Statement of Additional Information Supplement March 31, 2005

      AXP Core Bond Fund (9/29/04)                              S-6265-20 D
      AXP Diversified Bond Fund (10/29/04)                      S-6495-20 X
      AXP Global Bond Fund (12/30/04)                           S-6334-20 X
      AXP High Yield Bond Fund (7/30/04)                        S-6370-20 X
      AXP Income Opportunities Fund (9/29/04)                   S-6265-20 D
      AXP Limited Duration Bond Fund (9/29/04)                  S-6265-20 D
      AXP Managed Allocation Fund (11/29/04)                    S-6141-20 Y
      AXP Mutual (11/29/04)                                     S-6326-20 Y
      AXP Selective Fund (7/30/04)                              S-6376-20 Y
      AXP Short Duration U.S. Government Fund (7/30/04)         S-6042-20 Y
      AXP Threadneedle Global Balanced Fund (12/30/04)          S-6334-20 X
      AXP U.S. Government Mortgage Fund (7/30/04)               S-6245-20 E

The Investment Strategies and Types of Investments table has been changed to
include CMBS Total Return Swap Agreements as follows:

Investment strategies and types of investments           Allowable for the Fund?
Swap Agreements -- CMBS Total Return                               yes

The first paragraph of the Mortgage- and Asset-Backed Securities subsection in
the Investment Strategies section has been amended to read as follows:

Mortgage- and Asset-Backed Securities

Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property, and
include single- and multi-class pass-through securities and Collateralized
Mortgage Obligations (CMOs). These securities may be issued or guaranteed by
U.S. government agencies or instrumentalities (see also Agency and Government
Securities), or by private issuers, generally originators and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities. Mortgage-backed
securities issued by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement. Commercial
mortgage-backed securities (CMBS) are a specific type of mortgage-backed
security collateralized by a pool of mortgages on commercial real estate.

The Swap Agreements subsection in the Investment Strategies section has been
amended to read as follows:

Swap Agreements

Swap agreements obligate one party to make payments to the other party based on
the change in the market value of an index or other asset. In return, the other
party agrees to make payments to the first party based on the return of another
index or asset. Swap agreements entail the risk that a party will default on its
payment obligations.

Interest Rate Swaps. Interest rate swap agreements are used to obtain or
preserve a desired return or spread at a lower cost than through a direct
investment in an instrument that yields the desired return or spread. Swaps also
may protect against changes in the price of securities that an investor
anticipates buying or selling at a later date. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to several years. In a standard interest rate swap transaction,
two parties agree to exchange their respective commitments to pay fixed or
floating rates on a predetermined notional amount. The swap agreement notional
amount is the predetermined basis for calculating the obligations that the swap
counterparties have agreed to exchange. Under most swap agreements, the
obligations of the parties are exchanged on a net basis. The two payment streams
are netted out, with each party receiving or paying, as the case may be, only
the net amount of the two payments.

Swap agreements are usually entered into at a zero net market value of the swap
agreement commitments. The market values of the underlying commitments will
change over time resulting in one of the commitments being worth more than the
other and the net market value creating a risk exposure for one counterparty to
the other.

Swap agreements may include embedded interest rate caps, floor and collars. In
interest rate cap transactions, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates exceed a specified
rate, or cap. Interest rate floor transactions require one party, in exchange
for a premium to agree to make payments to the other to the extent that interest
rates fall below a specified level, or floor. In interest rate collar
transactions, one party sells a cap and purchases a floor, or vice versa, in an
attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels or collar amounts.

Statement of Additional Information Supplement                       Page 1 of 2


Swap agreements are traded in the over-the-counter market and may be considered
to be illiquid. The Fund will enter into interest rate swap agreements only if
the claims-paying ability of the other party or its guarantor is considered to
be investment grade by the Advisor. Generally, the unsecured senior debt or the
claims-paying ability of the other party or its guarantor must be rated in one
of the three highest rating categories of at least one NRSRO at the time of
entering into the transaction. If there is a default by the other party to such
a transaction, the Fund will have to rely on its contractual remedies (which may
be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements
related to the transaction. In certain circumstances, the Fund may seek to
minimize counterparty risk by requiring the counterparty to post collateral.

CMBS Total Return Swaps. CMBS total return swaps are bilateral financial
contracts designed to replicate synthetically the total returns of
collateralized mortgage-backed securities.

Currency Swaps. Currency swaps are similar to interest rate swaps, except that
they involve currencies instead of interest rates.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with swaps include: Liquidity Risk, Credit Risk and
Correlation Risk.

Statement of Additional Information Supplement                       Page 2 of 2


S-6495-4 A (3/05)

Valid until next update

* Destroy Dec. 30, 2005