N-30D 1 s6352.txt AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT AXP(R) Global Balanced Fund 2002 ANNUAL REPORT (Prospectus Enclosed) AXP Global Balanced Fund seeks to provide shareholders with a balance of growth of capital and current income. (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.) -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- 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 11 Investments in Securities 12 Financial Statements 17 Notes to Financial Statements 20 Independent Auditors' Report 29 Federal Income Tax Information 30 Board Members and Officers 31 Results of Meeting of Shareholders 34 -------------------------------------------------------------------------------- 2 -- AXP GLOBAL BALANCED 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 BALANCED 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 BALANCED 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 BALANCED FUND -- 2002 ANNUAL REPORT Fund Snapshot AS OF OCT. 31, 2002 PORTFOLIO MANAGER Portfolio manager Mark Burgess Tenure/since 9/02 Years in industry 17 Portfolio manager Mike Ng, CFA Tenure/since 7/98 Years in industry 16 FUND OBJECTIVE For investors seeking a balance of growth of capital and current income. Inception dates A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96 Ticker symbols A: IDGAX B: IGBBX C: -- Y: AGBYX Total net assets $93.7 million Number of holdings approximately 130 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL DURATION SHORT INT LONG X HIGH X MEDIUM QUALITY LOW PORTFOLIO ASSET MIX Percentage of portfolio assets TOP TEN HOLDINGS Percentage of portfolio assets Buoni Poliennali Del Tes (Italy) 3.6% 4.25% 2009 Oesterreich Kontrollbank (Austria) 3.5 1.80% 2010 Federal Natl Mtge Assn (United States) 2.4 6.00% 2011 American Intl Group (United States) 2.1 Govt of France (France) 2.1 5.50% 2010 Pharmacia (United States) 1.9 Novartis (Switzerland) 1.9 GlaxoSmithKline (United Kingdom) 1.9 Federal Republic of Germany (Germany) 1.9 6.50% 2027 General Electric (United States) 1.9 For further detail about these holdings, please refer to the section entitled "Investments in Securities." TOP FIVE COUNTRIES Percentage of portfolio assets United States 38.9% United Kingdom 11.4 Germany 6.2 France 6.0 Japan 5.5 There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Fund holdings are subject to change. -------------------------------------------------------------------------------- 6 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q. How did the Fund perform for the one-year period ended Oct. 31, 2002? A. AXP Global Balanced Fund Class A shares, excluding sales charges, returned -9.48% for the one-year period ended Oct. 31, 2002. This outperformed the MSCI All Country World Free Index (MSCI Index) (unmanaged) and underperformed the Lipper Global Flexible Funds Index, which returned -13.57% and -6.68% respectively. The MSCI Index is comprised of equities only, while the Lipper Index is a blend of equities and fixed income investments, as the Fund is. We are disappointed with this performance and know that you invest in a balanced fund with the hope of achieving positive absolute returns. For the Equity Portion of the Portfolio Mark Burgess assumed management for this portion of the Fund in September 2002. Mark Fawcett previously managed this portion of the Fund. At period's end, the Portfolio had approximately 66% of its assets in equities. Q. What factors had the most impact on the equities portion of the Fund? A. Overall, the equity portion of the portfolio underperformed its equity benchmark, primarily due to poor stock selection in consumer discretionary products and an underweight in European utilities, which performed well. Japanese stock selection and an underweight in emerging markets also hurt performance. The economy dominated the market throughout the period, making this a particularly volatile fiscal year. Initially in the reporting period, Japanese, European and emerging market stock holdings enjoyed positive performance. An underweight in equities during this time -- about 50-50 to bonds -- did not enhance performance. However, the second quarter of 2002 brought difficulty for equity investors worldwide as global markets took their lead from the continuation of (bar graph) PERFORMANCE COMPARISON For the year ended Oct. 31, 2002 0% -3% (bar 3) -6% (-6.68%) (bar 1) -9% (-9.48%) (bar 2) -12% (13.57%) -15% (bar 1) AXP Global Balanced Fund Class A (excluding sales charge) (bar 2) MSCI All Country World Free Index (unmanaged) (bar 3) Lipper Global Flexible 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 BALANCED FUND -- 2002 ANNUAL REPORT Questions & Answers (begin callout quote) > We have seen significant improvement against competitor returns over the past six months. (end callout quote) U.S. stock market difficulties and spiraled downward. During this time, we increased the equities portion of the Fund to 60% and performance suffered as a result. From the third quarter through the end of October, the equity portion of the Fund increased, with this overweight in equities generally benefiting performance. U.S. and U.K. stocks, which comprise about half of the Fund's equity holdings, began to recover late in the period from a particularly bad early summer performance. Q. What changes did you make to the portfolio? A. The Fund modestly underperformed its competitors over the year to October 2002. It also underperformed an all-equity benchmark although this is largely due to the underperformance of equities.
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 -9.48% -14.68% -10.19% -13.77% -10.34% -10.34% -9.55% -9.55% 5 years -1.06% -2.22% -1.80% -1.96% N/A N/A -0.87% -0.87% 10 years N/A N/A N/A N/A N/A N/A N/A N/A Since inception +0.41% -0.58% -0.34% -0.34% -15.84% -15.84% +0.60% +0.60%
(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 BALANCED FUND -- 2002 ANNUAL REPORT Questions & Answers The equity component of the Fund underperformed against the equity benchmark however, and we estimate that this was a key driver of the overall Fund's underperformance against competitors. The following drivers affected the equity component of the Fund: o Stock selection behind benchmark in Europe. This was due to poor stock selection in consumer discretionary (holdings in electronics and media early in the period), and utilities (where an underweight holding hurt returns and the sector outperformed). o Japanese stock selection was behind benchmark with underperformance in telecoms, materials and technology. o Regional allocation was behind benchmark (and against competitors by our estimate) due to underweight position in emerging markets in late 2001 and early 2002. Positive returns against the benchmark were seen in Pacific (ex-Japan) and emerging markets stock selection. During the year we undertook the following changes to improve returns. These included: o Change in Fund manager of the equity component of the Fund during the year. o Additions of senior equity investment staff who work in conjunction with the Fund manager. We have seen significant improvement against competitor returns over the six months to October 2002. Q. What is your outlook going forward? A. We expect continued volatility in U.S. markets, especially with uneasiness over events in the Middle East. We will continue to focus on companies that are able to cut costs, have clout with suppliers and can keep prices high enough to produce adequate profit margins. In a slow-growth, low-inflation environment, which we anticipate over the coming months, companies that have a strong market share, a strong balance sheet, adequate cash flow and accessible credit should perform best during this time. These attributes, in turn, should generate revenue growth for these companies. We also believe that European equities are underpriced right now and provide the Fund with opportunities to find quality bargains. We will remain underweight in Japanese equities until its government proves that it can follow through with measures designed to jump-start the country's long-suffering economy. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Questions & Answers For the Fixed Income Portion of the Portfolio Q. What factors had the most impact on the fixed-income portion of the Fund? A. Rising interest rates in many markets outside the U.S. marked the first four months of the period, when the Fund held its own by focusing on higher quality bond issuers. Results were less stellar in March and April, when the Fund's limited position in Japan hurt performance as a strengthening yen boosted Japanese bond returns. Our decision to overweight exposure in euro-denominated bonds in the second quarter enhanced performance, as the euro gained against the dollar. Likewise, strengthening currencies in Australia and Norway helped our government holdings in these countries. However, an overweight position in U.S. bonds adversely affected the fixed income of performance as the dollar declined in value. A general sell-off in bonds precipitated by falling equity prices challenged virtually all fixed income markets during the last few months of the period. July, in particular, dragged down performance as investors shed any investments they perceived to have a whiff of risk, especially in corporate and emerging market sectors. With fixed income supply high and investors risk-averse, this complicated our efforts to sell underperforming and troubled issues in our portfolio. Finally, our ownership of WorldCom shares, which declared bankruptcy, certainly hurt performance. Despite this negative news, the fixed-income portion of the Fund's portfolio performed well during the reporting period, largely due to an overweight in better-performing European debt. Overall, our returns were favorable and we are pleased to report that we added value through our decisions regarding both currency and country exposure. Q. What is your outlook? A. We believe that short-term rates will become more volatile during the next several months if the economy's recovery gains momentum and short-term interest rates rise. We have positioned the Fund to avoid this volatility by reducing the Fund's short-term holdings. We also believe that the euro will fare better than the yen, with the Fund positioned accordingly to take advantage of any gains here. Finally, we expect good performance among currency positions in Australia, Sweden and Norway over the next several months. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL BALANCED 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 Balanced Fund Class A shares (from 12/1/96 to 10/31/02) as compared to the performance of two widely cited performance indices, Morgan Stanley Capital International (MSCI) All Country World Free Index and the Lipper Global Flexible 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 BALANCED FUND $20,000 $15,000 (solid line) AXP Global Balanced Fund Class A (dotted line) MSCI All Country World Free Index(1) $10,000 (dashed line) Lipper Global Flexible Funds Index(2) $5,000 12/1/96 10/97 10/98 10/99 10/00 10/01 10/02 (solid line) AXP Global Balanced Fund Class A $9,660 (dotted line) MSCI All Country World Free Index(1) $10,234 (dashed line) Lipper Global Flexible Funds Index(2) $11,906 (1) Morgan Stanley Capital International (MSCI) All Country World Free Index, an unmanaged index, is compiled from a composite of securities markets of 47 countries, including Canada, the United States, and 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Global Flexible 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 -14.68% 5 years -2.22% 10 years N/A Since inception -0.58% Results for other share classes can be found on page 8. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Investments in Securities AXP Global Balanced Fund Oct. 31, 2002 (Percentages represent value of investments compared to net assets) Common stocks (64.4%)(c) Issuer Shares Value(a) Australia (0.7%) Banks and savings & loans (0.4%) Australia & New Zealand Banking Group 30,600 $319,790 Retail (0.3%) Woolworths 44,691 305,331 Bermuda (1.1%) Multi-industry conglomerates Accenture Cl A 23,300(b) 393,304 Tyco Intl 45,308 655,154 Total 1,048,458 Canada (2.4%) Energy (0.5%) Encana 15,000 435,484 Suncor Energy 1 3 Total 435,487 Insurance (1.2%) Sun Life Financial Services of Canada 68,805 1,150,632 Media (0.3%) Thomson 11,362 313,897 Utilities -- telephone (0.4%) BCE 19,525 336,748 Finland (0.8%) Communications equipment & services Nokia 42,331 718,935 France (2.3%) Automotive & related (0.5%) Suez 28,875 507,560 Banks and savings & loans (0.6%) BNP Paribas 14,523 579,024 Energy (1.2%) TotalFinaElf 7,699 1,060,543 Japan (5.4%) Automotive & related (0.4%) Nissan Motor 44,000 337,964 Communications equipment & services (0.3%) NTT DoCoMo 176 324,676 Computers & office equipment (0.5%) Canon 5,000 184,475 Nomura Research Institute 2,800 289,348 Total 473,823 Electronics (0.7%) Hitachi 46,000 179,855 Keyence 1,900 314,521 Tokyo Electron 3,400 137,099 Total 631,475 Financial services (0.6%) Nomura Holdings 31,000 356,787 Sumitomo Trust & Banking 39,000 178,271 Total 535,058 Furniture & appliances (0.2%) Matsushita Electric Industrial 16,000 167,692 Industrial equipment & services (0.2%) SMC 2,100 166,272 Media (0.2%) Sony 4,500 193,576 Multi-industry conglomerates (0.8%) Mitsubishi 33,000 206,065 Secom 12,000 424,129 Sumitomo Chemical 69,000 206,701 Total 836,895 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Japan (cont.) Retail (0.6%) Ito-Yokado 5,000 $155,906 Seven-Eleven Japan 14,000 395,396 Total 551,302 Textiles & apparel (0.3%) Asahi Glass 42,000 251,294 Transportation (0.6%) East Japan Railway 66 300,612 Yamato Transport 20,000 284,875 Total 585,487 Mexico (0.9%) Financial services (0.5%) Grupo Financiero BBVA Bancomer Cl B 599,981(b) 469,298 Retail (0.4%) Wal-Mart de Mexico 139,530 350,509 Netherlands (0.7%) Insurance Aegon 45,661 619,036 Portugal (1.0%) Utilities -- telephone Portugal Telecom 150,871 911,386 Singapore (0.8%) Banks and savings & loans United Overseas Bank 96,000 728,550 South Korea (0.5%) Automotive & related Hyundai Motor 18,880 479,554 Spain (1.0%) Banks and savings & loans (0.4%) Banco Santander Central Hispano 62,732 384,544 Beverages & tobacco (0.6%) Altadis 27,300 577,201 Switzerland (4.9%) Banks and savings & loans (1.5%) UBS 29,696(b) 1,415,197 Food (1.5%) Nestle 6,608 1,416,767 Health care (1.9%) Novartis 46,083 1,757,535 Taiwan (0.7%) Banks and savings & loans (0.4%) Chinatrust Financial Holding 431,000(b) 343,510 Electronics (0.3%) Taiwan Semiconductor Mfg 243,000 325,119 United Kingdom (9.1%) Banks and savings & loans (0.8%) Lloyds TSB Group 86,196 741,695 Communications equipment & services (1.8%) GlaxoSmithKline 91,339 1,743,377 Computer software & services (0.7%) Sage Group 303,646 693,579 Energy (1.2%) BP 174,599 1,119,956 Financial services (1.5%) HSBC Holdings 124,152 1,382,959 Food (0.4%) Compass Group 83,018 367,890 Media (0.8%) British Sky Broadcasting Group 75,814(b) 715,818 Retail (0.6%) Next 39,100 544,430 Utilities -- telephone (1.3%) Vodafone Group 775,961 1,247,375 United States (32.1%) Aerospace & defense (0.6%) Lockheed Martin 10,500 607,950 Beverages & tobacco (0.6%) PepsiCo 13,300 586,530 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Communications equipment & services (0.9%) Verizon Communications 21,100 $796,736 Computer software & services (1.5%) Microsoft 25,829(b) 1,381,077 Computers & office equipment (2.3%) Cisco Systems 67,181(b) 751,084 Dell Computer 50,178(b) 1,435,592 Total 2,186,676 Electronics (1.5%) Intel 55,000 951,500 Texas Instruments 29,800 472,628 Total 1,424,128 Energy (2.3%) ChevronTexaco 13,600 919,768 ConocoPhillips 17,959 871,012 EOG Resources 8,900 329,567 Total 2,120,347 Energy equipment & services (1.6%) Baker Hughes 50,700 1,472,835 Financial services (2.4%) Citigroup 29,763 1,099,743 Goldman Sachs Group 16,200 1,159,920 Total 2,259,663 Food (1.0%) Sysco 30,700 972,576 Health care (3.7%) Medtronic 9,000 403,200 Pfizer 23,370 742,465 Pharmacia 41,400 1,780,199 Wyeth 16,600 556,100 Total 3,481,964 Health care services (2.0%) HCA 21,300 926,337 McKesson 32,700 974,787 Total 1,901,124 Household products (1.7%) Estee Lauder Cl A 23,500 684,320 Kimberly-Clark 6,100 314,150 Procter & Gamble 6,900 610,305 Total 1,608,775 Industrial equipment & services (1.0%) Illinois Tool Works 15,000 921,000 Insurance (3.0%) American Intl Group 30,760 1,924,038 Travelers Property Casualty Cl A 69,804(b) 926,299 Total 2,850,337 Media (0.6%) Clear Channel Communications 14,900(b) 552,045 Multi-industry conglomerates (2.8%) General Electric 67,510 1,704,627 S&P Depositary Receipts 10,400 923,520 Total 2,628,147 Retail (2.6%) Office Depot 52,100(b) 749,719 Target 21,300 641,556 Wal-Mart Stores 18,800 1,006,740 Total 2,398,015 Total common stocks (Cost: $67,997,610) $60,317,129 Bonds (32.3%)(c) Issuer Coupon Principal Value(a) rate amount Australia (0.5%) New South Wales Treasury (Australian Dollar) 04-01-04 7.00% 600,000 $342,224 03-01-08 8.00 200,000 123,634 Total 465,858 Austria (3.5%) Oesterreich Kontrollbank (Japanese Yen) 03-22-10 1.80 364,000,000 3,250,293 Brazil (0.7%) Federal Republic of Brazil (U.S. Dollar) 01-11-06 10.25 400,000 298,000 04-15-14 8.00 554,135 321,897 Total 619,897 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Canada (1.7%) Govt of Canada (Canadian Dollar) 02-01-06 7.00% 800,000 $568,100 06-01-08 6.00 800,000 551,057 Province of British Columbia (Canadian Dollar) 12-01-06 5.25 500,000 330,340 Rogers Communications (Canadian Dollar) Sr Nts 07-15-07 8.75 300,000 153,306 Total 1,602,803 China (0.1%) Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-07 9.50 170,000(b) 93,500 Denmark (1.0%) Govt of Denmark (Danish Krone) 05-15-03 8.00 600,000 81,845 08-15-05 5.00 6,000,000 826,256 Total 908,101 France (3.6%) Govt of France (European Monetary Unit) 10-25-09 4.00 1,500,000 1,452,668 04-25-10 5.50 1,800,000 1,900,446 Total 3,353,114 Germany (6.0%) Allgemeine Hypo Bank (European Monetary Unit) 09-02-09 5.00 850,000(d) 854,849 Federal Republic of Germany (European Monetary Unit) 01-05-06 6.00 300,000 319,503 01-04-08 5.25 1,285,000 1,354,835 07-04-08 4.75 725,000 744,728 07-04-10 5.25 250,000 262,375 06-20-16 6.00 434,598 482,250 07-04-27 6.50 1,475,000 1,733,539 Total 5,752,079 Italy (5.2%) Buoni Poliennali Del Tes (European Monetary Unit) 11-01-09 4.25 3,400,000 3,342,394 11-01-10 5.50 650,000 687,981 11-01-29 5.25 800,000 794,559 Total 4,824,934 Mexico (0.2%) Bancomext Trust (U.S. Dollar) 05-30-06 11.25 150,000(d) 176,250 Norway (1.7%) Govt of Norway (Norwegian Krone) 11-30-04 5.75 7,200,000 961,572 05-15-09 5.50 5,000,000 651,887 Total 1,613,459 United Kingdom (2.0%) United Kingdom Treasury (British Pound) 06-10-03 8.00 300,000 481,397 12-07-05 8.50 800,000 1,411,123 Total 1,892,520 United States (6.1%) Citicorp (Deutsche Mark) 09-19-09 6.25 1,000,000 532,021 DTE Burns Harbor LLC (U.S. Dollar) Sr Nts 01-30-03 6.57 11,140(d) 9,836 Federal Natl Mtge Assn (U.S. Dollar) 05-15-11 6.00 2,000,000 2,228,414 07-01-13 6.00 438,297 459,735 Ford Motor Credit (Japanese Yen) 02-07-05 1.20 61,000,000 473,944 Intl Paper (European Monetary Unit) 08-11-06 5.38 560,000 557,011 NRG Energy (U.S. Dollar) 04-01-31 8.63 500,000(b) 95,000 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Phillips Petroleum (U.S. Dollar) 03-15-28 7.13% $200,000 $213,984 U.S. Treasury (U.S. Dollar) 11-15-16 7.50 870,000 1,121,553 Total 5,691,498 Total bonds (Cost: $29,611,364) $30,244,306 Short-term securities (1.6%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies Federal Natl Mtge Assn Disc Nts 11-13-02 1.65% $500,000 $499,703 12-16-02 1.69 500,000 498,920 12-20-02 1.66 500,000 498,847 Total short-term securities (Cost: $1,497,539) $1,497,470 Total investments in securities (Cost: $99,106,513)(e) $92,058,905 Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the board. (e) At Oct. 31, 2002, the cost of securities for federal income tax purposes was $99,544,099 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 2,919,741 Unrealized depreciation (10,404,935) ----------- Net unrealized depreciation $ (7,485,194) ------------ -------------------------------------------------------------------------------- 16 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Balanced Fund Oct. 31, 2002 Assets Investments in securities, at value (Note 1) (identified cost $99,106,513) $ 92,058,905 Cash in bank on demand deposit 25,582 Foreign currency holdings (identified cost $173,265) (Note 1) 172,674 Capital shares receivable 13,621 Dividends and accrued interest receivable 735,570 Receivable for investment securities sold 916,308 Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 5) 567 --- Total assets 93,923,227 ---------- Liabilities Capital shares payable 9,103 Payable for investment securities purchased 120,631 Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 5) 22,273 Accrued investment management services fee 2,029 Accrued distribution fee 1,363 Accrued service fee 10 Accrued transfer agency fee 728 Accrued administrative services fee 154 Other accrued expenses 83,854 ------ Total liabilities 240,145 ------- Net assets applicable to outstanding capital stock $ 93,683,082 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 231,246 Additional paid-in capital 145,787,935 Undistributed net investment income 128,128 Accumulated net realized gain (loss) (Note 7) (45,412,334) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) (7,051,893) ---------- Total -- representing net assets applicable to outstanding capital stock $ 93,683,082 ============ Net assets applicable to outstanding shares: Class A $ 53,856,701 Class B $ 35,557,655 Class C $ 710,645 Class Y $ 3,558,081 Net asset value per share of outstanding capital stock: Class A shares 13,205,508 $ 4.08 Class B shares 8,873,851 $ 4.01 Class C shares 177,965 $ 3.99 Class Y shares 867,292 $ 4.10 ------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT
Statement of operations AXP Global Balanced Fund Year ended Oct. 31, 2002 Investment income Income: Dividends $ 948,059 Interest 2,515,989 Less foreign taxes withheld (70,037) ------- Total income 3,394,011 --------- Expenses (Note 2): Investment management services fee 882,643 Distribution fee Class A 173,027 Class B 459,549 Class C 6,830 Transfer agency fee 294,799 Incremental transfer agency fee Class A 18,287 Class B 19,571 Class C 268 Service fee -- Class Y 3,138 Administrative services fees and expenses 71,921 Compensation of board members 10,463 Custodian fees 49,088 Printing and postage 55,298 Registration fees 45,027 Audit fees 18,750 Other 3,494 ----- Total expenses 2,112,153 Earnings credits on cash balances (Note 2) (3,388) ------ Total net expenses 2,108,765 --------- Investment income (loss) -- net 1,285,246 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (10,560,223) Foreign currency transactions (91,199) ------- Net realized gain (loss) on investments (10,651,422) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,044,378) ---------- Net gain (loss) on investments and foreign currencies (12,695,800) ----------- Net increase (decrease) in net assets resulting from operations $(11,410,554) ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 18 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets AXP Global Balanced Fund Year ended Oct. 31, 2002 2001 Operations and distributions Investment income (loss) -- net $ 1,285,246 $ 1,395,752 Net realized gain (loss) on investments (10,651,422) (35,636,460) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,044,378) (3,463,775) ---------- ---------- Net increase (decrease) in net assets resulting from operations (11,410,554) (37,704,483) ----------- ----------- Distributions to shareholders from: Net investment income Class A (398,116) (427,085) Class B (62,042) -- Class C (1,400) (677) Class Y (16,493) (9,408) Net realized gain Class A -- (8,653,890) Class B -- (6,251,273) Class C -- (14,106) Class Y -- (109,148) -------- ----------- Total distributions (478,051) (15,465,587) -------- ----------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 23,355,046 27,366,581 Class B shares 5,643,206 10,878,062 Class C shares 437,256 597,777 Class Y shares 3,051,849 2,186,077 Reinvestment of distributions at net asset value Class A shares 380,548 8,857,999 Class B shares 60,167 6,145,933 Class C shares 1,391 14,783 Class Y shares 16,486 118,556 Payments for redemptions Class A shares (42,926,054) (35,573,917) Class B shares (Note 2) (18,768,163) (18,871,266) Class C shares (Note 2) (187,066) (87,625) Class Y shares (1,568,467) (470,336) ---------- -------- Increase (decrease) in net assets from capital share transactions (30,503,801) 1,162,624 ----------- --------- Total increase (decrease) in net assets (42,392,406) (52,007,446) Net assets at beginning of year 136,075,488 188,082,934 ----------- ----------- Net assets at end of year $ 93,683,082 $136,075,488 ============ ============ Undistributed net investment income $ 128,128 $ 398,560 ------------ ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Notes to Financial Statements AXP Global Balanced Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified open-end management investment company. The Fund invests primarily in equity and debt securities of issuers throughout the world. 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. The Fund'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 such securities are normally traded. If trading or events occurring in other markets after the close of the principle market in which foreign securities are traded, and before the close of business of the Fund, 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. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Option transactions To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund 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 Fund 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 Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund 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 Fund pays a premium whether or not the option is exercised. The Fund 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 Fund 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 Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund 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 Fund 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 Fund 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 Fund 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. As of Oct. 31, 2002 foreign currency was comprised of Taiwan dollars. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT The Fund 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 Fund and the resulting unrealized appreciation and/or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. 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 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. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $1,077,627 and accumulated net realized loss has been decreased by $1,076,960 resulting in a net reclassification adjustment to increase paid-in capital by $667. 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 $398,116 $4,134,929 Long-term capital gain -- 4,946,046 Class B Distributions paid from: Ordinary income 62,042 2,678,404 Long-term capital gain -- 3,572,869 Class C Distributions paid from: Ordinary income 1,400 6,721 Long-term capital gain -- 8,062 Class Y Distributions paid from: Ordinary income 16,493 56,173 Long-term capital gain -- 62,383 As of Oct. 31, 2002, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 130,317 Accumulated gain (loss) $(44,974,747) Unrealized appreciation (depreciation) $ (7,491,669) -------------------------------------------------------------------------------- 22 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL 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. 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. EXPENSES AND SALES CHARGES The Fund has agreements with American Express Financial Corporation (AEFC) to manage its portfolio and provide administrative services. Under an Investment Management Services Agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets in reducing percentages from 0.79% to 0.67% annually. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper Global Flexible Funds Index. The maximum adjustment is 0.12% of the Fund's average daily net assets after deducting 1% from the performance difference. If the performance difference is less than 1%, the adjustment will be zero. The adjustment decreased the fee by $57,348 for the year ended Oct. 31, 2002. On Nov. 13, 2002, shareholders approved modification of the performance incentive adjustment calculation by adjusting the performance difference intervals, while retaining the previous maximum adjustment and reducing the amount of the performance difference for which no adjustment is made to 0.50%. The effect of the modifications will begin Dec. 1, 2002. 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 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. AEFC has a Subadvisory Agreement with American Express Asset Management International Inc., a wholly-owned subsidiary of AEFC. 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 -------------------------------------------------------------------------------- 23 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT 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 $100,410 for Class A, $51,171 for Class B and $439 for Class C for the year ended Oct. 31, 2002. The Fund also pays custodian fees to American Express Trust Company, an affiliate of AEFC. During the year ended Oct. 31, 2002, the Fund's custodian and transfer agency fees were reduced by $3,388 as a result of earnings credits from overnight cash balances. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $112,034,268 and $136,458,249, respectively, for the year ended Oct. 31, 2002. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $606 for the year ended Oct. 31, 2002. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 4. 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 5,328,588 1,283,731 101,110 689,459 Issued for reinvested distributions 82,548 13,194 306 3,561 Redeemed (9,813,471) (4,337,810) (45,171) (356,436) ---------- ---------- ------- -------- Net increase (decrease) (4,402,335) (3,040,885) 56,245 336,584 ---------- ---------- ------ ------- Year ended Oct. 31, 2001 Class A Class B Class C Class Y Sold 5,320,243 2,135,016 117,568 424,281 Issued for reinvested distributions 1,624,564 1,136,032 2,740 21,718 Redeemed (6,853,395) (3,769,909) (19,211) (92,728) ---------- ---------- ------- ------- Net increase (decrease) 91,412 (498,861) 101,097 353,271 ------ -------- ------- -------
-------------------------------------------------------------------------------- 24 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT 5. FORWARD FOREIGN CURRENCY CONTRACTS As of Oct. 31, 2002, the Fund has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation Nov. 1, 2002 83,988 85,383 $567 $ -- U.S. Dollar European Monetary Unit Dec. 5, 2002 2,800,000 2,749,600 -- 19,410 European Monetary Unit U.S. Dollar Dec. 5, 2002 163,000,000 1,331,699 -- 724 Japanese Yen U.S. Dollar Dec. 5, 2002 187,000,000 1,526,468 -- 2,139 Japanese Yen U.S. Dollar ---- ------- Total $567 $22,273 ---- -------
6. 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. 7. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $44,974,747 as of Oct. 31, 2002, that will expire in 2009 and 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. -------------------------------------------------------------------------------- 25 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT 8. 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 $4.53 $ 6.27 $6.61 $5.79 $5.33 Income from investment operations: Net investment income (loss) .07 .07 .08 .09 .10 Net gains (losses) (both realized and unrealized) (.50) (1.27) .12 .82 .48 Total from investment operations (.43) (1.20) .20 .91 .58 Less distributions: Dividends from net investment income (.02) (.03) (.03) (.07) (.11) Distributions from realized gains -- (.51) (.51) (.02) (.01) Total distributions (.02) (.54) (.54) (.09) (.12) Net asset value, end of period $4.08 $ 4.53 $6.27 $6.61 $5.79 Ratios/supplemental data Net assets, end of period (in millions) $54 $80 $110 $100 $63 Ratio of expenses to average daily net assets(c) 1.48% 1.45% 1.31% 1.40% 1.49%(d) Ratio of net investment income (loss) to average daily net assets 1.38% 1.18% 1.26% 1.43% 1.86% Portfolio turnover rate (excluding short-term securities) 99% 173% 110% 99% 74% Total return(h) (9.48%) (20.63%) 2.62% 15.53% 11.01%
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 $4.47 $ 6.21 $6.58 $5.77 $5.31 Income from investment operations: Net investment income (loss) .04 .01 .04 .03 .06 Net gains (losses) (both realized and unrealized) (.49) (1.24) .12 .83 .48 Total from investment operations (.45) (1.23) .16 .86 .54 Less distributions: Dividends from net investment income (.01) -- (.02) (.03) (.07) Distributions from realized gains -- (.51) (.51) (.02) (.01) Total distributions (.01) (.51) (.53) (.05) (.08) Net asset value, end of period $4.01 $ 4.47 $6.21 $6.58 $5.77 Ratios/supplemental data Net assets, end of period (in millions) $36 $53 $77 $68 $44 Ratio of expenses to average daily net assets(c) 2.25% 2.21% 2.07% 2.16% 2.25%(e) Ratio of net investment income (loss) to average daily net assets .61% .42% .51% .66% 1.10% Portfolio turnover rate (excluding short-term securities) 99% 173% 110% 99% 74% Total return(h) (10.19%) (21.21%) 1.95% 14.89% 10.18%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2002 2001 2000(b) Net asset value, beginning of period $4.46 $ 6.21 $6.58 Income from investment operations: Net investment income (loss) .03 .02 .01 Net gains (losses) (both realized and unrealized) (.49) (1.24) (.38) Total from investment operations (.46) (1.22) (.37) Less distributions: Dividends from net investment income (.01) (.02) -- Distributions from realized gains -- (.51) -- Total distributions (.01) (.53) -- Net asset value, end of period $3.99 $ 4.46 $6.21 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $-- Ratio of expenses to average daily net assets(c) 2.24% 2.21% 2.07%(g) Ratio of net investment income (loss) to average daily net assets .60% .41% .47%(g) Portfolio turnover rate (excluding short-term securities) 99% 173% 110% Total return(h) (10.34%) (21.17%) (5.62%)
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 $4.56 $ 6.30 $6.62 $5.79 $5.33 Income from investment operations: Net investment income (loss) .07 .08 .10 .09 .12 Net gains (losses) (both realized and unrealized) (.50) (1.28) .13 .84 .47 Total from investment operations (.43) (1.20) .23 .93 .59 Less distributions: Dividends from net investment income (.03) (.03) (.04) (.08) (.12) Distributions from realized gains -- (.51) (.51) (.02) (.01) Total distributions (.03) (.54) (.55) (.10) (.13) Net asset value, end of period $4.10 $ 4.56 $6.30 $6.62 $5.79 Ratios/supplemental data Net assets, end of period (in millions) $4 $2 $1 $-- $-- Ratio of expenses to average daily net assets(c) 1.30% 1.31% 1.20% 1.15% 1.42%(f) Ratio of net investment income (loss) to average daily net assets 1.52% 1.35% 1.51% 1.65% 2.02% Portfolio turnover rate (excluding short-term securities) 99% 173% 110% 99% 74% Total return(h) (9.55%) (20.40%) 2.99% 15.76% 11.17%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 27 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class A would have been 1.53% for the period ended 1998. (e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class B would have been 2.29% for the period ended 1998. (f) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class Y would have been 1.46% for the period ended 1998. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL BALANCED 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, including the schedule of investments in securities, of AXP Global Balanced Fund (a series of the 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. 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 and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Global Balanced 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 -------------------------------------------------------------------------------- 29 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Federal Income Tax Information (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. AXP Global Balanced Fund Fiscal year ended Oct. 31, 2002 Class A Income distribution taxable as dividend income, 54.94% qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $0.02322 Class B Income distribution taxable as dividend income, 54.94% qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $.00534 Class C Income distribution taxable as dividend income, 54.94% qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $0.00998 Class Y Income distribution taxable as dividend income, 54.94% qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $0.02775 -------------------------------------------------------------------------------- 30 -- AXP GLOBAL BALANCED 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. -------------------------------------------------------------------------------- 31 -- AXP GLOBAL BALANCED 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. -------------------------------------------------------------------------------- 32 -- AXP GLOBAL BALANCED 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. -------------------------------------------------------------------------------- 33 -- AXP GLOBAL BALANCED FUND -- 2002 ANNUAL REPORT Results of Meeting of Shareholders AXP GLOBAL BALANCED 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 -------------------------------------------------------------------------------- 34 -- AXP GLOBAL BALANCED 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 15,400,874.702 1,474,354.897 500,767.631 744,661.000 Proposal 4 To approve changes to the Investment Management Services Agreement: 4(b). To modify the performance incentive adjustment calculation. Shares Voted "For" Shares Voted "Against" Abstentions Broker Non-Votes 15,344,278.579 1,272,398.387 759,320.264 744,661.000 * Denotes Registrant-wide proposals and voting results. -------------------------------------------------------------------------------- 35 -- AXP GLOBAL BALANCED 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 Balanced Fund 70100 AXP Financial Center Minneapolis, MN 55474 americanexpress.com -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. S-6352 J (12/02)