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 811-7395
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GROWTH TRUST
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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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Growth Portfolio is the master fund in a master/feeder operating structure.
The two entities invested in Growth Portfolio are AXP Growth Fund and American
Express Financial Corporation. The shareholder report filed with this Form is
the report provided to shareholders of AXP Growth Fund.
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.
Growth Trends Portfolio is the master fund in a master/feeder operating
structure. The two entities invested in Growth Trends Portfolio are AXP New
Dimensions Fund and American Express Financial Corporation. The shareholder
report filed with this Form is the report provided to shareholders of AXP New
Dimensions Fund.
AXP(R)
New Dimensions
Fund(R)
Annual Report
for the Period Ended
July 31, 2005
AXP New Dimensions 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 (Portfolio) 14
Notes to Financial Statements (Portfolio) 17
Report of Independent Registered
Public Accounting Firm (Portfolio) 22
Financial Statements (Fund) 23
Notes to Financial Statements (Fund) 26
Report of Independent Registered
Public Accounting Firm (Fund) 37
Federal Income Tax Information 38
Fund Expenses Example 40
Board Members and Officers 42
Approval of Investment Management
Services Agreement 45
Proxy Voting 47
[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 NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Fund Snapshot
AT JULY 31, 2005
PORTFOLIO MANAGERS
Portfolio managers Since Years in industry
Gordon Fines 1/91 38
Michael Nance 2/05 12
Trisha Schuster, CFA 2/05 12
FUND OBJECTIVE
For investors seeking long-term growth of capital.
Inception dates by class
A: 8/1/68 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95
Ticker symbols by class
A: INNDX B: INDBX C: ANDCX I: ANDIX Y: IDNYX
Total net assets $11.521 billion
Number of holdings 99
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]
Information Technology 24.2%
Health Care 18.6%
Consumer Discretionary 14.8%
Energy 10.5%
Industrials 10.0%
Consumer Staples 8.0%
Financials 6.1%
Short-Term Securities* 3.1%
Utilities 2.0%
Materials 1.8%
Telecommunication Services 0.9%
* Of the 3.1%, 0.6% is due to security lending activity and 2.5% is the
Portfolio's cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
Procter & Gamble (Household Products) 3.2%
General Electric (Industrial Conglomerates) 3.2
Boeing (Aerospace & Defense) 3.1
Target (Multiline Retail) 3.0
Intel (Semiconductors & Semiconductor Equipment) 3.0
Motorola (Communications Equipment) 2.9
UnitedHealth Group
(Health Care Providers & Services) 2.6
Johnson & Johnson (Pharmaceuticals) 2.5
EMC (Computers & Peripherals) 2.5
Microsoft (Software) 2.5
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.
Stock prices of established companies that pay dividends may be less volatile
than the stock market as a whole. There are special risk considerations
associated with international investing related to market, currency, economic,
political and other factors.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Performance Summary
[BAR CHART]
PERFORMANCE COMPARISON
For the year ended July 31, 2005
+7.77% +14.05% +13.04% +15.89%
+7.77% = AXP New Dimensions Fund Class A (excluding sales charge)
+14.05% = S&P 500 Index (unmanaged)
+13.04% = Russell 1000 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) (8/1/68) (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 +7.77% +1.57% +6.93% +1.93% +6.89% +5.89% +8.24% +7.95%
3 years +6.91% +4.82% +6.07% +4.88% +6.06% +6.06% N/A +7.09%
5 years -5.33% -6.45% -6.06% -6.39% -6.07% -6.07% N/A -5.18%
10 years +8.15% +7.51% +7.32% +7.32% N/A N/A N/A +8.31%
Since inception +11.22% +11.04% +8.65% +8.65% -6.11% -6.11% +0.77% +9.64%
at June 30, 2005
1 year -0.70% -6.41% -1.45% -6.34% -1.45% -2.43% -0.22% -0.49%
3 years +3.42% +1.39% +2.61% +1.33% +2.60% +2.60% N/A +3.60%
5 years -6.21% -7.32% -6.93% -7.26% -6.94% -6.94% N/A -6.05%
10 years +8.31% +7.67% +7.49% +7.49% N/A N/A N/A +8.47%
Since inception +11.15% +10.97% +8.40% +8.40% -6.79% -6.79% -1.59% +9.39%
(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 NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
AXP New Dimensions Fund's Class A shares advanced 7.77%, excluding sales charge,
for the fiscal year ended July 31, 2005. The Fund underperformed its primary
benchmark, the Standard & Poor's 500 Composite Index (S&P 500 Index), which
increased 14.05% during the period. During the fiscal year, the Russell 1000
Growth Index was added as a secondary unmanaged benchmark for the Fund. For the
12-month period, the Fund underperformed the Russell 1000 Growth Index, which
rose 13.04%. The Fund's peer group, the Lipper Large-Cap Growth Funds Index,
gained 15.89% during the same time frame.
On Feb. 11, 2005, Michael Nance and Trisha Schuster joined the Fund's portfolio
management team as associate portfolio managers. In July 2005, Portfolio Manager
Gordon Fines announced his retirement effective Jan. 6, 2006. Michael Nance
assumed management of 50% of the Fund's portfolio effective Aug. 1, 2005.
Below, the Fund's portfolio managers discuss the Fund's performance for the
annual period ended July 31, 2005.
Q: What factors most significantly contributed to the Fund's underperformance
for the period?
A: In our view, there were several factors that contributed to the Fund's
underperformance.
o We didn't have enough exposure to companies with lower market
capitalizations. Companies with market capitalizations between $2 billion
and $10 billion continued to outperform larger market capitalization
stocks for most of the period. The Fund's fiscal period results were
negatively affected by the larger market cap positioning of the portfolio.
Because mid-cap stocks are an element of the S&P 500 Index, the Fund's
smaller-than-S&P 500 Index position in mid-cap stocks caused the Fund's
performance to lag relative to the benchmark.
o The Fund's higher-than-S&P 500 Index position in mega-cap stocks detracted
during the period. The Fund held large positions in mega-cap stocks such
as Citigroup, Pfizer and Wal-Mart resulting in a higher median market
capitalization than our peer group. This decision detracted from
performance in this fiscal year.
o Our stock selection efforts were not as effective as we would have liked.
Our stock selection, specifically in the consumer discretionary and health
care sectors, hurt performance. Biotechnology company Biogen Idec was a
sizeable position in the Fund and the stock was hit very hard during the
first quarter of the calendar year as the company faced product safety
concerns. In addition, media company Time Warner detracted from
performance.
o Value stocks outperformed growth stocks, which hurt performance relative
to the S&P 500 Index. Since the Fund has a distinct and consistent growth
focus, and the S&P 500 Index has both
- --------------------------------------------------------------------------------
5 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > Our stock selection, specifically in the consumer
discretionary and health care sectors, hurt performance. [END CALLOUT QUOTE]
growth and value stocks, it has been a challenging period for growth
funds relative to that benchmark. However, the Fund also underperformed
our growth fund peer group due to the other factors noted above.
We do not believe this style trend can be sustained indefinitely. We firmly
believe this imbalance in the equity markets will correct itself at some
point. In this environment, we believe it makes sense for investors to
maintain their exposure to growth stocks in order to benefit when the market
again begins to favor growth stocks.
Q: What were the success stories during the period?
A: The Fund's large position in the energy industry, which performed well
throughout the period, contributed positively to performance. In addition,
the Fund's low exposure to the consumer staples industry also contributed.
Stocks that helped performance included computer giant Apple Computer,
retailer Target and cell phone maker Motorola.
Although the Fund's sizeable health care position in Biogen Idec and Pfizer
negatively impacted Fund performance as previously mentioned, Fund holdings
in health care service company UnitedHealth Group and Amgen helped offset
some of the negative returns in the sector.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: The annual period encompassed the addition of two associate portfolio
managers to the management team, which provides the Fund with additional
resources. Both managers bring a combined 24 years of investment experience
that we believe will add value for shareholders and can help enhance
results. With the additional managers, the Fund remains focused on providing
shareholders with long-term growth of capital. In addition, the Fund's
managers believe that minimizing volatility in the portfolio will help
preserve capital for shareholders.
Portfolio changes during the annual period include increasing the Fund's
exposure to the technology sector as we have started seeing some strong
companies emerge in the market. As a result of adding to some of our
technology positions, we have more technology companies in the Fund's Top
Ten holdings such as Intel, Microsoft, Motorola and EMC Corporation.
- --------------------------------------------------------------------------------
6 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE] > Overall, we emphasize companies that we think are well
managed, healthy growing companies in terms of balance sheet and income
characteristics. [END CALLOUT QUOTE]
Overall, we emphasize companies that we think are well managed, healthy
growing companies in terms of balance sheet and income characteristics. We
try to find companies that show not only earnings and sales growth, but the
ability to generate sustainable levels of free cash flow. In our view,
dividend yield and dividend growth are very important themes in this market
cycle.
Q: How do you intend to manage the Fund in the coming months?
A: We are going to be very stock specific in terms of what we seek to add to
the portfolio. We continue to have a preference for select energy stocks,
and we are also focusing the health care segment of the portfolio. Companies
that best reflect growth at reasonable prices. In the technology sector, we
are focusing on those unique offerings that demonstrate above average growth
potential.
We feel that an overwhelming driver right now in the marketplace is energy.
With gasoline at the pump now approaching $3.00 per gallon, we believe this
will start to have an impact on people's behavior and thinking. This is
likely a long-term phenomenon. The plus for us of course is to be on the
right side of the energy sector and we think we are.
Our experience has taught us that during periods of rising interest rates
and slowing economic growth, when corporate earnings are nearing a peak,
higher quality companies generally perform better than lower quality
companies. In fact, a shift in the market emphasis toward quality growth
companies with sound balance sheets -- the kind of companies that dominate
the Fund's portfolio -- will provide an excellent opportunity for the Fund
to regain ground. We express our gratitude for shareholders' patience, and
we are optimistic that investors who have expressed long-term confidence in
our strategy will be rewarded.
- --------------------------------------------------------------------------------
7 -- AXP NEW DIMENSIONS 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 New Dimensions Fund Class A shares (from 8/1/95 to 7/31/05) as
compared to the performance of three widely cited performance indices, the
Standard & Poor's 500 Index (S&P 500 Index), 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 $0.16 $-- $0.18 $0.34
July 31, 2004 0.11 -- -- 0.11
July 31, 2003 0.03 -- -- 0.03
July 31, 2002 -- -- 0.02 0.02
July 31, 2001 0.02 -- 3.46 3.48
- --------------------------------------------------------------------------------
8 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP NEW DIMENSIONS FUND
AXP New Dimensions Fund Class A
(includes sales charge) $ 9,425 $10,983 $15,795 $18,352 $22,030 $27,132 $21,407 $16,882 $18,481 $19,144 $20,631
S&P 500 Index(1) $10,000 $11,657 $17,735 $21,154 $25,427 $27,708 $23,737 $18,128 $20,057 $22,699 $25,888
Russell 1000(R) Growth Index(2) $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(3) $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(4)
AXP New Dimensions Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,157 $11,517 $7,165 $20,631 $481,521
Average annual total return +1.57% +4.82% -6.45% +7.51% +11.04%
Standard & Poor's 500 Index(1)
Cumulative value of $10,000 $11,405 $14,280 $9,343 $25,888 N/A
Average annual total return +14.05% +12.61% -1.35% +9.98% N/A
Russell 1000(R) Growth Index(2)
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(3)
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 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 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.
(3) 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.
(4) Fund data is from Aug. 1, 1968. The Fund began operating before the
inception of the S&P 500 Index, Russell 1000 Growth Index and Lipper peer
group.
- --------------------------------------------------------------------------------
9 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Investments in Securities
Growth Trends Portfolio
July 31, 2005
(Percentages represent value of investments compared to net assets)
Common Stocks (97.5%)
Issuer Shares Value(a)
Aerospace & Defense (6.6%)
Boeing 5,439,893 $359,087,337
Lockheed Martin 2,057,720 128,401,728
Northrop Grumman 1,000,000 55,450,000
United Technologies 4,368,984 221,507,489
Total 764,446,554
Beverages (2.4%)
PepsiCo 5,000,000 272,650,000
Biotechnology (4.9%)
Amgen 3,463,407(b) 276,206,708
Biogen Idec 800,000(b,d) 31,432,000
Genentech 1,000,000(b,d) 89,330,000
Genzyme 1,100,000(b) 81,851,000
Gilead Sciences 1,800,000(b) 80,658,000
Total 559,477,708
Building Products (0.1%)
American Standard Companies 361,948 16,027,057
Capital Markets (2.1%)
Charles Schwab 17,272,001 236,626,414
Chemicals (1.8%)
EI du Pont de Nemours & Co 4,829,004 206,101,891
Commercial Banks (2.3%)
Bank of America 5,000,000 218,000,000
Commerce Bancorp 842,027(e) 28,569,976
US Bancorp 522,018 15,691,861
Total 262,261,837
Commercial Services & Supplies (0.1%)
Waste Management 424,994 11,950,831
Communications Equipment (4.8%)
Cisco Systems 10,912,340(b) 208,971,311
Motorola 15,843,471 335,564,715
Nokia ADR 756,166(c) 12,060,848
Total 556,596,874
Common Stocks (continued)
Issuer Shares Value(a)
Computers & Peripherals (8.0%)
Apple Computer 5,500,000(b,d) $234,575,000
Dell 5,163,772(b) 208,977,853
EMC 21,116,129(b) 289,079,806
NCR 5,371,843(b) 186,456,671
SanDisk 429,661(b) 14,531,135
Total 933,620,465
Diversified Financial Services (1.9%)
CapitalSource 1,200,151(b,e) 23,498,957
Citigroup 4,393,640 191,123,340
Total 214,622,297
Diversified Telecommunication Services (0.9%)
Sprint 4,000,000 107,600,000
Energy Equipment & Services (3.4%)
GlobalSantaFe 295,746 13,305,613
Halliburton 2,000,000 112,100,000
Schlumberger 1,500,000 125,610,000
Transocean 2,500,000(b) 141,075,000
Total 392,090,613
Food & Staples Retailing (1.6%)
Safeway 5,718,860 138,968,298
Whole Foods Market 300,000 40,953,000
Total 179,921,298
Health Care Equipment & Supplies (2.4%)
Alcon 550,000(c,d) 63,002,500
Medtronic 2,809,717 151,556,135
St. Jude Medical 1,300,000(b) 61,633,000
Total 276,191,635
Health Care Providers & Services (4.3%)
Caremark Rx 2,996,491(b) 133,583,569
HCA 1,037,600 51,101,800
UnitedHealth Group 5,866,983 306,843,211
Total 491,528,580
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Common Stocks (continued)
Issuer Shares Value(a)
Hotels, Restaurants & Leisure (2.4%)
Carnival Unit 3,600,000 $188,640,000
Royal Caribbean Cruises 593,200 26,960,940
Starbucks 1,200,000(b) 63,060,000
Total 278,660,940
Household Durables (2.3%)
DR Horton 424,590 17,442,157
Pulte Homes 2,637,442 246,917,320
Total 264,359,477
Household Products (3.3%)
Procter & Gamble 6,771,048 376,673,400
Industrial Conglomerates (3.2%)
General Electric 10,698,829 369,109,601
Internet & Catalog Retail (1.0%)
Amazon.com 300,000(b) 13,551,000
eBay 2,364,395(b) 98,784,423
Total 112,335,423
Internet Software & Services (2.0%)
Google Cl A 331,914(b) 95,511,573
Yahoo! 4,183,556(b,e) 139,479,757
Total 234,991,330
IT Services (0.9%)
First Data 500,000 20,570,000
Fiserv 239,216(b) 10,614,014
Infosys Technologies ADR 1,000,000(c,e) 71,180,000
Total 102,364,014
Media (2.2%)
Comcast Special Cl A 7,914,044(b) 237,421,320
DreamWorks
Animation SKG Cl AF 538,415(b) 12,679,673
Total 250,100,993
Multi-Utilities & Unregulated Power (2.0%)
Dominion Resources 3,100,000 228,966,000
Multiline Retail (5.5%)
Federated Dept Stores 1,319,845 100,136,640
Nordstrom 4,800,000 177,648,000
Target 6,000,000 352,500,000
Total 630,284,640
Common Stocks (continued)
Issuer Shares Value(a)
Office Electronics (0.2%)
Xerox 1,517,773(b) $20,049,781
Oil & Gas (7.1%)
Apache 3,151,001 215,528,468
Burlington Resources 400,000 25,644,000
Chesapeake Energy 1,020,682 26,650,007
ConocoPhillips 2,942,107 184,146,477
Exxon Mobil 4,408,270 258,985,863
Murphy Oil 1,200,000 63,648,000
Suncor Energy 1,000,000(c) 48,900,000
Total 823,502,815
Pharmaceuticals (7.1%)
Abbott Laboratories 2,500,000 116,575,000
Eli Lilly & Co 600,000 33,792,000
Johnson & Johnson 4,544,890 290,691,164
Novartis ADR 2,500,000(c) 121,775,000
Pfizer 5,394,772 142,961,458
Schering-Plough 3,200,084 66,625,749
Sepracor 1,000,000(b) 52,350,000
Total 824,770,371
Semiconductors & Semiconductor Equipment (4.4%)
Intel 12,847,325 348,676,401
Texas Instruments 5,000,000 158,800,000
Total 507,476,401
Software (3.9%)
Amdocs 380,295(b,c) 11,290,959
Autodesk 2,500,000 85,475,000
Microsoft 11,239,975 287,855,759
Symantec 2,880,000(b) 63,273,600
Total 447,895,318
Specialty Retail (1.6%)
Advance Auto Parts 561,009(b) 38,687,181
Lowe's Companies 2,218,498 146,908,937
Total 185,596,118
Tobacco (0.9%)
Altria Group 1,500,000 100,440,000
Total Common Stocks
(Cost: $9,757,875,423) $11,239,290,676
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Short-Term Securities (3.1%)(f)
Issuer Effective Amount Value(a)
yield payable at
maturity
Commercial Paper
Alpine Securitization
08-04-05 3.27% $20,000,000(g) $19,989,100
Barton Capital
08-03-05 3.27 43,500,000(g) 43,480,243
08-10-05 3.28 30,000,000(g) 29,967,200
08-11-05 3.28 25,000,000(g) 24,970,389
Beta Finance
08-10-05 3.28 20,000,000 19,978,133
CAFCO LLC
08-01-05 3.30 13,300,000(g) 13,296,343
Citibank Credit Card Dakota Nts
08-01-05 3.30 12,200,000(g) 12,196,645
Citigroup Funding
08-01-05 3.31 24,500,000 24,493,242
HSBC Finance
08-01-05 3.31 30,000,000 29,991,724
Natl Australia Funding
08-09-05 3.26 30,000,000(g) 29,970,116
Short-Term Securities (continued)
Issuer Effective Amount Value(a)
yield payable at
maturity
Commercial Paper (cont.)
Park Avenue Receivables
08-25-05 3.42% $30,000,000(g) $29,923,275
Scaldis Capital LLC
08-15-05 3.36 25,000,000(g) 24,960,452
Sheffield Receivables
08-01-05 3.30 11,700,000(g) 11,696,783
Societe Generale North America
08-12-05 3.28 25,000,000 24,968,111
Windmill Funding
08-23-05 3.41 20,000,000(g) 19,952,778
Total Short-Term Securities
(Cost: $359,867,609) $359,834,534
Total Investments in Securities
(Cost: $10,117,743,032)(h) $11,599,125,210
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP NEW DIMENSIONS 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 2.8% of net assets.
(d) At July 31, 2005, securities valued at $213,766,821 were held to cover
open call options written as follows (see Note 5 to the financial
statements):
Issuer Contracts Exercise Expiration Value(a)
price date
Alcon 3,000 $120.00 Aug. 2005 $ 232,500
Apple Computer 13,750 47.50 Sept. 2005 687,500
Biogen Idec 7,999 35.00 Aug. 2005 3,559,555
Genentech 10,000 85.00 Aug. 2005 5,050,000
------ ----- ---------- ---------
Total value $9,529,555
----------
(e) At July 31, 2005, security was partially or fully on loan. See Note 4 to
the financial statements.
(f) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.6% of net assets. See Note 4 to the
financial statements. 2.5% of net assets is the Portfolio's cash
equivalent position.
(g) 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 insititutional buyers. At July 31, 2005, the value
of these securities amounted to $260,403,324 or 2.3% of net assets.
(h) At July 31, 2005, the cost of securities for federal income tax purposes
was $10,140,479,002 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $1,673,893,157
Unrealized depreciation (215,246,949)
------------
Net unrealized appreciation $1,458,646,208
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 NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Growth Trends Portfolio
July 31, 2005
Assets
Investments in securities, at value (Note 1)*
(identified cost $10,117,743,032) $11,599,125,210
Foreign currency holdings (identified cost $5,524) (Note 1) 6,033
Dividends and accrued interest receivable 6,564,354
Receivable for investment securities sold 134,154,375
-----------
Total assets 11,739,849,972
--------------
Liabilities
Disbursements in excess of cash on demand deposit 3,209,640
Payable for investment securities purchased 139,725,305
Payable upon return of securities loaned (Note 4) 64,420,000
Accrued investment management services fee 167,912
Other accrued expenses 453,781
Options contracts written, at value (premiums received $6,283,053) (Note 5) 9,529,555
---------
Total liabilities 217,506,193
-----------
Net assets $11,522,343,779
===============
* Including securities on loan, at value (Note 4) $ 60,816,856
---------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statement of operations
Growth Trends Portfolio
Year ended July 31, 2005
Investment income
Income:
Dividends $ 233,045,584
Interest 12,013,702
Fee income from securities lending (Note 4) 320,446
Less foreign taxes withheld (442,238)
--------
Total income 244,937,494
-----------
Expenses (Note 2):
Investment management services fee 60,896,353
Compensation of board members 61,737
Custodian fees 1,042,579
Audit fees 37,500
Other 499,088
-------
Total expenses 62,537,257
Earnings credits on cash balances (Note 2) (3,398)
------
Total net expenses 62,533,859
----------
Investment income (loss) -- net 182,403,635
-----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 757,406,599
Foreign currency transactions (554,424)
Futures contracts (1,726,848)
Options contracts written (Note 5) (427,452)
--------
Net realized gain (loss) on investments 754,697,875
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 158,660,856
-----------
Net gain (loss) on investments and foreign currencies 913,358,731
-----------
Net increase (decrease) in net assets resulting from operations $1,095,762,366
==============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets
Growth Trends Portfolio
Year ended July 31, 2005 2004
Operations
Investment income (loss) -- net $ 182,403,635 $ 153,163,075
Net realized gain (loss) on investments 754,697,875 1,326,193,728
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 158,660,856 (740,840,157)
----------- ------------
Net increase (decrease) in net assets resulting from operations 1,095,762,366 738,516,646
------------- -----------
Proceeds from contributions 75,006,308 588,788,643
Fair value of withdrawals (4,968,829,051) (3,075,163,840)
In-kind contributions in connection with fund mergers (Note 1) -- 221,872,382
-------------- --------------
Net contributions (withdrawals) from partners (4,893,822,743) (2,264,502,815)
-------------- --------------
Total increase (decrease) in net assets (3,798,060,377) (1,525,986,169)
Net assets at beginning of year 15,320,404,156 16,846,390,325
-------------- --------------
Net assets at end of year $11,522,343,779 $15,320,404,156
=============== ===============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Notes to Financial Statements
Growth Trends Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Growth Trends 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 Trends Portfolio
invests primarily in common stocks of companies showing potential for
significant growth and operating in areas where economic or technological
changes are occurring. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio.
On June 25, 2004, AXP New Dimensions Fund acquired the assets and assumed the
identified liabilities of AXP Focused Growth Fund and AXP Growth Dimensions
Fund. Upon receipt of these assets and liabilities, AXP New Dimensions Fund made
an in-kind contribution of $221,872,382 to Growth Trends 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.
- --------------------------------------------------------------------------------
17 -- AXP NEW DIMENSIONS 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. At July 31, 2005, foreign currency holdings were entirely
comprised of Taiwan dollars.
- --------------------------------------------------------------------------------
18 -- AXP NEW DIMENSIONS 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 this 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 0.6% 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 New Dimensions 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 decreased the fee by $10,062,023 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.
- --------------------------------------------------------------------------------
19 -- AXP NEW DIMENSIONS 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 $3,398 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 $9,859,997,873 and $14,214,122,048, 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 $108,435 for the year ended July 31, 2005.
4. LENDING OF PORTFOLIO SECURITIES
At July 31, 2005, securities valued at $60,816,856 were on loan to brokers. For
collateral, the Portfolio received $64,420,000 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 $320,446 for the 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.
- --------------------------------------------------------------------------------
20 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
5. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as follows:
Year ended July 31, 2005
Puts
Contracts Premiums
Balance July 31, 2004 -- $ --
Opened 85,749 10,928,881
Closed (48,000) (4,486,835)
Expired (3,000) (158,993)
------ -----------
Balance July 31, 2005 34,749 $ 6,283,053
------ -----------
See "Summary of significant accounting policies."
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) .46% .45% .58% .61% .59%
Ratio of net investment income (loss) to average daily net assets 1.34% .91% .92% .64% .52%
Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29%
Total return(b) 8.30% 4.05% 10.01% (20.76%) (20.77%)
(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.
- --------------------------------------------------------------------------------
21 -- AXP NEW DIMENSIONS 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 Trends 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 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 Growth
Trends 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
- --------------------------------------------------------------------------------
22 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP New Dimensions Fund
July 31, 2005
Assets
Investment in Portfolio (Note 1) $11,522,269,040
Capital shares receivable 936,935
-------
Total assets 11,523,205,975
--------------
Liabilities
Capital shares payable 975,810
Accrued distribution fee 104,227
Accrued service fee 7,072
Accrued transfer agency fee 7,488
Accrued administrative services fee 11,218
Other accrued expenses 737,043
-------
Total liabilities 1,842,858
---------
Net assets applicable to outstanding capital stock $11,521,363,117
===============
Represented by
Capital stock -- $.01 par value (Note 1) $ 4,847,114
Additional paid-in capital 9,354,954,421
Undistributed net investment income 19,084,775
Accumulated net realized gain (loss) (Note 6) 664,348,286
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 1,478,128,521
-------------
Total -- representing net assets applicable to outstanding capital stock $11,521,363,117
===============
Net assets applicable to outstanding shares: Class A $ 6,845,241,780
Class B $ 2,003,569,556
Class C $ 45,662,322
Class I $ 69,748,064
Class Y $ 2,557,141,395
Net asset value per share of outstanding capital stock: Class A shares 285,315,473 $ 23.99
Class B shares 88,486,457 $ 22.64
Class C shares 2,019,120 $ 22.61
Class I shares 2,889,590 $ 24.14
Class Y shares 106,000,741 $ 24.12
----------- ---------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statement of operations
AXP New Dimensions Fund
Year ended July 31, 2005
Investment income
Income:
Dividends $ 233,044,387
Interest 12,020,030
Fee income from securities lending 320,444
Less foreign taxes withheld (442,235)
--------
Total income 244,942,626
-----------
Expenses (Note 2):
Expenses allocated from Portfolio 62,533,534
Distribution fee
Class A 20,565,923
Class B 24,839,333
Class C 559,396
Transfer agency fee 22,354,541
Incremental transfer agency fee
Class A 1,352,830
Class B 1,005,784
Class C 26,158
Service fee -- Class Y 2,800,648
Administrative services fees and expenses 4,756,123
Compensation of board members 32,620
Printing and postage 3,426,659
Registration fees 92,530
Audit fees 12,500
Other 233,261
-------
Total expenses 144,591,840
Earnings credits on cash balances (Note 2) (522,229)
--------
Total net expenses 144,069,611
-----------
Investment income (loss) -- net 100,873,015
-----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 757,404,472
Foreign currency transactions (554,419)
Futures contracts (1,726,839)
Options contracts written (427,448)
--------
Net realized gain (loss) on investments 754,695,766
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 158,658,167
-----------
Net gain (loss) on investments and foreign currencies 913,353,933
-----------
Net increase (decrease) in net assets resulting from operations $1,014,226,948
==============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP New Dimensions Fund
Year ended July 31, 2005 2004
Operations and distributions
Investment income (loss) -- net $ 100,873,015 $ 53,646,007
Net realized gain (loss) on investments 754,695,766 1,326,188,766
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 158,658,167 (740,837,241)
----------- ------------
Net increase (decrease) in net assets resulting from operations 1,014,226,948 638,997,532
------------- -----------
Distributions to shareholders from:
Net investment income
Class A (59,843,080) (46,364,316)
Class I (402,754) (24,173)
Class Y (25,264,241) (22,183,807)
Net realized gain
Class A (66,368,786) --
Class B (21,459,161) --
Class C (480,445) --
Class I (279,703) --
Class Y (22,415,431) --
------------ -----------
Total distributions (196,513,601) (68,572,296)
------------ -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 309,583,153 957,437,754
Class B shares 135,535,176 289,864,944
Class C shares 6,964,606 15,172,920
Class I shares 70,265,265 18,590,210
Class Y shares 249,749,841 649,466,427
Fund merger (Note 5)
Class A shares -- 145,036,482
Class B shares -- 71,825,421
Class C shares -- 4,985,482
Class Y shares -- 24,997
Reinvestment of distributions at net asset value
Class A shares 122,902,169 45,072,267
Class B shares 21,266,905 --
Class C shares 472,693 --
Class I shares 682,371 24,152
Class Y shares 46,516,684 21,742,867
Payments for redemptions
Class A shares (3,400,714,842) (2,032,028,533)
Class B shares (Note 2) (1,148,602,856) (1,071,801,488)
Class C shares (Note 2) (28,365,050) (17,016,745)
Class I shares (21,759,503) (10,876)
Class Y shares (978,758,913) (1,196,861,524)
------------ --------------
Increase (decrease) in net assets from capital share transactions (4,614,262,301) (2,098,475,243)
-------------- --------------
Total increase (decrease) in net assets (3,796,548,954) (1,528,050,007)
Net assets at beginning of year 15,317,912,071 16,845,962,078
-------------- --------------
Net assets at end of year $11,521,363,117 $15,317,912,071
=============== ===============
Undistributed net investment income $ 19,084,775 $ 4,276,254
--------------- ---------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Notes to Financial Statements
AXP New Dimensions Fund
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Dimensions Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Dimensions 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 Series funds owned 100% of Class I shares, which
represents 0.61% 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 Trends Portfolio
The Fund invests all of its assets in the Growth Trends 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 of companies showing potential for significant growth and
operating in areas where economic or technological changes are occurring.
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%.
- --------------------------------------------------------------------------------
26 -- AXP NEW DIMENSIONS 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 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.
- --------------------------------------------------------------------------------
27 -- AXP NEW DIMENSIONS 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 $554,419
and accumulated net realized gain has been increased by $558,085 resulting in a
net reclassification adjustment to decrease paid-in capital by $3,666.
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 $59,843,080 $46,364,316
Long-term capital gain 66,368,786 --
Class B
Distributions paid from:
Ordinary income -- --
Long-term capital gain 21,459,161 --
Class C
Distributions paid from:
Ordinary income -- --
Long-term capital gain 480,445 --
Class I*
Distributions paid from:
Ordinary income 402,754 24,173
Long-term capital gain 279,703 --
Class Y
Distributions paid from:
Ordinary income 25,264,241 22,183,807
Long-term capital gain 22,415,431 --
* 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 $ 19,018,739
Accumulated long-term gain (loss) $ 760,246,989
Unrealized appreciation (depreciation) $1,382,295,854
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with Ameriprise Financial to provide administrative
services. 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 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
- --------------------------------------------------------------------------------
28 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
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.
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
$8,545,696 for Class A, $2,954,578 for Class B and $9,351 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 $522,229 as a result of earnings credits from overnight cash
balances.
- --------------------------------------------------------------------------------
29 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
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 13,297,974 6,165,871 317,163 2,992,981 10,687,122
Issued for reinvested distributions 5,161,787 941,848 20,962 28,563 1,945,491
Redeemed (145,856,804) (52,123,835) (1,290,278) (930,034) (41,820,066)
------------ ----------- ---------- -------- -----------
Net increase (decrease) (127,397,043) (45,016,116) (952,153) 2,091,510 (29,187,453)
------------ ----------- -------- --------- -----------
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 41,994,227 13,241,759 694,168 797,528 27,893,281
Fund merger 6,143,014 3,220,859 223,688 -- 1,053
Issued for reinvested distributions 1,922,552 -- -- 1,014 922,930
Redeemed (87,457,046) (49,430,022) (773,898) (462) (51,317,577)
----------- ----------- -------- ---- -----------
Net increase (decrease) (37,397,253) (32,967,404) 143,958 798,080 (22,500,313)
----------- ----------- ------- ------- -----------
* 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.
5. FUND MERGER
At the close of business on June 25, 2004, AXP New Dimensions Fund acquired the
assets and assumed the identified liabilities of AXP Focused Growth Fund and AXP
Growth Dimensions Fund. Upon receipt of the investments and related assets and
liabilities from AXP Focused Growth Fund and AXP Growth Dimensions Fund, AXP New
Dimensions Fund made an in-kind contribution of $221,872,382 to Growth Trends
Portfolio. This reorganization was completed after shareholders approved the
plan on June 9, 2004.
The aggregate net assets of AXP New Dimensions Fund immediately before the
acquisition were $16,149,643,433 and the combined net assets immediately after
the acquisition were $16,371,515,815.
- --------------------------------------------------------------------------------
30 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
The merger was accomplished by a tax-free exchange of the following:
Shares Value
AXP Focused Growth Fund 23,415,522 $ 42,348,160
AXP Growth Dimensions Fund 74,295,087 179,524,222
In exchange for the AXP Focused Growth Fund and AXP Growth Dimensions Fund
shares and net assets, AXP New Dimensions Fund issued the following number of
shares:
Shares
Class A 6,143,014
Class B 3,220,859
Class C 223,688
Class Y 1,053
AXP Focused Growth Fund's and AXP Growth Dimensions 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, accumulated net realized loss and temporary book-to-tax
differences.
Temporary
Total net Capital Unrealized Accumulated book-to-tax
assets stock appreciation net realized loss differences
AXP Focused Growth Fund $ 42,348,160 $ 47,925,406 $ 5,187,878 $(10,453,291) $(311,833)
AXP Growth Dimensions Fund 179,524,222 234,495,050 18,406,183 (72,853,762) (523,249)
6. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$61,551,685, that if not offset by future capital gains realized after July 31,
2005 will expire as follows:
2008 2009 2010 2011
$5,869,455 $42,999,536 $8,294,019 $4,388,675
As a result of the merger on June 25, 2004, the Fund acquired capital loss
carry-overs and unrealized capital gains. The yearly utilization of the acquired
capital losses as well as the utilization of the acquired unrealized losses is
limited by the Internal Revenue Code. 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.
- --------------------------------------------------------------------------------
31 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
7. 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 $22.58 $21.90 $20.04 $25.43 $36.26
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) .20 .08 .07 .05 .02
Net gains (losses) (both realized and unrealized) 1.55 .71 1.82 (5.42) (7.37)
------ ------ ------ ------ ------
Total from investment operations 1.75 .79 1.89 (5.37) (7.35)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (.16) (.11) (.03) (.02) (.01)
Excess distributions from net investment income -- -- -- -- (.01)
Distributions from realized gains (.18) -- -- -- (3.46)
------ ------ ------ ------ ------
Total distributions (.34) (.11) (.03) (.02) (3.48)
------ ------ ------ ------ ------
Net asset value, end of period $23.99 $22.58 $21.90 $20.04 $25.43
------ ------ ------ ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $6,845 $9,319 $9,859 $9,863 $13,857
Ratio of expenses to average daily net assets(b) .95% .91% 1.08% 1.06% 1.00%
Ratio of net investment income (loss) to average daily net assets .85% .45% .42% .19% .12%
Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29%
Total return(c) 7.77% 3.59% 9.47% (21.14%) (21.10%)
(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.
- --------------------------------------------------------------------------------
32 -- AXP NEW DIMENSIONS 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 $21.34 $20.77 $19.12 $24.44 $35.22
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) .01 (.10) (.04) (.14) (.13)
Net gains (losses) (both realized and unrealized) 1.47 .67 1.69 (5.16) (7.19)
------ ------ ------ ------ ------
Total from investment operations 1.48 .57 1.65 (5.30) (7.32)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income -- -- -- (.02) --
Distributions from realized gains (.18) -- -- -- (3.46)
------ ------ ------ ------ ------
Total distributions (.18) -- -- (.02) (3.46)
------ ------ ------ ------ ------
Net asset value, end of period $22.64 $21.34 $20.77 $19.12 $24.44
------ ------ ------ ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $2,004 $2,849 $3,457 $3,728 $5,169
Ratio of expenses to average daily net assets(b) 1.73% 1.68% 1.85% 1.83% 1.76%
Ratio of net investment income (loss) to average daily net assets .08% (.32%) (.35%) (.57%) (.65%)
Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29%
Total return(c) 6.93% 2.74% 8.63% (21.71%) (21.69%)
(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 NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
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 $21.32 $20.74 $19.10 $24.42 $35.23
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) .01 (.09) (.04) (.14) (.13)
Net gains (losses) (both realized and unrealized) 1.46 .67 1.68 (5.16) (7.19)
------ ------ ------ ------ ------
Total from investment operations 1.47 .58 1.64 (5.30) (7.32)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income -- -- -- (.02) (.02)
Excess distributions from net investment income -- -- -- -- (.01)
Distributions from realized gains (.18) -- -- -- (3.46)
------ ------ ------ ------ ------
Total distributions (.18) -- -- (.02) (3.49)
------ ------ ------ ------ ------
Net asset value, end of period $22.61 $21.32 $20.74 $19.10 $24.42
------ ------ ------ ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $46 $63 $59 $44 $30
Ratio of expenses to average daily net assets(b) 1.73% 1.69% 1.87% 1.85% 1.76%
Ratio of net investment income (loss) to average daily net assets .07% (.33%) (.38%) (.60%) (.75%)
Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29%
Total return(c) 6.89% 2.80% 8.59% (21.73%) (21.70%)
(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 NEW DIMENSIONS 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 $22.71 $24.37
------ ------
Income from investment operations:
Net investment income (loss) .31 .06
Net gains (losses) (both realized and unrealized) 1.56 (1.67)
------ ------
Total from investment operations 1.87 (1.61)
------ ------
Less distributions:
Dividends from net investment income (.26) (.05)
Distributions from realized gains (.18) --
------ ------
Total distributions (.44) (.05)
------ ------
Net asset value, end of period $24.14 $22.71
------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $70 $18
Ratio of expenses to average daily net assets(c) .52% .50%(d)
Ratio of net investment income (loss) to average daily net assets 1.08% .87%(d)
Portfolio turnover rate (excluding short-term securities) 75% 49%
Total return(e) 8.24% (6.61%)(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.
- --------------------------------------------------------------------------------
35 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
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 $22.70 $22.02 $20.14 $25.51 $36.33
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) .25 .11 .11 .09 .07
Net gains (losses) (both realized and unrealized) 1.55 .72 1.83 (5.44) (7.38)
------ ------ ------ ------ ------
Total from investment operations 1.80 .83 1.94 (5.35) (7.31)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (.20) (.15) (.06) (.02) (.02)
Excess distributions from net investment income -- -- -- -- (.03)
Distributions from realized gains (.18) -- -- -- (3.46)
------ ------ ------ ------ ------
Total distributions (.38) (.15) (.06) (.02) (3.51)
------ ------ ------ ------ ------
Net asset value, end of period $24.12 $22.70 $22.02 $20.14 $25.51
------ ------ ------ ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $2,557 $3,068 $3,472 $3,222 $4,677
Ratio of expenses to average daily net assets(b) .78% .75% .91% .90% .84%
Ratio of net investment income (loss) to average daily net assets 1.00% .61% .59% .36% .28%
Portfolio turnover rate (excluding short-term securities) 75% 49% 20% 27% 29%
Total return(c) 7.95% 3.75% 9.64% (21.00%) (20.97%)
(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.
- --------------------------------------------------------------------------------
36 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP DIMENSIONS SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP New
Dimensions Fund (a series of AXP Dimensions 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
New Dimensions 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
- --------------------------------------------------------------------------------
37 -- AXP NEW DIMENSIONS 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 New Dimensions Fund
Fiscal year ended July 31, 2005
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 100%
Dividends Received Deduction for corporations 100%
Payable date Per share
Dec. 20, 2004 $0.16182
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.17948
Total distributions $0.34130
Class B
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.17948
Class C
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.17948
- --------------------------------------------------------------------------------
38 -- AXP NEW DIMENSIONS FUND -- 2005 ANNUAL REPORT
Class I
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 100%
Dividends Received Deduction for corporations 100%
Payable date Per share
Dec. 20, 2004 $0.25844
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.17948
Total distributions $0.43792
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 100%
Dividends Received Deduction for corporations 100%
Payable date Per share
Dec. 20, 2004 $0.20227
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 20, 2004 $0.17948
Total distributions $0.38175
- --------------------------------------------------------------------------------
39 -- AXP NEW DIMENSIONS 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.
- --------------------------------------------------------------------------------
40 -- AXP NEW DIMENSIONS 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 $1,025.60 $4.67(c) .94%
Hypothetical (5% return before expenses) $1,000 $1,019.91 $4.66(c) .94%
Class B
Actual(b) $1,000 $1,021.70 $8.53(c) 1.72%
Hypothetical (5% return before expenses) $1,000 $1,016.09 $8.50(c) 1.72%
Class C
Actual(b) $1,000 $1,021.70 $8.53(c) 1.72%
Hypothetical (5% return before expenses) $1,000 $1,016.09 $8.50(c) 1.72%
Class I
Actual(b) $1,000 $1,028.10 $2.54(c) .51%
Hypothetical (5% return before expenses) $1,000 $1,022.02 $2.53(c) .51%
Class Y
Actual(b) $1,000 $1,026.40 $3.83(c) .77%
Hypothetical (5% return before expenses) $1,000 $1,020.74 $3.82(c) .77%
(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: +2.56%
for Class A, +2.17% for Class B, +2.17% for Class C, +2.81% for Class I and
+2.64% 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 $4.72 for Class A, $8.58 for
Class B, $8.58 for Class C, $2.59 for Class I and $3.88 for Class Y; the
hypothetical expenses paid would have been $4.71 for Class A, $8.55 for
Class B, $8.55 for Class C, $2.58 for Class I and $3.86 for Class Y.
- --------------------------------------------------------------------------------
41 -- AXP NEW DIMENSIONS 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.
- --------------------------------------------------------------------------------
42 -- AXP NEW DIMENSIONS 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.
- --------------------------------------------------------------------------------
43 -- AXP NEW DIMENSIONS 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.
- --------------------------------------------------------------------------------
44 -- AXP NEW DIMENSIONS 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,
Ameriprise Financial has taken steps to address the below median performance.
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.
- --------------------------------------------------------------------------------
45 -- AXP NEW DIMENSIONS 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 the 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.
- --------------------------------------------------------------------------------
46 -- AXP NEW DIMENSIONS 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.
- --------------------------------------------------------------------------------
47 -- AXP NEW DIMENSIONS 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 Growth Trust were as follows:
2005 - $67,500; 2004 - $87,000
(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 Growth
Trust were as follows:
2005 - None; 2004 - None
(c) Tax Fees. The fees paid for the years ended July 31, to KPMG LLP for
tax compliance related services for Growth Trust were as follows:
2005 - $12,300; 2004 - $11,925
(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 Growth Trust were as follows:
2005 - None; 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) Growth Trust
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