497 1 s6466-28c.txt AMERICAN EXPRESS VARIABLE PORTFOLIO FUNDS-PROSPECTUS AND SAI SUPPLEMENT Prospectus and Statement of Additional Information Supplement November 14, 2002*
American Express Variable Portfolio Funds Prospectus Form # SAI Form # (MM/YY Printed) S-6466-99 V S-6466-20 V (10/02) AXP(R) Variable Portfolio - Income Series, Inc. AXP Variable Portfolio - Bond Fund AXP Variable Portfolio - Extra Income Fund AXP Variable Portfolio - Federal Income Fund AXP Variable Portfolio - Global Bond Fund AXP Variable Portfolio - Investment Series, Inc. AXP Variable Portfolio - Blue Chip Advantage Fund AXP Variable Portfolio - Capital Resource Fund AXP Variable Portfolio - Emerging Markets Fund AXP Variable Portfolio - Equity Select Fund AXP Variable Portfolio - Growth Fund AXP Variable Portfolio - International Fund AXP Variable Portfolio - New Dimensions Fund(R) AXP Variable Portfolio - S&P 500 Index Fund AXP Variable Portfolio - Small Cap Advantage Fund AXP Variable Portfolio - Stock Fund AXP Variable Portfolio - Strategy Aggressive Fund AXP Variable Portfolio - Managed Series, Inc. AXP Variable Portfolio - Diversified Equity Income Fund AXP Variable Portfolio - Managed Fund AXP Variable Portfolio - Money Market Series, Inc. AXP Variable Portfolio - Cash Management Fund AXP Variable Portfolio - Partners Series, Inc. AXP Variable Portfolio - Partners Small Cap Value Fund
SHAREHOLDER MEETINGS At the regular meetings of shareholders held on November 13, 2002, in addition to electing Board members, shareholders approved the following proposals: 1. Voting Procedures. Shareholders of all funds approved a change from share-based voting to dollar-based voting. Voting rights will be based on a shareholder's total dollar interest in the fund, rather than on the number of shares owned. As a result, voting power will be allocated in proportion to the value of each shareholder's investment. 2. Approval of Subadvisory Agreements. Shareholders of all funds except Variable Portfolio - Partners Small Cap Value approved a policy authorizing American Express Financial Corporation (AEFC), the fund's investment adviser, subject to Board approval, to retain and replace subadvisers, or to modify subadvisory agreements, without shareholder approval. If there is a change in subadvisers, within 90 days shareholders will receive an information statement that includes all of the information that is included in a proxy statement. 3. Investment Management Services Agreement. Shareholders of certain funds approved a proposal to either add or modify the performance incentive adjustment (PIA) element of the investment management fee effective December 1, 2002. Under a PIA, the management fee is calculated as shown in the prospectus. The fee is then adjusted for performance. The fund's performance is compared to the performance of a Lipper index of similar funds. The performance difference is used to determine the adjustment rate, described below. If the fund's performance is better than the index, the fee paid to AEFC will increase. If the fund's performance is worse than the index, the fee paid to AEFC will decrease. For those funds that are modifying the PIA, for a period of six months beginning December 1, 2002, the adjustment will be calculated based on the lesser of the amount due under the new adjustment or under the adjustment used prior to December 1, 2002 as outlined in the Statement of Additional Information.
Performance Incentive Adjustment Performance Difference Adjustment Rate 0.00%-0.50% 0 0.50%-1.00% 6 basis points (0.0006) times the Performance Difference over 0.50% (maximum of 3 basis points if a 1% Performance Difference) 1.00%-2.00% 3 basis points, plus 3 basis points times the Performance Difference over 1.00% (maximum 6 basis points if a 2% Performance Difference) 2.00%-4.00% 6 basis points, plus 2 basis points times the Performance Difference over 2.00% (maximum 10 basis points if a 4% Performance Difference) 4.00%-6.00% 10 basis points, plus 1 basis point times the Performance Difference over 4.00% (maximum 12 basis points if a 6% Performance Difference) 6.00% or more 12 basis points
Funds that approved this proposal were: Variable Portfolio - Blue Chip Advantage, Variable Portfolio - Capital Resource, Variable Portfolio - Diversified Equity Income, Variable Portfolio - Emerging Markets, Variable Portfolio - Equity Select, Variable Portfolio - Growth, Variable Portfolio - International, Variable Portfolio - Managed, Variable Portfolio - New Dimensions, Variable Portfolio - Partners Small Cap Value, Variable Portfolio - Small Cap Advantage, Variable Portfolio - Stock, Variable Portfolio - Strategy Aggressive. For Variable Portfolio - Managed, the maximum adjustment is 8 basis points. In addition, shareholders of all funds approved a proposal that AEFC assume both the role of investment manager, currently held by IDS Life Insurance Company, and the role of investment adviser, currently held by AEFC. This will combine all investment roles within one entity and one contract. The change will not affect the management of the funds and will not change the fees paid by the fund. S-6466-28 C (11/02) *Valid until next prospectus update Destroy Oct. 30, 2003