AXP(R)
Research
Opportunities
Fund
Semiannual Report
for the Period Ended
Jan. 31, 2004
AXP Research Opportunities Fund seeks to provide shareholders with long-term
capital growth.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Questions & Answers
with Portfolio Management 4
Investments in Securities 8
Financial Statements (Portfolio) 11
Notes to Financial Statements (Portfolio) 14
Financial Statements (Fund) 18
Notes to Financial Statements (Fund) 21
Proxy Voting 28
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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.
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2 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Fund Snapshot
AS OF JAN. 31, 2004
PORTFOLIO MANAGER
Portfolio manager Doug Chase
Since 11/03
Years in industry 12
FUND OBJECTIVE
For investors seeking long-term growth of capital.
Inception dates
A: 8/19/96 B: 8/19/96 C: 6/26/00 Y: 8/19/96
Ticker symbols
A: IRDAX B: IROBX C: -- Y: --
Total net assets $233.2 million
Number of holdings 96
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 22.9%
Financials 20.7%
Consumer discretionary 13.8%
Technology 13.6%
Consumer staples 10.5%
Industrials 7.4%
Energy 6.6%
Materials 3.5%
Telecommunications 0.5%
Utilities 0.5%
TOP TEN HOLDINGS
Percentage of portfolio assets
Pfizer (Health care products) 6.8%
Citigroup (Finance companies) 5.2
Cendant (Media) 3.4
Viacom Cl B (Leisure time & entertainment) 3.3
PepsiCo (Beverages & tobacco) 2.9
Microsoft (Computer software & services) 2.9
Colgate-Palmolive (Household products) 2.8
Fannie Mae (Financial services) 2.5
Procter & Gamble (Household products) 2.4
McKesson (Health care services) 2.4
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Stock prices of established companies that pay dividends may be less volatile
than the stock market as a whole.
Fund holdings are subject to change.
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3 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Doug Chase began managing AXP Research Opportunities Fund in November 2003.
Below, he discusses the Fund's repositioning and results for the six months
ended Jan. 31, 2004.
Shareholders will be asked to approve a merger of the Fund into AXP Large Cap
Equity Fund at a shareholder meeting on June 9, 2004. This approval is not
guaranteed. If shareholder approval is obtained, no new purchases or exchanges
into the Fund will be allowed, although existing shareholders may redeem or
exchange out of the Fund.
Q: How did AXP Research Opportunities Fund perform in the six months ended
Jan. 31, 2004?
A: AXP Research Opportunities Fund's Class A shares, excluding sales charge,
gained 12.07% for the six months ended Jan. 31, 2004. This was less than
the Standard & Poor's 500 Index, which rose 15.23% for the period. The
Lipper Large-Cap Core Funds Index, the Fund's peer group, rose 13.12% over
the same time frame.
Q: What factors most significantly affected Fund performance during the
semiannual period?
A: The Fund benefited from the U.S. equity market's strong rally, which has
been fueled by the improving economic environment and strong corporate
earnings results. Stock selection for most
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2004
20%
(bar 2)
15% (bar 1) +15.23% (bar 3)
+12.07% +13.12%
10%
5%
0%
(bar 1) AXP Research Opportunities Fund Class A (excluding sales charge)
(bar 2) S&P 500 Index Fund(1) (unmanaged)
(bar 3) Lipper Large-Cap Core Funds Index(2)
(1) Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common
stocks, is frequently used as a general measure of market performance. The
index reflects reinvestment of all distributions and changes in market
prices, but excludes brokerage commissions or other fees. However, the S&P
500 companies may be generally larger than those in which the Fund invests.
(2) The Lipper Large-Cap Core Funds Index, published by Lipper Inc., includes
the 30 largest funds that are generally similar to the Fund, although some
funds in the index may have somewhat different investment policies or
objectives.
Past performance is no guarantee of future results. The 5.75% sales charge
applicable to Class A shares of the Fund is not reflected in the bar chart; if
reflected, returns would be lower than those shown. The performance of Class B,
Class C and Class Y may vary from that shown above because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
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4 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> Currently, we believe the best market opportunities are
in growth stocks that have a high degree of stability to their growth. (end
callout quote)
of the fiscal period and a conservative positioning relative to the S&P 500
Index and its peer group since November were the primary reasons why the
Fund's return fell short of the Index and peer group for the six months
ended Jan. 31, 2004.
Early in the period, good stock selection in the health care, industrial
and technology sectors added to relative performance. However, stock
selection
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (8/19/96) (8/19/96) (6/26/00) (8/19/96)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
as of Jan. 31, 2004
6 months* +12.07% +5.63% +11.54% +7.54% +11.25% +10.25% +11.81% +11.81%
1 year +29.19% +21.75% +28.32% +24.32% +27.94% +27.94% +29.37% +29.37%
5 years -4.61% -5.73% -5.35% -5.50% N/A N/A -4.47% -4.47%
Since inception +4.61% +3.78% +3.80% +3.80% -10.07% -10.07% +4.76% +4.76%
as of Dec. 31, 2003
6 months* +12.46% +6.00% +11.92% +6.92% +11.92% +10.92% +12.46% +12.46%
1 year +23.95% +16.82% +23.08% +19.08% +23.08% +23.08% +24.16% +24.16%
5 years -3.86% -4.99% -4.59% -4.74% N/A N/A -3.72% -3.72%
Since inception +4.54% +3.70% +3.75% +3.75% -10.48% -10.48% +4.69% +4.69%
The performance information shown represents the past performance and is not a
guarantee of future results. The value of your investment and returns 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 (888) 723-8476 or visiting
www.americanexpress.com/funds. You should consider the investment objectives,
risks, and charges and expenses of the Fund carefully before investing.
* Not annualized.
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
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5 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Questions & Answers
within the consumer cyclical, financial and energy sectors hindered the
Fund's results.
One strong market trend working against the Fund's investment strategy was
the continued outperformance of small-cap stocks relative to large-cap
stocks, which are the focus of the Fund. Even within the S&P 500 Index, the
smaller the market capitalization, the stronger the stock's performance
generally was.
In mid-November, we made substantial changes to sector allocations and
individual holdings within the portfolio. Toward the end of the semiannual
period, we began to see some positive results from this repositioning. For
example, energy stocks that we added to the portfolio in mid-November
benefited performance in December when the energy sector rallied. However,
since the overall equity market generally favored smaller and lower quality
stocks, our restructuring of the portfolio toward high quality, large-cap
stocks was not fully rewarded.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: Early in the period, the portfolio's cyclical exposure was increased in an
effort to take advantage of the strengthening U.S. economy. In addition,
holdings of brokerage firms, biotechnology companies and home improvement
retail stores were increased. The Fund's exposure to big pharmaceutical
companies was reduced.
The most significant changes came in November. We moved to
higher-than-index positions in the health care and industrials sectors and
lower-than-index positions in the technology, financial, telecommunications
and utility sectors.
Late in the period, we broadened our ownership of pharmaceutical firms,
trimming holdings of Wyeth, which had appreciated significantly, and adding
Johnson & Johnson, Eli Lilly and Novartis to the Fund's holdings. Despite
last year's weakness, we maintain a higher-than-index weighting in health
care because we believe, long term, health care earnings will grow at rates
faster than the market overall due to demographic shifts, primarily the
aging of the U.S. population. In addition to pharmaceuticals, the Fund's
holdings within the health care sector are well diversified among
biotechnology companies, hospitals, medical device providers and drug
distributors. Our primary concern about health care is the forthcoming
November 2004 general election, and the potential for negative political
discourse about the industry. Therefore, we will probably be a bit cautious
in adding further to the health care sector. We may take advantage of
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6 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Questions & Answers
election-related uncertainties to add to some existing positions.
The Fund's weighting in the technology sector is smaller than the index. We
believe these stocks, as a group, are expensive. In our opinion, the only
way to justify current valuations is to assume exceptional economic growth
for several quarters to come. We believe that if growth is indeed that
strong, it will also drive performance in other sectors such as media,
which we consider more reasonably priced. The Fund ended the period with a
lower-than-index position in financial stocks because we believe many of
these companies are vulnerable to the negative effects of a potential
increase in interest rates.
Q: How do you intend to manage the Fund in the coming months?
A: One key issue for the market in 2004 is whether large-cap stocks can regain
market leadership from small-cap stocks. We believe several factors support
such an outcome. First, the overvaluation of small-caps versus large-caps
suggests that a period of large-cap outperformance may be due. Other
factors favoring large-caps include the decline in the U.S. dollar, which
has made U.S. exports more competitive, and the possibility of higher
interest rates. Small-cap companies generally do not benefit from export
growth the way large-cap companies do. In addition, smaller companies are
often more dependent on borrowed money and could suffer from either
expectations of rising interest rates or actual rate increases.
Consumer staples is a sector that looks interesting to us now precisely
because it is one of the most multinational groups in the market and could
benefit from the lower dollar. Anywhere you travel globally, you will find
the products of U.S. based multinationals -- from cola to razor blades to
hamburgers. We think such companies are attractive given the improved
export environment.
Currently, we believe the best market opportunities are in stocks that have
a high degree of stability to their growth. These stocks have become
cheaper relative to the market; yet in any given year, they tend to grow
earnings faster than the S&P 500 Index. We have been making a concerted
effort to move money into more stable growth stocks and out of companies
that require record levels of profitability to justify their current share
prices.
Given the improving global economy, the weak dollar, and large-cap relative
underperformance in 2003, we think the environment may be more favorable
for large stocks in 2004 and we consider the portfolio well positioned for
such a scenario.
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7 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Investments in Securities
Aggressive Growth Portfolio
Jan. 31, 2004 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (99.4%)
Issuer Shares Value(a)
Aerospace & defense (2.6%)
Empresa Brasileira de
Aeronautica ADR 16,800(c) $495,096
Lockheed Martin 44,800 2,178,176
Northrop Grumman 12,700 1,228,217
United Technologies 23,100 2,206,974
Total 6,108,463
Banks and savings & loans (3.5%)
Bank of America 44,400 3,616,824
U.S. Bancorp 47,500 1,342,825
Washington Mutual 18,500 819,550
Wells Fargo 43,600 2,503,076
Total 8,282,275
Beverages & tobacco (5.3%)
Altria Group 69,800 3,880,182
Anheuser-Busch Companies 10,800 547,776
Coca-Cola 24,100 1,186,684
PepsiCo 144,600 6,833,796
Total 12,448,438
Broker dealers (1.8%)
Merrill Lynch & Co 34,600 2,034,134
Morgan Stanley 38,600 2,246,906
Total 4,281,040
Building materials & construction (0.5%)
American Standard 10,900(b) 1,157,580
Cable (0.7%)
EchoStar Communications Cl A 19,800(b) 722,700
NTL 12,000(b) 796,080
Total 1,518,780
Cellular telecommunications (0.5%)
Nextel Communications Cl A 45,000(b) 1,187,550
Chemicals (1.5%)
Dow Chemical 42,700 1,791,265
Lyondell Chemical 96,200 1,648,868
Total 3,440,133
Computer hardware (4.8%)
Cisco Systems 170,200(b) 4,363,928
Dell 89,100(b) 2,982,177
Hewlett-Packard 140,400 3,340,116
NVIDIA 23,600(b) 525,100
Total 11,211,321
Computer software & services (4.4%)
Affiliated Computer Services Cl A 9,500(b) 526,775
BMC Software 29,800(b) 593,020
Investors Financial Services 9,500 393,680
Microsoft 246,900 6,826,785
Oracle 94,700(b) 1,307,807
VERITAS Software 18,500(b) 607,910
Total 10,255,977
Electronics (4.3%)
Analog Devices 30,600 1,464,210
Applied Materials 31,900(b) 694,144
Intel 148,000 4,528,800
Jabil Circuit 14,000(b) 414,400
KLA-Tencor 20,600(b) 1,175,642
STMicroelectronics 41,500(c) 1,113,860
Taiwan Semiconductor Mfg ADR 53,100(c) 593,658
Total 9,984,714
Energy (5.3%)
ChevronTexaco 38,400 3,315,840
ConocoPhillips 32,800 2,160,864
Devon Energy 20,000 1,129,200
Exxon Mobil 124,400 5,074,276
Newfield Exploration 13,100(b) 618,189
Total 12,298,369
Energy equipment & services (1.3%)
Halliburton 42,500 1,281,375
Noble 31,700(b) 1,176,070
Weatherford Intl 15,200(b) 612,864
Total 3,070,309
Finance companies (5.2%)
Citigroup 243,000 12,023,640
See accompanying notes to investments in securities.
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8 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Financial services (4.9%)
Capital One Financial 14,500 $1,030,660
Countrywide Financial 25,100 2,097,105
Fannie Mae 75,800 5,844,180
MBNA 91,600 2,469,536
Total 11,441,481
Health care products (16.2%)
Amgen 50,800(b) 3,276,092
Baxter Intl 58,100 1,693,615
Boston Scientific 32,900(b) 1,341,991
Forest Laboratories 36,900(b) 2,748,681
Gilead Sciences 9,500(b) 521,265
Johnson & Johnson 99,700 5,325,974
Medtronic 31,900 1,570,118
Merck & Co 25,600 1,218,560
Novartis ADR 55,800(c) 2,519,370
Pfizer 432,300 15,835,149
Teva Pharmaceutical Inds ADR 9,600(c) 600,864
Wyeth 26,800 1,097,460
Total 37,749,139
Health care services (6.6%)
AmerisourceBergen 62,400 3,435,120
Anthem 15,500(b) 1,267,590
Cardinal Health 44,200 2,833,662
Caremark Rx 23,600(b) 631,300
HCA 29,000 1,302,100
McKesson 190,100 5,585,138
Tenet Healthcare 19,000(b) 235,600
Total 15,290,510
Household products (5.1%)
Colgate-Palmolive 124,900 6,403,623
Procter & Gamble 55,400 5,599,832
Total 12,003,455
Insurance (5.1%)
ACE 27,400(c) 1,189,708
Allstate 58,600 2,663,956
American Intl Group 42,700 2,965,515
Chubb 51,400 3,674,586
Hartford Financial Services Group 14,400 926,496
MBIA 9,400 592,200
Total 12,012,461
Leisure time & entertainment (4.3%)
Mattel 134,800 2,549,068
Viacom Cl B 187,400 7,552,220
Total 10,101,288
Machinery (0.8%)
Caterpillar 23,600 1,843,868
Media (6.9%)
Cendant 348,200(b) 7,886,730
Disney (Walt) 194,500 4,668,000
InterActiveCorp 37,700(b) 1,221,480
Liberty Media Cl A 106,000(b) 1,233,840
Tribune 23,100 1,182,489
Total 16,192,539
Multi-industry (3.9%)
Accenture Cl A 25,400(b,c) 601,218
General Electric 146,400 4,923,432
ITT Inds 7,700 573,958
Tyco Intl 112,000(c) 2,996,000
Total 9,094,608
Paper & packaging (0.9%)
Avery Dennison 24,000 1,491,840
Weyerhaeuser 9,000 553,140
Total 2,044,980
Precious metals (0.7%)
Freeport McMoRan Cooper &
Gold Cl B 42,600 1,570,236
Retail -- general (1.8%)
Best Buy 49,250 2,481,708
Wal-Mart Stores 32,200 1,733,970
Total 4,215,678
Utilities -- electric (0.5%)
Exelon 8,700 582,726
FirstEnergy 16,000 600,320
Total 1,183,046
Total common stocks
(Cost: $216,769,389) $232,011,878
Total investments in securities
(Cost: $216,769,389)(d) $232,011,878
See accompanying notes to investments in securities.
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9 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL 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. As of Jan. 31, 2004,
the value of foreign securities represented 4.3% of net assets.
(d) At Jan. 31, 2004, the cost of securities for federal income tax purposes
was approximately $216,769,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $18,350,000
Unrealized depreciation (3,107,000)
----------
Net unrealized appreciation $15,243,000
-----------
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10 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Aggressive Growth Portfolio
Jan. 31, 2004 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $216,769,389) $232,011,878
Cash in bank on demand deposit 783,598
Dividends and accrued interest receivable 219,470
Receivable for investment securities sold 5,918,498
---------
Total assets 238,933,444
-----------
Liabilities
Payable for investment securities purchased 5,565,617
Accrued investment management services fee 4,162
Other accrued expenses 13,678
------
Total liabilities 5,583,457
---------
Net assets $233,349,987
============
See accompanying notes to financial statements.
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11 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Statement of operations
Aggressive Growth Portfolio
Six months ended Jan. 31, 2004 (Unaudited)
Investment income
Income:
Dividends $ 2,053,380
Interest 28,015
Less foreign taxes withheld (10,066)
-------
Total income 2,071,329
---------
Expenses (Note 2):
Investment management services fee 747,615
Compensation of board members 4,618
Custodian fees 17,300
Audit fees 10,500
Other 2,344
-----
Total expenses 782,377
Earnings credits on cash balances (Note 2) (592)
----
Total net expenses 781,785
-------
Investment income (loss) -- net 1,289,544
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 9,989,087
Options contracts written (Note 4) 43,301
------
Net realized gain (loss) on investments 10,032,388
Net change in unrealized appreciation (depreciation) on investments 16,000,429
----------
Net gain (loss) on investments 26,032,817
----------
Net increase (decrease) in net assets resulting from operations $27,322,361
===========
See accompanying notes to financial statements.
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12 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets
Aggressive Growth Portfolio
Jan. 31, 2004 July 31, 2003
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ 1,289,544 $ 3,016,145
Net realized gain (loss) on investments 10,032,388 (54,088,180)
Net change in unrealized appreciation (depreciation) on investments 16,000,429 65,040,858
---------- ----------
Net increase (decrease) in net assets resulting from operations 27,322,361 13,968,823
---------- ----------
Proceeds from contributions -- 280,192
Fair value of withdrawals (34,841,103) (82,264,696)
----------- -----------
Net contributions (withdrawals) from partners (34,841,103) (81,984,504)
----------- -----------
Total increase (decrease) in net assets (7,518,742) (68,015,681)
Net assets at beginning of period 240,868,729 308,884,410
----------- -----------
Net assets at end of period $233,349,987 $240,868,729
============ ============
See accompanying notes to financial statements.
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13 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Notes to Financial Statements
Aggressive Growth Portfolio
(Unaudited as to Jan. 31, 2004)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. Aggressive Growth
Portfolio invests primarily in equity securities of companies that comprise the
S&P 500 Index. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by independent pricing service.
American Express Financial Corporation (AEFC) may use fair value if a security's
value has been materially affected by events after the close of the primary
exchanges or markets on which the security is traded and before NAV is
calculated. The fair value of a security may be different from the quoted or
published price. AEFC will price a security at fair value in accordance with
procedures adopted by the Portfolio and board of trustees if a reliable market
quotation is not readily available. Short-term securities maturing in more than
60 days from the valuation date are valued at the market price or approximate
market value based on current interest rates; those maturing in 60 days or less
are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
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14 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
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.
- --------------------------------------------------------------------------------
15 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
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 AEFC to manage its portfolio. Under this Agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.65% to 0.50% annually. The fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of AXP Research Opportunities Fund to the Lipper
Large-Cap Core Funds Index. 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 $25,550 for the six months ended Jan. 31, 2004.
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.
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 changes and remains in the Portfolio until distributed in
accordance with the Plan.
During the six months ended Jan. 31, 2004, the Portfolio's custodian fees were
reduced by $592 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $239,217,887 and $266,572,558, respectively, for the six
months ended Jan. 31, 2004. Realized gains and losses are determined on an
identified cost basis.
Brokerage clearing fees paid to brokers affiliated with AEFC were $14,068 for
the six months ended Jan. 31, 2004.
- --------------------------------------------------------------------------------
16 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
4. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as follows:
Six months ended Jan. 31, 2004
Calls
Contracts Premiums
Balance July 31, 2003 270 $ 25,579
Opened 857 75,390
Closed (767) (76,750)
Exercised (170) (10,880)
Expired (190) (13,339)
---- -------
Balance Jan. 31, 2004 -- $ --
---- --------
See "Summary of significant accounting policies."
5. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended July 31, 2004(e) 2003 2002 2001 2000
Ratio of expenses to average daily net assets(a) .66%(c) .60% .60% .61% .63%
Ratio of net investment income (loss) to average daily net assets 1.08%(c) 1.18% .76% .91% .53%
Portfolio turnover rate (excluding short-term securities) 104% 82% 144% 234% 160%
Total return(b) 12.25%(d) 7.40% (26.92%) (17.05%) 8.43%
Notes to financial highlights
(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 NAV and does not reflect
payment of a sales charge.
(c) Adjusted to an annual basis.
(d) Not annualized.
(e) Six months ended Jan. 31, 2004 (Unaudited).
- --------------------------------------------------------------------------------
17 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Research Opportunities Fund
Jan. 31, 2004 (Unaudited)
Assets
Investment in Portfolio (Note 1) $ 233,281,106
Capital shares receivable 933
---
Total assets 233,282,039
-----------
Liabilities
Capital shares payable 3,354
Accrued distribution fee 3,442
Accrued transfer agency fee 1,711
Accrued administrative services fee 384
Other accrued expenses 76,769
------
Total liabilities 85,660
------
Net assets applicable to outstanding capital stock $ 233,196,379
=============
Represented by
Capital stock -- $.01 par value (Note 1) $ 515,748
Additional paid-in capital 480,830,274
Undistributed net investment income 124,415
Accumulated net realized gain (loss) (Note 5) (263,512,214)
Unrealized appreciation (depreciation) on investments 15,238,156
----------
Total -- representing net assets applicable to outstanding capital stock $ 233,196,379
=============
Net assets applicable to outstanding shares: Class A $ 143,595,618
Class B $ 89,301,137
Class C $ 298,219
Class Y $ 1,405
Net asset value per share of outstanding capital stock: Class A shares 30,978,884 $ 4.64
Class B shares 20,527,086 $ 4.35
Class C shares 68,489 $ 4.35
Class Y shares 300 $ 4.68
--- -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Statement of operations
AXP Research Opportunities Fund
Six months ended Jan. 31, 2004 (Unaudited)
Investment income
Income:
Dividends $ 2,052,818
Interest 28,008
Less foreign taxes withheld (10,063)
-------
Total income 2,070,763
---------
Expenses (Note 2):
Expenses allocated from Portfolio 781,570
Distribution fee
Class A 183,538
Class B 452,606
Class C 1,421
Transfer agency fee 327,159
Incremental transfer agency fee
Class A 22,314
Class B 22,776
Class C 66
Administrative services fees and expenses 71,661
Compensation of board members 4,250
Printing and postage 71,885
Registration fees 20,465
Audit fees 3,500
Other 5,908
-----
Total expenses 1,969,119
Expenses waived/reimbursed by AEFC (Note 2) (21,747)
-------
1,947,372
Earnings credits on cash balances (Note 2) (1,277)
------
Total net expenses 1,946,095
---------
Investment income (loss) -- net 124,668
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 9,986,498
Options contracts written 43,301
------
Net realized gain (loss) on investments 10,029,799
Net change in unrealized appreciation (depreciation) on investments 15,995,872
----------
Net gain (loss) on investments 26,025,671
----------
Net increase (decrease) in net assets resulting from operations $26,150,339
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Research Opportunities Fund
Jan. 31, 2004 July 31, 2003
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 124,668 $ 338,450
Net realized gain (loss) on investments 10,029,799 (54,080,938)
Net change in unrealized appreciation (depreciation) on investments 15,995,872 65,030,053
---------- ----------
Net increase (decrease) in net assets resulting from operations 26,150,339 11,287,565
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (338,698) --
Class Y (5) --
---------- ----------
Total distributions (338,703) --
---------- ----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 2,482,756 10,144,239
Class B shares 1,450,155 4,732,632
Class C shares 17,565 67,130
Class Y shares -- 4,652
Reinvestment of distributions at net asset value
Class A shares 333,621 --
Payments for redemptions
Class A shares (24,353,913) (57,637,339)
Class B shares (Note 2) (13,223,406) (36,351,756)
Class C shares (Note 2) (25,103) (91,096)
Class Y shares -- (198,402)
---------- ----------
Increase (decrease) in net assets from capital share transactions (33,318,325) (79,329,940)
----------- -----------
Total increase (decrease) in net assets (7,506,689) (68,042,375)
Net assets at beginning of period 240,703,068 308,745,443
----------- -----------
Net assets at end of period $233,196,379 $240,703,068
============ ============
Undistributed net investment income $ 124,415 $ 338,450
------------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Research Opportunities Fund
(Unaudited as to Jan. 31, 2004)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year
of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
Investment in Aggressive Growth Portfolio
The Fund invests all of its assets in Aggressive Growth Portfolio (the
Portfolio), a series of Growth Trust (the Trust), an open-end investment company
that has the same objectives as the Fund. The Portfolio invests primarily in
equity securities of companies that comprise the S&P 500 Index.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund as of Jan. 31, 2004, was 99.97%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolio's "Notes to financial statements" (included elsewhere in this report).
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
- --------------------------------------------------------------------------------
21 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
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 AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
in reducing percentages from 0.06% to 0.03% annually. A minor portion of
additional administrative service expenses paid by the Fund are consultants'
fees and fund office expenses. Under this agreement, the Fund also pays taxes,
audit and certain legal fees, registration fees for shares, compensation of
board members, corporate filing fees and any other expenses properly payable by
the Fund and approved by the board.
Under a 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, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
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.
- --------------------------------------------------------------------------------
22 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
In addition, AECSC is entitled to charge an annual closed-account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$76,055 for Class A, $33,286 for Class B and $22 for Class C for the six months
ended Jan. 31, 2004.
For the six months ended Jan. 31, 2004, AEFC and its affiliates waived certain
fees and expenses to 1.35% for Class A, 2.11% for Class B, 2.11% for Class C and
1.11% for Class Y. In addition, AEFC and its affiliates have agreed to waive
certain fees and expenses until July 31, 2004. Under this agreement, net
expenses will not exceed 1.35% for Class A, 2.11% for Class B, 2.11% for Class C
and 1.18% for Class Y of the Fund's average daily net assets.
During the six months ended Jan. 31, 2004, the Fund's transfer agency fees were
reduced by $1,277 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Jan. 31, 2004
Class A Class B Class C Class Y
Sold 564,967 351,796 4,271 --
Issued for reinvested distributions 73,810 -- -- --
Redeemed (5,549,852) (3,212,455) (6,195) --
----------- ----------- ------- -------
Net increase (decrease) (4,911,075) (2,860,659) (1,924) --
----------- ----------- ------- -------
Year ended July 31, 2003
Class A Class B Class C Class Y
Sold 2,606,091 1,322,189 18,719 1,227
Issued for reinvested distributions -- -- -- --
Redeemed (15,298,541) (10,145,114) (24,738) (53,135)
----------- ----------- ------- -------
Net increase (decrease) (12,692,450) (8,822,925) (6,019) (51,908)
----------- ---------- ------ -------
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23 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
Deutsche Bank, whereby the Fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The Fund must
maintain asset coverage for borrowings of at least 300%. The agreement, which
enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the LIBOR plus 0.50%, the
IBOR plus 0.50% or the higher of the Federal Funds Rate plus 0.25% and the Prime
Lending Rate. Borrowings are payable within 60 days after such loan is executed.
The Fund also pays a commitment fee equal to its pro rata share of the amount of
the credit facility at a rate of 0.09% per annum. The Fund had no borrowings
outstanding during the six months ended Jan. 31, 2004.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund has a capital loss carry-over of
$272,229,915 as of July 31, 2003, that will expire in 2009 through 2012 if not
offset by capital gains. It is unlikely the board will authorize a distribution
of any net realized capital gains until the available capital loss carry-over
has been offset or expires.
6. SUBSEQUENT EVENT
Shareholders will be asked to approve a merger of the Fund into AXP Large Cap
Equity Fund at a shareholder meeting on June 9, 2004. This approval is not
guaranteed. If shareholder approval is obtained, no new purchases or exchanges
into the Fund will be allowed, although existing shareholders may redeem or
exchange out of the Fund.
- --------------------------------------------------------------------------------
24 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL 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, 2004(k) 2003 2002 2001 2000
Net asset value, beginning of period $4.15 $3.90 $ 5.37 $ 7.61 $7.94
Income from investment operations:
Net investment income (loss) .01 .02 -- .02 --
Net gains (losses) (both realized and unrealized) .49 .23 (1.46) (1.27) .66
Total from investment operations .50 .25 (1.46) (1.25) .66
Less distributions:
Dividends from net investment income (.01) -- (.01) -- --
Distributions from realized gains -- -- -- (.99) (.99)
Total distributions (.01) -- (.01) (.99) (.99)
Net asset value, end of period $4.64 $4.15 $ 3.90 $ 5.37 $7.61
Ratios/supplemental data
Net assets, end of period (in millions) $144 $149 $189 $365 $540
Ratio of expenses to average daily net assets(c) 1.35%(d),(e) 1.35% 1.22% 1.16% 1.14%
Ratio of net investment income (loss) to average daily net assets .40%(d) .43% .15% .37% .02%
Portfolio turnover rate (excluding short-term securities) 104% 82% 144% 234% 160%
Total return(i) 12.07%(j) 6.41% (27.24%) (17.54%) 7.73%
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2004(k) 2003 2002 2001 2000
Net asset value, beginning of period $3.90 $3.69 $ 5.12 $ 7.36 $7.76
Income from investment operations:
Net investment income (loss) (.01) (.02) (.01) (.02) (.05)
Net gains (losses) (both realized and unrealized) .46 .23 (1.42) (1.23) .64
Total from investment operations .45 .21 (1.43) (1.25) .59
Less distributions:
Distributions from realized gains -- -- -- (.99) (.99)
Net asset value, end of period $4.35 $3.90 $ 3.69 $ 5.12 $7.36
Ratios/supplemental data
Net assets, end of period (in millions) $89 $91 $119 $235 $336
Ratio of expenses to average daily net assets(c) 2.11%(d),(f) 2.11% 1.98% 1.92% 1.91%
Ratio of net investment income (loss) to average daily net assets (.37%)(d) (.33%) (.62%) (.39%) (.73%)
Portfolio turnover rate (excluding short-term securities) 104% 82% 144% 234% 160%
Total return(i) 11.54%(j) 5.69% (27.93%) (18.19%) 7.03%
See accompanying notes to financial highlights.
- --------------------------------------------------------------------------------
25 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2004(k) 2003 2002 2001 2000(b)
Net asset value, beginning of period $3.91 $3.69 $ 5.13 $ 7.36 $7.50
Income from investment operations:
Net investment income (loss) (.02) (.01) (.02) (.02) .02
Net gains (losses) (both realized and unrealized) .46 .23 (1.42) (1.22) (.16)
Total from investment operations .44 .22 (1.44) (1.24) (.14)
Less distributions:
Distributions from realized gains -- -- -- (.99) --
Net asset value, end of period $4.35 $3.91 $ 3.69 $ 5.13 $7.36
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $-- $--
Ratio of expenses to average daily net assets(c) 2.11%(d),(g) 2.11% 1.99% 1.92% 1.91%(d)
Ratio of net investment income (loss) to average daily net assets (.36%)(d) (.34%) (.61%) (.36%) (.50%)(d)
Portfolio turnover rate (excluding short-term securities) 104% 82% 144% 234% 160%
Total return(i) 11.25%(j) 5.96% (28.05%) (18.03%) (1.87%)(j)
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2004(k) 2003 2002 2001 2000
Net asset value, beginning of period $4.20 $3.93 $ 5.42 $ 7.65 $7.96
Income from investment operations:
Net investment income (loss) .01 .04 -- .04 .01
Net gains (losses) (both realized and unrealized) .49 .23 (1.48) (1.28) .67
Total from investment operations .50 .27 (1.48) (1.24) .68
Less distributions:
Dividends from net investment income (.02) -- (.01) -- --
Distributions from realized gains -- -- -- (.99) (.99)
Total distributions (.02) -- (.01) (.99) (.99)
Net asset value, end of period $4.68 $4.20 $ 3.93 $ 5.42 $7.65
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $-- $--
Ratio of expenses to average daily net assets(c) 1.13%(d),(h) 1.13% 1.04% 1.00% .97%
Ratio of net investment income (loss) to average daily net assets .61%(d) .64% .33% .54% .17%
Portfolio turnover rate (excluding short-term securities) 104% 82% 144% 234% 160%
Total return(i) 11.81%(j) 6.87% (27.30%) (17.29%) 7.99%
See accompanying notes to financial highlights.
- --------------------------------------------------------------------------------
26 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
Notes to financial highlights
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class A would have been 1.36% for the six
months ended Jan. 31, 2004.
(f) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class B would have been 2.13% for the six
months ended Jan. 31, 2004.
(g) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class C would have been 2.13% for the six
months ended Jan. 31, 2004.
(h) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class Y would have been 1.15% for the six
months ended Jan. 31, 2004.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended Jan. 31, 2004 (Unaudited).
- --------------------------------------------------------------------------------
27 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL 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 Web site americanexpress.com/funds; or by
searching the Web site of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, after Aug.
1, 2004, information regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 will be
available at http://www.sec.gov.
- --------------------------------------------------------------------------------
28 -- AXP RESEARCH OPPORTUNITIES FUND -- 2004 SEMIANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.