N-30D 1 s6395f.txt AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT AXP(R) Global Technology Fund 2002 ANNUAL REPORT (Prospectus enclosed) AXP Global Technology Fund seeks to provide shareholders with long-term capital growth. American Express(R) Funds American Express(R) (This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) Table of Contents From the Chairman 3 Economic and Market Update 4 Fund Snapshot 6 Questions & Answers with Portfolio Management 7 The Fund's Long-term Performance 10 Investments in Securities 11 Financial Statements (Portfolio) 14 Notes to Financial Statements (Portfolio) 17 Independent Auditors' Report (Portfolio) 21 Financial Statements (Fund) 22 Notes to Financial Statements (Fund) 25 Independent Auditors' Report (Fund) 31 Board Members and Officers 32 Results of Meeting of Shareholders 35 -------------------------------------------------------------------------------- 2 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT From the Chairman (photo of) Arne H. Carlson Arne H. Carlson Chairman of the board Dear Shareholders, It is a very difficult period for investors caused by corporate management misconduct and its impact on the market as well as the economy. The integrity of corporations at large is being questioned. However, there is optimism that the resulting reforms will give Americans the kind of integrity they deserve. Many corporate leaders are strongly supportive of these reforms. We all have a right to expect financial statements to be fully accurate and business leaders to place the interests of shareholders above personal desires. Your Board is truly independent, comprised of 10 members (nominated by independent members) and three recommended by American Express Financial Corporation. These individuals come from a variety of geographic areas with the diverse skill sets necessary to oversee the operations of the Fund. Investment performance is, and remains, our primary concern. The Fund's auditors, KPMG LLP, are truly independent of American Express Financial Corporation. KPMG serves the interest of shareholders by supporting the work of the Board and certifying unbiased financial reports. The Board has confidence in Ted Truscott, American Express Financial Corporation's Chief Investment Officer, and shares his enthusiasm in the management changes he has effected to improve the investment performance of all American Express funds. The focus of the Board and American Express Financial Corporation is simple; we strive for consistent, competitive investment performance. All of the proposals in the proxy statement you received in September were approved at the shareholder meeting on November 13, 2002, and will be implemented in the coming weeks. On behalf of the Board, Arne H. Carlson -------------------------------------------------------------------------------- 3 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Economic and Market Update FROM CIO WILLIAM F. "TED" TRUSCOTT (photo of) William F. "Ted" Truscott William F. "Ted" Truscott Chief Investment Officer American Express Financial Corporation Dear Shareholders, The past several months* have proven that the economy isn't the only force driving the stock market. Although, early this year the U.S. recession was pronounced over, accounting scandals and shaky consumer confidence kept the downtrend in stock prices in place until mid-summer. September lived up to its reputation as the cruelest month for stocks, erasing all of the summertime gains -- and more. It remains to be seen whether the late-October rally -- among the strongest market performances in years -- will hold its own. Yet even as the stock market grapples with questions of corporate integrity, there are several factors working in stocks' favor: low interest rates, improved earnings (achieved in many cases by wringing out excess costs built up in the `90s) and a growing economy. The latest cut in interest rates enacted by the Federal Reserve could be the key to a sustainable rebound. At 1.25%, the Fed's overnight bank lending rate is now at its lowest level since July 1961. Today, stock market investors are in a better position than they have been for some time, with improving prospects for both consumers and businesses. That may just prove to be the winning combination for corporate earnings -- and for the stock market -- in 2003. KEY POINTS -- Stocks are continuing to get less expensive. -- Credit "crunch" for business sector persists. -- Those saving for long-term goals should maintain an allocation to equities. -------------------------------------------------------------------------------- 4 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Economic and Market Update One of the more striking changes we've seen in the past couple of years has occurred in investor behavior. U.S. investors have gone from being a risk-seeking population, willing to buy stocks at outrageous valuations, to a risk-averse group that has embraced interest rates at 40-year lows as acceptable for long-term returns. For example, the yield on 10-year U.S. Treasury Notes was at historic lows in early October -- about 3.7%. Since bond yields move inversely to prices, the low yield means that prices of U.S. Treasury securities have risen substantially. Investors are seeking the comparative safety of Uncle Sam in a very uncertain environment. The threat of war with Iraq and the prospect of higher oil prices stoked investors' fears toward the end of the period. It's also important to note that a bear market in corporate bonds has developed alongside one in stocks. Recent irregularities in corporate accounting have no doubt played a role in investors' concerns about non-government bonds. Nevertheless, opportunities do exist in corporate and high-yield securities because of the bear market of recent months. Investors who can tolerate some risk should not abandon these securities in a flight to safety. For more information about different kinds of bonds, speak to your financial advisor or retirement plan administrator. While the latest market declines are indeed painful, they are creating more opportunity in stocks in the form of a steadily declining price/earnings ratio. On both a relative and absolute basis, stocks continue to get less and less expensive. Those saving for long-term goals should maintain a significant allocation to equities. Over time, they have provided the best returns of virtually any investment. There's no compelling reason to believe this will be different going forward. As always, diversification is the best strategy for meeting your financial goals. Thank you for investing with American Express Funds. William F. Truscott * Please see portfolio manager Q&A for fiscal period economic coverage. -------------------------------------------------------------------------------- 5 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Fund Snapshot AS OF OCT. 31, 2002 PORTFOLIO MANAGER Portfolio manager Telis Bersekas Tenure/since 6/02 Years in industry 6 Portfolio manager Nina Hughes Tenure/since 6/02 Years in industry 4 FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96 Ticker symbols A: AXIAX B: INVBX C: AXICX Y: -- Total net assets $120.7 million Number of holdings approximately 70 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL PORTFOLIO ASSET MIX Percentage of portfolio assets (pie graph) Common stocks 87.0% Preferred stocks and other 2.4% Bonds 2.0% Option purchased 0.3% Cash equivalents 8.3% TOP FIVE SECTORS Percentage of portfolio assets Electronics 23.3% Computer software & services 22.3 Computers & office equipment 22.2 Communications equipment & services 11.6 Retail 4.0 TOP TEN HOLDINGS Percentage of portfolio assets Microsoft 4.3% Ariba 4.0 Sun Microsystems 4.0 BEA Systems 3.6 Rational Software 3.4 Marvell Technology Group 3.4 Circuit City Stores-Circuit City Group 3.4 Network Associates 3.2 SAP ADR 3.0 Oracle 2.9 For further detail about these holdings, please refer to the section entitled "Investments in Securities." Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Fund holdings are subject to change -------------------------------------------------------------------------------- 6 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did AXP Global Technology Fund perform for the one-year period ended Oct. 31, 2002? A: For the period, technology continued to rank among the hardest hit sectors, and stock prices fell dramatically. The Fund slightly underperformed its benchmark, the Lipper Science and Technology Funds Index, during the period, returning -35.62% vs. -33.00%. The Pacific Stock Exchange Technology Index returned -24.86% during the same period. Q: Why did the Fund perform this way during the period? A: Although the Fund's results over the last 12 months have lagged, recent performance has been more encouraging. In the first part of the period, during which technology stocks were grossly out of favor, the Fund suffered from overly aggressive positioning. The previous manager's strategy of investing in very volatile and economically sensitive technology stocks did especially poorly in the difficult market environment. Since then the Fund has achieved much better results under new managers Telis Bertsekas and Nina Hughes, who took over in June 2002. Their investment process relies on rigorous research to find the best companies with the fastest growth rates, while refusing to overpay for these stocks. They also narrowed the focus of the Fund to five core technology areas: software, hardware, semiconductors, networking and computer services. The combination of greater focus and the application of a stricter price discipline have resulted in much better absolute and relative results for the Fund. Software and biotechnology stocks, in particular, were hard hit during the second quarter of 2002. This spread to most technology sectors in the third quarter as volatility accelerated and lack of demand and capital spending weakened company fundamentals. (bar graph) PERFORMANCE COMPARISON For the year ended Oct. 31, 2002 0% -5% -10% -15% -20% -25% (bar 2) -30% -24.86% (bar 3) -35% (bar 1) -33.00% -40% -35.62% (bar 1) AXP Global Technology Fund Class A (excluding sales charge) (bar 2) Pacific Stock Exchange Technology Index (unmanaged) (bar 3) Lipper Science and Technology Funds Index (see "The Fund's Long-term Performance" for Index descriptions) Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in sales charges and fees. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 7 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Questions & Answers (begin callout quote)> ... many companies' stock prices fell to long-time lows, giving us an opportunity to buy certain issues at exceptional value.(end callout quote) However, we aided performance at the end of the period by reducing our exposure to the semiconductor sector, which was especially hard hit by lack of demand for products. Q: What changes did you make to the Fund's portfolio? A. Coinciding with the Fund's management change, we restructured the portfolio this summer in an effort to improve performance in light of the negative market. Our team sought the fastest growing companies while looking for stocks with exceptional value. Growth was relative, however, as forecasts of information technology spending for later in the period fell significantly short of industry expectations. To combat lower forecasts and, subsequently, lower stock prices, we eliminated many positions outside the technology sector.
AVERAGE ANNUAL TOTAL RETURNS as of Oct. 31, 2002 Class A Class B Class C Class Y (Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) 1 year -35.62% -39.34% -36.11% -38.67% -36.11% -36.11% -35.63% -35.63% 5 years -6.95% -8.04% -7.66% -7.71% N/A N/A -6.95% -6.95% 10 years N/A N/A N/A N/A N/A N/A N/A N/A Since inception -5.03% -5.96% -5.75% -5.75% -51.58% -51.58% -5.03% -5.03%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than the original cost. The performance shown for each class of shares will vary due to differences in sales charges and fees. Short term performance may be higher or lower than the figures shown. Visit americanexpress.com for current information -------------------------------------------------------------------------------- 8 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Questions & Answers Within the sector, we reduced our exposure in the semiconductor sector and sold some positions in the technology services sector. On the positive side, many companies' stock prices fell to long-time lows, giving us an opportunity to buy certain issues at exceptional value. We continued to broaden the Fund's technology holdings throughout the first half of the period, especially in computer-related industries. We believed that adding large-cap technology stocks would help mute some of the volatility in this sector. Stocks of companies in biotechnology and in the medical device industry were also added. Q: What is your outlook for the coming months? A: We believe information technology spending will pick up over the next six to 12 months and have positioned the Fund to take advantage of a gradual recovery in this area. After two years of a recession in this sector, we look forward to opportunities that arise as company fundamentals improve and growth rates accelerate. This combination also promises to make valuations of companies that are best positioned to take advantage of a recovery more attractive. Although no one can predict the timing of a full-blown technology recovery, we will continue to closely monitor individual companies and sub-sectors and look for any opportunities to buy that an eventual change in demand will create for some stocks. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT The Fund's Long-term Performance This chart illustrates the total value of an assumed $10,000 investment in AXP Global Technology Fund Class A shares (from 12/1/96 to 10/31/02) as compared to the performance of two widely cited performance indices, the Pacific Stock Exchange Technology Index (PSE/PCX Technology Index) and the Lipper Science and Technology Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. Past performance is no guarantee of future results. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Returns do not reflect taxes payable on distributions and redemptions. Also see "Past Performance" in the Fund's current prospectus. (line graph) VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP GLOBAL TECHNOLOGY FUND $30,000 (solid line) AXP Global Technology Fund Class A $20,000 (dotted line) Morgan Stanley Capital International All Country World Free Index (dashed line) Lipper Global Funds Index $10,000 `92 `93 `94 `95 `96 `97 `98 `99 `00 `01 `02 (solid line) AXP Global Technology Fund Class A $6,931 (dotted line) Pacific Stock Exchange Technology Index(1) $18,134 (dashed line) The Lipper Science and Technology Funds Index(2) $8,829 (1) Pacific Stock Exchange Technology Index (PSE/PCX Technology Index), an unmanaged index published by the Pacific Exchange, is comprised of 100 listed and over-the-counter stocks from 15 different industries including computer hardware, software, semiconductors, telecommunications, data storage and processing, electronics and biotechnology. (2) The Lipper Science and Technology Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Average Annual Total Returns Class A with Sales Charge as of Oct. 31, 2002 1 year -39.34% 5 years -8.04% 10 years N/A Since inception -5.96% Results for other share classes can be found on page 8. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Investments in Securities World Technologies Portfolio Oct. 31, 2002 (Percentages represent value of investments compared to net assets) Common stocks (89.2%) Issuer Shares Value(a) Aerospace & defense (0.5%) Rockwell Automation 40,000 $662,000 Communications equipment & services (11.9%) Advanced Fibre Communications 40,000(b) 647,160 Covad Communications Group 500,000(b) 690,000 Fairchild Semiconductor Intl Cl A 185,000(b) 2,201,500 Flextronics Intl 160,000(b,c) 1,337,600 JDS Uniphase 265,000(b) 593,865 Marvell Technology Group 260,000(b,c) 4,214,600 Nokia ADR 160,000(c) 2,659,200 Semtech 130,900(b) 1,849,617 Wavecom ADR 4,600(b,c) 147,890 Total 14,341,432 Computer software & services (22.8%) Adobe Systems 25,000 591,000 Avid Technology 20,000(b) 281,800 BEA Systems 545,000(b) 4,408,505 Borland Software 50,000(b) 671,500 Microsoft 100,000(b) 5,347,000 Network Associates 248,800(b) 3,953,432 Oracle 345,000(b) 3,536,250 Rational Software 640,000(b) 4,236,800 TIBCO Software 545,000(b) 2,725,000 United Online 155,000(b) 1,853,800 Total 27,605,087 Computers & office equipment (22.7%) Apple Computer 205,000(b) 3,294,350 ASML Holding NV 130,000(b,c) 1,118,000 Dell Computer 85,000(b) 2,431,850 First Data 85,000 2,969,900 Gateway 220,000(b) 660,000 Informatica 200,000(b) 1,040,000 Macromedia 245,000(b) 2,746,450 Mercury Interactive 20,000(b) 527,400 MicroStrategy Cl A 230,000(b) 2,822,100 Nassda 130,000(b) 1,233,700 SAP ADR 195,000(c) 3,732,300 Sun Microsystems 1,663,000(b) 4,924,144 Total 27,500,194 Electronics (23.9%) Analog Devices 95,000(b) 2,546,000 Ariba 2,105,000(b) 4,967,799 ATI Technologies 85,000(b,c) 545,700 Corning 150,000(b) 280,500 Integrated Circuit Systems 140,000(b) 2,861,600 Intel 189,000 3,269,700 Micron Technology 43,300(b) 692,800 MKS Instruments 20,000(b) 262,600 NetScreen Technologies 155,000(b) 2,041,350 Novellus Systems 35,000(b) 1,106,000 OPNET Technologies 100,000(b) 805,000 STMicroelectronics 50,000(c) 983,500 Taiwan Semiconductor Mfg ADR 390,000(b,c) 3,049,800 Texas Instruments 205,000 3,251,300 United Microelectronics ADR 541,750(b,c) 2,248,263 Total 28,911,912 Miscellaneous (0.5%) DiamondCluster Intl Cl A 209,800(b) 558,068 Multi-industry conglomerates (2.8%) Accenture Cl A 200,000(b,c) 3,376,000 Retail (4.1%) Circuit City Stores- Circuit City Group 420,000 4,162,200 Tweeter Home Entertainment Group 100,000(b) 781,100 Total 4,943,300 Total common stocks (Cost: $103,504,129) $107,897,993
See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Preferred stocks & other (2.4%)(b,f) Issuer Shares Value(a) Adaytum Software Series E 103,719 $406,579 Warrants 2,006(d) -- Agiliti Cv Series C 550,000(d) -- Avasta Series B 300,820(d) -- Avasta E-Services Warrants 150,410(d) -- Bluestream Ventures LP 2,500,000(e) 1,843,466 Evoice Cv Series D 981,091 550,000 Marketsoft Cv 225,410 112,705 Paxonet Communications 106,383(d) -- Portera Series G 425,374(d) -- Retail Exchange.com 314,286(d,g) -- Warrants 111,789(d) -- Vcommerce Cv Series C 64,378 5,150 Total preferred stocks & other (Cost: $11,281,635) $2,917,900
Bonds (2.1%) Issuer Coupon Principal Value(a) rate amount BEA Systems Cv 12-15-06 4.00% $900,000 $740,250 Rational Software Cv 02-01-07 5.00 900,000 747,540 Siebel Systems Cv 09-15-06 5.50 1,050,000 1,002,750 Total bonds (Cost: $2,433,356) $2,490,540
Option purchased (0.3%) Issuer Contracts Exercise Expiration Value(a) price date Put Nasdaq 100 Index 5,800 $24 Nov. 2002 $420,500 Total option purchased (Cost: $901,900) $420,500
Short-term securities (8.5%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Home Loan Bank Disc Nt 01-10-03 1.68% $1,800,000 $1,794,715 Federal Natl Mtge Assn Disc Nts 11-04-02 1.66 4,000,000 3,999,263 11-18-02 1.65 700,000 699,422 12-02-02 1.69 2,400,000 2,396,395 12-20-02 1.69 500,000 498,826 01-22-03 1.70 900,000 896,905 Total short-term securities (Cost: $10,284,904) $10,285,526 Total investments in securities (Cost: $128,405,924)(h) $124,012,459
See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. As of Oct. 31, 2002, the value of foreign securities represented 19.4% of net assets. (d) Negligible market value. (e) The share amount for Limited Liability Companies (LLC) or Limited Partnerships (LP) represents capital contributions. At Oct. 31, 2002, the amount of capital committed to the LLC or LP for future investment was $1,250,000. (f) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities are valued at fair value according to methods selected in good faith by the board. Information concerning such security holdings at Oct. 31, 2002, is as follows: Security Acquisition Cost dates Adaytum Software Series E 09-15-00 thru 05-10-01 $ 650,318 Warrants 05-10-01 -- Agiliti Cv Series C 11-14-00 1,650,000 Avasta Series B 11-09-00 1,649,847 Avasta E-Services Warrants 11-08-00 -- Bluestream Ventures LP 06-28-00 thru 006-28-01 2,500,000 Evoice Cv Series D 11-27-00 1,100,000 Marketsoft Cv 12-11-00 1,100,001 Paxonet Communications 04-04-01 thru 04-23-01 300,000 Portera Series G 11-10-00 1,425,003 Retail Exchange.com 11-29-00 606,464 Warrants 11-29-00 1 Vcommerce Cv Series C 07-21-00 300,001 (g) During the current fiscal year a liquidation payment of $493,537 was received. This payment was accounted for as a reduction of cost. (h) At Oct. 31, 2002, the cost of securities for federal income tax purposes was $135,261,833 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 10,663,184 Unrealized depreciation (21,912,558) ----------- Net unrealized depreciation $(11,249,374) ------------ -------------------------------------------------------------------------------- 13 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Financial Statements Statement of assets and liabilities World Technologies Portfolio Oct. 31, 2002 Assets Investments in securities, at value (Note 1)* (identified cost $128,405,924) $124,012,459 Cash in bank on demand deposit 47,445 Dividends and accrued interest receivable 36,585 Receivable for investment securities sold 11,980,481 ---------- Total assets 136,076,970 ----------- Liabilities Payable for investment securities purchased 13,876,568 Payable upon return of securities loaned (Note 4) 1,261,000 Accrued investment management services fee 2,377 Other accrued expenses 26,767 ------ Total liabilities 15,166,712 ---------- Net assets $120,910,258 ============ * Including securities on loan, at value (Note 4) $ 1,190,190 ------------ See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Statement of operations World Technologies Portfolio Year ended Oct. 31, 2002 Investment income Income: Dividends $ 263,701 Interest 251,975 Less foreign taxes withheld (28,519) ------- Total income 487,157 ------- Expenses (Note 2): Investment management services fee 1,358,065 Compensation of board members 10,463 Custodian fees 47,467 Audit fees 19,500 Other 13,907 ------ Total expenses 1,449,402 Earnings credits on cash balances (Note 2) (1,930) ------ Total net expenses 1,447,472 --------- Investment income (loss) -- net (960,315) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (87,249,962) Options contracts written (Note 5) 358,005 ------- Net realized gain (loss) on investments (86,891,957) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,298,490 ---------- Net gain (loss) on investments and foreign currencies (71,593,467) ----------- Net increase (decrease) in net assets resulting from operations $(72,553,782) ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets World Technologies Portfolio Year ended Oct. 31, 2002 2001 Operations Investment income (loss) -- net $ (960,315) $ (356,584) Net realized gain (loss) on investments (86,891,957) (392,358,181) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,298,490 (31,209,649) ---------- ----------- Net increase (decrease) in net assets resulting from operations (72,553,782) (423,924,414) ----------- ------------ Proceeds from contributions 12,839,018 208,160,212 Fair value of withdrawals (37,231,532) (27,593,768) ----------- ----------- Net contributions (withdrawals) from partners (24,392,514) 180,566,444 ----------- ----------- Total increase (decrease) in net assets (96,946,296) (243,357,970) Net assets at beginning of year 217,856,554 461,214,524 ----------- ----------- Net assets at end of year $120,910,258 $ 217,856,554 ============ =============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Notes to Financial Statements World Technologies Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Technologies Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests in equity securities of companies within the information technology industry throughout the world. 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. Foreign securities are valued based on quotations from the principal market in which securities are normally traded. If trading or events occurring in other markets after the close of the principal market in which foreign securities are traded, and before the close of business of the Portfolio, are expected to materially affect the value of those securities, then they are valued at their fair value taking this trading or these events into account. Securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Illiquid securities As of Oct. 31, 2002, investments in securities included issues that were illiquid which the Portfolio currently limits to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities as of Oct. 31, 2002 was $2,917,900 representing 2.41% of net assets. These securities are valued at fair value according to methods selected in good faith by the board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. -------------------------------------------------------------------------------- 18 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Securities purchased on a forward-commitment basis Delivery and payment for securities that have been purchased by the Portfolio on a forward-commitment basis, including when-issued securities and future capital commitments for limited partnership interests, can take place one month or more after the transaction date. During this period, when-issued securities are subject to market fluctuations, and they may affect the Portfolio's net assets the same as owned securities. The Portfolio designates cash or liquid securities at least equal to the amount of its forward-commitments. As of Oct. 31, 2002, the Portfolio has entered into outstanding future capital commitments for limited partnership interests of $1,250,000. 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 or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium and 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 American Express Financial Corporation (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 in reducing percentages from 0.72% to 0.595% annually. On November 13, 2002, shareholders approved the addition of a performance incentive adjustment that may adjust the management fee upward or downward based upon a comparison of the performance of Class A shares of the Fund to the Lipper Science and Technology Funds Index. The maximum adjustment is 0.12% of the Fund's average daily net assets. If the performance difference is less than 0.50%, the adjustment will be zero. The first adjustment will be made on June 1, 2003 and will cover the six-month period beginning Dec. 1, 2002. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. During the year ended Oct. 31, 2002, the Portfolio's custodian fees were reduced by $1,930 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. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $698,610,118 and $721,032,150, respectively, for the year ended Oct. 31, 2002. For the same period, the portfolio turnover rate was 391%. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $202,910 for the year ended Oct. 31, 2002. 4. LENDING OF PORTFOLIO SECURITIES As of Oct. 31, 2002, securities valued at $1,190,190 were on loan to brokers. For collateral, the Portfolio received $1,261,000 in cash. Income from securities lending amounted to $27,063 for the year ended Oct. 31, 2002. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 5. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows: Year ended Oct. 31, 2002 Puts Calls Contracts Premiums Contracts Premiums Balance Oct. 31, 2001 250 $ 50,498 1,665 $ 463,558 Opened -- -- 1,300 328,303 Closed (250) (50,498) (1,790) (403,668) Exercised -- -- (875) (308,479) Expired -- -- (300) (79,714) ---- ----- ---- ------- Balance Oct. 31, 2002 -- $ -- -- $ -- ---- ----- ---- ------- See "Summary of significant accounting policies." -------------------------------------------------------------------------------- 20 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Independent Auditors' Report THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Technologies Portfolio (a series of World Trust) as of October 31, 2002, the related statement of operations for the year then ended and the statements of changes in net assets for each of the years in the two-year period ended October 31, 2002. These financial statements are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2002, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of World Technologies Portfolio as of October 31, 2002, and the results of its operations and the changes in its net assets for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 13, 2002 -------------------------------------------------------------------------------- 21 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Technology Fund Oct. 31, 2002 Assets Investment in Portfolio (Note 1) $ 120,893,146 Capital shares receivable 9,723 ----- Total assets 120,902,869 ----------- Liabilities Capital shares payable 8,922 Accrued distribution fee 1,637 Accrued transfer agency fee 3,108 Accrued administrative services fee 198 Other accrued expenses 159,273 ------- Total liabilities 173,138 ------- Net assets applicable to outstanding capital stock $ 120,729,731 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 1,217,629 Additional paid-in capital 615,176,743 Undistributed net investment income 86,706 Accumulated net realized gain (loss) (Note 5) (491,358,471) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,392,876) ---------- Total -- representing net assets applicable to outstanding capital stock $ 120,729,731 ============= Net assets applicable to outstanding shares: Class A $ 80,830,612 Class B $ 37,877,444 Class C $ 1,963,519 Class Y $ 58,156 Net asset value per share of outstanding capital stock: Class A shares 78,409,973 $ 1.03 Class B shares 41,165,403 $ 0.92 Class C shares 2,130,986 $ 0.92 Class Y shares 56,502 $ 1.03 ------ -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Statement of operations AXP Global Technology Fund Year ended Oct. 31, 2002 Investment income Income: Dividends $ 263,670 Interest 251,950 Less foreign taxes withheld (28,515) ------- Total income 487,105 ------- Expenses (Note 2): Expenses allocated from Portfolio 1,447,293 Distribution fee Class A 312,347 Class B 595,774 Class C 37,974 Transfer agency fee 1,188,893 Incremental transfer agency fee Class A 88,555 Class B 72,489 Class C 3,582 Service fee -- Class Y 64 Administrative services fees and expenses 112,662 Compensation of board members 9,430 Printing and postage 168,808 Registration fees 55,321 Audit fees 6,500 Other 2,234 ----- Total expenses 4,101,926 Earnings credits on cash balances (Note 2) (1,475) ------ Total net expenses 4,100,451 --------- Investment income (loss) -- net (3,613,346) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (87,239,077) Options contracts written 357,962 ------- Net realized gain (loss) on investments (86,881,115) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,296,644 ---------- Net gain (loss) on investments and foreign currencies (71,584,471) ----------- Net increase (decrease) in net assets resulting from operations $(75,197,817) ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 23 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets AXP Global Technology Fund Year ended Oct. 31, 2002 2001 Operations Investment income (loss) -- net $ (3,613,346) $ (4,080,511) Net realized gain (loss) on investments (86,881,115) (392,303,736) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,296,644 (31,205,076) ---------- ----------- Net increase (decrease) in net assets resulting from operations (75,197,817) (427,589,323) ----------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 37,783,172 209,393,984 Class B shares 14,424,364 80,620,251 Class C shares 1,493,914 5,921,904 Class Y shares 76,038 215,882 Payments for redemptions Class A shares (54,052,105) (90,799,810) Class B shares (Note 2) (19,608,355) (20,364,403) Class C shares (Note 2) (1,832,580) (660,768) Class Y shares (46,571) (143,621) ------- -------- Increase (decrease) in net assets from capital share transactions (21,762,123) 184,183,419 ----------- ----------- Total increase (decrease) in net assets (96,959,940) (243,405,904) Net assets at beginning of year 217,689,671 461,095,575 ----------- ----------- Net assets at end of year $120,729,731 $ 217,689,671 ============ ============= Undistributed net investment income $ 86,706 $ -- ------------ -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Notes to Financial Statements AXP Global Technology Fund (formerly known as AXP Innovations Fund) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AXP Global Technology Fund (a series of AXP Global Series, Inc.) is registered under the Investment Company Act of 1940 (as amended) as an open-end management investment company. On Nov. 13, 2002 shareholders approved changing the Fund from diversified to non-diversified. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in World Technologies Portfolio The Fund invests all of its assets in World Technologies Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Fund. World Technologies Portfolio invests in equity securities of companies within the information technology industry throughout the world. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of Oct. 31, 2002 was 99.99%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. 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. -------------------------------------------------------------------------------- 25 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT 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. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $3,700,052 resulting in a net reclassification adjustment to decrease paid-in capital by $3,700,052. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2002 2001 Class A Distributions paid from: Ordinary income $-- $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- As of Oct. 31, 2002, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated gain (loss) $(484,898,024) Unrealized appreciation (depreciation) $ (10,766,617) Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.06% to 0.035% annually. A minor portion of additional administrative -------------------------------------------------------------------------------- 26 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.00 o Class B $20.00 o Class C $19.50 o Class Y $17.00 The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $618,911 for Class A, $96,228 for Class B and $1,872 for Class C for the year ended Oct. 31, 2002. During the year ended Oct. 31, 2002, the Fund's transfer agency fees were reduced by $1,475 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2002 Class A Class B Class C Class Y Sold 24,601,849 10,522,166 1,103,099 50,002 Issued for reinvested distributions -- -- -- -- Redeemed (37,466,707) (16,160,687) (1,796,278) (29,205) ----------- ----------- ---------- ------- Net increase (decrease) (12,864,858) (5,638,521) (693,179) 20,797 ----------- ---------- -------- ------
Year ended Oct. 31, 2001 Class A Class B Class C Class Y Sold 67,577,147 27,705,885 2,451,303 100,791 Issued for reinvested distributions -- -- -- -- Redeemed (36,991,839) (9,957,212) (319,219) (81,895) ----------- ---------- -------- ------- Net increase (decrease) 30,585,308 17,748,673 2,132,084 18,896 ---------- ---------- --------- ------
-------------------------------------------------------------------------------- 27 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT 4. BANK BORROWINGS The Fund has a revolving credit agreement with Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The agreement went into effect Sept. 24, 2002. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other American Express mutual funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the LIBOR plus 0.50%, the IBOR plus 0.50% or the higher of the Federal Funds Rate plus 0.25% and the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $200 million with U.S. Bank, N.A. The Fund had no borrowings outstanding during the year ended Oct. 31, 2002. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes the Fund has a capital loss carry-over of $484,898,024 as of Oct. 31, 2002, that will expire in 2008 through 2010 if not offset by capital gains. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2002 2001 2000 1999 1998 Net asset value, beginning of period $1.60 $ 5.26 $ 11.27 $ 5.41 $5.27 ----- ------ ------- ------ ----- Income from investment operations: Net investment income (loss) (.03) (.02) (.01) (.08) (.07) Net gains (losses) (both realized and unrealized) (.54) (3.64) 7.05 5.94 .21 ---- ----- ---- ---- --- Total from investment operations (.57) (3.66) 7.04 5.86 .14 ---- ----- ---- ---- --- Less distributions: Distributions from realized gains -- -- (1.29) -- -- Tax return of capital(h) -- -- (11.76) -- -- ---- ----- ---- ---- --- Total distributions -- -- (13.05) -- -- ---- ----- ---- ---- --- Net asset value, end of period $1.03 $ 1.60 $ 5.26 $11.27 $5.41 ----- ------ ------- ------ ----- Ratios/supplemental data: Net assets, end of period (in thousands) $80,831 $146,139 $319,164 $7,435 $3,572 Ratio of expenses to average daily net assets(c) 1.91% 1.63% 1.24%(d) 1.11%(d) 1.33%(d) Ratio of net investment income (loss) to average daily net assets (1.65%) (.99%) (.38%) (1.01%) (1.29%) Portfolio turnover rate (excluding short-term securities) 391% 233% 116% 113% 200% Total return(j) (35.62%) (69.58%) 66.58% 108.32% 2.68%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2002 2001 2000 1999 1998 Net asset value, beginning of period $1.44 $ 4.77 $ 11.02 $ 5.33 $5.23 ----- ------ ------- ------- ----- Income from investment operations: Net investment income (loss) (.04) (.04) (.04) (.14) (.11) Net gains (losses) (both realized and unrealized) (.48) (3.29) 6.84 5.83 .21 ---- ----- ---- ---- --- Total from investment operations (.52) (3.33) 6.80 5.69 .10 ---- ----- ---- ---- --- Less distributions: Distributions from realized gains -- -- (1.29) -- -- Tax return of capital(h) -- -- (11.76) -- -- ----- ------ ------- ------ ----- Total distributions -- -- (13.05) -- -- ----- ------ ------- ------ ----- Net asset value, end of period $0.92 $ 1.44 $ 4.77 $11.02 $5.33 ----- ------ ------- ------ ----- Ratios/supplemental data: Net assets, end of period (in thousands) $37,877 $67,425 $138,545 $220 $107 Ratio of expenses to average daily net assets(c) 2.71% 2.42% 2.01%(e) 1.86%(e) 2.08%(e) Ratio of net investment income (loss) to average daily net assets (2.45%) (1.78%) (1.16%) (1.76%) (2.04%) Portfolio turnover rate (excluding short-term securities) 391% 233% 116% 113% 200% Total return(j) (36.11%) (69.81%) 65.25% 106.72% 1.91%
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2002 2001 2000(b) Net asset value, beginning of period $1.44 $ 4.77 $5.05 ----- ------ ----- Income from investment operations: Net investment income (loss) (.04) (.04) (.01) Net gains (losses) (both realized and unrealized) (.48) (3.29) (.27) ---- ----- ---- Total from investment operations (.52) (3.33) (.28) ---- ----- ---- Net asset value, end of period $0.92 $ 1.44 $4.77 ----- ------ ----- Ratios/supplemental data: Net assets, end of period (in thousands) $1,964 $4,069 $3,298 Ratio of expenses to average daily net assets(c) 2.69% 2.42% 2.01%(f),(i) Ratio of net investment income (loss) to average daily net assets (2.39%) (1.84%) (1.17%)(i) Portfolio turnover rate (excluding short-term securities) 391% 233% 116% Total return(j) (36.11%) (69.81%) (5.54%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2002 2001 2000 1999 1998 Net asset value, beginning of period $1.60 $ 5.25 $ 11.27 $ 5.41 $5.27 ----- ------ ------- ------- ----- Income from investment operations: Net investment income (loss) (.03) (.02) -- (.08) (.07) Net gains (losses) (both realized and unrealized) (.54) (3.63) 7.03 5.94 .21 ---- ----- ---- ---- --- Total from investment operations (.57) (3.65) 7.03 5.86 .14 ---- ----- ---- ---- --- Less distributions: Distributions from realized gains -- -- (1.29) -- -- Tax return of capital(h) -- -- (11.76) -- -- ----- ------ ------- ------- ----- Total distributions -- -- (13.05) -- -- ----- ------ ------- ------- ----- Net asset value, end of period $1.03 $ 1.60 $ 5.25 $11.27 $5.41 ----- ------ ------- ------- ----- Ratios/supplemental data: Net assets, end of period (in thousands) $58 $57 $88 $225 $108 Ratio of expenses to average daily net assets(c) 1.72% 1.49% .94%(g) 1.11%(g) 1.33%(g) Ratio of net investment income (loss) to average daily net assets (1.61%) (.89%) (.80%) (1.01%) (1.29%) Portfolio turnover rate (excluding short-term securities) 391% 233% 116% 113% 200% Total return(j) (35.63%) (69.52%) 66.27% 108.32% 2.68%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class A would have been 1.45%, 1.22% and 1.63% for the periods ended 2000, 1999 and 1998, respectively. (e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class B would have been 2.26%, 1.97% and 2.38% for the periods ended 2000, 1999 and 1998, respectively. (f) AEFC wavied/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class C would have been 2.26% for the period ended 2000. (g) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class Y would have been 1.19%, 1.12% and 1.63% for the periods ended 2000, 1999 and 1998, respectively. (h) A distribution payable to a single corporate shareholder. (i) Adjusted to an annual basis. (j) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 30 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Independent Auditors' Report THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of AXP Global Technology Fund (a series of AXP Global Series, Inc.) as of October 31, 2002, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2002, and the financial highlights for each of the years in the five-year period ended October 31, 2002 These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Global Technology Fund as of October 31, 2002, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 13, 2002 -------------------------------------------------------------------------------- 31 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Board Members and Officers Shareholders elect a board that oversees the Fund's operations. The board appoints officers who are responsible for day-to-day business decisions based on policies set by the board. The following is a list of the Fund's board members. Each member oversees 15 Master Trust portfolios and 77 American Express mutual funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the board.
Independent Board Members Name, Position held with Fund and Principal occupation Other directorships address, length of service during past five years age -------------------------------------- ------------------------------ --------------------------- ---------------------------- Arne H. Carlson Board member since 1999 Chair, Board Services 901 S. Marquette Ave. Corporation (provides Minneapolis, MN 55402 administrative services Born in 1934 to boards). Former Governor of Minnesota -------------------------------------- ------------------------------ --------------------------- ---------------------------- Philip J. Carroll, Jr. Board member since 2002 Retired Chairman and CEO, Boise Cascade Corporation 901 S. Marquette Ave. Fluor Corporation (forest products), Minneapolis, MN 55402 (engineering and Scottish Power PLC, Vulcan Born in 1937 construction) since 1998. Materials Company, Inc. Former President and CEO, (construction Shell Oil Company materials/chemicals) -------------------------------------- ------------------------------ --------------------------- ---------------------------- Livio D. DeSimone Board member since 2001 Retired Chair of the Cargill, Incorporated 30 Seventh Street East Board and Chief Executive (commodity merchants and Suite 3050 Officer, Minnesota Mining processors), General St. Paul, MN 55101-4901 and Manufacturing (3M) Mills, Inc. (consumer Born in 1936 foods), Vulcan Materials Company (construction materials/ chemicals), Milliken & Company (textiles and chemicals), and Nexia Biotechnologies, Inc. -------------------------------------- ------------------------------ --------------------------- ---------------------------- Ira D. Hall Board member since 2001 Private investor; Imagistics International, 183 Long Close Road formerly with Texaco Inc. (office equipment), Stamford, CT 06902 Inc., Treasurer, Reynolds & Reynolds Born in 1944 1999-2001 and General Company (information Manager, Alliance services), TECO Energy, Management Operations, Inc. (energy holding 1998-1999. Prior to that, company), The Williams Director, International Companies, Inc. (energy Operations IBM Corp. distribution company) -------------------------------------- ------------------------------ --------------------------- ---------------------------- Heinz F. Hutter* Board member since 1994 Retired President and P.O. Box 2187 Chief Operating Officer, Minneapolis, MN 55402 Cargill, Incorporated Born in 1929 (commodity merchants and processors) -------------------------------------- ------------------------------ --------------------------- ---------------------------- Anne P. Jones Board member since 1985 Attorney and Consultant Motorola, Inc. 5716 Bent Branch Rd. (electronics) Bethesda, MD 20816 Born in 1935 -------------------------------------- ------------------------------ --------------------------- ----------------------------
* Interested person of AXP Partners International Aggressive Growth Fund by reason of being a security holder of J P Morgan Chase & Co., parent company of American Century Investment Management, L.P., one of the fund's subadvisers. -------------------------------------------------------------------------------- 32 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Independent Board Members (continued) Name, Position held with Fund and Principal occupation Other directorships address, length of service during past five years age -------------------------------------- ------------------------------ --------------------------- ---------------------------- Stephen R. Lewis, Jr.** Board member since 2002 Retired President and 901 S. Marquette Ave. Professor of Economics, Minneapolis, MN 55402 Carleton College Born in 1939 -------------------------------------- ------------------------------ --------------------------- ---------------------------- Alan G. Quasha Board member since 2002 President, Quadrant Compagnie Financiere 720 Fifth Avenue Management, Inc. Richemont AG (luxury goods) New York, NY 10019 (management of private Born in 1949 equities) -------------------------------------- ------------------------------ --------------------------- ---------------------------- Alan K. Simpson Board member since 1997 Former three-term United Biogen, Inc. 1201 Sunshine Ave. States Senator for Wyoming (biopharmaceuticals) Cody, WY 82414 Born in 1931 -------------------------------------- ------------------------------ --------------------------- ---------------------------- Alison Taunton-Rigby Board member since 2002 President, Forester Synaptic Pharmaceuticals 8 Farrar Road Biotech since 2000. Corporation Lincoln, MA 01773 Former President and CEO, Born in 1944 Aquila Biopharmaceuticals, Inc. -------------------------------------- ------------------------------ --------------------------- ---------------------------- Board Members Affiliated with AEFC*** Name, Position held with Fund and Principal occupation Other directorships address, length of service during past five years age -------------------------------------- ------------------------------ --------------------------- ---------------------------- Barbara H. Fraser Board member since 2002 Executive Vice President 1546 AXP Financial Center - AEFA Products and Minneapolis, MN 55474 Corporate Marketing of Born in 1949 AEFC since 2002. President - Travelers Check Group, American Express Company, 2001-2002. Management Consultant, Reuters, 2000-2001. Managing Director - International Investments, Citibank Global, 1999-2000. Chairman and CEO, Citicorp Investment Services and Citigroup Insurance Group, U.S., 1998-1999. Head of Marketing and Strategic Planning - Investment Products and Distribution, Citibank Global, 1995-1998 -------------------------------------- ------------------------------ --------------------------- ---------------------------- Stephen W. Roszell Board member since 2002; Senior Vice President - 50238 AXP Financial Center Vice President since 2002 Institutional Group of Minneapolis, MN 55474 AEFC Born in 1949 -------------------------------------- ------------------------------ --------------------------- ----------------------------
** Interested person of AXP Partners International Aggressive Growth Fund by reason of being a security holder of FleetBoston Financial Corporation, parent company of Liberty Wanger Asset Management, L.P., one of the fund's subadvisers. *** Interested person by reason of being an officer, director and/or employee of AEFC. -------------------------------------------------------------------------------- 33 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Board Members Affiliated with AEFC*** (continued) Name, Position held with Fund and Principal occupation Other directorships address, length of service during past five years age -------------------------------------- ------------------------------ --------------------------- ---------------------------- William F. Truscott Board member since 2001, Senior Vice President - 53600 AXP Financial Center Vice President since 2002 Chief Investment Officer Minneapolis, MN 55474 of AEFC since 2001. Born in 1960 Former Chief Investment Officer and Managing Director, Zurich Scudder Investments -------------------------------------- ------------------------------ --------------------------- ---------------------------- *** Interested person by reason of being an officer, director and/or employee of AEFC. The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Roszell, who is vice president, and Mr. Truscott, who is vice president, the Fund's other officers are: Other Officers Name, Position held with Fund and Principal occupation Other directorships address, length of service during past five years age -------------------------------------- ------------------------------ --------------------------- ---------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President - 50005 AXP Financial Center Investment Accounting, Minneapolis, MN 55474 AEFC, since 2002; Vice Born in 1955 President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, AEFC, 1996-2000 -------------------------------------- ------------------------------ --------------------------- ---------------------------- Paula R. Meyer President since 2002 Senior Vice President and 596 AXP Financial Center General Manager - Mutual Minneapolis, MN 55474 Funds, AEFC, since 2002; Born in 1954 Vice President and Managing Director - American Express Funds, AEFC, 2000-2002; Vice President, AEFC, 1998-2000; President - Piper Capital Management 1997-1998 -------------------------------------- ------------------------------ --------------------------- ---------------------------- Leslie L. Ogg Vice President, General President of Board 901 S. Marquette Ave. Counsel, and Secretary since Services Corporation Minneapolis, MN 55402 1978 Born in 1938 -------------------------------------- ------------------------------ --------------------------- ----------------------------
The SAI has additional information about the Fund's directors and is available, without charge, upon request by calling (800) 862-7919. -------------------------------------------------------------------------------- 34 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT Results of Meeting of Shareholders AXP GLOBAL TECHNOLOGY FUND REGULAR MEETING OF SHAREHOLDERS HELD ON NOVEMBER 13, 2002 (Unaudited) A brief description of each proposal voted upon at the meeting and the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each proposal is set forth below.
Proposal 1 To elect the thirteen nominees specified below as Board members*. Shares Voted "For" Shares Withholding Authority to Vote Arne H. Carlson 307,453,620.786 14,362,721.733 Philip J. Carroll, Jr. 308,412,076.160 13,404,266.359 Livio D. DeSimone 308,262,299.954 13,554,042.565 Barbara H. Fraser 308,553,589.276 13,262,753.243 Ira D. Hall 308,448,906.441 13,367,436.078 Heinz F. Hutter 308,072,355.120 13,743,987.399 Anne P. Jones 308,311,677.602 13,504,664.917 Stephen R. Lewis, Jr. 308,936,401.929 12,879,940.590 Alan G. Quasha 308,629,909.046 13,186,433.473 Stephen W. Roszell 308,744,782.085 13,071,560.434 Alan K. Simpson 307,351,873.663 14,464,468.856 Alison Taunton-Rigby 308,617,744.419 13,198,598.100 William F. Truscott 308,790,666.447 13,025,676.072
-------------------------------------------------------------------------------- 35 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT
Proposal 2 To Amend the Articles of Incorporation/Declaration of Trust*: 2(a). To allow one vote/dollar instead of one vote/share. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 261,361,542.848 30,761,596.724 9,739,751.947 19,953,451.000
Proposal 3 To approve a policy authorizing American Express Financial Corporation, subject to Board approval, to retain and replace subadvisers, or to modify subadvisory agreements, without shareholder approval. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 67,930,853.660 7,320,835.362 2,321,837.749 7,797,179.000
Proposal 4 To approve changes to the Investment Management Services Agreement: 4(a). To add a performance incentive adjustment. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 68,452,315.223 6,553,552.680 2,567,658.868 7,797,179.000
Proposal 5 To change the fund's classification from diversified to non-diversified. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 66,607,921.118 7,478,726.567 3,486,879.086 7,797,179.000
* Denotes Registrant-wide proposals and voting results. -------------------------------------------------------------------------------- 36 -- AXP GLOBAL TECHNOLOGY FUND -- 2002 ANNUAL REPORT American Express(R) Funds Growth Funds AXP(R) Emerging Markets Fund AXP Equity Select Fund AXP Focused Growth Fund AXP Global Growth Fund AXP Growth Fund AXP Growth Dimensions Fund AXP New Dimensions Fund(R) AXP Partners International Aggressive Growth Fund AXP Partners Small Cap Growth Fund AXP Strategy Aggressive Fund Blend Funds AXP Blue Chip Advantage Fund AXP Discovery Fund* AXP European Equity Fund AXP Global Balanced Fund AXP International Fund AXP Large Cap Equity Fund AXP Managed Allocation Fund AXP Mid Cap Index Fund AXP Partners International Core Fund AXP Partners International Small Cap Fund AXP Partners Small Cap Core Fund AXP Research Opportunities Fund AXP S&P 500 Index Fund AXP Small Cap Advantage Fund AXP Small Company Index Fund AXP Stock Fund Value Funds AXP Diversified Equity Income Fund AXP Equity Value Fund AXP Large Cap Value Fund AXP Mid Cap Value Fund AXP Mutual AXP Partners Fundamental Value Fund AXP Partners International Select Value Fund AXP Partners Select Value Fund AXP Partners Small Cap Value Fund AXP Partners Value Fund AXP Progressive Fund* Income/Tax-Exempt Income Funds AXP Bond Fund AXP Cash Management Fund** AXP Extra Income Fund AXP Federal Income Fund AXP Global Bond Fund AXP High Yield Tax-Exempt Fund AXP Insured Tax-Exempt Fund AXP Intermediate Tax-Exempt Fund AXP Selective Fund AXP State Tax-Exempt Funds AXP Tax-Exempt Bond Fund AXP Tax-Free Money Fund** AXP U.S. Government Mortgage Fund Sector Funds AXP Global Technology Fund AXP Precious Metals Fund AXP Utilities Fund These funds are also listed in the categories above. AXP(R) Partners Funds AXP Partners Fundamental Value Fund AXP Partners International Aggressive Growth Fund AXP Partners International Core Fund AXP Partners International Select Value Fund AXP Partners International Small Cap Fund AXP Partners Select Value Fund AXP Partners Small Cap Core Fund AXP Partners Small Cap Growth Fund AXP Partners Small Cap Value Fund AXP Partners Value Fund International Funds AXP Emerging Markets Fund AXP European Equity Fund AXP Global Balanced Fund AXP Global Bond Fund AXP Global Growth Fund AXP International Fund AXP Partners International Aggressive Growth Fund AXP Partners International Core Fund AXP Partners International Select Value Fund AXP Partners International Small Cap Fund * Closed to new investors. ** An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. For more complete information about our funds, including fees and expenses, please call (800) 862-7919 for prospectuses. Read them carefully before you invest. (12/02) AXP Global Technology Fund 70100 AXP Financial Center Minneapolis, MN 55474 americanexpress.com -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Partners Funds (R) -------------------------------------------------------------------------------- This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. S-6395 F (12/02)