N-CSRS 1 stock-ncsrs.txt AXP STOCK SERIES, INC. 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 811-498 ----------- AXP STOCK SERIES, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 50606 AXP Financial Center, Minneapolis, Minnesota 55474 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (612) 330-9283 ----------------- Date of fiscal year end: 9/30 -------------- Date of reporting period: 3/31 -------------- AXP(R) Stock Fund Semiannual Report for the Period Ended March 31, 2005 AXP Stock Fund seeks to provide shareholders with current income and growth of capital. (logo) (logo) American AMERICAN Express 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) 15 Notes to Financial Statements (Portfolio) 18 Financial Statements (Fund) 23 Notes to Financial Statements (Fund) 26 Fund Expenses Example 35 Proxy Voting 37 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. 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 STOCK FUND -- 2005 SEMIANNUAL REPORT Fund Snapshot AT MARCH 31, 2005 PORTFOLIO MANAGERS Portfolio managers Since Years in industry Mike Kennedy, CFA 7/99 34 Scott Mullinix, CFA 6/04 15 Dimitris Bertsimas 10/04 11 Gina Mourtzinou 10/04 8 FUND OBJECTIVE For investors seeking current income and growth of capital. Inception dates by class A: 4/6/45 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95 Ticker symbols by class A: INSTX B: IDSBX C: -- I: -- Y: IDSYX Total net assets $2.095 billion Number of holdings 210 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) Industrials 16.5% Consumer discretionary 15.4% Financials 12.4% Health care 12.4% Energy 10.6% Consumer staples 9.0% Information technology 8.6% Materials 5.2% Utilities 5.0% Short-term securities* 3.0% Telecommunication services 1.8% Telecommunications 0.1% * Of the 3.0%,1.0% is due to security lending activity and 2.0% is the Portfolio's cash equivalent position. TOP TEN HOLDINGS Percentage of portfolio assets General Electric (Multi-industry) 4.3% Exxon Mobil (Energy) 4.0 Johnson & Johnson (Health care products) 3.9 Bank of America (Banks and savings & loans) 2.3 United Technologies (Aerospace & defense) 2.1 Target (Retail -- general) 1.9 ConocoPhillips (Energy) 1.9 Citigroup (Finance companies) 1.8 Microsoft (Computer software & services) 1.8 Wal-Mart Stores (Retail -- general) 1.8 For further detail about these holdings, please refer to the section entitled "Investments in Securities." Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Performance Summary (bar chart) PERFORMANCE COMPARISON For the six-month period ended March 31, 2005 +6.44% +6.88% +6.04% +6.44% = AXP Stock Fund Class A (excluding sales charge) +6.88% = S&P 500 Index(1) (unmanaged) +6.04% = 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. (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) (4/6/45) (3/20/95) (6/26/00) (3/4/04) (3/20/95) After After NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) at March 31, 2005 6 months* +6.44% +0.32% +6.04% +2.04% +6.06% +5.06% +6.70% +6.58% 1 year +4.00% -1.98% +3.20% -0.80% +3.25% +3.25% +4.39% +4.16% 3 years +0.50% -1.46% -0.27% -1.27% -0.27% -0.27% N/A +0.67% 5 years -4.60% -5.72% -5.34% -5.50% N/A N/A N/A -4.44% 10 years +7.21% +6.58% +6.39% +6.39% N/A N/A N/A +7.36% Since inception +9.77% +9.67% +6.50% +6.50% -4.32% -4.32% +2.23% +7.47%
(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. * Not annualized. -------------------------------------------------------------------------------- 4 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, the Fund's portfolio management team -- Mike Kennedy and Scott Mullinix in Minneapolis and Dimitris Bertsimas and Gina Mourtzinou in Cambridge, Ma. -- discuss the Fund's results and positioning for the first half of the 2005 fiscal year. On Oct. 1, 2004, Bertsimas and Mourtzinou began managing approximately 25% of the Fund's assets using a quantitative investing approach. Q: How did AXP Stock Fund perform for the six months ended March 31, 2005? A: AXP Stock Fund's Class A shares rose 6.44%, excluding sales charge for the six months ended March 31, 2005. The Fund outperformed its peer group as represented by the Lipper Large-Cap Core Funds Index, which gained 6.04%. The Fund's benchmark, the broad-based Standard & Poor's 500 Index (S&P 500 Index), rose 6.88% for the same six-month period. Q: What factors most significantly affected performance? Kennedy and Mullinix: During the six-month period, the best performing sector within our portion of the portfolio was the industrial sector. Our strategy in the sector was to focus on companies whose earnings were leveraged to economic growth. The Fund benefited from our substantially larger-than- S&P 500 Index position with particularly strong performance from Rockwell Automation. Rockwell provides manufacturing companies with controls and software systems that enhance customers' productivity. We are still quite pleased with the company's prospects and think it could be a strong performer for some time. Other stocks within the industrial sector that performed well for the Fund include 3M, General Electric and Tyco, each of which significantly outperformed the sector and the market. A lower-than-S&P 500 Index allocation to financial stocks was the second most significant contributor to relative performance. Financials underperformed the overall market but good stock selection helped our returns in this sector. Based on our concerns about the impact of rising interest rates, we emphasized financial stocks that had exposure to the capital markets. We anticipated increased merger and acquisition activity and focused on companies that could benefit from that environment, rather than those that are more sensitive to interest rate trends. Energy was the best performing sector of the S&P 500 Index, and we benefited from a larger-than-S&P 500 Index position. Our energy holdings also performed better than the index sector. Significant contributors included equipment and services stock Transocean, as well as oil and gas companies EnCana and ConocoPhillips. -------------------------------------------------------------------------------- 5 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> During the six-month period, the best performing sector within our portion of the portfolio was the industrial sector. (end callout quote) -- Mike Kennedy and Scott Mullinix Our results in the technology sector detracted from relative return, largely due to underperformance of several individual technology holdings. These included Xerox, which was a small position in the Fund, but had a meaningful impact due to its decline during the period. Telecommunications equipment companies Motorola and Qualcomm also detracted from performance. The Fund's consumer discretionary positioning hurt our results. Our allocation to the sector was about market weight, but the sector outperformed the S&P 500 Index for the period. eBay and Carnival were key detractors. Internet retailer eBay had advanced sharply in 2004, but gave back a meaningful portion of those gains in the first quarter of 2005 following an unfavorable earnings release. Carnival, like other cruise lines, has been negatively affected by high oil prices. We still hold Carnival and believe that a drop in oil prices will relieve the earnings pressure as long as the company's bookings remain strong. Bertsimas and Mourtzinou: The portfolio segment that we manage performed quite well during the semiannual fiscal period. Our quantitative approach relies on computer modeling for individual stock selection. To manage our segment of this Fund, we use three separate time-tested models. o Our momentum model, which selects groups of companies that appear to have improving prospects based on the historical pattern of stock returns, did well throughout the period. o Our value model, which uses our proprietary corporate earnings estimates to buy stocks that appear undervalued based on historical price/earnings (P/E) ratios, performed well in the first three months of the period and was neutral in the final three months. o Our final model, the quality model, attempts to predict returns of stocks based on valuation measures adjusted for quality, using parameters such as high earnings, low volatility of -------------------------------------------------------------------------------- 6 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> We have been a bit more conservative in our view of the broad equity market, given current valuations and historical averages. (end callout quote) -- Dimitris Bertsimas and Gina Mourtzinou earnings and low debt. This quality model did its job very well in first three months of 2005, helping to support performance in a weak market. A larger-than-S&P 500 Index position in energy was particularly beneficial during the period. Our energy position was very close to our maximum overweight of 6% over the index. Stock selection within the energy sector also added to relative return. ConocoPhillips and Exxon Mobil were among our top performers for the six-month period. Our holdings of consumer staples stocks were also larger than those of the S&P 500 Index, which had a positive impact on performance. Stock selection in the sector was an even more significant positive. Food and tobacco company Altria Group was one of the top holdings selected by our models and was a leading contributor during the period. A slightly larger-than-S&P 500 Index position in health care was beneficial, as was the performance of our individual health care holdings, largely due to favorable results from Johnson & Johnson. In the technology sector, the benefit of a smaller-than-S&P 500 Index allocation offset the impact of weaker stock selection. On the negative side, our consumer discretionary and financial positions detracted from relative return. Although we had a slightly larger-than-S&P 500 Index position in the consumer discretionary sector, which was advantageous during this period, stock selection within the sector had a negative impact. We owned both eBay and General Motors, which were among the worst detractors for the quarter. While eBay suffered from its unfavorable fourth quarter earnings release, General Motors lowered its earnings guidance for the remainder of 2005. In the financial sector, a smaller-than-S&P 500 Index allocation was effective, but owning Fannie Mae led to below-benchmark stock performance -------------------------------------------------------------------------------- 7 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Questions & Answers as the mortgage financer continued to suffer from regulatory and accounting-related difficulties. Q: What changes did you make to the Fund and how is it currently positioned? Kennedy and Mullinix: We generally start with an economic scenario and then strive to pick stocks that will benefit from the scenario. At the start of the fiscal period, we had larger-than-S&P 500 Index positions in energy, materials and industrials, based on our expectations for continued economic strength. In the first three months of the semiannual period, we began to pare back our energy holdings. We also took some profits in industrial and materials stocks, slightly reducing the weightings in both sectors. Within the materials sector, we also made a modest change, moving our emphasis toward chemical companies. This is consistent with our belief that lower energy prices will lead to reduced costs for these companies, allowing them to benefit should demand continue to rise as we anticipate. Consequently, we think we will see rising earnings estimates for chemical stocks, more so than in other areas such as paper. Because we think interest rates will continue to creep up, we do not see much opportunity in the financial area, where we have made changes only at the margin. In the final three months of the period, we reduced our technology weighting. We eliminated a number of names and trimmed others, due to our valuation and our earnings outlook. We also increased the health care weighting and ended the period with the sector about market weight. Health care stocks had been underperforming for over a year and the valuations became very attractive to us. Bertsimas and Mourtzinou: There were few changes to our sector allocations, which are a by-product of the individual stocks selected by our three models. The models continued to favor energy stocks, leading to an increase in the energy weighting. However, since we were already close to what we feel should be our maximum position, the increase was very slight. In response to the Sears/Kmart merger, we took some of our Sears stock in cash and some in shares of the new combined company, Sears Holdings. At the very end of the quarter, we used the cash to add more exposure to international stocks. Our separate asset allocation model favors international stocks and with the weak dollar, we see these stocks as attractive opportunities for the Fund. -------------------------------------------------------------------------------- 8 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Questions & Answers Q: How do you intend to manage the Fund in the coming months? Kennedy and Mullinix: We continue to believe that interest rate and inflation worries are overblown. We do not anticipate interest rates or inflation rising rapidly enough to abort the global recovery. As we move through the second calendar quarter, we think there will be a lot of concern about these factors; however, we believe growth in second half of 2005 will be better than expected. Therefore, our portion of the portfolio has relatively high positions in materials and industrials. We prefer companies that demonstrate either pricing power or good dividend yields. We are less excited about consumer discretionary stocks because we have concerns about consumer spending behavior. We brought our energy allocation down to a market weight because we think oil prices will drift lower. In our view, the second quarter of 2005 could be very critical because the market is questioning the recovery and the duration of it. We experienced a similar situation last year and people then became very positive and earnings came through much higher than anticipated in the second, third, and fourth quarters of 2004. Overall, we are more optimistic about the second half of the year than the market consensus, and we believe the global recovery will continue into next year. Bertsimas and Mourtzinou: We have been a bit more conservative in our view of the broad equity market, 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. We are optimistic that market trends will favor our momentum model during 2005, since it has lagged during the past two years. However, if the market languishes, we anticipate that our quality model should help to support the portfolio's performance, as it did in the first three months of 2005. Our asset allocation models favor international stocks and U.S. large-cap stocks over small-cap stocks. Our focus going forward is to keep using our three well-tested models to find the best performing stocks regardless of market conditions. We will continue our strategy of monitoring weightings as a risk control, so that no individual security, industry or sector becomes too large within the portfolio segment. We also intend to continue to employ our risk controls, including constraints on market capitalization, price, quality, turnover and transaction costs. -------------------------------------------------------------------------------- 9 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Investments in Securities Equity Portfolio March 31, 2005 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (95.6%) Issuer Shares Value(a) Aerospace & defense (5.1%) Boeing 315,460 $18,441,792 General Dynamics 10,866 1,163,205 Lockheed Martin 265,027 16,182,549 Raytheon 62,202 2,407,217 Rockwell Automation 416,657 23,599,452 Rockwell Collins 23,054 1,097,140 United Technologies 440,593 44,790,685 Total 107,682,040 Automotive & related (0.7%) Dana 30,576 391,067 Delphi 111,477 499,417 Ford Motor 266,524(d) 3,019,717 General Motors 151,189(d) 4,443,444 Genuine Parts 42,125 1,832,016 Johnson Controls 25,635 1,429,408 PACCAR 28,107 2,034,666 Total 13,649,735 Banks and savings & loans (4.3%) Bank of America 1,104,709 48,717,666 Bank of New York 6,270 182,144 Comerica 21,570 1,188,076 First Horizon Natl 18,047 736,137 Natl City 146,869 4,920,112 Regions Financial 29,089 942,484 US Bancorp 300,000 8,646,000 Washington Mutual 155,877 6,157,142 Wells Fargo & Co 300,000 17,939,999 Total 89,429,760 Beverages & tobacco (2.3%) Altria Group 267,747 17,507,976 Coca-Cola 281,849 11,744,648 PepsiCo 311,159 16,500,762 Reynolds American 20,570 1,657,736 Total 47,411,122 Common stocks (continued) Issuer Shares Value(a) Broker dealers (1.6%) Bear Stearns Companies 22,687 $2,266,431 Franklin Resources 13,808 947,919 JPMorgan Chase & Co 260,517 9,013,888 Lehman Brothers Holdings 30,396 2,862,087 Merrill Lynch & Co 12,400 701,840 Morgan Stanley 300,000 17,175,001 Total 32,967,166 Building materials & construction (0.2%) American Standard Companies 15,689 729,225 Masco 64,461 2,234,862 Sherwin-Williams 12,550 552,075 Total 3,516,162 Cable (1.0%) Comcast Special Cl A 600,000(b) 20,040,000 Cellular telecommunications (0.1%) Nextel Communications Cl A 43,093(b) 1,224,703 Chemicals (3.0%) Air Products & Chemicals 400,000 25,316,000 Dow Chemical 500,000 24,925,000 Eastman Chemical 12,819 756,321 EI du Pont de Nemours & Co 200,000 10,248,000 Engelhard 19,253 578,168 Total 61,823,489 Computer hardware (1.6%) Apple Computer 318,045(b) 13,252,935 Dell 500,000(b) 19,210,000 Network Appliance 32,404(b) 896,295 Total 33,359,230 Computer software & services (4.5%) Adobe Systems 48,417 3,252,170 Autodesk 155,734 4,634,644 Automatic Data Processing 45,453 2,043,112 Convergys 40,151(b) 599,454 Electronic Data Systems 44,695 923,846 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Computer software & services (cont.) Google Cl A 80,000(b) $14,440,800 Intl Business Machines 200,000 18,276,000 Microsoft 1,607,919 38,863,403 NCR 21,612(b) 729,189 Oracle 680,701(b) 8,495,148 Symantec 121,657(b) 2,594,944 Total 94,852,710 Electronics (1.5%) Maxim Integrated Products 400,000 16,348,000 Xilinx 500,000 14,615,000 Total 30,963,000 Energy (9.6%) Amerada Hess 17,041 1,639,515 Anadarko Petroleum 87,059 6,625,190 Apache 300,000 18,369,000 Burlington Resources 65,069 3,258,005 ChevronTexaco 170,600 9,947,686 ConocoPhillips 364,709 39,330,218 Devon Energy 94,734 4,523,549 EnCana 300,000(c) 21,126,000 Exxon Mobil 1,405,599 83,773,699 Occidental Petroleum 106,246 7,561,528 Valero Energy 66,405 4,865,494 Total 201,019,884 Energy equipment & services (1.1%) Baker Hughes 45,570 2,027,409 Halliburton 19,291 834,336 Noble 16,812 945,003 Schlumberger 100,000 7,048,000 Transocean 252,761(b) 13,007,081 Total 23,861,829 Finance companies (1.9%) Citigroup 867,852 39,001,269 MGIC Investment 28,521 1,758,890 Total 40,760,159 Financial services (3.0%) Capital One Financial 200,000 14,954,000 Countrywide Financial 214,846 6,973,901 Fannie Mae 234,761 12,782,736 Freddie Mac 58,629 3,705,353 Goldman Sachs Group 200,000 21,998,001 SLM 38,822 1,934,888 Total 62,348,879 Common stocks (continued) Issuer Shares Value(a) Food (1.2%) Kellogg 300,000 $12,981,000 WM Wrigley Jr 200,000 13,114,000 Total 26,095,000 Furniture & appliances (0.1%) Black & Decker 21,880 1,728,301 Stanley Works 4,742 214,670 Whirlpool 9,416 637,746 Total 2,580,717 Health care products (8.6%) Abbott Laboratories 322,876 15,052,479 Amgen 300,000(b) 17,463,000 Becton, Dickinson & Co 56,167 3,281,276 Biomet 15,257 553,829 Bristol-Myers Squibb 30,259 770,394 CR Bard 14,293 973,067 Gilead Sciences 64,976(b) 2,326,141 Johnson & Johnson 1,227,350(f) 82,428,826 Medtronic 78,325 3,990,659 Merck & Co 1,018,739 32,976,581 Schering-Plough 90,715 1,646,477 Stryker 400,000 17,844,000 Total 179,306,729 Health care services (2.9%) Aetna 223,157 16,725,617 Cardinal Health 38,422 2,143,948 Caremark Rx 200,000(b) 7,956,000 Tenet Healthcare 120,323(b) 1,387,324 UnitedHealth Group 324,530 30,953,671 WellPoint 14,350(b) 1,798,773 Total 60,965,333 Home building (0.3%) Centex 31,880 1,825,768 KB HOME 17,711 2,080,334 Pulte Homes 29,157 2,146,830 Total 6,052,932 Household products (3.6%) Avon Products 400,000 17,176,000 Colgate-Palmolive 400,000 20,868,000 Gillette 107,700 5,436,696 Procter & Gamble 600,000 31,800,000 Total 75,280,696 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Industrial transportation (1.3%) Burlington Northern Santa Fe 71,324 $3,846,503 CSX 218,988 9,120,851 FedEx 59,053 5,548,029 Norfolk Southern 122,658 4,544,479 United Parcel Service Cl B 44,520 3,238,385 Total 26,298,247 Insurance (1.7%) ACE 12,982(c) 535,767 Allstate 96,447 5,213,925 Ambac Financial Group 14,927 1,115,793 Aon 95,199 2,174,345 CIGNA 63,848 5,701,626 Hartford Financial Services Group 28,202 1,933,529 Jefferson-Pilot 14,239 698,423 Lincoln Natl 26,406 1,191,967 Loews 22,260 1,637,000 Marsh & McLennan Companies 55,549 1,689,801 MBIA 24,119 1,260,941 Principal Financial Group 26,413 1,016,636 Prudential Financial 23,723 1,361,700 St. Paul Travelers Companies 200,000 7,346,001 Torchmark 22,084 1,152,785 UnumProvident 76,942 1,309,553 Total 35,339,792 Leisure time & entertainment (1.0%) Carnival 300,000 15,543,000 Harley-Davidson 70,005 4,043,489 Mattel 29,992 640,329 Total 20,226,818 Lodging & gaming (2.1%) Harrah's Entertainment 200,000 12,916,000 Marriott Intl Cl A 420,193 28,094,104 Starwood Hotels & Resorts Worldwide 33,989 2,040,360 Total 43,050,464 Machinery (1.3%) Caterpillar 213,112 19,486,961 Deere & Co 100,000 6,713,000 Total 26,199,961 Media (2.9%) eBay 742,319(b) 27,658,805 Walt Disney 600,000 17,238,000 Yahoo! 488,615(b) 16,564,049 Total 61,460,854 Common stocks (continued) Issuer Shares Value(a) Metals (0.9%) Alcoa 500,000 $15,195,000 Nucor 28,687 1,651,224 Phelps Dodge 7,248 737,339 United States Steel 12,985 660,287 Total 18,243,850 Multi-industry (9.0%) 3M 335,006 28,706,664 Accenture Cl A 400,000(b,c) 9,660,000 Danaher 400,000 21,364,000 Eastman Kodak 115,450 3,757,898 General Electric 2,500,000 90,149,999 Textron 22,195 1,656,191 Tyco Intl 986,934(c) 33,358,369 WW Grainger 14,540 905,406 Total 189,558,527 Paper & packaging (0.1%) Ball 14,586 605,027 Louisiana-Pacific 23,721 596,346 Total 1,201,373 Precious metals (1.3%) Barrick Gold 400,000(c) 9,584,000 Freeport-McMoRan Copper & Gold Cl B 422,697 16,743,028 Total 26,327,028 Real estate investment trust (--%) Archstone-Smith Trust 24,478 834,945 Restaurants (0.8%) Applebee's Intl 400,000 11,024,000 Starbucks 118,595(b) 6,126,618 Total 17,150,618 Retail -- drugstores (1.0%) CVS 417,546 21,971,271 Retail -- general (6.6%) Best Buy 216,972 11,718,658 Dollar General 31,747 695,577 Home Depot 786,329 30,069,221 JC Penney 49,696 2,580,216 May Dept Stores 22,444 830,877 Nordstrom 200,000 11,076,000 Sears Holdings 16,927(b) 2,254,222 Staples 33,412 1,050,139 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Retail -- general (cont.) Target 800,000 $40,015,999 Toys "R" Us 43,276(b) 1,114,790 Wal-Mart Stores 743,723 37,267,959 Total 138,673,658 Retail -- grocery (0.9%) Albertson's 82,337 1,700,259 Kroger 161,252(b) 2,584,870 Safeway 114,493(b) 2,121,555 SUPERVALU 400,000(d) 13,340,000 Total 19,746,684 Telecom equipment & services (1.1%) QUALCOMM 640,665 23,480,372 Textiles & apparel (0.2%) Liz Claiborne 15,157 608,250 Nike Cl B 25,940 2,161,062 VF 16,538 978,057 Total 3,747,369 Utilities -- electric (3.6%) AES 58,597(b) 959,819 American Electric Power 21,814 742,985 CenterPoint Energy 81,337 978,484 DTE Energy 20,212 919,242 Edison Intl 108,510 3,767,467 PG&E 81,743 2,787,436 PPL 300,000 16,197,000 Public Service Enterprise Group 28,797 1,566,269 Southern 500,000 15,915,000 TECO Energy 42,883 672,405 TXU 395,583(d) 31,500,275 Total 76,006,382 Utilities -- telephone (1.8%) AT&T 218,203 4,091,306 BellSouth 372,778 9,800,334 CenturyTel 28,779 945,102 SBC Communications 217,283 5,147,434 Sprint 297,381 6,765,418 Verizon Communications 314,033 11,148,172 Total 37,897,766 Total common stocks (Cost: $1,813,494,898) $2,002,607,254 Preferred stocks (2.4%) Issuer Shares Value(a) Public Service Enterprise Group 10.25% Cv 415,000 $29,008,500 Schering-Plough 6.00% Cv 440,000 22,044,000 Total preferred stocks (Cost: $43,382,290) $51,052,500 Short-term securities (3.0%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agency (0.2%) Federal Natl Mtge Assn Disc Nt 05-11-05 2.80% $5,000,000 $4,984,113 Commercial paper (2.8%) Abbey National North America LLC 04-01-05 2.85 3,100,000 3,099,755 Amsterdam Funding 04-01-05 2.85 4,500,000 4,499,644 Fairway Finance 04-01-05 2.85 16,200,000 16,198,716 04-13-05 2.78 15,000,000 14,984,942 Morgan Stanley 04-07-05 2.73 10,000,000 9,994,692 Sheffield Receivables 04-01-05 2.71 10,000,000 9,999,247 Total 58,776,996 Total short-term securities (Cost: $63,766,050) $63,761,109 Total investments in securities (Cost: $1,920,643,238)(g) $2,117,420,863 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 13 -- AXP STOCK 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 March 31, 2005, the value of foreign securities represented 3.5% of net assets. (d) At March 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 1.0% of net assets. See Note 5 to the financial statements. 2.0% of net assets is the Portfolio's cash equivalent position. (f) Partially pledged as initial margin deposit on the following open stock index futures contracts (see Note 4 to the financial statements): Type of security Contracts Purchase contracts S&P 500 Index, June 2005 5 (g) At March 31, 2005, the cost of securities for federal income tax purposes was approximately $1,920,643,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $248,305,000 Unrealized depreciation (51,527,000) ----------- Net unrealized appreciation $196,778,000 ------------ 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. -------------------------------------------------------------------------------- 14 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Financial Statements Statement of assets and liabilities Equity Portfolio March 31, 2005 (Unaudited) Assets Investments in securities, at value (Note 1)* (identified cost $1,920,643,238) $2,117,420,863 Dividends and accrued interest receivable 2,518,572 Receivable for investment securities sold 67,550,526 ---------- Total assets 2,187,489,961 ------------- Liabilities Disbursements in excess of cash on demand deposit 1,059,541 Payable for investment securities purchased 69,997,544 Payable upon return of securities loaned (Note 5) 21,697,000 Accrued investment management services fee 28,518 Other accrued expenses 88,326 ------ Total liabilities 92,870,929 ---------- Net assets $2,094,619,032 ============== * Including securities on loan, at value (Note 5) $ 20,959,430 -------------- See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Statement of operations Equity Portfolio Six months ended March 31, 2005 (Unaudited) Investment income Income: Dividends $ 26,998,143 Interest 523,985 Fee income from securities lending (Note 5) 30,404 Less foreign taxes withheld (15,650) ------- Total income 27,536,882 ---------- Expenses (Note 2): Investment management services fee 5,004,147 Compensation of board members 7,557 Custodian fees 88,754 Audit fees 16,125 Other 50,477 ------ Total expenses 5,167,060 Earnings credits on cash balances (Note 2) (139) ---- Total net expenses 5,166,921 --------- Investment income (loss) -- net 22,369,961 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 73,920,483 Futures contracts 850,913 ------- Net realized gain (loss) on investments 74,771,396 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 47,000,631 ---------- Net gain (loss) on investments and foreign currencies 121,772,027 ----------- Net increase (decrease) in net assets resulting from operations $144,141,988 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets Equity Portfolio March 31, 2005 Sept. 30, 2004 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 22,369,961 $ 35,485,819 Net realized gain (loss) on investments 74,771,396 197,097,988 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 47,000,631 6,927,011 ---------- --------- Net increase (decrease) in net assets resulting from operations 144,141,988 239,510,818 ----------- ----------- Proceeds from contributions 5,316,561 19,586,930 Fair value of withdrawals (249,830,997) (428,338,955) ------------ ------------ Net contributions (withdrawals) from partners (244,514,436) (408,752,025) ------------ ------------ Total increase (decrease) in net assets (100,372,448) (169,241,207) Net assets at beginning of period 2,194,991,480 2,364,232,687 ------------- ------------- Net assets at end of period $2,094,619,032 $2,194,991,480 ============== ==============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 17 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Notes to Financial Statements Equity Portfolio (Unaudited as to March 31, 2005) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Equity Portfolio (the Portfolio) is a series of Growth and Income Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. Equity Portfolio invests primarily in common stocks and securities convertible into common stocks. In pursuit of its income objective, the Portfolio will invest in income-producing equity securities (such as convertible securities and preferred stocks) and short-term debt instruments (such as commercial paper). 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. 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. -------------------------------------------------------------------------------- 18 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. -------------------------------------------------------------------------------- 19 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Guarantees and indemnifications Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with AEFC to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets that declines from 0.53% to 0.40% 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 Stock Fund to the Lipper Large-Cap Core Funds Index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the fee by $389,640 for the six months ended March 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. -------------------------------------------------------------------------------- 20 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. During the six months ended March 31, 2005, the Portfolio's custodian fees were reduced by $139 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 $1,434,032,946 and $1,571,718,328, respectively, for the six months ended March 31, 2005. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $23,308 for the six months ended March 31, 2005. 4. STOCK INDEX FUTURES CONTRACTS At March 31, 2005, investments in securities included securities valued at $288,788 that were pledged as collateral to cover initial margin deposits on 5 open purchase contracts. The notional market value of the open purchase contracts at March 31, 2005 was $1,479,875 with a net unrealized loss of $28,008. See "Summary of significant accounting policies" and "Notes to investments in securities." 5. LENDING OF PORTFOLIO SECURITIES At March 31, 2005, securities valued at $20,959,430 were on loan to brokers. For collateral, the Portfolio received $21,697,000 in cash. Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending amounted to $30,404 for the six months ended March 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. -------------------------------------------------------------------------------- 21 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
Ratios/supplemental data Fiscal period ended Sept. 30, 2005(e) 2004 2003 2002 2001 Ratio of expenses to average daily net assets(a) .47%(b) .47% .47% .49% .48% Ratio of net investment income (loss) to average daily net assets 2.05%(b) 1.48% 1.56% 1.35% 1.27% Portfolio turnover rate (excluding short-term securities) 67% 76% 68% 86% 87% Total return(c) 6.70%(d) 10.19% 16.53% (17.87%) (24.59%)
(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 net asset value and does not reflect payment of a sales charge. (d) Not annualized. (e) Six months ended March 31, 2005 (Unaudited). -------------------------------------------------------------------------------- 22 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP Stock Fund March 31, 2005 (Unaudited) Assets Investment in Portfolio (Note 1) $2,094,535,690 Capital shares receivable 67,490 ------ Total assets 2,094,603,180 ------------- Liabilities Capital shares payable 348,281 Accrued distribution fee 14,162 Accrued service fee 1,122 Accrued transfer agency fee 2,690 Accrued administrative services fee 1,914 Other accrued expenses 99,615 ------ Total liabilities 467,784 ------- Net assets applicable to outstanding capital stock $2,094,135,396 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 1,101,406 Additional paid-in capital 2,080,748,825 Undistributed net investment income 571,281 Accumulated net realized gain (loss) (Note 5) (185,053,349) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 196,767,233 ----------- Total -- representing net assets applicable to outstanding capital stock $2,094,135,396 ============== Net assets applicable to outstanding shares: Class A $1,531,625,901 Class B $ 131,127,714 Class C $ 2,764,383 Class I $ 19,207,304 Class Y $ 409,410,094 Net asset value per share of outstanding capital stock: Class A shares 80,506,751 $ 19.02 Class B shares 6,954,777 $ 18.85 Class C shares 147,211 $ 18.78 Class I shares 1,009,690 $ 19.02 Class Y shares 21,522,200 $ 19.02 ---------- --------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 232 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Statement of operations AXP Stock Fund Six months ended March 31, 2005 (Unaudited) Investment income Income: Dividends $ 26,997,134 Interest 524,046 Fee income from securities lending 30,403 Less foreign taxes withheld (15,649) ------- Total income 27,535,934 ---------- Expenses (Note 2): Expenses allocated from Portfolio 5,166,729 Distribution fee Class A 1,990,397 Class B 707,984 Class C 15,407 Transfer agency fee 1,155,959 Incremental transfer agency fee Class A 77,560 Class B 25,087 Class C 512 Service fee -- Class Y 213,394 Administrative services fees and expenses 366,274 Compensation of board members 5,857 Printing and postage 174,545 Registration fees 12,883 Audit fees 5,375 Other 21,817 ------ Total expenses 9,939,780 Earnings credits on cash balances (Note 2) (26,143) ------- Total net expenses 9,913,637 --------- Investment income (loss) -- net 17,622,297 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 73,918,377 Futures contracts 850,913 ------- Net realized gain (loss) on investments 74,769,290 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 46,998,342 ---------- Net gain (loss) on investments and foreign currencies 121,767,632 ----------- Net increase (decrease) in net assets resulting from operations $139,389,929 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 24 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets AXP Stock Fund March 31, 2005 Sept. 30, 2004 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 17,622,297 $ 24,794,317 Net realized gain (loss) on investments 74,769,290 197,092,357 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 46,998,342 6,926,582 ---------- --------- Net increase (decrease) in net assets resulting from operations 139,389,929 228,813,256 ----------- ----------- Distributions to shareholders from: Net investment income Class A (13,531,635) (17,822,836) Class B (681,563) (462,784) Class C (15,121) (9,793) Class I (165,491) (73,594) Class Y (3,964,456) (6,002,196) ---------- ---------- Total distributions (18,358,266) (24,371,203) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 11,419,750 63,479,881 Class B shares 3,701,156 12,358,184 Class C shares 180,103 856,199 Class I shares 8,425,303 13,794,550 Class Y shares 17,619,545 103,308,321 Reinvestment of distributions at net asset value Class A shares 12,223,155 16,110,619 Class B shares 668,763 454,174 Class C shares 14,802 9,509 Class I shares 165,386 73,495 Class Y shares 3,964,456 6,002,197 Payments for redemptions Class A shares (176,373,716) (277,171,254) Class B shares (Note 2) (26,716,770) (73,507,847) Class C shares (Note 2) (751,582) (793,152) Class I shares (2,220,182) (1,535,947) Class Y shares (73,816,611) (237,347,682) ----------- ------------ Increase (decrease) in net assets from capital share transactions (221,496,442) (373,908,753) ------------ ------------ Total increase (decrease) in net assets (100,464,779) (169,466,700) Net assets at beginning of period 2,194,600,175 2,364,066,875 ------------- ------------- Net assets at end of period $2,094,135,396 $2,194,600,175 ============== ============== Undistributed net investment income $ 571,281 $ 1,307,250 -------------- --------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 25 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Notes to Financial Statements AXP Stock Fund (Unaudited as to March 31, 2005) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Stock Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Stock 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 March 31, 2005, AEFC and the AXP Portfolio Builder Series funds owned 100% of Class I shares, which represents 0.92% 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 Equity Portfolio The Fund invests all of its assets in Equity Portfolio (the Portfolio), a series of Growth and Income 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. In pursuit of its income objective, the Fund will invest in income-producing equity securities (such as convertible securities and preferred stocks) and short-term debt instruments (such as commercial paper). 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 March 31, 2005 was 99.99%. -------------------------------------------------------------------------------- 26 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT All securities held by the Portfolio are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Pursuant to procedures adopted by the Board of Trustees of the portfolios, 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. 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. -------------------------------------------------------------------------------- 27 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT Dividends to shareholders Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. 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 that declines from 0.04% 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. -------------------------------------------------------------------------------- 28 -- AXP STOCK 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 $212,484 for Class A, $57,962 for Class B and $43 for Class C for the six months ended March 31, 2005. During the six months ended March 31, 2005, the Fund's transfer agency fees were reduced by $26,143 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 March 31, 2005 Class A Class B Class C Class I Class Y Sold 604,130 198,049 9,810 445,486 934,199 Issued for reinvested distributions 635,429 34,922 776 8,619 206,226 Redeemed (9,319,426) (1,427,037) (40,315) (121,198) (3,919,613) ---------- ---------- ------- -------- ---------- Net increase (decrease) (8,079,867) (1,194,066) (29,729) 332,907 (2,779,188) ---------- ---------- ------- ------- ---------- Year ended Sept. 30, 2004 Class A Class B Class C Class I* Class Y Sold 3,548,705 689,923 48,092 759,831 5,707,084 Issued for reinvested distributions 890,502 25,336 534 4,073 331,674 Redeemed (15,333,355) (4,140,596) (44,248) (87,121) (13,073,718) ----------- ---------- ------- ------- ----------- Net increase (decrease) (10,894,148) (3,425,337) 4,378 676,783 (7,034,960) ----------- ---------- ----- ------- ----------
* 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 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. The Fund had no borrowings outstanding during the six months ended March 31, 2005. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $256,397,902 at Sept. 30, 2004, that if not offset by capital gains will expire in 2011. 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. -------------------------------------------------------------------------------- 29 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important finanicial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Sept. 30, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $18.02 $16.60 $14.47 $17.86 $27.12 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .16 .20 .18 .17 .20 Net gains (losses) (both realized and unrealized) 1.00 1.41 2.13 (3.39) (6.47) ------ ------ ------ ------ ------ Total from investment operations 1.16 1.61 2.31 (3.22) (6.27) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.16) (.19) (.18) (.17) (.18) Distributions from realized gains -- -- -- -- (2.81) ------ ------ ------ ------ ------ Total distributions (.16) (.19) (.18) (.17) (2.99) ------ ------ ------ ------ ------ Net asset value, end of period $19.02 $18.02 $16.60 $14.47 $17.86 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $1,532 $1,596 $1,651 $1,599 $2,277 Ratio of expenses to average daily net assets(b) .89%(c) .89% .92% .92% .87% Ratio of net investment income (loss) to average daily net assets 1.63%(c) 1.06% 1.12% .93% .88% Portfolio turnover rate (excluding short-term securities) 67% 76% 68% 86% 87% Total return(d) 6.44%(e) 9.72% 16.03% (18.20%) (24.87%)
(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 March 31, 2005 (Unaudited). -------------------------------------------------------------------------------- 30 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Sept. 30, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $17.86 $16.44 $14.34 $17.70 $26.90 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .09 .05 .06 .03 .01 Net gains (losses) (both realized and unrealized) .99 1.42 2.10 (3.36) (6.39) ------ ------ ------ ------ ------ Total from investment operations 1.08 1.47 2.16 (3.33) (6.38) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.09) (.05) (.06) (.03) (.01) Distributions from realized gains -- -- -- -- (2.81) ------ ------ ------ ------ ------ Total distributions (.09) (.05) (.06) (.03) (2.82) ------ ------ ------ ------ ------ Net asset value, end of period $18.85 $17.86 $16.44 $14.34 $17.70 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $131 $146 $190 $210 $306 Ratio of expenses to average daily net assets(b) 1.67%(c) 1.67% 1.69% 1.69% 1.64% Ratio of net investment income (loss) to average daily net assets .87%(c) .27% .35% .15% .11% Portfolio turnover rate (excluding short-term securities) 67% 76% 68% 86% 87% Total return(d) 6.04%(e) 8.91% 15.09% (18.84%) (25.48%)
(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 March 31, 2005 (Unaudited). -------------------------------------------------------------------------------- 31 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Sept. 30, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $17.79 $16.39 $14.30 $17.66 $26.88 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .09 .06 .07 .04 .04 Net gains (losses) (both realized and unrealized) .99 1.39 2.09 (3.36) (6.41) ------ ------ ------ ------ ------ Total from investment operations 1.08 1.45 2.16 (3.32) (6.37) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.09) (.05) (.07) (.04) (.04) Distributions from realized gains -- -- -- -- (2.81) ------ ------ ------ ------ ------ Total distributions (.09) (.05) (.07) (.04) (2.85) ------ ------ ------ ------ ------ Net asset value, end of period $18.78 $17.79 $16.39 $14.30 $17.66 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $3 $3 $3 $2 $2 Ratio of expenses to average daily net assets(b) 1.66%(c) 1.67% 1.70% 1.71% 1.64% Ratio of net investment income (loss) to average daily net assets .86%(c) .29% .32% .14% .16% Portfolio turnover rate (excluding short-term securities) 67% 76% 68% 86% 87% Total return(d) 6.06%(e) 8.87% 15.11% (18.84%) (25.47%)
(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 March 31, 2005 (Unaudited). -------------------------------------------------------------------------------- 32 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Class I Per share income and capital changes(a) Fiscal period ended Sept. 30, 2005(g) 2004(b) Net asset value, beginning of period $18.01 $18.96 ------ ------ Income from investment operations: Net investment income (loss) .19 .20 Net gains (losses) (both realized and unrealized) 1.02 (.96) ------ ------ Total from investment operations 1.21 (.76) ------ ------ Less distributions: Dividends from net investment income (.20) (.19) ------ ------ Net asset value, end of period $19.02 $18.01 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $19 $12 Ratio of expenses to average daily net assets(c) .54%(d) .52%(d) Ratio of net investment income (loss) to average daily net assets 1.90%(d) 1.50%(d) Portfolio turnover rate (excluding short-term securities) 67% 76% Total return(e) 6.70%(f) (4.03%)(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 March 31, 2005 (Unaudited). -------------------------------------------------------------------------------- 33 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Sept. 30, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $18.01 $16.59 $14.46 $17.86 $27.13 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .17 .23 .20 .20 .23 Net gains (losses) (both realized and unrealized) 1.02 1.41 2.14 (3.40) (6.47) ------ ------ ------ ------ ------ Total from investment operations 1.19 1.64 2.34 (3.20) (6.24) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.18) (.22) (.21) (.20) (.22) Distributions from realized gains -- -- -- -- (2.81) ------ ------ ------ ------ ------ Total distributions (.18) (.22) (.21) (.20) (3.03) ------ ------ ------ ------ ------ Net asset value, end of period $19.02 $18.01 $16.59 $14.46 $17.86 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $409 $438 $520 $490 $694 Ratio of expenses to average daily net assets(b) .73%(c) .73% .76% .76% .71% Ratio of net investment income (loss) to average daily net assets 1.79%(c) 1.23% 1.28% 1.08% 1.04% Portfolio turnover rate (excluding short-term securities) 67% 76% 68% 86% 87% Total return(d) 6.58%(e) 9.90% 16.23% (18.12%) (24.77%)
(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 March 31, 2005 (Unaudited). -------------------------------------------------------------------------------- 34 -- AXP STOCK 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 March 31, 2005. Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- 35 -- AXP STOCK FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses account value account value paid during Annualized Oct. 1, 2004 March 31, 2005 the period(a) expense ratio Class A Actual(b) $1,000 $1,064.40 $4.58 .89% Hypothetical (5% return before expenses) $1,000 $1,020.49 $4.48 .89% Class B Actual(b) $1,000 $1,060.40 $8.58 1.67% Hypothetical (5% return before expenses) $1,000 $1,016.60 $8.40 1.67% Class C Actual(b) $1,000 $1,060.60 $8.53 1.66% Hypothetical (5% return before expenses) $1,000 $1,016.65 $8.35 1.66% Class I Actual(b) $1,000 $1,067.00 $2.78 .54% Hypothetical (5% return before expenses) $1,000 $1,022.24 $2.72 .54% Class Y Actual(b) $1,000 $1,065.80 $3.76 .73% Hypothetical (5% return before expenses) $1,000 $1,021.29 $3.68 .73%
(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 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended March 31, 2005: +6.44% for Class A, +6.04% for Class B, +6.06% for Class C, +6.70% for Class I and +6.58% for Class Y. -------------------------------------------------------------------------------- 36 -- AXP STOCK 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. -------------------------------------------------------------------------------- 37 -- AXP STOCK 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 Stock Series, Inc. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date May 31, 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 May 31, 2005 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date May 31, 2005