
July 31, 2001 -- -- 2.20 2.20
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10 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP GROWTH FUND
AXP Growth Fund Class A
(includes sales charge) $ 9,425 $10,678 $16,764 $17,823 $21,475 $28,134 $16,278 $11,473 $12,510 $13,025 $15,556
Russell 1000(R) Growth Index(1) $10,000 $11,552 $17,542 $21,036 $26,093 $32,454 $21,076 $15,017 $16,765 $18,192 $20,564
Lipper Large-Cap Growth Funds
Index(2) $10,000 $11,139 $16,494 $19,819 $24,363 $29,737 $19,507 $14,049 $15,309 $16,249 $18,831
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
COMPARATIVE RESULTS
Results at July 31, 2005 Since
1 year 3 years 5 years 10 years inception(3)
AXP Growth Fund (includes sales charge)
Class A Cumulative value of $10,000 $11,256 $12,780 $5,212 $15,556 $447,887
Average annual total return +12.56% +8.52% -12.22% +4.52% +12.05%
Russell 1000(R) Growth Index(1)
Cumulative value of $10,000 $11,304 $13,695 $6,337 $20,564 N/A
Average annual total return +13.04% +11.05% -8.72% +7.48% N/A
Lipper Large-Cap Growth Funds Index(2)
Cumulative value of $10,000 $11,589 $13,405 $6,333 $18,831 N/A
Average annual total return +15.89% +10.26% -8.73% +6.53% N/A
Results for other share classes can be found on page 4.
(1) The Russell 1000(R) Growth Index, an unmanaged index, measures the
performance of those Russell 1000 companies with higher price-to-book
ratios and higher forecasted growth values.
(2) The Lipper Large-Cap Growth Funds Index includes the 30 largest large-cap
growth funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
(3) Fund data is from March 1, 1972. The Fund began operating before the
inception of the Russell 1000 Growth Index and Lipper peer group.
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11 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Investments in Securities
Growth Portfolio
July 31, 2005
(Percentages represent value of investments compared to net assets)
Common Stocks (93.6%)
Issuer Shares Value(a)
Aerospace & Defense (1.2%)
Boeing 174,832 $11,540,660
Goodrich 72,802 3,220,760
Honeywell Intl 120,389 4,728,880
Lockheed Martin 273,766 17,082,999
Total 36,573,299
Beverages (1.2%)
PepsiCo 717,009 39,098,501
Biotechnology (3.4%)
Amgen 617,634(b) 49,256,312
Biogen Idec 229,170(b) 9,004,089
Genentech 388,290(b) 34,685,946
Gilead Sciences 314,510(b) 14,093,193
Total 107,039,540
Capital Markets (1.3%)
Franklin Resources 130,600 10,555,092
Investors Financial Services 572,753 19,714,158
Nomura Holdings 534,700(c) 6,329,573
State Street 91,370 4,544,744
Total 41,143,567
Chemicals (0.7%)
Monsanto 324,300 21,848,091
Commercial Banks (0.1%)
ICICI Bank ADR 177,620(c) 4,690,944
Commercial Services & Supplies (0.1%)
Career Education 89,671(b) 3,478,338
Communications Equipment (4.6%)
CIENA 3,880,340(b) 8,691,962
Cisco Systems 1,615,125(b) 30,929,644
Motorola 1,336,627 28,309,760
Nokia ADR 3,964,017(c) 63,226,070
QUALCOMM 331,038 13,072,691
Total 144,230,127
Common Stocks (continued)
Issuer Shares Value(a)
Computers & Peripherals (4.1%)
Brocade Communications
Systems 1,951,455(b) $8,742,518
Dell 1,837,839(b) 74,377,344
EMC 1,936,807(b,d) 26,514,888
Hewlett-Packard 769,738 18,950,950
Total 128,585,700
Consumer Finance (0.3%)
Capital One Financial 49,677 4,098,353
First Marblehead 180,265(b,d) 6,264,208
Total 10,362,561
Diversified Financial Services (0.5%)
streetTRACKS Gold Trust 370,000(b) 15,839,700
Diversified Telecommunication Services (11.4%)
ALLTEL 320,314 21,300,881
Sprint 9,622,971(d) 258,857,920
Telewest Global 3,344,246(b,c) 74,710,456
Total 354,869,257
Electronic Equipment & Instruments (0.4%)
Flextronics Intl 409,825(b,c) 5,549,031
Solectron 1,627,685(b) 6,250,310
Total 11,799,341
Energy Equipment & Services (0.9%)
Halliburton 263,350 14,760,768
Schlumberger 75,432 6,316,676
Transocean 105,373(b) 5,946,198
Total 27,023,642
Food & Staples Retailing (1.3%)
Wal-Mart Stores 811,454 40,045,255
Food Products (0.7%)
Kellogg 501,190 22,708,919
See accompanying notes to investments in securities.
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12 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Health Care Equipment & Supplies (2.5%)
Alcon 54,916(c) $6,290,628
Baxter Intl 682,770 26,812,377
Boston Scientific 165,343(b) 4,786,680
Guidant 389,666 26,809,021
Medtronic 269,900 14,558,406
Total 79,257,112
Health Care Providers & Services (6.1%)
Aetna 129,761 10,043,501
AmerisourceBergen 97,019 6,964,994
Cardinal Health 753,672 44,903,778
HCA 1,075,341 52,960,544
HealthSouth 1,149,893(b) 6,163,426
Magellan Health Services 412,550(b) 14,777,541
McKesson 122,988 5,534,460
Medco Health Solutions 356,370(b) 17,262,563
UnitedHealth Group 576,327 30,141,902
WellPoint 38,494(b) 2,723,066
Total 191,475,775
Household Durables (0.4%)
Harman Intl Inds 11,100 954,045
Sony 279,100(c) 9,211,467
Tempur-Pedic Intl 149,900(b,d) 2,579,779
Total 12,745,291
Household Products (2.9%)
Colgate-Palmolive 164,701 8,719,271
Procter & Gamble 653,513 36,354,928
Spectrum Brands 1,497,097(b) 46,410,007
Total 91,484,206
Industrial Conglomerates (1.3%)
Tyco Intl 1,362,273(c) 41,508,458
Insurance (2.2%)
ACE 388,636(c) 17,958,870
American Intl Group 758,143 45,640,208
Chubb 35,323 3,137,389
Hartford Financial Services Group 40,009 3,223,525
Total 69,959,992
Internet & Catalog Retail (0.5%)
eBay 340,009(b) 14,205,576
Internet Software & Services (1.8%)
Google Cl A 195,549(b) 56,271,180
Common Stocks (continued)
Issuer Shares Value(a)
Media (11.2%)
Comcast Cl A 1,237,137(b) $38,017,220
Liberty Global Cl A 65,420(b) 3,103,525
NTL 3,776,488(b) 251,627,395
Vivendi Universal ADR 1,749,273(c) 55,591,896
Total 348,340,036
Metals & Mining (2.2%)
Barrick Gold 22,982(c) 563,059
Coeur d'Alene Mines 4,711,561(b,d) 16,726,042
Glamis Gold 286,200(b,c) 4,999,914
Harmony Gold Mining ADR 423,600(c) 3,473,520
Kinross Gold 655,900(b,c) 3,646,804
Newmont Mining 999,447 37,529,234
PAN American Silver 37,200(b,c) 589,620
Stillwater Mining 284,500(b) 2,321,520
Total 69,849,713
Multiline Retail (0.6%)
JC Penney 89,528 5,026,102
Kohl's 217,921(b) 12,279,848
Total 17,305,950
Oil & Gas (2.6%)
Anadarko Petroleum 208,300 18,403,305
Burlington Resources 61,535 3,945,009
Chevron 288,200 16,718,482
ConocoPhillips 332,600 20,817,434
Kinder Morgan Management LLC --(b) 15
Marathon Oil 192,200 11,216,792
Valero Energy 147,525 12,212,120
Total 83,313,157
Personal Products (2.5%)
Avon Products 94,659 3,096,296
Gillette 1,432,333 76,873,312
Total 79,969,608
Pharmaceuticals (8.7%)
Abbott Laboratories 513,030 23,922,589
AstraZeneca 111,443(c) 5,036,260
Bristol-Myers Squibb 726,156(d) 18,139,377
GlaxoSmithKline ADR 263,390(c) 12,495,222
Johnson & Johnson 722,707(d) 46,224,340
Novartis ADR 649,378(c) 31,631,202
Pfizer 3,039,799 80,554,673
Roche Holding 185,822(c) 25,201,658
Schering-Plough 726,500 15,125,730
Wyeth 296,331 13,557,143
Total 271,888,194
See accompanying notes to investments in securities.
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13 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Semiconductors & Semiconductor Equipment (3.4%)
Applied Materials 171,674 $3,169,102
ASML Holding 5,000(b,c) 88,000
Freescale Semiconductor Cl A 921,162(b) 23,508,054
Freescale Semiconductor Cl B 302,062(b) 7,778,097
Intel 2,079,491 56,437,386
Texas Instruments 470,057 14,929,010
Total 105,909,649
Software (3.6%)
Electronic Arts 164,183(b) 9,456,941
Mercury Interactive 355,019(b) 13,977,098
Microsoft 1,640,748 42,019,556
Novell 257,010(b) 1,562,621
Oracle 1,842,147(b) 25,016,356
Siebel Systems 1,204,024 10,113,802
Symantec 488,754(b) 10,737,925
Total 112,884,299
Specialty Retail (--%)
Gap 62,488 1,319,122
Thrifts & Mortgage Finance (0.9%)
Countrywide Financial 419,451 15,100,237
Fannie Mae 190,811 10,658,702
Freddie Mac 63,554 4,021,697
Total 29,780,636
Tobacco (0.7%)
Altria Group 351,865 23,560,880
Wireless Telecommunication Services (7.4%)
Hutchison Telecommunications
Intl ADR 614,003(b,c) 10,462,611
Millicom Intl Cellular 375,142(b,c,d) 7,968,016
NeuStar Cl A 115,558(b) 3,235,624
Nextel Communications Cl A 4,599,721(b) 160,070,291
Orascom Telecom 519,728(c) 25,269,175
Turkcell Iletisim Hizmetleri 480,379(c) 6,610,015
Vodafone Group ADR 798,073(c) 20,614,226
Total 234,229,958
Total Common Stocks
(Cost: $2,619,729,854) $2,944,595,574
Options Purchased (0.3%)
Issuer Contracts Exercise Expiration Value(a)
price date
Call
Nextel
Communications 10,680 $27.50 Jan. 2006 $8,490,600
Put
S&P 500 Index 1,365 1,135 Dec. 2005 1,405,950
Total Options Purchased
(Cost: $8,694,885) $9,896,550
Short-Term Securities (9.3%)(e)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. Government Agency (1.6%)
Federal Home Loan Mtge Corp Disc Nt
09-13-05 3.32% $50,000,000 $49,788,527
Commercial Paper (7.7%)
Alpine Securitization
08-01-05 3.31 20,100,000(f) 20,094,456
Bryant Park Funding LLC
08-15-05 3.36 20,000,000(f) 19,968,361
08-22-05 3.38 15,000,000(f) 14,966,300
Chariot Funding LLC
08-25-05 3.43 20,000,000(f) 19,948,700
08-26-05 3.45 20,000,000(f) 19,946,489
CHARTA LLC
09-02-05 3.45 35,000,000(f) 34,882,945
FCAR Owner Trust I
08-04-05 3.27 15,000,000 14,991,825
Grampian Funding LLC
08-01-05 3.31 29,000,000(f) 28,992,001
HSBC Finance
08-01-05 3.31 14,200,000 14,196,083
K2 (USA) LLC
08-19-05 3.36 25,000,000 24,951,146
Preferred Receivables Funding
08-24-05 3.39 30,000,000(f) 29,926,767
Total 242,865,073
Total Short-Term Securities
(Cost: $292,680,943) $292,653,600
Total Investments in Securities
(Cost: $2,921,105,682)(g) $3,247,145,724
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
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. At July 31, 2005, the
value of foreign securities represented 14.1% of net assets.
(d) At July 31, 2005, security was partially or fully on loan. See Note 4 to
the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 1.3% of net assets. See Note 4 to the
financial statements. 8.0% of net assets is the Portfolio's cash
equivalent position.
(f) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid
under guidelines established by the Fund's Board of Directors. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 2005, the value of
these securities amounted to $188,726,019 or 6.0% of net assets.
(g) At July 31, 2005, the cost of securities for federal income tax purposes
was $2,944,865,213 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $340,547,365
Unrealized depreciation (38,266,854)
-----------
Net unrealized appreciation $302,280,511
------------
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.riversource.com/investments.
- --------------------------------------------------------------------------------
15 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Growth Portfolio
July 31, 2005
Assets
Investments in securities, at value (Note 1)*
(identified cost $2,921,105,682) $3,247,145,724
Dividends and accrued interest receivable 1,496,603
Receivable for investment securities sold 84,047,080
----------
Total assets 3,332,689,407
=============
Liabilities
Disbursements in excess of cash on demand deposit 321,748
Payable for investment securities purchased 147,549,031
Payable upon return of securities loaned (Note 4) 39,971,200
Accrued investment management services fee 49,547
Other accrued expenses 135,650
-------
Total liabilities 188,027,176
-----------
Net assets $3,144,662,231
==============
* Including securities on loan, at value (Note 4) $ 38,111,730
--------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Statement of operations
Growth Portfolio
Year ended July 31, 2005
Investment income
Income:
Dividends $ 38,136,284
Interest 2,553,033
Fee income from securities lending (Note 4) 561,115
Less foreign taxes withheld (737,925)
--------
Total income 40,512,507
----------
Expenses (Note 2):
Investment management services fee 18,968,320
Compensation of board members 19,204
Custodian fees 264,471
Audit fees 33,000
Other 115,398
-------
Total expenses 19,400,393
Earnings credits on cash balances (Note 2) (1,699)
------
Total net expenses 19,398,694
----------
Investment income (loss) -- net 21,113,813
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 295,603,187
Foreign currency transactions (36,291)
Options contracts written (Note 5) (6,253,539)
----------
Net realized gain (loss) on investments 289,313,357
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 243,575,091
-----------
Net gain (loss) on investments and foreign currencies 532,888,448
-----------
Net increase (decrease) in net assets resulting from operations $554,002,261
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets
Growth Portfolio
Year ended July 31, 2005 2004
Operations
Investment income (loss) -- net $ 21,113,813 $ 21,150,217
Net realized gain (loss) on investments 289,313,357 362,598,800
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 243,575,091 (210,306,341)
----------- ------------
Net increase (decrease) in net assets resulting from operations 554,002,261 173,442,676
----------- -----------
Proceeds from contributions 56,639,055 20,257,382
Fair value of withdrawals (562,295,652) (544,632,609)
------------ ------------
Net contributions (withdrawals) from partners (505,656,597) (524,375,227)
------------ ------------
Total increase (decrease) in net assets 48,345,664 (350,932,551)
Net assets at beginning of year 3,096,316,567 3,447,249,118
------------- -------------
Net assets at end of year $3,144,662,231 $3,096,316,567
============== ==============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Notes to Financial Statements
Growth Portfolio
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 common stocks and securities convertible into common 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 U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Trustees of the portfolios,
Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express
Financial Corporation) utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there is a reasonably high degree of certainty that
the effect of the development or event has actually caused the closing price to
no longer reflect the actual value, the closing prices, as determined at the
close of the applicable foreign market, may be adjusted to reflect the fair
value of the affected foreign securities as of the close of the New York Stock
Exchange. Significant events include material movements in the U.S. securities
markets prior to the opening of foreign markets on the following trading day.
FVP results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. 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.
- --------------------------------------------------------------------------------
19 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
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.
- --------------------------------------------------------------------------------
20 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
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.
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
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, market discount and original issue 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 RiverSource Investments, LLC to manage its portfolio. Prior to
Oct. 1, 2005, investment management services were provided by Ameriprise
Financial. Under an Investment Management Service Agreement, RiverSource
Investments, LLC (the Investment Manager) determines which securities will be
purchased, held or sold. The management fee is a percentage of the Portfolio's
average daily net assets that declines from 0.60% to 0.48% annually as the
Portfolio's assets increase. 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 Growth Fund to the Lipper Large-Cap Growth Funds Index. In
certain circumstances, the board may approve a change in the index. The maximum
adjustment is 0.12% per year. If the performance difference is less than 0.50%,
the adjustment will be zero. The adjustment increased the fee by $1,705,757 for
the year ended July 31, 2005.
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.
- --------------------------------------------------------------------------------
21 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their compensation. Deferred amounts are treated as though equivalent
dollar amounts had been invested in shares of the underlying Fund or other
American Express mutual funds. The Portfolio's liability for these amounts is
adjusted for market value changes and remains in the Portfolio until distributed
in accordance with the Plan.
During the year ended July 31, 2005, the Portfolio's custodian fees were reduced
by $1,699 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to Ameriprise Trust Company (formerly
American Express Trust Company), an affiliate of Ameriprise Financial.
According to a Placement Agency Agreement, Ameriprise Financial Services, Inc.
(formerly 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 $3,922,996,626 and $4,573,625,345, respectively, for the
year ended July 31, 2005. Realized gains and losses are determined on an
identified cost basis.
Brokerage clearing fees paid to brokers affiliated with Ameriprise Financial
were $13,720 for the year ended July 31, 2005.
4. LENDING OF PORTFOLIO SECURITIES
At July 31, 2005, securities valued at $38,111,730 were on loan to brokers. For
collateral, the Portfolio received $39,971,200 in cash. Cash collateral received
is invested in short-term securities, which are included in the short-term
section of the "Investments in securities." Income from securities lending
amounted to $561,115 for year ended July 31, 2005. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
5. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as follows:
Year ended July 31, 2005
Calls Puts
Contracts Premiums Contracts Premiums
Balance July 31, 2004 -- $ -- -- $ --
Opened 780 882,931 10,280 9,835,760
Closed (780) (882,931) (10,280) (9,835,760)
---- --------- ------- -----------
Balance July 31, 2005 -- $ -- -- $ --
---- --------- ------- -----------
See "Summary of significant accounting policies."
- --------------------------------------------------------------------------------
22 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data:
Fiscal period ended July 31, 2005 2004 2003 2002 2001
Ratio of expenses to average daily net assets(a) .64% .49% .62% .47% .55%
Ratio of net investment income (loss) to average daily net assets .70% .61% .59% .37% .09%
Portfolio turnover rate (excluding short-term securities) 136% 171% 205% 225% 41%
Total return(b) 20.12% 4.65% 9.73% (29.17%) (41.87%)
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Total return is based on a calculated Portfolio net asset value and does
not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
23 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
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 Growth Portfolio (a series of
Growth Trust) as of July 31, 2005, 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, 2005, and the financial highlights for
each of the years in the five-year period ended July 31, 2005. These financial
statements and the financial highlights are the responsibility of portfolio
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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and 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. Our procedures included confirmation of
securities owned as of July 31, 2005, 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of Growth
Portfolio as of July 31, 2005, 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 U.S. generally accepted accounting
principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2005
- --------------------------------------------------------------------------------
24 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Growth Fund
July 31, 2005
Assets
Investment in Portfolio (Note 1) $3,144,608,611
Capital shares receivable 1,022,690
---------
Total assets 3,145,631,301
-------------
Liabilities
Capital shares payable 289,626
Accrued distribution fee 30,742
Accrued service fee 840
Accrued transfer agency fee 5,291
Accrued administrative services fee 3,849
Other accrued expenses 240,697
-------
Total liabilities 571,045
-------
Net assets applicable to outstanding capital stock $3,145,060,256
==============
Represented by
Capital stock -- $.01 par value (Note 1) $ 1,125,608
Additional paid-in capital 3,754,721,405
Undistributed net investment income 1,171,059
Accumulated net realized gain (loss) (Note 5) (937,992,748)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 326,034,932
-----------
Total -- representing net assets applicable to outstanding capital stock $3,145,060,256
==============
Net assets applicable to outstanding shares: Class A $2,101,095,913
Class B $ 578,073,340
Class C $ 14,995,769
Class I $ 146,738,136
Class Y $ 304,157,098
Net asset value per share of outstanding capital stock: Class A shares 74,131,468 $ 28.34
Class B shares 22,222,644 $ 26.01
Class C shares 576,446 $ 26.01
Class I shares 5,072,507 $ 28.93
Class Y shares 10,557,701 $ 28.81
---------- --------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Statement of operations
AXP Growth Fund
Year ended July 31, 2005
Investment income
Income:
Dividends $ 38,135,671
Interest 2,552,993
Fee income from securities lending 561,105
Less foreign taxes withheld (737,912)
--------
Total income 40,511,857
----------
Expenses (Note 2):
Expenses allocated from Portfolio 19,398,381
Distribution fee
Class A 5,058,973
Class B 5,641,889
Class C 128,612
Transfer agency fee 5,869,135
Incremental transfer agency fee
Class A 427,875
Class B 286,709
Class C 6,131
Service fee -- Class Y 329,679
Administrative services fees and expenses 1,370,094
Compensation of board members 13,737
Printing and postage 754,975
Registration fees 72,275
Audit fees 11,000
Other 49,263
------
Total expenses 39,418,728
Earnings credits on cash balances (Note 2) (114,220)
--------
Total net expenses 39,304,508
----------
Investment income (loss) -- net 1,207,349
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 295,598,845
Foreign currency transactions (36,290)
Options contracts written (6,253,432)
----------
Net realized gain (loss) on investments 289,309,123
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 243,570,687
-----------
Net gain (loss) on investments and foreign currencies 532,879,810
-----------
Net increase (decrease) in net assets resulting from operations $534,087,159
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP Growth Fund
Year ended July 31, 2005 2004
Operations
Investment income (loss) -- net $ 1,207,349 $ (2,970,542)
Net realized gain (loss) on investments 289,309,123 362,594,443
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 243,570,687 (210,303,690)
----------- ------------
Net increase (decrease) in net assets resulting from operations 534,087,159 149,320,211
----------- -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 245,400,269 285,165,756
Class B shares 84,469,961 80,166,420
Class C shares 4,411,692 4,297,146
Class I shares 115,544,634 18,579,557
Class Y shares 47,375,409 110,428,653
Payments for redemptions
Class A shares (623,373,452) (533,084,922)
Class B shares (Note 2) (200,303,603) (286,628,598)
Class C shares (Note 2) (4,584,216) (3,709,528)
Class I shares (1,248,614) (7,079)
Class Y shares (152,214,350) (176,524,688)
------------ ------------
Increase (decrease) in net assets from capital share transactions (484,522,270) (501,317,283)
------------ ------------
Total increase (decrease) in net assets 49,564,889 (351,997,072)
Net assets at beginning of year 3,095,495,367 3,447,492,439
------------- -------------
Net assets at end of year $3,145,060,256 $3,095,495,367
============== ==============
Undistributed net investment income $ 1,171,059 $ --
-------------- --------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Notes to Financial Statements
AXP Growth 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 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.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July 31, 2005, Ameriprise Financial and the
AXP Portfolio Builder Funds owned 100% of Class I shares, which represents 4.67%
of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees 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 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 common stocks and
securities convertible into common 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 at July 31, 2005 was 99.99%.
- --------------------------------------------------------------------------------
28 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
All securities held by the Portfolio 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. Pursuant to procedures adopted by the Board of
Trustees of the portfolios, Ameriprise Financial utilizes Fair Value Pricing
(FVP). FVP determinations are made in good faith in accordance with these
procedures. If a development or event is so significant that there is a
reasonably high degree of certainty that the effect of the development or event
has actually caused the closing price to no longer reflect the actual value, the
closing prices, as determined at the close of the applicable foreign market, may
be adjusted to reflect the fair value of the affected foreign securities as of
the close of the New York Stock Exchange. Significant events include material
movements in the U.S. securities markets prior to the opening of foreign markets
on the following trading day. FVP results in an estimated price that reasonably
reflects the current market conditions in order to value the portfolio holdings
such that shareholder transactions receive a fair net asset value. 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.
Use of estimates
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
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.
- --------------------------------------------------------------------------------
29 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $36,290
and accumulated net realized loss has been decreased by $36,290.
The tax character of distributions paid for the years indicated is as follows:
Year ended July 31, 2005 2004
Class A
Distributions paid from:
Ordinary income $-- $--
Long-term capital gain -- --
Class B
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class C
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class I*
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class Y
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
* Inception date is March 4, 2004.
At July 31, 2005, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income $ 1,171,059
Accumulated long-term gain (loss) $(913,031,953)
Unrealized appreciation (depreciation) $ 301,074,137
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.
- --------------------------------------------------------------------------------
30 -- AXP GROWTH FUND -- 2005 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 Ameriprise Financial to provide administrative
services. Under the current Administrative Services Agreement, the Fund pays
Ameriprise Financial a fee for administrative and accounting services at a
percentage of the Fund's average daily net assets that declines from 0.05% to
0.02% annually as the Fund's assets increase. It is expected that the fee
schedule to the agreement will be revised effective Oct. 1, 2005. Under the new
agreement, the fee percentage of the Fund's average daily net assets will
decline from 0.06% to 0.03% annually as the Fund's assets increase. 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 Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(formerly American Express Client Service Corporation) (the Transfer Agent)
maintains shareholder accounts and records. The Fund pays the Transfer Agent 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
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
Beginning May 20, 2005, the Transfer Agent implemented an annual closed account
fee of $5 per inactive account, charged on a pro rata basis for 12 months from
the date the account becomes inactive. These fees were insignificant for the
year ended July 31, 2005 and are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (formerly
American Express Financial Advisors Inc.) (the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, 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.
- --------------------------------------------------------------------------------
31 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
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
$2,726,588 for Class A, $634,395 for Class B and $2,160 for Class C for the year
ended July 31, 2005.
During the year ended July 31, 2005, the Fund's transfer agency fees were
reduced by $114,220 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, 2005
Class A Class B Class C Class I Class Y
Sold 9,267,227 3,475,136 181,331 4,366,146 1,841,710
Issued for reinvested distributions -- -- -- -- --
Redeemed (24,353,716) (8,484,021) (194,446) (44,571) (5,823,100)
----------- ---------- -------- ------- ----------
Net increase (decrease) (15,086,489) (5,008,885) (13,115) 4,321,575 (3,981,390)
----------- ---------- ------- --------- ----------
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 11,944,233 3,592,298 193,314 751,217 4,533,974
Issued for reinvested distributions -- -- -- -- --
Redeemed (21,995,982) (12,837,345) (164,669) (285) (7,210,738)
----------- ----------- -------- ---- ----------
Net increase (decrease) (10,051,749) (9,245,047) 28,645 750,932 (2,676,764)
----------- ---------- ------ ------- ----------
* Inception date is March 4, 2004.
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective
Rate plus 0.50% or 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 $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended July 31, 2005.
- --------------------------------------------------------------------------------
32 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$913,031,953 at July 31, 2005, that if not offset by capital gains will expire
as follows:
2010 2011
$544,257,626 $368,774,327
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.
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, 2005 2004 2003 2002 2001
Net asset value, beginning of period $23.73 $22.80 $20.88 $29.68 $ 54.36
------ ------ ------ ------ -------
Income from investment operations:
Net investment income (loss) .04 .02 -- (.04) (.14)
Net gains (losses) (both realized and unrealized) 4.57 .91 1.92 (8.74) (22.34)
------ ------ ------ ------ -------
Total from investment operations 4.61 .93 1.92 (8.78) (22.48)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $28.34 $23.73 $22.80 $20.88 $ 29.68
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $2,101 $2,117 $2,263 $2,213 $3,851
Ratio of expenses to average daily net assets(b) 1.19% 1.03% 1.21% .99% .99%
Ratio of net investment income (loss) to average daily net assets .16% .07% --% (.15%) (.34%)
Portfolio turnover rate (excluding short-term securities) 136% 171% 205% 225% 41%
Total return(c) 19.43% 4.08% 9.20% (29.59%) (42.14%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
33 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002 2001
Net asset value, beginning of period $21.95 $21.25 $19.61 $28.11 $ 52.02
------ ------ ------ ------ -------
Income from investment operations:
Net investment income (loss) (.16) (.16) (.17) (.25) (.42)
Net gains (losses) (both realized and unrealized) 4.22 .86 1.81 (8.23) (21.29)
------ ------ ------ ------ -------
Total from investment operations 4.06 .70 1.64 (8.48) (21.71)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $26.01 $21.95 $21.25 $19.61 $ 28.11
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $578 $598 $775 $845 $1,510
Ratio of expenses to average daily net assets(b) 1.97% 1.81% 1.99% 1.77% 1.75%
Ratio of net investment income (loss) to average daily net assets (.62%) (.71%) (.77%) (.93%) (1.11%)
Portfolio turnover rate (excluding short-term securities) 136% 171% 205% 225% 41%
Total return(c) 18.50% 3.29% 8.36% (30.18%) (42.57%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002 2001
Net asset value, beginning of period $21.95 $21.25 $19.62 $28.12 $ 52.03
------ ------ ------ ------ -------
Income from investment operations:
Net investment income (loss) (.16) (.16) (.17) (.21) (.42)
Net gains (losses) (both realized and unrealized) 4.22 .86 1.80 (8.27) (21.29)
------ ------ ------ ------ -------
Total from investment operations 4.06 .70 1.63 (8.48) (21.71)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $26.01 $21.95 $21.25 $19.62 $ 28.12
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $15 $13 $12 $7 $9
Ratio of expenses to average daily net assets(b) 1.97% 1.81% 2.01% 1.80% 1.75%
Ratio of net investment income (loss) to average daily net assets (.62%) (.71%) (.81%) (.96%) (1.10%)
Portfolio turnover rate (excluding short-term securities) 136% 171% 205% 225% 41%
Total return(c) 18.50% 3.29% 8.31% (30.17%) (42.56%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
34 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004(b)
Net asset value, beginning of period $24.10 $25.61
------ ------
Income from investment operations:
Net investment income (loss) .12 .09
Net gains (losses) (both realized and unrealized) 4.71 (1.60)
------ ------
Total from investment operations 4.83 (1.51)
------ ------
Net asset value, end of period $28.93 $24.10
------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $147 $18
Ratio of expenses to average daily net assets(c) .75% .57%(d)
Ratio of net investment income (loss) to average daily net assets .55% .43%(d)
Portfolio turnover rate (excluding short-term securities) 136% 171%
Total return(e) 20.04% (5.90%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is March 4, 2004.
(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.
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002 2001
Net asset value, beginning of period $24.07 $23.09 $21.11 $29.96 $ 54.75
------ ------ ------ ------ -------
Income from investment operations:
Net investment income (loss) .09 .07 .04 -- (.07)
Net gains (losses) (both realized and unrealized) 4.65 .91 1.94 (8.83) (22.52)
------ ------ ------ ------ -------
Total from investment operations 4.74 .98 1.98 (8.83) (22.59)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $28.81 $24.07 $23.09 $21.11 $ 29.96
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $304 $350 $398 $481 $974
Ratio of expenses to average daily net assets(b) 1.02% .86% 1.03% .82% .83%
Ratio of net investment income (loss) to average daily net assets .34% .25% .18% .02% (.18%)
Portfolio turnover rate (excluding short-term securities) 136% 171% 205% 225% 41%
Total return(c) 19.69% 4.24% 9.38% (29.48%) (42.04%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
35 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GROWTH SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP
Growth Fund (a series of AXP Growth Series, Inc.) as of July 31, 2005, 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, 2005, and the financial highlights for each of the years in the five-year
period ended July 31, 2005. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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
Growth Fund as of July 31, 2005, 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 U.S. generally accepted accounting
principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2005
- --------------------------------------------------------------------------------
36 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended July 31, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
37 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Feb. 1, 2005 July 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,086.70 $6.29(c) 1.23%
Hypothetical (5% return before expenses) $1,000 $1,018.49 $6.09(c) 1.23%
Class B
Actual(b) $1,000 $1,082.80 $10.27(c) 2.01%
Hypothetical (5% return before expenses) $1,000 $1,014.66 $9.93(c) 2.01%
Class C
Actual(b) $1,000 $1,083.30 $10.27(c) 2.01%
Hypothetical (5% return before expenses) $1,000 $1,014.66 $9.93(c) 2.01%
Class I
Actual(b) $1,000 $1,089.60 $3.89(c) .76%
Hypothetical (5% return before expenses) $1,000 $1,020.79 $3.77(c) .76%
Class Y
Actual(b) $1,000 $1,088.00 $5.38(c) 1.05%
Hypothetical (5% return before expenses) $1,000 $1,019.37 $5.20(c) 1.05%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2005: +8.67%
for Class A, +8.28% for Class B, +8.33% for Class C, +8.96% for Class I and
+8.80% for Class Y.
(c) Pending final approval from the Fund's Board of Directors, it is expected
that, effective Oct. 1, 2005, the fee schedule under the Administrative
Services Agreement between Ameriprise Financial and the Fund will be
revised. If the revised fee schedule under the Administrative Services
Agreement had been in place for the entire six-month period ended July 31,
2005, the actual expenses paid would have been $6.34 for Class A, $10.32
for Class B, $10.32 for Class C, $3.95 for Class I and $5.43 for Class Y;
the hypothetical expenses paid would have been $6.14 for Class A, $9.98 for
Class B, $9.98 for Class C, $3.82 for Class I and $5.25 for Class Y.
- --------------------------------------------------------------------------------
38 -- AXP GROWTH FUND -- 2005 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 14
Master Trust portfolios and 90 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 Other directorships
with Fund and during past five
length of years
service
- --------------------------------------- ----------------- ---------------------- --------------------------------
Arne H. Carlson Board member Chair, Board
901 S. Marquette Ave. since 1999 Services Corporation
Minneapolis, MN 55402 (provides
Age 70 administrative
services to boards).
Former Governor
of Minnesota
- --------------------------------------- ----------------- ---------------------- --------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Materials Company, Inc.
Minneapolis, MN 55402 (engineering and (construction
Age 67 construction) since materials/chemicals)
1998
- --------------------------------------- ----------------- ---------------------- --------------------------------
Livio D. DeSimone* Board member Retired Chair of the Cargill, Incorporated
30 Seventh Street East since 2001 Board and (commodity merchants and
Suite 3050 St. Paul, MN Chief Executive processors), General Mills,
55101-4901 Officer, Minnesota Inc. (consumer foods), Vulcan
Age 71 Mining and Materials Company (construction
Manufacturing (3M) materials/chemicals), Milliken &
Company (textiles and chemicals),
and Nexia Biotechnologies, Inc.
- --------------------------------------- ----------------- ---------------------- --------------------------------
Patricia M. Flynn Board member Trustee Professor of BostonFed Bancorp, Inc.
901 S. Marquette Ave. since 2004 Economics and (holding company) and its
Minneapolis, MN 55402 Management, Bentley subsidiary Boston Federal
Age 54 College since 2002; Savings Bank
former Dean,
McCallum Graduate
School of Business,
Bentley College from
1999 to 2002
- --------------------------------------- ----------------- ---------------------- --------------------------------
Anne P. Jones Board member Attorney and
901 S. Marquette Ave. since 1985 Consultant
Minneapolis, MN 55402
Age 70
- --------------------------------------- ----------------- ---------------------- --------------------------------
Stephen R. Lewis, Jr. Board member Retired President Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 and Professor of (manufactures irrigation
Minneapolis, MN 55402 Economics, Carleton systems)
Age 66 College
- --------------------------------------- ----------------- ---------------------- --------------------------------
* Livio D. DeSimone retired as a member of the Board, effective Sept. 8,
2005.
- --------------------------------------------------------------------------------
39 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Catherine James Paglia Board member Director, Enterprise Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Asset Management, (transportation, distribution
Minneapolis, MN 55402 Inc. (private real and logistics consultants)
Age 52 estate and asset
management company)
since 1999
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alan K. Simpson Board member Former three-term
1201 Sunshine Ave. since 1997 United States
Cody, WY 82414 Senator for Wyoming
Age 73
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alison Taunton-Rigby Board member Founder and Chief Hybridon, Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Executive Officer,
Minneapolis, MN 55402 RiboNovix, Inc.
Age 61 since 2004;
President, Forester
Biotech since 2000;
prior to that,
President and CEO,
Aquila
Biopharmaceuticals,
Inc.
- -------------------------------------- ------------------ ---------------------- --------------------------------
Board Member Affiliated with Ameriprise Financial, Inc. (formerly AEFC)**
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
William F. Truscott Board member Senior Vice
53600 Ameriprise Financial Center since 2001, President - Chief
Minneapolis, MN 55474 Vice President Investment Officer
Age 44 since 2002 of Ameriprise
Financial, Inc. and
RiverSource
Investments, LLC
since 2001. Former
Chief Investment
Officer and Managing
Director, Zurich
Scudder Investments
- -------------------------------------- ------------------ ---------------------- --------------------------------
** Interested person by reason of being an officer, director and/or employee of
Ameriprise Financial, Inc. (formerly American Express Financial Corporation)
or of RiverSource Investments, LLC, its wholly owned subsidiary.
- --------------------------------------------------------------------------------
40 -- AXP GROWTH FUND -- 2005 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. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Jeffrey P. Fox Treasurer Vice President -
105 Ameriprise Financial Center since 2002 Investment
Minneapolis, MN 55474 Accounting,
Age 50 Ameriprise
Financial, Inc.,
since 2002; Vice
President - Finance,
American Express
Company, 2000-2002;
Vice President -
Corporate
Controller,
Ameriprise
Financial, Inc.,
1996-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Paula R. Meyer President Senior Vice President
596 Ameriprise Financial Center since 2002 and General Manager -
Minneapolis, MN 55474 Mutual Funds,
Age 51 Ameriprise
Financial, Inc.,
since 2002 and
Senior Vice
President,
RiverSource
Investments, LLC
since 2004; Vice
President and
Managing Director -
American Express
Funds, Ameriprise
Financial, Inc.,
2000-2002;
Vice President,
Ameriprise
Financial, Inc.,
1998-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Leslie L. Ogg Vice President, President of Board
901 S. Marquette Ave. General Counsel, Services Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- -------------------------------------- ------------------ ---------------------- --------------------------------
Beth E. Weimer Chief Compliance Vice President and
172 Ameriprise Financial Center Officer since Chief Compliance
Minneapolis, MN 55474 2004 Officer, Ameriprise
Age 52 Financial, Inc.,
since 2001 and Chief
Compliance Officer,
RiverSource
Investments, LLC
since 2005; Vice
President and
Chief Compliance
Officer, Ameriprise
Financial Services,
Inc. (formerly
American Express
Financial Advisors),
2001-2005; Partner,
Arthur Andersen
Regulatory Risk
Services, 1998-2001
- -------------------------------------- ------------------ ---------------------- --------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
- --------------------------------------------------------------------------------
41 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Approval of Investment Management Services Agreement
Ameriprise Financial, Inc. (formerly American Express Financial Corporation or
AEFC) (the investment manager) is a wholly-owned subsidiary of American Express
Company. Under an Investment Management Services Agreement (the Agreement), the
investment manager provides investment advice and other services to the Fund.
Throughout the year, the Funds' Board of Directors and the Board's Investment
Review Committee monitor these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. The investment manager prepares detailed reports for the Board and its
Contracts Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On Feb. 1, 2005, American Express Company announced its intention to pursue a
spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with the investment manager (the Interim Period). The spin-off will
not result in an "assignment" of the Agreement under the Investment Company Act
of 1940 and, therefore, will not cause the termination of the Agreement
according to its terms. In connection with the spin-off the investment manager
has proposed that going forward, services under the Agreement be provided by an
affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel
advised the Board that it would be prudent, in connection with the spin-off, to
consider a new agreement with RiverSource and to seek shareholder approval of
that agreement as soon as practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above median for a peer group of funds with similar investment goals and noted
that the Fund's investment performance in 2004 exceeded the median.
The Board noted that, in addition to portfolio management and investment
research, the investment manager provides portfolio trading, daily net asset
value calculation, management of cash flow, product development, administration
of its compliance and legal departments, access to distribution, accounting and
recordkeeping, and reporting to the Board and shareholders. To evaluate these
services, the Board referred to surveys and benchmarks established by commercial
providers, trade associations and the investment manager's internal processes.
The Board concluded that the services provided were consistent with services
provided by investment managers to comparable mutual funds.
- --------------------------------------------------------------------------------
42 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
The Board also evaluated the price paid for the services provided by the
investment manager, noting the existence of a pricing philosophy, established by
the Board and the investment manager, that seeks to maintain total Fund expenses
within a range of the median expenses charged to comparable funds sold through
financial advisors. The Board considered detailed information set forth in an
annual report on fees and expenses, including, among other things, data showing
a comparison of the Fund's expenses with median expenses paid by funds in its
comparison group and data showing the Fund's contribution to the investment
manager's profitability. The Board determined that the total expense ratio of
the Fund is below median for its comparison group.
The Board considered the economies of scale that might be realized by the
investment manager as the Fund grew and took note of the extent to which Fund
shareholders also might benefit from such growth. The Board considered that the
Agreement provided for lower fees as assets increase at pre-established
breakpoints and concluded that the Agreement satisfactorily provided for sharing
these economies of scale.
The Board took into account the Contracts Committee's discussion comparing the
fees the investment manager charges to the Fund with those it charges to
institutional clients, noting that the relatively higher fees paid by the Fund
were principally attributable to the additional services required to manage a
regulated mutual fund, like the Fund, and the operation of a large mutual fund
family. The Board also considered the profitability realized by the investment
manager and its affiliates from its relationship with the Fund. The Board took
into account the services acquired by the investment manager through the use of
commission dollars paid by the Fund on portfolio transactions. The Board
concluded that the investment manager's overall costs and profitability were
appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit the investment
manager to offer competitive compensation to its personnel, make necessary
investments in its business and earn an appropriate profit. Based on the
foregoing, the Board concluded that the fees paid to the investment manager
under the Agreement were fair and reasonable and determined to approve renewal
of the Agreement for the Interim Period.
- --------------------------------------------------------------------------------
43 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website www.riversource.com/investments; or by
searching the website of the Securities and Exchange Commission (SEC) at
www.sec.gov. Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available without charge by calling the Fund's administrator, Board Services
Corporation, collect at (612) 330-9283; through the investment manager's
website, www.riversource.com/investments; or by searching the website of the SEC
at www.sec.gov.
- --------------------------------------------------------------------------------
44 -- AXP GROWTH FUND -- 2005 ANNUAL REPORT
American Express Funds
70100 Ameriprise Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by Ameriprise Financial Services, Inc. (formerly known as American
Express Financial Advisors Inc.). Member NASD.
AXP(R)
Large Cap
Equity
Fund
Annual Report
for the Period Ended
July 31, 2005
AXP Large Cap Equity Fund
seeks to provide shareholders
with long-term growth of capital.
(This annual report is intended only for the information of shareholders or
those who have received the offering prospectus of the Fund, which contains
information about 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.)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 8
Investments in Securities 10
Financial Statements 16
Notes to Financial Statements 19
Report of Independent Registered
Public Accounting Firm 32
Federal Income Tax Information 33
Fund Expenses Example 35
Board Members and Officers 37
Approval of Investment Management
Services Agreement 40
Proxy Voting 41
[DALBAR LOGO]
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.
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company (American Express) announced plans
to pursue a spin off of Ameriprise Financial, Inc. (Ameriprise Financial)
(formerly American Express Financial Corporation) to American Express
shareholders. The separation from American Express is expected to be completed
on Sept. 30, 2005. After the separation from American Express, Ameriprise
Financial will no longer be affiliated with American Express.
Ameriprise Financial provides administrative services to the Fund and, through
Sept. 30, 2005, investment management services to the Fund. Effective Oct. 1,
2005, RiverSource Investments, LLC, a wholly owned subsidiary of Ameriprise
Financial, will provide investment management services to the Fund. In
addition, Ameriprise Financial is the parent company of the Fund's
distributor, Ameriprise Financial Services, Inc. (formerly American Express
Financial Advisors Inc.); the Fund's transfer agent, RiverSource Service
Corporation (formerly American Express Client Service Corporation); and the
Fund's custodian, Ameriprise Trust Company (formerly American Express Trust
Company).
Effective Oct. 1, 2005, the Fund will change its name such that it no longer
bears the American Express brand and instead will bear the RiverSource(SM)
brand. Information regarding the new name of the Fund and other changes will be
separately communicated to shareholders.
- --------------------------------------------------------------------------------
2 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Fund Snapshot
AT JULY 31, 2005
PORTFOLIO MANAGERS
Portfolio managers Since Years in industry
Robert Ewing 1/05 16
Nick Thakore 1/05 11
FUND OBJECTIVE
The Fund seeks to provide shareholders with long-term growth of capital.
Inception dates by class
A: 3/28/02 B: 3/28/02 C: 3/28/02 I: 3/4/04 Y: 3/28/02
Ticker symbols by class
A: ALEAX B: ALEBX C: ARQCX I: -- Y: ALEYX
Total net assets $1.553 billion
Number of holdings 293
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 20.9%
Information Technology 13.7%
Health Care 11.9%
Consumer Discretionary 10.4%
Telecommunication Services 10.2%
Consumer Staples 8.6%
Industrials 7.3%
Energy 7.1%
Short-Term Securities* 5.6%
Materials 2.6%
Utilities 1.7%
* Of the 5.6%, 2.1% is due to security lending activity and 3.5% is the Fund's
cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
Sprint
(Diversified Telecommunication Services) 4.5%
NTL (Media) 3.0
Exxon Mobil (Oil & Gas) 2.2
Pfizer (Pharmaceuticals) 1.9
Bank of America (Commercial Banks) 1.7
American Intl Group (Insurance) 1.7
Nextel Communications Cl A
(Wireless Telecommunication Services) 1.7
Citigroup (Diversified Financial Services) 1.6
Dell (Computers & Peripherals) 1.4
Altria Group (Tobacco) 1.3
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Performance Summary
[BAR CHART]
PERFORMANCE COMPARISON
For the year ended July 31, 2005
+13.99% +16.20% +12.56%
+13.99% = AXP Large Cap Equity Fund Class A (excluding sales charge)
+16.20% = Russell 1000(R) Index (unmanaged)
+12.56% = Lipper Large-Cap Core Funds Index
(see "The Fund`s Long-term Performance" for Index descriptions) The performance
information shown represents past performance and is not a guarantee of future
results. The investment return and principal value of your investment will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the
performance information shown. You may obtain performance information current to
the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments.
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 other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (3/28/02) (3/28/02) (3/28/02) (3/4/04) (3/28/02)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at July 31, 2005
1 year +13.99% +7.44% +13.09% +8.09% +13.06% +12.06% +14.64% +14.06%
3 years +10.37% +8.22% +9.58% +8.46% +9.56% +9.56% N/A +10.57%
Since inception +3.12% +1.30% +2.30% +1.44% +2.35% +2.35% +5.73% +3.28%
at June 30, 2005
1 year +5.72% -0.36% +4.94% -0.06% +4.93% +3.93% +6.38% +6.02%
3 years +7.18% +5.09% +6.44% +5.25% +6.43% +6.43% N/A +7.44%
Since inception +2.35% +0.50% +1.56% +0.66% +1.62% +1.62% +3.99% +2.57%
(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
eligible investors only, currently limited to AXP Portfolio Builder Funds,
six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- --------------------------------------------------------------------------------
4 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
AXP Large Cap Equity Fund's Class A shares advanced 13.99%, excluding sales
charge, for the 12 months ended July 31, 2005. The Fund underperformed its
benchmark, the Russell 1000 Index (Russell Index), which increased 16.20% during
the period. The Fund's peer group, the Lipper Large-Cap Core Funds Index, gained
12.56% during the same time frame.
On Oct. 1, 2004, Robert Ewing and Nick Thakore began managing the Fund on a
temporary basis for Doug Chase, the Fund's portfolio manager, who took a leave
of absence. Mr. Chase subsequently decided to leave on Jan. 3, 2005. Mr.
Ewing and Mr. Thakore were named portfolio managers of the Fund. Together they
manage the Fund in conjunction with a team of equity analysts. Below, Mr.
Ewing and Mr. Thakore discuss the Fund's results and positioning for the annual
period ended July 31, 2005.
Q: What factors most significantly affected performance for the period?
A: During the 12-month period, stock selection and sector allocation detracted
from performance relative to the Russell Index. Stock selection within the
information technology and telecommunications sectors helped Fund
performance. However, selection within the financials and consumer
discretionary sectors detracted from performance.
In terms of sector allocation, the industrial sector did not perform well
and as a result, our smaller position helped performance. The Fund's cash
position detracted from performance, as holding cash during the period when
the market was up meant losing out on opportunities in the market for
positive returns. In addition, the Fund's large exposure to the health care
sector hurt performance.
Three of the largest contributors to Fund performance during the period were
Sprint, cell phone maker Nokia and Medco Health Solutions, a health services
company. The Fund's smaller position in Home Depot detracted from
performance during the period as did our smaller position in computer
company Apple, which had strong performance throughout the year. Finally,
our larger position in financial company Fannie Mae hurt performance as the
stock struggled throughout the period.
- --------------------------------------------------------------------------------
5 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > In terms of sector allocation, the industrial sector did
not perform well and as a result, our smaller position helped performance.
[END CALLOUT QUOTE]
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: The annual period encompassed our interim management period and the
subsequent naming as portfolio managers. In January 2005, we began
implementing our current three-sided investment process in which we each
manage approximately one-third of the Fund's assets while our equity analyst
team selects stocks for the remaining one-third of the Fund.
Regarding sector allocation, we lowered our exposure to the health care
sector the most throughout the 12-month period. We sold some holdings in the
consumer staples area and in industrials, where we believe we are late in
the economic expansion and do not think it is prudent to have large
positions in the sector. Finally, we added positions to the
telecommunications services, utilities and consumer discretionary sectors.
Q: How do you plan to manage the Fund in the coming months?
A: We are somewhat cautious given that this is the fourth year of economic
expansion. Though we believe the economy will continue to grow, we think its
growth rate will noticeably decelerate. In the context of this economic
outlook and what we consider to be high equity valuations, we think it is
appropriate to be careful.
Although this Fund essentially uses a fundamentally driven, bottom-up
strategy, we realize how important it is to be cognizant of market trends
and potential risks. We continue to have a more cautious stance, emphasizing
higher quality stocks over lower quality stocks that have high amounts of
leverage or exhibit volatile earnings.
- --------------------------------------------------------------------------------
6 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > We are focusing on larger stocks because they tend to
be more stable companies and have been more attractively valued than mid-cap
and small-cap stocks. [END CALLOUT QUOTE]
One of the portfolio's current themes is increasing the average market cap
for the Fund's holdings. We are focusing on larger stocks because they tend
to be more stable companies and have been more attractively valued than
mid-cap and small-cap stocks. The Fund is designed and set up currently for
more stability and is positioned to benefit from any upcoming periods of
notable growth.
We continue to see benefits from our three-sided approach to managing this
Fund. We oversee all three segments to monitor overall sector weightings and
individual stock positions. We believe that our strategy, which taps
opportunities across multiple sectors and investment styles, will be
instrumental to the Fund's results in the current market environment.
- --------------------------------------------------------------------------------
7 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Large Cap Equity Fund Class A shares (from 4/1/02 to 7/31/05)
as compared to the performance of two widely cited performance indices, the
Russell 1000(R) 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.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments. Also see "Past Performance" in the Fund's
current prospectus.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
July 31, 2005 $0.02 $ -- $0.01 $0.03
July 31, 2004 -- 0.20 0.02 0.22
July 31, 2003 -- -- -- --
July 31, 2002(1) -- -- -- --
(1) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
- --------------------------------------------------------------------------------
8 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP LARGE CAP EQUITY FUND
AXP Large Cap Equity Fund Class A (includes sales charge) $ 9,425 $7,766 $8,546 $ 9,160 $10,441
Russell 1000(R) Index(1) $10,000 $8,014 $8,911 $10,072 $11,704
Lipper Large-Cap Core Funds Index(2) $10,000 $8,108 $8,808 $ 9,690 $10,907
4/1/02 7/02 7/03 7/04 7/05
COMPARATIVE RESULTS
Results at July 31, 2005 Since
1 year 3 years inception(3)
AXP Large Cap Equity Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,744 $12,674 $10,441
Average annual total return +7.44% +8.22% +1.30%
Russell 1000(R) Index(1)
Cumulative value of $10,000 $11,620 $14,606 $11,704
Average annual total return +16.20% +13.46% +4.83%
Lipper Large-Cap Core Funds Index(2)
Cumulative value of $10,000 $11,256 $13,452 $10,907
Average annual total return +12.56% +10.39% +2.63%
Results for other share classes can be found on page 4.
(1) The Russell 1000(R) Index, an unmanaged index, measures the performance of
the 1,000 largest companies in the Russell 3000 Index, and represents
approximately 92% of the total market capitalization of the Russell 3000
Index.
(2) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
(3) Fund data is from March 28, 2002. Russell 1000 Index and Lipper peer group
data is from April 1, 2002.
- --------------------------------------------------------------------------------
9 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Investments in Securities
AXP Large Cap Equity Fund
July 31, 2005
(Percentages represent value of investments compared to net assets)
Common Stocks (96.8%)
Issuer Shares Value(a)
Aerospace & Defense (3.1%)
Boeing 132,630 $8,754,907
Empresa Brasileira de
Aeronautica ADR 119,302(c) 3,858,227
General Dynamics 12,727 1,466,023
Goodrich 116,774 5,166,082
Honeywell Intl 210,201 8,256,695
Lockheed Martin 137,816 8,599,718
Northrop Grumman 80,844 4,482,800
United Technologies 158,889 8,055,672
Total 48,640,124
Auto Components (0.1%)
Johnson Controls 8,639 496,224
Lear 11,436 489,118
Total 985,342
Automobiles (0.2%)
Ford Motor 85,134 914,339
General Motors 64,760(d) 2,384,463
Harley-Davidson 13,137 698,757
Total 3,997,559
Beverages (1.0%)
Coca-Cola 18,776 821,638
Coca-Cola Enterprises 42,291 993,839
PepsiCo 245,882 13,407,945
Total 15,223,422
Biotechnology (1.5%)
Amgen 162,488(b) 12,958,418
Biogen Idec 68,514(b) 2,691,915
Genentech 65,830(b) 5,880,594
Gilead Sciences 53,201(b) 2,383,937
Total 23,914,864
Building Products (0.2%)
American Standard Companies 27,504 1,217,877
Masco 44,839 1,520,491
Total 2,738,368
Common Stocks (continued)
Issuer Shares Value(a)
Capital Markets (2.8%)
Bank of New York 107,433 $3,306,788
E*TRADE Financial 107,034(b) 1,660,097
Franklin Resources 74,301 6,005,007
Investors Financial Services 207,410 7,139,052
Legg Mason 11,332 1,157,564
Lehman Brothers Holdings 50,518 5,310,957
Merrill Lynch & Co 52,867 3,107,522
Morgan Stanley 191,367 10,152,019
National Financial Partners 10,574 478,474
Nomura Holdings 97,200(c) 1,150,616
State Street 88,509 4,402,438
Total 43,870,534
Chemicals (1.1%)
Dow Chemical 195,329 9,366,026
Eastman Chemical 18,408 1,019,619
EI du Pont de Nemours & Co 41,999 1,792,517
Lyondell Chemical 46,581 1,301,473
Monsanto 54,927 3,700,432
RPM Intl 27,333 512,494
Total 17,692,561
Commercial Banks (4.3%)
Bank of America 632,640 27,583,104
Commerce Bancorp 108,171(d) 3,670,242
Fifth Third Bancorp 26,291 1,133,142
ICICI Bank ADR 38,269(c) 1,010,684
PNC Financial Services Group 82,245 4,508,671
Regions Financial 23,288 783,408
US Bancorp 160,442 4,822,887
Wachovia 199,329 10,042,195
Wells Fargo & Co 230,404 14,132,981
Western Alliance Bancorp 304(b) 9,394
Total 67,696,708
Commercial Services & Supplies (1.1%)
Avery Dennison 20,285 1,149,551
Career Education 15,200(b) 589,608
Cendant 693,946 14,822,687
Total 16,561,846
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Communications Equipment (2.6%)
CIENA 658,925(b) $1,475,992
Cisco Systems 606,218(b) 11,609,075
Corning 94,665(b) 1,803,368
Motorola 291,050 6,164,439
Nokia ADR 1,064,288(c) 16,975,394
QUALCOMM 55,709 2,199,948
Total 40,228,216
Computers & Peripherals (3.7%)
Brocade Communications Systems 330,190(b) 1,479,251
Dell 543,394(b) 21,991,156
EMC 626,589(b) 8,578,003
Hewlett-Packard 519,650 12,793,783
Intl Business Machines 151,477 12,642,270
Total 57,484,463
Consumer Finance (0.9%)
Capital One Financial 98,291 8,109,007
First Marblehead 41,434(b) 1,439,832
MBNA 185,929 4,677,974
Total 14,226,813
Containers & Packaging (0.1%)
Temple-Inland 57,494 2,287,686
Distributors (--%)
Genuine Parts 8,142 372,822
Diversified Financial Services (6.8%)
Citigroup 595,194 25,890,939
Consumer Discretionary Select
Sector SPDR Fund 148,564 5,149,228
Energy Select Sector SPDR Fund 285,008(d) 13,566,381
Health Care Select Sector
SPDR Fund 276,173 8,762,969
Industrial Select Sector
SPDR Fund 291,477(d) 8,898,793
iShares Dow Jones US
Healthcare Sector Index Fund 141,848 8,916,565
JPMorgan Chase & Co 414,710 14,572,909
Materials Select Sector
SPDR Fund 332,618(d) 9,526,180
Utilities Select Sector
SPDR Fund 348,316(d) 11,240,157
Total 106,524,121
Common Stocks (continued)
Issuer Shares Value(a)
Diversified Telecommunication Services (7.7%)
ALLTEL 93,518 $6,218,947
BellSouth 188,312 5,197,411
Citizens Communications 39,163 514,602
KT ADR 63,547(c) 1,406,931
MCI 138,857 3,543,631
SBC Communications 581,756 14,223,934
Sprint 2,659,750 71,547,274
Telewest Global 601,498(b,c) 13,437,465
Verizon Communications 107,110 3,666,375
Total 119,756,570
Electric Utilities (1.2%)
Entergy 42,775 3,333,884
Exelon 113,730 6,086,830
FPL Group 37,773 1,628,772
PPL 27,194 1,674,607
Southern 120,771 4,225,777
TXU 9,907 858,342
Xcel Energy 49,501 960,814
Total 18,769,026
Electrical Equipment (0.1%)
Emerson Electric 19,489 1,282,376
Electronic Equipment & Instruments (0.2%)
Flextronics Intl 177,295(b,c) 2,400,575
Solectron 418,329(b) 1,606,383
Total 4,006,958
Energy Equipment & Services (1.0%)
Cooper Cameron 18,622(b) 1,321,790
Halliburton 86,399 4,842,663
Schlumberger 48,563 4,066,666
Transocean 49,698(b) 2,804,458
Weatherford Intl 31,022(b) 1,963,072
Total 14,998,649
Food & Staples Retailing (1.2%)
CVS 121,638 3,774,427
Wal-Mart Stores 291,079 14,364,749
Total 18,139,176
Food Products (0.8%)
General Mills 50,591 2,398,013
Kellogg 235,450 10,668,240
Total 13,066,253
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Gas Utilities (0.1%)
ONEOK 48,928 $1,710,034
Health Care Equipment & Supplies (1.6%)
Alcon 9,300(c) 1,065,315
Baxter Intl 189,390 7,437,346
Boston Scientific 84,706(b) 2,452,239
Guidant 99,243 6,827,918
Hospira 40,635(b) 1,554,289
Medtronic 102,643 5,536,563
Total 24,873,670
Health Care Providers & Services (2.8%)
Aetna 21,998 1,702,645
AmerisourceBergen 16,474 1,182,668
Cardinal Health 170,032 10,130,507
CIGNA 16,885 1,802,474
HCA 242,155 11,926,134
HealthSouth 196,272(b) 1,052,018
Magellan Health Services 69,925(b) 2,504,714
McKesson 21,072 948,240
Medco Health Solutions 76,317(b) 3,696,795
UnitedHealth Group 157,393 8,231,654
WellPoint 6,526(b) 461,649
Total 43,639,498
Hotels, Restaurants & Leisure (0.2%)
Applebee's Intl 64,208 1,702,154
GTECH Holdings 32,726 980,471
Total 2,682,625
Household Durables (0.4%)
Centex 5,650 417,987
Fortune Brands 6,614 625,354
Harman Intl Inds 1,881 161,672
Leggett & Platt 21,366 540,346
Pulte Homes 5,796 542,622
Sony 53,100(c) 1,752,522
Tempur-Pedic Intl 164,977(b) 2,839,254
Total 6,879,757
Household Products (2.8%)
Colgate-Palmolive 98,478 5,213,425
Procter & Gamble 360,305 20,043,767
Spectrum Brands 610,210(b) 18,916,510
Total 44,173,702
Common Stocks (continued)
Issuer Shares Value(a)
Industrial Conglomerates (2.5%)
3M 20,624 $1,546,800
General Electric 578,112 19,944,864
Tyco Intl 554,264(c) 16,888,424
Total 38,380,088
Insurance (3.7%)
ACE 243,468(c) 11,250,656
AFLAC 47,433 2,139,228
Allstate 20,165 1,235,308
American Intl Group 455,744 27,435,789
Assurant 21,150 781,493
Chubb 64,770 5,752,871
Endurance Specialty Holdings 36,019(c) 1,404,741
First American 27,136 1,192,627
Hartford Financial Services Group 33,324 2,684,915
Montpelier Re Holdings 12,101(c) 434,668
State Auto Financial 77,788 2,446,433
United America Indemnity Cl A 9,883(b,c) 181,155
Total 56,939,884
Internet & Catalog Retail (0.3%)
eBay 115,102(b) 4,808,962
Internet Software & Services (0.8%)
Google Cl A 34,413(b) 9,902,685
Yahoo! 64,892(b) 2,163,499
Total 12,066,184
IT Services (0.6%)
Accenture Cl A 65,124(b,c) 1,630,705
Affiliated Computer Services Cl A 65,566(b) 3,276,333
Automatic Data Processing 21,183 940,737
First Data 7,613 313,199
Infosys Technologies ADR 8,257(c) 587,733
Ness Technologies 42,993(b,c) 429,930
Paychex 36,092 1,259,972
Satyam Computer Services ADR 20,765(c) 593,464
Total 9,032,073
Leisure Equipment & Products (0.1%)
Mattel 51,659 963,440
Machinery (0.5%)
Caterpillar 62,655 3,377,731
Illinois Tool Works 23,710 2,030,762
Ingersoll-Rand Cl A 11,944(c) 933,662
ITT Inds 8,804 936,746
Total 7,278,901
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Media (6.9%)
Clear Channel Communications 25,453 $830,786
Comcast Cl A 339,366(b) 10,428,717
Comcast Special Cl A 105,129(b) 3,153,870
EchoStar Communications Cl A 32,363 929,465
Gannett 12,256 894,198
Liberty Global Cl A 46,713(b) 2,216,065
Liberty Media Cl A 482,881(b) 4,244,524
McGraw-Hill Companies 17,243 793,350
News Corp Cl A 120,527 1,974,232
NTL 712,427(b) 47,469,011
Omnicom Group 8,406 713,417
Reader's Digest Assn 33,909 550,682
Time Warner 361,370(b) 6,150,517
Tribune 72,919 2,661,544
Univision Communications Cl A 14,712(b) 416,055
Viacom Cl B 231,973 7,768,776
Vivendi Universal ADR 346,059(c) 10,997,755
Walt Disney 208,297 5,340,735
Total 107,533,699
Metals & Mining (1.0%)
Alcan 31,738(c) 1,072,110
Alcoa 79,085 2,218,334
Barrick Gold 3,921(c) 96,065
Coeur d'Alene Mines 804,721(b) 2,856,760
Glamis Gold 48,447(b,c) 846,369
Harmony Gold Mining ADR 72,268(c) 592,598
Kinross Gold 111,924(b,c) 622,297
Newmont Mining 168,531 6,328,338
PAN American Silver 6,200(b,c) 98,270
Stillwater Mining 48,183(b) 393,173
Total 15,124,314
Multi-Utilities & Unregulated Power (0.5%)
Dominion Resources 77,642 5,734,638
Duke Energy 43,153 1,274,740
Total 7,009,378
Multiline Retail (1.2%)
Dollar General 30,530 620,370
Federated Dept Stores 39,067 2,964,013
JC Penney 83,224 4,672,195
Kohl's 96,668(b) 5,447,242
Target 98,138 5,765,608
Total 19,469,428
Office Electronics (0.1%)
Xerox 103,982(b) 1,373,602
Common Stocks (continued)
Issuer Shares Value(a)
Oil & Gas (6.3%)
Anadarko Petroleum 108,326 $9,570,602
BP ADR 70,751(c) 4,661,076
Burlington Resources 10,437 669,116
Chevron 293,190 17,007,952
ConocoPhillips 320,951 20,088,323
Devon Energy 38,197 2,142,470
Exxon Mobil 588,282 34,561,568
Marathon Oil 32,585 1,901,661
Newfield Exploration 52,031(b) 2,210,797
Occidental Petroleum 16,023 1,318,372
Royal Dutch Shell Cl A ADR 21,960(b,c) 1,345,709
Valero Energy 24,935 2,064,119
Total 97,541,765
Paper & Forest Products (0.4%)
Bowater 50,701 1,714,201
Intl Paper 75,200 2,376,320
Weyerhaeuser 24,409 1,683,733
Total 5,774,254
Personal Products (1.6%)
Avon Products 189,783 6,207,802
Gillette 346,990 18,622,953
Total 24,830,755
Pharmaceuticals (6.3%)
Abbott Laboratories 156,775 7,310,418
AstraZeneca 19,021(c) 859,585
Bristol-Myers Squibb 268,789 6,714,349
Eli Lilly & Co 51,687 2,911,012
GlaxoSmithKline ADR 59,322(c) 2,814,236
IVAX 200(b) 5,096
Johnson & Johnson 281,978 18,035,313
Merck & Co 179,853 5,586,234
Novartis ADR 146,528(c) 7,137,379
Pfizer 1,128,684 29,910,125
Roche Holding 32,920(c) 4,464,695
Schering-Plough 259,205 5,396,648
Wyeth 141,770 6,485,978
Total 97,631,068
Real Estate Investment Trust (0.6%)
Apartment Investment
& Management Cl A 31,892 1,403,248
Equity Office Properties Trust 100,035 3,546,240
HomeBanc 360,044 3,261,999
Jer Investors Trust 30,271(b) 559,408
Total 8,770,895
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
13 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Road & Rail (0.1%)
Norfolk Southern 24,962 $928,836
Semiconductors & Semiconductor Equipment (3.5%)
Analog Devices 72,157 2,828,554
Applied Materials 68,848 1,270,934
ASML Holding 31,984(b,c) 562,918
ATI Technologies 42,191(b,c) 531,185
Broadcom Cl A 108,532(b) 4,641,914
Credence Systems 69,912(b) 761,342
Cypress Semiconductor 157,828(b) 2,266,410
Freescale Semiconductor Cl A 292,496(b) 7,464,498
Freescale Semiconductor Cl B 143,448(b) 3,693,786
Intel 719,479 19,526,660
Linear Technology 47,007 1,826,692
Maxim Integrated Products 15,453 647,017
MEMC Electronic Materials 104,056(b) 1,767,911
Texas Instruments 228,088 7,244,075
Total 55,033,896
Software (2.5%)
Adobe Systems 3,883 115,092
Cadence Design Systems 118,643(b) 1,908,966
Citrix Systems 4,510(b) 107,473
Compuware 19,746(b) 166,459
Electronic Arts 39,090(b) 2,251,584
Macromedia 12,986(b) 521,388
Mercury Interactive 64,752(b) 2,549,286
Microsoft 755,127 19,338,802
Novell 43,447(b) 264,158
Oracle 471,834(b) 6,407,506
Siebel Systems 309,488 2,599,699
Symantec 147,649(b) 3,243,849
Total 39,474,262
Specialty Retail (1.1%)
AutoZone 3,207(b) 312,490
Bed Bath & Beyond 14,246(b) 653,891
Best Buy 29,035 2,224,081
Circuit City Stores 12,197 222,595
Gap 51,591 1,089,086
Home Depot 162,683 7,078,338
Lowe's Companies 34,159 2,262,009
PETCO Animal Supplies 61,558(b) 1,715,621
Staples 36,218 824,684
Total 16,382,795
Textiles, Apparel & Luxury Goods (0.1%)
Coach 14,525(b) 509,973
Nike Cl B 12,580 1,054,204
Total 1,564,177
Common Stocks (continued)
Issuer Shares Value(a)
Thrifts & Mortgage Finance (2.3%)
BankAtlantic Bancorp Cl A 23,957 $429,789
Countrywide Financial 352,161 12,677,796
Fannie Mae 195,176 10,902,531
Freddie Mac 149,968 9,489,975
Washington Mutual 36,843 1,565,091
Total 35,065,182
Tobacco (1.4%)
Altria Group 320,988 21,493,356
Wireless Telecommunication Services (2.8%)
Hutchison Telecommunications
Intl ADR 105,422(b,c) 1,796,391
Millicom Intl Cellular 63,718(b,c) 1,353,370
NeuStar Cl A 19,532(b) 546,896
Nextel Communications Cl A 778,974(b) 27,108,296
Orascom Telecom GDR 93,426(c) 4,542,372
Turkcell Iletisim Hizmetleri ADR 83,247(c) 1,145,479
Vodafone Group ADR 267,704(c) 6,914,794
Total 43,407,598
Total Common Stocks
(Cost: $1,406,369,997) $1,504,302,535
Short-Term Securities (5.8%)(e)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. Government Agency (1.0%)
Federal Home Loan Bank Disc Nt
08-19-05 3.21% $15,000,000(f) $14,972,001
Commercial Paper (4.8%)
Chariot Funding LLC
08-26-05 3.45 15,000,000 14,959,867
Citigroup Funding
08-01-05 3.31 19,800,000 19,794,538
FCAR Owner Trust I
08-04-05 3.27 10,000,000 9,994,550
Natl Australia Funding
08-08-05 3.27 10,000,000(f) 9,990,917
Sheffield Receivables
08-22-05 3.41 20,000,000(f) 19,954,666
Total 74,694,538
Total Short-Term Securities
(Cost: $89,674,831) $89,666,539
Total Investments in Securities
(Cost: $1,496,044,828)(g) $1,593,969,074
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
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. At July 31, 2005, the
value of foreign securities represented 8.4% of net assets.
(d) At July 31, 2005, security was partially or fully on loan. See Note 5 to
the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 2.2% of net assets. See Note 5 to the
financial statements. 3.6% of net assets is the Fund's cash equivalent
position.
(f) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the board. These securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At July 31, 2005, the value of these securities
amounted to $44,917,584 or 2.9% of net assets.
(g) At July 31, 2005, the cost of securities for federal income tax purposes
was $1,524,155,705 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $ 98,862,905
Unrealized depreciation (29,049,536)
-----------
Net unrealized appreciation $ 69,813,369
------------
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.riversource.com/investments.
- --------------------------------------------------------------------------------
15 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Large Cap Equity Fund
July 31, 2005
Assets
Investments in securities, at value (Note 1)*
(identified cost $1,496,044,828) $1,593,969,074
Capital shares receivable 183,393
Expense reimbursement receivable from
Ameriprise Financial (formerly AEFC) 854,035
Dividends and accrued interest receivable 1,474,567
Receivable for investment securities sold 25,448,033
----------
Total assets 1,621,929,102
-------------
Liabilities
Disbursements in excess of cash on demand deposit 574,129
Capital shares payable 233,627
Payable for investment securities purchased 32,555,009
Payable upon return of securities loaned (Note 5) 34,147,000
Accrued investment management services fee 25,327
Accrued distribution fee 20,384
Accrued service fee 1
Accrued transfer agency fee 5,066
Accrued administrative services fee 2,066
Other accrued expenses 290,046
-------
Total liabilities 67,852,655
----------
Net assets applicable to outstanding capital stock $1,554,076,447
==============
Represented by
Capital stock -- $.01 par value (Note 1) $ 2,973,060
Additional paid-in capital 2,430,766,764
Undistributed net investment income 4,353,601
Accumulated net realized gain (loss) (Note 8) (981,941,224)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 97,924,246
----------
Total -- representing net assets applicable to outstanding capital stock $1,554,076,447
==============
Net assets applicable to outstanding shares: Class A $1,030,109,387
Class B $ 471,864,336
Class C $ 9,284,115
Class I $ 42,610,172
Class Y $ 208,437
Net asset value per share of outstanding capital stock: Class A shares 195,824,050 $ 5.26
Class B shares 91,616,485 $ 5.15
Class C shares 1,799,299 $ 5.16
Class I shares 8,026,676 $ 5.31
Class Y shares 39,442 $ 5.28
------ --------------
* Including securities on loan, at value (Note 5) $ 32,867,866
--------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Statement of operations
AXP Large Cap Equity Fund
Year ended July 31, 2005
Investment income
Income:
Dividends $ 31,753,996
Interest 871,611
Fee income from securities lending (Note 5) 227,206
Less foreign taxes withheld (304,627)
--------
Total income 32,548,186
----------
Expenses (Note 2):
Investment management services fee 9,680,873
Distribution fee
Class A 2,866,767
Class B 5,272,525
Class C 101,520
Transfer agency fee 3,572,606
Incremental transfer agency fee
Class A 253,892
Class B 214,592
Class C 4,181
Service fee -- Class Y 3,664
Administrative services fees and expenses 860,387
Compensation of board members 17,545
Custodian fees 296,060
Printing and postage 626,976
Registration fees 42,760
Audit fees 30,000
Other 67,503
------
Total expenses 23,911,851
Expenses waived/reimbursed by Ameriprise Financial (formerly AEFC) (Note 2) (859,581)
--------
23,052,270
Earnings credits on cash balances (Note 2) (59,729)
-------
Total net expenses 22,992,541
----------
Investment income (loss) -- net 9,555,645
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 81,303,618
Foreign currency transactions (8,433)
------
Net realized gain (loss) on investments 81,295,185
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 128,747,672
-----------
Net gain (loss) on investments and foreign currencies 210,042,857
-----------
Net increase (decrease) in net assets resulting from operations $219,598,502
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP Large Cap Equity Fund
Year ended July 31, 2005 2004
Operations and distributions
Investment income (loss) -- net $ 9,555,645 $ 401,719
Net realized gain (loss) on investments 81,295,185 12,441,166
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 128,747,672 (66,709,001)
----------- -----------
Net increase (decrease) in net assets resulting from operations 219,598,502 (53,866,116)
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (5,100,612) (190,447)
Class I (205,016) --
Class Y (42,646) (99)
Net realized gain
Class A (1,579,848) (10,249,150)
Class B (746,323) (4,251,044)
Class C (14,219) (267,748)
Class I (38,374) (411,555)
Class Y (10,290) (29,079)
------- -------
Total distributions (7,737,328) (15,399,122)
---------- -----------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 72,128,244 303,658,868
Class B shares 33,166,584 83,846,079
Class C shares 1,679,423 5,258,048
Class I shares 35,280,636 20,944,518
Class Y shares 569,613 8,142,956
Fund merger (Note 7)
Class A shares -- 942,709,419
Class B shares -- 589,683,135
Class C shares -- 4,576,296
Class Y shares -- 11,200
Reinvestment of distributions at net asset value
Class A shares 6,565,939 10,345,503
Class B shares 737,490 4,192,636
Class C shares 13,859 257,935
Class I shares 243,352 411,300
Class Y shares 52,860 28,728
Payments for redemptions
Class A shares (438,987,389) (50,748,072)
Class B shares (Note 2) (197,466,065) (115,514,441)
Class C shares (Note 2) (4,548,807) (911,625)
Class I shares (11,054,445) (5,803,591)
Class Y shares (8,498,540) (413,179)
---------- --------
Increase (decrease) in net assets from capital share transactions (510,117,246) 1,800,675,713
------------ -------------
Total increase (decrease) in net assets (298,256,072) 1,731,410,475
Net assets at beginning of year 1,852,332,519 120,922,044
------------- -----------
Net assets at end of year $1,554,076,447 $1,852,332,519
============== ==============
Undistributed net investment income $ 4,353,601 $ 209,548
-------------- --------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Notes to Financial Statements
AXP Large Cap Equity 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 invests primarily in equity securities of
companies with a market capitalization greater than $5 billion at the time of
purchase.
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 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.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July 31, 2005, Ameriprise Financial, Inc.
(Ameriprise Financial) (formerly American Express Financial Corporation) and the
AXP Portfolio Builder Funds owned 100% of Class I shares, which represents 2.74%
of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees 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.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds,
Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there is a reasonably high degree of certainty that
the effect of the development or event has
- --------------------------------------------------------------------------------
19 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
actually caused the closing price to no longer reflect the actual value, the
closing prices, as determined at the close of the applicable foreign market, may
be adjusted to reflect the fair value of the affected foreign securities as of
the close of the New York Stock Exchange. Significant events include material
movements in the U.S. securities markets prior to the opening of foreign markets
on the following trading day. FVP results in an estimated price that reasonably
reflects the current market conditions in order to value the portfolio holdings
such that shareholder transactions receive a fair net asset value. 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 Fund 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 Fund 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 Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund 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
Fund pays a premium whether or not the option is exercised. The Fund 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 Fund 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 Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund 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 Fund 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 Fund 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 Fund recognizes a realized gain or loss when the contract is closed
or expires.
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20 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
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 Fund may enter into forward foreign currency exchange contracts for
operational purposes. The net U.S. dollar value of foreign currency underlying
all contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the credit
risk that the other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
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 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.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $63,318
and accumulated net realized loss has been decreased by $110,548 resulting in a
net reclassification adjustment to decrease paid-in capital by $47,230.
- --------------------------------------------------------------------------------
21 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
The tax character of distributions paid for the years indicated is as follows:
Year ended July 31, 2005 2004
Class A
Distributions paid from:
Ordinary income $5,588,051 $9,388,916
Long-term capital gain 1,092,409 1,050,681
Class B
Distributions paid from:
Ordinary income 230,260 3,818,774
Long-term capital gain 516,063 432,270
Class C
Distributions paid from:
Ordinary income 4,387 240,898
Long-term capital gain 9,832 26,850
Class I*
Distributions paid from:
Ordinary income 216,856 350,249
Long-term capital gain 26,534 61,306
Class Y
Distributions paid from:
Ordinary income 45,820 25,037
Long-term capital gain 7,116 4,141
* Inception date is March 4, 2004.
At July 31, 2005, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income $ 4,346,177
Accumulated long-term gain (loss) $(953,822,923)
Unrealized appreciation (depreciation) $ 69,813,369
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.
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, market discount and original issue discount
using the effective interest method, is accrued daily.
- --------------------------------------------------------------------------------
22 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. Prior to Oct. 1, 2005, investment management services were provided by
Ameriprise Financial. The management fee is a percentage of the Fund's average
daily net assets that declines from 0.60% to 0.48% annually as the Fund's assets
increase. 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 the
Fund to the Lipper Large-Cap Core Funds Index. In certain circumstances, the
board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment decreased the fee by $414,150 for the year ended July 31,
2005.
Under the current Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
the Fund's average daily net assets that declines from 0.05% to 0.02% annually
as the Fund's assets increase. It is expected that the fee schedule to the
agreement will be revised effective Oct. 1, 2005. Under the new agreement, the
fee percentage of the Fund's average daily net assets will decline from 0.06% to
0.03% annually as the Fund's assets increase. 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 Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(formerly American Express Client Service Corporation) (the Transfer Agent)
maintains shareholder accounts and records. The Fund pays the Transfer Agent 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
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
Beginning May 20, 2005, the Transfer Agent implemented an annual closed account
fee of $5 per inactive account, charged on a pro rata basis for 12 months from
the date the account becomes inactive. These fees were insignificant for the
year ended July 31, 2005 and are included in the transfer agency fees on the
statement of operations.
- --------------------------------------------------------------------------------
23 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
The Fund has agreements with Ameriprise Financial Services, Inc. (formerly
American Express Financial Advisors Inc.) (the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, 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
$1,317,619 for Class A, $379,665 for Class B and $1,904 for Class C for the year
ended July 31, 2005.
For the year ended July 31, 2005, Ameriprise Financial and its affiliates waived
certain fees and expenses to 1.11% for Class A, 1.88% for Class B, 1.88% for
Class C, 0.65% for Class I and 0.90% for Class Y. Previously, Ameriprise
Financial had contractually agreed to reduce its management fee by 0.05% through
July 31, 2005. The agreement expired on July 31, 2005 and will not be extended.
During the year ended July 31, 2005, the Fund's custodian and transfer agency
fees were reduced by $59,729 as a result of earnings credits from overnight cash
balances. The Fund also pays custodian fees to Ameriprise Trust Company
(formerly American Express Trust Company), an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $2,148,464,097 and $2,681,141,359, respectively, for the
year ended July 31, 2005. Realized gains and losses are determined on an
identified cost basis.
Brokerage clearing fees paid to brokers affiliated with Ameriprise Financial
were $10,214 for the year ended July 31, 2005.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2005
Class A Class B Class C Class I Class Y
Sold 14,871,934 6,952,759 351,747 7,088,316 117,456
Issued for reinvested distributions 1,331,830 152,060 2,852 49,063 10,679
Redeemed (89,223,978) (40,853,895) (942,228) (2,204,982) (1,698,241)
----------- ----------- -------- ---------- ----------
Net increase (decrease) (73,020,214) (33,749,076) (587,629) 4,932,397 (1,570,106)
----------- ----------- -------- --------- ----------
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 63,776,788 17,608,704 1,105,201 4,261,085 1,674,757
Fund merger 195,139,277 124,164,313 961,940 -- 2,310
Issued for reinvested distributions 2,127,178 875,289 53,736 83,939 5,876
Redeemed (10,573,028) (25,212,059) (190,776) (1,250,745) (86,872)
----------- ----------- -------- ---------- -------
Net increase (decrease) 250,470,215 117,436,247 1,930,101 3,094,279 1,596,071
----------- ----------- --------- --------- ---------
* Inception date is March 4, 2004.
- --------------------------------------------------------------------------------
24 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
5. LENDING OF PORTFOLIO SECURITIES
At July 31, 2005, securities valued at $32,867,866 were on loan to brokers. For
collateral, the Fund received $34,147,000 in cash. Cash collateral received is
invested in short-term securities, which are included in the short-term section
of the "Investments in securities." Income from securities lending amounted to
$227,206 for the year ended July 31, 2005. The risks to the Fund of securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due.
6. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective
Rate plus 0.50% or 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 $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended July 31, 2005.
7. FUND MERGER
At the close of business on June 25, 2004, AXP Large Cap Equity Fund acquired
the assets and assumed the identified liabilities of AXP Blue Chip Advantage
Fund and AXP Research Opportunities Fund. This reorganization was completed
after shareholders approved the plan on June 9, 2004.
The aggregate net assets of AXP Large Cap Equity Fund immediately before the
acquisition were $404,994,552 and the combined net assets immediately after the
acquisition were $1,941,974,602.
The merger was accomplished by a tax-free exchange of the following:
Shares Value
AXP Blue Chip Advantage Fund 171,778,024 $1,331,930,990
AXP Research Opportunities Fund 45,469,648 205,049,060
In exchange for the AXP Blue Chip Advantage Fund and AXP Research Opportunities
Fund shares and net assets, AXP Large Cap Equity Fund issued the following
number of shares:
Shares
Class A 195,139,277
Class B 124,164,313
Class C 961,940
Class Y 2,310
- --------------------------------------------------------------------------------
25 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
AXP Blue Chip Advantage Fund's and AXP Research Opportunities Fund's net assets
after adjustments for any permanent book-to-tax differences at the merger date
were as follows, which include the following amounts of capital stock,
unrealized appreciation and accumulated net realized loss.
Total Capital Unrealized Accumulated
net assets stock appreciation net realized loss
AXP Blue Chip Advantage Fund $1,331,930,990 $2,300,150,539 $20,542,743 $(988,762,292)
AXP Research Opportunities Fund 205,049,060 265,819,324 9,544,965 (70,315,229)
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$953,822,923 as of July 31, 2005, that if not offset by capital gains will
expire as follows:
2008 2009 2010 2011
$506,643,917 $416,711,846 $20,988,174 $9,478,986
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.
- --------------------------------------------------------------------------------
26 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
9. 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, 2005 2004 2003 2002(b)
Net asset value, beginning of period $4.64 $4.53 $4.11 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .04 .01 .01 --
Net gains (losses) (both realized and unrealized) .61 .32 .41 (.89)
----- ----- ----- -----
Total from investment operations .65 .33 .42 (.89)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.02) -- -- --
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Total distributions (.03) (.22) -- --
----- ----- ----- -----
Net asset value, end of period $5.26 $4.64 $4.53 $4.11
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $1,030 $1,248 $83 $11
Ratio of expenses to average daily net assets(c),(d) 1.11% 1.20% 1.25% 1.25%(e)
Ratio of net investment income (loss) to average daily net assets .79% .36% .24% (.11%)(e)
Portfolio turnover rate (excluding short-term securities) 128% 99% 135% 88%
Total return(f) 13.99% 7.19% 10.22% (17.80%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class A
would have been 1.16%, 1.23%, 1.84% and 5.12% for the periods ended July
31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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27 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002(b)
Net asset value, beginning of period $4.56 $4.48 $4.10 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) -- (.01) (.01) (.01)
Net gains (losses) (both realized and unrealized) .60 .31 .39 (.89)
----- ----- ----- -----
Total from investment operations .60 .30 .38 (.90)
----- ----- ----- -----
Less distributions:
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Net asset value, end of period $5.15 $4.56 $4.48 $4.10
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $472 $572 $36 $5
Ratio of expenses to average daily net assets(c),(d) 1.88% 1.95% 2.01% 2.01%(e)
Ratio of net investment income (loss) to average daily net assets .02% (.46%) (.52%) (.86%)(e)
Portfolio turnover rate (excluding short-term securities) 128% 99% 135% 88%
Total return(f) 13.09% 6.48% 9.27% (18.00%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class B
would have been 1.93%, 1.98%, 2.60% and 5.88% for the periods ended July
31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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28 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002(b)
Net asset value, beginning of period $4.57 $4.49 $4.10 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) -- (.01) (.01) (.01)
Net gains (losses) (both realized and unrealized) .60 .31 .40 (.89)
----- ----- ----- -----
Total from investment operations .60 .30 .39 (.90)
----- ----- ----- -----
Less distributions:
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Net asset value, end of period $5.16 $4.57 $4.49 $4.10
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $9 $11 $2 $--
Ratio of expenses to average daily net assets(c),(d) 1.88% 1.98% 2.01% 2.01%(e)
Ratio of net investment income (loss) to average daily net assets .02% (.43%) (.53%) (.92%)(e)
Portfolio turnover rate (excluding short-term securities) 128% 99% 135% 88%
Total return(f) 13.06% 6.46% 9.51% (18.00%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class C
would have been 1.93%, 2.01%, 2.60% and 5.88% for the periods ended July
31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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29 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004(b)
Net asset value, beginning of period $4.67 $5.08
----- -----
Income from investment operations:
Net investment income (loss) .05 --
Net gains (losses) (both realized and unrealized) .63 (.28)
----- -----
Total from investment operations .68 (.28)
----- -----
Less distributions:
Dividends from net investment income (.03) --
Distributions from realized gains (.01) (.13)
----- -----
Total distributions (.04) (.13)
----- -----
Net asset value, end of period $5.31 $4.67
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $43 $14
Ratio of expenses to average daily net assets(c),(d) .65% .71%(e)
Ratio of net investment income (loss) to average daily net assets 1.24% .74%(e)
Portfolio turnover rate (excluding short-term securities) 128% 99%
Total return(f) 14.64% (5.65%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class I
would have been 0.70% and 0.72% for the periods ended July 31, 2005 and
2004, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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30 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002(b)
Net asset value, beginning of period $4.66 $4.54 $4.11 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .04 .01 .01 --
Net gains (losses) (both realized and unrealized) .61 .34 .42 (.89)
----- ----- ----- -----
Total from investment operations .65 .35 .43 (.89)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.02) (.01) -- --
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Total distributions (.03) (.23) -- --
----- ----- ----- -----
Net asset value, end of period $5.28 $4.66 $4.54 $4.11
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $8 $-- $--
Ratio of expenses to average daily net assets(c),(d) .90% 1.00% 1.07% 1.07%(e)
Ratio of net investment income (loss) to average daily net assets 1.08% .50% .45% .09%(e)
Portfolio turnover rate (excluding short-term securities) 128% 99% 135% 88%
Total return(f) 14.06% 7.44% 10.46% (17.80%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class Y
would have been 0.95%, 1.03%, 1.66% and 4.94% for the periods ended July
31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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31 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GROWTH SERIES, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of AXP Large Cap Equity Fund (a
series of AXP Growth Series, Inc.) as of July 31, 2005, 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, 2005, and the financial
highlights for each of the years in the three-year period ended July 31, 2005
and for the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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. Our procedures included confirmation of
securities owned as of July 31, 2005, 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Large Cap Equity Fund as of July 31, 2005, 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 U.S. generally accepted
accounting principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2005
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32 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
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 Large Cap Equity Fund
Fiscal year ended July 31, 2005
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 91.96%
Dividends Received Deduction for corporations 91.46%
Payable date Per share
Dec. 20, 2004 $0.02282
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.00446
Total distributions $0.02728
Class B
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 91.96%
Dividends Received Deduction for corporations 91.46%
Payable date Per share
Dec. 20, 2004 $0.00199
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.00446
Total distributions $0.00645
Class C
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 91.96%
Dividends Received Deduction for corporations 91.46%
Payable date Per share
Dec. 20, 2004 $0.00199
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.00446
Total distributions $0.00645
- --------------------------------------------------------------------------------
33 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class I
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 91.96%
Dividends Received Deduction for corporations 91.46%
Payable date Per share
Dec. 20, 2004 $0.03645
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.00446
Total distributions $0.04091
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 91.96%
Dividends Received Deduction for corporations 91.46%
Payable date Per share
Dec. 20, 2004 $0.02872
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.00446
Total distributions $0.03318
- --------------------------------------------------------------------------------
34 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended July 31, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
35 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Feb. 1, 2005 July 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,058.30 $5.75(c) 1.14%(d)
Hypothetical (5% return before expenses) $1,000 $1,018.93 $5.64(c) 1.14%(d)
Class B
Actual(b) $1,000 $1,055.30 $9.63(c) 1.91%(d)
Hypothetical (5% return before expenses) $1,000 $1,015.15 $9.44(c) 1.91%(d)
Class C
Actual(b) $1,000 $1,055.20 $9.63(c) 1.91%(d)
Hypothetical (5% return before expenses) $1,000 $1,015.15 $9.44(c) 1.91%(d)
Class I
Actual(b) $1,000 $1,062.00 $3.44(c) .68%(d)
Hypothetical (5% return before expenses) $1,000 $1,021.19 $3.37(c) .68%(d)
Class Y
Actual(b) $1,000 $1,060.20 $4.70(c) .93%(d)
Hypothetical (5% return before expenses) $1,000 $1,019.96 $4.61(c) .93%(d)
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2005: +5.83%
for Class A, +5.53% for Class B, +5.52% for Class C, +6.20% for Class I and
+6.02% for Class Y.
(c) Pending final approval from the Fund's Board of Directors, it is expected
that, effective Oct. 1, 2005, the fee schedule under the Administrative
Services Agreement between Ameriprise Financial and the Fund will be
revised. If the revised fee schedule under the Administrative Services
Agreement had been in place for the entire six-month period ended July 31,
2005, the actual expenses paid would have been $5.80 for Class A, $9.68 for
Class B, $9.68 for Class C, $3.49 for Class I and $4.75 for Class Y; the
hypothetical expenses paid would have been $5.69 for Class A, $9.49 for
Class B, $9.49 for Class C, $3.42 for Class I and $4.66 for Class Y.
(d) Previously, Ameriprise Financial had contractually agreed to reduce its
management fee by 0.05% through July 31, 2005. The agreement expired on
July 31, 2005 and will not be extended. The waiver of management fees is
reflected in the expenses shown above.
- --------------------------------------------------------------------------------
36 -- AXP LARGE CAP EQUITY FUND -- 2005 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 14
Master Trust portfolios and 90 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 Other directorships
with Fund and during past five
length of years
service
- --------------------------------------- ----------------- ---------------------- --------------------------------
Arne H. Carlson Board member Chair, Board
901 S. Marquette Ave. since 1999 Services Corporation
Minneapolis, MN 55402 (provides
Age 70 administrative
services to boards).
Former Governor
of Minnesota
- --------------------------------------- ----------------- ---------------------- --------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Materials Company, Inc.
Minneapolis, MN 55402 (engineering and (construction
Age 67 construction) since materials/chemicals)
1998
- --------------------------------------- ----------------- ---------------------- --------------------------------
Livio D. DeSimone* Board member Retired Chair of the Cargill, Incorporated
30 Seventh Street East since 2001 Board and (commodity merchants and
Suite 3050 St. Paul, MN Chief Executive processors), General Mills,
55101-4901 Officer, Minnesota Inc. (consumer foods), Vulcan
Age 71 Mining and Materials Company (construction
Manufacturing (3M) materials/chemicals), Milliken &
Company (textiles and chemicals),
and Nexia Biotechnologies, Inc.
- --------------------------------------- ----------------- ---------------------- --------------------------------
Patricia M. Flynn Board member Trustee Professor of BostonFed Bancorp, Inc.
901 S. Marquette Ave. since 2004 Economics and (holding company) and its
Minneapolis, MN 55402 Management, Bentley subsidiary Boston Federal
Age 54 College since 2002; Savings Bank
former Dean,
McCallum Graduate
School of Business,
Bentley College from
1999 to 2002
- --------------------------------------- ----------------- ---------------------- --------------------------------
Anne P. Jones Board member Attorney and
901 S. Marquette Ave. since 1985 Consultant
Minneapolis, MN 55402
Age 70
- --------------------------------------- ----------------- ---------------------- --------------------------------
Stephen R. Lewis, Jr. Board member Retired President Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 and Professor of (manufactures irrigation
Minneapolis, MN 55402 Economics, Carleton systems)
Age 66 College
- --------------------------------------- ----------------- ---------------------- --------------------------------
* Livio D. DeSimone retired as a member of the Board, effective Sept. 8,
2005.
- --------------------------------------------------------------------------------
37 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Catherine James Paglia Board member Director, Enterprise Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Asset Management, (transportation, distribution
Minneapolis, MN 55402 Inc. (private real and logistics consultants)
Age 52 estate and asset
management company)
since 1999
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alan K. Simpson Board member Former three-term
1201 Sunshine Ave. since 1997 United States
Cody, WY 82414 Senator for Wyoming
Age 73
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alison Taunton-Rigby Board member Founder and Chief Hybridon, Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Executive Officer,
Minneapolis, MN 55402 RiboNovix, Inc.
Age 61 since 2004;
President, Forester
Biotech since 2000;
prior to that,
President and CEO,
Aquila
Biopharmaceuticals,
Inc.
- -------------------------------------- ------------------ ---------------------- --------------------------------
Board Member Affiliated with Ameriprise Financial, Inc. (formerly AEFC)**
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
William F. Truscott Board member Senior Vice
53600 Ameriprise Financial Center since 2001, President - Chief
Minneapolis, MN 55474 Vice President Investment Officer
Age 44 since 2002 of Ameriprise
Financial, Inc. and
RiverSource
Investments, LLC
since 2001. Former
Chief Investment
Officer and Managing
Director, Zurich
Scudder Investments
- -------------------------------------- ------------------ ---------------------- --------------------------------
** Interested person by reason of being an officer, director and/or employee of
Ameriprise Financial, Inc. (formerly American Express Financial Corporation)
or of RiverSource Investments, LLC, its wholly owned subsidiary.
- --------------------------------------------------------------------------------
38 -- AXP LARGE CAP EQUITY FUND -- 2005 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. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Jeffrey P. Fox Treasurer Vice President -
105 Ameriprise Financial Center since 2002 Investment
Minneapolis, MN 55474 Accounting,
Age 50 Ameriprise
Financial, Inc.,
since 2002; Vice
President - Finance,
American Express
Company, 2000-2002;
Vice President -
Corporate
Controller,
Ameriprise
Financial, Inc.,
1996-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Paula R. Meyer President Senior Vice President
596 Ameriprise Financial Center since 2002 and General Manager -
Minneapolis, MN 55474 Mutual Funds,
Age 51 Ameriprise
Financial, Inc.,
since 2002 and
Senior Vice
President,
RiverSource
Investments, LLC
since 2004; Vice
President and
Managing Director -
American Express
Funds, Ameriprise
Financial, Inc.,
2000-2002;
Vice President,
Ameriprise
Financial, Inc.,
1998-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Leslie L. Ogg Vice President, President of Board
901 S. Marquette Ave. General Counsel, Services Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- -------------------------------------- ------------------ ---------------------- --------------------------------
Beth E. Weimer Chief Compliance Vice President and
172 Ameriprise Financial Center Officer since Chief Compliance
Minneapolis, MN 55474 2004 Officer, Ameriprise
Age 52 Financial, Inc.,
since 2001 and Chief
Compliance Officer,
RiverSource
Investments, LLC
since 2005; Vice
President and
Chief Compliance
Officer, Ameriprise
Financial Services,
Inc. (formerly
American Express
Financial Advisors),
2001-2005; Partner,
Arthur Andersen
Regulatory Risk
Services, 1998-2001
- -------------------------------------- ------------------ ---------------------- --------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
- --------------------------------------------------------------------------------
39 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Approval of Investment Management Services Agreement
Ameriprise Financial, Inc. (formerly American Express Financial Corporation or
AEFC) (the investment manager) is a wholly-owned subsidiary of American Express
Company. Under an Investment Management Services Agreement (the Agreement), the
investment manager provides investment advice and other services to the Fund.
Throughout the year, the Funds' Board of Directors and the Board's Investment
Review Committee monitor these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. The investment manager prepares detailed reports for the Board and its
Contracts Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with the investment manager (the Interim Period). The spin-off will
not result in an "assignment" of the Agreement under the Investment Company Act
of 1940 and, therefore, will not cause the termination of the Agreement
according to its terms. In connection with the spin-off the investment manager
has proposed that going forward, services under the Agreement be provided by an
affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel
advised the Board that it would be prudent, in connection with the spin-off, to
consider a new agreement with RiverSource and to seek shareholder approval of
that agreement as soon as practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above median for a peer group of funds with similar investment goals and noted
that although the Fund's investment performance in 2004 was below median, it was
consistent with the management style of the Fund in light of market conditions
in 2004.
The Board noted that, in addition to portfolio management and investment
research, the investment manager provides portfolio trading, daily net asset
value calculation, management of cash flow, product development, administration
of its compliance and legal departments, access to distribution, accounting and
recordkeeping, and reporting to the Board and shareholders. To evaluate these
services, the Board referred to surveys and benchmarks established by commercial
providers, trade associations and the investment manager's internal processes.
The Board concluded that the services provided were consistent with services
provided by investment managers to comparable mutual funds.
- --------------------------------------------------------------------------------
40 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
The Board also evaluated the price paid for the services provided by the
investment manager, noting the existence of a pricing philosophy, established by
the Board and the investment manager, that seeks to maintain total Fund expenses
within a range of the median expenses charged to comparable funds sold through
financial advisors. The Board considered detailed information set forth in an
annual report on fees and expenses, including, among other things, data showing
a comparison of the Fund's expenses with median expenses paid by funds in its
comparison group and data showing the Fund's contribution to the investment
manager's profitability. The Board determined that the total expense ratio of
the Fund is below median of its comparison group.
The Board considered the economies of scale that might be realized by the
investment manager as the Fund grew and took note of the extent to which Fund
shareholders also might benefit from such growth. The Board considered that the
Agreement provided for lower fees as assets increase at pre-established
breakpoints and concluded that the Agreement satisfactorily provided for sharing
these economies of scale.
The Board took into account the Contracts Committee's discussion comparing the
fees the investment manager charges to the Fund with those it charges to
institutional clients, noting that the relatively higher fees paid by the Fund
were principally attributable to the additional services required to manage a
regulated mutual fund, like the Fund, and the operation of a large mutual fund
family. The Board also considered the profitability realized by the investment
manager and its affiliates from its relationship with the Fund. The Board took
into account the services acquired by the investment manager through the use of
commission dollars paid by the Fund on portfolio transactions. The Board
concluded that the investment manager's overall costs and profitability were
appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit the investment
manager to offer competitive compensation to its personnel, make necessary
investments in its business and earn an appropriate profit. Based on the
foregoing, the Board concluded that the fees paid to the investment manager
under the Agreement were fair and reasonable and determined to approve renewal
of the Agreement for the Interim Period.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website www.riversource.com/investments; or by
searching the website of the Securities and Exchange Commission (SEC) at
www.sec.gov. Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available without charge by calling the Fund's administrator, Board Services
Corporation, collect at (612) 330-9283; through the investment manager's
website, www.riversource.com/investments; or by searching the website of the SEC
at www.sec.gov.
- --------------------------------------------------------------------------------
41 -- AXP LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
American Express Funds
70100 Ameriprise Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by Ameriprise Financial Services, Inc. (formerly known as American
Express Financial Advisors Inc.). Member NASD.
AXP(R)
Large Cap
Value
Fund
Annual Report
for the Period Ended
July 31, 2005
AXP Large Cap Value Fund seeks
to provide shareholders with
long-term growth of capital.
(This annual report is intended only for the information of shareholders or
those who have received the offering prospectus of the Fund, which contains
information about 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.)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 8
Investments in Securities 10
Financial Statements 14
Notes to Financial Statements 17
Report of Independent Registered
Public Accounting Firm 28
Federal Income Tax Information 29
Fund Expenses Example 31
Board Members and Officers 33
Approval of Investment Management
Services Agreement 36
Proxy Voting 38
[DALBAR LOGO]
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.
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company (American Express) announced plans
to pursue a spin off of Ameriprise Financial, Inc. (Ameriprise Financial)
(formerly American Express Financial Corporation) to American Express
shareholders. The separation from American Express is expected to be completed
on Sept. 30, 2005. After the separation from American Express, Ameriprise
Financial will no longer be affiliated with American Express.
Ameriprise Financial provides administrative services to the Fund and, through
Sept. 30, 2005, investment management services to the Fund. Effective Oct. 1,
2005, RiverSource Investments, LLC, a wholly owned subsidiary of Ameriprise
Financial, will provide investment management services to the Fund. In
addition, Ameriprise Financial is the parent company of the Fund's
distributor, Ameriprise Financial Services, Inc. (formerly American Express
Financial Advisors Inc.); the Fund's transfer agent, RiverSource Service
Corporation (formerly American Express Client Service Corporation); and the
Fund's custodian, Ameriprise Trust Company (formerly American Express Trust
Company).
Effective Oct. 1, 2005, the Fund will change its name such that it no longer
bears the American Express brand and instead will bear the RiverSourceSM brand.
Information regarding the new name of the Fund and other changes will be
separately communicated to shareholders.
- --------------------------------------------------------------------------------
2 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Fund Snapshot
AT JULY 31, 2005
PORTFOLIO MANAGER
Portfolio manager Since Years in industry
Robert Ewing, CFA 6/02 16
FUND OBJECTIVE
The Fund seeks to provide shareholders with long-term growth of capital.
Inception dates by class
A: 6/27/02 B: 6/27/02 C: 6/27/02 I: 3/4/04 Y: 6/27/02
Ticker symbols by class
A: ALVAX B: ALVBX C: -- I: ALCIX Y: --
Total net assets $141.9 million
Number of holdings 177
STYLE MATRIX
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
Shading within the style matrix indicates areas in which the Fund generally
invests.
SECTOR COMPOSITION
Percentage of portfolio assets
[PIE CHART]
Financials 27.7%
Energy 12.9%
Consumer Discretionary 9.0%
Information Technology 8.8%
Industrials 8.6%
Consumer Staples 8.2%
Telecommunication
Services 6.5%
Health Care 5.8%
Short-Term Securities 4.3%
Utilities 4.2%
Materials 4.0%
TOP TEN HOLDINGS
Percentage of portfolio assets
Exxon Mobil (Oil & Gas) 3.7%
Bank of America (Commercial Banks) 3.2
Citigroup (Diversified Financial Services) 3.1
ConocoPhillips (Oil & Gas) 2.5
American Intl Group (Insurance) 2.1
Altria Group (Tobacco) 2.0
JPMorgan Chase & Co
(Diversified Financial Services) 1.8
Chevron (Oil & Gas) 1.7
Dow Chemical (Chemicals) 1.4
Wells Fargo & Co (Commercial Banks) 1.4
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Performance Summary
[BAR CHART]
PERFORMANCE COMPARISON
For the year ended July 31, 2005
+14.52% +19.04% +15.06%
+14.52% = AXP Large Cap Value Fund Class A (excluding sales charge)
+19.04% = Russell 1000 Value Index (unmanaged)
+15.06% = Lipper Large-Cap Value Funds Index
(see "The Fund`s Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments.
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 other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (6/27/02) (6/27/02) (6/27/02) (3/4/04) (6/27/02)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at July 31, 2005
1 year +14.52% +7.93% +13.66% +8.66% +13.62% +12.62% +14.97% +14.67%
3 years +12.62% +10.41% +11.76% +10.68% +11.76% +11.76% N/A +12.85%
Since inception +9.32% +7.25% +8.52% +7.69% +8.51% +8.51% +7.44% +9.54%
at June 30, 2005
1 year +9.30% +3.01% +8.43% +3.43% +8.59% +7.59% +9.96% +9.66%
3 years +8.66% +6.53% +7.82% +6.66% +7.82% +7.82% N/A +8.88%
Since inception +8.78% +6.66% +7.95% +7.08% +7.94% +7.94% +6.12% +9.00%
(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
eligible investors only, currently limited to AXP Portfolio Builder Funds,
six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- --------------------------------------------------------------------------------
4 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
AXP Large Cap Value Fund's Class A shares advanced 14.52%, excluding sales
charge, for the 12 months ended July 31, 2005. The Fund underperformed its
benchmark, the Russell 1000 Value Index (Russell Index), which increased 19.04%
during the period. The Fund's peer group, the Lipper Large-Cap Value Funds
Index, gained 15.06% during the same time frame.
Below, Portfolio Manager Robert Ewing discusses the Fund's results and
positioning for the annual period ended July 31, 2005.
At July 31, 2005, approximately 26% of the Fund's shares were owned in aggregate
by AXP Portfolio Builder Funds, a group of six asset allocation funds managed by
RiverSource Investments, LLC* (RiverSource Investments). As a result, it is
possible AXP Large Cap Value Fund may experience relatively large purchases or
redemptions from AXP Portfolio Builder Funds (see page 22, Class I capital share
transactions for related activity during the most recent fiscal period).
RiverSource Investments seeks to minimize the impact of these transactions,
which may include structuring them over a reasonable period of time. AXP Large
Cap Value Fund may experience increased expenses as it buys and sells securities
to satisfy subscriptions and redemptions in AXP Portfolio Builder Funds. For
more information on the Fund's expenses, see the discussions beginning on pages
21 and 31.
Q: What factors most significantly affected performance for the period?
A: During the annual period, stock selection was favorable in some sectors,
while detrimental in others. Stock selection within the information
technology and telecommunications sectors helped Fund performance. However,
selection within the financials and consumer staples sectors detracted from
performance.
In terms of sector allocation, the industrial sector did not perform well
and as a result, our smaller-than-Russell Index position helped performance.
In addition, our larger exposure to the technology sector compared to the
Russell Index contributed positively during the fiscal year. The Fund's
relatively small cash position detracted from performance, as holding cash
during the period when the market was up meant losing out on opportunities
in the market for positive returns. Finally, the Fund's low exposure to the
utilities sector hurt performance while the sector was up approximately 40%.
* Prior to Oct. 1, 2005, Ameriprise Financial, Inc. (formerly American Express
Financial Corporation) served as investment manager to the AXP mutual funds.
- --------------------------------------------------------------------------------
5 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > During the annual period, stock selection was
favorable in some sectors, while detrimental in others. [END CALLOUT QUOTE]
Overall, the energy sector performed extremely well during the period and
stock selection within contributed positively to performance, specifically
ConocoPhillips, Andarko Petroleum and Transocean. Cell phone maker Nokia and
hospital company HCA also performed well and were significant positive
contributors.
Conversely, not owning energy stocks or having smaller positions in these
stocks during the period detracted from performance. The Fund's
significantly lower-than-Russell Index position in Exxon Mobil detracted as
the stock was a strong performer. Other smaller Fund positions in strongly
performing energy stocks included Occidental Petroleum and refining company
Valero. In addition, General Electric, another large percentage of the
Russell Index, performed well and our lower exposure hurt performance.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: We increased the Fund's allocations to the information technology, energy
and financials sectors. Throughout the period there were very exploitable
valuation opportunities in information technology and we took the chance to
add to the sector.
Within energy, we added to the Fund's position throughout the year as we
found attractive opportunities. However, we are currently in an exciting
energy environment and are content to keep the Fund's energy allocation as
is until we see how things play out through the close of the year. In
addition, the financial sector has had very attractive valuations in our
view. We added positions in some of the higher quality, larger cap
companies.
We eliminated positions in health care, materials and industrials.
Specifically, hospitals and health maintenance organizations (HMOs) have
performed very well over the year, and we have
- --------------------------------------------------------------------------------
6 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > We continue to emphasize higher quality stocks over
lower quality stocks that have high amounts of leverage or exhibit volatile
earnings. [END CALLOUT QUOTE]
taken down some of our positions, including well-known HMO Aetna. We also
eliminated some strong performing stocks in the chemicals subsector of
materials during the period. Finally, we decreased our holdings in the
industrial sector as we are late in the economic expansion and a large
position does not seem prudent.
Q: How do you plan to manage the Fund in the coming months?
A: We are somewhat cautious given that this is the fourth year of economic
expansion. Though we believe the economy will continue to grow, we think its
growth rate will noticeably decelerate. In the context of this economic
outlook and what we consider to be high equity valuations, we think it is
appropriate to be careful.
We are maintaining our key portfolio themes. We continue to emphasize higher
quality stocks over lower quality stocks that have high amounts of leverage
or exhibit volatile earnings. We have tried to keep the average
price/earnings ratio of our holdings below that of the benchmark. We have
focused on larger stocks because they tend to be more stable companies, but
also because they have been more attractively valued than mid- and small-cap
stocks. We have also sought to keep the portfolio's volatility close to or
lower than that of the Fund's benchmark, thus positioning the Fund to
perform better in a flat or down market.
Although it is worth noting that value stocks have outperformed growth
stocks for some time and may be susceptible to a market reversal, we
consider it more pertinent that small- and mid-cap stocks have outperformed
large-caps for a prolonged period. We are finding more opportunities among
large-cap stocks, and therefore, the Fund's average market capitalization
has increased. At this stage in the economic cycle, we expect economic and
corporate growth to decelerate a bit and deceleration tends to favor bigger,
more secure companies.
- --------------------------------------------------------------------------------
7 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Large Cap Value Fund Class A shares (from 7/1/02 to 7/31/05)
as compared to the performance of two widely cited performance indices, the
Russell 1000 Value Index and the Lipper Large-Cap Value 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.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Returns do not reflect taxes payable on
distributions and redemptions. Current performance may be lower or higher than
the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments. Also see "Past Performance" in the Fund's
current prospectus.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
July 31, 2005 $0.04 $0.07 $0.16 $0.27
July 31, 2004 0.03 0.23 0.01 0.27
July 31, 2003 0.01 -- -- 0.01
July 31, 2002(1) -- -- -- --
(1) For the period from June 27, 2002 (when shares became publicily available)
to July 31, 2002.
- --------------------------------------------------------------------------------
8 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP LARGE CAP VALUE FUND
AXP Large Cap Value Fund Class A
(includes sales charge) $ 9,425 $8,695 $ 9,610 $10,845 $12,420
Russell 1000(R) Value Index(1) $10,000 $9,070 $10,045 $11,821 $14,072
Lipper Large-Cap Value Funds Index(2) $10,000 $9,136 $ 9,923 $11,424 $13,144
7/1/02 7/02 7/03 7/04 7/05
COMPARATIVE RESULTS
Results at July 31, 2005 Since
1 year 3 years inception(3)
AXP Large Cap Value Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,793 $13,459 $12,420
Average annual total return +7.93% +10.41% +7.25%
Russell 1000(R) Value Index(1)
Cumulative value of $10,000 $11,904 $15,512 $14,072
Average annual total return +19.04% +15.76% +11.71%
Lipper Large-Cap Value Funds Index(2)
Cumulative value of $10,000 $11,506 $14,387 $13,144
Average annual total return +15.06% +12.89% +9.27%
Results for other share classes can be found on page 4.
(1) The Russell 1000(R) Value Index, an unmanaged index, measures the
performance of those stocks in the Russell 1000 Index with lower
price-to-book ratios and lower forecasted growth values.
(2) The Lipper Large-Cap Value Funds Index includes the 30 largest large-cap
value funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
(3) Fund data is from June 27, 2002. Russell 1000 Value Index and Lipper peer
group data is from July 1, 2002.
- --------------------------------------------------------------------------------
9 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Investments in Securities
AXP Large Cap Value Fund
July 31, 2005
(Percentages represent value of investments compared to net assets)
Common Stocks (95.5%)
Issuer Shares Value(a)
Aerospace & Defense (4.3%)
Boeing 8,480 $559,765
Empresa Brasileira de
Aeronautica ADR 25,073(c) 810,861
General Dynamics 3,518 405,238
Goodrich 6,558 290,126
Honeywell Intl 26,093 1,024,933
Lockheed Martin 14,643 913,723
Northrop Grumman 22,346 1,239,086
United Technologies 17,739 899,367
Total 6,143,099
Auto Components (0.1%)
Lear 3,140 134,298
Automobiles (0.3%)
General Motors 10,573 389,298
Beverages (1.3%)
Coca-Cola 4,990 218,362
Coca-Cola Enterprises 11,692 274,762
PepsiCo 23,611 1,287,508
Total 1,780,632
Biotechnology (0.1%)
Biogen Idec 3,967(b) 155,863
Building Products (0.5%)
American Standard Companies 7,623 337,546
Masco 12,394 420,281
Total 757,827
Capital Markets (4.5%)
Bank of New York 29,698 914,104
E*TRADE Financial 9,486(b) 147,128
Franklin Resources 6,571 531,068
Investors Financial Services 18,665 642,449
Legg Mason 3,112 317,891
Lehman Brothers Holdings 7,750 814,758
Merrill Lynch & Co 15,029 883,405
Morgan Stanley 32,118 1,703,860
State Street 9,635 479,245
Total 6,433,908
Common Stocks (continued)
Issuer Shares Value(a)
Chemicals (2.0%)
Dow Chemical 42,700 $2,047,466
Eastman Chemical 5,088 281,824
Lyondell Chemical 12,877 359,783
RPM Intl 7,556 141,675
Total 2,830,748
Commercial Banks (7.4%)
Bank of America 103,057 4,493,284
Commerce Bancorp 9,621 326,441
PNC Financial Services Group 12,466 683,386
Regions Financial 6,436 216,507
US Bancorp 44,351 1,333,191
Wachovia 29,171 1,469,635
Wells Fargo & Co 32,872 2,016,368
Total 10,538,812
Commercial Services & Supplies (0.9%)
Avery Dennison 5,608 317,805
Cendant 44,998 961,158
Total 1,278,963
Communications Equipment (1.2%)
Cisco Systems 22,312(b) 427,275
Motorola 17,998 381,198
Nokia ADR 56,979(c) 908,814
Total 1,717,287
Computers & Peripherals (2.9%)
Dell 24,173(b) 978,281
EMC 22,541(b) 308,586
Hewlett-Packard 61,981 1,525,973
Intl Business Machines 16,190 1,351,217
Total 4,164,057
Consumer Finance (1.2%)
Capital One Financial 12,384 1,021,680
MBNA 26,458 665,683
Total 1,687,363
Containers & Packaging (0.4%)
Temple-Inland 15,891 632,303
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Diversified Financial Services (5.0%)
Citigroup 102,393 $4,454,096
JPMorgan Chase & Co 73,652 2,588,131
Total 7,042,227
Diversified Telecommunication Services (5.8%)
ALLTEL 3,543 235,610
BellSouth 52,057 1,436,773
Citizens Communications 10,824 142,227
KT ADR 17,568(c) 388,956
MCI 38,163 973,920
SBC Communications 77,172 1,886,855
Sprint 73,683 1,982,073
Telewest Global 9,656(b,c) 215,715
Verizon Communications 29,610 1,013,550
Total 8,275,679
Electric Utilities (2.9%)
Entergy 11,825 921,641
Exelon 23,017 1,231,869
FPL Group 10,441 450,216
PPL 7,517 462,897
Southern 23,533 823,420
Xcel Energy 13,683 265,587
Total 4,155,630
Electronic Equipment & Instruments (0.3%)
Flextronics Intl 18,712(b,c) 253,361
Solectron 39,406(b) 151,319
Total 404,680
Energy Equipment & Services (1.6%)
Cooper Cameron 5,146(b) 365,263
Halliburton 11,544 647,042
Schlumberger 2,989 250,299
Transocean 8,794(b) 496,245
Weatherford Intl 8,576(b) 542,689
Total 2,301,538
Food & Staples Retailing (0.9%)
CVS 11,411 354,083
Wal-Mart Stores 19,795 976,884
Total 1,330,967
Food Products (0.9%)
General Mills 13,985 662,889
Kellogg 13,189 597,594
Total 1,260,483
Gas Utilities (0.3%)
ONEOK 13,526 472,734
Common Stocks (continued)
Issuer Shares Value(a)
Health Care Equipment & Supplies (1.0%)
Baxter Intl 12,585 $494,213
Boston Scientific 4,971(b) 143,910
Guidant 5,132 353,082
Hospira 11,232(b) 429,624
Total 1,420,829
Health Care Providers & Services (1.2%)
Cardinal Health 6,367 379,346
CIGNA 4,667 498,202
HCA 11,918 586,962
Medco Health Solutions 4,421(b) 214,153
Total 1,678,663
Household Durables (0.2%)
Leggett & Platt 5,905 149,338
Tempur-Pedic Intl 3,925(b) 67,549
Total 216,887
Household Products (2.0%)
Colgate-Palmolive 12,802 677,738
Procter & Gamble 20,484 1,139,525
Spectrum Brands 32,243(b) 999,533
Total 2,816,796
Industrial Conglomerates (1.9%)
General Electric 33,226 1,146,297
Tyco Intl 51,335(c) 1,564,177
Total 2,710,474
Insurance (5.3%)
ACE 34,582(c) 1,598,034
AFLAC 3,498 157,760
Allstate 5,653 346,303
American Intl Group 48,864 2,941,612
Assurant 5,846 216,010
Chubb 12,002 1,066,018
Endurance Specialty Holdings 9,956(c) 388,284
First American 7,501 329,669
Hartford Financial Services Group 4,987 401,803
Montpelier Re Holdings 3,344(c) 120,116
Total 7,565,609
Internet Software & Services (0.1%)
Google Cl A 374(b) 107,622
IT Services (0.7%)
Accenture Cl A 8,943(b,c) 223,933
Affiliated Computer Services Cl A 14,911(b) 745,102
Total 969,035
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Leisure Equipment & Products (0.2%)
Mattel 14,279 $266,303
Machinery (0.9%)
Caterpillar 8,782 473,438
Illinois Tool Works 2,919 250,012
Ingersoll-Rand Cl A 3,302(c) 258,117
ITT Inds 2,434 258,978
Total 1,240,545
Media (6.2%)
Comcast Cl A 20,868(b) 641,274
Comcast Special Cl A 29,059(b) 871,770
EchoStar Communications Cl A 8,946 256,929
Liberty Global Cl A 9,849(b) 467,237
Liberty Media Cl A 133,486(b) 1,173,342
NTL 20,038(b) 1,335,132
Reader's Digest Assn 9,375 152,250
Time Warner 41,543(b) 707,062
Tribune 16,142 589,183
Viacom Cl B 41,994 1,406,378
Vivendi Universal ADR 13,754(c) 437,102
Walt Disney 32,194 825,454
Total 8,863,113
Metals & Mining (0.4%)
Alcan 8,773(c) 296,352
Alcoa 11,300 316,965
Total 613,317
Multi-Utilities & Unregulated Power (0.9%)
Dominion Resources 17,274 1,275,858
Multiline Retail (1.1%)
Federated Dept Stores 4,463 338,608
JC Penney 5,492 308,321
Target 15,223 894,351
Total 1,541,280
Office Electronics (0.1%)
Xerox 10,058(b) 132,866
Oil & Gas (11.3%)
Anadarko Petroleum 20,184 1,783,256
BP ADR 19,563(c) 1,288,810
Chevron 42,555 2,468,616
ConocoPhillips 57,471 3,597,110
Devon Energy 10,560 592,310
Exxon Mobil 89,695 5,269,581
Newfield Exploration 14,381(b) 611,049
Royal Dutch Shell Cl A ADR 6,025(b,c) 369,212
Total 15,979,944
Common Stocks (continued)
Issuer Shares Value(a)
Paper & Forest Products (1.1%)
Bowater 14,015 $473,847
Intl Paper 20,788 656,901
Weyerhaeuser 6,748 465,477
Total 1,596,225
Personal Products (1.1%)
Avon Products 26,328 861,188
Gillette 13,453 722,023
Total 1,583,211
Pharmaceuticals (3.5%)
Bristol-Myers Squibb 16,040 400,679
GlaxoSmithKline ADR 4,062(c) 192,701
Johnson & Johnson 6,726 430,195
Merck & Co 21,452 666,299
Novartis ADR 10,092(c) 491,581
Pfizer 75,823 2,009,310
Schering-Plough 19,189 399,515
Wyeth 7,990 365,543
Total 4,955,823
Real Estate Investment Trust (1.1%)
Apartment Investment &
Management Cl A 8,816 387,904
Equity Office Properties Trust 27,655 980,370
HomeBanc 15,540 140,792
Total 1,509,066
Semiconductors & Semiconductor Equipment (2.4%)
ATI Technologies 11,595(b,c) 145,981
Broadcom Cl A 5,940(b) 254,054
Credence Systems 19,325(b) 210,449
Cypress Semiconductor 43,889(b) 630,246
Freescale Semiconductor Cl A 18,707(b) 477,403
Freescale Semiconductor Cl B 3,233(b) 83,250
Intel 26,064 707,376
MEMC Electronic Materials 28,749(b) 488,446
Texas Instruments 12,713 403,765
Total 3,400,970
Software (1.1%)
Cadence Design Systems 32,795(b) 527,672
Microsoft 30,420 779,056
Siebel Systems 15,929 133,804
Symantec 5,824(b) 127,953
Total 1,568,485
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Specialty Retail (0.9%)
Gap 10,228 $215,913
Home Depot 17,606 766,038
PETCO Animal Supplies 11,135(b) 310,332
Total 1,292,283
Thrifts & Mortgage Finance (3.3%)
Countrywide Financial 43,844 1,578,384
Fannie Mae 24,368 1,361,196
Freddie Mac 22,178 1,403,424
Washington Mutual 6,564 278,839
Total 4,621,843
Tobacco (2.0%)
Altria Group 41,458 2,776,028
Wireless Telecommunication Services (0.7%)
Vodafone Group ADR 36,633(c) 946,230
Total Common Stocks
(Cost: $123,495,876) $135,537,701
Short-Term Securities (4.3%)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. Government Agency (2.4%)
Federal Home Loan Bank Disc Nt
08-17-05 3.24% $3,400,000 $3,394,201
Commercial Paper (1.9%)
Citibank Credit Card Dakota Nts
08-01-05 3.30 2,700,000(d) 2,699,258
Total Short-Term Securities
(Cost: $6,094,012) $6,093,459
Total Investments in Securities
(Cost: $129,589,888)(e) $141,631,160
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. At July 31, 2005, the
value of foreign securities represented 7.7% 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 Fund's Board of Directors.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 2005, the value
of these securities amounted to $2,699,258 or 1.9% of net assets.
(e) At July 31, 2005, the cost of securities for federal income tax purposes
was $130,166,821 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $14,443,575
Unrealized depreciation (2,979,236)
----------
Net unrealized appreciation $11,464,339
-----------
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.riversource.com/investments.
- --------------------------------------------------------------------------------
13 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Large Cap Value Fund
July 31, 2005
Assets
Investments in securities, at value (Note 1)
(identified cost $129,589,888) $141,631,160
Cash in bank on demand deposit 57,624
Capital shares receivable 2,404
Dividends and accrued interest receivable 214,965
Receivable for investment securities sold 353,880
-------
Total assets 142,260,033
-----------
Liabilities
Capital shares payable 13,056
Payable for investment securities purchased 215,338
Accrued investment management services fee 2,351
Accrued distribution fee 1,335
Accrued transfer agency fee 245
Accrued administrative services fee 196
Other accrued expenses 85,043
------
Total liabilities 317,564
-------
Net assets applicable to outstanding capital stock $141,942,469
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 243,672
Additional paid-in capital 122,863,980
Undistributed net investment income 750,831
Accumulated net realized gain (loss) 6,042,714
Unrealized appreciation (depreciation) on investments 12,041,272
----------
Total -- representing net assets applicable to outstanding capital stock $141,942,469
============
Net assets applicable to outstanding shares: Class A $ 74,114,932
Class B $ 28,468,201
Class C $ 1,392,159
Class I $ 37,827,081
Class Y $ 140,096
Net asset value per share of outstanding capital stock: Class A shares 12,713,655 $ 5.83
Class B shares 4,935,011 $ 5.77
Class C shares 241,376 $ 5.77
Class I shares 6,453,226 $ 5.86
Class Y shares 23,947 $ 5.85
------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Statement of operations
AXP Large Cap Value Fund
Year ended July 31, 2005
Investment income
Income:
Dividends $ 3,133,148
Interest 98,502
Less foreign taxes withheld (20,161)
-------
Total income 3,211,489
---------
Expenses (Note 2):
Investment management services fee 803,736
Distribution fee
Class A 183,291
Class B 277,867
Class C 14,213
Transfer agency fee 170,475
Incremental transfer agency fee
Class A 12,699
Class B 9,182
Class C 566
Service fee -- Class Y 121
Administrative services fees and expenses 67,667
Compensation of board members 9,287
Custodian fees 158,870
Printing and postage 51,645
Registration fees 50,705
Audit fees 20,500
Other 8,798
-----
Total expenses 1,839,622
Earnings credits on cash balances (Note 2) (6,611)
------
Total net expenses 1,833,011
---------
Investment income (loss) -- net 1,378,478
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 8,924,948
Foreign currency transactions (5)
--
Net realized gain (loss) on investments 8,924,943
Net change in unrealized appreciation (depreciation) on investments 7,691,556
---------
Net gain (loss) on investments and foreign currencies 16,616,499
----------
Net increase (decrease) in net assets resulting from operations $17,994,977
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP Large Cap Value Fund
Year ended July 31, 2005 2004
Operations and distributions
Investment income (loss) -- net $ 1,378,478 $ 556,993
Net realized gain (loss) on investments 8,924,943 5,214,984
Net change in unrealized appreciation (depreciation) on investments 7,691,556 1,187,608
--------- ---------
Net increase (decrease) in net assets resulting from operations 17,994,977 6,959,585
---------- ---------
Distributions to shareholders from:
Net investment income
Class A (546,048) (292,557)
Class B (10,205) (34,475)
Class C -- (1,580)
Class I (382,906) --
Class Y (1,186) (292)
Net realized gain
Class A (3,015,777) (2,044,844)
Class B (1,148,832) (923,944)
Class C (57,627) (49,121)
Class I (1,527,915) --
Class Y (5,242) (1,778)
------ ------
Total distributions (6,695,738) (3,348,591)
---------- ----------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 17,758,111 40,922,272
Class B shares 7,075,931 15,773,087
Class C shares 380,110 859,541
Class I shares 35,295,804 16,471,765
Class Y shares 81,000 46,998
Reinvestment of distributions at net asset value
Class A shares 3,502,995 2,313,251
Class B shares 1,145,619 949,778
Class C shares 56,012 49,389
Class I shares 1,910,566 --
Class Y shares 5,863 1,511
Payments for redemptions
Class A shares (20,411,526) (9,764,607)
Class B shares (Note 2) (7,218,949) (6,087,609)
Class C shares (Note 2) (563,631) (329,387)
Class I shares (18,207,821) (5,871)
Class Y shares (17,206) (17,446)
------- -------
Increase (decrease) in net assets from capital share transactions 20,792,878 61,182,672
---------- ----------
Total increase (decrease) in net assets 32,092,117 64,793,666
Net assets at beginning of year 109,850,352 45,056,686
----------- ----------
Net assets at end of year $141,942,469 $109,850,352
============ ============
Undistributed (excess of distributions over) net investment income $ 750,831 $ 336,307
------------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Notes to Financial Statements
AXP Large Cap Value 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 invests primarily in equity securities of
companies with a market capitalization greater than $5 billion.
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 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.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July 31, 2005, Ameriprise Financial Inc.
(Ameriprise Financial) (formerly American Express Financial Corporation) and the
AXP Portfolio Builder Funds owned 100% of Class I shares, which represents
26.65% of the Fund's net assets.
At July 31, 2005, Ameriprise Financial and the AXP Portfolio Builder Funds owned
approximately 27% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees 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.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds,
Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there
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17 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
is a reasonably high degree of certainty that the effect of the development or
event has actually caused the closing price to no longer reflect the actual
value, the closing prices, as determined at the close of the applicable foreign
market, may be adjusted to reflect the fair value of the affected foreign
securities as of the close of the New York Stock Exchange. Significant events
include material movements in the U.S. securities markets prior to the opening
of foreign markets on the following trading day. FVP results in an estimated
price that reasonably reflects the current market conditions in order to value
the portfolio holdings such that shareholder transactions receive a fair net
asset value. 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 Fund 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 Fund 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 Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund 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
Fund pays a premium whether or not the option is exercised. The Fund 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 Fund 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 Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund 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 Fund 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 Fund 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 Fund recognizes a realized gain or loss when the contract is closed
or expires.
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18 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
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 Fund 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 Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
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 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.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $23,609
and accumulated net realized gain has been increased by $23,609.
- --------------------------------------------------------------------------------
19 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
The tax character of distributions paid for the years indicated is as follows:
Year ended July 31, 2005 2004
Class A
Distributions paid from:
Ordinary income $1,523,416 $2,282,707
Long-term capital gain 2,038,409 54,694
Class B
Distributions paid from:
Ordinary income 382,524 933,705
Long-term capital gain 776,513 24,714
Class C
Distributions paid from:
Ordinary income 18,676 49,387
Long-term capital gain 38,951 1,314
Class I*
Distributions paid from:
Ordinary income 878,081 --
Long-term capital gain 1,032,740 --
Class Y
Distributions paid from:
Ordinary income 2,885 2,024
Long-term capital gain 3,543 46
* Inception date is March 4, 2004.
At July 31, 2005, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income $ 2,717,260
Accumulated long-term gain (loss) $ 4,653,218
Unrealized appreciation (depreciation) $11,464,339
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.
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, market discount and original issue discount
using the effective interest method, is accrued daily.
- --------------------------------------------------------------------------------
20 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. Prior to Oct. 1, 2005, investment management services were provided by
Ameriprise Financial. The management fee is a percentage of the Fund's average
daily net assets that declines from 0.60% to 0.48% annually as the Fund's assets
increase. 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 the
Fund to the Lipper Large-Cap Value Funds Index. In certain circumstances, the
board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment decreased the fee by $14,485 for the year ended July 31,
2005.
Under the current Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
the Fund's average daily net assets that declines from 0.05% to 0.02% annually
as the Fund's assets increase. It is expected that the fee schedule to the
agreement will be revised effective Oct. 1, 2005. Under the new agreement, the
fee percentage of the Fund's average daily net assets will decline from 0.06% to
0.03% annually as the Fund's assets increase. 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 Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(formerly American Express Client Service Corporation) (the Transfer Agent)
maintains shareholder accounts and records. The Fund pays the Transfer Agent 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
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
Beginning May 20, 2005, the Transfer Agent implemented an annual closed account
fee of $5 per inactive account, charged on a pro rata basis for 12 months from
the date the account becomes inactive. These fees were insignificant for the
year ended July 31, 2005 and are included in the transfer agency fees on the
statement of operations.
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21 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
The Fund has agreements with Ameriprise Financial Services, Inc. (formerly
American Express Financial Advisors Inc.) (the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, 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
$169,043 for Class A, $19,464 for Class B and $324 for Class C for the year
ended July 31, 2005.
Ameriprise Financial and its affiliates have agreed to extend the current
agreement to waive certain fees and expenses through Sept. 30, 2005. It is
expected that a new agreement to waive certain fees and expenses will be
effective on Oct. 1, 2005 until July 31, 2006, such that net expenses, before
giving effect to any performance incentive adjustment, will not exceed 1.29% for
Class A, 2.05% for Class B, 2.06% for Class C, 0.94% for Class I and 1.12% for
Class Y of the Fund's average daily net assets.
During the year ended July 31, 2005, the Fund's custodian and transfer agency
fees were reduced by $6,611 as a result of earnings credits from overnight cash
balances. The Fund also pays custodian fees to Ameriprise Trust Company
(formerly American Express Trust Company), an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $89,089,105 and $74,696,039, respectively, for the year
ended July 31, 2005. Realized gains and losses are determined on an identified
cost basis.
Brokerage clearing fees paid to brokers affiliated with Ameriprise Financial
were $276 for the year ended July 31, 2005.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2005
Class A Class B Class C Class I Class Y
Sold 3,185,715 1,283,395 69,124 6,285,074 14,833
Issued for reinvested distributions 628,904 206,791 10,111 341,783 1,049
Redeemed (3,634,034) (1,298,146) (101,928) (3,228,175) (3,074)
---------- ---------- -------- ---------- ------
Net increase (decrease) 180,585 192,040 (22,693) 3,398,682 12,808
------- ------- ------- --------- ------
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 7,723,484 3,005,409 163,615 3,055,637 8,912
Issued for reinvested distributions 443,151 182,649 9,516 -- 289
Redeemed (1,837,759) (1,153,773) (61,678) (1,093) (3,191)
---------- ---------- ------- ------ ------
Net increase (decrease) 6,328,876 2,034,285 111,453 3,054,544 6,010
--------- --------- ------- --------- -----
* Inception date is March 4, 2004.
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22 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
5. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective
Rate plus 0.50% or 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 $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended July 31, 2005.
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, 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.34 $4.98 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .06 .04 .03 --
Net gains (losses) (both realized and unrealized) .70 .59 .44 (.38)
----- ----- ----- -----
Total from investment operations .76 .63 .47 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.04) (.03) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.27) (.27) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.83 $5.34 $4.98 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $74 $67 $31 $4
Ratio of expenses to average daily net assets(c) 1.29% 1.24%(d) 1.25%(d) 1.19%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.07% .95% 1.01% .23%(e)
Portfolio turnover rate (excluding short-rm securities) 57% 59% 77% 9%
Total return(f) 14.52% 12.85% 10.52% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class A
would have been 1.54%, 2.64% and 20.50% for the periods ended July 31,
2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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23 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.29 $4.95 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .01 -- .01 --
Net gains (losses) (both realized and unrealized) .70 .59 .43 (.38)
----- ----- ----- -----
Total from investment operations .71 .59 .44 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income -- (.01) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.23) (.25) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.77 $5.29 $4.95 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $28 $25 $13 $1
Ratio of expenses to average daily net assets(c) 2.05% 2.00%(d) 2.00%(d) 1.95%(d),(e)
Ratio of net investment income (loss) to average daily net assets .30% .16% .25% (.49%)(e)
Portfolio turnover rate (excluding short-term securities) 57% 59% 77% 9%
Total return(f) 13.66% 12.00% 9.66% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class B
would have been 2.30%, 3.40% and 21.26% for the periods ended July 31,
2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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24 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.29 $4.94 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .01 -- .01 --
Net gains (losses) (both realized and unrealized) .70 .60 .42 (.38)
----- ----- ----- -----
Total from investment operations .71 .60 .43 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income -- (.01) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.23) (.25) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.77 $5.29 $4.94 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $--
Ratio of expenses to average daily net assets(c) 2.06% 2.00%(d) 2.00%(d) 1.95%(d),(e)
Ratio of net investment income (loss) to average daily net assets .30% .19% .26% (.45%)(e)
Portfolio turnover rate (excluding short-term securities) 57% 59% 77% 9%
Total return(f) 13.62% 12.19% 9.50% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class C
would have been 2.30%, 3.40% and 21.26% for the periods ended July 31,
2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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25 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004(b)
Net asset value, beginning of period $5.36 $5.57
----- -----
Income from investment operations:
Net investment income (loss) .07 .03
Net gains (losses) (both realized and unrealized) .72 (.24)
----- -----
Total from investment operations .79 (.21)
----- -----
Less distributions:
Dividends from net investment income (.06) --
Distributions from realized gains (.23) --
----- -----
Total distributions (.29) --
----- -----
Net asset value, end of period $5.86 $5.36
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $38 $16
Ratio of expenses to average daily net assets(c) .86% .93%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.50% 1.33%(e)
Portfolio turnover rate (excluding short-term securities) 57% 59%
Total return(f) 14.97% (3.77%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratio of expenses for Class I
would have been 1.02% for the period ended July 31, 2004.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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26 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.36 $4.99 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .07 .04 .03 --
Net gains (losses) (both realized and unrealized) .70 .61 .45 (.38)
----- ----- ----- -----
Total from investment operations .77 .65 .48 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.05) (.04) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.28) (.28) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.85 $5.36 $4.99 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $--
Ratio of expenses to average daily net assets(c) 1.11% 1.06%(d) .95%(d) 1.01%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.25% 1.12% 1.30% .31%(e)
Portfolio turnover rate (excluding short-term securities) 57% 59% 77% 9%
Total return(f) 14.67% 13.14% 10.76% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class Y
would have been 1.36%, 2.46% and 20.32% for the periods ended July 31,
2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- --------------------------------------------------------------------------------
27 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GROWTH SERIES, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of AXP Large Cap Value Fund (a series
of AXP Growth Series, Inc.) as of July 31, 2005, 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, 2005, and the financial
highlights for each of the years in the three-year period ended July 31, 2005,
and for the period from June 27, 2002 (when shares became publicly available) to
July 31, 2002. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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. Our procedures included confirmation of
securities owned as of July 31, 2005, 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Large Cap Value Fund as of July 31, 2005, 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 U.S. generally accepted
accounting principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2005
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28 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
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 Large Cap Value Fund
Fiscal year ended July 31, 2005
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 55.22%
Dividends Received Deduction for corporations 50.94%
Payable date Per share
Dec. 20, 2004 $0.11650
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.15592
Total distributions $0.27242
Class B
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 55.22%
Dividends Received Deduction for corporations 50.94%
Payable date Per share
Dec. 20, 2004 $0.07681
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.15592
Total distributions $0.23273
- --------------------------------------------------------------------------------
29 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Class C
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 55.22%
Dividends Received Deduction for corporations 50.94%
Payable date Per share
Dec. 20, 2004 $0.07476
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.15592
Total distributions $0.23068
Class I
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 55.22%
Dividends Received Deduction for corporations 50.94%
Payable date Per share
Dec. 20, 2004 $0.13257
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.15592
Total distributions $0.28849
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 55.22%
Dividends Received Deduction for corporations 50.94%
Payable date Per share
Dec. 20, 2004 $0.12697
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.15592
Total distributions $0.28289
- --------------------------------------------------------------------------------
30 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended July 31, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
31 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Feb. 1, 2005 July 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,048.60 $6.18(c) 1.23%
Hypothetical (5% return before expenses) $1,000 $1,018.49 $6.09(c) 1.23%
Class B
Actual(b) $1,000 $1,043.40 $10.02(c) 2.00%
Hypothetical (5% return before expenses) $1,000 $1,014.71 $9.88(c) 2.00%
Class C
Actual(b) $1,000 $1,043.40 $10.12(c) 2.02%
Hypothetical (5% return before expenses) $1,000 $1,014.61 $9.98(c) 2.02%
Class I
Actual(b) $1,000 $1,050.20 $3.82(c) .76%
Hypothetical (5% return before expenses) $1,000 $1,020.79 $3.77(c) .76%
Class Y
Actual(b) $1,000 $1,048.40 $5.37(c) 1.07%
Hypothetical (5% return before expenses) $1,000 $1,019.27 $5.30(c) 1.07%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2005: +4.86%
for Class A, +4.34% for Class B, +4.34% for Class C, +5.02% for Class I and
+4.84% for Class Y.
(c) Pending final approval from the Fund's Board of Directors (Board), it is
expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the Fund
will be revised. It is also expected that Ameriprise Financial and its
affiliates will contractually agree to waive certain fees and to absorb
certain expenses until July 31, 2006, unless sooner terminated at the
discretion of the Board. Under this expense cap/fee waiver agreement, net
expenses, before giving effect to any performance incentive adjustment,
will not exceed 1.29% for Class A; 2.05% for Class B; 2.06% for Class C;
0.94% for Class I and 1.12% for Class Y. If the revised fee schedule under
the Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended July 31, 2005, the actual
expenses paid would have been $6.23 for Class A, $10.07 for Class B, $10.17
for Class C, $3.87 for Class I and $5.42 for Class Y; the hypothetical
expenses paid would have been $6.14 for Class A, $9.93 for Class B, $10.03
for Class C, $3.82 for Class I and $5.35 for Class Y.
- --------------------------------------------------------------------------------
32 -- AXP LARGE CAP VALUE FUND -- 2005 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 14
Master Trust portfolios and 90 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 Other directorships
with Fund and during past five
length of years
service
- --------------------------------------- ----------------- ---------------------- --------------------------------
Arne H. Carlson Board member Chair, Board
901 S. Marquette Ave. since 1999 Services Corporation
Minneapolis, MN 55402 (provides
Age 70 administrative
services to boards).
Former Governor
of Minnesota
- --------------------------------------- ----------------- ---------------------- --------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Materials Company, Inc.
Minneapolis, MN 55402 (engineering and (construction
Age 67 construction) since materials/chemicals)
1998
- --------------------------------------- ----------------- ---------------------- --------------------------------
Livio D. DeSimone* Board member Retired Chair of the Cargill, Incorporated
30 Seventh Street East since 2001 Board and (commodity merchants and
Suite 3050 St. Paul, MN Chief Executive processors), General Mills,
55101-4901 Officer, Minnesota Inc. (consumer foods), Vulcan
Age 71 Mining and Materials Company (construction
Manufacturing (3M) materials/chemicals), Milliken &
Company (textiles and chemicals),
and Nexia Biotechnologies, Inc.
- --------------------------------------- ----------------- ---------------------- --------------------------------
Patricia M. Flynn Board member Trustee Professor of BostonFed Bancorp, Inc.
901 S. Marquette Ave. since 2004 Economics and (holding company) and its
Minneapolis, MN 55402 Management, Bentley subsidiary Boston Federal
Age 54 College since 2002; Savings Bank
former Dean,
McCallum Graduate
School of Business,
Bentley College from
1999 to 2002
- --------------------------------------- ----------------- ---------------------- --------------------------------
Anne P. Jones Board member Attorney and
901 S. Marquette Ave. since 1985 Consultant
Minneapolis, MN 55402
Age 70
- --------------------------------------- ----------------- ---------------------- --------------------------------
Stephen R. Lewis, Jr. Board member Retired President Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 and Professor of (manufactures irrigation
Minneapolis, MN 55402 Economics, Carleton systems)
Age 66 College
- --------------------------------------- ----------------- ---------------------- --------------------------------
* Livio D. DeSimone retired as a member of the Board, effective Sept. 8,
2005.
- --------------------------------------------------------------------------------
33 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Catherine James Paglia Board member Director, Enterprise Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Asset Management, (transportation, distribution
Minneapolis, MN 55402 Inc. (private real and logistics consultants)
Age 52 estate and asset
management company)
since 1999
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alan K. Simpson Board member Former three-term
1201 Sunshine Ave. since 1997 United States
Cody, WY 82414 Senator for Wyoming
Age 73
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alison Taunton-Rigby Board member Founder and Chief Hybridon, Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Executive Officer,
Minneapolis, MN 55402 RiboNovix, Inc.
Age 61 since 2004;
President, Forester
Biotech since 2000;
prior to that,
President and CEO,
Aquila
Biopharmaceuticals,
Inc.
- -------------------------------------- ------------------ ---------------------- --------------------------------
Board Member Affiliated with Ameriprise Financial, Inc. (formerly AEFC)**
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
William F. Truscott Board member Senior Vice
53600 Ameriprise Financial Center since 2001, President - Chief
Minneapolis, MN 55474 Vice President Investment Officer
Age 44 since 2002 of Ameriprise
Financial, Inc. and
RiverSource
Investments, LLC
since 2001. Former
Chief Investment
Officer and Managing
Director, Zurich
Scudder Investments
- -------------------------------------- ------------------ ---------------------- --------------------------------
** Interested person by reason of being an officer, director and/or employee of
Ameriprise Financial, Inc. (formerly American Express Financial Corporation)
or of RiverSource Investments, LLC, its wholly owned subsidiary.
- --------------------------------------------------------------------------------
34 -- AXP LARGE CAP VALUE FUND -- 2005 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. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Jeffrey P. Fox Treasurer Vice President -
105 Ameriprise Financial Center since 2002 Investment
Minneapolis, MN 55474 Accounting,
Age 50 Ameriprise
Financial, Inc.,
since 2002; Vice
President - Finance,
American Express
Company, 2000-2002;
Vice President -
Corporate
Controller,
Ameriprise
Financial, Inc.,
1996-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Paula R. Meyer President Senior Vice President
596 Ameriprise Financial Center since 2002 and General Manager -
Minneapolis, MN 55474 Mutual Funds,
Age 51 Ameriprise
Financial, Inc.,
since 2002 and
Senior Vice
President,
RiverSource
Investments, LLC
since 2004; Vice
President and
Managing Director -
American Express
Funds, Ameriprise
Financial, Inc.,
2000-2002;
Vice President,
Ameriprise
Financial, Inc.,
1998-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Leslie L. Ogg Vice President, President of Board
901 S. Marquette Ave. General Counsel, Services Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- -------------------------------------- ------------------ ---------------------- --------------------------------
Beth E. Weimer Chief Compliance Vice President and
172 Ameriprise Financial Center Officer since Chief Compliance
Minneapolis, MN 55474 2004 Officer, Ameriprise
Age 52 Financial, Inc.,
since 2001 and Chief
Compliance Officer,
RiverSource
Investments, LLC
since 2005; Vice
President and
Chief Compliance
Officer, Ameriprise
Financial Services,
Inc. (formerly
American Express
Financial Advisors),
2001-2005; Partner,
Arthur Andersen
Regulatory Risk
Services, 1998-2001
- -------------------------------------- ------------------ ---------------------- --------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
- --------------------------------------------------------------------------------
35 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Approval of Investment Management Services Agreement
Ameriprise Financial, Inc. (formerly American Express Financial Corporation or
AEFC) (the investment manager) is a wholly-owned subsidiary of American Express
Company. Under an Investment Management Services Agreement (the Agreement), the
investment manager provides investment advice and other services to the Fund.
Throughout the year, the Funds' Board of Directors and the Board's Investment
Review Committee monitor these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. The investment manager prepares detailed reports for the Board and its
Contracts Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with the investment manager (the Interim Period). The spin-off will
not result in an "assignment" of the Agreement under the Investment Company Act
of 1940 and, therefore, will not cause the termination of the Agreement
according to its terms. In connection with the spin-off the investment manager
has proposed that going forward, services under the Agreement be provided by an
affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel
advised the Board that it would be prudent, in connection with the spin-off, to
consider a new agreement with RiverSource and to seek shareholder approval of
that agreement as soon as practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above median for a peer group of funds with similar investment goals and noted
that although the Fund's investment performance in 2004 was below median, it was
consistent with the management style of the Fund in light of market conditions
in 2004.
- --------------------------------------------------------------------------------
36 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
The Board noted that, in addition to portfolio management and investment
research, the investment manager provides portfolio trading, daily net asset
value calculation, management of cash flow, product development, administration
of its compliance and legal departments, access to distribution, accounting and
recordkeeping, and reporting to the Board and shareholders. To evaluate these
services, the Board referred to surveys and benchmarks established by commercial
providers, trade associations and the investment manager's internal processes.
The Board concluded that the services provided were consistent with services
provided by investment managers to comparable mutual funds.
The Board also evaluated the price paid for the services provided by the
investment manager, noting the existence of a pricing philosophy, established by
the Board and the investment manager, that seeks to maintain total Fund expenses
within a range of the median expenses charged to comparable funds sold through
financial advisors. The Board considered detailed information set forth in an
annual report on fees and expenses, including, among other things, data showing
a comparison of the Fund's expenses with median expenses paid by funds in its
comparison group and data showing the Fund's contribution to the investment
manager's profitability. The Board determined that the total expense ratio of
the Fund is below median of its comparison group.
The Board considered the economies of scale that might be realized by the
investment manager as the Fund grew and took note of the extent to which Fund
shareholders also might benefit from such growth. The Board considered that the
Agreement provided for lower fees as assets increase at pre-established
breakpoints and concluded that the Agreement satisfactorily provided for sharing
these economies of scale.
The Board took into account the Contracts Committee's discussion comparing the
fees the investment manager charges to the Fund with those it charges to
institutional clients, noting that the relatively higher fees paid by the Fund
were principally attributable to the additional services required to manage a
regulated mutual fund, like the Fund, and the operation of a large mutual fund
family. The Board also considered the profitability realized by the investment
manager and its affiliates from its relationship with the Fund. The Board took
into account the services acquired by the investment manager through the use of
commission dollars paid by the Fund on portfolio transactions. The Board
concluded that the investment manager's overall costs and profitability were
appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit the investment
manager to offer competitive compensation to its personnel, make necessary
investments in its business and earn an appropriate profit. Based on the
foregoing, the Board concluded that the fees paid to the investment manager
under the Agreement were fair and reasonable and determined to approve renewal
of the Agreement for the Interim Period.
- --------------------------------------------------------------------------------
37 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website www.riversource.com/investments; or by
searching the website of the Securities and Exchange Commission (SEC) at
www.sec.gov. Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available without charge by calling the Fund's administrator, Board Services
Corporation, collect at (612) 330-9283; through the investment manager's
website, www.riversource.com/investments; or by searching the website of the SEC
at www.sec.gov.
- --------------------------------------------------------------------------------
38 -- AXP LARGE CAP VALUE FUND -- 2005 ANNUAL REPORT
American Express Funds
70100 Ameriprise Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by Ameriprise Financial Services, Inc. (formerly known as American
Express Financial Advisors Inc.). Member NASD.
AXP(R)
Quantitative
Large Cap Equity
Fund
Annual Report
for the Period Ended
July 31, 2005
AXP Quantitative Large Cap Equity Fund seeks to provide shareholders with
long-term capital growth.
(This annual report is intended only for the information of shareholders or
those who have received the offering prospectus of the Fund, which contains
information about 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.)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 8
Investments in Securities 10
Financial Statements 15
Notes to Financial Statements 18
Report of Independent Registered
Public Accounting Firm 29
Federal Income Tax Information 30
Fund Expenses Example 32
Board Members and Officers 34
Approval of Investment Management
Services Agreement 37
Proxy Voting 39
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company (American Express) announced plans to
pursue a spin off of Ameriprise Financial, Inc. (Ameriprise Financial) (formerly
American Express Financial Corporation) to American Express shareholders. The
separation from American Express is expected to be completed on Sept. 30, 2005.
After the separation from American Express, Ameriprise Financial will no longer
be affiliated with American Express.
Ameriprise Financial provides administrative services to the Fund and, through
Sept. 30, 2005, investment management services to the Fund. Effective Oct. 1,
2005, RiverSource Investments, LLC, a wholly owned subsidiary of Ameriprise
Financial, will provide investment management services to the Fund. In addition,
Ameriprise Financial is the parent company of the Fund's distributor, Ameriprise
Financial Services, Inc. (formerly American Express Financial Advisors Inc.);
the Fund's transfer agent, RiverSource Service Corporation (formerly American
Express Client Service Corporation); and the Fund's custodian, Ameriprise Trust
Company (formerly American Express Trust Company).
Effective Oct. 1, 2005, the Fund will change its name such that it no longer
bears the American Express brand and instead will bear the RiverSourceSM brand.
Information regarding the new name of the Fund and other changes will be
separately communicated to shareholders.
- --------------------------------------------------------------------------------
2 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Fund Snapshot AT JULY 31, 2005
PORTFOLIO MANAGERS
Portfolio managers Since Years in industry
Dimitris J. Bertsimas 4/03 12
Gina K. Mourtzinou 4/03 8
FUND OBJECTIVE
This Fund seeks to provide shareholders with long-term capital growth.
Inception dates by class
A: 4/24/03 B: 4/24/03 C: 4/24/03 I: 7/15/04 Y: 4/24/03
Ticker symbols by class
A: AQEAX B: -- C: -- I: ALEIX Y: --
Total net assets $119.4 million
Number of holdings 185
STYLE MATRIX
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
Shading within the style matrix indicates areas in which the Fund generally
invests.
SECTOR COMPOSITION
Percentage of portfolio assets
[PIE CHART]
Financials 16.2%
Health Care 14.3%
Energy 12.6%
Consumer Staples 11.5%
Consumer
Discretionary 10.8%
Information Technology 8.3%
Telecommunication
Services 8.2%
Industrials 6.1%
Short-Term Securities 5.5%
Utilities 5.0%
Materials 1.5%
TOP TEN HOLDINGS
Percentage of portfolio assets
Altria Group (Tobacco) 5.5%
Exxon Mobil (Oil & Gas) 4.3
Johnson & Johnson (Pharmaceuticals) 3.2
Chevron (Oil & Gas) 2.8
iShares MSCI EAFE Index Fund
(Diversified Financial Services) 2.4
SBC Communications
(Diversified Telecommunication Services) 2.3
Wal-Mart Stores (Food & Staples Retailing) 2.3
UnitedHealth Group (Health Care Providers & Services) 2.3
Citigroup (Diversified Financial Services) 2.3
Merck & Co (Pharmaceuticals) 2.0
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
The investment process used to manage the AXP Quantitative Large Cap Equity Fund
employs new technologies and statistical methods that have not previously been
used to managed open-end mutual funds. Shareholders should be prepared for the
possibility that the Fund may underperform its benchmark. While RiverSource
Investments seeks to control trading activity, the Fund may trade more often
than other funds in its peer group. Trading activity may result in increased
fees, expenses and taxes.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Performance Summary
[BAR CHART]
PERFORMANCE COMPARISON
For the year ended July 31, 2005
+15.95% +14.05% +12.56%
+15.95% = AXP Quantitative Large Cap Equity Fund Class A (excluding sales
charge)
+14.05% = S&P 500 Index (unmanaged)
+12.56% = Lipper Large-Cap Core Funds Index
(see "The Fund`s Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments.
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 other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (4/24/03) (4/24/03) (4/24/03) (7/15/04) (4/24/03)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at July 31, 2005
1 year +15.95% +9.28% +15.03% +10.03% +15.03% +14.03% +16.29% +16.25%
Since inception +16.45% +13.45% +15.47% +13.99% +15.48% +15.48% +15.00% +16.63%
at June 30, 2005
1 year +6.27% +0.15% +5.66% +0.66% +5.49% +4.49% N/A +6.72%
Since inception +15.04% +11.96% +14.17% +12.60% +14.18% +14.18% +11.41%* +15.30%
(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
eligible investors only, currently limited to AXP Portfolio Builder Funds,
six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- --------------------------------------------------------------------------------
4 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
AXP Quantitative Large Cap Equity Fund's Class A shares gained 15.95%, excluding
sales charge, for the 12 months ended July 31, 2005. The Fund outperformed the
Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which
returned 12.56%, as well as the Standard & Poor's 500 Index (S&P 500 Index),
which gained 14.05% for the same period.
Below, Portfolio Managers Dimitris Bertsimas and Gina Mourtzinou discuss the
Fund's positioning and results for the fiscal year ended July 31, 2005.
At July 31, 2005, approximately 68% of the Fund's shares were owned in aggregate
by AXP Portfolio Builder Funds, a group of six asset allocation funds managed by
RiverSource Investments, LLC* (RiverSource Investments). As a result, it is
possible AXP Quantitative Large Cap Equity Fund may experience relatively large
purchases or redemptions from AXP Portfolio Builder Funds (see page 23, Class I
capital share transactions for related activity during the most recent fiscal
period). RiverSource Investments seeks to minimize the impact of these
transactions by structuring them over a reasonable period of time. AXP
Quantitative Large Cap Equity Fund may experience increased expenses as it buys
and sells securities to satisfy subscriptions and redemptions in AXP Portfolio
Builder Funds. For more information on the Fund's expenses, see the discussions
beginning on pages 22 and 32.
Q: What factors most significantly affected performance?
A: Stocks selected using the Fund's three quantitative models (value, momentum,
and quality) drove strong performance relative to both the S&P 500 Index and
its peers during the 12-month period. Indeed, for the annual period, each of
the three quantitative models outperformed the S&P 500 Index, with the
momentum model leading the way, followed by the value and then quality
models. We believe the style diversification provided by the Fund's three
quantitative models continues to be a significant investment advantage.
Throughout the period, our use of risk modeling -- limits on individual
holding size and on sector and industry allocations relative to the S&P 500
Index -- supported the Fund's strong relative performance as well.
Another positive contributor to the Fund's relative results was its
international exposure. The Fund's international position was established
during the fourth calendar quarter of 2004 through MSCI EAFE iShares, an
exchange-traded fund based on the MSCI EAFE Index. When we established the
position, the U.S. dollar was weakening, thereby contributing to iShares'
strong performance. The Fund's international exposure accounted for a small
portion of its total net assets throughout the period,
* Prior to Oct. 1, 2005, Ameriprise Financial, Inc. (formerly American Express
Financial Corporation) served as investment manager to the AXP mutual funds.
- --------------------------------------------------------------------------------
5 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > Stocks selected using the Fund's three quantitative
models (value, momentum and quality) drove strong performance relative to both
the S&P 500 Index and its peers during the 12-month period. [END CALLOUT QUOTE]
reaching as much as 4% of portfolio assets at one time and standing at an
allocation of approximately 2% as of July 31, 2005.
Q: Which equity sectors and securities affected the Fund's performance most
during the fiscal year?
A: The Fund's stock holdings are determined by our quantitative models. The
Fund's sector allocations stem from these individual stock selections,
rather than any prediction that certain sectors might perform better or
worse than the market.
That said, from a sector perspective, significant exposure to and effective
stock selection within utilities and consumer staples made positive
contributions to the Fund's annual performance. Strong stock selection in
materials further boosted the Fund's relative results. The positive effect
of a sizable allocation to energy more than offset the negative effect of
the Fund's weak stock selection in this strongly performing sector. From an
individual stock perspective, positions in Altria Group (a consumer staples
beverages and tobacco stock selected by the momentum and value models),
ConocoPhillips (an integrated oil company originally both a momentum and
value model pick though currently just a value model selection), Johnson &
Johnson (a health care giant selected by the quality model) and Qualcomm (a
telecommunications equipment and services leader selected by the momentum
model) particularly helped the Fund's relative performance.
On the other hand, the Fund's ineffective stock selection in financials
detracted most from relative performance. A position in Fannie Mae (a
mortgage financer selected by the value model) particularly detracted. So,
too, did a holding in Intel (a semiconductor industry bellwether selected by
the momentum model). We maintained the Fund's holding in Fannie Mae, but
sold its position in Intel by the end of the annual period.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: During the period, the Fund maintained the following allocation among the
three quantitative models:
o 40% investment in the momentum model
o 30% in the value model and
o 30% in the quality model.
- --------------------------------------------------------------------------------
6 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > We will continue our strategy of monitoring weightings
as a risk management tool, so that no individual security, industry or sector
becomes too large within the Fund's portfolio. [END CALLOUT QUOTE]
As indicated, we also established a position in MSCI EAFE iShares during the
period, as our separate asset allocation model pointed to opportunities in
international stocks.
The Fund experienced significant inflows of cash during the annual period,
including share purchases by the AXP Portfolio Builder Series asset
allocation funds. We managed this influx by purchasing S&P 500 futures.
While the influx triggered a need to rebalance the portfolio more than once
a month, it had a rather neutral effect on Fund performance for the 12-month
period. Indeed, we continued to improve trading and cash flow management
through the fiscal year.
As mentioned, the Fund's sector weightings are a by-product of the
individual stocks selected by our three models. Over the course of the 12
months, our models became more positive on stocks in the energy and
telecommunications services sectors. On the other hand, our models became
more negative on stocks in the information technology and industrials
sectors.
At the end of the fiscal year, the Fund had significant exposures to the
telecommunications services, energy and consumer staples sectors and more
modest allocations to the information technology, financials and industrials
sectors.
Q: How do you intend to manage the Fund in the coming months?
A: We believe the Fund's consistent, disciplined approach will benefit
performance over the long term. Our focus going forward is to keep using our
three well-tested models to find the best-performing stocks regardless of
market conditions. We will continue our strategy of monitoring weightings as
a risk management tool, so that no individual security, industry or sector
becomes too large within the Fund's portfolio. We also intend to continue to
employ the macroscopic aspects of our risk controls, including constraints
on market capitalization, price, quality, turnover, transactions costs and
more.
Overall, we intend to maintain the high quality of the Fund's portfolio,
while at the same time maintaining our style diversification.
- --------------------------------------------------------------------------------
7 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Quantitative Large Cap Equity Fund Class A shares (from 5/1/03
to 7/31/05) as compared to the performance of two widely cited performance
indices, the Standard & Poor's 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.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Returns do not reflect taxes payable on
distributions and redemptions. Current performance may be lower or higher than
the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.riversource.com/investments. Also see "Past Performance" in the Fund's
current prospectus.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
July 31, 2005 $0.03 $0.07 $0.09 $0.19
July 31, 2004 0.02 0.11 0.01 0.14
July 31, 2003(1) -- -- -- --
(1) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
- --------------------------------------------------------------------------------
8 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP QUANTITATIVE LARGE CAP EQUITY FUND
AXP Quantitative Large Cap Equity Fund Class A
(includes sales charge) ($13,315) $ 9,425 $10,254 $11,483 $13,315
S&P 500 Index(1) ($14,003) $10,000 $10,849 $12,278 $14,003
Lipper Large-Cap Core Funds Index(2) ($13,318) $10,000 $10,755 $11,832 $13,318
5/1/03 7/03 7/04 7/05
COMPARATIVE RESULTS
Results at July 31, 2005 Since
1 year inception(3)
AXP Quantitative Large Cap Equity Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,928 $13,315
Average annual total return +9.28% +13.45%
S&P 500 Index(1)
Cumulative value of $10,000 $11,405 $14,003
Average annual total return +14.05% +16.14%
Lipper Large-Cap Core Funds Index(2)
Cumulative value of $10,000 $11,256 $13,318
Average annual total return +12.56% +13.58%
Results for other share classes can be found on page 4.
(1) The Standard & Poor's 500 Index (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.
(2) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
(3) Fund data is from April 24, 2003. S&P 500 Index and Lipper peer data is
from May 1, 2003.
- --------------------------------------------------------------------------------
9 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Investments in Securities
AXP Quantitative Large Cap Equity Fund
July 31, 2005
(Percentages represent value of investments compared to net assets)
Common Stocks (99.8%)
Issuer Shares Value(a)
Aerospace & Defense (1.2%)
Lockheed Martin 3,104 $193,690
Rockwell Collins 6,474 315,931
United Technologies 17,742 899,519
Total 1,409,140
Air Freight & Logistics (1.1%)
FedEx 8,070 678,607
United Parcel Service Cl B 8,119 592,443
Total 1,271,050
Auto Components (0.1%)
Johnson Controls 2,710 155,662
Automobiles (1.5%)
Ford Motor 59,497 638,998
General Motors 19,047 701,310
Harley-Davidson 7,703 409,723
Total 1,750,031
Beverages (2.0%)
Coca-Cola 54,536 2,386,495
Biotechnology (0.3%)
Gilead Sciences 8,252(b) 369,772
Building Products (0.2%)
Masco 5,949 201,731
Capital Markets (1.9%)
Bear Stearns Companies 2,977 303,981
Franklin Resources 11,019 890,557
Lehman Brothers Holdings 6,573 691,019
Merrill Lynch & Co 3,855 226,597
Morgan Stanley 2,267 120,264
Total 2,232,418
Chemicals (0.9%)
Dow Chemical 11,766 564,180
Monsanto 7,987 538,084
Total 1,102,264
Common Stocks (continued)
Issuer Shares Value(a)
Commercial Banks (2.1%)
Bank of America 15,071 $657,096
Comerica 3,962 242,078
KeyCorp 5,983 204,858
Natl City 18,078 667,258
PNC Financial Services Group 10,111 554,285
Regions Financial 1,911 64,286
Wachovia 2,649 133,457
Total 2,523,318
Communications Equipment (0.3%)
Comverse Technology 9,884(b) 249,966
Tellabs 11,862(b) 115,299
Total 365,265
Computers & Peripherals (2.8%)
Apple Computer 29,129(b) 1,242,353
Gateway 29,177(b) 116,124
Hewlett-Packard 21,708 534,451
Lexmark Intl Cl A 1,816(b) 113,863
NCR 10,017(b) 347,690
Network Appliance 12,591(b) 321,196
QLogic 19,572(b) 607,711
Total 3,283,388
Consumer Finance (0.6%)
MBNA 14,538 365,776
Providian Financial 7,465(b) 141,089
SLM 2,933 151,020
Total 657,885
Distributors (0.2%)
Genuine Parts 4,854 222,265
Diversified Financial Services (5.5%)
CIT Group 4,009 176,957
Citigroup 65,559 2,851,817
iShares MSCI EAFE Index Fund 56,400 3,042,216
Technology Select Sector
Index Fund 23,600 497,016
Total 6,568,006
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Diversified Telecommunication Services (8.0%)
AT&T 40,392 $799,762
BellSouth 84,339 2,327,756
SBC Communications 118,859 2,906,102
Sprint 45,198 1,215,826
Verizon Communications 69,594 2,382,202
Total 9,631,648
Electric Utilities (3.6%)
Allegheny Energy 7,515(b) 214,178
American Electric Power 8,425 326,048
CenterPoint Energy 9,851 135,353
Edison Intl 4,888 199,821
Exelon 29,458 1,576,591
FPL Group 5,382 232,072
PG&E 10,993 413,667
TECO Energy 9,536 180,803
TXU 11,741 1,017,240
Total 4,295,773
Electrical Equipment (0.5%)
American Power Conversion 6,587 185,161
Rockwell Automation 7,068 364,072
Total 549,233
Electronic Equipment & Instruments (0.1%)
Jabil Circuit 3,704(b) 115,528
Energy Equipment & Services (1.6%)
Halliburton 13,539 758,861
Noble 5,789 388,905
Transocean 13,356(b) 753,679
Total 1,901,445
Food & Staples Retailing (3.3%)
Albertson's 9,051 192,877
Kroger 18,677(b) 370,738
Safeway 14,936 362,945
SYSCO 4,436 159,962
Wal-Mart Stores 58,504 2,887,173
Total 3,973,695
Food Products (0.6%)
Archer-Daniels-Midland 28,840 661,590
Health Care Equipment & Supplies (0.9%)
Becton, Dickinson & Co 3,982 220,483
Biomet 2,427 92,542
Medtronic 10,087 544,093
Zimmer Holdings 2,417(b) 199,064
Total 1,056,182
Common Stocks (continued)
Issuer Shares Value(a)
Health Care Providers & Services (6.4%)
Aetna 10,729 $830,425
Cardinal Health 9,078 540,867
Caremark Rx 6,863(b) 305,953
CIGNA 9,990 1,066,433
HCA 9,971 491,072
Humana 8,427(b) 335,816
Medco Health Solutions 2,805(b) 135,874
Tenet Healthcare 11,188(b) 135,822
UnitedHealth Group 55,138 2,883,716
WellPoint 13,851(b) 979,820
Total 7,705,798
Hotels, Restaurants & Leisure (2.0%)
Darden Restaurants 4,418 153,305
Harrah's Entertainment 8,056 634,329
Marriott Intl Cl A 7,230 495,038
Starbucks 5,346(b) 280,932
Starwood Hotels & Resorts
Worldwide Unit 6,800 430,576
Yum! Brands 6,453 337,815
Total 2,331,995
Household Durables (2.1%)
Black & Decker 2,610 235,709
Centex 7,611 563,062
DR Horton 22,231 913,249
KB HOME 5,316 435,434
Pulte Homes 3,146 294,529
Whirlpool 1,247 99,735
Total 2,541,718
Household Products (0.2%)
Kimberly-Clark 3,802 242,416
Industrial Conglomerates (1.1%)
3M 14,197 1,064,775
Textron 3,415 253,291
Total 1,318,066
Insurance (3.5%)
Allstate 15,708 962,272
Ambac Financial Group 4,537 325,938
Aon 11,958 304,212
Jefferson-Pilot 2,029 101,795
Lincoln Natl 6,281 303,372
Loews 4,520 378,008
Marsh & McLennan Companies 9,979 289,092
MBIA 5,309 322,469
Prudential Financial 11,757 786,543
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Insurance (cont.)
Safeco 1,299 $71,367
Torchmark 3,597 188,015
UnumProvident 9,896 189,508
Total 4,222,591
Internet & Catalog Retail (0.4%)
eBay 12,445(b) 519,952
IT Services (1.2%)
Affiliated Computer Services Cl A 2,305(b) 115,181
Automatic Data Processing 5,141 228,311
Computer Sciences 2,552(b) 116,831
Convergys 11,645(b) 169,435
Electronic Data Systems 19,225 395,457
Sabre Holdings Cl A 6,183 118,714
SunGard Data Systems 3,167(b) 113,664
Unisys 17,838(b) 115,412
Total 1,373,005
Leisure Equipment & Products (0.5%)
Eastman Kodak 15,799 422,466
Mattel 8,419 157,014
Total 579,480
Machinery (0.9%)
Caterpillar 13,374 720,993
PACCAR 4,329 312,640
Total 1,033,633
Media (0.3%)
Walt Disney 13,238 339,422
Metals & Mining (0.7%)
Freeport-McMoRan Copper &
Gold Cl B 4,687 188,792
Nucor 4,197 232,724
Phelps Dodge 3,550 377,898
Total 799,414
Multi-Utilities & Unregulated Power (1.7%)
AES 31,821(b) 510,727
CMS Energy 10,719(b) 169,789
Duke Energy 24,072 711,087
Public Service Enterprise Group 7,731 497,103
Sempra Energy 2,652 112,710
Total 2,001,416
Common Stocks (continued)
Issuer Shares Value(a)
Multiline Retail (1.8%)
Dollar General 7,198 $146,263
Federated Dept Stores 5,958 452,033
May Dept Stores 12,818 526,179
Nordstrom 9,150 338,642
Sears Holdings 4,466(b) 688,791
Total 2,151,908
Oil & Gas (11.6%)
Amerada Hess 2,404 283,335
Anadarko Petroleum 5,403 477,355
Apache 2,021 138,236
Chevron 60,101 3,486,459
ConocoPhillips 7,228 452,401
Devon Energy 19,319 1,083,603
El Paso 37,470 449,640
EOG Resources 7,649 467,354
Exxon Mobil 92,215 5,417,630
Kinder Morgan 4,504 400,225
Marathon Oil 2,863 167,085
Unocal 8,370 542,795
Valero Energy 6,815 564,146
Total 13,930,264
Pharmaceuticals (7.4%)
Abbott Laboratories 6,212 289,666
Bristol-Myers Squibb 65,709 1,641,411
Johnson & Johnson 62,672 4,008,500
Merck & Co 81,218 2,522,631
Wyeth 10,467 478,865
Total 8,941,073
Real Estate Investment Trust (0.3%)
Archstone-Smith Trust 3,635 154,488
ProLogis 3,989 181,738
Total 336,226
Road & Rail (1.5%)
Burlington Northern Santa Fe 16,941 919,049
CSX 6,339 288,678
Norfolk Southern 15,036 559,490
Total 1,767,217
Semiconductors & Semiconductor Equipment (0.6%)
Advanced Micro Devices 13,354(b) 268,148
LSI Logic 11,706(b) 114,251
NVIDIA 11,473(b) 310,459
Total 692,858
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Software (3.9%)
Adobe Systems 17,128 $507,674
Autodesk 9,357 319,916
Compuware 28,997(b) 244,445
Microsoft 69,193 1,772,033
Oracle 113,833(b) 1,545,852
Symantec 11,891(b) 261,245
Total 4,651,165
Specialty Retail (2.2%)
Best Buy 4,212 322,639
Home Depot 46,869 2,039,271
Staples 12,394 282,211
Total 2,644,121
Textiles, Apparel & Luxury Goods (0.3%)
Nike Cl B 4,448 372,742
Thrifts & Mortgage Finance (3.2%)
Countrywide Financial 6,048 217,728
Fannie Mae 31,160 1,740,598
Freddie Mac 10,326 653,429
MGIC Investment 3,110 213,284
Washington Mutual 24,008 1,019,860
Total 3,844,899
Tobacco (6.1%)
Altria Group 104,032 6,965,982
UST 6,330 291,307
Total 7,257,289
Trading Companies & Distributors (0.1%)
WW Grainger 2,096 130,623
Wireless Telecommunication Services (0.6%)
Nextel Communications Cl A 21,414(b) 745,207
Total Common Stocks
(Cost: $113,013,983) $119,158,282
Short-Term Securities (5.8%)
Issuer Effective Principal Value(a)
yield amount
U.S. Government Agency (4.9%)
Federal Natl Mtge Assn Disc Nts
08-22-05 3.28% $2,600,000 $2,594,332
09-07-05 3.26 3,300,000 3,288,083
Total 5,882,415
Commercial Paper (0.9%)
HSBC Finance
08-01-05 3.31 1,000,000 999,724
Total Short-Term Securities
(Cost: $6,882,765) $6,882,139
Total Investments in Securities
(Cost: $119,896,748)(c) $126,040,421
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
13 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Notes to Investments in Securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) At July 31, 2005, the cost of securities for federal income tax purposes
was $119,994,041 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $ 7,865,150
Unrealized depreciation (1,818,770)
----------
Net unrealized appreciation $ 6,046,380
-----------
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.riversource.com/investments.
- --------------------------------------------------------------------------------
14 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Quantitative Large Cap Equity Fund
July 31, 2005
Assets
Investments in securities, at value (Note 1)
(identified cost $119,896,748) $126,040,421
Cash in bank on demand deposit 63,008
Capital shares receivable 43,455
Dividends and accrued interest receivable 194,530
Receivable for investment securities sold 5,782,959
---------
Total assets 132,124,373
-----------
Liabilities
Capital shares payable 10,711
Payable for investment securities purchased 12,666,426
Accrued investment management services fee 1,976
Accrued distribution fee 455
Accrued transfer agency fee 141
Accrued administrative services fee 165
Other accrued expenses 69,384
------
Total liabilities 12,749,258
----------
Net assets applicable to outstanding capital stock $119,375,115
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 177,771
Additional paid-in capital 109,222,972
Undistributed net investment income 503,820
Accumulated net realized gain (loss) 3,326,879
Unrealized appreciation (depreciation) on investments 6,143,673
---------
Total -- representing net assets applicable to outstanding capital stock $119,375,115
============
Net assets applicable to outstanding shares: Class A $ 28,058,336
Class B $ 9,287,787
Class C $ 188,938
Class I $ 81,805,703
Class Y $ 34,351
Net asset value per share of outstanding capital stock: Class A shares 4,189,337 $ 6.70
Class B shares 1,402,057 $ 6.62
Class C shares 28,519 $ 6.62
Class I shares 12,152,084 $ 6.73
Class Y shares 5,118 $ 6.71
----- ------------
See accompanying notes to financial statements.
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15 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Statement of operations
AXP Quantitative Large Cap Equity Fund
Year ended July 31, 2005
Investment income
Income:
Dividends $1,295,906
Interest 73,221
------
Total income 1,369,127
---------
Expenses (Note 2):
Investment management services fee 408,720
Distribution fee
Class A 44,025
Class B 51,693
Class C 1,420
Transfer agency fee 40,155
Incremental transfer agency fee
Class A 3,114
Class B 2,060
Class C 71
Service fee -- Class Y 30
Administrative services fees and expenses 29,441
Compensation of board members 8,604
Custodian fees 27,540
Printing and postage 37,795
Registration fees 57,489
Audit fees 20,500
Other 5,942
-----
Total expenses 738,599
Expenses waived/reimbursed by Ameriprise Financial (formerly AEFC) (Note 2) (23,127)
-------
715,472
Earnings credits on cash balances (Note 2) (4,727)
------
Total net expenses 710,745
-------
Investment income (loss) -- net 658,382
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 3,680,690
Futures contracts 115,625
-------
Net realized gain (loss) on investments 3,796,315
Net change in unrealized appreciation (depreciation) on investments 5,439,579
---------
Net gain (loss) on investments 9,235,894
---------
Net increase (decrease) in net assets resulting from operations $9,894,276
==========
See accompanying notes to financial statements.
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16 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP Quantitative Large Cap Equity Fund
Year ended July 31, 2005 2004
Operations and distributions
Investment income (loss) -- net $ 658,382 $ 70,924
Net realized gain (loss) on investments 3,796,315 824,610
Net change in unrealized appreciation (depreciation) on investments 5,439,579 335,658
--------- -------
Net increase (decrease) in net assets resulting from operations 9,894,276 1,231,192
--------- ---------
Distributions to shareholders from:
Net investment income
Class A (62,837) (32,550)
Class B -- (921)
Class C -- (88)
Class I (142,494) --
Class Y (172) (94)
Net realized gain
Class A (327,285) (204,671)
Class B (102,880) (35,467)
Class C (3,213) (2,669)
Class I (723,932) --
Class Y (727) (461)
---- ----
Total distributions (1,363,540) (276,921)
---------- --------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 21,609,484 6,113,596
Class B shares 6,978,820 2,111,340
Class C shares 77,713 99,094
Class I shares 66,292,986 9,070,761
Class Y shares 7,000 --
Reinvestment of distributions at net asset value
Class A shares 346,177 96,546
Class B shares 100,334 34,783
Class C shares 2,894 2,508
Class I shares 866,109 --
Class Y shares 505 257
Payments for redemptions
Class A shares (9,642,178) (1,001,408)
Class B shares (Note 2) (1,046,545) (582,132)
Class C shares (Note 2) (48,696) (31,819)
Class I shares (150,008) (701)
-------- ----
Increase (decrease) in net assets from capital share transactions 85,394,595 15,912,825
---------- ----------
Total increase (decrease) in net assets 93,925,331 16,867,096
Net assets at beginning of year 25,449,784 8,582,688
---------- ---------
Net assets at end of year $119,375,115 $25,449,784
============ ===========
Undistributed net investment income $ 503,820 $ 52,439
------------ -----------
See accompanying notes to financial statements.
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17 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Notes to Financial Statements
AXP Quantitative Large Cap Equity 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 invests primarily in equity securities of
companies listed on U.S. exchanges with market capitalizations greater than $5
billion at the time of purchase.
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 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.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July 31, 2005, Ameriprise Financial, Inc.
(Ameriprise Financial) (formerly American Express Financial Corporation) and the
AXP Portfolio Builder Funds owned 100% of Class I shares, which represents
68.53% of the Fund's net assets.
At July 31, 2005, Ameriprise Financial and the AXP Portfolio Builder Funds owned
approximately 68% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees 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.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
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18 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
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.
Pursuant to procedures adopted by the Board of Directors of the funds,
Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there is a reasonably high degree of certainty that
the effect of the development or event has actually caused the closing price to
no longer reflect the actual value, the closing prices, as determined at the
close of the applicable foreign market, may be adjusted to reflect the fair
value of the affected foreign securities as of the close of the New York Stock
Exchange. Significant events include material movements in the U.S. securities
markets prior to the opening of foreign markets on the following trading day.
FVP results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. 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 Fund 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 Fund 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 Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund 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
Fund pays a premium whether or not the option is exercised. The Fund 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 Fund 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 Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund 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.
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19 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Upon entering into a futures contract, the Fund 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 Fund 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 Fund 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 Fund 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 Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
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 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.
- --------------------------------------------------------------------------------
20 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $1,498
and accumulated net realized gain been increased by $1,498.
The tax character of distributions paid for the years indicated is as follows:
Year ended July 31, 2005 2004
Class A
Distributions paid from:
Ordinary income $202,166 $228,642
Long-term capital gain 187,956 8,579
Class B
Distributions paid from:
Ordinary income 43,797 34,902
Long-term capital gain 59,083 1,486
Class C
Distributions paid from:
Ordinary income 1,368 2,645
Long-term capital gain 1,845 112
Class I*
Distributions paid from:
Ordinary income 450,678 --
Long-term capital gain 415,748 --
Class Y
Distributions paid from:
Ordinary income 481 536
Long-term capital gain 418 19
* Inception date is July 15, 2004.
At July 31, 2005, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income $2,869,627
Accumulated long-term gain (loss) $1,058,365
Unrealized appreciation (depreciation) $6,046,380
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.
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, market discount and original issue discount
using the effective interest method, is accrued daily.
- --------------------------------------------------------------------------------
21 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. Prior to Oct. 1, 2005, investment management services were provided by
Ameriprise Financial. The management fee is a percentage of the Fund's average
daily net assets that declines from 0.60% to 0.48% annually as the Fund's assets
increase. 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 the
Fund to the Lipper Large-Cap Core Funds Index. In certain circumstances, the
board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment increased the fee by $15,749 for the year ended July 31,
2005.
Under the current Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
the Fund's average daily net assets that declines from 0.05% to 0.02% annually
as the Fund's assets increase. It is expected that the fee schedule to the
agreement will be revised effective Oct. 1, 2005. Under the new agreement, the
fee percentage of the Fund's average daily net assets will decline from 0.06% to
0.03% annually as the Fund's net assets increase. 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 Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(formerly American Express Client Service Corporation) (the Transfer Agent)
maintains shareholder accounts and records. The Fund pays the Transfer Agent 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
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
Beginning May 20, 2005, the Transfer Agent implemented an annual closed account
fee of $5 per inactive account, charged on a pro rata basis for 12 months from
the date the account becomes inactive. These fees were insignificant for the
year ended July 31, 2005 and are included in the transfer agency fees on the
statement of operations.
- --------------------------------------------------------------------------------
22 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
The Fund has agreements with Ameriprise Financial Services, Inc. (formerly
American Express Financial Advisors Inc.) (the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, 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
$120,789 for Class A, $5,134 for Class B and $30 for Class C for the year ended
July 31, 2005.
For the year ended July 31, 2005, Ameriprise Financial and its affiliates waived
certain fees and expenses to 1.25% for Class A, 2.04% for Class B, 2.06% for
Class C and 1.06% for Class Y. Of these waived fees and expenses, the transfer
agency fees waived for Class A, Class B, Class C and Class Y were $18,458,
$4,530, $104 and $35 respectively. In addition, Ameriprise Financial and its
affiliates have agreed to extend the current agreement to waive certain fees and
expenses through Sept. 30, 2005. It is expected that a new agreement to waive
certain fees and expenses will be effective on Oct. 1, 2005 until July 31, 2006,
such that net expenses, before giving effect to any performance incentive
adjustment, will not exceed 1.25% for Class A, 2.04% for Class B, 2.06% for
Class C, 0.93% for Class I and 1.06% for Class Y of the Fund's average daily net
assets.
During the year ended July 31, 2005, the Fund's custodian and transfer agency
fees were reduced by $4,727 as a result of earnings credits from overnight cash
balances. The Fund also pays custodian fees to Ameriprise Trust Company
(formerly American Express Trust Company), an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $126,724,187 and $41,805,397, respectively, for the year
ended July 31, 2005. Realized gains and losses are determined on an identified
cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended July 31, 2005
Class A Class B Class C Class I Class Y
Sold 3,401,658 1,109,408 12,216 10,493,500 1,160
Issued for reinvested distributions 54,345 15,850 457 135,541 79
Redeemed (1,531,238) (165,421) (7,726) (24,014) --
---------- -------- ------ ------- -----
Net increase (decrease) 1,924,765 959,837 4,947 10,605,027 1,239
--------- ------- ----- ---------- -----
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 1,028,744 358,722 17,252 1,547,177 --
Issued for reinvested distributions 16,447 5,946 429 -- 45
Redeemed (166,966) (99,601) (5,323) (120) --
-------- ------- ------ ---- --
Net increase (decrease) 878,225 265,067 12,358 1,547,057 45
------- ------- ------ --------- --
* Inception date is July 15, 2004.
- --------------------------------------------------------------------------------
23 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
5. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The agreement
went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective
Rate plus 0.50% or 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 $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended July 31, 2005.
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, 2005 2004 2003(b)
Net asset value, beginning of period $5.95 $5.44 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) .04 .02 .01
Net gains (losses) (both realized and unrealized) .90 .63 .43
----- ----- -----
Total from investment operations .94 .65 .44
----- ----- -----
Less distributions:
Dividends from net investment income (.03) (.02) --
Distributions from realized gains (.16) (.12) --
----- ----- -----
Total distributions (.19) (.14) --
----- ----- -----
Net asset value, end of period $6.70 $5.95 $5.44
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $28 $13 $8
Ratio of expenses to average daily net assets(c),(d) 1.25% 1.13% 1.22%(e)
Ratio of net investment income (loss) to average daily net assets .84% .65% .81%(e)
Portfolio turnover rate (excluding short-term securities) 64% 64% 17%
Total return(f) 15.95% 11.99% 8.80%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class A
would have been 1.35%, 1.91% and 7.39% for the periods ended July 31, 2005,
2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- --------------------------------------------------------------------------------
24 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003(b)
Net asset value, beginning of period $5.90 $5.43 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) .02 (.02) --
Net gains (losses) (both realized and unrealized) .86 .61 .43
----- ----- -----
Total from investment operations .88 .59 .43
----- ----- -----
Less distributions:
Distributions from realized gains (.16) (.12) --
----- ----- -----
Net asset value, end of period $6.62 $5.90 $5.43
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $9 $3 $1
Ratio of expenses to average daily net assets(c),(d) 2.04% 1.95% 2.01%(e)
Ratio of net investment income (loss) to average daily net assets .06% (.16%) (.08%)(e)
Portfolio turnover rate (excluding short-term securities) 64% 64% 17%
Total return(f) 15.03% 10.95% 8.60%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class B
would have been 2.13%, 2.73% and 8.18% for the periods ended July 31, 2005,
2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- --------------------------------------------------------------------------------
25 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003(b)
Net asset value, beginning of period $5.90 $5.43 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) .01 (.02) --
Net gains (losses) (both realized and unrealized) .87 .61 .43
----- ----- -----
Total from investment operations .88 .59 .43
----- ----- -----
Less distributions:
Distributions from realized gains (.16) (.12) --
----- ----- -----
Net asset value, end of period $6.62 $5.90 $5.43
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $--
Ratio of expenses to average daily net assets(c),(d) 2.06% 1.95% 2.01%(e)
Ratio of net investment income (loss) to average daily net assets .02% (.17%) (.05%)(e)
Portfolio turnover rate (excluding short-term securities) 64% 64% 17%
Total return(f) 15.03% 10.96% 8.60%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class C
would have been 2.13%, 2.73% and 8.20% for the periods ended July 31, 2005,
2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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26 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004(b)
Net asset value, beginning of period $5.96 $5.99
----- -----
Income from investment operations:
Net investment income (loss) .04 .02
Net gains (losses) (both realized and unrealized) .92 (.05)
----- -----
Total from investment operations .96 (.03)
----- -----
Less distributions:
Dividends from net investment income (.03) --
Distributions from realized gains (.16) --
----- -----
Total distributions (.19) --
----- -----
Net asset value, end of period $6.73 $5.96
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $82 $9
Ratio of expenses to average daily net assets(c) .91% .93%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.19% 5.35%(d)
Portfolio turnover rate (excluding short-term securities) 64% 64%
Total return(f) 16.29% (.50%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is July 15, 2004.
(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) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratio of expenses for Class I
would have been 1.27% for the period ended July 31, 2004.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- --------------------------------------------------------------------------------
27 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005 2004 2003(b)
Net asset value, beginning of period $5.95 $5.45 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) .05 .03 .01
Net gains (losses) (both realized and unrealized) .91 .61 .44
----- ----- -----
Total from investment operations .96 .64 .45
----- ----- -----
Less distributions:
Dividends from net investment income (.04) (.02) --
Distributions from realized gains (.16) (.12) --
----- ----- -----
Total distributions (.20) (.14) --
----- ----- -----
Net asset value, end of period $6.71 $5.95 $5.45
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $--
Ratio of expenses to average daily net assets(c),(d) 1.06% .98% 1.01%(e)
Ratio of net investment income (loss) to average daily net assets 1.03% .78% .90%(e)
Portfolio turnover rate (excluding short-term securities) 64% 64% 17%
Total return(f) 16.25% 11.87% 9.00%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Ameriprise Financial waived/reimbursed the Fund for certain expenses. Had
Ameriprise Financial not done so, the annual ratios of expenses for Class Y
would have been 1.18%, 1.76% and 7.20% for the periods ended July 31, 2005,
2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
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28 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GROWTH SERIES, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of AXP Quantitative Large Cap Equity
Fund (a series of AXP Growth Series, Inc.) as of July 31, 2005, 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, 2005, and
the financial highlights for each of the years in the two-year period ended July
31, 2005 and for the period from April 24, 2003 (when shares became publicly
available) to 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 the standards of the Public Company
Accounting Oversight Board (United States). 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. Our procedures included confirmation of
securities owned as of July 31, 2005, 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Quantitative Large Cap Equity Fund as of July 31, 2005, 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 U.S.
generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2005
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29 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
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 Quantitative Large Cap Equity Fund
Fiscal year ended July 31, 2005
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 35.08%
Dividends Received Deduction for corporations 34.99%
Payable date Per share
Dec. 20, 2004 $0.09760
Capital gain distributions -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.09141
Total distributions $0.18901
Class B
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 35.08%
Dividends Received Deduction for corporations 34.99%
Payable date Per share
Dec. 20, 2004 $0.06776
Capital gain distributions -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.09141
Total distributions $0.15917
- --------------------------------------------------------------------------------
30 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Class C
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 35.08%
Dividends Received Deduction for corporations 34.99%
Payable date Per share
Dec. 20, 2004 $0.06776
Capital gain distributions -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.09141
Total distributions $0.15917
Class I
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 35.08%
Dividends Received Deduction for corporations 34.99%
Payable date Per share
Dec. 20, 2004 $0.09909
Capital gain distributions -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.09141
Total distributions $0.19050
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 35.08%
Dividends Received Deduction for corporations 34.99%
Payable date Per share
Dec. 20, 2004 $0.10555
Capital gain distributions -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.09141
Total distributions $0.19696
- --------------------------------------------------------------------------------
31 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended July 31, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
32 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Feb. 1, 2005 July 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,063.50 $6.32(c) 1.25%
Hypothetical (5% return before expenses) $1,000 $1,018.39 $6.19(c) 1.25%
Class B
Actual(b) $1,000 $1,057.50 $10.29(c) 2.04%
Hypothetical (5% return before expenses) $1,000 $1,014.52 $10.08(c) 2.04%
Class C
Actual(b) $1,000 $1,057.50 $10.39(c) 2.06%
Hypothetical (5% return before expenses) $1,000 $1,014.42 $10.18(c) 2.06%
Class I
Actual(b) $1,000 $1,064.90 $4.61(c) .91%
Hypothetical (5% return before expenses) $1,000 $1,020.06 $4.51(c) .91%
Class Y
Actual(b) $1,000 $1,063.40 $5.36(c) 1.06%
Hypothetical (5% return before expenses) $1,000 $1,019.32 $5.25(c) 1.06%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2005: +6.35%
for Class A, +5.75% for Class B, +5.75% for Class C, +6.49% for Class I and
+6.34% for Class Y.
(c) Pending final approval from the Fund's Board of Directors (Board), it is
expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the Fund
will be revised. It is also expected that Ameriprise Financial and its
affiliates will contractually agree to waive certain fees and to absorb
certain expenses until July 31, 2006, unless sooner terminated at the
discretion of the Board. Under this expense cap/fee waiver agreement, net
expenses, before giving effect to any performance incentive adjustment,
will not exceed 1.25% for Class A; 2.04% for Class B; 2.06% for Class C;
0.93% for Class I and 1.06% for Class Y. If the revised fee schedule under
the Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended July 31, 2005, the actual
and hypothetical expenses paid would have been the same as those expenses
presented in the table above for all classes, except Class I. The actual
expenses paid for Class I would have been $4.66 and the hypothetical
expenses paid would have been $4.56.
- --------------------------------------------------------------------------------
33 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 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 14
Master Trust portfolios and 90 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 Other directorships
with Fund and during past five
length of years
service
- --------------------------------------- ----------------- ---------------------- --------------------------------
Arne H. Carlson Board member Chair, Board
901 S. Marquette Ave. since 1999 Services Corporation
Minneapolis, MN 55402 (provides
Age 70 administrative
services to boards).
Former Governor
of Minnesota
- --------------------------------------- ----------------- ---------------------- --------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Materials Company, Inc.
Minneapolis, MN 55402 (engineering and (construction
Age 67 construction) since materials/chemicals)
1998
- --------------------------------------- ----------------- ---------------------- --------------------------------
Livio D. DeSimone* Board member Retired Chair of the Cargill, Incorporated
30 Seventh Street East since 2001 Board and (commodity merchants and
Suite 3050 St. Paul, MN Chief Executive processors), General Mills,
55101-4901 Officer, Minnesota Inc. (consumer foods), Vulcan
Age 71 Mining and Materials Company (construction
Manufacturing (3M) materials/chemicals), Milliken &
Company (textiles and chemicals),
and Nexia Biotechnologies, Inc.
- --------------------------------------- ----------------- ---------------------- --------------------------------
Patricia M. Flynn Board member Trustee Professor of BostonFed Bancorp, Inc.
901 S. Marquette Ave. since 2004 Economics and (holding company) and its
Minneapolis, MN 55402 Management, Bentley subsidiary Boston Federal
Age 54 College since 2002; Savings Bank
former Dean,
McCallum Graduate
School of Business,
Bentley College from
1999 to 2002
- --------------------------------------- ----------------- ---------------------- --------------------------------
Anne P. Jones Board member Attorney and
901 S. Marquette Ave. since 1985 Consultant
Minneapolis, MN 55402
Age 70
- --------------------------------------- ----------------- ---------------------- --------------------------------
Stephen R. Lewis, Jr. Board member Retired President Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 and Professor of (manufactures irrigation
Minneapolis, MN 55402 Economics, Carleton systems)
Age 66 College
- --------------------------------------- ----------------- ---------------------- --------------------------------
* Livio D. DeSimone retired as a member of the Board, effective Sept. 8,
2005.
- --------------------------------------------------------------------------------
34 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Catherine James Paglia Board member Director, Enterprise Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Asset Management, (transportation, distribution
Minneapolis, MN 55402 Inc. (private real and logistics consultants)
Age 52 estate and asset
management company)
since 1999
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alan K. Simpson Board member Former three-term
1201 Sunshine Ave. since 1997 United States
Cody, WY 82414 Senator for Wyoming
Age 73
- -------------------------------------- ------------------ ---------------------- --------------------------------
Alison Taunton-Rigby Board member Founder and Chief Hybridon, Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Executive Officer,
Minneapolis, MN 55402 RiboNovix, Inc.
Age 61 since 2004;
President, Forester
Biotech since 2000;
prior to that,
President and CEO,
Aquila
Biopharmaceuticals,
Inc.
- -------------------------------------- ------------------ ---------------------- --------------------------------
Board Member Affiliated with Ameriprise Financial, Inc. (formerly AEFC)**
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
William F. Truscott Board member Senior Vice
53600 Ameriprise Financial Center since 2001, President - Chief
Minneapolis, MN 55474 Vice President Investment Officer
Age 44 since 2002 of Ameriprise
Financial, Inc. and
RiverSource
Investments, LLC
since 2001. Former
Chief Investment
Officer and Managing
Director, Zurich
Scudder Investments
- -------------------------------------- ------------------ ---------------------- --------------------------------
** Interested person by reason of being an officer, director and/or employee of
Ameriprise Financial, Inc. (formerly American Express Financial Corporation)
or of RiverSource Investments, LLC, its wholly owned subsidiary.
- --------------------------------------------------------------------------------
35 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 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. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation Other directorships
with Fund and during past five
length of service years
- -------------------------------------- ------------------ ---------------------- --------------------------------
Jeffrey P. Fox Treasurer Vice President -
105 Ameriprise Financial Center since 2002 Investment
Minneapolis, MN 55474 Accounting,
Age 50 Ameriprise
Financial, Inc.,
since 2002; Vice
President - Finance,
American Express
Company, 2000-2002;
Vice President -
Corporate
Controller,
Ameriprise
Financial, Inc.,
1996-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Paula R. Meyer President Senior Vice President
596 Ameriprise Financial Center since 2002 and General Manager -
Minneapolis, MN 55474 Mutual Funds,
Age 51 Ameriprise
Financial, Inc.,
since 2002 and
Senior Vice
President,
RiverSource
Investments, LLC
since 2004; Vice
President and
Managing Director -
American Express
Funds, Ameriprise
Financial, Inc.,
2000-2002;
Vice President,
Ameriprise
Financial, Inc.,
1998-2000
- -------------------------------------- ------------------ ---------------------- --------------------------------
Leslie L. Ogg Vice President, President of Board
901 S. Marquette Ave. General Counsel, Services Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- -------------------------------------- ------------------ ---------------------- --------------------------------
Beth E. Weimer Chief Compliance Vice President and
172 Ameriprise Financial Center Officer since Chief Compliance
Minneapolis, MN 55474 2004 Officer, Ameriprise
Age 52 Financial, Inc.,
since 2001 and Chief
Compliance Officer,
RiverSource
Investments, LLC
since 2005; Vice
President and
Chief Compliance
Officer, Ameriprise
Financial Services,
Inc. (formerly
American Express
Financial Advisors),
2001-2005; Partner,
Arthur Andersen
Regulatory Risk
Services, 1998-2001
- -------------------------------------- ------------------ ---------------------- --------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
- --------------------------------------------------------------------------------
36 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Approval of Investment Management Services Agreement
Ameriprise Financial, Inc. (formerly American Express Financial Corporation or
AEFC) (the investment manager) is a wholly-owned subsidiary of American Express
Company. Under an Investment Management Services Agreement (the Agreement), the
investment manager provides investment advice and other services to the Fund.
Throughout the year, the Funds' Board of Directors and the Board's Investment
Review Committee monitor these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. The investment manager prepares detailed reports for the Board and its
Contracts Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with the investment manager (the Interim Period). The spin-off will
not result in an "assignment" of the Agreement under the Investment Company Act
of 1940 and, therefore, will not cause the termination of the Agreement
according to its terms. In connection with the spin-off the investment manager
has proposed that going forward, services under the Agreement be provided by an
affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel
advised the Board that it would be prudent, in connection with the spin-off, to
consider a new agreement with RiverSource and to seek shareholder approval of
that agreement as soon as practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above median for a peer group of funds with similar investment goals and noted
that the Fund's investment performance in 2004 exceeded the median.
The Board noted that, in addition to portfolio management and investment
research, the investment manager provides portfolio trading, daily net asset
value calculation, management of cash flow, product development, administration
of its compliance and legal departments, access to distribution, accounting and
recordkeeping, and reporting to the Board and shareholders. To evaluate these
services, the Board referred to surveys and benchmarks established by commercial
providers, trade associations and the investment manager's internal processes.
The Board concluded that the services provided were consistent with services
provided by investment managers to comparable mutual funds.
- --------------------------------------------------------------------------------
37 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
The Board also evaluated the price paid for the services provided by the
investment manager, noting the existence of a pricing philosophy, established by
the Board and the investment manager, that seeks to maintain total Fund expenses
within a range of the median expenses charged to comparable funds sold through
financial advisors. The Board considered detailed information set forth in an
annual report on fees and expenses, including, among other things, data showing
a comparison of the Fund's expenses with median expenses paid by funds in its
comparison group and data showing the Fund's contribution to the investment
manager's profitability. The Board determined that the total expense ratio of
the Fund is below median for its comparison group.
The Board considered the economies of scale that might be realized by the
investment manager as the Fund grew and took note of the extent to which Fund
shareholders also might benefit from such growth. The Board considered that the
Agreement provided for lower fees as assets increase at pre-established
breakpoints and concluded that the Agreement satisfactorily provided for sharing
these economies of scale.
The Board took into account the Contracts Committee's discussion comparing the
fees the investment manager charges to the Fund with those it charges to
institutional clients, noting that the relatively higher fees paid by the Fund
were principally attributable to the additional services required to manage a
regulated mutual fund, like the Fund, and the operation of a large mutual fund
family. The Board also considered the profitability realized by the investment
manager and its affiliates from its relationship with the Fund. The Board took
into account the services acquired by the investment manager through the use of
commission dollars paid by the Fund on portfolio transactions. The Board
concluded that the investment manager's overall costs and profitability were
appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit the investment
manager to offer competitive compensation to its personnel, make necessary
investments in its business and earn an appropriate profit. Based on the
foregoing, the Board concluded that the fees paid to the investment manager
under the Agreement were fair and reasonable and determined to approve renewal
of the Agreement for the Interim Period.
- --------------------------------------------------------------------------------
38 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website www.riversource.com/investments; or by
searching the website of the Securities and Exchange Commission (SEC) at
www.sec.gov. Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available without charge by calling the Fund's administrator, Board Services
Corporation, collect at (612) 330-9283; through the investment manager's
website, www.riversource.com/investments; or by searching the website of the SEC
at www.sec.gov.
- --------------------------------------------------------------------------------
39 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 ANNUAL REPORT
American Express Funds
70100 Ameriprise Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by Ameriprise Financial Services, Inc. (formerly known as American
Express Financial Advisors Inc.). Member NASD.
Item 2. (a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial
officer. A copy of the code of ethics is filed as an exhibit to this
form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of ethics
adopted in 2(a).
Item 3. The Registrant's board of directors has determined that independent
directors Livio D. DeSimone and Anne P. Jones, each qualify as audit
committee financial experts.
Item 4. Principal Accountant Fees and Services
Fund - Related Fees*
(a) Audit Fees. The fees paid for the years ended July 31, to KPMG LLP for
professional services rendered for the audits of the annual financial
statements for AXP Growth Series, Inc. were as follows:
2005 - $70,000; 2004 - $67,007
(b) Audit - Related Fees. The fees paid for the years ended July 31, to
KPMG LLP for additional professional services rendered in connection
with the registrant's security count pursuant to Rule 17f-2 for AXP
Growth Series, Inc. were as follows:
2005 - $1,077; 2004 - $845
(c) Tax Fees. The fees paid for the years ended July 31, to KPMG LLP for
tax compliance related services for AXP Growth Series, Inc. were as
follows:
2005 - $10,467; 2004 - $11,375
(d) All Other Fees. The fees paid for the years ended July 31, to KPMG LLP
for additional professional services rendered in connection to proxy
filing for AXP Growth Series, Inc. were as follows:
2005 - $3,239; 2004 - None
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by KPMG LLP for
the registrant and to the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
must be pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above
during 2005 and 2004 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees paid for the years ended July 31, by the
registrant for non-audit services to KPMG LLP were as follows:
2005 - None; 2004 - None
The fees paid for the years ended July 31, to KPMG LLP by the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant were as follows:
2005 - $38,450; 2004 - $88,450
(h) 100% of the services performed in item (g) above during 2005 and 2004
were pre-approved by the audit committee.
*2004 represents bills paid 8/1/03 - 7/31/04
2005 represents bills paid 8/1/04 - 7/31/05
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing
date of this Form N-CSR, the registrant's Principal Financial
Officer and Principal Executive Officer have concluded that those
disclosure controls and procedures provide reasonable assurance
that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics as applies to the Registrant's principal
executive officer and principal financial officer, as required to be
disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH.
(a)(2) Separate certification for the Registrant's principal
executive officer and principal financial officer, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a)
under the Investment Company Act of 1940, are attached as
EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) AXP Growth Series, Inc.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date Oct. 3, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date Oct. 3, 2005
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date Oct. 3, 2005