UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2111
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AXP GROWTH SERIES, INC.
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(Exact name of registrant as specified in charter)
50606 AXP 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: 1/31
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AXP(R)
Growth
Fund
Semiannual Report
for the Period Ended
Jan. 31, 2005
AXP Growth 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
Performance Summary 4
Questions & Answers
with Portfolio Management 5
Investments in Securities 10
Financial Statements (Portfolio) 14
Notes to Financial Statements (Portfolio) 17
Financial Statements (Fund) 21
Notes to Financial Statements (Fund) 24
Fund Expenses Example 33
Proxy Voting 35
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated.
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
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2 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Fund Snapshot
AT JAN. 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 $3.020 billion
Number of holdings 123
STYLE MATRIX
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
Shading within the style matrix indicates areas in which the Fund generally
invests.
SECTOR COMPOSITION
Percentage of portfolio assets
(pie chart)
Information technology 20.0%
Health care 19.0%
Consumer discretionary 14.3%
Telecommunications 11.2%
Financials 9.0%
Consumer staples 7.8%
Short-term securities* 6.5%
Energy 4.1%
Industrials 3.4%
Telecommunication services 3.1%
Materials 1.5%
Other 0.1%
*2.4% of portfolio assers is due to security lending activity.
4.1% of portfolio assets is the Portfolio's cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
NTL (Cable) 7.6%
Nextel Communications Cl A
(Cellular telecommunications) 7.5
Nokia ADR (Telecom equipment & services) 3.1
Sprint (Utilities -- telephone) 3.1
Johnson & Johnson (Health care products) 3.0
Motorola (Telecom equipment & services) 2.5
Dell (Computer hardware) 2.3
Pfizer (Health care products) 1.9
Intel (Electronics) 1.8
Procter & Gamble (Household products) 1.8
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Stock prices of established companies that pay dividends may be less volatile
than the stock market as a whole. There are special risk considerations
associated with international investing related to market, currency, political,
economica and other factors.
Fund holdings are subject to change.
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3 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2005
+9.86% +6.01% +7.92%
+9.86% = AXP Growth Fund Class A (excluding sales charge)
+6.01% = Russell 1000(R) Growth Index(1) (unmanaged)
+7.92% = Lipper Large-Cap Growth Funds Index(2)
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.americanexpress.com/funds.
(1) The Russell 1000(R) Growth Index, an unmanaged index, measures the
performance of those companies among the 1,000 largest companies included
in the Russell 3000(R) Index 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.
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.
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4 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager Nick Thakore discusses the Fund's positioning and
results for the first half of the 2005 fiscal year.
Q: How did AXP Growth Fund perform for the six-month period ended Jan. 31,
2005?
A: AXP Growth Fund's Class A shares rose 9.86%, excluding sales charge, for the
six-month period ended Jan. 31, 2005. The Fund outperformed the 7.92% return
of its peer group as represented by the Lipper Large-Cap Growth Funds Index
as well as its benchmark, the Russell 1000(R) Growth Index (Russell Index),
which advanced 6.01% for the same period.
Q: What factors affected performance?
A: Favorable sector allocations and strong stock selection helped the Fund
outperform the Russell Index and its peer group by a strong margin for the
fiscal period. Several of the dominant themes in
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)
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at Jan. 31, 2005
6 months* +9.86% +3.54% +9.43% +5.43% +9.43% +8.43% +10.17% +10.01%
1 year +6.02% -0.08% +5.17% +1.17% +5.17% +5.17% N/A +6.17%
3 years -0.42% -2.36% -1.21% -2.20% -1.21% -1.21% N/A -0.25%
5 years -11.10% -12.15% -11.79% -11.96% N/A N/A N/A -10.95%
10 years +7.00% +6.37% N/A N/A N/A N/A N/A N/A
Since inception +11.96% +11.96% +5.48% +5.48% -14.55% -14.55% +3.67%* +6.45%
at Dec. 31, 2004
6 months* +6.88% +0.73% +6.47% +1.47% +6.47% +5.47% +7.13% +6.93%
1 year +8.49% +2.25% +7.69% +3.69% +7.69% +7.69% N/A +8.70%
3 years -0.19% -2.14% -0.96% -1.96% -0.96% -0.96% N/A -0.01%
5 years -11.17% -12.21% -11.85% -12.02% N/A N/A N/A -11.02%
10 years +7.20% +6.57% N/A N/A N/A N/A N/A N/A
Since inception +12.06% +12.06% +5.75% +5.75% -14.42% -14.42% +5.66%* +6.72%
* 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
eligible investors only, currently limited to AXP Portfolio Builder Series
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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5 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> Favorable sector allocations and strong stock
selection helped the Fund outperform the Russell Index and its peer group by a
strong margin for the fiscal period. (end callout quote)
the portfolio -- including an emphasis on cable stocks and wireless
telecommunications companies -- were particularly advantageous for our
results.
Regarding the Fund's sector allocations, the results were almost uniformly
positive. A higher-than-Russell Index position in telecommunications
services was a major contributor. In addition, a number of individual
telecommunications stocks added to relative return, including Vodafone,
Nextel Partners, Nextel and Western Wireless. These stocks benefited from
strong fundamentals during the period. Mergers also contributed to the
strong results within the sector. Western Wireless benefited from the
announcement that it would be acquired by Alltel, while Nextel and Nextel
Partners both advanced on news of the intended merger between Sprint and
Nextel.
The Fund's cable holdings advanced during the period, driven by cheap
valuations and value-unlocking catalysts. In particular, NTL, a U.K. cable
stock that we have held for some time, added to relative return. The company
announced the sale of its tower business during the period for an attractive
price. Speculation related to a possible merger with Telewest Global,
another U.K. cable company, also helped NTL's stock.
The Fund's technology position added to relative return, as did our
lower-than-Russell Index positions in some weaker performing technology
stocks such as Cisco and Intel. Cell phone maker Nokia was the largest
positive contributor within the technology sector. After Nokia declined on
earnings difficulties last year, we aggressively bought the stock. Since
then the company has begun to deliver strong earnings and its stock price
has rebounded.
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6 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
Stock selection among health care holdings was a modest positive
contributor. The Fund benefited from larger-than-Russell Index positions in
Aetna, a well-known HMO, and Medco Health Solutions, a pharmacy benefits
management company. The Fund's position in the energy sector was also
advantageous as energy stocks continued to benefit from high global energy
prices.
Pharmaceutical giant Merck was the only individual stock to have a
significant negative impact on relative return for the fiscal period.
Merck's stock declined sharply in the fall of 2004 after the company removed
its leading arthritis drug Vioxx from the market due to evidence that
long-term use significantly increased the risk of stroke and heart attack.
From a sector allocation perspective, lower-than-benchmark positions in the
industrials and consumer discretionary sectors had a marginal negative
impact.
Q: What changes did you make during the six-month period?
A: Telecommunications services remained an important emphasis for the Fund, but
within the sector, we adjusted some holdings, largely due to strong
performance from selected stocks. For example, we sold Western Wireless,
which advanced strongly during the period. We increased the Fund's holdings
of Sprint and Nextel due to optimism about the prospects for the combined
Nextel/Sprint entity in 2005. We are impressed by the prospect of a positive
growth rate, attractive valuation and the potential power which could be
created by putting these two companies together.
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7 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
We slightly reduced our energy exposure when oil prices rose to such high
levels that we thought any subsequent price decline would hurt the stocks.
Still, the portfolio's energy position remains larger than that of the
Russell Index. We have preferred energy over industrial stocks because we
would rather emphasize sectors where growth is not decelerating and not so
dependant on the economy. We think growth rates on industrials are
decelerating and that valuations already discount very strong forward
growth. During the fiscal period, we also sold a few health care stocks.
Q: How do you plan to manage the Fund in the coming months given current market
conditions?
A: We believe 2005 will be a year with lower growth rates overall, resulting in
an environment where the market is likely to reward strong growth that is
viewed as sustainable. We believe the growth rates on the stocks we own are
very good. Although some stocks may be facing decelerating growth, in
general, the stocks we have emphasized still have better growth rates than
the market, as well as good valuations. In addition, we have favored stocks
with growth stories that are more company-specific than dependant on
economic growth, particularly those with identifiable catalysts for future
appreciation.
What are Growth and Value Funds?
Growth Funds: Funds that seek growth of capital by investing in growing
companies that are expected to have above-average increases in earnings or
sales.
Value Funds: Funds that seek growth of capital by investing in companies that
are believed to be temporarily undervalued in the market and may show promise
for the future.
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8 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> Value stocks have outpaced growth stocks since 2000,
making this cycle of outperformance longer and more substantial than any other
during the last 20 years. History tells us that such an imbalance in the equity
market must correct itself at some point. (end callout quote)
Since small-cap stocks have performed better than large-caps for some time,
we see an opportunity for larger-cap stocks to reclaim the market
leadership. Consequently, we have been actively looking for large-cap stocks
that are positioned to do well, with a goal of increasing the Fund's average
market capitalization.
Similarly, we are optimistic about the prospects for growth stocks. Value
stocks have outpaced growth stocks since 2000, making this cycle of
outperformance longer and more substantial than any other during the last 20
years. History tells us that such an imbalance in the equity market must
correct itself at some point. This far into such a prolonged cycle, we
believe investors should maintain their exposure to growth stocks.
Otherwise, they may not benefit when the market again begins to favor
growth.
To illustrate the difference in performance between large-cap growth and
large-cap value stocks in recent years, the chart below compares the returns
of the Russell 1000 Growth Index, the Russell 1000 Value Index and the
Standard & Poor's 500 Index, an unmanaged index containing both growth and
value stocks.
COMPARISON OF RETURNS
At Jan. 31, 2005 Is a Growth Style Investment Recovery on the Horizon?
1 yr 3 yr 5 yr 10 yr
Russell 1000 Growth Index +0.70% -0.71% -9.04% +8.99%
Russell 1000 Value Index +12.45% +8.20% +5.59% +13.28%
S&P 500 Index +6.22% +3.24% -1.77% +11.51%
Past performance does not guarantee future results. The Russell 1000(R) Growth
Index is an unmanaged market capitalization weighted index of those Russell 1000
Index companies with higher forecasted growth values The Russell 1000(R) Value
Index is an unmanaged market capitalization weighted index of those Russell 1000
Index companies with lower price-to-book ratios and lower forecasted growth
values. None of the Index figures reflect any deduction for fees or expenses.
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9 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Investments in Securities
Growth Portfolio
Jan. 31, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (95.5%)
Issuer Shares Value(a)
Aerospace & defense (1.1%)
Lockheed Martin 466,000(d) $26,939,460
United Technologies 74,200 7,470,456
Total 34,409,916
Banks and savings & loans (1.9%)
Commerce Bancorp 271,800(d) 15,639,372
First Marblehead 43,450(b) 2,795,139
HDFC Bank ADR 75,100(c) 3,341,950
Investors Financial Services 513,100 25,865,371
Wachovia 168,000 9,214,800
Total 56,856,632
Beverages & tobacco (2.2%)
Altria Group 170,150 10,860,675
Coca-Cola 119,800 4,970,502
PepsiCo 958,800 51,487,560
Total 67,318,737
Broker dealers (0.2%)
Merrill Lynch & Co 100,800 6,055,056
Cable (9.4%)
NTL 3,464,296(b) 235,676,057
RCN 249,100(b,d) 4,857,450
Telewest Global 2,583,100(b,c) 43,525,235
Total 284,058,742
Cellular telecommunications (11.5%)
Nextel Communications Cl A 8,053,500(b) 231,054,914
NTT DoCoMo 6,600(c) 11,429,254
Telesystem Intl Wireless 3,531,749(b,c) 49,832,978
Vodafone Group ADR 2,057,200(c) 53,446,056
Total 345,763,202
Computer hardware (4.9%)
Cisco Systems 2,430,000(b) 43,837,200
Dell 1,685,300(b) 70,378,128
EMC 1,392,600(b) 18,243,060
Sun Microsystems 3,376,900(b) 14,723,284
Total 147,181,672
Computer software & services (2.9%)
Google Cl A 78,900(b,d) 15,435,207
Microsoft 1,051,600 27,636,048
Oracle 1,696,000(b) 23,353,920
Symantec 968,000(b) 22,602,800
Total 89,027,975
Electronics (4.4%)
ASML Holding 599,500(b,c) 9,849,785
Freescale Semiconductor Cl A 664,100(b) 11,356,110
Freescale Semiconductor Cl B 302,062(b) 5,277,023
Intel 2,539,400 57,009,530
Linear Technology 346,400 13,073,136
Marvell Technology Group 135,200(b,c) 4,522,440
Maxim Integrated Products 324,700 12,666,547
Texas Instruments 772,000 17,918,120
Total 131,672,691
Energy (1.7%)
Anadarko Petroleum 285,700 18,916,197
ChevronTexaco 288,200 15,678,080
ConocoPhillips 166,300 15,430,977
Total 50,025,254
Energy equipment & services (2.5%)
Baker Hughes 147,900 6,404,070
Halliburton 1,006,000 41,376,780
Schlumberger 282,000 19,187,280
Transocean 187,300(b) 8,241,200
Total 75,209,330
Finance companies (0.2%)
Citigroup 136,900 6,714,945
Financial services (3.0%)
Capital One Financial 177,100 13,863,388
Countrywide Financial 417,500 15,447,500
Fannie Mae 536,400 34,640,712
Freddie Mac 317,900 20,755,691
Nomura Holdings 534,700(c) 7,021,475
Total 91,728,766
See accompanying notes to investments in securities.
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10 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Food (1.1%)
Kellogg 630,350 $28,138,824
Sara Lee 192,700 4,524,596
Total 32,663,420
Health care products (14.9%)
Allergan 57,300 4,351,935
Amgen 210,500(b) 13,101,520
Baxter Intl 224,400 7,575,744
Biogen Idec 702,200(b) 45,614,912
Bristol-Myers Squibb 843,600 19,773,984
Elan ADR 631,400(b,c,d) 17,003,602
Forest Laboratories 71,300(b) 2,961,089
Genentech 578,000(b) 27,576,380
Gilead Sciences 181,100(b) 5,994,410
GlaxoSmithKline ADR 447,700(c,d) 19,953,989
Johnson & Johnson 1,450,300 93,834,409
Medco Health Solutions 719,400(b) 30,624,858
Medtronic 383,900 20,150,911
Merck & Co 337,600 9,469,680
Novartis ADR 582,300(c,d) 27,880,524
OSI Pharmaceuticals 335,500(b) 21,841,050
Pfizer 2,385,800 57,640,928
Schering Plough 992,300 18,417,088
Wyeth 168,900 6,693,507
Total 450,460,520
Health care services (4.5%)
Aetna 172,850 21,960,593
Cardinal Health 327,500 18,444,800
Caremark Rx 116,800(b) 4,566,880
Community Health Systems 111,600(b) 3,234,168
HCA 882,700 39,297,804
HealthSouth 1,687,100(b) 9,869,535
Lincare Holdings 33,500(b) 1,390,250
Magellan Health Services 412,550(b) 15,322,107
Tenet Healthcare 118,800(b) 1,179,684
WellPoint 176,700(b) 21,469,050
Total 136,734,871
Household products (4.5%)
Avon Products 405,800 17,132,876
Colgate-Palmolive 218,000 11,453,720
Gillette 973,000 49,350,560
Kimberly-Clark 46,700 3,059,317
Procter & Gamble 1,044,100 55,577,443
Total 136,573,916
Insurance (3.8%)
ACE 357,400(c) 15,511,160
Allstate 230,500 11,626,420
American Intl Group 815,100 54,032,979
Chubb 323,000 24,057,040
Prudential Financial 191,600 10,329,156
Total 115,556,755
Leisure time & entertainment (0.5%)
Viacom Cl B 366,412 13,681,824
Media (1.5%)
eBay 275,300(b) 22,436,950
Walt Disney 749,200 21,449,596
Total 43,886,546
Multi-industry (2.4%)
Monsanto 216,000 11,692,080
Sony 199,300(c) 7,385,043
Tyco Intl 1,060,900(c) 38,340,926
Vivendi Universal ADR 441,000(b,c) 13,953,240
Total 71,371,289
Precious metals (1.5%)
Coeur d'Alene Mines 4,860,300(b,d) 17,156,859
Newmont Mining 694,200 28,871,778
Total 46,028,637
Retail -- general (3.3%)
Gap 588,800 12,959,488
Home Depot 318,400 13,137,184
Lowe's Companies 108,000 6,154,920
Target 570,900 28,984,593
Wal-Mart Stores 758,700 39,755,880
Total 100,992,065
Retail -- grocery (0.2%)
Safeway 244,500(b) 4,608,825
Telecom equipment & services (8.3%)
Hutchison Telecommunications
Intl ADR 1,493,800(b,c) 20,016,920
Indonesian Satellite 12,009,500(c) 7,470,079
Leap Wireless Intl 250,900(b) 6,837,025
Motorola 4,977,000 78,337,980
Nextel Partners Cl A 1,991,750(b) 39,615,908
Nokia ADR 6,359,000(c) 97,165,519
Total 249,443,431
See accompanying notes to investments in securities.
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11 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Utilities -- natural gas (--%)
Kinder Morgan Management LLC --(b) $14
Utilities -- telephone (3.1%)
Sprint 3,973,000 94,676,590
Total common stocks
(Cost: $2,633,889,214) $2,882,701,621
Option purchased (0.2%)
Issuer Contracts Exercise Expiration Value(a)
price date
Put
S&P 500 Index 5,140 $1,075 June 2005 $4,600,300
Total option purchased
(Cost: $14,860,350) $4,600,300
Short-term securities (6.6%)(e)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agency (4.1%)
Federal Natl Mtge Assn Disc Nts
02-07-05 2.23% $24,500,000 $24,489,365
02-08-05 2.22 20,000,000 19,990,119
02-10-05 2.22 4,400,000 4,397,293
03-02-05 2.38 25,000,000 24,950,416
04-13-05 2.47 50,000,000 49,754,450
Total 123,581,643
Commercial paper (2.5%)
Fairway Finance
02-28-05 2.50 2,800,000 2,794,556
General Electric Capital
02-01-05 2.48 5,100,000 5,099,649
Harrier Finance Funding (US) LLC
03-01-05 2.43 11,200,000 11,178,076
Jupiter Securitization
02-22-05 2.45 20,000,000 19,970,056
Ranger Funding LLC
02-23-05 2.50 25,000,000 24,960,069
UBS Finance LLC
02-14-05 2.35 11,600,000 11,589,399
Total 75,591,805
Total short-term securities
(Cost: $199,178,212) $199,173,448
Total investments in securities
(Cost: $2,847,927,776)(f) $3,086,475,369
See accompanying notes to investments in securities.
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12 -- AXP GROWTH FUND -- 2005 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. At Jan. 31, 2005, the
value of foreign securities represented 14.8% of net assets.
(d) At Jan. 31, 2005, security was partially or fully on loan.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 2.5% of net assets. 4.1% of the net
assets is the Portfolio's cash equivalent position.
(f) At Jan. 31, 2005, the cost of securities for federal income tax purposes
was approximately $2,847,928,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $306,178,000
Unrealized depreciation (67,631,000)
-----------
Net unrealized appreciation $238,547,000
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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.americanexpress.com/funds.
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13 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Growth Portfolio
Jan. 31, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)*
(identified cost $2,847,927,776) $3,086,475,369
Dividends and accrued interest receivable 2,219,445
Receivable for investment securities sold 131,535,152
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Total assets 3,220,229,966
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Liabilities
Disbursements in excess of cash on demand deposit 800,778
Payable for investment securities purchased 125,775,104
Payable upon return of securities loaned (Note 4) 74,303,800
Accrued investment management services fee 141,575
Other accrued expenses 101,093
-------
Total liabilities 201,122,350
-----------
Net assets $3,019,107,616
==============
* Including securities on loan, at value (Note 4) 72,106,966
----------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
Growth Portfolio
Six months ended Jan. 31, 2005 (Unaudited)
Investment income
Income:
Dividends $ 19,927,428
Interest 1,277,347
Fee income from securities lending (Note 4) 103,565
Less foreign taxes withheld (97,376)
-------
Total income 21,210,964
----------
Expenses (Note 2):
Investment management services fee 9,118,775
Compensation of board members 8,935
Custodian fees 117,226
Audit fees 15,750
Other 68,539
------
Total expenses 9,329,225
Earnings credits on cash balances (Note 2) (618)
----
Total net expenses 9,328,607
---------
Investment income (loss) -- net 11,882,357
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 128,785,637
Foreign currency transactions (53,516)
-------
Net realized gain (loss) on investments 128,732,121
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 156,110,748
-----------
Net gain (loss) on investments and foreign currencies 284,842,869
-----------
Net increase (decrease) in net assets resulting from operations $296,725,226
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
Growth Portfolio
Jan. 31, 2005 July 31, 2004
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ 11,882,357 $ 21,150,217
Net realized gain (loss) on investments 128,732,121 362,598,800
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 156,110,748 (210,306,341)
----------- ------------
Net increase (decrease) in net assets resulting from operations 296,725,226 173,442,676
----------- -----------
Proceeds from contributions 6,933,553 20,257,382
Fair value of withdrawals (380,867,730) (544,632,609)
------------ ------------
Net contributions (withdrawals) from partners (373,934,177) (524,375,227)
------------ ------------
Total increase (decrease) in net assets (77,208,951) (350,932,551)
Net assets at beginning of period 3,096,316,567 3,447,249,118
------------- -------------
Net assets at end of period $3,019,107,616 $3,096,316,567
============== ==============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
Growth Portfolio
(Unaudited as to Jan. 31, 2005)
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 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 an independent pricing service.
Pursuant to procedures adopted by the Board of Trustees of the portfolios,
American Express Financial Corporation (AEFC) 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 (NAV).
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.
- --------------------------------------------------------------------------------
17 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
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.
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.
- --------------------------------------------------------------------------------
18 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
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 AEFC to manage its portfolio. Under an Investment Management
Service 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 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 $243,840 for
the six months ended Jan. 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.
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.
- --------------------------------------------------------------------------------
19 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
During the six months ended Jan. 31, 2005, the Portfolio's custodian fees were
reduced by $618 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 $1,972,187,516 and $2,441,023,206, respectively, for the
six months ended Jan. 31, 2005. Realized gains and losses are determined on an
identified cost basis.
Brokerage clearing fees paid to brokers affiliated with AEFC were $13,720 for
the six months ended Jan. 31, 2005.
4. LENDING OF PORTFOLIO SECURITIES
At Jan. 31, 2005, securities valued at $72,106,966 were on loan to brokers. For
collateral, the Portfolio received $74,303,800 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 $103,565 for six months ended Jan. 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. 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(e) 2004 2003 2002 2001
Ratio of expenses to average daily net assets(a) .60%(b) .49% .62% .47% .55%
Ratio of net investment income (loss) to average daily net assets .77%(b) .61% .59% .37% .09%
Portfolio turnover rate (excluding short-term securities) 68% 171% 205% 225% 41%
Total return(c) 10.22%(d) 4.65% 9.73% (29.17%) (41.87%)
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) Adjusted to an annual basis.
(c) Total return is based on a calculated Portfolio NAV and does not reflect
payment of a sales charge.
(d) Not annualized.
(e) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
20 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Growth Fund
Jan. 31, 2005 (Unaudited)
Assets
Investment in Portfolio (Note 1) $ 3,019,058,417
Capital shares receivable 1,953,536
---------
Total assets 3,021,011,953
-------------
Liabilities
Capital shares payable 668,552
Accrued distribution fee 88,705
Accrued service fee 2,693
Accrued transfer agency fee 49,275
Accrued administrative services fee 11,076
Other accrued expenses 290,046
-------
Total liabilities 1,110,347
---------
Net assets applicable to outstanding capital stock $ 3,019,901,606
===============
Represented by
Capital stock -- $.01 par value (Note 1) $ 1,174,744
Additional paid-in capital 3,877,363,157
Undistributed net investment income 1,399,128
Accumulated net realized gain (loss) (Note 5) (1,098,607,776)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 238,572,353
-----------
Total -- representing net assets applicable to outstanding capital stock $ 3,019,901,606
===============
Net assets applicable to outstanding shares: Class A $ 2,030,912,554
Class B $ 567,352,001
Class C $ 12,637,366
Class I $ 77,021,553
Class Y $ 331,978,132
Net asset value per share of outstanding capital stock: Class A shares 77,891,887 $ 26.07
Class B shares 23,618,372 $ 24.02
Class C shares 526,070 $ 24.02
Class I shares 2,900,906 $ 26.55
Class Y shares 12,537,171 $ 26.48
---------- ---------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Growth Fund
Six months ended Jan. 31, 2005 (Unaudited)
Investment income
Income:
Dividends $ 19,927,123
Interest 1,277,328
Fee income from securities lending 103,563
Less foreign taxes withheld (97,374)
-------
Total income 21,210,640
----------
Expenses (Note 2):
Expenses allocated from Portfolio 9,328,464
Distribution fee
Class A 2,620,635
Class B 2,946,274
Class C 64,321
Transfer agency fee 3,098,416
Incremental transfer agency fee
Class A 227,904
Class B 153,279
Class C 3,218
Service fee -- Class Y 178,242
Administrative services fees and expenses 705,807
Compensation of board members 6,269
Printing and postage 440,750
Registration fees 42,850
Audit fees 5,250
Other 23,188
------
Total expenses 19,844,867
Earnings credits on cash balances (Note 2) (33,355)
-------
Total net expenses 19,811,512
----------
Investment income (loss) -- net 1,399,128
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 128,783,899
Foreign currency transactions (53,514)
-------
Net realized gain (loss) on investments 128,730,385
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 156,108,108
-----------
Net gain (loss) on investments and foreign currencies 284,838,493
-----------
Net increase (decrease) in net assets resulting from operations $286,237,621
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Growth Fund
Jan. 31, 2005 July 31, 2004
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ 1,399,128 $ (2,970,542)
Net realized gain (loss) on investments 128,730,385 362,594,443
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 156,108,108 (210,303,690)
----------- ------------
Net increase (decrease) in net assets resulting from operations 286,237,621 149,320,211
----------- -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 55,812,089 285,165,756
Class B shares 20,915,687 80,166,420
Class C shares 1,054,956 4,297,146
Class I shares 56,059,772 18,579,557
Class Y shares 27,548,396 110,428,653
Payments for redemptions
Class A shares (337,182,567) (533,084,922)
Class B shares (Note 2) (103,724,302) (286,628,598)
Class C shares (Note 2) (2,500,000) (3,709,528)
Class I shares (40,151) (7,079)
Class Y shares (79,775,262) (176,524,688)
----------- ------------
Increase (decrease) in net assets from capital share transactions (361,831,382) (501,317,283)
------------ ------------
Total increase (decrease) in net assets (75,593,761) (351,997,072)
Net assets at beginning of period 3,095,495,367 3,447,492,439
------------- -------------
Net assets at end of period $3,019,901,606 $3,095,495,367
============== ==============
Undistributed net investment income $ 1,399,128 $ --
-------------- --------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Growth Fund
(Unaudited as to Jan. 31, 2005)
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.
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 Jan. 31, 2005, AEFC and the AXP Portfolio
Builder Series funds owned 100% of Class I shares, which represents 2.55% 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 Jan. 31, 2005 was 99.99%.
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
- --------------------------------------------------------------------------------
24 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
an independent pricing service. Pursuant to procedures adopted by the Board of
Trustees of the portfolios, AEFC 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 (NAV). 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 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.
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.
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.
- --------------------------------------------------------------------------------
25 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for 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. 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.
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.
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 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.
- --------------------------------------------------------------------------------
26 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Sales charges received by the Distributor for distributing Fund shares were
$1,202,067 for Class A, $435,732 for Class B and $1,423 for Class C for the six
months ended Jan. 31, 2005.
During the six months ended Jan. 31, 2005, the Fund's transfer agency fees were
reduced by $33,355 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, 2005
Class A Class B Class C Class I Class Y
Sold 2,222,409 903,262 45,865 2,151,583 1,103,191
Issued for reinvested distributions -- -- -- -- --
Redeemed (13,548,479) (4,516,419) (109,356) (1,609) (3,105,111)
----------- ---------- -------- ------ ----------
Net increase (decrease) (11,326,070) (3,613,157) (63,491) 2,149,974 (2,001,920)
----------- ---------- ------- --------- ----------
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 was 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 six months ended Jan. 31, 2005.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$1,205,376,835 at July 31, 2004, that if not offset by capital gains will expire
as follows:
2010 2011
$836,602,508 $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.
- --------------------------------------------------------------------------------
27 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(f) 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) .03 .02 -- (.04) (.14)
Net gains (losses) (both realized and unrealized) 2.31 .91 1.92 (8.74) (22.34)
------ ------ ------ ------ -------
Total from investment operations 2.34 .93 1.92 (8.78) (22.48)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $26.07 $23.73 $22.80 $20.88 $ 29.68
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $2,031 $2,117 $2,263 $2,213 $3,851
Ratio of expenses to average daily net assets(b) 1.15%(c) 1.03% 1.21% .99% .99%
Ratio of net investment income (loss) to average daily net assets .22%(c) .07% --% (.15%) (.34%)
Portfolio turnover rate (excluding short-term securities) 68% 171% 205% 225% 41%
Total return(d) 9.86%(e) 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) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
28 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(f) 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) (.07) (.16) (.17) (.25) (.42)
Net gains (losses) (both realized and unrealized) 2.14 .86 1.81 (8.23) (21.29)
------ ------ ------ ------ -------
Total from investment operations 2.07 .70 1.64 (8.48) (21.71)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $24.02 $21.95 $21.25 $19.61 $ 28.11
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $567 $598 $775 $845 $1,510
Ratio of expenses to average daily net assets(b) 1.93%(c) 1.81% 1.99% 1.77% 1.75%
Ratio of net investment income (loss) to average daily net assets (.56%)(c) (.71%) (.77%) (.93%) (1.11%)
Portfolio turnover rate (excluding short-term securities) 68% 171% 205% 225% 41%
Total return(d) 9.43%(e) 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) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
29 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(f) 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) (.07) (.16) (.17) (.21) (.42)
Net gains (losses) (both realized and unrealized) 2.14 .86 1.80 (8.27) (21.29)
------ ------ ------ ------ -------
Total from investment operations 2.07 .70 1.63 (8.48) (21.71)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $24.02 $21.95 $21.25 $19.62 $ 28.12
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $13 $13 $12 $7 $9
Ratio of expenses to average daily net assets(b) 1.93%(c) 1.81% 2.01% 1.80% 1.75%
Ratio of net investment income (loss) to average daily net assets (.56%)(c) (.71%) (.81%) (.96%) (1.10%)
Portfolio turnover rate (excluding short-term securities) 68% 171% 205% 225% 41%
Total return(d) 9.43%(e) 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) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
30 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(g) 2004(b)
Net asset value, beginning of period $24.10 $25.61
------ ------
Income from investment operations:
Net investment income (loss) .07 .09
Net gains (losses) (both realized and unrealized) 2.38 (1.60)
------ ------
Total from investment operations 2.45 (1.51)
------ ------
Net asset value, end of period $26.55 $24.10
------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $77 $18
Ratio of expenses to average daily net assets(c) .70%(d) .57%(d)
Ratio of net investment income (loss) to average daily net assets .58%(d) .43%(d)
Portfolio turnover rate (excluding short-term securities) 68% 171%
Total return(e) 10.17%(f) (5.90%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
31 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(f) 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) .05 .07 .04 -- (.07)
Net gains (losses) (both realized and unrealized) 2.36 .91 1.94 (8.83) (22.52)
------ ------ ------ ------ -------
Total from investment operations 2.41 .98 1.98 (8.83) (22.59)
------ ------ ------ ------ -------
Less distributions:
Distributions from realized gains -- -- -- (.02) (2.20)
------ ------ ------ ------ -------
Net asset value, end of period $26.48 $24.07 $23.09 $21.11 $ 29.96
------ ------ ------ ------ -------
Ratios/supplemental data
Net assets, end of period (in millions) $332 $350 $398 $481 $974
Ratio of expenses to average daily net assets(b) .98%(c) .86% 1.03% .82% .83%
Ratio of net investment income (loss) to average daily net assets .40%(c) .25% .18% .02% (.18%)
Portfolio turnover rate (excluding short-term securities) 68% 171% 205% 225% 41%
Total return(d) 10.01%(e) 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) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2005 (Unaudited).
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32 -- AXP GROWTH FUND -- 2005 SEMIANNUAL 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 Jan. 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.
- --------------------------------------------------------------------------------
33 -- AXP GROWTH FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Aug. 1, 2004 Jan. 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,098.60 $6.12 1.15%
Hypothetical (5% return before expenses) $1,000 $1,019.51 $5.89 1.15%
Class B
Actual(b) $1,000 $1,094.30 $10.24 1.93%
Hypothetical (5% return before expenses) $1,000 $1,015.56 $9.86 1.93%
Class C
Actual(b) $1,000 $1,094.30 $10.24 1.93%
Hypothetical (5% return before expenses) $1,000 $1,015.56 $9.86 1.93%
Class I
Actual(b) $1,000 $1,101.70 $3.73 0.70%
Hypothetical (5% return before expenses) $1,000 $1,021.79 $3.59 0.70%
Class Y
Actual(b) $1,000 $1,100.10 $5.22 0.98%
Hypothetical (5% return before expenses) $1,000 $1,020.38 $5.02 0.98%
(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 185/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Jan. 31, 2005: +9.86%
for Class A, +9.43% for Class B, +9.43% for Class C, +10.17% for Class I
and +10.01% for Class Y.
- --------------------------------------------------------------------------------
34 -- AXP GROWTH FUND -- 2005 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 website americanexpress.com/funds; or by
searching the website 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, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
35 -- AXP GROWTH FUND -- 2005 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.
AXP(R)
Large Cap
Equity
Fund
Semiannual Report
for the Period Ended
Jan. 31, 2005
AXP Large Cap Equity Fund seeks to provide shareholders with long-term growth of
capital.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
Investments in Securities 9
Financial Statements 13
Notes to Financial Statements 17
Fund Expenses Example 29
Proxy Voting 31
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated.
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Fund Snapshot AT JAN. 31, 2005
PORTFOLIO MANAGERS
Portfolio managers Since Years in industry
Bob Ewing 1/05 15
Nick Thakore 1/05 10
FUND OBJECTIVE
The Fund seeks to provide shareholders with long-term growth of capital.
Inception dates by class
A: 3/28/02 B: 3/28/02 C: 3/28/02 I: 3/4/04 Y: 3/28/02
Ticker symbols by class
A: ALEAX B: ALEBX C: ARQCX I: -- Y: ALEYX
Total net assets $1.755 billion
Number of holdings 136
STYLE MATRIX
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
Shading within the style matrix indicates areas in which the Fund generally
invests.
SECTOR COMPOSITION
Percentage of portfolio assets
(pie chart)
Financials 19.9%
Health care 15.3%
Consumer discretionary 14.5%
Information technology 14.4%
Consumer staples 9.2%
Industrials 5.9%
Energy 5.8%
Telecommunications 5.0%
Utilities 2.8%
Investment companies 1.9%
Materials 1.9%
Short-term securities* 1.9%
Telecommunication services 1.5%
* 0.8% of portfolio assets is due to security lending activity. 1.1% of
portfolio assets is the Fund's cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
Cendant (Leisure time & entertainment) 6.1%
Citigroup (Finance companies) 3.7
Nextel Communications Cl A
(Cellular telecommunications) 3.7
Exxon Mobil (Energy) 3.5
General Electric (Multi-industry) 2.7
NTL (Cable) 2.5
PepsiCo (Beverages & tobacco) 2.3
Colgate-Palmolive (Household products) 2.3
Bank of America (Banks and savings & loans) 2.0
Wal-Mart Stores (Retail -- general) 2.0
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 LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2005
(bar 1) (bar 2) (bar 3)
+7.70% +8.92% +7.32%
(bar 1) AXP Large Cap Equity Fund Class A (excluding sales charge)
(bar 2) Russell 1000(R) Index(1) (unmanaged)
(bar 3) Lipper Large-Cap Core Funds Index(2)
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.americanexpress.com/funds.
(1) The Russell 1000(R) Index, an unmanaged index, measures the performance of
the 1,000 largest companies in the Russell 3000(R) Index, a broad measure
of equity market performance.
(2) The Lipper Large-Cap Core Funds Index includes the 30 largest large cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (3/28/02) (3/28/02) (3/28/02) (3/4/04) (3/28/02)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at Jan. 31, 2005
6 months* +7.70% +1.51% +7.16% +3.16% +7.14% +6.14% +7.95% +7.58%
1 year +3.22% -2.72% +2.41% -1.57% +2.40% +2.40% N/A +3.33%
Since inception +1.62% -0.47% +0.78% -0.24% +0.85% +0.85% +1.85%* +1.75%
at Dec. 31, 2004
6 months* +4.06% -1.92% +3.48% -1.52% +3.47% +2.47% +4.32% +3.96%
1 year +5.52% -0.55% +4.73% +0.73% +4.72% +4.72% N/A +5.63%
Since inception +2.19% +0.02% +1.32% -0.09% +1.40% +1.40% +3.27%* +2.32%
* 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
eligible investors only, currently limited to AXP Portfolio Builder Series
funds, six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- --------------------------------------------------------------------------------
4 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Performance Summary
AXP Large Cap Equity Fund's Class A shares advanced 7.70%, excluding sales
charge, for the six months ended Jan. 31, 2005. The Fund lagged its benchmark,
the Russell 1000(R) Index (Russell Index), which advanced 8.92%, but
outperformed its peers as represented by the Lipper Large-Cap Core Funds Index,
which gained 7.32% over the same time frame.
On Oct. 1, 2004, Bob Ewing and Nick Thakore began managing the Fund on a
temporary basis for Doug Chase, the Fund's portfolio manager, who took a leave
of absence. Mr. Chase subsequently decided to leave American Express and on Jan.
3, 2005, Mr. Ewing and Mr. Thakore were named portfolio managers of the Fund.
Together, they manage the Fund in conjunction with a team of equity analysts.
Below, Mr. Ewing and Mr. Thakore discuss the Fund's results for the first half
of fiscal year 2005.
Q: What factors significantly affected performance?
A: The portfolio's sector allocations were primarily responsible for its
underperformance compared to the Russell Index for the fiscal period. Strong
stock selection, however, helped to mitigate this negative impact.
Our stock selections in the telecommunications services sector were
particularly effective. Among our telecommunications holdings, Western
Wireless was a significant individual contributor. The stock benefited from
the announcement of Alltel's acquisition plans.
The Fund also benefited from stock selection in the health care sector.
Within health care, the Fund had lower-than-Russell Index weightings in
pharmaceutical stocks and a focus on medical device makers and health
services firms. The health services industry provided strong results during
the fiscal period. Among our health care holdings, Medco Health Solutions, a
pharmacy benefits management company, was a significant positive
contributor.
In the technology sector, cell phone maker Nokia was also a leading
contributor to relative return.
Stock selection in the industrials sector detracted from relative return.
Based on our expectations for the economy and for earnings growth in the
industrial sector, we have focused on industrial stocks that are likely to
be less sensitive to changes in economic activity. However, during the
six-month period, economically sensitive industrial stocks were the
strongest performers.
A smaller-than-Russell Index position in technology was the only sector
decision that added value during the six-month period, as technology stocks
suffered from over abundant inventories and concerns about the
sustainability of
- --------------------------------------------------------------------------------
5 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> The portfolio's sector allocations were primarily
responsible for its underperformance compared to the Russell Index for the
fiscal period. Strong stock selection, however, helped to mitigate this negative
impact. (end callout quote)
increased corporate spending. The Fund's cash position was the largest
detractor, as is often the case during a rising stock market. Nonetheless,
maintaining a cash position is essential since it enables us to take
advantage of emerging opportunities and respond to other liquidity needs. A
larger-than-Russell Index position in telecommunications services also
detracted from relative performance.
Individual holdings that detracted most from relative return were generally
strong performing stocks where the Fund's weightings were too small or where
the Fund had no exposure. For example, we had only a small position in
Motorola because we had been concerned about the company's array of products
and whether or not it could compete in the fragmented cell phone industry.
However, the stock performed well during the period and we have been pleased
by the growing popularity of Motorola's RAZR phone. We have since added to
the portfolio's holdings in Motorola. Similarly, we did not own Home Depot
during the period. We consider the stock to be a little more expensive than
normal and believe its current valuation implies a continuation of domestic
growth that we are not sure will unfold.
We also did not own Apple Computer during the fiscal period, and this hurt
our results. In our view, Apple has done an exceptional job with its current
product cycle, but the stock was quite expensive. We believed there was a
substantial amount of good news already reflected in Apple's price, which
did not leave any margin for error in the company's future earnings and
product news.
Q: What changes did you make to the portfolio during the period?
A: Since Oct. 1, 2004, when we began to manage the Fund, we have added more
stocks to the portfolio and made some positioning changes. Previously, the
Fund's sector weightings were sometimes substantially different from those
of the
- --------------------------------------------------------------------------------
6 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> We remain careful in the current environment given
prevailing market risks and the reality that this is the fourth year of the U.S.
economic recovery. (end callout quote)
Russell Index. We have aligned the Fund's sector weightings more closely
with those of the Russell Index. An example is our reduction of the Fund's
health care weighting.
We also slightly lowered the Fund's average market capitalization by
trimming our holdings of very large capitalization stocks.
In terms of sector allocations, we added most significantly to
telecommunications services, financials and utilities. Conversely, we made
the most substantial reductions in health care, consumer discretionary and
consumer staples.
The outcome of this repositioning is that the Fund is now more focused on
adding value through our choice of individual stocks rather than through top
down decisions about which sectors might perform better or worse than the
Russell Index.
There have also been some changes to individual stock positions over the
course of the six month period. The three largest purchases were wireless
telecommunications company Nextel, cell phone maker Nokia, and U.K. cable
company NTL. We are optimistic about the prospects for the combined
Nextel/Sprint entity in 2005. We are impressed by the great growth rate,
attractive valuation and the potential power created by merging Nextel and
Sprint. Since Nokia declined on earnings difficulties last year, the company
has begun to deliver strong earnings and its stock price has rebounded. We
believe NTL remains a promising story for 2005, as the stock appears cheap
with solid growth prospects. We also anticipate that NTL may join with
another U.K. cable company, which could spur further appreciation.
- --------------------------------------------------------------------------------
7 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
Pharmaceutical firm Pfizer had been a large position for the Fund and we
significantly reduced that, although the stock remained a major holding at
the end of the period. We also eliminated AmerisourceBergen, a
pharmaceutical services firm, from the portfolio. This had been one of the
Fund's biggest positions and we were concerned with how large the position
was. AmerisourceBergen stock had a very strong month in November, which gave
us an opportunity to sell our holdings at a strong profit.
We consider the Fund's current portfolio to be representative of the best
ideas generated by our team. Even with the changes we made to the Fund
during the six months ended Jan. 31, 2005, the Fund's portfolio turnover
rate was only 56%, less than the 99% turnover in the prior fiscal year.
Q: How will you manage the Fund in the coming months?
A: Although this Fund essentially uses a fundamentally driven, bottom-up
strategy, we are cognizant of market trends and potential risks. We remain
careful in the current environment given prevailing market risks and the
reality that this is the fourth year of the U.S. economic recovery. In
general, this outlook leads us to incorporate certain themes into our
management of the Fund. For instance, we have emphasized higher quality
stocks over lower quality stocks that have high amounts of leverage on their
balance sheets or exhibit volatile earnings.
We have also begun to extend our time horizon, striving to anticipate which
stocks are best positioned for the next market and economic phases.
Specifically, we see potential opportunities in telecommunications,
particularly providers of wireless services. There is an attractive growth
dimension in this sector, with potential for additional mergers, yet these
stocks are still inexpensive in our view. Based on stock-by-stock
assessments, we are also still finding health care stocks with attractive
fundamentals.
At the end of the period, we were substantially underweighted in the
consumer discretionary sector (relative to the Russell Index), based on our
negative view of retail and some cable stocks. This stems from our cautious
view of consumer activity in 2005. Consumers have been aggressive spenders
for some years and we think this spending fervor will have to decelerate at
some point.
- --------------------------------------------------------------------------------
8 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Investments in Securities
AXP Large Cap Equity Fund
Jan. 31, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (100.4%)
Issuer Shares Value(a)
Aerospace & defense (1.6%)
Empresa Brasileira
de Aeronautica ADR 334,314(c) $10,647,901
Lockheed Martin 122,860 7,102,537
Northrop Grumman 210,028 10,896,252
Total 28,646,690
Banks and savings & loans (6.6%)
Bank of America 789,400 36,604,478
Commerce Bancorp 162,700(d) 9,361,758
First Marblehead 23,350(b) 1,502,106
HDFC Bank ADR 87,050(c) 3,873,725
Investors Financial Services 309,500 15,601,895
State Street 38,300 1,716,223
US Bancorp 347,100 10,430,355
Wachovia 268,000 14,699,800
Washington Mutual 108,300 4,369,905
Wells Fargo & Co 281,800 17,274,340
Total 115,434,585
Beverages & tobacco (3.5%)
Altria Group 220,300 14,061,749
Coca-Cola 45,550 1,889,870
Coca-Cola Enterprises 205,300 4,506,335
PepsiCo 772,124 41,463,058
Total 61,921,012
Broker dealers (2.2%)
Franklin Resources 71,800 4,872,348
JPMorgan Chase & Co 648,700 24,215,971
Morgan Stanley 174,500 9,765,020
Total 38,853,339
Cable (3.1%)
NTL 661,569(b) 45,006,539
Telewest Global 574,100(b,c) 9,673,585
Total 54,680,124
Cellular telecommunications (5.1%)
China Unicom 4,778,000(c) 3,889,882
Nextel Communications Cl A 2,311,300(b) 66,311,196
Telesystem Intl Wireless 391,700(b,c) 5,526,887
Vodafone Group ADR 314,400(c) 8,168,112
Western Wireless Cl A 140,025(b) 5,290,145
Total 89,186,222
Chemicals (1.0%)
Dow Chemical 352,545 17,521,487
Computer hardware (3.1%)
Cisco Systems 1,004,100(b) 18,113,964
Dell 618,000(b) 25,807,680
EMC 665,500(b) 8,718,050
Gateway 38,750(b) 183,288
Sun Microsystems 338,300(b) 1,474,988
Total 54,297,970
Computer software & services (3.8%)
Affiliated Computer
Services Cl A 190,200(b) 10,306,938
Business Objects ADR 25,400(b,c,d) 619,506
Citrix Systems 168,700(b) 3,618,615
Juniper Networks 33,600(b) 844,368
Macromedia 115,800(b) 3,964,992
Microsoft 611,400 16,067,592
Oracle 1,599,200(b) 22,020,984
Paychex 168,200 5,128,418
Symantec 139,100(b) 3,247,985
Total 65,819,398
Electronics (3.5%)
Analog Devices 49,100 1,762,199
ASML Holding 181,200(b,c) 2,977,116
Broadcom Cl A 279,400(b) 8,893,302
Freescale Semiconductor Cl B 96,585(b) 1,687,340
Intel 741,000 16,635,450
Linear Technology 91,700 3,460,758
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
9 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Electronics (cont.)
Maxim Integrated Products 86,600 $3,378,266
Micron Technology 705,800(b) 7,347,378
Texas Instruments 582,100 13,510,541
Xilinx 56,800 1,657,992
Total 61,310,342
Energy (6.0%)
ChevronTexaco 522,600 28,429,440
ConocoPhillips 140,573 13,043,769
Exxon Mobil 1,229,746 63,454,893
Total 104,928,102
Finance companies (3.8%)
Citigroup 1,363,308 66,870,257
Financial services (3.2%)
Capital One Financial 160,000 12,524,800
Countrywide Financial 236,596 8,754,052
Fannie Mae 542,097 35,008,624
PHH 1(b) 17
Total 56,287,493
Food (0.3%)
Kellogg 77,700 3,468,528
Sara Lee 112,300 2,636,804
Total 6,105,332
Health care products (10.7%)
Baxter Intl 244,200 8,244,192
Biogen Idec 199,000(b) 12,927,040
Bristol-Myers Squibb 515,600 12,085,664
Elan ADR 590,100(b,c,d) 15,891,393
Genentech 275,124(b) 13,126,166
Guidant 117,900 8,546,571
Johnson & Johnson 273,650 17,705,155
Medco Health Solutions 701,900(b) 29,879,883
Medtronic 81,100 4,256,939
Merck & Co 507,200 14,226,960
Momenta Pharmaceuticals 138,850(b) 981,670
Novartis ADR 599,850(c) 28,720,818
OSI Pharmaceuticals 61,600(b) 4,010,160
Pfizer 749,300 18,103,088
Total 188,705,699
Health care services (4.9%)
Aetna 85,900 10,913,595
Cardinal Health 59,900 3,373,568
Caremark Rx 353,600(b) 13,825,760
Fisher Scientific Intl 136,000(b) 8,588,400
HCA 522,600 23,266,152
HealthSouth 601,100(b) 3,516,435
Hospira 211,000(b) 6,095,790
Lincare Holdings 22,600(b) 937,900
Magellan Health Services 204,900(b) 7,609,986
Tenet Healthcare 788,900(b) 7,833,777
Total 85,961,363
Household products (5.2%)
Avon Products 231,100 9,757,042
Colgate-Palmolive 782,400 41,107,296
Gillette 358,500 18,183,120
Kimberly-Clark 54,400 3,563,744
Procter & Gamble 305,808 16,278,160
Rayovac 43,200(b) 1,623,024
Total 90,512,386
Insurance (4.6%)
ACE 457,347(c) 19,848,860
Allstate 141,600 7,142,304
American Intl Group 473,594 31,394,546
Chubb 228,900 17,048,472
Prudential Financial 91,500 4,932,765
Total 80,366,947
Investment companies (1.9%)
iShares Dow Jones US Utilities
Sector Index Fund 69,900 4,870,632
Utilities Select Sector
SPDR Fund 1,006,200(d) 28,616,328
Total 33,486,960
Leisure time & entertainment (6.9%)
Blockbuster Cl A 1 9
Blockbuster Cl B 1 9
Cendant 2,373,235 55,889,684
Cendant 2,373,235(b) 53,160,464
Viacom Cl B 366,618 13,689,516
Total 122,739,682
Lodging & gaming (0.2%)
GTECH Holdings 175,400 4,100,852
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Machinery (0.9%)
Caterpillar 107,156 $9,547,600
Ingersoll-Rand Cl A 72,300(c) 5,377,674
Total 14,925,274
Media (0.6%)
Walt Disney 344,500 9,863,035
Metals (0.3%)
Phelps Dodge 52,900 5,094,270
Multi-industry (3.6%)
General Electric 1,358,156 49,070,176
Tyco Intl 384,600(c) 13,899,444
Total 62,969,620
Paper & packaging (0.4%)
Weyerhaeuser 98,600 6,152,640
Precious metals (0.3%)
Freeport-McMoRan
Copper & Gold Cl B 140,041 5,154,909
Restaurants (0.2%)
Domino's Pizza 205,700 3,431,076
Retail -- drugstores (0.4%)
CVS 149,500 6,929,325
Retail -- general (3.7%)
Dollar General 493,000 9,963,530
Home Depot 110,300 4,550,978
Lowe's Companies 78,500 4,473,715
Target 201,700 10,240,309
Wal-Mart Stores 696,300 36,486,120
Total 65,714,652
Telecom equipment & services (4.4%)
Hutchison Telecommunications
Intl ADR 621,700(b,c) 8,330,780
Indonesian Satellite 3,488,000(c) 2,169,585
Motorola 1,416,100 22,289,414
Nextel Partners Cl A 538,600(b) 10,712,754
Nokia ADR 2,201,400(c) 33,637,392
Total 77,139,925
Utilities -- electric (2.9%)
American Electric Power 107,100 3,775,275
Entergy 206,600 14,362,832
Exelon 226,400 10,018,200
FPL Group 50,600 3,877,984
PPL 139,500 7,533,000
Southern 330,600 11,164,362
Total 50,731,653
Utilities -- telephone (1.5%)
Citizens Communications 304,600 4,109,054
Sprint 917,300 21,859,259
Total 25,968,313
Total common stocks
(Cost: $1,648,643,217) $1,761,810,934
Short-term securities (1.9%)(e)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agency (1.6%)
Federal Natl Mtge Assn Disc Nts
02-16-05 2.44% $20,000,000 $19,978,311
03-17-05 2.33 7,500,000 7,478,250
Total 27,456,561
Commercial paper (0.3%)
Banque Nationale de Paris North America
02-01-05 2.49 6,000,000 5,999,585
Total short-term securities
(Cost: $33,457,758) $33,456,146
Total investments in securities
(Cost: $1,682,100,975)(f) $1,795,267,080
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP LARGE CAP EQUITY FUND -- 2005 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. At Jan. 31, 2005, the
value of foreign securities represented 9.9% of net assets.
(d) At Jan. 31, 2005, security was partially or fully on loan. See Note 5 to
the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.8% of net assets. See Note 5 to the
financial statements. 1.1% of net assets is the Fund's cash equivalent
position.
(f) At Jan. 31, 2005, the cost of securities for federal income tax purposes
was approximately $1,682,101,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $153,039,000
Unrealized depreciation (39,873,000)
-----------
Net unrealized appreciation $113,166,000
------------
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.americanexpress.com/funds.
- --------------------------------------------------------------------------------
12 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Large Cap Equity Fund
Jan. 31, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)*
(identified cost $1,682,100,975) $ 1,795,267,080
Capital shares receivable 78,714
Dividends and accrued interest receivable 1,347,214
Receivable for investment securities sold 33,432,217
----------
Total assets 1,830,125,225
-------------
Liabilities
Disbursements in excess of cash on demand deposit 492,074
Capital shares payable 302,945
Payable for investment securities purchased 59,202,947
Payable upon return of securities loaned (Note 5) 14,527,500
Accrued investment management services fee 84,061
Accrued distribution fee 69,182
Accrued service fee 8
Accrued transfer agency fee 29,895
Accrued administrative services fee 6,832
Other accrued expenses 270,521
-------
Total liabilities 74,985,965
----------
Net assets applicable to outstanding capital stock $ 1,755,139,260
===============
Represented by
Capital stock -- $.01 par value (Note 1) $ 3,543,742
Additional paid-in capital 2,715,148,060
Excess of distributions over net investment income (821,948)
Accumulated net realized gain (loss) (Note 8) (1,075,896,699)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 113,166,105
-----------
Total -- representing net assets applicable to outstanding capital stock $ 1,755,139,260
===============
Net assets applicable to outstanding shares: Class A $ 1,177,340,217
Class B $ 545,943,618
Class C $ 10,554,439
Class I $ 20,290,335
Class Y $ 1,010,651
Net asset value per share of outstanding capital stock: Class A shares 236,421,584 $ 4.98
Class B shares 111,550,654 $ 4.89
Class C shares 2,152,618 $ 4.90
Class I shares 4,047,126 $ 5.01
Class Y shares 202,210 $ 5.00
------- ---------------
* Including securities on loan, at value (Note 5) $ 14,264,225
---------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Large Cap Equity Fund
Six months ended Jan. 31, 2005 (Unaudited)
Investment income
Income:
Dividends $ 16,863,397
Interest 339,234
Fee income from securities lending (Note 5) 3,066
Less foreign taxes withheld (134,421)
--------
Total income 17,071,276
----------
Expenses (Note 2):
Investment management services fee 5,107,141
Distribution fee
Class A 1,539,654
Class B 2,832,718
Class C 53,985
Transfer agency fee 1,922,698
Incremental transfer agency fee
Class A 138,519
Class B 117,755
Class C 2,278
Service fee -- Class Y 3,390
Administrative services fees and expenses 463,469
Compensation of board members 8,077
Custodian fees 177,610
Printing and postage 227,900
Registration fees 138,895
Audit fees 11,500
Other 31,503
------
Total expenses 12,777,092
Earnings credits on cash balances (Note 2) (22,698)
-------
Total net expenses 12,754,394
----------
Investment income (loss) -- net 4,316,882
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (12,547,530)
Foreign currency transactions (2,212)
------
Net realized gain (loss) on investments (12,549,742)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 143,989,531
-----------
Net gain (loss) on investments and foreign currencies 131,439,789
-----------
Net increase (decrease) in net assets resulting from operations $135,756,671
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Large Cap Equity Fund
Jan. 31, 2005 July 31, 2004
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 4,316,882 $ 401,719
Net realized gain (loss) on investments (12,549,742) 12,441,166
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 143,989,531 (66,709,001)
----------- -----------
Net increase (decrease) in net assets resulting from operations 135,756,671 (53,866,116)
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (5,100,572) (190,447)
Class B (140) --
Class C (4) --
Class I (205,016) --
Class Y (42,646) (99)
Net realized gain
Class A (1,579,848) (10,249,150)
Class B (746,323) (4,251,044)
Class C (14,219) (267,748)
Class I (38,374) (411,555)
Class Y (10,290) (29,079)
------- -------
Total distributions (7,737,432) (15,399,122)
---------- -----------
- --------------------------------------------------------------------------------
15 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets (continued)
AXP Large Cap Equity Fund
Jan. 31, 2005 July 31, 2004
Six months ended Year ended
(Unaudited)
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) $ 44,174,407 $ 303,658,868
Class B shares 19,716,181 83,846,079
Class C shares 1,025,125 5,258,048
Class I shares 14,607,731 20,944,518
Class Y shares 486,812 8,142,956
Fund merger (Note 7)
Class A shares -- 942,709,419
Class B shares -- 589,683,135
Class C shares -- 4,576,296
Class Y shares -- 11,200
Reinvestment of distributions at net asset value
Class A shares 6,566,031 10,345,503
Class B shares 737,501 4,192,636
Class C shares 13,860 257,935
Class I shares 243,352 411,300
Class Y shares 52,860 28,728
Payments for redemptions
Class A shares (206,656,519) (50,748,072)
Class B shares (Note 2) (85,623,341) (115,514,441)
Class C shares (Note 2) (2,150,315) (911,625)
Class I shares (10,805,090) (5,803,591)
Class Y shares (7,601,093) (413,179)
---------- --------
Increase (decrease) in net assets from capital share transactions (225,212,498) 1,800,675,713
------------ -------------
Total increase (decrease) in net assets (97,193,259) 1,731,410,475
Net assets at beginning of period 1,852,332,519 120,922,044
------------- -----------
Net assets at end of period $1,755,139,260 $1,852,332,519
============== ==============
Undistributed (excess of distributions over) net investment income $ (821,948) $ 209,548
-------------- --------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Large Cap Equity Fund
(Unaudited as to Jan. 31, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board. The Fund invests primarily in equity securities of
companies with a market capitalization greater than $5 billion at the time of
purchase.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth 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.
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 Jan. 31, 2005, American Express Financial
Corporation (AEFC) and the AXP Portfolio Builder Series funds owned 100% of
Class I shares, which represents 1.16% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to 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.
- --------------------------------------------------------------------------------
17 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds, American
Express Financial Corporation (AEFC) 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 (NAV). Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
- --------------------------------------------------------------------------------
18 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes. The net U.S. dollar value of foreign currency underlying
all contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the credit
risk that the other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
- --------------------------------------------------------------------------------
19 -- AXP LARGE CAP EQUITY FUND -- 2005 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 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.
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. EXPENSES AND SALES CHARGES
The Fund has agreements with AEFC to manage its portfolio and provide
administrative services. Under an Investment Management Services Agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 0.60%
to 0.48% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Large-Cap Core Funds
Index. In certain circumstances, the board may approve a change in the index.
The maximum adjustment is 0.12% per year. If the performance difference is less
than 0.50%, the adjustment will be zero. The adjustment decreased the fee by
$330,081 for the six months ended Jan. 31, 2005. In addition, AEFC has
contractually agreed to waive 0.05% of the management fees through July 31,
2005.
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 that declines from 0.05% to 0.02% 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.
- --------------------------------------------------------------------------------
20 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
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.
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.
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 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
$764,629 for Class A, $253,277 for Class B and $1,142 for Class C for the six
months ended Jan. 31, 2005.
During the six months ended Jan. 31, 2005, the Fund's custodian and transfer
agency fees were reduced by $22,698 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $999,995,078 and $1,196,547,830, respectively, for the
six months ended Jan. 31, 2005. Realized gains and losses are determined on an
identified cost basis.
Brokerage clearing fees paid to brokers affiliated with AEFC were $10,214 for
the six months ended Jan. 31, 2005.
- --------------------------------------------------------------------------------
21 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Jan. 31, 2005
Class A Class B Class C Class I Class Y
Sold 9,315,147 4,229,922 219,644 3,058,975 101,078
Issued for reinvested distributions 1,331,849 152,062 2,852 49,063 10,678
Redeemed (43,069,676) (18,196,891) (456,806) (2,155,191) (1,519,094)
----------- ----------- -------- ---------- ----------
Net increase (decrease) (32,422,680) (13,814,907) (234,310) 952,847 (1,407,338)
----------- ----------- -------- ------- ----------
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 63,776,788 17,608,704 1,105,201 4,261,085 1,674,757
Fund merger 195,139,277 124,164,313 961,940 -- 2,310
Issued for reinvested distributions 2,127,178 875,289 53,736 83,939 5,876
Redeemed (10,573,028) (25,212,059) (190,776) (1,250,745) (86,872)
----------- ----------- -------- ---------- -------
Net increase (decrease) 250,470,215 117,436,247 1,930,101 3,094,279 1,596,071
----------- ----------- --------- --------- ---------
* Inception was March 4, 2004.
5. LENDING OF PORTFOLIO SECURITIES
At Jan. 31, 2005, securities valued at $14,264,225 were on loan to brokers. For
collateral, the Fund received $14,527,500 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
$3,066 for the six months ended Jan. 31, 2005. The risks to the Fund of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
6. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The agreement
went into effect Sept. 21, 2004. The Fund must maintain asset coverage for
borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the six months ended Jan. 31, 2005.
- --------------------------------------------------------------------------------
22 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
7. FUND MERGER
At the close of business on June 25, 2004, AXP Large Cap Equity Fund acquired
the assets and assumed the identified liabilities of AXP Blue Chip Advantage
Fund and AXP Research Opportunities Fund. This reorganization was completed
after shareholders approved the plan on June 9, 2004.
The aggregate net assets of AXP Large Cap Equity Fund immediately before the
acquisition was $404,994,552 and the combined net assets immediately after the
acquisition was $1,941,974,602.
The merger was accomplished by a tax-free exchange of the following:
Shares Value
AXP Blue Chip Advantage Fund 171,778,024 $1,331,930,990
AXP Research Opportunities Fund 45,469,648 205,049,060
In exchange for the AXP Blue Chip Advantage Fund and AXP Research Opportunities
Fund shares and net assets, AXP Large Cap Equity Fund issued the following
number of shares:
Shares
Class A 195,139,277
Class B 124,164,313
Class C 961,940
Class Y 2,310
AXP Blue Chip Advantage Fund's and AXP Research Opportunities Fund's net assets
after adjustments for any permanent book-to-tax differences at the merger date
were as follows, which include the following amounts of capital stock,
unrealized appreciation, accumulated net realized loss.
Total Capital Unrealized Accumulated
net assets stock appreciation net realized loss
AXP Blue Chip Advantage Fund $1,331,930,990 $2,300,150,539 $20,542,743 $(988,762,292)
AXP Research Opportunities Fund 205,049,060 265,819,324 9,544,965 (70,315,229)
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$1,027,332,263, that if not offset by future capital gains realized after July
31, 2004 will expire as follows:
2008 2009 2010 2011
$580,153,257 $416,711,846 $20,988,174 $9,478,986
AXP Large Cap Equity Fund acquired $1,028,552,364 of capital loss carry-overs in
connection with the AXP Blue Chip Advantage Fund and AXP Research Opportunities
Fund merger (Note 7). In addition to the acquired capital loss carry-overs, the
Fund also acquired unrealized capital gains as a result of the mergers. 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.
- --------------------------------------------------------------------------------
23 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
9. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $4.64 $4.53 $4.11 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .02 .01 .01 --
Net gains (losses) (both realized and unrealized) .35 .32 .41 (.89)
----- ----- ----- -----
Total from investment operations .37 .33 .42 (.89)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.02) -- -- --
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Total distributions (.03) (.22) -- --
----- ----- ----- -----
Net asset value, end of period $4.98 $4.64 $4.53 $4.11
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $1,177 $1,248 $83 $11
Ratio of expenses to average daily net assets(c) 1.15%(d) 1.20%(e) 1.25%(e) 1.25%(d),(e)
Ratio of net investment income (loss) to average daily net assets .70%(d) .36% .24% (.11%)(d)
Portfolio turnover rate (excluding short-term securities) 56% 99% 135% 88%
Total return(f) 7.70%(g) 7.19% 10.22% (17.80%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class A would have been 1.23%, 1.84% and
5.12% for the periods ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
24 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $4.56 $4.48 $4.10 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) -- (.01) (.01) (.01)
Net gains (losses) (both realized and unrealized) .34 .31 .39 (.89)
----- ----- ----- -----
Total from investment operations .34 .30 .38 (.90)
----- ----- ----- -----
Less distributions:
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Net asset value, end of period $4.89 $4.56 $4.48 $4.10
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $546 $572 $36 $5
Ratio of expenses to average daily net assets(c) 1.92%(d) 1.95%(e) 2.01%(e) 2.01%(d),(e)
Ratio of net investment income (loss) to average daily net assets (.07%)(d) (.46%) (.52%) (.86%)(d)
Portfolio turnover rate (excluding short-term securities) 56% 99% 135% 88%
Total return(f) 7.16%(g) 6.48% 9.27% (18.00%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class B would have been 1.98%, 2.60% and
5.88% for the periods ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
25 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $4.57 $4.49 $4.10 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) -- (.01) (.01) (.01)
Net gains (losses) (both realized and unrealized) .34 .31 .40 (.89)
----- ----- ----- -----
Total from investment operations .34 .30 .39 (.90)
----- ----- ----- -----
Less distributions:
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Net asset value, end of period $4.90 $4.57 $4.49 $4.10
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $11 $11 $2 $--
Ratio of expenses to average daily net assets(c) 1.92%(d) 1.98%(e) 2.01%(e) 2.01%(d),(e)
Ratio of net investment income (loss) to average daily net assets (.07%)(d) (.43%) (.53%) (.92%)(d)
Portfolio turnover rate (excluding short-term securities) 56% 99% 135% 88%
Total return(f) 7.14%(g) 6.46% 9.51% (18.00%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class C would have been 2.01%, 2.60% and
5.88% for the periods ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
26 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004(b)
Net asset value, beginning of period $4.67 $5.08
----- -----
Income from investment operations:
Net investment income (loss) .03 --
Net gains (losses) (both realized and unrealized) .35 (.28)
----- -----
Total from investment operations .38 (.28)
----- -----
Less distributions:
Dividends from net investment income (.03) --
Distributions from realized gains (.01) (.13)
----- -----
Total distributions (.04) (.13)
----- -----
Net asset value, end of period $5.01 $4.67
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $20 $14
Ratio of expenses to average daily net assets(c) .67%(d) .71%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.23%(d) .74%(d)
Portfolio turnover rate (excluding short-term securities) 56% 99%
Total return(f) 7.95%(g) (5.65%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) 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 I would have been 0.72% for the
period ended July 31, 2004.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
27 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $4.66 $4.54 $4.11 $5.00
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .02 .01 .01 --
Net gains (losses) (both realized and unrealized) .35 .34 .42 (.89)
----- ----- ----- -----
Total from investment operations .37 .35 .43 (.89)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.02) (.01) -- --
Distributions from realized gains (.01) (.22) -- --
----- ----- ----- -----
Total distributions (.03) (.23) -- --
----- ----- ----- -----
Net asset value, end of period $5.00 $4.66 $4.54 $4.11
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $1 $8 $-- $--
Ratio of expenses to average daily net assets(c) .96%(d) 1.00%(e) 1.07%(e) 1.07%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.01%(d) .50% .45% .09%(d)
Portfolio turnover rate (excluding short-term securities) 56% 99% 135% 88%
Total return(f) 7.58%(g) 7.44% 10.46% (17.80%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class Y would have been 1.03%, 1.66% and
4.94% for the periods ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
28 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL 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 Jan. 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.
- --------------------------------------------------------------------------------
29 -- AXP LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Aug. 1, 2004 Jan. 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,077.00 $6.05 1.15%
Hypothetical (5% return before expenses) $1,000 $1,019.51 $5.89 1.15%
Class B
Actual(b) $1,000 $1,071.60 $10.08 1.92%
Hypothetical (5% return before expenses) $1,000 $1,015.61 $9.81 1.92%
Class C
Actual(b) $1,000 $1,071.40 $10.08 1.92%
Hypothetical (5% return before expenses) $1,000 $1,015.61 $9.81 1.92%
Class I
Actual(b) $1,000 $1,079.50 $3.53 .67%
Hypothetical (5% return before expenses) $1,000 $1,021.95 $3.43 .67%
Class Y
Actual(b) $1,000 $1,075.80 $5.05 .96%
Hypothetical (5% return before expenses) $1,000 $1,020.48 $4.92 .96%
(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 185/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Jan. 31, 2005: +7.70%
for Class A, +7.16% for Class B, +7.14% for Class C, +7.95% for Class I and
+7.58% for Class Y.
- --------------------------------------------------------------------------------
30 -- AXP LARGE CAP EQUITY FUND -- 2005 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 website americanexpress.com/funds; or by
searching the website 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, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
31 -- AXP LARGE CAP EQUITY FUND -- 2005 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.
AXP(R)
Large Cap
Value
Fund
Semiannual Report
for the Period Ended
Jan. 31, 2005
AXP Large Cap Value Fund seeks to provide shareholders with long-term growth of
capital.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
Investments in Securities 9
Financial Statements 13
Notes to Financial Statements 16
Fund Expenses Example 27
Proxy Voting 29
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated.
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Fund Snapshot
AT JAN. 31, 2005
PORTFOLIO MANAGER
Portfolio manager Since Years in industry
Bob Ewing, CFA 6/02 17
FUND OBJECTIVE
The Fund seeks to provide shareholders with long-term growth of capital.
Inception dates by class
A: 6/27/02 B: 6/27/02 C: 6/27/02 I: 3/4/04 Y: 6/27/02
Ticker symbols by class
A: ALVAX B: ALVBX C: -- I: ALCIX Y: --
Total net assets $144.0 million
Number of holdings 174
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
SECTOR COMPOSITION
Percentage of portfolio assets
(pie chart)
Financials 31.2%
Consumer discretionary 12.3%
Energy 11.5%
Consumer staples 7.5%
Information technology 7.0%
Health care 6.4%
Industrials 6.0%
Materials 5.9%
Utilities 4.2%
Telecommunication services 3.7%
Short-term securities 2.6%
Telecommunications 1.7%
TOP TEN HOLDINGS
Percentage of portfolio assets
Citigroup (Finance companies) 3.9%
Bank of America (Banks and savings & loans) 3.3
Exxon Mobil (Energy) 2.8
JPMorgan Chase & Co (Broker dealers) 2.4
ConocoPhillips (Energy) 2.2
ChevronTexaco (Energy) 1.8
American Intl Group (Insurance) 1.8
Altria Group (Beverages & tobacco) 1.8
Cendant (Leisure time & entertainment) 1.5
Morgan Stanley (Broker dealers) 1.5
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Stock prices of established companies that pay dividends may be less volatile
than the stock market as a whole.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2005
(bar 1) (bar 2) (bar 3)
+9.40% +11.67% +8.74%
(bar 1) AXP Large Cap Value Fund Class A (excluding sales charge)
(bar 2) Russell 1000 Value Index(1) (unmanaged)
(bar 3) Lipper Large-Cap Value Funds Index(2)
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.americanexpress.com/funds.
(1) The Russell 1000(R) Value Index, an unmanaged index, measures the
performance of those Russell 1000 companies with lower price-to-book ratios
and lower forecasted growth values.
(2) The Lipper Large-Cap Value Funds Index includes the 30 largest large-cap
value funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (6/27/02) (6/27/02) (6/27/02) (3/4/04) (6/27/02)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at Jan. 31, 2005
6 months* +9.40% +3.12% +8.93% +4.93% +8.89% +7.89% +9.67% +9.56%
1 year +7.60% +1.41% +6.91% +2.91% +6.87% +6.87% N/A +7.76%
Since inception +9.19% +6.73% +8.43% +7.41% +8.43% +8.43% +5.35%* +9.45%
at Dec. 31. 2004
6 months* +8.73% +2.47% +8.24% +3.24% +8.40% +7.40% +9.19% +8.89%
1 year +11.37% +4.96% +10.48% +6.48% +10.44% +10.44% N/A +11.54%
Since inception +10.37% +7.80% +9.51% +8.11% +9.51% +9.51% +7.43%* +10.57%
* 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
eligible investors only, currently limited to AXP Portfolio Builder Series
funds, six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- --------------------------------------------------------------------------------
4 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
AXP Large Cap Value Fund's Class A shares advanced 9.40%, excluding sales
charge, for the six months ended Jan. 31, 2005. The Fund outperformed its peer
group, as represented by the Lipper Large-Cap Value Funds Index, which advanced
8.74% for the period. The Fund's benchmark, the Russell 1000(R) Value Index
(Russell Index), gained 11.67%.
Below, Portfolio Manager Bob Ewing discusses the Fund's positioning and results
for the first half of the 2005 fiscal year.
At Jan. 31, 2005, approximately 26.11% of the Fund's shares were owned in
aggregate by AXP Portfolio Builder Series funds, a group of six asset allocation
funds managed by American Express Financial Corporation (AEFC). As a result, it
is possible AXP Large Cap Value Fund may experience relatively large purchases
or redemptions from AXP Portfolio Builder Funds (see page 15, Class I capital
share transactions for related activity during the most recent fiscal period).
AEFC seeks to minimize the impact of these transactions, which may include
structuring them over a reasonable period of time. AXP Large Cap Value Fund may
experience increased expenses as it buys and sells securities to satisfy
subscriptions and redemptions in AXP Portfolio Builder Series funds. For more
information on the Fund's expenses, see the discussions beginning on pages 22
and 27.
Q: What factors had a significant effect on performance?
A: At the start of our fiscal year, U.S. equities faced a period of lackluster
performance as high oil prices, election concerns, global politics and
economic worries plagued market sentiment. However, as uncertainties such as
the presidential election were resolved and oil prices moderated, investors
began to refocus on the positive U.S. economic environment. Results in the
latter part of the past six months were quite strong.
Given the substantial rise in the overall equity market during the six month
period, the Fund's relatively conservative positioning created some
challenges. Nonetheless, we are pleased the Fund was able to outpace its
peers.
Both sector allocations and stock selection detracted from performance. The
Fund's cash position had the most significant negative effect compared to
the Russell Index, which has no cash. Such a result is typical for many
mutual funds in a rising equity market. However, the challenge was somewhat
greater for the Fund as its assets have continued to grow at a steady pace.
We worked diligently to invest excess cash during the period.
- --------------------------------------------------------------------------------
5 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> In the industrial sector, we de-emphasized companies with
high financial leverage and greater sensitivity to economic activity.
(end callout quote)
A larger-than-Russell Index position in health care also detracted from
relative return, as did an underweight in the strong performing utilities
sector.
Stock selection was favorable in some sectors, while detrimental in others.
Stock selection among consumer staples stocks was hurt by weak performance
from specific holdings such as Colgate-Palmolive and Coca-Cola, stocks that
would ordinarily be considered less volatile. In the industrial sector, we
de-emphasized companies with high financial leverage and greater sensitivity
to economic activity because we believe they are too expensive and likely to
show decelerating growth. Unfortunately, those industrial companies
performed best during the period.
In terms of individual contributors, the Fund had a higher-than-Russell
Index position in Lyondell Chemical, which was the most significant positive
contributor during the six-month period. The company has been the
beneficiary of an improving environment for chemical firms. A meaningful
position in Disney also helped as investors became more comfortable with the
performance of Disney's economically sensitive businesses. The Fund's
positioning in oil company ConocoPhillips was advantageous, as was our
positioning in cell phone maker Nokia.
Individual detractors from relative performance included the portfolio's
lower-than-Russell Index positions in General Electric and Exxon Mobil.
Though we hold GE in the portfolio, it represents a very large percentage of
the benchmark and we do not consider such a large position appropriate.
GE stock performed well as investors became more confident in the
durability of the strong economy. Exxon Mobil was also a strong performer
and a large benchmark position. Though we were underweight in Exxon Mobil,
we also held a basket of other oil stocks (including ConocoPhillips cited
above as a top performer). Our positioning in Pfizer also detracted as the
company continued to struggle along with most branded pharmaceutical
companies.
- --------------------------------------------------------------------------------
6 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> We have also sought to keep Fund volatility lower than
that of the Russell Index, which we believe may position the Fund to perform
well in a flat or down market. (end callout quote)
Q: What changes did you make to the portfolio during the period?
A: In general, we have been placing greater emphasis on more stable, higher
quality companies, those that have more predictable profitability at this
point in the economic cycle.
We increased the Fund's technology and telecommunications services
allocations during the past six months, while also adding to our consumer
discretionary position. These areas have some degree of exposure to economic
activity, but, in our view, they are generally cheaper than areas of the
market with the greatest sensitivity to economic cycles. We reduced
allocations to both industrials and health care stocks over the fiscal
period, although the Fund's health care position remained larger than that
of the Russell Index. We also reduced the Fund's holdings of financial
stocks.
The Fund's allocation to the consumer staples sector was larger than that of
the Russell Index. This is somewhat unusual since value-oriented funds
traditionally don't get a chance to own high quality consumer staples
stocks. However, because the market has embraced stocks with economic
sensitivity, less cyclical consumer staples stocks, such as
Colgate-Palmolive and Procter & Gamble, are relatively inexpensive at this
time.
The portfolio has a lower-than-Russell Index weighting in the industrials
group. Although our bottom-up analysis suggests that these companies have
strong fundamentals, their high valuations seem to leave no room for error,
so we believe it is prudent to be cautious in our exposure to the sector.
Our utility holdings are also modest. We consider the utility sector to be
expensive compared to where it traditionally trades. In addition, we believe
interest rates are more likely to go up than down, which would be
problematic for utility stocks.
Nokia was our single largest purchase during the time period. After the cell
phone maker declined on earnings difficulties last year, we eagerly bought
the stock. Since then the company has begun to deliver strong earnings and
as noted above, Nokia was one of the largest positive contributors during
the period.
- --------------------------------------------------------------------------------
7 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
We eliminated the Fund's holdings of well-known HMO Aetna. HMOs and, in
particular, Aetna, have performed very well. As a result, the stock no
longer suited the value orientation of the Fund.
Q: How do you plan to manage the Fund in the coming months?
A: Although this Fund essentially follows a fundamentally-driven, bottom-up
equity strategy, we are cognizant of market trends and potential risks. We
believe it is prudent to be careful in the current environment due to
elevated risk and the reality that this is the fourth year of the economic
recovery. In general, this outlook has led us to incorporate certain themes
into our management. We have emphasized higher quality stocks over lower
quality stocks that have high amounts of leverage or exhibit volatile
earnings. We have tried to keep the average price/earnings ratio of our
holdings below that of the Russell Index. We have focused on larger stocks
because they tend to be more stable companies, but also because they have
been more attractively valued than mid-cap and small-cap stocks. We have
also sought to keep Fund volatility lower than that of the Russell Index,
which we believe may position the Fund to perform well in a flat or down
market.
Although it is worth noting that value has outperformed growth for some time
and may be susceptible to a market reversal, we consider it much more
pertinent that small- and mid-cap stocks have outperformed large-caps for a
prolonged period. We are finding more opportunities among large-cap stocks
and, therefore, the Fund's average market capitalization has increased. At
this stage of the cycle, we expect economic and corporate growth to
decelerate a bit and deceleration tends to favor bigger, more stable
companies.
Q: What is a stock's price earnings (P/E) ratio?
A: A P/E ratio is the price of a stock divided by its earnings per share. For a
fund, it is the weighted average P/E of the stocks it holds. The
price/earnings ratio, also known as the multiple, gives investors an idea of
how much they are paying for a company's earnings power.
- --------------------------------------------------------------------------------
8 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Investments in Securities
AXP Large Cap Value Fund
Jan. 31, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (98.2%)
Issuer Shares Value(a)
Aerospace & defense (3.3%)
Boeing 5,555 $281,083
Empresa Brasileira de
Aeronautica ADR 27,832(c) 886,449
General Dynamics 5,579 576,032
Goodrich 6,700 229,810
Lockheed Martin 11,310 653,831
Northrop Grumman 22,732 1,179,336
United Technologies 9,785 985,154
Total 4,791,695
Automotive & related (0.4%)
General Motors 14,184 522,113
Banks and savings & loans (10.2%)
Bank of America 104,820 4,860,503
Bank of New York 30,301 900,243
Commerce Bancorp 3,600 207,144
Investors Financial Services 16,275 820,423
PNC Financial Services Group 12,684 683,287
Regions Financial 10,837 346,784
Sovereign Bancorp 21,800 495,732
State Street 16,150 723,682
US Bancorp 45,150 1,356,758
Wachovia 26,838 1,472,064
Washington Mutual 20,701 835,285
Wells Fargo & Co 33,463 2,051,282
Total 14,753,187
Beverages & tobacco (3.3%)
Altria Group 40,284 2,571,327
Coca-Cola 7,300 302,877
Coca-Cola Enterprises 17,950 394,003
PepsiCo 27,804 1,493,075
Total 4,761,282
Broker dealers (5.7%)
Franklin Resources 5,893 399,899
JPMorgan Chase & Co 91,824 3,427,790
Legg Mason 1,900 146,737
Merrill Lynch & Co 34,619 2,079,563
Morgan Stanley 39,256 2,196,766
Total 8,250,755
Building materials & construction (0.7%)
American Standard Companies 11,045(b) 442,242
Masco 16,984 625,011
Total 1,067,253
Cable (2.4%)
Comcast Cl A 21,255(b) 684,198
Comcast Special Cl A 25,100(b) 793,411
EchoStar Communications Cl A 17,669 539,081
NTL 20,787(b) 1,414,140
Total 3,430,830
Cellular telecommunications (1.7%)
China Unicom 186,000(c) 151,427
Nextel Communications Cl A 45,300(b) 1,299,657
Vodafone Group ADR 37,238(c) 967,443
Total 2,418,527
Chemicals (2.7%)
Dow Chemical 43,484 2,161,155
Eastman Chemical 8,789 475,924
Lyondell Chemical 33,152 975,332
RPM Intl 16,700 294,421
Total 3,906,832
Computer hardware (1.9%)
Cisco Systems 22,655(b) 408,696
Dell 20,650(b) 862,344
EMC 14,200(b) 186,020
Hewlett-Packard 63,683 1,247,550
Total 2,704,610
Computer software & services (2.5%)
Affiliated Computer Services Cl A 19,309(b) 1,046,355
Cadence Design Systems 33,300(b) 443,889
Intl Business Machines 12,655 1,182,230
Microsoft 25,398 667,459
VERITAS Software 8,000(b) 205,760
Total 3,545,693
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
9 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Electronics (1.1%)
Broadcom Cl A 5,191(b) $165,230
Credence Systems 15,700(b) 125,600
Cypress Semiconductor 28,600(b) 326,040
Freescale Semiconductor Cl B 3,239(b) 56,585
Intel 26,550 596,047
Texas Instruments 12,941 300,361
Total 1,569,863
Energy (9.7%)
Anadarko Petroleum 18,319 1,212,901
BP ADR 19,864(c) 1,184,292
ChevronTexaco 48,164 2,620,122
ConocoPhillips 34,140 3,167,851
Devon Energy 14,794 601,672
Exxon Mobil 78,996 4,076,193
Newfield Exploration 11,582(b) 708,818
Royal Dutch Petroleum 6,142(c) 359,123
Total 13,930,972
Energy equipment & services (2.0%)
Cooper Cameron 14,445(b) 814,842
Schlumberger 4,831 328,701
Transocean 15,177(b) 667,788
Weatherford Intl 18,771(b) 1,018,703
Total 2,830,034
Finance companies (4.0%)
Citigroup 116,891 5,733,504
Financial services (4.3%)
Capital One Financial 13,033 1,020,223
Countrywide Financial 23,301 862,137
Fannie Mae 28,599 1,846,923
Freddie Mac 30,700 2,004,404
MBNA 17,635 468,738
Total 6,202,425
Food (1.8%)
General Mills 14,249 755,055
Hain Celestial Group 7,500(b) 150,900
HJ Heinz 25,130 950,164
Kellogg 6,500 290,160
Sara Lee 21,641 508,131
Total 2,654,410
Furniture & appliances (0.1%)
Leggett & Platt 6,036 172,026
Health care products (4.4%)
Baxter Intl 12,802 432,196
Biogen Idec 9,697(b) 629,917
Bristol-Myers Squibb 16,306 382,213
GlaxoSmithKline ADR 7,744(c) 345,150
Guidant 2,620 189,924
Johnson & Johnson 11,175 723,023
Medco Health Solutions 14,710(b) 626,205
Merck & Co 25,374 711,741
Novartis ADR 10,291(c) 492,733
Pfizer 44,253 1,069,151
Schering Plough 19,523 362,347
Wyeth 8,089 320,567
Total 6,285,167
Health care services (2.0%)
Cardinal Health 5,200 292,864
HCA 28,437 1,266,015
Hospira 11,443(b) 330,588
Lincare Holdings 13,063(b) 542,115
Tenet Healthcare 51,700(b) 513,381
Total 2,944,963
Household products (2.2%)
Avon Products 5,737 242,216
Colgate-Palmolive 27,350 1,436,969
Gillette 7,700 390,544
Kimberly-Clark 2,250 147,398
Procter & Gamble 9,528 507,175
Rayovac 11,700(b) 439,569
Total 3,163,871
Industrial transportation (0.2%)
Burlington Northern Santa Fe 4,700 226,446
Insurance (6.4%)
ACE 35,219(c) 1,528,505
Allstate 17,261 870,645
American Intl Group 39,143 2,594,789
Assurant 5,989 194,822
Chubb 16,317 1,215,290
CIGNA 4,697 376,934
Endurance Specialty Holdings 22,300(c) 767,120
First American 11,968 442,577
Hartford Financial Services Group 5,022 337,930
Montpelier Re Holdings 3,431(c) 128,491
Prudential Financial 13,900 749,349
Total 9,206,452
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Leisure time & entertainment (3.0%)
Cendant 48,600(b) $1,088,640
Cendant 48,600 1,144,530
Mattel 20,398 396,741
Multimedia Games 2,850(b) 25,109
Viacom Cl B 42,708 1,594,716
Total 4,249,736
Machinery (0.7%)
AGCO 7,440(b) 152,743
Caterpillar 4,509 401,752
Illinois Tool Works 3,025 263,115
Ingersoll-Rand Cl A 3,324(c) 247,239
Total 1,064,849
Media (4.1%)
EW Scripps Cl A 7,900 366,244
Liberty Media Cl A 135,748(b) 1,417,209
Liberty Media Intl Cl A 10,000(b) 452,800
Reader's Digest Assn 9,575 154,349
Time Warner 42,300(b) 761,400
Tribune 16,399 655,632
Walt Disney 71,920 2,059,070
Total 5,866,704
Metals (0.5%)
Alcan 8,857(c) 352,243
Alcoa 11,504 339,483
Novelis 1,771(b,c) 39,697
Total 731,423
Multi-industry (1.8%)
General Electric 29,573 1,068,472
ITT Inds 2,492 212,543
Tyco Intl 37,316(c) 1,348,600
Total 2,629,615
Paper & packaging (2.0%)
Avery Dennison 5,721 343,775
Bowater 14,224 540,512
Intl Paper 21,164 828,571
Temple-Inland 10,799 686,816
Weyerhaeuser 6,811 425,006
Total 2,824,680
Real estate investment trust (0.8%)
Apartment Investment &
Management Cl A 8,996 322,956
Equity Office Properties Trust 28,133 787,162
Total 1,110,118
Restaurants (0.4%)
Domino's Pizza 19,700 328,596
McDonald's 6,129 198,518
Total 527,114
Retail -- drugstores (0.2%)
CVS 6,732 312,028
Retail -- general (2.2%)
Dollar General 7,500 151,575
Home Depot 17,926 739,627
Sonic Automotive 20,262 473,320
Target 18,676 948,181
Wal-Mart Stores 16,000 838,400
Total 3,151,103
Telecom equipment & services (1.7%)
Motorola 65,434 1,029,931
Nokia ADR 90,900(c) 1,388,952
Total 2,418,883
Utilities -- electric (3.8%)
Dominion Resources 17,561 1,218,382
Entergy 13,959 970,430
Exelon 28,762 1,272,719
FPL Group 5,266 403,586
PPL 8,896 480,384
Southern 28,000 945,560
Xcel Energy 13,800 251,022
Total 5,542,083
Utilities -- natural gas (0.4%)
ONEOK 18,349 508,267
Utilities -- telephone (3.8%)
BellSouth 48,984 1,285,340
Citizens Communications 11,000 148,390
KT ADR 17,898(c) 387,671
SBC Communications 59,773 1,420,206
Sprint 23,600 562,388
Verizon Communications 45,909 1,633,902
Total 5,437,897
Total common stocks
(Cost: $129,794,084) $141,447,410
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Short-term securities (2.6%)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies(1.8%)
Federal Home Loan Bank Disc Nt
02-18-05 2.34% $600,000 $599,298
Federal Natl Mtge Assn Disc Nts
02-14-05 2.26 300,000 299,736
04-06-05 2.46 700,000 696,901
04-13-05 2.47 1,000,000 995,089
Total 2,591,024
Commercial paper (0.8%)
Household Intl Finance
02-01-05 2.48 1,200,000 1,199,917
Total short-term securities
(Cost: $3,790,946) $3,790,941
Total investments in securities
(Cost: $133,585,030)(d) $145,238,351
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 Jan. 31, 2005, the
value of foreign securities represented 7.3% of net assets.
(d) At Jan. 31, 2005, the cost of securities for federal income tax purposes
was approximately $133,585,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $13,733,000
Unrealized depreciation (2,080,000)
----------
Net unrealized appreciation $11,653,000
-----------
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.americanexpress.com/funds.
- --------------------------------------------------------------------------------
12 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Large Cap Value Fund
Jan. 31, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $133,585,030) $145,238,351
Cash in bank on demand deposit 14,813
Capital shares receivable 21,683
Dividends and accrued interest receivable 132,908
Receivable for investment securities sold 856,084
-------
Total assets 146,263,839
-----------
Liabilities
Capital shares payable 5,454
Payable for investment securities purchased 2,098,709
Accrued investment management services fee 7,024
Accrued distribution fee 4,000
Accrued service fee 1
Accrued transfer agency fee 1,491
Accrued administrative services fee 585
Other accrued expenses 117,943
-------
Total liabilities 2,235,207
---------
Net assets applicable to outstanding capital stock $144,028,632
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 258,747
Additional paid-in capital 131,261,704
Excess of distributions over net investment income (37,383)
Accumulated net realized gain (loss) 892,243
Unrealized appreciation (depreciation) on investments 11,653,321
----------
Total -- representing net assets applicable to outstanding capital stock $144,028,632
============
Net assets applicable to outstanding shares: Class A $ 76,139,234
Class B $ 28,703,035
Class C $ 1,446,948
Class I $ 37,606,636
Class Y $ 132,779
Net asset value per share of outstanding capital stock: Class A shares 13,670,054 $ 5.57
Class B shares 5,188,217 $ 5.53
Class C shares 261,572 $ 5.53
Class I shares 6,731,098 $ 5.59
Class Y shares 23,773 $ 5.59
------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Large Cap Value Fund
Six months ended Jan. 31, 2005 (Unaudited)
Investment income
Income:
Dividends $ 1,463,514
Interest 51,717
Less foreign taxes withheld (4,471)
------
Total income 1,510,760
---------
Expenses (Note 2):
Investment management services fee 381,319
Distribution fee
Class A 91,443
Class B 137,535
Class C 7,233
Transfer agency fee 85,084
Incremental transfer agency fee
Class A 6,392
Class B 4,641
Class C 288
Service fee -- Class Y 55
Administrative services fees and expenses 33,335
Compensation of board members 4,219
Custodian fees 184,700
Printing and postage 17,375
Registration fees 5,629
Audit fees 9,250
Other 6,031
-----
Total expenses 974,529
Expenses waived/reimbursed by AEFC (Note 2) (26,344)
-------
948,185
Earnings credits on cash balances (Note 2) (3,234)
------
Total net expenses 944,951
-------
Investment income (loss) -- net 565,809
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 3,798,076
Foreign currency transactions 6
-
Net realized gain (loss) on investments 3,798,082
Net change in unrealized appreciation (depreciation) on investments 7,303,605
---------
Net gain (loss) on investments and foreign currencies 11,101,687
----------
Net increase (decrease) in net assets resulting from operations $11,667,496
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Large Cap Value Fund
Jan. 31, 2005 July 31, 2004
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 565,809 $ 556,993
Net realized gain (loss) on investments 3,798,082 5,214,984
Net change in unrealized appreciation (depreciation) on investments 7,303,605 1,187,608
--------- ---------
Net increase (decrease) in net assets resulting from operations 11,667,496 6,959,585
---------- ---------
Distributions to shareholders from:
Net investment income
Class A (545,202) (292,557)
Class B (10,205) (34,475)
Class C -- (1,580)
Class I (382,906) --
Class Y (1,186) (292)
Net realized gain
Class A (3,015,777) (2,044,844)
Class B (1,148,833) (923,944)
Class C (57,627) (49,121)
Class I (1,527,915) --
Class Y (5,242) (1,778)
------ ------
Total distributions (6,694,893) (3,348,591)
---------- ----------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 11,451,752 40,922,272
Class B shares 4,196,983 15,773,087
Class C shares 210,117 859,541
Class I shares 21,238,262 16,471,765
Class Y shares 70,000 46,998
Reinvestment of distributions at net asset value
Class A shares 3,502,150 2,313,251
Class B shares 1,145,619 949,778
Class C shares 56,012 49,389
Class I shares 1,910,566 --
Class Y shares 5,863 1,511
Payments for redemptions
Class A shares (8,678,274) (9,764,607)
Class B shares (Note 2) (2,911,034) (6,087,609)
Class C shares (Note 2) (280,797) (329,387)
Class I shares (2,704,569) (5,871)
Class Y shares (6,973) (17,446)
------ -------
Increase (decrease) in net assets from capital share transactions 29,205,677 61,182,672
---------- ----------
Total increase (decrease) in net assets 34,178,280 64,793,666
Net assets at beginning of period 109,850,352 45,056,686
----------- ----------
Net assets at end of period $144,028,632 $109,850,352
============ ============
Undistributed (excess of distributions over) net investment income $ (37,383) $ 336,307
------------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Large Cap Value Fund
(Unaudited as to Jan. 31, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board. The Fund invests primarily in equity securities of
companies with a market capitalization greater than $5 billion.
The Fund offers Class A, Class B, Class C and Class Y shares.
Class A shares are sold with a front-end sales charge.
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.
Class C shares may be subject to a CDSC.
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 Jan. 31, 2005, American Express Financial
Corporation (AEFC) and the AXP Portfolio Builder Series funds owned 100% of
Class I shares, which represents 26.11% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to 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.
- --------------------------------------------------------------------------------
16 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds, AEFC
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 (NAV). Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
- --------------------------------------------------------------------------------
17 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
- --------------------------------------------------------------------------------
18 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
The Fund has agreements with AEFC to manage its portfolio and provide
administrative services. Under an Investment Management Services Agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 0.60%
to 0.48% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Large-Cap Value Funds
Index. In certain circumstances, the board may approve a change in the index.
The maximum adjustment is 0.12% per year. If the performance difference is less
than 0.50%, the adjustment will be zero. The adjustment decreased the fee by
$14,354 for the six months ended Jan. 31, 2005.
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 that declines from 0.05% to 0.02% 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, 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.
- --------------------------------------------------------------------------------
19 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
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.
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 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
$100,117 for Class A, $12,205 for Class B and $291 for Class C for the six
months ended Jan. 31, 2005.
For the six months ended Jan. 31, 2005, 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
1.17% for Class Y. Of these waived fees and expenses, the transfer agency fees
waived for Class A, Class B, Class C and Class Y were $18,345, $7,542, $418 and
$39, respectively. In addition, AEFC and its affiliates have agreed to waive
certain fees and expenses until July 31, 2005. Under this agreement, net
expenses will not exceed 1.35% for Class A, 2.11% for Class B, 2.11% for Class
C, 1.03% for Class I and 1.17% for Class Y of the Fund's average daily net
assets.
During the six months ended Jan. 31, 2005, the Fund's custodian and transfer
agency fees were reduced by $3,234 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $59,545,638 and $33,727,515, respectively, for the six
months ended Jan. 31, 2005. Realized gains and losses are determined on an
identified cost basis.
Brokerage clearing fees paid to brokers affiliated with AEFC were $276 for the
six months ended Jan. 31, 2005.
- --------------------------------------------------------------------------------
20 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Jan. 31, 2005
Class A Class B Class C Class I Class Y
Sold 2,069,321 767,493 38,829 3,818,045 12,867
Issued for reinvested distributions 628,752 206,791 10,111 341,783 1,049
Redeemed (1,561,089) (529,038) (51,437) (483,274) (1,282)
---------- -------- ------- -------- ------
Net increase (decrease) 1,136,984 445,246 (2,497) 3,676,554 12,634
--------- ------- ------ --------- ------
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 7,723,484 3,005,409 163,615 3,055,637 8,912
Issued for reinvested distributions 443,151 182,649 9,516 -- 289
Redeemed (1,837,759) (1,153,773) (61,678) (1,093) (3,191)
---------- ---------- ------- ------ ------
Net increase (decrease) 6,328,876 2,034,285 111,453 3,054,544 6,010
--------- --------- ------- --------- -----
* Inception date was March 4, 2004.
5. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. The Fund must maintain asset coverage
for borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the six months ended Jan. 31, 2005.
- --------------------------------------------------------------------------------
21 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $5.34 $4.98 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .02 .04 .03 --
Net gains (losses) (both realized and unrealized) .48 .59 .44 (.38)
----- ----- ----- -----
Total from investment operations .50 .63 .47 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.04) (.03) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.27) (.27) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.57 $5.34 $4.98 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $76 $67 $31 $4
Ratio of expenses to average daily net assets(c),(d) 1.35%(e) 1.24% 1.25% 1.19%(e)
Ratio of net investment income (loss) to average daily net assets .94%(e) .95% 1.01% .23%(e)
Portfolio turnover rate (excluding short-term securities) 27% 59% 77% 9%
Total return(f) 9.40%(g) 12.85% 10.52% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class A would have been 1.40% for the six
months ended Jan. 31, 2005 and 1.54%, 2.64% and 20.50% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
22 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $5.29 $4.95 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) -- -- .01 --
Net gains (losses) (both realized and unrealized) .47 .59 .43 (.38)
----- ----- ----- -----
Total from investment operations .47 .59 .44 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income -- (.01) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.23) (.25) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.53 $5.29 $4.95 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $29 $25 $13 $1
Ratio of expenses to average daily net assets(c),(d) 2.11%(e) 2.00% 2.00% 1.95%(e)
Ratio of net investment income (loss) to average daily net assets .18%(e) .16% .25% (.49%)(e)
Portfolio turnover rate (excluding short-term securities) 27% 59% 77% 9%
Total return(f) 8.93%(g) 12.00% 9.66% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class B would have been 2.16% for the six
months ended Jan. 31, 2005 and 2.30%, 3.40% and 21.26% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
23 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $5.29 $4.94 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) -- -- .01 --
Net gains (losses) (both realized and unrealized) .47 .60 .42 (.38)
----- ----- ----- -----
Total from investment operations .47 .60 .43 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income -- (.01) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.23) (.25) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.53 $5.29 $4.94 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $--
Ratio of expenses to average daily net assets(c),(d) 2.11%(e) 2.00% 2.00% 1.95%(e)
Ratio of net investment income (loss) to average daily net assets .19%(e) .19% .26% (.45%)(e)
Portfolio turnover rate (excluding short-term securities) 27% 59% 77% 9%
Total return(f) 8.89%(g) 12.19% 9.50% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class C would have been 2.17% for the six
months ended Jan. 31, 2005 and 2.30%, 3.40% and 21.26% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
24 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004(b)
Net asset value, beginning of period $5.36 $5.57
----- -----
Income from investment operations:
Net investment income (loss) .03 .03
Net gains (losses) (both realized and unrealized) .49 (.24)
----- -----
Total from investment operations .52 (.21)
----- -----
Less distributions:
Dividends from net investment income (.06) --
Distributions from realized gains (.23) --
----- -----
Total distributions (.29) --
----- -----
Net asset value, end of period $5.59 $5.36
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $38 $16
Ratio of expenses to average daily net assets(c) .99%(d) .93%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.30%(d) 1.33%(d)
Portfolio turnover rate (excluding short-term securities) 27% 59%
Total return(f) 9.67%(g) (3.77%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) 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 I would have been 1.02% for the
period ended July 31, 2004.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
25 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003 2002(b)
Net asset value, beginning of period $5.36 $4.99 $4.52 $4.90
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .03 .04 .03 --
Net gains (losses) (both realized and unrealized) .48 .61 .45 (.38)
----- ----- ----- -----
Total from investment operations .51 .65 .48 (.38)
----- ----- ----- -----
Less distributions:
Dividends from net investment income (.05) (.04) (.01) --
Distributions from realized gains (.23) (.24) -- --
----- ----- ----- -----
Total distributions (.28) (.28) (.01) --
----- ----- ----- -----
Net asset value, end of period $5.59 $5.36 $4.99 $4.52
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $--
Ratio of expenses to average daily net assets(c),(d) 1.17%(e) 1.06% .95% 1.01%(e)
Ratio of net investment income (loss) to average daily net assets 1.14%(e) 1.12% 1.30% .31%(e)
Portfolio turnover rate (excluding short-term securities) 27% 59% 77% 9%
Total return(f) 9.56%(g) 13.14% 10.76% (7.75%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class Y would have been 1.24% for the six
months ended Jan. 31, 2005 and 1.36%, 2.46% and 20.32% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
26 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL 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 Jan. 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.
- --------------------------------------------------------------------------------
27 -- AXP LARGE CAP VALUE FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Aug. 1, 2004 Jan. 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,094.00 $7.16 1.35%
Hypothetical (5% return before expenses) $1,000 $1,018.50 $6.91 1.35%
Class B
Actual(b) $1,000 $1,089.30 $11.17 2.11%
Hypothetical (5% return before expenses) $1,000 $1,014.65 $10.77 2.11%
Class C
Actual(b) $1,000 $1,088.90 $11.17 2.11%
Hypothetical (5% return before expenses) $1,000 $1,014.65 $10.77 2.11%
Class I
Actual(b) $1,000 $1,096.70 $5.26 0.99%
Hypothetical (5% return before expenses) $1,000 $1,020.32 $5.07 0.99%
Class Y
Actual(b) $1,000 $1,095.60 $6.21 1.17%
Hypothetical (5% return before expenses) $1,000 $1,019.41 $5.99 1.17%
(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 185/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Jan. 31, 2005: +9.40%
for Class A, +8.93% for Class B, +8.89% for Class C, +9.67% for Class I and
+9.56% for Class Y.
- --------------------------------------------------------------------------------
28 -- AXP LARGE CAP VALUE FUND -- 2005 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 website americanexpress.com/funds; or by
searching the website 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, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
29 -- AXP LARGE CAP VALUE FUND -- 2005 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.
AXP(R)
Quantitative
Large Cap Equity
Fund
Semiannual Report
for the Period Ended
Jan. 31, 2005
AXP Quantitative Large Cap Equity 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
Performance Summary 4
Questions & Answers
with Portfolio Management 5
Investments in Securities 9
Financial Statements 13
Notes to Financial Statements 16
Fund Expenses Example 26
Proxy Voting 28
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated.
- --------------------------------------------------------------------------------
2 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Fund Snapshot
AT JAN. 31, 2005
PORTFOLIO MANAGERS
Portfolio managers Since Years in industry
Dimitris J. Bertsimas 4/03 12
Gina K. Mourtzinou 4/03 8
FUND OBJECTIVE
The Fund seeks to provide shareholders with long-term growth of capital.
Inception dates by class
A: 4/24/03 B: 4/24/03 C: 4/24/03 I: 7/15/04 Y: 4/24/03
Ticker symbols by class
A: AQEAX B: -- C: -- I: ALEIX Y: --
Total net assets $61.4 million
Number of holdings 162
STYLE MATRIX
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
Shading within the style matrix indicates areas in which the Fund generally
invests.
SECTOR COMPOSITION
Percentage of portfolio assets
(pie chart)
Financials 18.5%
Consumer discretionary 15.0%
Energy 12.9%
Health care 10.7%
Information technology 10.5%
Consumer staples 9.4%
Industrials 7.7%
Telecommunication services 5.7%
Utilities 2.9%
Investment companies 2.5%
Short-term securities 2.4%
Materials 1.6%
Telecommunications 0.2%
TOP TEN HOLDINGS
Percentage of portfolio assets
Altria Group (Beverages & tobacco) 4.3%
Johnson & Johnson (Health care products) 4.0
Exxon Mobil (Energy) 3.4
ConocoPhillips (Energy) 3.2
QUALCOMM (Telecom equipment & services) 3.1
Microsoft (Computer software & services) 2.9
iShares MSCI EAFE Index Fund (Investment companies) 2.5
Fannie Mae (Financial services) 2.5
Wal-Mart Stores (Retail -- general) 2.3
eBay (Media) 2.2
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2005
+9.02% +8.16% +7.32%
+9.02% = AXP Quantitative Large Cap Equity Fund Class A (excluding sales charge)
+8.16% = S&P 500 Index(1) (unmanaged)
+7.32% = Lipper Large-Cap Core Funds Index(2)
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.americanexpress.com/funds.
(1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of
common stocks, is frequently used as a general measure of market
performance. The index reflects reinvestment of all distributions and
changes in market prices, but excludes brokerage commissions or other fees.
The S&P 500 companies may be generally larger than those in which the Fund
invests.
(2) The Lipper Large-Cap Core Funds Index includes the 30 largest large cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
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.
- --------------------------------------------------------------------------------
4 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
AXP Quantitative Large Cap Equity Fund's Class A shares gained 9.02%, excluding
sales charge, for the six months ended Jan. 31, 2005. The Fund outperformed the
Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which
returned 7.32%, as well as the Standard & Poor's 500 Index (S&P 500 Index),
which gained 8.16% for the same period.
Below, Portfolio Managers Dimitris Bertsimas and Gina Mourtzinou discuss the
Fund's positioning and results for the first half of the 2005 fiscal year.
At Jan. 31, 2005, approximately 67.26% of the Fund's shares were owned in
aggregate by AXP Portfolio Builder Series funds, a group of six asset allocation
funds managed by American Express Financial Corporation (AEFC). As a result, it
is possible AXP Quantitative Large Cap Equity Fund may experience relatively
large purchases or redemptions from AXP Portfolio Builder Series funds (see page
15, Class I capital share transactions for related activity during the most
recent fiscal period). AEFC seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. AXP Quantitative Large Cap
Equity Fund may experience increased expenses as it buys and sells securities to
satisfy subscriptions and redemptions in AXP Portfolio Builder Series funds. For
more information on the Fund's expenses, see the discussions beginning on pages
21 and 26.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (4/24/03) (4/24/03) (4/24/03) (7/15/04) (4/24/03)
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at Jan. 31, 2005
6 months* +9.02% +2.75% +8.77% +4.77% +8.77% +7.77% +9.20% +9.32%
1 year +5.31% -0.75% +4.52% +0.52% +4.35% +4.35% N/A +5.43%
Since inception +17.37% +13.52% +16.48% +14.46% +16.49% +16.49% +8.65%* +17.61%
at Dec. 31, 2004
6 months* +6.43% +0.31% +6.16% +1.16% +5.99% +4.99% N/A +6.72%
1 year +9.96% +3.64% +9.16% +5.16% +9.16 +9.16% N/A +10.26%
Since inception +19.98% +15.85% +19.04% +16.92% +19.05% +19.05% +11.23%* +20.23%
* 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
eligible investors only, currently limited to AXP Portfolio Builder Series
funds, six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- --------------------------------------------------------------------------------
5 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> We believe the style diversification provided by the
Fund's three quantitative investment models played an important role in its
outperformance of both the S&P 500 and its peers. (end callout quote)
Q: What factors most significantly affected performance?
A: We believe the style diversification provided by the Fund's three
quantitative investment models played an important role in its
outperformance of both the S&P 500 and its peers. Over the course of the
period, our value and quality models outperformed the S&P 500 Index, while
our momentum model underperformed. However, the momentum model had several
very strong months when the stock market advanced sharply in September,
October and November, helping us to capitalize on the market's uptrend. Our
quality model also performed better in the latter part of the period. Our
goal in using these three diverse quantitative models is to help ensure that
a portion of the portfolio will be performing well at any given time. The
potential positive impact of this strategy was well-demonstrated during the
past six months.
Throughout the period, our use of risk modeling -- limits on the size of
individual holdings and on sector and industry allocations relative to the
S&P 500 Index -- also supported the Fund's strong performance.
Q: Which equity sectors and securities affected the Fund's performance most
during the period?
A: The Fund's stock holdings are determined by our quantitative models. The
Fund's sector allocations stem from these individual stock selections,
rather than any prediction that certain sectors might perform better or
worse than the market. The results of the Fund's sector weightings were
positive overall during the period.
The performance of the Fund's stock holdings added even more significantly
to relative return. Stock selection within the consumer staples and health
care sectors made the largest positive contributions. Stock selection within
information technology had a neutral impact, while selection in the
financials and consumer discretionary sectors detracted from relative
return.
Stocks that had the greatest positive effect on relative return included
Altria, a consumer staples/tobacco stock that was
- --------------------------------------------------------------------------------
6 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> We will maintain our strategy of monitoring weightings
for risk management so that no individual security, industry or sector becomes
too large within the Fund's portfolio. (end callout quote)
favored by all three of our models and health care company Johnson &
Johnson, which was favored by our quality model. Exxon Mobil, an integrated
oil company chosen by our quality model, also performed quite well, as did
home improvement retailer Home Depot. Stocks that detracted from relative
return included large pharmaceutical firm Merck, which faced the recall of
its popular arthritis drug Vioxx and semi-conductor firm Intel, which
suffered from concerns about excess capacity in the semiconductor industry.
Additionally, previous strong performer eBay gave back some of its 2004
gains during the month of January when the internet auction company
announced earnings that fell short of analyst expectations. The Fund's
holdings of mortgage financer Fannie Mae and telecommunications services
company Verizon Communications also detracted from relative performance.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: During the period, the Fund maintained the following allocation among the
three models:
o 40% investment in the momentum model
o 30% in the value model and
o 30% in the quality model.
The Fund continued to experience inflows of cash during the period,
primarily share purchases by the AXP Portfolio Builder Series asset
allocation funds. We managed this influx by purchasing S&P 500 Index
futures.
The Fund's sector weightings are a by-product of the individual stocks
selected by our three models. Over the course of the six months, our models
became more negative on stocks in the financial sector. Also during the
period, the Fund's position in energy relative to the S&P 500 Index became a
bit larger.
- --------------------------------------------------------------------------------
7 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
To summarize the Fund's allocations at the end of the period, it had
larger-than-S&P 500 Index positions in energy, telecommunications and
consumer staples and smaller-than benchmark positions in industrials and
financials.
Also during the period, our separate asset allocation model pointed to
opportunities in international stocks. Consequently, this past autumn we
began buying MSCI EAFE iShares, an exchange-traded fund based on the MSCI
EAFE Index. As much as 4% of portfolio assets were invested in MSCI EAFE
iShares during the period. The position was 2.5% at the end of the
semi-annual period. The Fund benefited from this position as international
stocks performed well relative to the S&P 500 Index.
Q: How do you intend to manage the Fund in the coming months?
A: We will continue to use our three well-tested models with a goal of finding
attractive stocks regardless of market conditions. We believe the style
diversification of these three models has been vital to the relatively
consistent performance that has benefited shareholders since the Fund's
inception.
We will also maintain our strategy of monitoring weightings for risk
management so that no individual security, industry or sector becomes too
large within the Fund's portfolio. We also intend to continue our use of
other risk controls, including constraints on market capitalization, price,
quality, turnover, transaction costs, and more.
If our asset allocation model shows greater preference for international
stocks, we may increase our exposure there. The strong performance of our
value model has been a key performance factor for approximately two years
now. Considering the relatively weak performance of our momentum model
during that time, we believe results from the momentum model may begin to
improve. In addition, the quality model typically acts as a defensive
position, so if equity markets weaken, we would expect the quality model to
help support the Fund's performance.
We have become a bit more conservative in our view for the broad equity
market going forward, given current valuations and historical averages.
Thus, we intend to maintain the high quality of the Fund's portfolio, while
at the same time maintaining our style diversification.
- --------------------------------------------------------------------------------
8 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Investments in Securities
AXP Quantitative Large Cap Equity Fund
Jan. 31, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (99.7%)
Issuer Shares Value(a)
Aerospace & defense (93.1%)
Boeing 11,836 $598,902
General Dynamics 1,018 105,109
Honeywell Intl 2,242 80,667
Lockheed Martin 6,404 370,215
Raytheon 6,787 253,834
Rockwell Collins 1,517 65,079
United Technologies 4,106 413,392
Total 1,887,198
Automotive & related (2.4%)
Delphi 9,270 70,359
Ford Motor 27,963 368,273
General Motors 14,147 520,751
Genuine Parts 4,854 205,470
Johnson Controls 2,710 160,324
PACCAR 1,914 135,243
Total 1,460,420
Banks and savings & loans (4.4%)
Bank of America 21,635 1,003,215
Bank of New York 2,641 78,464
Comerica 2,928 169,414
First Horizon Natl 1,395 59,385
Natl City 16,249 577,652
Regions Financial 3,058 97,856
Washington Mutual 17,053 688,089
Total 2,674,075
Beverages & tobacco (6.7%)
Altria Group 41,974 2,679,201
Coca-Cola 27,383 1,136,121
PepsiCo 1,067 57,298
Reynolds American 2,784 223,889
UST 2,049 103,802
Total 4,200,311
Broker dealers (2.5%)
Bear Stearns Companies 2,309 233,348
JPMorgan Chase & Co 25,484 951,317
Lehman Brothers Holdings 3,215 293,176
Merrill Lynch & Co 1,030 61,872
Total 1,539,713
Building materials & construction (0.7%)
American Standard Companies 2,670(b) 106,907
Masco 6,349 233,643
Sherwin-Williams 1,430 61,776
Total 402,326
Cellular telecommunications (0.2%)
Nextel Communications Cl A 4,062(b) 116,539
Chemicals (0.2%)
Eastman Chemical 1,947 105,430
Computer hardware (0.9%)
Apple Computer 7,106(b) 546,451
Computer software & services (6.1%)
Adobe Systems 2,589 147,314
Autodesk 7,095 208,380
Automatic Data Processing 3,583 155,789
Convergys 4,276(b) 61,104
Electronic Data Systems 5,286 113,226
Microsoft 69,193 1,818,392
NCR 1,760(b) 60,157
Oracle 65,606(b) 903,395
Symantec 11,891(b) 277,655
Total 3,745,412
Energy (12.1%)
Anadarko Petroleum 10,368 686,465
Burlington Resources 11,389 497,813
ChevronTexaco 17,104 930,458
ConocoPhillips 21,394 1,985,149
Devon Energy 13,196 536,681
Exxon Mobil 41,661 2,149,708
Occidental Petroleum 11,777 687,541
Total 7,473,815
Energy equipment & services (1.0%)
Baker Hughes 4,609 199,570
BJ Services 3,204 153,952
Noble 1,127(b) 60,125
Transocean 4,269(b) 187,836
Total 601,483
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
9 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Finance companies (2.3%)
Citigroup 25,879 $1,269,365
MGIC Investment 1,989 127,097
Total 1,396,462
Financial services (4.5%)
Countrywide Financial 22,439 830,243
Fannie Mae 24,192 1,562,318
Freddie Mac 3,757 245,295
Providian Financial 3,657(b) 60,999
SLM 1,687 84,671
Total 2,783,526
Furniture & appliances (0.4%)
Black & Decker 1,813 149,391
Stanley Works 1,664 79,140
Total 228,531
Health care products (9.4%)
Abbott Laboratories 2,836 127,677
Becton, Dickinson & Co 8,363 473,764
Biogen Idec 6,445(b) 418,667
Biomet 2,427 103,099
Bristol-Myers Squibb 2,848 66,757
CR Bard 2,441 165,500
Gilead Sciences 6,206(b) 205,419
Johnson & Johnson 38,320 2,479,303
Medtronic 7,073 371,262
Merck & Co 41,123 1,153,499
Schering Plough 12,534 232,631
Waters 1,221(b) 59,927
Total 5,857,505
Health care services (1.4%)
Aetna 475 60,349
Cardinal Health 4,826 271,800
Tenet Healthcare 11,188(b) 111,097
WellPoint 3,362(b) 408,483
Total 851,729
Home building (1.0%)
Centex 2,951 180,926
KB HOME 1,880 204,262
Pulte Homes 3,146 207,887
Total 593,075
Household products (1.7%)
Avon Products 6,524 275,443
Gillette 14,733 747,258
Total 1,022,701
Industrial transportation (2.1%)
Burlington Northern Santa Fe 3,874 186,649
FedEx 4,322 413,399
Norfolk Southern 8,599 300,277
Ryder System 1,330 60,582
United Parcel Service Cl B 4,398 328,443
Total 1,289,350
Insurance (5.0%)
ACE 1,740(c) 75,516
Allstate 10,114 510,150
Ambac Financial Group 1,495 114,936
Aon 9,296 211,391
CIGNA 6,573 527,483
Hartford Financial Services Group 2,351 158,199
Jefferson-Pilot 2,029 101,247
Lincoln Natl 2,712 125,132
Loews 4,110 279,480
Marsh & McLennan Companies 4,147 134,778
MBIA 2,489 148,693
Principal Financial Group 2,364 95,931
Prudential Financial 4,085 220,222
Safeco 1,299 60,144
Torchmark 2,377 129,784
UnumProvident 6,129 105,235
XL Capital Cl A 798(c) 59,674
Total 3,057,995
Investment companies (2.6%)
iShares MSCI EAFE Index Fund 10,000 1,569,000
Leisure time & entertainment (1.4%)
Brunswick 1,032 47,596
Eastman Kodak 10,366 343,011
Harley-Davidson 6,636 398,890
Mattel 3,612 70,253
Total 859,750
Lodging & gaming (0.3%)
Marriott Intl Cl A 927 58,568
Starwood Hotels & Resorts
Worldwide 2,038 117,980
Total 176,548
Media (2.7%)
eBay 16,547(b) 1,348,580
Yahoo! 9,037(b) 318,193
Total 1,666,773
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Metals (0.4%)
Nucor 2,946 $165,448
Phelps Dodge 764 73,573
Total 239,021
Multi-industry (2.7%)
3M 3,534 298,128
Monsanto 3,023 163,635
Textron 1,304 93,862
Tyco Intl 29,189(c) 1,054,890
WW Grainger 1,031 63,108
Total 1,673,623
Paper & packaging (0.4%)
Ball 3,016 128,844
Georgia-Pacific 3,144 100,922
Total 229,766
Real estate investment trust (0.3%)
Archstone-Smith Trust 1,727 59,236
Plum Creek Timber 1,401 50,044
ProLogis 1,558 59,422
Total 168,702
Restaurants (0.9%)
Starbucks 9,693(b) 523,422
Retail -- drugstores (0.1%)
CVS 1,670 77,405
Retail -- general (5.8%)
Best Buy 2,172 116,832
Circuit City Stores 4,198 60,115
Dollar General 2,935 59,316
Home Depot 29,413 1,213,580
JC Penney 5,725 244,572
May Dept Stores 2,021 68,512
Sears, Roebuck and Co 5,507 276,727
Toys "R" Us 4,712(b) 101,072
Wal-Mart Stores 27,346 1,432,931
Total 3,573,657
Retail -- grocery (1.0%)
Albertson's 5,606 128,265
Kroger 15,040(b) 257,184
Safeway 11,080(b) 208,858
Total 594,307
Telecom equipment & services (3.7%)
Motorola 20,338 320,120
QUALCOMM 52,999 1,973,683
Total 2,293,803
Textiles & apparel (0.5%)
Nike Cl B 2,895 250,794
VF 1,162 61,760
Total 312,554
Utilities -- electric (2.7%)
American Electric Power 4,102 144,596
CenterPoint Energy 9,851 110,824
DTE Energy 1,380 60,458
Duke Energy 4,176 111,875
Edison Intl 9,830 319,180
PG&E 8,973(b) 314,055
Public Service Enterprise Group 2,910 153,503
TXU 6,840 473,327
Total 1,687,818
Utilities -- natural gas (0.2%)
Sempra Energy 3,333 124,054
Utilities -- telephone (5.9%)
AT&T 18,562 356,205
BellSouth 34,568 907,065
CenturyTel 3,807 124,108
SBC Communications 34,434 818,152
Sprint 24,558 585,217
Verizon Communications 22,797 811,345
Total 3,602,092
Total common stocks
(Cost: $58,033,786) $61,206,342
Short-term security (2.4%)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agency
Federal Natl Mtge Assn Disc Nt
04-06-05 2.46% $1,500,000 $1,493,360
Total short-term security
(Cost: $1,493,280) $1,493,360
Total investments in securities
(Cost: $59,527,066)(d) $62,699,702
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 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. At Jan. 31, 2005, the
value of foreign securities represented 1.9% of net assets.
(d) At Jan. 31, 2005, the cost of securities for federal income tax purposes
was approximately $59,527,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 4,435,000
Unrealized depreciation (1,262,000)
----------
Net unrealized appreciation $ 3,173,000
-----------
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.americanexpress.com/funds.
- --------------------------------------------------------------------------------
12 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Quantitative Large Cap Equity Fund
Jan. 31, 2005 (Unanudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $59,527,066) $62,699,702
Cash in bank on demand deposit 651,418
Capital shares receivable 30,378
Dividends and accrued interest receivable 61,170
Receivable for investment securities sold 1,752,691
---------
Total assets 65,195,359
----------
Liabilities
Capital shares payable 13,736
Payable for investment securities purchased 3,765,064
Accrued investment management services fee 2,992
Accrued distribution fee 705
Accrued transfer agency fee 335
Accrued administrative services fee 249
Other accrued expenses 24,400
------
Total liabilities 3,807,481
---------
Net assets applicable to outstanding capital stock $61,387,878
===========
Represented by
Capital stock -- $.01 par value (Note 1) $ 97,224
Additional paid-in capital 57,710,566
Undistributed net investment income 34,770
Accumulated net realized gain (loss) 372,682
Unrealized appreciation (depreciation) on investments 3,172,636
---------
Total -- representing net assets applicable to outstanding capital stock $61,387,878
===========
Net assets applicable to outstanding shares: Class A $15,221,449
Class B $ 4,712,142
Class C $ 137,752
Class I $41,287,230
Class Y $ 29,305
Net asset value per share of outstanding capital stock: Class A shares 2,414,699 $ 6.30
Class B shares 752,914 $ 6.26
Class C shares 22,003 $ 6.26
Class I shares 6,528,144 $ 6.32
Class Y shares 4,643 $ 6.31
----- -----------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Quantitative Large Cap Equity Fund
Six months ended Jan. 31, 2005 (Unaudited)
Investment income
Income:
Dividends $ 402,405
Interest 17,814
------
Total income 420,219
-------
Expenses (Note 2):
Investment management services fee 131,798
Distribution fee
Class A 17,738
Class B 17,981
Class C 670
Transfer agency fee 14,148
Incremental transfer agency fee
Class A 1,093
Class B 739
Class C 34
Service fee -- Class Y 14
Administrative services fees and expenses 9,322
Compensation of board members 3,536
Custodian fees 10,170
Printing and postage 10,125
Registration fees 18,424
Audit fees 9,000
Other 1,929
-----
Total expenses 246,721
Expenses waived/reimbursed by AEFC (Note 2) (13,420)
-------
233,301
Earnings credits on cash balances (Note 2) (916)
----
Total net expenses 232,385
-------
Investment income (loss) -- net 187,834
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 895,958
Futures contracts (52,342)
-------
Net realized gain (loss) on investments 843,616
Net change in unrealized appreciation (depreciation) on investments 2,468,542
---------
Net gain (loss) on investments 3,312,158
---------
Net increase (decrease) in net assets resulting from operations $3,499,992
==========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Quantitative Large Cap Equity Fund
Jan. 31, 2005 July 31, 2004
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 187,834 $ 70,924
Net realized gain (loss) on investments 843,616 824,610
Net change in unrealized appreciation (depreciation) on investments 2,468,542 335,658
--------- -------
Net increase (decrease) in net assets resulting from operations 3,499,992 1,231,192
--------- ---------
Distributions to shareholders from:
Net investment income
Class A (62,837) (32,550)
Class B -- (921)
Class C -- (88)
Class I (142,494) --
Class Y (172) (94)
Net realized gain
Class A (327,285) (204,671)
Class B (102,880) (35,467)
Class C (3,213) (2,669)
Class I (723,932) --
Class Y (727) (461)
---- ----
Total distributions (1,363,540) (276,921)
---------- --------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 7,609,125 6,113,596
Class B shares 2,103,999 2,111,340
Class C shares 12,380 99,094
Class I shares 30,155,666 9,070,761
Class Y shares 4,000 --
Reinvestment of distributions at net asset value
Class A shares 346,177 96,546
Class B shares 100,334 34,783
Class C shares 2,894 2,508
Class I shares 866,108 --
Class Y shares 505 257
Payments for redemptions
Class A shares (6,985,867) (1,001,408)
Class B shares (Note 2) (278,220) (582,132)
Class C shares (Note 2) (24,527) (31,819)
Class I shares (110,932) (701)
-------- ----
Increase (decrease) in net assets from capital share transactions 33,801,642 15,912,825
---------- ----------
Total increase (decrease) in net assets 35,938,094 16,867,096
Net assets at beginning of period 25,449,784 8,582,688
---------- ---------
Net assets at end of period $61,387,878 $25,449,784
=========== ===========
Undistributed net investment income $ 34,770 $ 52,439
----------- -----------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Quantitative Large Cap Equity Fund
(Unaudited as to Jan. 31, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board. The Fund invests primarily in equity securities of
companies listed on U.S. exchanges with market capitalizations greater than $5
billion at the time of purchase.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth 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.
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 Jan. 31, 2005, American Express Financial
Corporation (AEFC) and the AXP Portfolio Builder Series funds owned 100% of
Class I shares, which represents 67.26% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to 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 an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds, AEFC
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
- --------------------------------------------------------------------------------
16 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
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 (NAV). Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
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,
- --------------------------------------------------------------------------------
17 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
net realized gains or losses from foreign currency transactions, if any, may
arise from sales of foreign currency, closed forward contracts, exchange gains
or losses realized between the trade date and settlement date on securities
transactions, and other translation gains or losses on dividends, interest
income and foreign withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
- --------------------------------------------------------------------------------
18 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
2. EXPENSES AND SALES CHARGES
The Fund has agreements with AEFC to manage its portfolio and provide
administrative services. Under an Investment Management Services Agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 0.60%
to 0.48% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Large-Cap Core Funds
Index. In certain circumstances, the board may approve a change in the index.
The maximum adjustment is 0.12% per year. If the performance difference is less
than 0.50%, the adjustment will be zero. The adjustment increased the fee by
$4,958 for the six months ended Jan. 31, 2005.
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 that declines from 0.05% to 0.02% 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, 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.
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.
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 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.
- --------------------------------------------------------------------------------
19 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL 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
$41,444 for Class A, $1,875 for Class B and $30 for Class C for the six months
ended Jan. 31, 2005.
For the six months ended Jan. 31, 2005, AEFC and its affiliates waived certain
fees and expenses to 1.22% for Class A, 2.01% for Class B, 2.03% for Class C,
0.89% for Class I and 1.04% for Class Y. Of these waived fees and expenses, the
transfer agency fees waived for Class A, Class B, Class C and Class Y were
$7,060, $1,408, $50 and $17, respectively, and the management fees waived at the
Fund level were $4,885. In addition, AEFC and its affiliates have agreed to
waive certain fees and expenses until July 31, 2005. Under this agreement, net
expenses will not exceed 1.25% for Class A, 2.04% for Class B, 2.06% for Class
C, 0.93% for Class I and 1.06% for Class Y of the Fund's average daily net
assets.
During the six months ended Jan. 31, 2005, the Fund's custodian and transfer
agency fees were reduced by $916 as a result of earnings credits from overnight
cash balances. The Fund also pays custodian fees to American Express Trust
Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $45,478,239 and $12,755,551, respectively, for the six
months ended Jan. 31, 2005. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Jan. 31, 2005
Class A Class B Class C Class I Class Y
Sold 1,210,633 339,910 1,997 4,863,531 685
Issued for reinvested distributions 54,345 15,850 457 135,541 79
Redeemed (1,114,851) (45,066) (4,023) (17,985) --
---------- ------- ------ ------- ---
Net increase (decrease) 150,127 310,694 (1,569) 4,981,087 764
------- ------- ------ --------- ---
Year ended July 31, 2004
Class A Class B Class C Class I* Class Y
Sold 1,028,744 358,722 17,252 1,547,177 --
Issued for reinvested distributions 16,447 5,946 429 -- 45
Redeemed (166,966) (99,601) (5,323) (120) --
-------- ------- ------ ---- ---
Net increase (decrease) 878,225 265,067 12,358 1,547,057 45
------- ------- ------ --------- ---
* Inception date was July 15, 2004.
- --------------------------------------------------------------------------------
20 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
5. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The agreement
went into effect Sept. 21, 2004. The Fund must maintain asset coverage for
borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the six months ended Jan. 31, 2005.
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003(b)
Net asset value, beginning of period $5.95 $5.44 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) .02 .02 .01
Net gains (losses) (both realized and unrealized) .52 .63 .43
----- ----- -----
Total from investment operations .54 .65 .44
----- ----- -----
Less distributions:
Dividends from net investment income (.03) (.02) --
Distributions from realized gains (.16) (.12) --
----- ----- -----
Total distributions (.19) (.14) --
----- ----- -----
Net asset value, end of period $6.30 $5.95 $5.44
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $15 $13 $8
Ratio of expenses to average daily net assets(c),(d) 1.22%(e) 1.13% 1.22%(e)
Ratio of net investment income (loss) to average daily net assets .78%(e) .65% .81%(e)
Portfolio turnover rate (excluding short-term securities) 31% 64% 17%
Total return(f) 9.02%(g) 11.99% 8.80%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class A would have been 1.35% for the six
months ended Jan. 31, 2005 and 1.91% and 7.39% for the periods ended July
31, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
21 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003(b)
Net asset value, beginning of period $5.90 $5.43 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) -- (.02) --
Net gains (losses) (both realized and unrealized) .52 .61 .43
----- ----- -----
Total from investment operations .52 .59 .43
----- ----- -----
Less distributions:
Distributions from realized gains (.16) (.12) --
----- ----- -----
Net asset value, end of period $6.26 $5.90 $5.43
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $5 $3 $1
Ratio of expenses to average daily net assets(c),(d) 2.01%(e) 1.95% 2.01%(e)
Ratio of net investment income (loss) to average daily net assets (.02%)(e) (.16%) (.08%)(e)
Portfolio turnover rate (excluding short-term securities) 31% 64% 17%
Total return(f) 8.77%(g) 10.95% 8.60%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class B would have been 2.12% for the six
months ended Jan. 31, 2005 and 2.73% and 8.18% for the periods ended July
31, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
22 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003(b)
Net asset value, beginning of period $5.90 $5.43 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) -- (.02) --
Net gains (losses) (both realized and unrealized) .52 .61 .43
----- ----- -----
Total from investment operations .52 .59 .43
----- ----- -----
Less distributions:
Distributions from realized gains (.16) (.12) --
----- ----- -----
Net asset value, end of period $6.26 $5.90 $5.43
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $--
Ratio of expenses to average daily net assets(c),(d) 2.03%(e) 1.95% 2.01%(e)
Ratio of net investment income (loss) to average daily net assets (.03%)(e) (.17%) (.05%)(e)
Portfolio turnover rate (excluding short-term securities) 31% 64% 17%
Total return(f) 8.77%(g) 10.96% 8.60%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class C would have been 2.13% for the six
months ended Jan. 31, 2005 and 2.73% and 8.20% for the periods ended July
31, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
23 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004(b)
Net asset value, beginning of period $5.96 $5.99
----- -----
Income from investment operations:
Net investment income (loss) .02 .02
Net gains (losses) (both realized and unrealized) .53 (.05)
----- -----
Total from investment operations .55 (.03)
----- -----
Less distributions:
Dividends from net investment income (.03) --
Distributions from realized gains (.16) --
----- -----
Total distributions (.19) --
----- -----
Net asset value, end of period $6.32 $5.96
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $41 $9
Ratio of expenses to average daily net assets(c) .89%(d) .93%(d),(e)
Ratio of net investment income (loss) to average daily net assets 1.09%(d) 5.35%(d)
Portfolio turnover rate (excluding short-term securities) 31% 64%
Total return(f) 9.20%(g) (.50%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was July 15, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class I would have been 1.27% for the
period ended July 31, 2004.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
24 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended July 31, 2005(h) 2004 2003(b)
Net asset value, beginning of period $5.95 $5.45 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) .02 .03 .01
Net gains (losses) (both realized and unrealized) .54 .61 .44
----- ----- -----
Total from investment operations .56 .64 .45
----- ----- -----
Less distributions:
Dividends from net investment income (.04) (.02) --
Distributions from realized gains (.16) (.12) --
----- ----- -----
Total distributions (.20) (.14) --
----- ----- -----
Net asset value, end of period $6.31 $5.95 $5.45
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $--
Ratio of expenses to average daily net assets(c),(d) 1.04%(e) .98% 1.01%(e)
Ratio of net investment income (loss) to average daily net assets .97%(e) .78% .90%(e)
Portfolio turnover rate (excluding short-term securities) 31% 64% 17%
Total return(f) 9.32%(g) 11.87% 9.00%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from April 24, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class Y would have been 1.18% for the six
months ended Jan. 31, 2005 and 1.76% and 7.20% for the periods ended July
31, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2005 (Unaudited).
- --------------------------------------------------------------------------------
25 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL 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 Jan. 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.
- --------------------------------------------------------------------------------
26 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Aug. 1, 2004 Jan. 31, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,090.20 $ 6.46 1.22%
Hypothetical (5% return before expenses) $1,000 $1,019.16 $ 6.24 1.22%
Class B
Actual(b) $1,000 $1,087.70 $10.63 2.01%
Hypothetical (5% return before expenses) $1,000 $1,015.15 $10.26 2.01%
Class C
Actual(b) $1,000 $1,087.70 $10.74 2.03%
Hypothetical (5% return before expenses) $1,000 $1,015.05 $10.37 2.03%
Class I
Actual(b) $1,000 $1,092.00 $ 4.72 .89%
Hypothetical (5% return before expenses) $1,000 $1,020.83 $ 4.56 .89%
Class Y
Actual(b) $1,000 $1,093.20 $ 5.52 1.04%
Hypothetical (5% return before expenses) $1,000 $1,020.07 $ 5.32 1.04%
(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 185/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Jan. 31, 2005: +9.02%
for Class A, +8.77% for Class B, +8.77% for Class C, +9.20% for Class I and
+9.32% for Class Y.
- --------------------------------------------------------------------------------
27 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 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 website americanexpress.com/funds; or by
searching the website 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, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
28 -- AXP QUANTITATIVE LARGE CAP EQUITY FUND -- 2005 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.
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for
semi-annual reports.
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) Not applicable for semi-annual reports.
(a)(2) Separate certification for the Registrant's principal
executive officer and principal financial officer, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a)
under the Investment Company Act of 1940, are attached as
EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) AXP Growth Series, Inc.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date March 30, 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 March 30, 2005
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date March 30, 2005