N-30D 1 s6309w.txt AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT AXP(R) Global Bond Fund 2002 ANNUAL REPORT (Prospectus Enclosed) AXP Global Bond Fund seeks to provide shareholders with high total return through income and growth of capital. (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 10 Investments in Securities 11 Financial Statements (Portfolio) 16 Notes to Financial Statements (Portfolio) 19 Independent Auditors' Report (Portfolio) 23 Financial Statements (Fund) 24 Notes to Financial Statements (Fund) 27 Independent Auditors' Report (Fund) 33 Federal Income Tax Information 34 Board Members and Officers 35 Results of Meetings of Shareholders 38 -------------------------------------------------------------------------------- 2 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT (photo of) Arne H. Carlson From the Chairman 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 BOND 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 BOND 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 BOND FUND -- 2002 ANNUAL REPORT Fund Snapshot AS OF OCT. 31, 2002 PORTFOLIO MANAGER Portfolio manager Nic Pifer, CFA Tenure/since 5/00 Years in industry 12 FUND OBJECTIVE For investors seeking high total return through income and growth of capital. Inception dates A: 3/20/89 B: 3/20/95 C: 6/26/00 Y: 3/20/95 Ticker symbols A: IGBFX B: IGLOX C: -- Y: -- Total net assets $503.1 million Number of holdings approximately 100 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. DURATION SHORT INT. LONG X X HIGH MEDIUM QUALITY LOW PORTFOLIO ASSET MIX Percentage of portfolio assets Bonds 93.2% Cash equivalents 6.8% TOP FIVE COUNTRIES Percentage of portfolio assets United States 31.8% Germany 16.7 Italy 9.3 Canada 6.2 France 4.3 CREDIT QUALITY SUMMARY Percentage of portfolio assets AAA bonds 56.7% AA bonds 14.9 A bonds 7.6 BAA bonds 4.5 Non-investment grade bonds 9.5 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 BOND FUND -- 2002 ANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q. How did AXP Global Bond Fund perform for the 12-month period ended Oct. 31, 2002? A. For the period, the Fund's Class A shares returned 6.24% (excluding sales charge). In comparison, the Fund underperformed the Salomon Smith Barney World Government Bond Index, which returned 9.15% during the fiscal year. The Fund outperformed the Lipper Global Income Funds Index, which returned 4.90% over the same timeframe. Q: What factors significantly impacted performance? A. Rising interest rates during the beginning of the period negatively affected the Fund. Rates rose during this time because investors sold their bonds, anticipating improvement in the world's economies. For most of the winter, the dollar gained against the euro and also had a negative impact on the Fund. When investors realized that the economic recovery was falling short of expectations, global equity prices plummeted and investors poured their money into less risky asset classes such as bonds. This and a strengthening euro against the dollar were positives for the Fund throughout the second half of the fiscal year. Yields on government bonds, a large percentage of our holdings, moved lower for much of the third quarter. However, this asset class had a generally positive impact on Fund performance. Investors continued to shun corporate bonds in the wake of corporate governance issues, but corporates produced positive returns. Investors' risk aversion also spread to emerging market debt and this asset class performed poorly. (bar graph) PERFORMANCE COMPARISON For the year ended Oct. 31, 2002 10% (bar 2) 8% (bar 1) +9.15% 6% +6.24% (bar 3) 4% +4.90% 2% 0% (bar 1) AXP Global Bond Fund Class A (excluding sales charge) (bar 2) Salomon Smith Barney World Government Bond Index (unmanaged) (bar 3) Lipper Global Income Funds Index (see "The Fund's Long-term Performance" for Index descriptions) Past performance is no guarantee of future results. The 4.75% 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 BOND FUND -- 2002 ANNUAL REPORT Questions & Answers (begin callout quote) > We believe the U.S. economy will remain in a slow-motion recovery, and that global economies will follow suit. (end callout quote) Toward period's end, the dollar's decline against the euro stabilized and eventually reversed itself. This had a slightly negative impact on performance, but currency trends generally were neutral for the Fund during the period. Q. What changes did you make to the Fund's portfolio? A. At the beginning of the period, concern that interest rates in the U.S. had reached bottom prompted us to shift assets away from domestic bonds and into European debt. This overweight in Europe helped performance. Our outlook on Japan, however, remained cautious as the nation struggles with both economic turmoil and extremely low interest rates. As a result, we changed our weighting in Japan several times early in the period.
AVERAGE ANNUAL TOTAL RETURNS as of Oct. 31, 2002 Class A Class B Class C Class Y (Inception dates) (3/20/89) (3/20/95) (6/26/00) (3/20/95) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) 1 year +6.24% +1.19% +5.59% +1.59% +5.51% +5.51% +6.72% +6.72% 5 years +3.21% +2.21% +2.42% +2.25% N/A N/A +3.40% +3.40% 10 years +5.66% +5.15% N/A N/A N/A N/A N/A N/A Since inception N/A N/A +4.69% +4.69% +5.34% +5.34% +5.43% +5.43%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 4.75%. (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 BOND FUND -- 2002 ANNUAL REPORT Questions & Answers Entering the new year, we expected a global economic recovery. Thus, we emphasized corporate bonds, reduced the Fund's duration and shifted more assets into overseas debt. This recovery did not fully materialize and possibly hurt performance. We believe this view will eventually become reality, but market turmoil could last a while longer. As a result, we reduced the size of some corporate debt positions and adjusted the Fund's duration slightly higher toward period's end. Q. What is your outlook for the coming months? A. We expect more of the same, at least initially. We believe the U.S. economy will remain in a slow-motion recovery, but it will eventually recover. We anticipate that global economies will follow suit, although we don't expect help from European central banks, which seem intent on keeping interest rates stable. With bond yields at historic lows, we believe that yields will begin rising slightly as the economy gains some steam. As for currency trends, the dollar appears susceptible to some weakness over the long term. We will continue to structure the portfolio somewhat defensively because of low current interest rates. Corporate debt, however promises to play an important role in the Fund's future performance. Attractively valued and with potentially attractive yields, corporate bonds offer investors value relative to other debt classes. Finally, we plan to continue a large overweight in overseas bonds, with a lesser emphasis on domestic debt. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL BOND 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 Bond Fund Class A shares (from 11/1/92 to 10/31/02) as compared to the performance of two widely cited performance indices, Salomon Smith Barney World Government Bond Index and the Lipper Global Income 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 4.75%, 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 BOND FUND $20,000 $15,000 (solid line) AXP Global Bond Fund Class A $10,000 (dotted line) Salomon Smith Barney World Government Bond Index(1) $5,500 (dashed line) Lipper Global Income Funds Index(2) '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 (solid line) AXP Global Bond Fund Class A $16,526 (dotted line) Salomon Smith Barney World Government Bond Index(1) $17,899 (dashed line) Lipper Global Income Funds Index(2) $17,022 (1) Salomon Smith Barney World Government Bond Index, an unmanaged market capitalization weighted benchmark, tracks the performance of the 17 government bond markets around the world. It is widely recognized by investors as a measurement index for portfolios of government bond securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Global Income 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 +1.19% 5 years +2.21% 10 years +5.15% Since inception N/A Results for other share classes can be found on page 8. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Investments in Securities World Income Portfolio Oct. 31, 2002 (Percentages represent value of investments compared to net assets) Bonds (94.5%)(c) Issuer Coupon Principal Value(a) rate amount Australia (1.0%) New South Wales Treasury (Australian Dollar) 03-01-08 8.00% 8,000,000 $4,945,356 Bahamas (0.1%) Imexsa Export Trust (U.S. Dollar) Company Guaranty 05-31-05 10.63 635,899(d) 324,309 Brazil (0.4%) Federal Republic of Brazil (U.S. Dollar) 01-11-06 10.25 2,400,000 1,788,000 Canada (6.2%) Calpine Canada Energy Finance (U.S. Dollar) Company Guaranty 05-01-08 8.50 3,500,000 1,137,500 Govt of Canada (Canadian Dollar) 12-01-03 7.50 21,100,000 14,127,767 (Japanese Yen) 03-23-09 1.90 980,000,000 8,766,964 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,400,000 4,378,002 Province of Ontario (Japanese Yen) 01-25-10 1.88 340,000,000 3,020,125 Total 31,430,358 China (1.3%) Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-04 9.25 3,500,000(b) 1,925,000 06-15-07 9.50 8,750,000(b) 4,812,500 Total 6,737,500 Costa Rica (0.5%) Republic of Costa Rica (U.S. Dollar) 02-01-12 8.11 2,500,000(d) 2,512,500 Denmark (1.4%) Depfa Pfandbriefbank (Japanese Yen) 07-13-05 1.25 240,000,000 2,012,080 Kingdom of Denmark (Danish Krone) 03-15-06 8.00 16,000,000 2,405,345 Realkredit Danmark (Danish Krone) 01-01-05 4.00 18,000,000 2,411,689 Total 6,829,114 Dominican Republic (0.5%) Dominican Republic (U.S. Dollar) 09-27-06 9.50 2,400,000(d) 2,520,000 France (4.4%) Cie Financement Foncier (European Monetary Unit) 06-24-05 5.00 1,900,000 1,952,242 France Telecom (U.S. Dollar) 03-01-06 8.70 1,200,000 1,285,575 Govt of France (European Monetary Unit) 04-25-05 7.50 8,710,000 9,500,106 10-25-11 5.00 9,100,000 9,324,419 Total 22,062,342 Germany (16.9%) Allgemeine Hypo Bank (European Monetary Unit) 09-02-09 5.00 10,760,000(d) 10,821,387 Federal Republic of Germany (European Monetary Unit) 11-11-04 7.50 29,600,000 31,775,104 07-04-08 4.13 9,000,000 8,964,848 07-04-27 6.50 19,005,512 22,336,801 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Germany (cont.) Hypothekenbk In Essen (European Monetary Unit) 02-20-07 5.50% 4,700,000 $4,905,306 Kredit Fuer Wiederaufbau (European Monetary Unit) 08-18-06 4.75 6,100,000 6,274,471 Total 85,077,917 Greece (1.5%) Hellenic Republic (European Monetary Unit) 02-19-06 6.00 6,900,000 7,371,311 Hungary (1.8%) Govt of Hungary (Hungarian Forint) 04-12-05 7.75 1,510,000,000 5,998,458 02-12-11 7.50 700,000,000 2,932,822 Total 8,931,280 Italy (9.4%) Buoni Poliennali Del Tes (European Monetary Unit) 01-01-04 8.50 32,321,533 33,966,649 11-01-26 7.25 6,686,283 8,427,063 Republic of Italy (Japanese Yen) 03-27-08 3.80 500,000,000 4,853,481 Total 47,247,193 Japan (1.2%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 700,000,000 5,919,631 Malaysia (0.3%) Petronas Capital (U.S. Dollar) Company Guaranty 05-22-12 7.00 1,500,000(d) 1,630,485 Mexico (0.9%) United Mexican States (U.S. Dollar) 01-14-11 8.38 4,000,000 4,310,000 Netherlands (0.1%) Vodafone Finance (European Monetary Unit) Company Guaranty 05-27-09 4.75 740,000 709,893 New Zealand (0.9%) Govt of New Zealand (New Zealand Dollar) 02-15-05 6.50 9,200,000 4,540,238 Norway (1.9%) A/S Eksportfinans (Japanese Yen) 06-21-10 1.80 340,000,000 3,002,094 Govt of Norway (Norwegian Krone) 05-16-11 6.00 49,000,000 6,507,526 Total 9,509,620 Panama (0.4%) Republic of Panama (U.S. Dollar) 02-08-11 9.63 2,100,000 2,194,500 Peru (0.4%) Republic of Peru (U.S. Dollar) 02-21-12 9.13 2,300,000(d) 2,029,750 Philippines (0.3%) Republic of Philippines (U.S. Dollar) 01-15-19 9.88 1,600,000 1,586,000 Poland (0.2%) Republic of Poland (U.S. Dollar) 10-27-14 6.00 1,028,600(i) 1,048,966 Russia (0.5%) Federation of Russia (U.S. Dollar) 06-26-07 10.00 2,100,000(d) 2,394,000 Singapore (0.8%) PSA (U.S. Dollar) 08-01-05 7.13 3,500,000(d) 3,932,187 Spain (3.6%) Govt of Spain (European Monetary Unit) 07-30-09 5.15 17,500,000 18,203,868 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Supra National (2.8%) European Investment Bank (British Pound) 12-07-06 7.63% 2,900,000 $5,041,401 Inter-American Development Bank (Japanese Yen) 07-08-09 1.90 1,035,000,000 9,283,479 Total 14,324,880 United Kingdom (2.7%) United Kingdom Treasury (British Pound) 06-10-03 8.00 8,380,000 13,447,014 United States (32.2%) Allied Waste North America (U.S. Dollar) Company Guaranty Series B 04-01-08 8.88 3,500,000 3,465,000 AT&T (U.S. Dollar) Sr Nts 11-15-06 6.50 500,000(i) 500,000 AT&T Wireless Services (U.S. Dollar) Sr Nts 03-01-11 7.88 1,500,000 1,305,000 Bank of America (U.S. Dollar) Sr Nts 02-01-07 5.25 1,000,000 1,070,461 Citicorp (Deutsche Mark) 09-19-09 6.25 10,800,000 5,745,824 DaimlerChrysler North America Holding (European Monetary Unit) Company Guaranty 01-16-07 5.63 670,000 678,911 Del Monte (U.S. Dollar) Company Guaranty Series B 05-15-11 9.25 1,500,000 1,492,500 Federal Home Loan Mtge Corp (European Monetary Unit) 01-15-06 5.25 1,800,000 1,865,403 (U.S. Dollar) 11-01-17 6.00 2,500,000(g) 2,603,906 08-01-32 6.50 2,371,897(g) 2,461,090 Federal Natl Mtge Assn (U.S. Dollar) 02-15-08 5.75 8,500,000 9,450,564 12-01-15 5.50 4,800,000(g) 4,936,500 12-01-30 6.00 4,900,000(g) 5,019,438 08-01-32 6.50 2,395,582(g) 2,483,420 Ford Motor Credit (Japanese Yen) 02-07-05 1.20 180,000,000 1,398,523 (U.S. Dollar) 02-01-06 6.88 1,000,000 921,949 GMAC (U.S. Dollar) 09-15-06 6.13 2,500,000 2,403,405 HCA (U.S. Dollar) 06-01-06 7.13 3,700,000 3,888,685 Household Finance (U.S. Dollar) 05-09-05 8.00 1,200,000 1,128,316 IBM (Japanese Yen) 04-14-03 .90 880,000,000 7,202,331 Intl Paper (European Monetary Unit) 08-11-06 5.38 4,000,000 3,978,649 J.P. Morgan Chase (U.S. Dollar) Sub Nts 02-01-11 6.75 2,500,000 2,699,745 L-3 Communications (U.S. Dollar) Sr Sub Nts 06-15-12 7.63 1,570,000(d) 1,624,950 LaBranche (U.S. Dollar) Sr Sub Nts 03-02-07 12.00 2,100,000(f) 2,226,000 Morgan Stanley, Dean Witter (European Monetary Unit) 03-16-06 5.25 2,400,000 2,416,704 Northwest Airlines (U.S. Dollar) Company Guaranty 1st Series 1996 01-02-15 7.67 2,057,326 1,756,010 NRG Energy (U.S. Dollar) 04-01-31 8.63 2,300,000(b) 437,000 Overseas Private Investment (U.S. Dollar) U.S. Govt Guaranty Series 1996A 01-15-09 6.99 5,000,000 5,586,100 PDV America (U.S. Dollar) Sr Nts 08-01-03 7.88 1,500,000 1,515,912 Starwood Hotels Resorts (U.S. Dollar) 05-01-12 7.88 2,300,000(d) 2,202,250 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Tenet Healthcare (U.S. Dollar) Sr Nts 12-01-11 6.38% $1,000,000 $1,058,863 Toyota Motor Credit (Japanese Yen) 06-09-08 .75 120,000,000 992,097 TRAINS 10-2002 (U.S. Dollar) 01-15-12 6.85 2,964,000(d,e) 3,211,878 U.S. Treasury (U.S. Dollar) 01-31-04 3.00 15,000,000 15,288,915 10-15-06 6.50 2,000,000(f) 2,299,452 08-15-10 5.75 4,000,000 4,567,656 11-15-16 7.50 29,500,000 38,029,659 02-15-26 6.00 5,100,000 5,701,642 Verizon Global Funding (U.S. Dollar) 06-15-07 6.13 1,000,000 1,060,720 Washington Mutual (U.S. Dollar) Sr Nts 01-15-07 5.63 2,500,000 2,633,653 Wells Fargo (U.S. Dollar) Sr Nts 02-15-07 5.13 1,000,000 1,068,958 Zurich Capital (U.S. Dollar) Company Guaranty 06-01-37 8.38 2,025,000(d) 1,793,927 Total 162,171,966 Total bonds (Cost: $486,814,677) $475,730,178 Other (--%)(b,c) Issuer Shares Value(a) Mexico Mexico Value Rights 1,000 $220 Total other (Cost: $--) $220 Short-term securities (6.9%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (6.4%) Federal Home Loan Bank Disc Nt 01-08-03 1.68% $3,900,000 $3,888,877 Federal Home Loan Mtge Corp Disc Nt 11-12-02 1.68 3,100,000 3,098,264 Federal Natl Mtge Assn Disc Nts 11-01-02 1.67 4,300,000 4,299,800 11-06-02 1.70 1,800,000 1,799,490 11-15-02 1.64 3,000,000 2,997,950 11-27-02 1.66 2,300,000 2,297,137 12-20-02 1.66 2,500,000 2,494,236 12-24-02 1.65 4,300,000 4,289,342 01-22-03 1.56 2,100,000 2,092,446 01-22-03 1.70 5,000,000 4,982,806 Total 32,240,348 Commercial paper (0.5%) Preferred Receivables Funding 12-02-02 1.78 1,300,000(h) 1,297,943 SBC Intl 11-08-02 1.77 800,000(h) 799,685 Southern Co Funding 11-13-02 1.75 600,000(h) 599,621 Total 2,697,249 Total short-term securities (Cost: $34,935,507) $34,937,597 Total investments in securities (Cost: $521,750,184)(j) $510,667,995 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT 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) Represents ownership in a cash TRAINS (Targeted Return Index Securities) comprised of a portfolio of 23 corporate bonds selected to target a maturity range of 7 to 15 years in the corresponding Lehman Brothers Credit Index with a current maturity date of Jan. 15, 2012. (f) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 5 to the financial statements): Type of security Notional amount Purchase contracts German Euro, Dec. 2002, 10-year $10,000,000 Sale contracts U.S. Treasury Notes, Dec. 2002, 10-year 17,000,000 (g) At Oct. 31, 2002, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $17,412,032. (h) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board. (i) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Oct. 31, 2002. (j) At Oct. 31, 2002, the cost of securities for federal income tax purposes was $523,126,153 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 11,466,362 Unrealized depreciation (23,924,520) ----------- Net unrealized depreciation $(12,458,158) ------------ -------------------------------------------------------------------------------- 15 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Financial Statements
Statement of assets and liabilities World Income Portfolio Oct. 31, 2002 Assets Investments in securities, at value (Note 1) (identified cost $521,750,184) $510,667,995 Dividends and accrued interest receivable 10,577,745 Receivable for investment securities sold 5,032,458 Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 9,145 ----- Total assets 526,287,343 ----------- Liabilities Disbursements in excess of cash on demand deposit 114,738 Payable for investment securities purchased 22,467,562 Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 320,323 Accrued investment management services fee 10,401 Other accrued expenses 52,828 ------ Total liabilities 22,965,852 ---------- Net assets $503,321,491 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT
Statement of operations World Income Portfolio Year ended Oct. 31, 2002 Investment income Income: Interest $ 21,750,891 Less foreign taxes withheld (158,174) -------- Total income 21,592,717 ---------- Expenses (Note 2): Investment management services fee 3,677,461 Compensation of board members 10,546 Custodian fees 107,544 Audit fees 24,750 Other 8,749 ----- Total expenses 3,829,050 Earnings credits on cash balances (Note 2) (1,972) ------ Total net expenses 3,827,078 --------- Investment income (loss) -- net 17,765,639 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (11,765,799) Foreign currency transactions (1,135,600) Futures contracts (1,073,732) ---------- Net realized gain (loss) on investments (13,975,131) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,002,434 ---------- Net gain (loss) on investments and foreign currencies 14,027,303 ---------- Net increase (decrease) in net assets resulting from operations $ 31,792,942 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets World Income Portfolio Year ended Oct. 31, 2002 2001 Operations Investment income (loss) -- net $ 17,765,639 $ 27,344,107 Net realized gain (loss) on investments (13,975,131) (15,366,355) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,002,434 43,790,272 ---------- ---------- Net increase (decrease) in net assets resulting from operations 31,792,942 55,768,024 ---------- ---------- Proceeds from contributions 27,551,027 13,294,921 Fair value of withdrawals (58,048,238) (111,539,809) ----------- ------------ Net contributions (withdrawals) from partners (30,497,211) (98,244,888) ----------- ----------- Total increase (decrease) in net assets 1,295,731 (42,476,864) Net assets at beginning of year 502,025,760 544,502,624 ----------- ----------- Net assets at end of year $503,321,491 $502,025,760 ============ ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 18 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Notes to Financial Statements World Income Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Income 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 non-diversified, open-end management investment company. The Portfolio invests primarily in debt securities of U.S. and foreign issuers. 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 such 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. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL BOND 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. 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 other forward-commitments, can take place one month or more after the transaction date. During this period, such 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 when-issued securities of $12,482,904 and other forward-commitments of $4,929,128. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. 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 0.77% to 0.67% annually. 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 $1,972 as a result of earnings credits from overnight cash balances. The Portfolio also pays custodian fees to American Express Trust Company, an affiliate of AEFC. According to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the Trust's units. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $235,087,547 and $251,747,427, respectively, for the year ended Oct. 31, 2002. For the same period, the portfolio turnover rate was 51%. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $4,279 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. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT 4. FORWARD FOREIGN CURRENCY CONTRACTS As of Oct. 31, 2002, the Portfolio 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. 21, 2002 14,300,000 13,914,329 $ -- $236,263 European Monetary Unit U.S. Dollar Dec. 4, 2002 697,970,000 5,621,129 -- 84,060 Japanese Yen U.S. Dollar Dec. 4, 2002 8,650,000 4,794,436 5,969 -- Australian Dollar U.S. Dollar Dec 4, 2002 6,227,000 3,020,406 3,176 -- New Zealand Dollar U.S. Dollar ------ -------- Total $9,145 $320,323 ------ --------
5. INTEREST RATE FUTURES CONTRACTS As of Oct. 31, 2002, investments in securities included securities valued at $621,302 that were pledged as collateral to cover initial margin deposits on 100 open purchase contracts denominated in Euros and 170 open sale contracts. The notional market value of the open purchase contracts as of Oct. 31, 2002 was $11,034,913 with a net unrealized gain of $12,639. The notional market value of the open sale contracts as of Oct. 31, 2002 was $19,502,188 with a net unrealized loss of $536,734. See "Summary of significant accounting policies." -------------------------------------------------------------------------------- 22 -- AXP GLOBAL BOND 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 Income 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 Income 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 -------------------------------------------------------------------------------- 23 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Bond Fund Oct. 31, 2002 Assets Investment in Portfolio (Note 1) $503,205,620 Capital shares receivable 125,232 ------- Total assets 503,330,852 ----------- Liabilities Capital shares payable 171,642 Accrued distribution fee 6,591 Accrued transfer agency fee 2,229 Accrued administrative services fee 789 Other accrued expenses 85,085 ------ Total liabilities 266,336 ------- Net assets applicable to outstanding capital stock $503,064,516 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 838,966 Additional paid-in capital 537,426,978 Undistributed net investment income 1,228,206 Accumulated net realized gain (loss) (Note 5) (24,758,953) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (11,670,681) ----------- Total -- representing net assets applicable to outstanding capital stock $503,064,516 ============ Net assets applicable to outstanding shares: Class A $348,350,295 Class B $152,058,247 Class C $ 2,580,172 Class Y $ 75,802 Net asset value per share of outstanding capital stock: Class A shares 58,060,845 $ 6.00 Class B shares 25,391,386 $ 5.99 Class C shares 431,753 $ 5.98 Class Y shares 12,611 $ 6.01 ------ ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT
Statement of operations AXP Global Bond Fund Year ended Oct. 31, 2002 Investment income Income: Interest $ 21,745,004 Less foreign taxes withheld (158,139) -------- Total income 21,586,865 ---------- Expenses (Note 2): Expenses allocated from Portfolio 3,826,213 Distribution fee Class A 850,680 Class B 1,421,569 Class C 15,436 Transfer agency fee 853,898 Incremental transfer agency fee Class A 64,845 Class B 48,328 Class C 606 Service fee -- Class Y 71 Administrative services fees and expenses 279,674 Compensation of board members 10,463 Printing and postage 128,196 Registration fees 61,034 Audit fees 8,250 Other 5,442 ----- Total expenses 7,574,705 Earnings credits on cash balances (Note 2) (3,068) ------ Total net expenses 7,571,637 --------- Investment income (loss) -- net 14,015,228 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (11,765,697) Foreign currency transactions (1,139,195) Futures contracts (1,073,737) ---------- Net realized gain (loss) on investments (13,978,629) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,002,459 ---------- Net gain (loss) on investments and foreign currencies 14,023,830 ---------- Net increase (decrease) in net assets resulting from operations $ 28,039,058 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 25 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT
Statements of changes in net assets AXP Global Bond Fund Year ended Oct. 31, 2002 2001 Operations and distributions Investment income (loss) -- net $ 14,015,228 $ 23,430,380 Net realized gain (loss) on investments (13,978,629) (15,368,676) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,002,459 43,787,031 ---------- ---------- Net increase (decrease) in net assets resulting from operations 28,039,058 51,848,735 ---------- ---------- Distributions to shareholders from: Net investment income Class A (9,644,735) (10,394,416) Class B (2,850,093) (2,969,230) Class C (18,570) (7,342) Class Y (1,859) (1,888) ------ ------ Total distributions (12,515,257) (13,372,876) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 85,865,445 62,825,835 Class B shares 39,838,214 20,979,915 Class C shares 2,477,135 693,932 Class Y shares 39,390 44,000 Reinvestment of distributions at net asset value Class A shares 9,451,955 8,857,094 Class B shares 2,694,998 2,774,203 Class C shares 18,429 6,659 Class Y shares 2,055 1,727 Payments for redemptions Class A shares (112,854,832) (133,156,929) Class B shares (Note 2) (40,086,791) (44,412,190) Class C shares (Note 2) (813,795) (129,429) Class Y shares (34,448) -- ------- ----- Increase (decrease) in net assets from capital share transactions (13,402,245) (81,515,183) ----------- ----------- Total increase (decrease) in net assets 2,121,556 (43,039,324) Net assets at beginning of year 500,942,960 543,982,284 ----------- ----------- Net assets at end of year $ 503,064,516 $ 500,942,960 ============= ============= Undistributed net investment income $ 1,228,206 $ 896,452 ------------- -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Notes to Financial Statements AXP Global Bond 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 non-diversified open-end management investment company. 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 Income Portfolio The Fund invests all of its assets in the World Income Portfolio (the Portfolio), a series of World Trust, an open-end investment company that has the same objectives as the Fund. The Portfolio seeks to provide shareholders with high total return through income and growth of capital by investing primarily in debt securities of U.S. and foreign issuers. 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 99.98%. 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. -------------------------------------------------------------------------------- 27 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $1,168,217 and accumulated net realized loss has been decreased by $1,168,217. 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 $9,644,735 $10,394,416 Long-term capital gain -- -- Class B Distributions paid from: Ordinary income 2,850,093 2,969,230 Long-term capital gain -- -- Class C Distributions paid from: Ordinary income 18,570 7,342 Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income 1,859 1,888 Long-term capital gain -- -- As of Oct. 31, 2002, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 2,438,762 Accumulated gain (loss) $(24,197,023) Unrealized appreciation (depreciation) $(13,443,167) 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. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT 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 0.04% 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. 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 $19.50 o Class B $20.50 o Class C $20.00 o Class Y $17.50 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 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 $420,409 for Class A, $94,486 for Class B and $865 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 $3,068 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT 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 14,885,496 6,883,558 432,176 6,938 Issued for reinvested distributions 1,684,541 480,718 3,287 366 Redeemed (19,692,200) (6,992,384) (140,508) (6,113) ----------- ---------- -------- ------ Net increase (decrease) (3,122,163) 371,892 294,955 1,191 ---------- ------- ------- ----- Year ended Oct. 31, 2001 Class A Class B Class C Class Y Sold 11,184,424 3,751,515 124,626 8,059 Issued for reinvested distributions 1,576,372 496,882 1,188 306 Redeemed (23,732,345) (7,958,269) (22,929) -- ----------- ---------- ------- ----- Net increase (decrease) (10,971,549) (3,709,872) 102,885 8,365 ----------- ---------- ------- -----
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 not to exceed the aggregate 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 $24,197,023 as of Oct. 31, 2002, that will expire in 2006 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. -------------------------------------------------------------------------------- 30 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT 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 $5.81 $5.39 $5.87 $6.17 $6.26 Income from investment operations: Net investment income (loss) .19 .27 .34 .33 .39 Net gains (losses) (both realized and unrealized) .17 .30 (.63) (.36) (.05) Total from investment operations .36 .57 (.29) (.03) .34 Less distributions: Dividends from net investment income (.17) (.15) (.19) (.26) (.29) Distributions from realized gains -- -- -- (.01) (.14) Total distributions (.17) (.15) (.19) (.27) (.43) Net asset value, end of period $6.00 $5.81 $5.39 $5.87 $6.17 Ratios/supplemental data Net assets, end of period (in millions) $348 $355 $389 $598 $724 Ratio of expenses to average daily net assets(c) 1.34% 1.32% 1.30% 1.22% 1.16% Ratio of net investment income (loss) to average daily net assets 3.12% 4.75% 5.49% 5.49% 5.86% Portfolio turnover rate (excluding short-term securities) 51% 24% 48% 48% 27% Total return(e) 6.24% 10.83% (5.16%) (.35%) 5.52%
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 $5.79 $5.38 $5.87 $6.17 $6.26 Income from investment operations: Net investment income (loss) .13 .21 .29 .28 .33 Net gains (losses) (both realized and unrealized) .19 .31 (.62) (.35) (.04) Total from investment operations .32 .52 (.33) (.07) .29 Less distributions: Dividends from net investment income (.12) (.11) (.16) (.22) (.24) Distributions from realized gains -- -- -- (.01) (.14) Total distributions (.12) (.11) (.16) (.23) (.38) Net asset value, end of period $5.99 $5.79 $5.38 $5.87 $6.17 Ratios/supplemental data Net assets, end of period (in millions) $152 $145 $155 $235 $263 Ratio of expenses to average daily net assets(c) 2.10% 2.09% 2.07% 1.98% 1.92% Ratio of net investment income (loss) to average daily net assets 2.36% 3.99% 4.73% 4.72% 5.11% Portfolio turnover rate (excluding short-term securities) 51% 24% 48% 48% 27% Total return(e) 5.59% 9.73% (5.77%) (1.10%) 4.73%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 31 -- AXP GLOBAL BOND 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 $5.79 $5.38 $5.52 Income from investment operations: Net investment income (loss) .14 .21 .10 Net gains (losses) (both realized and unrealized) .18 .31 (.24) Total from investment operations .32 .52 (.14) Less distributions: Dividends from net investment income (.13) (.11) -- Net asset value, end of period $5.98 $5.79 $5.38 Ratios/supplemental data Net assets, end of period (in millions) $3 $1 $-- Ratio of expenses to average daily net assets(c) 2.10% 2.09% 2.07%(d) Ratio of net investment income (loss) to average daily net assets 2.29% 3.84% 4.80%(d) Portfolio turnover rate (excluding short-term securities) 51% 24% 48% Total return(e) 5.51% 9.84% (2.49%)
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 $5.80 $5.40 $5.87 $6.17 $6.26 Income from investment operations: Net investment income (loss) .20 .29 .35 .34 .40 Net gains (losses) (both realized and unrealized) .19 .27 (.62) (.36) (.06) Total from investment operations .39 .56 (.27) (.02) .34 Less distributions: Dividends from net investment income (.18) (.16) (.20) (.27) (.29) Distributions from realized gains -- -- -- (.01) (.14) Total distributions (.18) (.16) (.20) (.28) (.43) Net asset value, end of period $6.01 $5.80 $5.40 $5.87 $6.17 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.17% 1.16% 1.14% 1.07% .99% Ratio of net investment income (loss) to average daily net assets 3.29% 4.90% 5.75% 5.63% 6.10% Portfolio turnover rate (excluding short-term securities) 51% 24% 48% 48% 27% Total return(e) 6.72% 10.71% (4.88%) (.19%) 5.62%
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) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 32 -- AXP GLOBAL BOND 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 Bond 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 Bond 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 -------------------------------------------------------------------------------- 33 -- AXP GLOBAL BOND 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 Bond Fund Fiscal year ended Oct. 31, 2002 Class A Income distributions taxable as dividend income, none qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $0.12371 March 21, 2002 0.03089 June 21, 2002 0.01995 Total distributions $0.17455 Class B Income distributions taxable as dividend income, none qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $0.09073 March 21, 2002 0.01726 June 21, 2002 0.00912 Total distributions $0.11711 Class C Income distributions taxable as dividend income, none qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $0.09814 March 21, 2002 0.01790 June 21, 2002 0.00908 Total distributions $0.12512 Class Y Income distributions taxable as dividend income, none qualifying for deduction by corporations. Payable date Per share Dec. 20, 2001 $0.12626 March 21, 2002 0.03333 June 21, 2002 0.02225 Total distributions $0.18184 -------------------------------------------------------------------------------- 34 -- AXP GLOBAL BOND 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. -------------------------------------------------------------------------------- 35 -- AXP GLOBAL BOND 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. -------------------------------------------------------------------------------- 36 -- AXP GLOBAL BOND 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. -------------------------------------------------------------------------------- 37 -- AXP GLOBAL BOND FUND -- 2002 ANNUAL REPORT Results of Meeting of Shareholders AXP GLOBAL BOND 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 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 * Denotes Registrant-wide proposals and voting results. -------------------------------------------------------------------------------- 38 -- AXP GLOBAL BOND 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 Bond 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-6309 W (12/02)