-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WikDgAqFmC52h0vpzSZO+c1Q5Hlpgh1Q01voIqcsHWDXB09ahFFYXTREc/3486nB xMAFBp2RbckjUzYicbCHgg== 0000820027-03-000245.txt : 20030403 0000820027-03-000245.hdr.sgml : 20030403 20030403160929 ACCESSION NUMBER: 0000820027-03-000245 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030131 FILED AS OF DATE: 20030403 EFFECTIVENESS DATE: 20030403 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GROWTH SERIES INC/MN CENTRAL INDEX KEY: 0000049702 IRS NUMBER: 410962638 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02111 FILM NUMBER: 03638798 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126712772 MAIL ADDRESS: STREET 1: 80 S. 8TH STREET CITY: MINNEAPOLIS STATE: MN ZIP: 55440 FORMER COMPANY: FORMER CONFORMED NAME: IDS GROWTH FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH FUND INC DATE OF NAME CHANGE: 20000829 N-30D 1 s6359.txt AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT AXP(R) Research Opportunities Fund 2003 SEMIANNUAL REPORT JAN. 31, 2003 AXP Research Opportunities Fund seeks to provide shareholders with long-term capital growth. - -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) - -------------------------------------------------------------------------------- Mutual Funds Can Work for You For more than six decades, American Express(R) Funds has provided investors with attractive investment opportunities. Several of our funds helped pioneer the mutual fund industry in the 1940s. Today, with 58 publicly offered funds and nearly $64 billion* in assets, American Express Funds ranks among the largest U.S. fund families. American Express Financial Corporation, the investment manager for American Express Funds, has more than 100 years of experience as a financial services provider -- a claim few other financial firms can make. With investment management offices in Minneapolis, Boston, New York, San Diego, London, Tokyo and Singapore, we strive to provide our shareholders with the high-quality service American Express is known for worldwide. At American Express Funds, we're focused on your success. Our investment managers have the strength and experience that you can count on to help you achieve your financial goals -- now and into the future. * As of December 2002. - -------------------------------------------------------------------------------- Table of Contents From the Chairman 3 Economic and Market Update 4 Fund Snapshot 6 Questions & Answers with Portfolio Management 7 Investments in Securities 10 Financial Statements (Portfolio) 13 Notes to Financial Statements (Portfolio) 16 Financial Statements (Fund) 19 Notes to Financial Statements (Fund) 22 Results of Meeting of Shareholders 28 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT From the Chairman (photo of) Arne H. Carlson Arne H. Carlson Chairman of the board Dear Shareholders, The recent proposed Bush economic stimulus package and potential conflicts around the globe are capturing headlines. Negative investment returns persisted in 2002 and the investing public also had their confidence in the integrity of corporations shaken. While the scandals appear to be largely behind us, the recent past offers lessons on investing and on governance, which I would like to discuss with you. First, and importantly, we have learned that diversification is not just a concept but a key tactic investors can use to help preserve assets. We would encourage you to work closely with your financial advisor to build a diversified portfolio designed to match your current thoughts about risk and reward. A second lesson of 2002 is that we must have enhanced oversight of corporations to ensure their financial statements are accurate, their officers act in the interest of shareholders and their directors are truly independent. The Sarbanes-Oxley Act passed by Congress in August, is already having an impact in these areas. The American Express Funds Board is an independent body comprised of nine members who are nominated by the independent directors. American Express Financial Corporation is represented by three board members, however, they do not play a role on the nominating committee. In addition, the Funds auditors, KPMG LLP, are independent of American Express Financial Corporation. KPMG serves the interest of shareholders by supporting the work of the Board and certifying unbiased financial reports. Further, the Board has confidence in Ted Truscott, American Express Financial Corporation's Chief Investment Officer, and shares his enthusiasm in the management changes he has effected to improve the investment performance of all American Express funds. The focus of the Board and American Express Financial Corporation is simple; we strive for consistent, competitive investment performance. On behalf of the Board, Arne H. Carlson - -------------------------------------------------------------------------------- 3 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Economic and Market Update FROM CIO WILLIAM F. "TED" TRUSCOTT (photo of) William F. "Ted" Truscott William F. "Ted" Truscott Chief Investment Officer American Express Financial Corporation Dear Shareholders, In spite of a mostly positive fourth quarter*, 2002 proved to be an extraordinarily challenging year for investors, with the benchmark stock indices - -- the Dow, the Nasdaq and the S&P 500 -- all registering percentage losses well into the double digits. While there were technical factors that put a damper on market performance last year, most notably, P/E ratios that are surprisingly high after three years of a bear market, it was corporate governance issues that fostered a general atmosphere of mistrust. The collapse of several large, high profile companies due to outright fraud and malfeasance has been -- and ought to be -- outrageous to the investing public. The magnitude of this wrongdoing is still shocking months after the fact. When many economic factors should have been giving investors reason for optimism, the steady drip of news about these companies sapped overall confidence. I believe there is ample evidence that conditions are not as bad as the markets seem to think. While corporate earnings have been weak, the economy grew at the respectable rate of about 3% last year, compared to 0.1% in 2001. A portion of the softness in earnings can be attributed to excess capacity added in the late `90s. KEY POINTS - -- If you are rebalancing your portfolio, we encourage moderate changes from stocks to bonds. - -- Interest rates are the lowest they have been in 40 years. - -- There is ample evidence that conditions are not as bad as the markets seem to think. - -------------------------------------------------------------------------------- 4 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Economic and Market Update Interest rates are another bright spot. They are the lowest they have been in 40 years, which has added to consumer and business purchasing power. There's no better illustration of this than the housing market, which has remained vigorous. Finally, the business productivity gains we've seen since the mid-`90s are remarkable, making products and services less expensive. The macroeconomic picture, while not ideal, is certainly positive. For these reasons, I'm cautiously optimistic about market prospects for 2003. Of course, there are still risks. Much of what happens this year will depend on external factors, such as whether or not more scandals arise and the implications of potential conflict in Iraq. In the short term, military action in Iraq would almost certainly produce an oil price spike; if that increase became severe enough for a significant period of time, it would create inflationary pressures that could endanger economic growth. In addition to stocks, some bond categories offer opportunity. Though we believe U.S. Treasuries are currently overvalued, select corporate, high-yield and municipal issues may provide competitive returns this year. Speak to your financial advisor to learn more about different asset classes. After three years of negative stock market returns, many individual investors are rebalancing portfolios with regard to risk and return. If you are repositioning, we would encourage moderate changes from stocks to bonds. The risk inherent in emotion-based repositioning is that you will go too far too fast. I encourage gradual movement across categories. Should interest rates move at all in 2003, it's likely that they'll go up, which will have a negative impact on most bonds. Continue to invest according to your individual timeframe and financial goals. As always, thank you for investing with American Express Funds. William F. Truscott * Please see portfolio manager Q&A for fiscal period economic coverage. - -------------------------------------------------------------------------------- 5 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Fund Snapshot AS OF JAN. 31, 2003 PORTFOLIO MANAGERS Portfolio manager Joan Kampmeyer, CFA Tenure/since 1/02 Years in industry 16 Portfolio manager Tom Mahowald, CFA Tenure/since 6/02 Years in industry 12 FUND OBJECTIVE For investors seeking long-term growth of capital. Inception dates A: 8/19/96 B: 8/19/96 C: 6/26/00 Y: 8/19/96 Ticker symbols A: IRDAX B: IROBX C: -- Y: -- Total net assets $241.2 million Number of holdings approximately 130 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL SECTOR COMPOSITION Percentage of portfolio assets (pie chart) Financials 20.3% Health Care 15.8% Industrials 14.3% Information Technology 13.4% Consumer Discretionary 12.1% Energy & utilities 10.0% Consumer Staples 6.1% Communications services 3.3% Materials 2.6% Cash and equivalents 2.1% TOP TEN HOLDINGS Percentage of portfolio assets Pfizer 3.3% Microsoft 3.3 General Electric 2.9 Exxon Mobil 2.9 Citigroup 2.9 Wal-Mart Stores 2.7 Johnson & Johnson 2.5 Wells Fargo 2.2 Bank of America 2.1 Merck & Co 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. - -------------------------------------------------------------------------------- 6 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did AXP Research Opportunities Fund perform for the six-month period ended Jan. 31, 2003? A: AXP Research Opportunities Fund's Class A shares declined 7.69%, excluding sales charges, for the period. The Fund significantly underperformed both the S&P 500 Index, the Fund's benchmark, which fell 5.26% and the Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which fell 5.46%. Q: What factors significantly impacted performance of the Fund? A: The Fund's goal is to outperform the broad stock market as measured by the S&P 500 Index. The Fund's sector breakdown follows that of the Index so that stock picking drives performance. Volatility characterized the six-month period ended Jan. 31. In October and November of last year, highly volatile technology and telecommunications stocks led the market's short-term rally. While the Fund benefited from the upturn in stocks during that period, performance lagged the market as a whole. As the market retreated in December and January over geopolitical and economic concerns, the Fund's performance improved. During the past six months, bright spots in the Fund included household products, general merchandise retail, electric and selected financial services stocks. (bar chart) PERFORMANCE COMPARISON For the year ended Jan. 31, 2003 0% - -1% - -2% - -3% - -4% (bar 2) (bar 3) - -5% -5.26% -5.46% - -6% - -7% (bar 1) - -8% -7.69% (bar 1) AXP Research Opportunities Fund Class A (excluding sales charge) (bar 2) S&P 500 Index (unmanaged)(1) (bar 3) Lipper Large-Cap Core Funds Index(2) (1) S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the S&P 500 companies may be generally larger than those in which the Fund invests. (2) The Lipper Large-Cap Core Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in sales charges and fees. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 7 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> We continue to position the Fund in stocks that we believe offer the best potential to outperform the Index over the long term. (end callout quote)
AVERAGE ANNUAL TOTAL RETURNS as of Jan. 31, 2003 Class A Class B Class C Class Y (Inception dates) (8/19/96) (8/19/96) (6/26/00) (8/19/96) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) 6 months* -7.69% -13.00% -8.13% -11.80% -7.86% -8.78% -7.63% -7.63% 1 year -25.16% -29.45% -25.98% -28.94% -25.76% -25.76% -25.15% -25.15% 5 years -4.49% -5.62% -5.26% -5.39% N/A N/A -4.36% -4.36% Since inception +1.24% +0.31% +0.44% +0.44% -21.48% -21.48% +1.39% +1.39%
* Not annualized. (1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost. The performance shown for each class of shares will vary due to differences in sales charges and fees. Short term performance may be higher or lower than the figures shown. Visit americanexpress.com for current information. - -------------------------------------------------------------------------------- 8 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Questions & Answers Stock selection in consumer staples also contributed to performance. Detractors from performance included a slight underweight in the telecom sector. Also, stock selection in industrials and information technology held back Fund performance. Q: Did you make significant changes to the Fund during this period? A: One major goal for our Fund has been to limit the amount of turnover in the portfolio, and we did reduce the number of trades significantly over the period. Most of the changes that occur in the Fund are the result of adjustments in how stocks are rated by our research analysts. We purchased selected software and computer services providers with improving fundamentals. In the closing months of 2002, we added to the Fund's previously light weighting in telecommunications stocks, which we felt had reached attractive valuation levels. Medical equipment firms were also added to the portfolio. After Standard & Poor's eliminated stocks of foreign-based corporations from the Index, we trimmed our energy holdings. Q: What is your outlook for the coming months? A: After three dismal years, we are cautiously optimistic that the S&P 500 will enjoy a modest recovery in 2003. There are several positive factors that argue for better performance this year: modest economic growth, rising corporate earnings, low interest rates, likely fiscal stimulus and a pro-business government. In addition, stock valuations, as measured by price-to-earnings ratios, are certainly more attractive than in recent years, although are not at historic lows. However, geopolitical uncertainties, coupled with high oil prices, a weak dollar and government budget deficits, temper our outlook. Q: How are you positioning the Fund in light of your outlook? A: We continue to position the Fund in stocks that we believe offer the best potential to outperform the Index over the long term. The Fund remains well-diversified among all of the broad sector groups represented in the S&P 500 Index. We continue to own a selected group of stocks within many industries, identified by our firm's research analysts as offering solid potential and fundamental value. By owning a range of 80 to 125 carefully researched and selected stocks, we expect our strategy will benefit equity investors with a long-term investment horizon. - -------------------------------------------------------------------------------- 9 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Investments in Securities Aggressive Growth Portfolio Jan. 31, 2003 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (97.1%) Issuer Shares Value(a) Aerospace & defense (2.1%) Boeing 36,400 $1,149,876 General Dynamics 7,000 462,980 Lockheed Martin 19,000 969,950 Northrop Grumman 14,700 1,343,727 United Technologies 18,600 1,182,588 Total 5,109,121 Airlines (0.5%) Southwest Airlines 99,400 1,297,170 Automotive & related (0.3%) Johnson Controls 9,900 799,623 Banks and savings & loans (5.9%) Bank of America 70,800 4,959,540 State Street 49,200 1,947,828 U.S. Bancorp 58,800 1,240,680 Washington Mutual 26,400 909,480 Wells Fargo 111,700 5,291,229 Total 14,348,757 Beverages & tobacco (4.9%) Altria Group 106,900 4,048,303 Anheuser-Busch 20,500 973,135 Coca-Cola 76,900 3,111,374 PepsiCo 61,500 2,489,520 UST 40,600 1,254,540 Total 11,876,872 Building materials & construction (0.5%) Weyerhaeuser 27,100 1,302,155 Chemicals (1.5%) Air Products & Chemicals 34,900 1,446,605 Rohm & Haas 26,500 817,525 Waste Management 55,800 1,282,842 Total 3,546,972 Communications equipment & services (2.0%) Verizon Communications 124,700 4,773,516 Computer software & services (5.0%) Lexmark Intl Cl A 19,500(b) 1,180,530 Microsoft 165,300(b) 7,845,138 Oracle 157,900(b) 1,899,537 SunGard Data Systems 60,300(b) 1,172,232 Total 12,097,437 Computers & office equipment (6.2%) Cisco Systems 238,500(b) 3,188,745 Dell Computer 77,400(b) 1,846,764 Electronic Data Systems 23,600 400,020 EMC 229,300(b) 1,765,610 Fiserv 75,900(b) 2,365,879 Hewlett-Packard 81,600 1,420,656 Intl Business Machines 51,600 4,036,668 Total 15,024,342 Electronics (3.9%) Altera 65,500(b) 719,190 Applied Materials 120,600(b) 1,443,582 Corning 151,400(b) 617,712 Intel 78,100 1,223,046 Jabil Circuit 57,000(b) 889,770 KLA-Tencor 22,900(b) 747,456 Linear Technology 48,400 1,264,692 Maxim Integrated Products 57,200 1,781,780 Xilinx 41,700(b) 825,243 Total 9,512,471 Energy (5.2%) Apache 12,500 780,125 ChevronTexaco 39,000 2,511,600 ConocoPhillips 35,888 1,729,443 Exxon Mobil 204,800 6,993,920 FirstEnergy 19,100 595,920 Total 12,611,008 Energy equipment & services (1.5%) Schlumberger 51,800 1,952,860 Transocean 76,400 1,739,628 Total 3,692,488 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Financial services (7.1%) Capital One Financial 35,500 $1,102,275 Citigroup 201,500 6,927,570 Fannie Mae 30,000 1,941,000 Freddie Mac 26,900 1,505,862 Lehman Brothers Holdings 29,700 1,619,541 MBNA 128,550 2,163,497 Morgan Stanley 43,400 1,644,860 Total 16,904,605 Food (1.1%) Kellogg 51,300 1,713,420 Sysco 30,600 898,722 Total 2,612,142 Health care (15.7%) Abbott Laboratories 69,100 2,634,092 Amgen 62,900(b) 3,205,384 Baxter Intl 58,400 1,645,712 Boston Scientific 24,900(b) 1,007,205 Bristol-Myers Squibb 64,200 1,514,478 Forest Laboratories 25,000(b) 1,293,750 Johnson & Johnson 112,500 6,031,125 Medtronic 63,500 2,852,420 Merck & Co 88,200 4,885,398 Pfizer 263,300 7,993,787 Quest Diagnostics 11,200(b) 602,336 St. Jude Medical 37,300(b) 1,625,161 Wyeth 62,500 2,439,375 Total 37,730,223 Household products (2.6%) Avon Products 26,900 1,345,000 Colgate-Palmolive 21,600 1,099,656 Procter & Gamble 44,600 3,816,422 Total 6,261,078 Industrial equipment & services (0.3%) Illinois Tool Works 11,100 675,102 Insurance (6.6%) ACE 55,900(c) 1,646,255 AFLAC 38,900 1,259,971 American Intl Group 85,300 4,616,436 Aon 31,200 590,616 Hartford Financial Services Group 17,800 741,904 John Hancock Financial Services 18,300 499,773 Lincoln Natl 33,200 1,070,700 Marsh & McLennan 55,300 2,357,439 Principal Financial Group 24,400 697,840 St. Paul Companies 37,500 1,224,000 XL Capital Cl A 16,300(c) 1,223,478 Total 15,928,412 Leisure time & entertainment (3.0%) AOL Time Warner 184,600(b) 2,152,436 Carnival 20,600 496,460 Harley-Davidson 10,400 434,512 Viacom Cl B 107,400(b) 4,140,270 Total 7,223,678 Media (1.8%) Comcast Special Cl A 29,100(b) 744,378 eBay 19,200(b) 1,443,072 Gannett 29,600 2,150,736 Total 4,338,186 Metals (0.6%) Alcoa 43,500 859,995 Nucor 14,300 570,713 Total 1,430,708 Multi-industry conglomerates (6.9%) 3M 30,600 3,811,230 Cendant 148,900(b) 1,649,812 Danaher 25,300 1,553,673 General Electric 302,700 7,004,478 ITT Inds 10,700 600,912 Tyco Intl 128,800(c) 2,062,088 Total 16,682,193 Real estate investment trust (0.5%) Starwood Hotels & Resorts Worldwide 54,700 1,282,715 Restaurants & lodging (0.6%) Darden Restaurants 33,200 720,440 Yum! Brands 35,300(b) 818,254 Total 1,538,694 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Retail (5.4%) Best Buy 70,750(b) $1,845,868 Family Dollar Stores 25,400 765,048 Gap 57,100 835,373 Home Depot 73,400 1,534,060 Target 59,300 1,672,853 Wal-Mart Stores 133,100 6,362,180 Total 13,015,382 Transportation (0.6%) Union Pacific 23,600 1,346,616 Utilities -- electric (3.2%) Dominion Resources 54,700 2,964,193 Exelon 9,300 473,649 FPL Group 25,700 1,500,623 PPL 50,000 1,750,000 Public Service Enterprise Group 29,500 1,040,760 Total 7,729,225 Utilities -- telephone (1.5%) BellSouth 50,200 1,143,556 SBC Communications 100,700 2,461,108 Total 3,604,664 Total common stocks (Cost: $282,817,745) $234,295,555 Short-term securities (2.1%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Home Loan Bank Disc Nts 02-21-03 1.25% $200,000 $199,857 04-04-03 1.22 1,300,000 1,297,400 Federal Natl Mtge Assn Disc Nts 02-03-03 1.28 300,000 299,968 03-12-03 1.28 1,500,000 1,498,098 04-09-03 1.25 700,000 698,483 04-30-03 1.23 1,000,000 996,972 Total short-term securities (Cost: $4,990,412) $4,990,778 Total investments in securities (Cost: $287,808,157)(d) $239,286,333 Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. As of Jan. 31, 2003, the value of foreign securities represented 2.0% of net assets. (d) At Jan. 31, 2003, the cost of securities for federal income tax purposes was approximately $287,808,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 4,761,000 Unrealized depreciation (53,283,000) ----------- Net unrealized depreciation $(48,522,000) ------------ - -------------------------------------------------------------------------------- 12 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities Aggressive Growth Portfolio Jan. 31, 2003 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $287,808,157) $239,286,333 Cash in bank on demand deposit 23,564 Dividends and accrued interest receivable 297,901 Receivable for investment securities sold 3,067,197 --------- Total assets 242,674,995 ----------- Liabilities Payable for investment securities purchased 1,224,436 Accrued investment management services fee 4,254 Other accrued expenses 59,363 ------ Total liabilities 1,288,053 --------- Net assets $241,386,942 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT
Statement of operations Aggressive Growth Portfolio Six months ended Jan. 31, 2003 (Unaudited) Investment income Income: Dividends $ 2,447,008 Interest 63,037 Fee income from securities lending -- net (Note 3) 114 --- Total income 2,510,159 --------- Expenses (Note 2): Investment management services fee 810,393 Compensation of board members 4,842 Custodian fees 45,277 Audit fees 9,375 Other 13,363 ------ Total expenses 883,250 Earnings credits on cash balances (Note 2) (36) --- Total net expenses 883,214 ------- Investment income (loss) -- net 1,626,945 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (Note 3) (39,786,719) Net change in unrealized appreciation (depreciation) on investments 17,276,974 ---------- Net gain (loss) on investments (22,509,745) ----------- Net increase (decrease) in net assets resulting from operations $(20,882,800) ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT
Statements of changes in net assets Aggressive Growth Portfolio Jan. 31, 2003 July 31, 2002 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 1,626,945 $ 3,496,349 Net realized gain (loss) on investments (39,786,719) (113,496,294) Net change in unrealized appreciation (depreciation) on investments 17,276,974 (28,602,926) ---------- ----------- Net increase (decrease) in net assets resulting from operations (20,882,800) (138,602,871) ----------- ------------ Proceeds from contributions 276,643 4,397,176 Fair value of withdrawals (46,891,311) (157,127,612) ----------- ------------ Net contributions (withdrawals) from partners (46,614,668) (152,730,436) ----------- ------------ Total increase (decrease) in net assets (67,497,468) (291,333,307) Net assets at beginning of period 308,884,410 600,217,717 ----------- ----------- Net assets at end of period $241,386,942 $ 308,884,410 ============ =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Notes to Financial Statements Aggressive Growth Portfolio (Unaudited as to Jan. 31, 2003) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Aggressive Growth Portfolio (the Portfolio) is a series of Growth Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Aggressive Growth Portfolio invests primarily in equity securities of companies that comprise the S&P 500 Index. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by independent pricing service. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. - -------------------------------------------------------------------------------- 16 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. - -------------------------------------------------------------------------------- 17 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium and discount using the effective interest method, is accrued daily. 2. FEES AND EXPENSES The Fund has agreements with American Express Financial Corporation (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 in reducing percentages from 0.65% to 0.50% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper Large-Cap Core Funds Index. Prior to Dec. 1, 2002, the maximum adjustment was 0.12% of the Fund's average daily net assets after deducting 1% from the performance difference. If the performance difference was less than 1%, the adjustment was zero. On Nov. 13, 2002, shareholders approved modification of the performance incentive adjustment calculation by adjusting the performance difference intervals, while retaining the previous maximum adjustment and reducing the amount of the performance difference for which no adjustment is made to 0.50%. The effect of the modifications began Dec. 1, 2002. The adjustment decreased the fee by $86,550 for the six months ended Jan. 31, 2003. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. During the six months ended Jan. 31, 2003, the Portfolio's custodian fees were reduced by $36 as a result of earnings credits from overnight cash balances. The Portfolio 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 $87,278,395 and $129,642,494, respectively, for the six months ended Jan. 31, 2003. For the same period, the portfolio turnover rate was 33%. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $27,218 for the six months ended Jan. 31, 2003. Income from securities lending amounted to $114 for the six months ended Jan. 31, 2003. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. - -------------------------------------------------------------------------------- 18 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Research Opportunities Fund Jan. 31, 2003 (Unaudited) Assets Investment in Portfolio (Note 1) $ 241,333,965 Capital shares receivable 1,256 ----- Total assets 241,335,221 ----------- Liabilities Capital shares payable 23,625 Accrued distribution fee 3,540 Accrued transfer agency fee 2,023 Accrued administrative services fee 392 Other accrued expenses 71,913 ------ Total liabilities 101,493 ------- Net assets applicable to outstanding capital stock $ 241,233,728 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 686,069 Additional paid-in capital 548,112,321 Undistributed net investment income 189,413 Accumulated net realized gain (loss) (Note 5) (259,241,184) Unrealized appreciation (depreciation) on investments (48,512,891) ----------- Total -- representing net assets applicable to outstanding capital stock $ 241,233,728 ============= Net assets applicable to outstanding shares: Class A $ 147,364,365 Class B $ 93,626,561 Class C $ 241,712 Class Y $ 1,090 Net asset value per share of outstanding capital stock: Class A shares 40,954,723 $ 3.60 Class B shares 27,580,736 $ 3.39 Class C shares 71,141 $ 3.40 Class Y shares 300 $ 3.63 --- -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT
Statement of operations AXP Research Opportunities Fund Six months ended Jan. 31, 2003 (Unaudited) Investment income Income: Dividends $ 2,446,515 Interest 63,024 Fee income from securities lending -- net 114 --- Total income 2,509,653 --------- Expenses (Note 2): Expenses allocated from Portfolio 883,034 Distribution fee Class A 211,979 Class B 533,689 Class C 1,325 Transfer agency fee 425,169 Incremental transfer agency fee Class A 29,949 Class B 29,991 Class C 76 Service fee -- Class Y 49 Administrative services fees and expenses 83,013 Compensation of board members 4,842 Printing and postage 94,390 Registration fees 19,159 Audit fees 3,125 Other 3,073 ----- Total expenses 2,322,863 Earnings credits on cash balances (Note 2) (2,623) ------ Total net expenses 2,320,240 --------- Investment income (loss) -- net 189,413 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on security transactions (39,780,109) Net change in unrealized appreciation (depreciation) on investments 17,274,878 ---------- Net gain (loss) on investments (22,505,231) ----------- Net increase (decrease) in net assets resulting from operations $(22,315,818) ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT
Statements of changes in net assets AXP Research Opportunities Fund Jan. 31, 2003 July 31, 2002 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 189,413 $ (700,665) Net realized gain (loss) on investments (39,780,109) (113,481,022) Net change in unrealized appreciation (depreciation) on investments 17,274,878 (28,596,657) ---------- ----------- Net increase (decrease) in net assets resulting from operations (22,315,818) (142,778,344) ----------- ------------ Distributions to shareholders from: Net investment income Class A -- (548,089) Class B -- -- Class C -- (96) Class Y -- (693) ----------- ------------ Total distributions -- (548,878) ----------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 3,860,393 43,870,066 Class B shares 2,732,523 10,812,283 Class C shares 44,859 159,554 Class Y shares 4,652 9,017 Reinvestment of distributions at net asset value Class A shares -- 543,290 Class C shares -- 95 Class Y shares -- 689 Payments for redemptions Class A shares (32,418,888) (133,571,180) Class B shares (Note 2) (19,155,738) (69,710,542) Class C shares (Note 2) (65,296) (48,509) Class Y shares (198,402) (37,131) -------- ------- Increase (decrease) in net assets from capital share transactions (45,195,897) (147,972,368) ----------- ------------ Total increase (decrease) in net assets (67,511,715) (291,299,590) Net assets at beginning of period 308,745,443 600,045,033 ----------- ----------- Net assets at end of period $241,233,728 $ 308,745,443 ============ ============= Undistributed net investment income $ 189,413 $ -- ------------ -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Notes to Financial Statements AXP Research Opportunities Fund (Unaudited as to Jan. 31, 2003) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Growth Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Growth Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in Aggressive Growth Portfolio The Fund invests all of its assets in Aggressive Growth Portfolio (the Portfolio), a series of Growth Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of companies that comprise the S&P 500 Index. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of Jan. 31, 2003, was 99.98%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- 22 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.06% to 0.03% annually. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.00 o Class B $20.00 o Class C $19.50 o Class Y $17.00 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. - -------------------------------------------------------------------------------- 23 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 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 $110,400 for Class A and $56,973 for Class B for the six months ended Jan. 31, 2003. During the six months ended Jan. 31, 2003, the Fund's transfer agency fees were reduced by $2,623 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, 2003 Class A Class B Class C Class Y Sold 1,021,863 767,963 12,470 1,227 Issued for reinvested distributions -- -- -- -- Redeemed (8,649,549) (5,397,897) (17,761) (53,135) ---------- ---------- ------- ------- Net increase (decrease) (7,627,686) (4,629,934) (5,291) (51,908) ---------- ---------- ------ ------- Year ended July 31, 2002 Class A Class B Class C Class Y Sold 9,259,194 2,412,020 35,293 1,898 Issued for reinvested distributions 110,287 -- 20 139 Redeemed (28,644,747) (16,048,196) (10,730) (7,914) ----------- ----------- ------- ------ Net increase (decrease) (19,275,266) (13,636,176) 24,583 (5,877) ----------- ----------- ------ ------
4. BANK BORROWINGS The Fund has a revolving credit agreement with Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The agreement went into effect Sept. 24, 2002. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the LIBOR plus 0.50%, the IBOR plus 0.50% or the higher of the Federal Funds Rate plus 0.25% and the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $200 million with U.S. Bank, N.A. The Fund had no borrowings outstanding during the six months ended Jan. 31, 2003. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $214,998,504 as of July 31, 2002, that will expire in 2009 through 2011 if not offset by capital gains. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 24 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 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, 2003(f) 2002 2001 2000 1999 Net asset value, beginning of period $3.90 $ 5.37 $ 7.61 $7.94 $6.98 Income from investment operations: Net investment income (loss) .01 -- .02 -- (.01) Net gains (losses) (both realized and unrealized) (.31) (1.46) (1.27) .66 1.32 Total from investment operations (.30) (1.46) (1.25) .66 1.31 Less distributions: Dividends from net investment income -- (.01) -- -- -- Distributions from realized gains -- -- (.99) (.99) (.35) Total distributions -- (.01) (.99) (.99) (.35) Net asset value, end of period $3.60 $ 3.90 $ 5.37 $7.61 $7.94 Ratios/supplemental data Net assets, end of period (in millions) $147 $189 $365 $540 $481 Ratio of expenses to average daily net assets(c) 1.38%(d) 1.22% 1.16% 1.14% 1.12% Ratio of net investment income (loss) to average daily net assets .43%(d) .15% .37% .02% .04% Portfolio turnover rate (excluding short-term securities) 33% 144% 234% 160% 143% Total return(e) (7.69%)(g) (27.24%) (17.54%) 7.73% 19.21% Class B Per share income and capital changes(a) Fiscal period ended July 31, 2003(f) 2002 2001 2000 1999 Net asset value, beginning of period $3.69 $ 5.12 $ 7.36 $7.76 $6.88 Income from investment operations: Net investment income (loss) (.01) (.01) (.02) (.05) (.02) Net gains (losses) (both realized and unrealized) (.29) (1.42) (1.23) .64 1.25 Total from investment operations (.30) (1.43) (1.25) .59 1.23 Less distributions: Distributions from realized gains -- -- (.99) (.99) (.35) Net asset value, end of period $3.39 $ 3.69 $ 5.12 $7.36 $7.76 Ratios/supplemental data Net assets, end of period (in millions) $94 $119 $235 $336 $276 Ratio of expenses to average daily net assets(c) 2.15%(d) 1.98% 1.92% 1.91% 1.88% Ratio of net investment income (loss) to average daily net assets (.34%)(d) (.62%) (.39%) (.73%) (.72%) Portfolio turnover rate (excluding short-term securities) 33% 144% 234% 160% 143% Total return(e) (8.13%)(g) (27.93%) (18.19%) 7.03% 18.31%
See accompanying notes to financial highlights. - -------------------------------------------------------------------------------- 25 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended July 31, 2003(f) 2002 2001 2000(b) Net asset value, beginning of period $3.69 $ 5.13 $ 7.36 $7.50 Income from investment operations: Net investment income (loss) (.01) (.02) (.02) .02 Net gains (losses) (both realized and unrealized) (.28) (1.42) (1.22) (.16) Total from investment operations (.29) (1.44) (1.24) (.14) Less distributions: Distributions from realized gains -- -- (.99) -- Net asset value, end of period $3.40 $ 3.69 $ 5.13 $7.36 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 2.15%(d) 1.99% 1.92% 1.91%(d) Ratio of net investment income (loss) to average daily net assets (.34%)(d) (.61%) (.36%) (.50%)(d) Portfolio turnover rate (excluding short-term securities) 33% 144% 234% 160% Total return(e) (7.86%)(g) (28.05%) (18.03%) (1.87%)(g)
Class Y Per share income and capital changes(a) Fiscal period ended July 31, 2003(f) 2002 2001 2000 1999 Net asset value, beginning of period $3.93 $ 5.42 $ 7.65 $7.96 $7.01 Income from investment operations: Net investment income (loss) .02 -- .04 .01 -- Net gains (losses) (both realized and unrealized) (.32) (1.48) (1.28) .67 1.32 Total from investment operations (.30) (1.48) (1.24) .68 1.32 Less distributions: Dividends from net investment income -- (.01) -- -- (.02) Distributions from realized gains -- -- (.99) (.99) (.35) Total distributions -- (.01) (.99) (.99) (.37) Net asset value, end of period $3.63 $ 3.93 $ 5.42 $7.65 $7.96 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.13%(d) 1.04% 1.00% .97% 1.02% Ratio of net investment income (loss) to average daily net assets .64%(d) .33% .54% .17% .12% Portfolio turnover rate (excluding short-term securities) 33% 144% 234% 160% 143% Total return(e) (7.63%)(g) (27.30%) (17.29%) 7.99% 19.34%
See accompanying notes to financial highlights. - -------------------------------------------------------------------------------- 26 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Jan. 31, 2003 (Unaudited). (g) Not annualized. - -------------------------------------------------------------------------------- 27 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Results of Meeting of Shareholders AXP RESEARCH OPPORTUNITIES FUND REGULAR MEETING OF SHAREHOLDERS HELD ON NOVEMBER 13, 2002 (UNAUDITED) A brief description of each proposal voted upon at the meeting and the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each proposal is set forth below. Proposal 1 To elect the thirteen nominees specified below as Board members*. Shares Voted "For" Shares Withholding Authority to Vote Arne H. Carlson 161,067,509.378 8,777,289.897 Philip J. Carroll, Jr. 161,696,909.389 8,147,889.886 Livio D. DeSimone 161,363,098.318 8,481,700.957 Barbara H. Fraser 161,749,782.777 8,095,016.498 Ira D. Hall 161,624,688.292 8,220,110.983 Heinz F. Hutter 161,223,353.993 8,621,445.282 Anne P. Jones 161,454,050.036 8,390,749.239 Stephen R. Lewis, Jr. 161,977,476.287 7,867,322.988 Alan G. Quasha 161,843,920.313 8,000,878.962 Stephen W. Roszell 161,838,277.012 8,006,522.263 Alan K. Simpson 160,863,762.643 8,981,036.632 Alison Taunton-Rigby 161,799,304.848 8,045,494.427 William F. Truscott 161,815,746.539 8,029,052.736 - -------------------------------------------------------------------------------- 28 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Proposal 2 To Amend the Articles of Incorporation/Declaration of Trust*: 2(a). To allow one vote/dollar instead of one vote/share. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 141,057,904.638 17,507,272.377 4,873,844.260 6,405,778.000 Proposal 3 To approve a policy authorizing American Express Financial Corporation, subject to Board approval, to retain and replace subadvisers, or to modify subadvisory agreements, without shareholder approval. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 46,696,300.207 5,321,920.495 1,455,946.854 1,236,391.000 Proposal 4 To approve changes to the Investment Management Services Agreement: 4(b). To modify the performance incentive adjustment calculation. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 46,099,041.850 5,258,176.734 2,116,948.972 1,236,391.000 * Denotes Registrant-wide proposals and voting results. - -------------------------------------------------------------------------------- 29 -- AXP RESEARCH OPPORTUNITIES FUND -- 2003 SEMIANNUAL REPORT Contact Information and Services Internet Receive 24-hour access to your account information at www.americanexpress.com. Client Service Receive fund performance, fund prices, account values, recent account transactions, and make account inquiries by calling American Express Financial Advisors at (800) 862-7919 or TTY: (800) 846-4852. Telephone Transaction Service For sales and exchange, dividend payments, or reinvestments and automatic payment arrangement contact American Express Financial Advisors at (888) 723-8476. Find an American Express Financial Advisor If you are an existing American Express Financial Advisors client who has recently moved and would like to speak with a new advisor, please call your local Client Service Coordinator at (800) 803-6284. - -------------------------------------------------------------------------------- American Express(R) Funds provide investment opportunities for shareholders, all in one place. We've been managing mutual funds for over 60 years. Today, our family of funds includes 58 publicly offered funds in all style categories: growth, blend, value, and income. Our broad selection of funds allows you to build a portfolio diversified across various asset classes. Growth Funds Typically, growth investing seeks to invest in companies with the greatest earnings growth potential. Blend Funds Blend is often regarded as an investment style that incorporates both growth and value considerations in the stock selection process. Value Funds A value investment approach generally seeks to invest in undervalued stocks that are temporarily out of favor. Income/Tax-Exempt Income Funds Involves investing primarily in fixed income securities with the goal of maximizing income and often, but not always, capital appreciation. American Express(R) Funds For more complete information about our funds, including fees and expenses, please call (800) 862-7919 for prospectuses. Read them carefully before you invest. Growth Funds AXP(R) Emerging Markets Fund AXP Equity Select Fund AXP Focused Growth Fund AXP Global Growth Fund AXP Growth Fund AXP Growth Dimensions Fund AXP New Dimensions Fund(R) AXP Partners International Aggressive Growth Fund AXP Partners Small Cap Growth Fund AXP Strategy Aggressive Fund Blend Funds AXP Blue Chip Advantage Fund AXP Discovery Fund* AXP European Equity Fund AXP Global Balanced Fund AXP International Fund AXP Large Cap Equity Fund AXP Managed Allocation Fund AXP Mid Cap Index Fund AXP Partners International Core Fund AXP Partners International Small Cap Fund AXP Partners Small Cap Core Fund AXP Research Opportunities Fund AXP S&P 500 Index Fund AXP Small Cap Advantage Fund AXP Small Company Index Fund AXP Stock Fund Value Funds AXP Diversified Equity Income Fund AXP Equity Value Fund AXP Large Cap Value Fund AXP Mid Cap Value Fund AXP Mutual AXP Partners Fundamental Value Fund AXP Partners International Select Value Fund AXP Partners Select Value Fund AXP Partners Small Cap Value Fund AXP Partners Value Fund AXP Progressive Fund* Income/Tax-Exempt Income Funds AXP Bond Fund AXP Cash Management Fund** AXP Extra Income Fund AXP Federal Income Fund AXP Global Bond Fund AXP High Yield Tax-Exempt Fund AXP Insured Tax-Exempt Fund AXP Intermediate Tax-Exempt Fund AXP Selective Fund AXP State Tax-Exempt Funds AXP Tax-Exempt Bond Fund AXP Tax-Free Money Fund** AXP U.S. Government Mortgage Fund Sector Funds AXP Global Technology Fund AXP Precious Metals Fund AXP Utilities Fund These funds are also listed in the categories above. AXP(R) Partners Funds AXP Partners Fundamental Value Fund AXP Partners International Aggressive Growth Fund AXP Partners International Core Fund AXP Partners International Select Value Fund AXP Partners International Small Cap Fund AXP Partners Select Value Fund AXP Partners Small Cap Core Fund AXP Partners Small Cap Growth Fund AXP Partners Small Cap Value Fund AXP Partners Value Fund International Funds AXP Emerging Markets Fund AXP European Equity Fund AXP Global Balanced Fund AXP Global Bond Fund AXP Global Growth Fund AXP International Fund AXP Partners International Aggressive Growth Fund AXP Partners International Core Fund AXP Partners International Select Value Fund AXP Partners International Small Cap Fund * Closed to new investors. ** An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. (4/03) AXP Research Opportunities Fund 70100 AXP Financial Center Minneapolis, MN 55474 americanexpress.com - -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) - -------------------------------------------------------------------------------- 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. S-6359 H (4/03) -----END PRIVACY-ENHANCED MESSAGE-----