485BPOS 1 partabc.txt AXP GLOBAL SERIES, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 40 (File No. 33-25824) [X] --------- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 42 (File No. 811-5696) [X] ------- AXP GLOBAL SERIES, INC. 50606 AXP Financial Center Minneapolis, Minnesota 55474 Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810 Minneapolis, MN 55402-3268 (612) 330-9283 Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on Dec. 30, 2003 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485. If appropriate, check the following box: [ ] This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment. AXP Emerging Markets Fund, AXP Global Bond Fund, AXP Global Equity Fund (formerly AXP Global Growth Fund) and AXP Global Technology Fund, series of the Registrant, have adopted a master/feeder operating structure. This Post-Effective Amendment includes a signature page for World Trust, the master fund. AXP(R) Emerging Markets Fund AXP Emerging Markets Fund seeks to provide shareholders with long-term capital growth. Prospectus Dec. 30, 2003 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 5p Past Performance 6p Fees and Expenses 9p Investment Manager 11p Other Securities and Investment Strategies 12p Buying and Selling Shares 12p Valuing Fund Shares 12p Investment Options 13p Purchasing Shares 14p Transactions Through Third Parties 17p Sales Charges 17p Exchanging/Selling Shares 20p Distributions and Taxes 23p Master/Feeder Structure 25p Financial Highlights 26p -------------------------------------------------------------------------------- 2p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS The Fund GOAL AXP Emerging Markets Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in equity securities of emerging markets companies. Emerging markets are countries characterized as developing or emerging by either the World Bank or the United Nations. Under normal market conditions, at least 80% of the Fund's net assets will be invested in securities of companies that are located in emerging market countries, or that earn 50% or more of their total revenues from goods or services produced in emerging market countries or from sales made in emerging market countries. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. American Express Financial Corporation (AEFC) serves as the investment manager to the Fund and is responsible for the Fund's overall administration, distribution and oversight of the investment process. AEFC has entered into an agreement with American Express Asset Management International, Inc. (AEAMI), a wholly-owned subsidiary, to act as subadviser to the Fund. Investment decisions for the Fund are made by a team of seasoned investment professionals at Threadneedle Asset Management Limited (Threadneedle) who are associated with AEAMI. Threadneedle is also a wholly-owned subsidiary of AEFC. Threadneedle chooses investments by: o Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. o Conducting detailed research on companies in a consistent strategic and macroeconomic framework. o Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. o Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. -------------------------------------------------------------------------------- 3p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Using the global sector strategy, the Fund's portfolio management team constructs the portfolio by selecting geographic regions in which to invest and by investing in most of the stocks on two core lists of holdings, the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the portfolio management team. These discretionary holdings will typically make up a much smaller portion of the Fund. o The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. o The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by: o Evaluating the opportunities and risks within regions and sectors; o Assessing valuations; and o Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. o Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark, a change in sector strategy, or a change in the economic or political conditions in a particular country. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. Unusual Market Conditions During weak or declining markets, the Fund may invest more of its assets in money market securities. The Fund will invest in these securities primarily to avoid losses, however this type of investment also could prevent the Fund from achieving its investment objective. During these times, the Fund may make frequent securities trades that could result in increased fees, expenses, and taxes. -------------------------------------------------------------------------------- 4p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Foreign/Emerging Markets Risk Issuer Risk Sector/Concentration Risk Liquidity Risk Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. -------------------------------------------------------------------------------- 5p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price (the more you diversify, the more you spread risk). Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year that the Fund has existed, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) 80% +79.03% 70% 60% 50% 40% 30% 20% 10% +6.26% 0% -3.85% -3.06% -10% -20% -30% -30.26% -33.03% -40% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 During the period shown in the bar chart, the highest return for a calendar quarter was +37.49% (quarter ending December 1999) and the lowest return for a calendar quarter was -27.03% (quarter ending September 1998). 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 expenses. The Fund's Class A year to date return as of Sept. 30, 2003 was +21.84%. -------------------------------------------------------------------------------- 6p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2002) Since Since 1 year 5 years inception (A,B&Y) inception (C) Emerging Markets: Class A Return before taxes -8.63% -5.98% -3.57%(a) N/A Return after taxes on distributions -8.63% -6.00% -3.76%(a) N/A Return after taxes on distributions and sale of fund shares -5.30% -4.67% -2.88%(a) N/A Class B Return before taxes -7.75% -5.78% -3.37%(a) N/A Class C Return before taxes -3.66% N/A N/A -13.20%(c) Class Y Return before taxes -3.03% -4.65% -2.46%(a) N/A MSCI Emerging Markets Free Index -6.00% -4.58% -5.64%(b) -13.69%(d) Lipper Emerging Markets Funds Index -4.63% -4.71% -5.44%(b) -13.12%(d)
(a) Inception date was Nov. 13, 1996. (b) Measurement period started Dec. 1, 1996. (c) Inception date was June 26, 2000. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. -------------------------------------------------------------------------------- 7p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The Return After Taxes on Distributions for a period may be the same as the Return Before Taxes for the same period if there are no distributions or if the distributions are small. The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return Before Taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. Morgan Stanley Capital International (MSCI) Emerging Markets Free Index, an unmanaged market capitalization-weighted index, is compiled from a composite of securities markets of 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Emerging Markets 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. -------------------------------------------------------------------------------- 8p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none
Annual Fund operating expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 1.05% 1.05% 1.05% 1.05% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.74% 0.75% 0.75% 0.82% Total 2.04% 2.80% 2.80% 1.87% Fee waiver/expense reimbursement 0.05% 0.05% 0.05% 0.05% Net expenses 1.99% 2.75% 2.75% 1.82% (a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Management." Other expenses are based on estimated amounts for the current fiscal year. AEFC has contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2004. Under this agreement, total expenses will not exceed 1.99% for Class A; 2.75% for Class B; 2.75% for Class C and 1.82% for Class Y. (e) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.05% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder services fee for Class Y, a transfer agency fee and other nonadvisory expenses. Effective May 2003, the Fund's transfer agency fee increased. The percentages above reflect the increase. -------------------------------------------------------------------------------- 9p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. The operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated: 1 year 3 years 5 years 10 years Class A(a) $765 $1,174 $1,607 $2,808 Class B $678(b) $1,164(b) $1,575(b) $2,946(c) Class C $278 $ 864 $1,475 $3,128 Class Y $185 $ 583 $1,007 $2,191 (a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares: 1 year 3 years 5 years 10 years Class A(a) $765 $1,174 $1,607 $2,808 Class B $278 $ 864 $1,475 $2,946(b) Class C $278 $ 864 $1,475 $3,128 Class Y $185 $ 583 $1,007 $2,191 (a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. -------------------------------------------------------------------------------- 10p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS INVESTMENT MANAGER The Fund's assets are invested in Emerging Markets Portfolio (the Portfolio). The team that manages the Portfolio is led by: Julian A.S. Thompson, Portfolio Manager o Managed the Portfolio since 2000. o Joined AEFC in 1999. o Began investment career in 1993 as an Investment Manager for Stewart Ivory, a Scottish investment company, from 1993 to 1999. o BA and Ph.D., Magdalene College, Cambridge University. and Jules Mort, Deputy Portfolio Manager o Managed the Portfolio since 2003. o Joined Threadneedle in 2001 as a fund manager. o Began investment career in 1997 as an Analyst and Portfolio Manager, Baillie Gifford & Co., 1997 to 2001. o MSc, University of Stirling. The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 1.05% of the Portfolio's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The maximum monthly adjustment (increase or decrease) will be 0.12% of the Portfolio's average net assets on an annual basis. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. American Express Asset Management International Inc. (Subadviser), a wholly-owned subsidiary of AEFC, 50192 AXP Financial Center, Minneapolis, Minnesota 55474, subadvises the Fund's assets. The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. -------------------------------------------------------------------------------- 11p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may employ other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments such as money market securities and debt securities. Additionally, the Fund may use derivative instruments such as futures, options, and forward contracts to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc., you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations. However, securities will be valued at fair value if reliable quotations are not readily available. Securities also will be valued at fair value if their value has been materially affected by events after the close of the primary exchanges or markets on which they trade and before the NAV is calculated. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. Fair value procedures are approved by the Fund's Board of Directors. Certain short-term securities are valued at amortized cost. Foreign investments are valued in U.S. dollars. -------------------------------------------------------------------------------- 12p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. The Fund also offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y --------------- ------------------ -------------- --------------- -------------- Availability Available to Available to Available to Limited to all investors. all all investors. qualifying investors. institutional investors. --------------- ------------------ -------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase price purchase. price is price is is invested in Lower sales invested in invested in shares of the charge for shares of shares of the Fund. larger the Fund. Fund. investments. --------------- ------------------ -------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over $1,000,000, CDSC during applies if 1% CDSC the first you sell your applies if you year shares less sell your decreasing than one year shares less to 0% after after than one year six years. purchase. after purchase. --------------- ------------------ -------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee --------------- ------------------ -------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. --------------- ------------------ -------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. -------------------------------------------------------------------------------- 13p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. PURCHASING SHARES To purchase shares through entities other than American Express Financial Advisors Inc. (the Distributor), please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. -------------------------------------------------------------------------------- 14p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: --------------------------------------------- ---------------------------------- Individual or joint account The individual or one of the owners listed on the joint account --------------------------------------------- ---------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) --------------------------------------------- ---------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) --------------------------------------------- ---------------------------------- An irrevocable trust, pension trust or The legal entity (not the personal estate representative or trustee, unless no legal entity is designated in the account title) --------------------------------------------- ---------------------------------- Sole proprietorship or single-owner LLC The owner --------------------------------------------- ---------------------------------- Partnership or multi-member LLC The partnership --------------------------------------------- ---------------------------------- Corporate or LLC electing corporate status The corporation on Form 8837 --------------------------------------------- ---------------------------------- Association, club or tax-exempt organization The organization --------------------------------------------- ---------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (www.irs.gov). Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). -------------------------------------------------------------------------------- 15p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 872-4377 for brokerage accounts (800) 967-4377 for wrap accounts -------------------------------------------------------------------------------- 16p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. The sales charge on Class A shares may be lower than 5.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds where you have paid a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges and are excluded from the total. If you or any member of your primary household group elects to split the primary household group into individual household groups (for example, by asking that account statements be sent to separate addresses), assets will no longer be combined for purposes of reducing the sales charge. -------------------------------------------------------------------------------- 17p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Other Class A sales charge policies o IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar group, may be added together to reduce sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of American Express Fund shares (up to the amount sold). Send the Fund a written request along with your payment, indicating the account number, the date and the amount of the sale. -------------------------------------------------------------------------------- 18p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o within the University of Massachusetts After-Tax Savings Program, or o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. -------------------------------------------------------------------------------- 19p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3-1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59-1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, the Distributor and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege, or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgment has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. -------------------------------------------------------------------------------- 20p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. -------------------------------------------------------------------------------- 21p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o delivery instructions, if applicable o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 872-4377 for brokerage accounts (800) 437-3133 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 -------------------------------------------------------------------------------- 22p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100*. o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include non-qualifying dividends, interest income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. -------------------------------------------------------------------------------- 23p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. -------------------------------------------------------------------------------- 24p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund The Fund buys units in the Portfolio The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. -------------------------------------------------------------------------------- 25p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.00 $3.69 $ 4.81 $4.99 $3.44 Income from investment operations: Net investment income (loss) .02 (.01) -- (.02) .02 Net gains (losses) (both realized and unrealized) 1.44 .32 (1.12) (.16) 1.54 Total from investment operations 1.46 .31 (1.12) (.18) 1.56 Less distributions: Dividends from net investment income -- -- -- -- (.01) Net asset value, end of period $5.46 $4.00 $ 3.69 $4.81 $4.99 Ratios/supplemental data Net assets, end of period (in millions) $155 $132 $143 $234 $251 Ratio of expenses to average daily net assets(c) 2.02% 2.05% 2.02% 1.83% 2.03% Ratio of net investment income (loss) to average daily net assets .39% (.19%) (.02%) (.38%) .14% Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% 143% Total return(e) 36.50% 8.40% (23.28%) (3.60%) 45.13%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 26p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.83 $3.56 $ 4.67 $4.88 $3.39 Income from investment operations: Net investment income (loss) (.02) (.04) (.04) (.07) (.05) Net gains (losses) (both realized and unrealized) 1.38 .31 (1.07) (.14) 1.54 Total from investment operations 1.36 .27 (1.11) (.21) 1.49 Net asset value, end of period $5.19 $3.83 $ 3.56 $4.67 $4.88 Ratios/supplemental data Net assets, end of period (in millions) $72 $65 $73 $120 $130 Ratio of expenses to average daily net assets(c) 2.80% 2.83% 2.79% 2.60% 2.81% Ratio of net investment income (loss) to average daily net assets (.39%) (.95%) (.80%) (1.14%) (.63%) Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% 143% Total return(e) 35.51% 7.58% (23.77%) (4.30%) 43.87%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 27p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $3.84 $3.56 $ 4.68 $5.64 Income from investment operations: Net investment income (loss) (.02) (.03) (.04) (.01) Net gains (losses) (both realized and unrealized) 1.38 .31 (1.08) (.95) Total from investment operations 1.36 .28 (1.12) (.96) Net asset value, end of period $5.20 $3.84 $ 3.56 $4.68 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $-- $-- Ratio of expenses to average daily net assets(c) 2.80% 2.85% 2.79% 2.60%(d) Ratio of net investment income (loss) to average daily net assets (.41%) (1.13%) (.63%) (2.06%)(d) Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% Total return(e) 35.42% 7.87% (23.93%) (17.02%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 28p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.04 $3.72 $ 4.83 $4.99 $3.45 Income from investment operations: Net investment income (loss) .03 -- .01 (.01) .02 Net gains (losses) (both realized and unrealized) 1.45 .32 (1.12) (.15) 1.53 Total from investment operations 1.48 .32 (1.11) (.16) 1.55 Less distributions: Dividends from net investment income -- -- -- -- (.01) Net asset value, end of period $5.52 $4.04 $ 3.72 $4.83 $4.99 Ratios/supplemental data Net assets, end of period (in millions) $18 $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.87% 1.59% 1.84% 1.66% 1.88% Ratio of net investment income (loss) to average daily net assets .54% .19% .21% (.29%) 1.18% Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% 143% Total return(e) 36.63% 8.60% (22.98%) (3.21%) 45.29%
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. (f) Not annualized. -------------------------------------------------------------------------------- 29p -- AXP EMERGING MARKETS FUND -- 2003 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IDEAX Class B: IEMBX Class C: -- Class Y: -- -------------------------------------------------------------------------------- (logo) AMERICAN EXPRESS(R) -------------------------------------------------------------------------------- American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6354-99 L (12/03) AXP(R) Emerging Markets Fund Supplement to the Dec. 30, 2003 Prospectus This supplement describes the Fund's Class I shares and it supplements certain information in the Fund's prospectus dated Dec. 30, 2003. The caption headings used in this Supplement correspond with the caption headings used in the prospectus. You may purchase Class I shares only if you are an eligible investor, as described under the caption "Buying and Selling Shares" below. PAST PERFORMANCE Class I is new as of the date of this supplement and therefore performance information is not available. The performance table is intended to indicate some of the risks of investing in the Fund by showing changes in the Fund's performance over time. Please note that you will find performance returns, after the deduction of certain taxes, for Class A shares of the Fund, together with returns of one or more broad measures of market performance, in the performance table of the prospectus. Past performance for Class I for the period prior to the date the class began operations may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, although not for other differences in expenses. The use of blended performance generally results in lower performance than Class I shares would have experienced had they been offered for the entire period. FEES AND EXPENSES Fund investors pay various expenses. The table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. The table is supplemented as follows: Shareholder Fees (fees paid directly from your investment) Class I Maximum sales charge (load) imposed on purchases (as a percentage of offering price) none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none Annual Fund operating expenses(a) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class I Management fees 1.10 % Distribution (12b-1) fees 0.00 % Other expenses(b) 0.29 % Total 1.39 % (a) Other expenses are based on estimated amounts for the current fiscal year. (b) Other expenses include an administrative services fee and other nonadvisory expenses. Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The table is supplemented as follows: 1 year 3 years Class I $142 $440 BUYING AND SELLING SHARES The description of Investment Options is supplemented as follows: If you are an eligible investor, you may purchase Class I shares at net asset value without an initial sales charge or CDSC on redemption. Class I shares do not have annual distribution and service fees, and do not convert to any other class of shares. The following eligible investors may purchase Class I shares: o Any fund distributed by AEFA, if the fund seeks to achieve its investment objective by investing primarily in shares of the Fund and other American Express Funds. The discussion of buying and selling shares is supplemented as follows: You may purchase, redeem or exchange Class I shares only through AEFA (see the back cover of the prospectus for address and telephone number). You may exchange your Class I shares only for Class I shares of another American Express Fund. AXP(R) Global Balanced Fund AXP Global Balanced Fund seeks to provide shareholders with a balance of growth of capital and current income. Prospectus Dec. 30, 2003 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 5p Past Performance 7p Fees and Expenses 10p Investment Manager 12p Other Securities and Investment Strategies 13p Buying and Selling Shares 14p Valuing Fund Shares 14p Investment Options 14p Purchasing Shares 16p Transactions Through Third Parties 18p Sales Charges 18p Exchanging/Selling Shares 21p Distributions and Taxes 24p Financial Highlights 26p -------------------------------------------------------------------------------- 2p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS The Fund GOAL AXP Global Balanced Fund (the Fund) seeks to provide shareholders with a balance of growth of capital and current income. Because any investment involves risk, achieving this goal cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in a combination of equity and debt securities of issuers throughout the world. No less than 25% of the Fund's total assets will be invested in government, agency and corporate debt securities or debt convertible securities. These securities may be of any maturity. No more than 20% of the Fund's net assets will be invested in bonds rated below investment grade (junk bonds). American Express Financial Corporation (AEFC) serves as the investment manager to the Fund and is responsible for the Fund's overall administration, distribution and oversight of the investment process. With respect to equity securities, AEFC has entered into an agreement with American Express Asset Management International, Inc. (AEAMI), a wholly-owned subsidiary, to act as subadviser to the Fund. Investment decisions for the Fund are made by a team of seasoned investment professionals at Threadneedle Asset Management Limited (Threadneedle) who are associated with AEAMI. Threadneedle is also a wholly-owned subsidiary of AEFC. Threadneedle chooses investments by: o Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. o Conducting detailed research on companies in a consistent strategic and macroeconomic framework. o Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. o Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. -------------------------------------------------------------------------------- 3p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS The equity portfolio is constructed using the global sector strategy and contains securities primarily from two lists of holdings. Core securities include all stocks on the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the portfolio management team. These discretionary holdings will typically make up a much smaller portion of the Fund. o The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) All Country World Free Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. o The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by: o Evaluating the opportunities and risks within regions and sectors; o Assessing valuations; and o Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. o Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. With respect to debt securities, AEFC chooses debt obligations by: o Considering opportunities and risks by credit ratings and currency. o Identifying investment-grade U.S. and foreign bonds. o Identifying below investment-grade U.S. and foreign bonds. o Focusing on bonds that contribute to portfolio diversification. o Identifying bonds that can take advantage of currency movements and interest rate differences among nations. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o The security is overvalued relative to alternative investments. o The security has reached AEFC's price objective. o The company or the security continues to meet the standards described above. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. -------------------------------------------------------------------------------- 4p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Unusual Market Conditions During weak or declining markets, the Fund may invest more of its assets in money market securities. The Fund will invest in these securities primarily to avoid losses, however this type of investment also could prevent the Fund from achieving its investment objective. During these times, the Fund may make frequent securities trades that could result in increased fees, expenses, and taxes. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Foreign Risk Interest Rate Risk Sector/Concentration Risk Liquidity Risk Credit Risk Issuer Risk Small and Medium Company Risk Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Foreign Risk The following are all components of foreign risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. -------------------------------------------------------------------------------- 5p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Interest Rate Risk The risk of losses attributable to changes in interest rates. This term is generally associated with bond prices (when interest rates rise, bond prices fall). In general, the longer the maturity of a bond, the greater its sensitivity to changes in interest rates. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price (the more you diversify, the more you spread risk). Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation (such as payments due on a bond or a note). The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Junk bonds have greater price fluctuations and are more likely to experience a default than investment grade bonds. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. Small and Medium Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. -------------------------------------------------------------------------------- 6p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year that the Fund has existed, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) 20% +19.54% +18.64% 15% 10% +10.09% 5% 0% -5% -10% -10.36% -10.38% -15% -16.50% -20% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 During the period shown in the bar chart, the highest return for a calendar quarter was +16.18% (quarter ending December 1999) and the lowest return for a calendar quarter was -12.40% (quarter ending March 2001). 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 expenses. The Fund's Class A year to date return as of Sept. 30, 2003 was +11.80%. -------------------------------------------------------------------------------- 7p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2002) Since Since 1 year 5 years inception (A,B&Y) inception (C) Global Balanced: Class A Return before taxes -15.53% -2.16% -0.29%(a) N/A Return after taxes on distributions -15.60% -3.40% -1.47%(a) N/A Return after taxes on distributions and sale of fund shares -9.53% -1.97% -0.52%(a) N/A Class B Return before taxes -14.69% -1.91% -0.09%(a) N/A Class C Return before taxes -11.16% N/A N/A -14.28%(c) Class Y Return before taxes -10.43% -0.79% +0.87%(a) N/A MSCI All Country World Free Index -18.98% -1.94% +0.45%(b) -18.34%(d) CitiGroup World Government Bond Index Index +19.49% +5.82% +4.66%(b) +7.62%(d) Lipper Global Flexible Funds Index -8.82% +1.45% +3.14%(b) -8.79%(d)
(a) Inception date was Nov. 13, 1996. (b) Measurement period started Dec. 1, 1996. (c) Inception date was June 26, 2000. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. -------------------------------------------------------------------------------- 8p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The Return After Taxes on Distributions for a period may be the same as the Return Before Taxes for the same period if there are no distributions or if the distributions are small. The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return Before Taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. Morgan Stanley Capital International (MSCI) All Country World Free Index, an unmanaged index of equity securities, 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. CitiGroup 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. 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. -------------------------------------------------------------------------------- 9p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none
Annual Fund operating expenses (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(d) 0.77% 0.77% 0.77% 0.77% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(e) 0.58% 0.60% 0.59% 0.66% Total 1.60% 2.37% 2.36% 1.43% (a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.02% for the most recent fiscal year. (e) Other expenses include an administrative services fee, a shareholder services fee for Class Y, a transfer agency fee and other nonadvisory expenses. Effective May 2003, the Fund's transfer agency fee increased. The percentages above reflect the increase. -------------------------------------------------------------------------------- 10p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. The operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated: 1 year 3 years 5 years 10 years Class A(a) $728 $1,051 $1,397 $2,371 Class B $640(b) $1,040(b) $1,366(b) $2,519(c) Class C $239 $ 737 $1,261 $2,700 Class Y $146 $ 453 $ 783 $1,718 (a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares: 1 year 3 years 5 years 10 years Class A(a) $728 $1,051 $1,397 $2,371 Class B $240 $ 740 $1,266 $2,519(b) Class C $239 $ 737 $1,261 $2,700 Class Y $146 $ 453 $ 783 $1,718 (a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. -------------------------------------------------------------------------------- 11p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS INVESTMENT MANAGER The team that manages the equity portion of the Fund's portfolio is led by: Alex Lyle, Portfolio Manager o Head of managed funds. o Managed the Fund since 2003. o Joined Threadneedle in 1994, where he managed the U.K. equity investments for some large insurance clients and has run a wide range of portfolios. o Began investment career in 1980. o MA, Oxford University. and Stephen Thornber, Deputy Portfolio Manager o Head of the global oil sector. o Managed the Fund since 2003. o Joined Threadneedle in 1993. o Began investment career in 1987. o BA, Plymouth Polytechnic. The team that manages the fixed income portion of the Fund's portfolio is led by: Nicholas Pifer, CFA, Co-Portfolio Manager o Managed the Fund since 2003. o Leader of the global sector team. o Joined AEFC in 2000. o Prior to that, Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. o Began investment career in 1990. o MA, Johns Hopkins University School of Advanced International Studies. AEFC's investment professionals who manage fixed income funds are organized into teams. Each team specializes in a particular sector of the fixed income market. -------------------------------------------------------------------------------- 12p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS The Fund pays AEFC a fee for managing its assets. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.77% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The maximum monthly adjustment (increase or decrease) will be 0.08% of the Fund's average net assets on an annual basis. Under the agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Fund, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. American Express Asset Management International Inc. (Subadviser), a wholly-owned subsidiary of AEFC, at 50192 AXP Financial Center, Minneapolis, Minnesota 55474, subadvises the Fund's assets. The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may employ other investment strategies that are not principal investment strategies. The Fund's policies permit investments in other instruments, such as preferred stocks, convertible securities and money market securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. -------------------------------------------------------------------------------- 13p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc., you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations. However, securities will be valued at fair value if reliable quotations are not readily available. Securities also will be valued at fair value if their value has been materially affected by events after the close of the primary exchanges or markets on which they trade and before the NAV is calculated. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. Fair value procedures are approved by the Fund's Board of Directors. Certain short-term securities are valued at amortized cost. Foreign investments are valued in U.S. dollars. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. -------------------------------------------------------------------------------- 14p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y --------------- ------------------ -------------- --------------- -------------- Availability Available to Available to Available to Limited to all investors. all all investors. qualifying investors. institutional investors. --------------- ------------------ -------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase price purchase. price is price is is invested in Lower sales invested in invested in shares of the charge for shares of shares of the Fund. larger the Fund. Fund. investments. --------------- ------------------ -------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over $1,000,000, CDSC during applies if 1% CDSC the first you sell your applies if you year shares less sell your decreasing than one year shares less to 0% after after than one year six years. purchase. after purchase. --------------- ------------------ -------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee --------------- ------------------ -------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. --------------- ------------------ -------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. -------------------------------------------------------------------------------- 15p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS PURCHASING SHARES To purchase shares through entities other than American Express Financial Advisors Inc. (the Distributor), please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: --------------------------------------------- ---------------------------------- Individual or joint account The individual or one of the owners listed on the joint account --------------------------------------------- ---------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) --------------------------------------------- ---------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) --------------------------------------------- ---------------------------------- An irrevocable trust, pension trust or The legal entity (not the personal estate representative or trustee, unless no legal entity is designated in the account title) --------------------------------------------- ---------------------------------- Sole proprietorship or single-owner LLC The owner --------------------------------------------- ---------------------------------- Partnership or multi-member LLC The partnership --------------------------------------------- ---------------------------------- Corporate or LLC electing corporate status The corporation on Form 8837 --------------------------------------------- ---------------------------------- Association, club or tax-exempt organization The organization --------------------------------------------- ---------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (www.irs.gov). -------------------------------------------------------------------------------- 16p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 872-4377 for brokerage accounts (800) 967-4377 for wrap accounts -------------------------------------------------------------------------------- 17p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. The sales charge on Class A shares may be lower than 5.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds where you have paid a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges and are excluded from the total. If you or any member of your primary household group elects to split the primary household group into individual household groups (for example, by asking that account statements be sent to separate addresses), assets will no longer be combined for purposes of reducing the sales charge. -------------------------------------------------------------------------------- 18p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Other Class A sales charge policies o IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar group, may be added together to reduce sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of American Express Fund shares (up to the amount sold). Send the Fund a written request along with your payment, indicating the account number, the date and the amount of the sale. -------------------------------------------------------------------------------- 19p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o within the University of Massachusetts After-Tax Savings Program, or o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. -------------------------------------------------------------------------------- 20p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3-1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59-1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, the Distributor and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege, or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgment has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. -------------------------------------------------------------------------------- 21p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. -------------------------------------------------------------------------------- 22p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o delivery instructions, if applicable o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 872-4377 for brokerage accounts (800) 437-3133 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 -------------------------------------------------------------------------------- 23p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100*. o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include non-qualifying dividends, interest income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. -------------------------------------------------------------------------------- 24p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. -------------------------------------------------------------------------------- 25p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.08 $4.53 $ 6.27 $6.61 $5.79 Income from investment operations: Net investment income (loss) .05 .07 .07 .08 .09 Net gains (losses) (both realized and unrealized) .64 (.50) (1.27) .12 .82 Total from investment operations .69 (.43) (1.20) .20 .91 Less distributions: Dividends from net investment income (.04) (.02) (.03) (.03) (.07) Distributions from realized gains -- -- (.51) (.51) (.02) Total distributions (.04) (.02) (.54) (.54) (.09) Net asset value, end of period $4.73 $4.08 $ 4.53 $6.27 $6.61 Ratios/supplemental data Net assets, end of period (in millions) $53 $54 $80 $110 $100 Ratio of expenses to average daily net assets(c) 1.60% 1.48% 1.45% 1.31% 1.40% Ratio of net investment income (loss) to average daily net assets 1.03% 1.38% 1.18% 1.26% 1.43% Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% 99% Total return(e) 16.91% (9.48%) (20.63%) 2.62% 15.53%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 26p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.01 $4.47 $ 6.21 $6.58 $5.77 Income from investment operations: Net investment income (loss) -- .04 .01 .04 .03 Net gains (losses) (both realized and unrealized) .64 (.49) (1.24) .12 .83 Total from investment operations .64 (.45) (1.23) .16 .86 Less distributions: Dividends from net investment income -- (.01) -- (.02) (.03) Distributions from realized gains -- -- (.51) (.51) (.02) Total distributions -- (.01) (.51) (.53) (.05) Net asset value, end of period $4.65 $4.01 $ 4.47 $6.21 $6.58 Ratios/supplemental data Net assets, end of period (in millions) $33 $36 $53 $77 $68 Ratio of expenses to average daily net assets(c) 2.37% 2.25% 2.21% 2.07% 2.16% Ratio of net investment income (loss) to average daily net assets .27% .61% .42% .51% .66% Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% 99% Total return(e) 15.96% (10.19%) (21.21%) 1.95% 14.89%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 27p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $3.99 $4.46 $ 6.21 $6.58 Income from investment operations: Net investment income (loss) -- .03 .02 .01 Net gains (losses) (both realized and unrealized) .65 (.49) (1.24) (.38) Total from investment operations .65 (.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 $4.64 $3.99 $ 4.46 $6.21 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $-- Ratio of expenses to average daily net assets(c) 2.36% 2.24% 2.21% 2.07%(d) Ratio of net investment income (loss) to average daily net assets .26% .60% .41% .47%(d) Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% Total return(e) 16.29% (10.34%) (21.17%) (5.62%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 28p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.10 $4.56 $ 6.30 $6.62 $5.79 Income from investment operations: Net investment income (loss) .07 .07 .08 .10 .09 Net gains (losses) (both realized and unrealized) .64 (.50) (1.28) .13 .84 Total from investment operations .71 (.43) (1.20) .23 .93 Less distributions: Dividends from net investment income (.05) (.03) (.03) (.04) (.08) Distributions from realized gains -- -- (.51) (.51) (.02) Total distributions (.05) (.03) (.54) (.55) (.10) Net asset value, end of period $4.76 $4.10 $ 4.56 $6.30 $6.62 Ratios/supplemental data Net assets, end of period (in millions) $7 $4 $2 $1 $-- Ratio of expenses to average daily net assets(c) 1.43% 1.30% 1.31% 1.20% 1.15% Ratio of net investment income (loss) to average daily net assets 1.21% 1.52% 1.35% 1.51% 1.65% Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% 99% Total return(e) 17.32% (9.55%) (20.40%) 2.99% 15.76%
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. (f) Not annualized. -------------------------------------------------------------------------------- 29p -- AXP GLOBAL BALANCED FUND -- 2003 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IDGAX Class B: IGBBX Class C: -- Class Y: AGBYX -------------------------------------------------------------------------------- (logo) AMERICAN EXPRESS(R) -------------------------------------------------------------------------------- American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6352-99 K (12/03) AXP(R) Global Bond Fund AXP Global Bond Fund seeks to provide shareholders with high total return through income and growth of capital. Prospectus Dec. 30, 2003 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 4p Past Performance 5p Fees and Expenses 8p Investment Manager 9p Other Securities and Investment Strategies 10p Buying and Selling Shares 11p Valuing Fund Shares 11p Investment Options 11p Purchasing Shares 13p Transactions Through Third Parties 15p Sales Charges 15p Exchanging/Selling Shares 18p Distributions and Taxes 21p Master/Feeder Structure 23p Financial Highlights 24p -------------------------------------------------------------------------------- 2p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS The Fund GOAL AXP Global Bond Fund (the Fund) seeks to provide shareholders with high total return through income and growth of capital. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified mutual fund that invests primarily in debt obligations of U.S. and foreign issuers. Under normal market conditions, at least 80% of the Fund's net assets will be invested in investment-grade corporate or government debt obligations, including money market instruments, of issuers located in at least three different countries. Although the Fund emphasizes high and medium-quality debt securities, it may assume some credit risk to achieve higher dividends and /or capital appreciation by buying below investment-grade bonds (junk bonds). The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's goal, American Express Financial Corporation (AEFC), the Fund's investment manager, chooses investments by: o Considering opportunities and risks by credit rating and currency. o Identifying investment-grade U.S. and foreign bonds. o Identifying below investment-grade U.S. and foreign bonds. o Identifying bonds that can take advantage of currency movements and interest rate differences among nations. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o The security is overvalued. o The security continues to meet the standards described above. AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From time to time, AEFC may purchase derivative instruments to hedge against currency fluctuations. Unusual Market Conditions During unusual market conditions, the Fund may invest more of its assets in money market securities. Although the Fund primarily will invest in these securities to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, AEFC may make frequent securities trades that could result in increased fees, expenses, and taxes. -------------------------------------------------------------------------------- 3p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Interest Rate Risk Foreign/Emerging Markets Risk Credit Risk Liquidity Risk Sector/Concentration Risk Interest Rate Risk The risk of losses attributable to changes in interest rates. This term is generally associated with bond prices (when interest rates rise, bond prices fall). In general, the longer the maturity of a bond, the greater its sensitivity to changes in interest rates. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in emerging market countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation (such as payments due on a bond or a note). The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. They have greater price fluctuations and are more likely to experience a default. -------------------------------------------------------------------------------- 4p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price (the more you diversify, the more you spread risk). PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year shown on the chart below, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) 20% 15% +16.43% +19.20% 10% +14.02% 5% +7.78% +7.49% 0% +2.98% +2.40% +1.51% -5% -4.73% -4.11% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 During the period shown in the bar chart, the highest return for a calendar quarter was +6.97% (quarter ending June 1995) and the lowest return for a calendar quarter was -4.49% (quarter ending March 1994). 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 expenses. The Fund's Class A year to date return as of Sept. 30, 2003 was +8.85%. -------------------------------------------------------------------------------- 5p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2002) Since Since 1 year 5 years 10 years inception (B&Y) inception (C) Global Bond: Class A Return before taxes +8.60% +3.08% +5.50% N/A N/A Return after taxes on distributions +7.80% +1.64% +3.46% N/A N/A Return after taxes on distributions and sale of fund shares +5.26% +1.72% +3.38% N/A N/A Class B Return before taxes +9.21% +3.11% N/A +5.21%(a) N/A Class C Return before taxes +13.16% N/A N/A N/A +6.93%(c) Class Y Return before taxes +14.49% +4.26% N/A +5.96%(a) N/A Lehman Brothers Global Aggregate Index +16.53% +5.66% +6.69% +6.14%(b) +8.08%(d) CitiGroup World Government Bond Index +19.49% +5.82% +6.64% +5.18%(b) +7.62%(d) Lipper Global Income Funds Index +11.68% +4.28% +5.91% +6.16%(b) +7.05%(d)
(a) Inception date was March 20, 1995. (b) Measurement period started April 1, 1995. (c) Inception date was June 26, 2000. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. Past performance for Class Y for the periods prior to March 20, 1995 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, although not for other differences in expenses. After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. -------------------------------------------------------------------------------- 6p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS The Return After Taxes on Distributions for a period may be the same as the Return Before Taxes for the same period if there are no distributions or if the distributions are small. The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return Before Taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. The Lehman Brothers Global Aggregate Index, an unmanaged market capitalization weighted benchmark, tracks the performance of investment grade fixed income securities denominated in 13 currencies. The index reflects the reinvestment of all income and changes in market prices, but excludes brokerage commissions or other fees. CitiGroup 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. 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. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from the CitiGroup World Government Bond Index to the Lehman Brothers Global Aggregate Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indexes in this transition year. In the future, however, only the Lehman Brothers Global Aggregate Index will be included. -------------------------------------------------------------------------------- 7p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 4.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none
Annual Fund operating expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees 0.76% 0.76% 0.76% 0.76% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(e) 0.36% 0.37% 0.39% 0.43% Total 1.37% 2.13% 2.15% 1.19% (a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Management." (e) Other expenses include an administrative services fee, a shareholder services fee for Class Y, a transfer agency fee and other nonadvisory expenses. Effective May 2003, the Fund's transfer agency fee increased. The percentages above reflect the increase. -------------------------------------------------------------------------------- 8p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. The operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated: 1 year 3 years 5 years 10 years Class A(a) $608 $889 $1,190 $2,048 Class B $616(b) $967(b) $1,245(b) $2,273(c) Class C $218 $673 $1,155 $2,487 Class Y $121 $378 $ 655 $1,448 (a) Includes a 4.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares: 1 year 3 years 5 years 10 years Class A(a) $608 $889 $1,190 $2,048 Class B $216 $667 $1,145 $2,273(b) Class C $218 $673 $1,155 $2,487 Class Y $121 $378 $ 655 $1,448 (a) Includes a 4.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in World Income Portfolio (the Portfolio), which is managed by AEFC. The team that manages the Fund's portfolio is led by: Nicholas Pifer, CFA, Portfolio Manager o Managed the Portfolio since 2000. o Leader of the global sector team. o Joined AEFC in 2000. o Prior to that, Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. o Began investment career in 1990. o MA, Johns Hopkins University School of Advanced International Studies. AEFC's investment professionals who manage fixed income funds are organized into teams. Each team specializes in a particular sector of the fixed income market. -------------------------------------------------------------------------------- 9p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.76% of the Portfolio's average daily net assets. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. The Fund has received an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. Before the Fund may rely on the order, a majority of the Fund's outstanding voting securities will need to approve operating the Fund in this manner. If shareholder approval is received, the Fund may add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. There is no assurance shareholder approval will be received, and no changes will be made without shareholder approval until that time. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may employ other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as preferred stocks and convertible securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. -------------------------------------------------------------------------------- 10p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc., you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's assets are valued primarily on the basis of market quotations. Certain short-term securities are valued at amortized cost. Foreign investments are valued in U.S. dollars. The Fund's securities are valued primarily on the basis of market quotations. However, securities will be valued at fair value if reliable quotations are not readily available. Securities also will be valued at fair value if their value has been materially affected by events after the close of the primary exchanges or markets on which they trade and before the NAV is calculated. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. Fair value procedures are approved by the Fund's Board of Directors. Certain short-term securities are valued at amortized cost. Foreign investments are valued in U.S. dollars. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. The Fund also offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. -------------------------------------------------------------------------------- 11p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y --------------- ------------------ -------------- --------------- -------------- Availability Available to Available to Available to Limited to all investors. all all investors. qualifying investors. institutional investors. --------------- ------------------ -------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase price purchase. price is price is is invested in Lower sales invested in invested in shares of the charge for shares of shares of the Fund. larger the Fund. Fund. investments. --------------- ------------------ -------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over $1,000,000, CDSC during applies if 1% CDSC the first you sell your applies if you year shares less sell your decreasing than one year shares less to 0% after after than one year six years. purchase. after purchase. --------------- ------------------ -------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee --------------- ------------------ -------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. --------------- ------------------ -------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. -------------------------------------------------------------------------------- 12p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS PURCHASING SHARES To purchase shares through entities other than American Express Financial Advisors Inc. (the Distributor), please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: --------------------------------------------- ---------------------------------- Individual or joint account The individual or one of the owners listed on the joint account --------------------------------------------- ---------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) --------------------------------------------- ---------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) --------------------------------------------- ---------------------------------- An irrevocable trust, pension trust or The legal entity (not the personal estate representative or trustee, unless no legal entity is designated in the account title) --------------------------------------------- ---------------------------------- Sole proprietorship or single-owner LLC The owner --------------------------------------------- ---------------------------------- Partnership or multi-member LLC The partnership --------------------------------------------- ---------------------------------- Corporate or LLC electing corporate status The corporation on Form 8837 --------------------------------------------- ---------------------------------- Association, club or tax-exempt organization The organization --------------------------------------------- ---------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (www.irs.gov). -------------------------------------------------------------------------------- 13p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 872-4377 for brokerage accounts (800) 967-4377 for wrap accounts -------------------------------------------------------------------------------- 14p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 4.75% 4.99% $50,000-$99,999 4.25 4.44 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. The sales charge on Class A shares may be lower than 4.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds where you have paid a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges and are excluded from the total. If you or any member of your primary household group elects to split the primary household group into individual household groups (for example, by asking that account statements be sent to separate addresses), assets will no longer be combined for purposes of reducing the sales charge. -------------------------------------------------------------------------------- 15p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Other Class A sales charge policies o IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar group, may be added together to reduce sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of American Express Fund shares (up to the amount sold). Send the Fund a written request along with your payment, indicating the account number, the date and the amount of the sale. -------------------------------------------------------------------------------- 16p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o within the University of Massachusetts After-Tax Savings Program, or o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. -------------------------------------------------------------------------------- 17p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, the Distributor and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege, or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgment has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. -------------------------------------------------------------------------------- 18p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. -------------------------------------------------------------------------------- 19p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o delivery instructions, if applicable o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 872-4377 for brokerage accounts (800) 437-3133 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 -------------------------------------------------------------------------------- 20p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100*. o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends will generally be composed of ordinary dividend income (which may include interest income, short-term capital gains and non-qualifying dividends). It is unlikely the Fund will distribute qualifying dividend income, which is eligible for preferential tax rates under current tax law. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. -------------------------------------------------------------------------------- #p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. -------------------------------------------------------------------------------- 22p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund The Fund buys units in the Portfolio The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. -------------------------------------------------------------------------------- 23p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $6.00 $5.81 $5.39 $5.87 $6.17 Income from investment operations: Net investment income (loss) .18 .19 .27 .34 .33 Net gains (losses) (both realized and unrealized) .60 .17 .30 (.63) (.36) Total from investment operations .78 .36 .57 (.29) (.03) Less distributions: Dividends from net investment income (.21) (.17) (.15) (.19) (.26) Distributions from realized gains -- -- -- -- (.01) Total distributions (.21) (.17) (.15) (.19) (.27) Net asset value, end of period $6.57 $6.00 $5.81 $5.39 $5.87 Ratios/supplemental data Net assets, end of period (in millions) $380 $348 $355 $389 $598 Ratio of expenses to average daily net assets(c) 1.36% 1.34% 1.32% 1.30% 1.22% Ratio of net investment income (loss) to average daily net assets 2.73% 3.12% 4.75% 5.49% 5.49% Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% 48% Total return(e) 13.25% 6.24% 10.83% (5.16%) (.35%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 24p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $5.99 $5.79 $5.38 $5.87 $6.17 Income from investment operations: Net investment income (loss) .12 .13 .21 .29 .28 Net gains (losses) (both realized and unrealized) .62 .19 .31 (.62) (.35) Total from investment operations .74 .32 .52 (.33) (.07) Less distributions: Dividends from net investment income (.16) (.12) (.11) (.16) (.22) Distributions from realized gains -- -- -- -- (.01) Total distributions (.16) (.12) (.11) (.16) (.23) Net asset value, end of period $6.57 $5.99 $5.79 $5.38 $5.87 Ratios/supplemental data Net assets, end of period (in millions) $158 $152 $145 $155 $235 Ratio of expenses to average daily net assets(c) 2.12% 2.10% 2.09% 2.07% 1.98% Ratio of net investment income (loss) to average daily net assets 1.97% 2.36% 3.99% 4.73% 4.72% Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% 48% Total return(e) 12.39% 5.59% 9.73% (5.77%) (1.10%)
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $5.98 $5.79 $5.38 $5.52 Income from investment operations: Net investment income (loss) .13 .14 .21 .10 Net gains (losses) (both realized and unrealized) .60 .18 .31 (.24) Total from investment operations .73 .32 .52 (.14) Less distributions: Dividends from net investment income (.16) (.13) (.11) -- Net asset value, end of period $6.55 $5.98 $5.79 $5.38 Ratios/supplemental data Net assets, end of period (in millions) $5 $3 $1 $-- Ratio of expenses to average daily net assets(c) 2.14% 2.10% 2.09% 2.07%(d) Ratio of net investment income (loss) to average daily net assets 1.89% 2.29% 3.84% 4.80%(d) Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% Total return(e) 12.41% 5.51% 9.84% (2.49%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 25p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $6.01 $5.80 $5.40 $5.87 $6.17 Income from investment operations: Net investment income (loss) .19 .20 .29 .35 .34 Net gains (losses) (both realized and unrealized) .61 .19 .27 (.62) (.36) Total from investment operations .80 .39 .56 (.27) (.02) Less distributions: Dividends from net investment income (.22) (.18) (.16) (.20) (.27) Distributions from realized gains -- -- -- -- (.01) Total distributions (.22) (.18) (.16) (.20) (.28) Net asset value, end of period $6.59 $6.01 $5.80 $5.40 $5.87 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.18% 1.17% 1.16% 1.14% 1.07% Ratio of net investment income (loss) to average daily net assets 2.69% 3.29% 4.90% 5.75% 5.63% Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% 48% Total return(e) 13.54% 6.72% 10.71% (4.88%) (.19%)
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. (f) Not annualized. -------------------------------------------------------------------------------- 26p -- AXP GLOBAL BOND FUND -- 2003 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IGBFX Class B: IGLOX Class C: -- Class Y: -- -------------------------------------------------------------------------------- (logo) AMERICAN EXPRESS(R) -------------------------------------------------------------------------------- American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6309-99 X (12/03) AXP(R) Global Bond Fund Supplement to the Dec. 30, 2003 Prospectus This supplement describes the Fund's Class I shares and it supplements certain information in the Fund's prospectus dated Dec. 30, 2003. The caption headings used in this Supplement correspond with the caption headings used in the prospectus. You may purchase Class I shares only if you are an eligible investor, as described under the caption "Buying and Selling Shares" below. PAST PERFORMANCE Class I is new as of the date of this supplement and therefore performance information is not available. The performance table is intended to indicate some of the risks of investing in the Fund by showing changes in the Fund's performance over time. Please note that you will find performance returns, after the deduction of certain taxes, for Class A shares of the Fund, together with returns of one or more broad measures of market performance, in the performance table of the prospectus. Past performance for Class I for the period prior to the date the class began operations may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, although not for other differences in expenses. The use of blended performance generally results in lower performance than Class I shares would have experienced had they been offered for the entire period. FEES AND EXPENSES Fund investors pay various expenses. The table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. The table is supplemented as follows: Shareholder Fees (fees paid directly from your investment) Class I Maximum sales charge (load) imposed on purchases (as a percentage of offering price) none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none Annual Fund operating expenses(a) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class I Management fees 0.75 % Distribution (12b-1) fees 0.00 % Other expenses(b) 0.10 % Total 0.85 % (a) Other expenses are based on estimated amounts for the current fiscal year. (b) Other expenses include an administrative services fee and other nonadvisory expenses. Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The table is supplemented as follows: 1 year 3 years Class I $87 $270 BUYING AND SELLING SHARES The description of Investment Options is supplemented as follows: If you are an eligible investor, you may purchase Class I shares at net asset value without an initial sales charge or CDSC on redemption. Class I shares do not have annual distribution and service fees, and do not convert to any other class of shares. The following eligible investors may purchase Class I shares: o Any fund distributed by AEFA, if the fund seeks to achieve its investment objective by investing primarily in shares of the Fund and other American Express Funds. The discussion of buying and selling shares is supplemented as follows: You may purchase, redeem or exchange Class I shares only through AEFA (see the back cover of the prospectus for address and telephone number). You may exchange your Class I shares only for Class I shares of another American Express Fund. AXP(R) Global Equity Fund AXP Global Equity Fund seeks to provide shareholders with long-term capital growth. Prospectus Dec. 30, 2003 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- (logo) American AMERICAN Express(R) EXPRESS(R) Funds -------------------------------------------------------------------------------- Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 5p Past Performance 6p Fees and Expenses 9p Investment Manager 10p Other Securities and Investment Strategies 11p Buying and Selling Shares 12p Valuing Fund Shares 12p Investment Options 12p Purchasing Shares 14p Transactions Through Third Parties 16p Sales Charges 16p Exchanging/Selling Shares 19p Distributions and Taxes 22p Master/Feeder Structure 24p Financial Highlights 25p -------------------------------------------------------------------------------- 2p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS The Fund GOAL AXP Global Equity Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in equity securities of companies around the world, including companies located in developed and emerging countries. American Express Financial Corporation (AEFC) serves as the investment manager to the Fund and is responsible for the Fund's overall administration, distribution and oversight of the investment process. AEFC has entered into an agreement with American Express Asset Management International, Inc. (AEAMI), a wholly owned subsidiary, to act as subadviser to the Fund. Investment decisions for the Fund are made by a team of seasoned investment professionals at Threadneedle Asset Management Limited (Threadneedle) who are associated with AEAMI. Threadneedle is also a wholly owned subsidiary of AEFC. Threadneedle chooses investments by: o Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. o Conducting detailed research on companies in a consistent strategic and macroeconomic framework. o Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. o Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. -------------------------------------------------------------------------------- 3p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Using the global sector strategy, the Fund's portfolio management team constructs the portfolio by investing in most of the stocks on two core lists of holdings, the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the portfolio management team. These discretionary holdings will typically make up a much smaller portion of the Fund. o The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) All Country World Free Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. o The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by o Evaluating the opportunities and risks within regions and sectors; o Assessing valuations; and o Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. o Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. Unusual Market Conditions During weak or declining markets, the Fund may invest more of its assets in money market securities. The Fund will invest in these securities primarily to avoid losses, however this type of investment also could prevent the Fund from achieving its investment objective. During these times, the Fund may make frequent securities trades that could result in increased fees, expenses, and taxes. -------------------------------------------------------------------------------- 4p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Foreign/Emerging Markets Risk Small and Medium Company Risk Issuer Risk Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Small and Medium Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. -------------------------------------------------------------------------------- 5p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year shown on the chart below, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) 40% +39.13% 35% +37.02% 30% 25% +26.16% 20% 15% +14.89% 10% 5% +6.36% +7.18% 0% -5% -7.39% -10% -15% -20% -23.37% -22.29% -23.38% -25% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 During the period shown in the bar chart, the highest return for a calendar quarter was +32.17% (quarter ending December 1999) and the lowest return for a calendar quarter was -18.41% (quarter ending September 2001). 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 expenses. The Fund's Class A year to date return as of Sept. 30, 2003 was +12.56%. -------------------------------------------------------------------------------- 6p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2002) Since Since 1 year 5 years 10 years inception (B&Y) inception (C) Global Equity: Class A Return before taxes -27.79% -5.76% +2.29% N/A N/A Return after taxes on distributions -27.79% -7.17% +0.81% N/A N/A Return after taxes on distributions and sale of fund shares -17.06% -4.05% +1.79% N/A N/A Class B Return before taxes -26.88% -5.48% N/A +0.40%(a) N/A Class C Return before taxes -23.88% N/A N/A N/A -25.56%(c) Class Y Return before taxes -22.94% -4.44% N/A +1.34%(a) N/A MSCI All Country World Free Index -18.98% -1.94% +6.34% +4.07%(b) -18.34%(d) Lipper Global Funds Index -18.65% -0.80% +6.60% +5.02%(b) -17.11%(d)
(a) Inception date was March 20, 1995. (b) Measurement period started April 1, 1995. (c) Inception date was June 26, 2000. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. Past performance for Class Y for the periods prior to March 20, 1995 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, although not for other differences in expenses. -------------------------------------------------------------------------------- 7p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The Return After Taxes on Distributions for a period may be the same as the Return Before Taxes for the same period if there are no distributions or if the distributions are small. The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return Before Taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. 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. The Lipper Global 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. -------------------------------------------------------------------------------- 8p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none
Annual Fund operating expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 0.72% 0.72% 0.72% 0.72% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.53% 0.55% 0.57% 0.58% Total 1.50% 2.27% 2.29% 1.30% (a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Management." (e) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.07% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder services fee for Class Y, a transfer agency fee and other nonadvisory expenses. Effective May 2003, the Fund's transfer agency fee increased. The percentages above reflect the increase. -------------------------------------------------------------------------------- 9p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. The operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated: 1 year 3 years 5 years 10 years Class A(a) $719 $1,022 $1,347 $2,267 Class B $630(b) $1,010(b) $1,316(b) $2,416(c) Class C $232 $ 716 $1,226 $2,630 Class Y $132 $ 412 $ 714 $1,573 (a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares: 1 year 3 years 5 years 10 years Class A(a) $719 $1,022 $1,347 $2,267 Class B $230 $ 710 $1,216 $2,416(b) Class C $232 $ 716 $1,226 $2,630 Class Y $132 $ 412 $ 714 $1,573 (a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in World Growth Portfolio (the Portfolio). The team that manages the Portfolio is led by: Dominic Rossi, Portfolio Manager o Head of international equities. o Managed the Portfolio since 2003. o Joined Threadneedle in 1997 as head of international equities. o Began investment career in 1986. o MBA, City University, London. and -------------------------------------------------------------------------------- 10p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Stephen Thornber, Deputy Portfolio Manager o Head of the global oil sector. o Managed the Portfolio since 2003. o Joined Threadneedle in 1993 as a fund manager. o Began investment career in 1987. o BA, Plymouth Polytechnic. The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.72% of the Portfolio's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The maximum monthly adjustment (increase or decrease) will be 0.12% of the Portfolio's average net assets on an annual basis. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. American Express Asset Management International Inc. (Subadviser), a wholly-owned subsidiary of AEFC, 50192 AXP Financial Center, Minneapolis, Minnesota 55474, subadvises the Fund's assets. The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may employ other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as preferred stocks, convertible securities, and money market securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. -------------------------------------------------------------------------------- 11p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc., you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations. However, securities will be valued at fair value if reliable quotations are not readily available. Securities also will be valued at fair value if their value has been materially affected by events after the close of the primary exchanges or markets on which they trade and before the NAV is calculated. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. Fair value procedures are approved by the Fund's Board of Directors. Certain short-term securities are valued at amortized cost. Foreign investments are valued in U.S. dollars. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. -------------------------------------------------------------------------------- 12p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y --------------- ------------------ -------------- --------------- -------------- Availability Available to Available to Available to Limited to all investors. all all investors. qualifying investors. institutional investors. --------------- ------------------ -------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase price purchase. price is price is is invested in Lower sales invested in invested in shares of the charge for shares of shares of the Fund. larger the Fund. Fund. investments. --------------- ------------------ -------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over $1,000,000, CDSC during applies if 1% CDSC the first you sell your applies if you year shares less sell your decreasing than one year shares less to 0% after after than one year six years. purchase. after purchase. --------------- ------------------ -------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee --------------- ------------------ -------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. --------------- ------------------ -------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. -------------------------------------------------------------------------------- 13p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS PURCHASING SHARES To purchase shares through entities other than American Express Financial Advisors Inc. (the Distributor), please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: --------------------------------------------- ---------------------------------- Individual or joint account The individual or one of the owners listed on the joint account --------------------------------------------- ---------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) --------------------------------------------- ---------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) --------------------------------------------- ---------------------------------- An irrevocable trust, pension trust or The legal entity (not the personal estate representative or trustee, unless no legal entity is designated in the account title) --------------------------------------------- ---------------------------------- Sole proprietorship or single-owner LLC The owner --------------------------------------------- ---------------------------------- Partnership or multi-member LLC The partnership --------------------------------------------- ---------------------------------- Corporate or LLC electing corporate status The corporation on Form 8837 --------------------------------------------- ---------------------------------- Association, club or tax-exempt organization The organization --------------------------------------------- ---------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (www.irs.gov). -------------------------------------------------------------------------------- 14p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 872-4377 for brokerage accounts (800) 967-4377 for wrap accounts -------------------------------------------------------------------------------- 15p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. The sales charge on Class A shares may be lower than 5.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds where you have paid a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges and are excluded from the total. If you or any member of your primary household group elects to split the primary household group into individual household groups (for example, by asking that account statements be sent to separate addresses), assets will no longer be combined for purposes of reducing the sales charge. -------------------------------------------------------------------------------- 16p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Other Class A sales charge policies o IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar group, may be added together to reduce sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of American Express Fund shares (up to the amount sold). Send the Fund a written request along with your payment, indicating the account number, the date and the amount of the sale. -------------------------------------------------------------------------------- 17p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o within the University of Massachusetts After-Tax Savings Program, or o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. -------------------------------------------------------------------------------- 18p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3-1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59-1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, the Distributor and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege, or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgment has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. -------------------------------------------------------------------------------- 19p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. -------------------------------------------------------------------------------- 20p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o delivery instructions, if applicable o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 872-4377 for brokerage accounts (800) 437-3133 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 -------------------------------------------------------------------------------- 21p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100*. o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include non-qualifying dividends, interest income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. -------------------------------------------------------------------------------- 22p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. -------------------------------------------------------------------------------- 23p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund The Fund buys units in the Portfolio The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. -------------------------------------------------------------------------------- 24p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.92 $4.69 $ 8.74 $ 9.18 $7.80 Income from investment operations: Net investment income (loss) .01 -- .02 (.02) .02 Net gains (losses) (both realized and unrealized) .69 (.77) (2.71) .58 1.78 Total from investment operations .70 (.77) (2.69) .56 1.80 Less distributions: Dividends from and in excess of net investment income -- -- (.02) (.04) (.05) Distributions from realized gains -- -- (1.34) (.96) (.37) Total distributions -- -- (1.36) (1.00) (.42) Net asset value, end of period $4.62 $3.92 $ 4.69 $ 8.74 $9.18 Ratios/supplemental data Net assets, end of period (in millions) $366 $406 $714 $1,356 $1,260 Ratio of expenses to average daily net assets(c) 1.50% 1.39% 1.18% 1.22% 1.25% Ratio of net investment income (loss) to average daily net assets .26% .01% .39% (.21%) .14% Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% 83% Total return(e) 17.86% (16.42%) (34.83%) 4.74% 23.59%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 25p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.76 $4.53 $ 8.53 $9.01 $7.68 Income from investment operations: Net investment income (loss) (.03) (.04) (.02) (.08) (.05) Net gains (losses) (both realized and unrealized) .67 (.73) (2.64) .56 1.75 Total from investment operations .64 (.77) (2.66) .48 1.70 Less distributions: Distributions from realized gains -- -- (1.34) (.96) (.37) Net asset value, end of period $4.40 $3.76 $ 4.53 $8.53 $9.01 Ratios/supplemental data Net assets, end of period (in millions) $142 $173 $309 $575 $464 Ratio of expenses to average daily net assets(c) 2.27% 2.16% 1.95% 1.98% 2.02% Ratio of net investment income (loss) to average daily net assets (.52%) (.77%) (.38%) (.95%) (.62%) Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% 83% Total return(e) 17.02% (17.00%) (35.38%) 3.89% 22.66%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 26p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $3.75 $4.52 $ 8.54 $ 9.57 Income from investment operations: Net investment income (loss) (.03) (.04) (.02) (.01) Net gains (losses) (both realized and unrealized) .66 (.73) (2.64) (1.02) Total from investment operations .63 (.77) (2.66) (1.03) Less distributions: Dividends from and in excess of net investment income -- -- (.02) -- Distributions from realized gains -- -- (1.34) -- Total distributions -- -- (1.36) -- Net asset value, end of period $4.38 $3.75 $ 4.52 $ 8.54 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $1 Ratio of expenses to average daily net assets(c) 2.29% 2.19% 1.95% 1.98%(d) Ratio of net investment income (loss) to average daily net assets (.52%) (.78%) (.42%) (1.15%)(d) Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% Total return(e) 16.80% (17.04%) (35.37%) (10.76%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 27p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.94 $4.70 $ 8.76 $ 9.20 $7.81 Income from investment operations: Net investment income (loss) .02 .01 .04 (.01) .03 Net gains (losses) (both realized and unrealized) .69 (.77) (2.73) .58 1.78 Total from investment operations .71 (.76) (2.69) .57 1.81 Less distributions: Dividends from and in excess of net investment income -- -- (.03) (.05) (.05) Distributions from realized gains -- -- (1.34) (.96) (.37) Total distributions -- -- (1.37) (1.01) (.42) Net asset value, end of period $4.65 $3.94 $ 4.70 $ 8.76 $9.20 Ratios/supplemental data Net assets, end of period (in millions) $5 $8 $12 $20 $26 Ratio of expenses to average daily net assets(c) 1.30% 1.21% 1.01% 1.05% 1.13% Ratio of net investment income (loss) to average daily net assets .43% .18% .55% (.06%) .24% Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% 83% Total return(e) 18.02% (16.17%) (34.78%) 4.86% 23.86%
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. (f) Not annualized. -------------------------------------------------------------------------------- 28p -- AXP GLOBAL EQUITY FUND -- 2003 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IGLGX Class B: IDGBX Class C: -- Class Y: IDGYX -------------------------------------------------------------------------------- (logo) AMERICAN EXPRESS(R) -------------------------------------------------------------------------------- American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6334-99 W (12/03) AXP(R) Global Technology Fund AXP Global Technology Fund seeks to provide shareholders with long-term capital growth. Prospectus Dec. 30, 2003 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal Like all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. -------------------------------------------------------------------------------- (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) -------------------------------------------------------------------------------- Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 4p Past Performance 5p Fees and Expenses 8p Investment Manager 9p Other Securities and Investment Strategies 10p Buying and Selling Shares 11p Valuing Fund Shares 11p Investment Options 11p Purchasing Shares 13p Transactions Through Third Parties 15p Sales Charges 15p Exchanging/Selling Shares 18p Distributions and Taxes 21p Master/Feeder Structure 23p Financial Highlights 24p -------------------------------------------------------------------------------- 2p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS The Fund GOAL AXP Global Technology Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified mutual fund that focuses on equity securities of companies in the information technology industry throughout the world. Under normal market conditions, at least 80% of the Fund's net assets are invested in securities of companies in the technology industry. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's goal, American Express Financial Corporation (AEFC), the Fund's investment manager, chooses investments by: o Identifying companies that AEFC believes to be principally engaged in the development, advancement, production, and/or use of products or services related to information processing, data processing, and/or information presentation. o Identifying companies with: o high demand for their products and/or services, o competitive market position, and o effective management. o Considering opportunities and risks within the technology, telecommunications, and media sectors. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o The security is overvalued relative to alternative investments. o The company or the security continues to meet the standards described above. o The company meets earnings expectations. o The company's industry experiences a broad down-turn. Unusual Market Conditions During unusual market conditions, the Fund may invest more of its assets in money market securities. Although the Fund primarily will invest in these securities to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, AEFC may make frequent securities trades that could result in increased fees, expenses, and taxes. -------------------------------------------------------------------------------- 3p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Issuer Risk Market Risk Sector Risk Style Risk Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Sector Risk The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, the Fund may be more susceptible to a single economic, political or regulatory event than a diversified fund. In addition, the fund may invest a significant part of its total assets in securities of companies primarily engaged in the technology, media or telecommunications sectors. This may result in greater market fluctuations than would happen with a fund invested in a wider variety of companies. As these sectors increase or decrease in favor with the investing public, the price of securities of companies that rely heavily on those sectors could become increasingly sensitive to downswings in the economy. Style Risk The Fund purchases growth stocks based on the expectation that the companies will have strong growth in earnings. The price paid often reflects an expected rate of growth. If that growth fails to occur, the price of the stock may decline quickly. -------------------------------------------------------------------------------- 4p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year that the Fund has existed, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) 150% 120% +145.12% 90% 60% 30% +41.51% 0% +7.56% -30% -23.19% -60% -53.79% -42.08% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 During the period shown in the bar chart, the highest return for a calendar quarter was +86.25% (quarter ending December 1999) and the lowest return for a calendar quarter was -48.48% (quarter ending March 2001). 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 expenses. The Fund's Class A year to date return as of Sept. 30, 2003 was +46.23%. Prior to April 19, 2000, the Fund had not engaged in a broad public offering of its shares, or been subject to redemption requests. It had sold shares only to a single investor. One factor impacting the Fund's 1999 performance was the high concentration in technology investments, particularly in securities of internet and communication companies. These investments performed well and had a greater effect on the Fund's performance than similar investments made by other funds because of the high concentration, the lack of cash flows and the smaller size of the Fund. There is no assurance that the Fund's future investments will result in the same level or performance. -------------------------------------------------------------------------------- 5p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2002) Since Since 1 year 5 years inception (A,B,Y) inception (C) Global Technology: Class A Return before taxes -45.42% -7.64% -5.36%(a) N/A Return after taxes on distributions -45.42% -12.18% -9.18%(a) N/A Return after taxes on distributions and sale of fund shares -27.89% -0.81% +0.11%(a) N/A Class B Return before taxes -44.39% -7.21% -5.10%(a) N/A Class C Return before taxes -42.07% N/A N/A -48.54%(c) Class Y Return before taxes -41.76% -6.54% -4.45%(a) N/A GSTI Composite Index -40.27% -3.62% +0.22%(b) -42.41%(d) Lipper Science and Technology Funds Index -41.38% -3.46% -1.91%(b) -43.03%(d) PSE/PCX Technology Index -33.33% +9.54% +10.61%(b) -29.58%(d)
(a) Inception date was Nov. 13, 1996. (b) Measurement period started Dec. 1, 1996. (c) Inception date was June 26, 2000. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. -------------------------------------------------------------------------------- 6p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS The Return After Taxes on Distributions for a period may be the same as the Return Before Taxes for the same period if there are no distributions or if the distributions are small. The Return After Taxes on Distributions and Sale of Fund Shares for a period may be greater than the Return Before Taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. Goldman Sachs Technology Index Composite Index (GSTI Composite Index), an unmanaged index published by Goldman Sachs, is a market capitalization-weighted index of over 200 stocks designed to measure the performance of companies in the technology sector. The Lipper Science and Technology Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Pacific Stock Exchange Technology Index (PSE/PCX Technology Index), an unmanaged index published by the Pacific Exchange, is comprised of 100 listed and over-the-counter stocks from 15 different industries including computer hardware, software, semiconductors, telecommunications, data storage and processing, electronics and biotechnology. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from PSE/PCX Technology Index to the GSTI Composite Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. AEFC will include both indexes in this transition year. In the future, however, only the GSTI Composite Index will be included. -------------------------------------------------------------------------------- 7p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75%(b) none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none 5% 1%(c) none
Annual Fund operating expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 0.76% 0.76% 0.76% 0.76% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.94% 0.99% 0.97% 0.94% Total 1.95% 2.75% 2.73% 1.70% (a) This charge may be reduced depending on the value of your total investments in American Express mutual funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Management." AEFC has agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2004. Under this agreement, total expenses will not exceed 1.99% for Class A; 2.75% for Class B; 2.75% for Class C and 1.82% for Class Y. (e) Includes the impact of a performance incentive adjustment fee that increased the management fee by 0.04% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder services fee, a transfer agency fee and other nonadvisory expenses. Effective May 2003, the Fund's transfer agency fee increased. The percentages above reflect the increase. -------------------------------------------------------------------------------- 8p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. The operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated: 1 year 3 years 5 years 10 years Class A(a) $762 $1,152 $1,568 $2,724 Class B $678(b) $1,153(b) $1,555(b) $2,892(c) Class C $276 $ 847 $1,445 $3,064 Class Y $173 $ 536 $ 924 $2,014 (a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares: 1 year 3 years 5 years 10 years Class A(a) $765 $1,164 $1,587 $2,763 Class B $278 $ 853 $1,455 $2,892(b) Class C $276 $ 847 $1,445 $3,064 Class Y $173 $ 536 $ 924 $2,014 (a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in World Technologies Portfolio (the Portfolio), which is managed by AEFC. Telis Bertsekas, Co-Portfolio Manager o Managed the Portfolio since 2002. o Joined AEFC in 2002. o Prior to that, Equity Analyst at Fidelity Investments covering the beverage and tobacco industries, 1997 to 2000, Portfolio Manager of the Fidelity Select Software and Computer Services Fund, March 2000 to December 2001, the Fidelity Select Computer Fund, June 2001 to February 2002, and the Fidelity Select Technology Fund, January 2002 to February 2002. o Began investment career in 1996. o MBA, Sloan School of Management. -------------------------------------------------------------------------------- 9p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Nina Hughes, Co-Portfolio Manager o Managed the Portfolio since 2002. o Joined AEFC in 2002. o Prior to that, Equity Analyst at Tudor Investment Corporation covering software, infrastructure and service companies, 1998 to 2002, Software Quality Engineer for Baxter Healthcare, 1995 to 1997. o MBA, Babson College. The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.76% of the Portfolio's average daily net assets. Beginning Dec. 1, 2002, the fee will be subject to an adjustment under the terms of a performance incentive arrangement. The maximum monthly adjustment (increase or decrease) will be 0.12% of the Portfolio's average net assets on an annual basis. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may employ other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as money market securities and debt securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Funds policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. -------------------------------------------------------------------------------- 10p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc., you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations. However, securities will be valued at fair value if reliable quotations are not readily available. Securities also will be valued at fair value if their value has been materially affected by events after the close of the primary exchanges or markets on which they trade and before the NAV is calculated. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. Fair value procedures are approved by the Fund's Board of Directors. Certain short-term securities are valued at amortized cost. Foreign investments are valued in U.S. dollars. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. -------------------------------------------------------------------------------- 11p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y --------------- ------------------ -------------- --------------- -------------- Availability Available to Available to Available to Limited to all investors. all all investors. qualifying investors. institutional investors. --------------- ------------------ -------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase price purchase. price is price is is invested in Lower sales invested in invested in shares of the charge for shares of shares of the Fund. larger the Fund. Fund. investments. --------------- ------------------ -------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over $1,000,000, CDSC during applies if 1% CDSC the first you sell your applies if you year shares less sell your decreasing than one year shares less to 0% after after than one year six years. purchase. after purchase. --------------- ------------------ -------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee --------------- ------------------ -------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. --------------- ------------------ -------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $250,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $250,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. -------------------------------------------------------------------------------- 12p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS PURCHASING SHARES To purchase shares through entities other than American Express Financial Advisors Inc. (the Distributor), please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: --------------------------------------------- ---------------------------------- Individual or joint account The individual or one of the owners listed on the joint account --------------------------------------------- ---------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) --------------------------------------------- ---------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) --------------------------------------------- ---------------------------------- An irrevocable trust, pension trust or The legal entity (not the personal estate representative or trustee, unless no legal entity is designated in the account title) --------------------------------------------- ---------------------------------- Sole proprietorship or single-owner LLC The owner --------------------------------------------- ---------------------------------- Partnership or multi-member LLC The partnership --------------------------------------------- ---------------------------------- Corporate or LLC electing corporate status The corporation on Form 8837 --------------------------------------------- ---------------------------------- Association, club or tax-exempt organization The organization --------------------------------------------- ---------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at (www.irs.gov). -------------------------------------------------------------------------------- 13p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 872-4377 for brokerage accounts (800) 967-4377 for wrap accounts -------------------------------------------------------------------------------- 14p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other pertinent information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. The sales charge on Class A shares may be lower than 5.75%, based on the combined market value of: o your current investment in this Fund, o your previous investment in this Fund, and o investments you and your primary household group have made in other American Express mutual funds where you have paid a sales charge. (The primary household group consists of accounts in any ownership for spouses or domestic partners and their unmarried children under 21. For purposes of this policy, domestic partners are individuals who maintain a shared primary residence and have joint property or other insurable interests.) AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do not have sales charges and are excluded from the total. If you or any member of your primary household group elects to split the primary household group into individual household groups (for example, by asking that account statements be sent to separate addresses), assets will no longer be combined for purposes of reducing the sales charge. -------------------------------------------------------------------------------- 15p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Other Class A sales charge policies o IRA purchases or other employee benefit plan purchases made through a payroll deduction plan or through a plan sponsored by an employer, association of employers, employee organization or other similar group, may be added together to reduce sales charges for all shares purchased through that plan, and o if you intend to invest more than $50,000 over a period of 13 months, you can reduce the sales charges in Class A by filing a letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o investors who have a business relationship with a newly associated financial advisor who joined the Distributor from another investment firm provided that (1) the purchase is made within six months of the advisor's appointment date with the Distributor, (2) the purchase is made with proceeds of shares sold that were sponsored by the financial advisor's previous broker-dealer, and (3) the proceeds are the result of a sale of an equal or greater value where a sales load was assessed. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. During that year, the CDSC will be waived only in the circumstances described for waivers for Class B and Class C shares. o purchases made within 90 days after a sale of American Express Fund shares (up to the amount sold). Send the Fund a written request along with your payment, indicating the account number, the date and the amount of the sale. -------------------------------------------------------------------------------- 16p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o within the University of Massachusetts After-Tax Savings Program, or o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. -------------------------------------------------------------------------------- 17p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES Exchanges You can exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. The Fund does not permit market-timing. Do not invest in the Fund if you are a market timer. Excessive trading (market-timing) or other abusive short-term trading practices may disrupt portfolio management strategies, harm performance and increase fund expenses. To prevent abuse or adverse effects on the Fund and its shareholders, the Distributor and the Fund reserve the right to reject any purchase orders, including exchanges, limit the amount, modify or discontinue the exchange privilege, or charge a fee to any investor we believe has a history of abusive trading or whose trading, in our judgment has been disruptive to the Fund. For example, we may exercise these rights if exchanges are too numerous or too large. -------------------------------------------------------------------------------- 18p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this option, send a written request within 90 days of the date your sale request was received and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. -------------------------------------------------------------------------------- 19p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o delivery instructions, if applicable o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 872-4377 for brokerage accounts (800) 437-3133 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 -------------------------------------------------------------------------------- 20p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100*. o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. -------------------------------------------------------------------------------- 21p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. -------------------------------------------------------------------------------- 22p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund The Fund buys units in the Portfolio The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. -------------------------------------------------------------------------------- 23p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $1.03 $1.60 $ 5.26 $ 11.27 $ 5.41 Income from investment operations: Net investment income (loss) (.02) (.03) (.02) (.01) (.08) Net gains (losses) (both realized and unrealized) .71 (.54) (3.64) 7.05 5.94 Total from investment operations .69 (.57) (3.66) 7.04 5.86 Less distributions: Distributions from realized gains -- -- -- (1.29) -- Tax return of capital -- -- -- (11.76)(i) -- Total distributions -- -- -- (13.05) -- Net asset value, end of period $1.72 $1.03 $ 1.60 $ 5.26 $11.27 Ratios/supplemental data Net assets, end of period (in thousands) $145,382 $80,831 $146,139 $319,164 $7,435 Ratio of expenses to average daily net assets(c) 1.94% 1.91% 1.63% 1.24%(e) 1.11%(e) Ratio of net investment income (loss) to average daily net assets (1.47%) (1.65%) (.99%) (.38%) (1.01%) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% 113% Total return(j) 66.99% (35.62%) (69.58%) 66.58% 108.32%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 24p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $ .92 $1.44 $ 4.77 $ 11.02 $ 5.33 Income from investment operations: Net investment income (loss) (.03) (.04) (.04) (.04) (.14) Net gains (losses) (both realized and unrealized) .64 (.48) (3.29) 6.84 5.83 Total from investment operations .61 (.52) (3.33) 6.80 5.69 Less distributions: Distributions from realized gains -- -- -- (1.29) -- Tax return of capital -- -- -- (11.76)(i) -- Total distributions -- -- -- (13.05) -- Net asset value, end of period $1.53 $ .92 $ 1.44 $ 4.77 $11.02 Ratios/supplemental data Net assets, end of period (in thousands) $64,387 $37,877 $67,425 $138,545 $220 Ratio of expenses to average daily net assets(c) 2.75% 2.71% 2.42% 2.01%(f) 1.86%(f) Ratio of net investment income (loss) to average daily net assets (2.27%) (2.45%) (1.78%) (1.16%) (1.76%) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% 113% Total return(j) 66.30% (36.11%) (69.81%) 65.25% 106.72%
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $ .92 $1.44 $ 4.77 $5.05 Income from investment operations: Net investment income (loss) (.03) (.04) (.04) (.01) Net gains (losses) (both realized and unrealized) .64 (.48) (3.29) (.27) Total from investment operations .61 (.52) (3.33) (.28) Net asset value, end of period $1.53 $ .92 $ 1.44 $4.77 Ratios/supplemental data Net assets, end of period (in thousands) $4,000 $1,964 $4,069 $3,298 Ratio of expenses to average daily net assets(c) 2.72% 2.69% 2.42% 2.01%(d),(g) Ratio of net investment income (loss) to average daily net assets (2.26%) (2.39%) (1.84%) (1.17%)(d) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% Total return(j) 66.30% (36.11%) (69.81%) (5.54%)(k)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 25p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $1.03 $1.60 $ 5.25 $ 11.27 $ 5.41 Income from investment operations: Net investment income (loss) (.02) (.03) (.02) -- (.08) Net gains (losses) (both realized and unrealized) .71 (.54) (3.63) 7.03 5.94 Total from investment operations .69 (.57) (3.65) 7.03 5.86 Less distributions: Distributions from realized gains -- -- -- (1.29) -- Tax return of capital -- -- -- (11.76)(i) -- Total distributions -- -- -- (13.05) -- Net asset value, end of period $1.72 $1.03 $ 1.60 $ 5.25 $11.27 Ratios/supplemental data Net assets, end of period (in thousands) $229 $58 $57 $88 $225 Ratio of expenses to average daily net assets(c) 1.69% 1.72% 1.49% .94%(h) 1.11%(h) Ratio of net investment income (loss) to average daily net assets (1.25%) (1.61%) (.89%) (.80%) (1.01%) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% 113% Total return(j) 66.99% (35.63%) (69.52%) 66.27% 108.32%
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) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class A would have been 1.45% and 1.22% for the periods ended Oct. 31, 2000 and 1999, respectively. (f) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class B would have been 2.26% and 1.97% for the periods ended Oct. 31, 2000 and 1999, respectively. (g) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class C would have been 2.26% for the period ended Oct. 31, 2000. (h) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class Y would have been 1.19% and 1.12% for the periods ended Oct. 31, 2000 and 1999, respectively. (i) A distibution payable to a single corporate shareholder. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. -------------------------------------------------------------------------------- 26p --- AXP GLOBAL TECHNOLOGY FUND --- 2003 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its last fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Web site address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: AXIAX Class B: INVBX Class C: AXICX Class Y: -- -------------------------------------------------------------------------------- (logo) AMERICAN EXPRESS(R) -------------------------------------------------------------------------------- American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6395-99 G (12/03) AXP(R) GLOBAL SERIES, INC. STATEMENT OF ADDITIONAL INFORMATION FOR AXP(R) EMERGING MARKETS FUND AXP(R) GLOBAL BALANCED FUND AXP(R) GLOBAL BOND FUND AXP(R) GLOBAL EQUITY FUND AXP(R) GLOBAL TECHNOLOGY FUND (singularly and collectively where the context requires, referred to as the Fund) DEC. 30, 2003 This Statement of Additional Information (SAI) is not a prospectus. It should be read together with the prospectus and the financial statements contained in the most recent Annual Report to shareholders (Annual Report) that may be obtained from your financial advisor or by writing to American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474 or by calling (800) 862-7919. The Independent Auditors' Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities, contained in the Annual Report are incorporated in this SAI by reference. No other portion of the Annual Report, however, is incorporated by reference. The prospectus for the Fund, dated the same date as this SAI, also is incorporated in this SAI by reference. Table of Contents Mutual Fund Checklist p. 3 Fundamental Investment Policies p. 4 Investment Strategies and Types of Investments p. 7 Information Regarding Risks and Investment Strategies p. 9 Security Transactions p. 26 Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation p. 28 Valuing Fund Shares p. 29 Proxy Voting p. 30 Investing in the Fund p. 31 Selling Shares p. 33 Pay-out Plans p. 34 Capital Loss Carryover p. 34 Taxes p. 35 Agreements p. 37 Organizational Information p. 42 Board Members and Officers p. 46 Principal Holders of Securities p. 51 Independent Auditors p. 51 Appendix: Description of Ratings p. 52 -------------------------------------------------------------------------------- 2 -- AXP GLOBAL SERIES, INC. Mutual Fund Checklist [X] Mutual funds are NOT guaranteed or insured by any bank or government agency. You can lose money. [X] Mutual funds ALWAYS carry investment risks. Some types carry more risk than others. [X] A higher rate of return typically involves a higher risk of loss. [X] Past performance is not a reliable indicator of future performance. [X] ALL mutual funds have costs that lower investment return. [X] You can buy some mutual funds by contacting them directly. Others, like this one, are sold mainly through brokers, banks, financial planners, or insurance agents. If you buy through these financial professionals, you generally will pay a sales charge. [X] Shop around. Compare a mutual fund with others of the same type before you buy. OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING Develop a Financial Plan Have a plan -- even a simple plan can help you take control of your financial future. Review your plan with your advisor at least once a year or more frequently if your circumstances change. Dollar-Cost Averaging An investment technique that works well for many investors is one that eliminates random buy and sell decisions. One such system is dollar-cost averaging. Dollar-cost averaging involves building a portfolio through the investment of fixed amounts of money on a regular basis regardless of the price or market condition. This may enable an investor to smooth out the effects of the volatility of the financial markets. By using this strategy, more shares will be purchased when the price is low and less when the price is high. As the accompanying chart illustrates, dollar-cost averaging tends to keep the average price paid for the shares lower than the average market price of shares purchased, although there is no guarantee. While this does not ensure a profit and does not protect against a loss if the market declines, it is an effective way for many shareholders who can continue investing through changing market conditions to accumulate shares to meet long-term goals. Dollar-cost averaging Regular Market price Shares investment of a share acquired $100 $ 6.00 16.7 100 4.00 25.0 100 4.00 25.0 100 6.00 16.7 100 5.00 20.0 $500 $25.00 103.4 Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5) The average price you paid for each share: $4.84 ($500 divided by 103.4) Diversify Diversify your portfolio. By investing in different asset classes and different economic environments you help protect against poor performance in one type of investment while including investments most likely to help you achieve your important goals. Understand Your Investment Know what you are buying. Make sure you understand the potential risks, rewards, costs, and expenses associated with each of your investments. -------------------------------------------------------------------------------- 3 -- AXP GLOBAL SERIES, INC. Fundamental Investment Policies Throughout this SAI, the funds are referred to as follows: AXP Emerging Markets Fund (Emerging Markets) AXP Global Balanced Fund (Global Balanced) AXP Global Bond Fund (Global Bond) AXP Global Equity Fund (Global Equity) AXP Global Technology Fund (Global Technology) Emerging Markets pursues its investment objective by investing all of its assets in Emerging Markets Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. Emerging Markets Portfolio has the same investment objectives, policies and restrictions as the Fund. Global Bond pursues its investment objective by investing all of its assets in World Income Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. World Income Portfolio has the same investment objectives, policies and restrictions as the Fund. Global Equity pursues its investment objective by investing all of its assets in World Growth Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. World Growth Portfolio has the same investment objectives, policies and restrictions as the Fund. Global Technology pursues its investment objective by investing all of its assets in World Technologies Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. World Technologies Portfolio has the same invesmtent objectives, policies and restrictions as the Fund. Emerging Markets Portfolio, World Income Portfolio, World Growth Portfolio and World Technologies Portfolio singularly and collectively, where the context requires, referred to as the Portfolio. References to "Fund" in this SAI, where applicable, refer to the Fund and Portfolio, collectively, to the Fund, singularly, or to the Portfolio, singularly. Fundamental investment policies adopted by the Fund cannot be changed without the approval of a majority of the outstanding voting securities of the Fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Notwithstanding any of the Fund's other investment policies, the Fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the Fund for the purpose of having those assets managed as part of a combined pool. The policies below are fundamental policies that apply to the Fund and may be changed only with shareholder approval. Unless holders of a majority of the outstanding voting securities agree to make the change, the Fund will not: Emerging Markets o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. -------------------------------------------------------------------------------- 4 -- AXP GLOBAL SERIES, INC. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Global Balanced o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Global Bond o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. -------------------------------------------------------------------------------- 5 -- AXP GLOBAL SERIES, INC. Global Equity o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Global Technology o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Except for the fundamental investment policies listed above, the other investment policies described in each Fund's prospectus and in this SAI are not fundamental and may be changed by the board at any time. -------------------------------------------------------------------------------- 6 -- AXP GLOBAL SERIES, INC. Investment Strategies and Types of Investments This table shows various investment strategies and investments that many funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager may make on behalf of the Fund. For a description of principal risks, please see each Fund's prospectus. Notwithstanding the Fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion.
Allowable for the Fund Emerging Global Global Global Global Investment strategies and types of investments Markets Balanced Bond Equity Technology Agency and Government Securities yes yes yes yes yes Borrowing yes yes yes yes yes Cash/Money Market Instruments yes yes yes yes yes Collateralized Bond Obligations yes yes yes yes yes Commercial Paper yes yes yes yes yes Common Stock yes yes yes yes yes Convertible Securities yes yes yes yes yes Corporate Bonds yes yes yes yes yes Debt Obligations yes yes yes yes yes Depositary Receipts yes yes yes yes yes Derivative Instruments (including Options and Futures) yes yes yes yes yes Exchange-Traded Funds yes yes yes yes yes Foreign Currency Transactions yes yes yes yes yes Foreign Securities yes yes yes yes yes High-Yield (High-Risk) Securities (Junk Bonds) yes yes yes yes yes Illiquid and Restricted Securities yes yes yes yes yes Indexed Securities yes yes yes yes yes Inflation Protected Securities yes yes yes yes yes Inverse Floaters no yes yes no no Investment Companies yes yes yes yes yes Lending of Portfolio Securities yes yes yes yes yes Loan Participations yes yes yes yes yes Mortgage- and Asset-Backed Securities yes yes yes yes yes Mortgage Dollar Rolls no yes yes no no Municipal Obligations yes yes yes yes yes Preferred Stock yes yes yes yes yes Real Estate Investment Trusts yes yes yes yes yes Repurchase Agreements yes yes yes yes yes Reverse Repurchase Agreements yes yes yes yes yes Short Sales no no no no no Sovereign Debt yes yes yes yes yes Structured Products yes yes yes yes yes Swap Agreements no no no no no Variable- or Floating-Rate Securities yes yes yes yes yes Warrants yes yes yes yes yes When-Issued Securities and Forward Commitments yes yes yes yes yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes yes yes yes yes
-------------------------------------------------------------------------------- 7 -- AXP GLOBAL SERIES, INC. The following are guidelines that may be changed by the board at any time: Emerging Markets o The Fund may invest up to 20% of its net assets in bonds. o The Fund may invest up to 10% of its net assets in bonds rated below investment grade, including Brady bonds. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Global Balanced o The Fund may not purchase debt securities rated lower than B by Moody's Investors Service Inc. or the equivalent. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Global Bond o The Fund may not purchase debt securities rated lower than B by Moody's Investors Service Inc. or the equivalent. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Global Equity o The Fund may invest up to 20% of its net assets in bonds. o The Fund will not invest more than 5% of its net assets in bonds below investment grade, including Brady bonds. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. -------------------------------------------------------------------------------- 8 -- AXP GLOBAL SERIES, INC. Global Technology o The Fund may invest up to 20% of its net assets in bonds. o The Fund will not invest more than 5% of its net assets in bonds below investment grade, including Brady bonds. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Information Regarding Risks and Investment Strategies RISKS The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). Please remember that a mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with the Fund at any time (for a description of principal risks, please see the prospectus): Call/Prepayment Risk The risk that a bond or other security might be called (or otherwise converted, prepaid, or redeemed) before maturity. This type of risk is closely related to reinvestment risk. Correlation Risk The risk that a given transaction may fail to achieve its objectives due to an imperfect relationship between markets. Certain investments may react more negatively than others in response to changing market conditions. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation (such as payments due on a bond or a note). The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Junk bonds have greater price fluctuations and are more likely to experience a default than investment grade bonds. Event Risk Occasionally, the value of a security may be seriously and unexpectedly changed by a natural or industrial accident or occurrence. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL SERIES, INC. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in emerging market countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Inflation Risk Also known as purchasing power risk, inflation risk measures the effects of continually rising prices on investments. If an investment's yield is lower than the rate of inflation, your money will have less purchasing power as time goes on. Interest Rate Risk The risk of losses attributable to changes in interest rates. This term is generally associated with bond prices (when interest rates rise, bond prices fall). In general, the longer the maturity of a bond, the greater its sensitivity to changes in interest rates. Issuer Risk The risk that an issuer, or the value of its stocks or bonds, will perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Legal/Legislative Risk Congress and other governmental units have the power to change existing laws affecting securities. A change in law might affect an investment adversely. Leverage Risk Some derivative investments (such as options, futures, or options on futures) require little or no initial payment and base their price on a security, a currency, or an index. A small change in the value of the underlying security, currency, or index may cause a sizable gain or loss in the price of the instrument. Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Management Risk The risk that a strategy or selection method utilized by the investment manager may fail to produce the intended result. When all other factors have been accounted for and the investment manager chooses an investment, there is always the possibility that the choice will be a poor one. Market Risk The market may drop and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Reinvestment Risk The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or industry will be more susceptible to changes in price (the more you diversify, the more you spread risk). Small and Medium Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL SERIES, INC. INVESTMENT STRATEGIES The following information supplements the discussion of the Fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes many strategies that many mutual funds use and types of securities that they purchase. Please refer to the section titled Investment Strategies and Types of Investments to see which are applicable to the Fund. Agency and Government Securities The U.S. government and its agencies issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities, including mortgage pass through certificates of the Government National Mortgage Association (GNMA), are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and Reinvestment Risk. Borrowing The Fund may borrow money for temporary or emergency purposes and make other investments or engage in other transactions permissible under the 1940 Act that may be considered a borrowing (such as derivative instruments). Borrowings are subject to costs (in addition to any interest that may be paid) and typically reduce the Fund's total return. Except as qualified above, however, the Fund will not buy securities on margin. Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk and Management Risk. Cash/Money Market Instruments The Fund may maintain a portion of its assets in cash and cash-equivalent investments. Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. The Fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types of instruments generally offer low rates of return and subject the Fund to certain costs and expenses. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk, Inflation Risk, and Management Risk. Collateralized Bond Obligations Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, earns them investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield (High-Risk) Securities (Junk Bonds).) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, and Management Risk. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL SERIES, INC. Commercial Paper Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk, Liquidity Risk, and Management Risk. Common Stock Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Event Risk, Issuer Risk, Legal/Legislative Risk, Management Risk, Market Risk, and Small and Medium Company Risk. Convertible Securities Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Call/Prepayment Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and Reinvestment Risk. Corporate Bonds Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government agency or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield (High-Risk) Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL SERIES, INC. Debt Obligations Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a specified rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High-Yield (High-Risk) Securities (Junk Bonds).) All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating organization or their rating systems, the Fund will attempt to use comparable ratings as standards for selecting investments. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. Depositary Receipts Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, Management Risk, and Market Risk. Derivative Instruments Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward-based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange-traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL SERIES, INC. Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Options on many securities are listed on options exchanges. If the Fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indices (such as the S&P 500 Index), foreign currencies and other financial instruments and indices. The Fund will engage in futures and related options transactions to produce incremental earnings, to hedge existing positions, and to increase flexibility. The Fund intends to comply with Rule 4.5 of the Commodity Futures Trading Commission (CFTC), under which a mutual fund is exempt from the definition of a "commodity pool operator." The Fund, therefore, is not subject to registration or regulation as a pool operator, meaning that the Fund may invest in futures contracts without registering with the CFTC. Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL SERIES, INC. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. Options on Stock Indexes. Options on stock indexes are securities traded on national securities exchanges. An option on a stock index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Tax and Accounting Treatment. As permitted under federal income tax laws and to the extent the Fund is allowed to invest in futures contracts, the Fund intends to identify futures contracts as mixed straddles and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If the Fund is using short futures contracts for hedging purposes, the Fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Federal income tax treatment of gains or losses from transactions in options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, the Fund will either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The IRS has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (the Fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last-quoted sales price on their primary exchange. Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange-traded derivatives since they often can only be closed out with the other party to the transaction. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL SERIES, INC. Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Leverage Risk, Liquidity Risk, and Management Risk. Foreign Currency Transactions Investments in foreign countries usually involve currencies of foreign countries. In addition, the Fund may hold cash and cash-equivalent investments in foreign currencies. As a result, the value of the Fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, the Fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing the Fund's NAV to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. Spot Rates and Derivative Instruments. The Fund conducts its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts) as a hedge against fluctuations in future foreign exchange rates. (See also Derivative Instruments). These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, the Fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. The Fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, the Fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. The Fund also may enter into forward contracts when management of the Fund believes the currency of a particular foreign country may change in relationship to another currency. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. The Fund will not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund's securities or other assets denominated in that currency. The Fund will designate cash or securities in an amount equal to the value of the Fund's total assets committed to consummating forward contracts entered into under the second circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the Fund's commitments on such contracts. At maturity of a forward contract, the Fund may either sell the security and make delivery of the foreign currency or retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an offsetting contract with the same currency trader obligating it to buy, on the same maturity date, the same amount of foreign currency. If the Fund retains the security and engages in an offsetting transaction, the Fund will incur a gain or loss (as described below) to the extent there has been movement in forward contract prices. If the Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline between the date the Fund enters into a forward contract for selling foreign currency and the date it enters into an offsetting contract for purchasing the foreign currency, the Fund will realize a gain to the extent that the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to buy. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to buy exceeds the price of the currency it has agreed to sell. It is impossible to forecast what the market value of securities will be at the expiration of a contract. Accordingly, it may be necessary for the Fund to buy additional foreign currency on the spot market (and bear the expense of that purchase) if the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver and a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign -------------------------------------------------------------------------------- 16 -- AXP GLOBAL SERIES, INC. currency received on the sale of the portfolio security if its market value exceeds the amount of foreign currency the Fund is obligated to deliver. The Fund's dealing in forward contracts will be limited to the transactions described above. This method of protecting the value of the Fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. Although the Fund values its assets each business day in terms of U.S. dollars, it does not intend to convert its foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. Options on Foreign Currencies. The Fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, the Fund may buy put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell the currency for a fixed amount in dollars and will offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities the Fund plans to buy, the Fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. As in the case of other types of options, however, the benefit to the Fund derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, the Fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. The Fund may write options on foreign currencies for the same types of hedging purposes. For example, when the Fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the diminution in value of securities will be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency. If rates move in the manner projected, the put option will expire unexercised and allow the Fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if the Fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting the Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL SERIES, INC. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Foreign Currency Futures and Related Options. The Fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. The Fund may use currency futures for the same purposes as currency forward contracts, subject to Commodity Futures Trading Commission (CFTC) limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the Fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect the Fund against price decline if the issuer's creditworthiness deteriorates. Because the value of the Fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of the Fund's investments denominated in that currency over time. The Fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The Fund will not enter into an option or futures position that exposes the Fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Correlation Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk. Exchange-Traded Funds Exchange-traded funds (ETFs) represent shares of ownership in mutual funds, unit investment trusts or depositary receipts. ETFs hold portfolios of securities that closely track the performance and dividend yield of specific domestic or foreign market indexes. Although one or more of other risks described in this SAI may apply, the largest risks associated with ETFs include: Management Risk and Market Risk. Foreign Securities Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently -------------------------------------------------------------------------------- 18 -- AXP GLOBAL SERIES, INC. informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The introduction of a single currency, the euro, on Jan. 1, 1999 for participating European nations in the Economic and Monetary Union ("EU") presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after Jan. 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other EU countries such as the United Kingdom and Denmark into the euro and the admission of other non-EU countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk, Issuer Risk, and Management Risk. High-Yield (High-Risk) Securities (Junk Bonds) High yield (high-risk) securities are sometimes referred to as junk bonds. They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers. Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield (high-risk) securities include: Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and Management Risk. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL SERIES, INC. Illiquid and Restricted Securities The Fund may invest in illiquid securities (i.e., securities that are not readily marketable). These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. To the extent the Fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for such securities. Disposing of illiquid or restricted securities may involve time-consuming negotiations and legal expense, and it may be difficult or impossible for the Fund to sell such an investment promptly and at an acceptable price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk and Management Risk. Indexed Securities The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk, Management Risk, and Market Risk. Inflation Protected Securities Inflation is a general rise in prices of goods and services. Inflation erodes the purchasing power of an investor's assets. For example, if an investment provides a total return of 7% in a given year and inflation is 3% during that period, the inflation-adjusted, or real, return is 4%. Inflation protected securities are debt securities whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. One type of inflation-protected debt security is issued by the U.S. Treasury. The principal of these securities is adjusted for inflation as indicated by the Consumer Price Index for Urban Consumers (CPI) and interest is paid on the adjusted amount. The CPI is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. If the CPI falls, the principal value of inflation-protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Conversely, if the CPI rises, the principal value of inflation-protected securities will be adjusted upward, and consequently the interest payable on these securities will be increased. Repayment of the original bond principal upon maturity is guaranteed in the case of U.S. Treasury inflation-protected securities, even during a period of deflation. However, the current market value of the inflation-protected securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal. Other issuers of inflation-protected debt securities include other U.S. government agencies or instrumentalities, corporations and foreign governments. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure. Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. By contrast, a fund holding these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders. Although one or more of the other risks described in this SAI may apply, the largest risks associated with inflation-protected securities include: Interest Rate Risk and Market Risk. Inverse Floaters Inverse floaters are created by underwriters using the interest payment on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. The remainder, minus a servicing fee, is paid to holders of inverse floaters. As interest rates go down, the holders of the inverse floaters receive more income and an increase in the price for the inverse floaters. As interest rates go up, the holders of the inverse floaters receive less income and a decrease in the price for the inverse floaters. (See also Derivative Instruments.) -------------------------------------------------------------------------------- 20 -- AXP GLOBAL SERIES, INC. Although one or more of the other risks described in this SAI may apply, the largest risks associated with inverse floaters include: Interest Rate Risk and Management Risk. Investment Companies Investing in securities issued by registered and unregistered investment companies may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Management Risk and Market Risk. Lending of Portfolio Securities The Fund may lend certain of its portfolio securities to broker-dealers. The current policy of the Fund's board is to make these loans, either long- or short-term, to broker-dealers. In making loans, the Fund receives the market price in cash, U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the board. If the market price of the loaned securities goes up, the Fund will get additional collateral on a daily basis. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the Fund receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The Fund may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The Fund will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the lending of portfolio securities include: Credit Risk and Management Risk. Loan Participations Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk and Management Risk. Mortgage- and Asset-Backed Securities Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL SERIES, INC. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Asset-backed securities have structural characteristics similar to mortgage-backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset-backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage- and asset-backed securities include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and Management Risk. Mortgage Dollar Rolls Mortgage dollar rolls are investments whereby an investor would sell mortgage-backed securities for delivery in the current month and simultaneously contract to purchase substantially similar securities on a specified future date. While an investor would forego principal and interest paid on the mortgage-backed securities during the roll period, the investor would be compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk, Interest Rate Risk, and Management Risk. Municipal Obligations Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain -------------------------------------------------------------------------------- 22 -- AXP GLOBAL SERIES, INC. professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Event Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market Risk. Preferred Stock Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk, Management Risk, and Market Risk. Real Estate Investment Trusts Real estate investment trusts (REITs) are entities that manage a portfolio of real estate to earn profits for their shareholders. REITs can make investments in real estate such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Additionally, the failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Issuer Risk, Management Risk, and Market Risk. Repurchase Agreements The Fund may enter into repurchase agreements with certain banks or non-bank dealers. In a repurchase agreement, the Fund buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk and Management Risk. Reverse Repurchase Agreements In a reverse repurchase agreement, the investor would sell a security and enter into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk, Interest Rate Risk, and Management Risk. Short Sales With short sales, an investor sells a security that it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the investor must borrow the security to make delivery to the buyer. The investor is obligated to replace the security that was borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the investor sold the security. A fund that is allowed to utilize short sales will designate cash or liquid securities to cover its open short positions. Those funds also may engage in "short sales against the box," a form of short-selling that involves selling a security that an investor owns (or has an unconditioned right to purchase) for delivery at a specified date in the future. This technique allows an investor to hedge protectively against anticipated declines in the market of its securities. If the value of the securities sold short increased between the date of the short sale and the date on which the borrowed security is replaced, the investor loses the opportunity to participate in the gain. A "short sale against the box" will result in a constructive sale of appreciated securities thereby generating capital gains to the Fund. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Management Risk and Market Risk. Sovereign Debt A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a -------------------------------------------------------------------------------- 23 -- AXP GLOBAL SERIES, INC. payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk, Foreign/Emerging Markets Risk, and Management Risk. Structured Products Structured products are over-the-counter financial instruments created specifically to meet the needs of one or a small number of investors. The instrument may consist of a warrant, an option, or a forward contract embedded in a note or any of a wide variety of debt, equity, and/or currency combinations. Risks of structured products include the inability to close such instruments, rapid changes in the market, and defaults by other parties. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured products include: Credit Risk, Liquidity Risk, and Management Risk. Swap Agreements Swap agreements obligate one party to make payments to the other party based on the change in the market value of an index or other asset. In return, the other party agrees to make payments to the first party based on the return of another index or asset. Swap agreements entail the risk that a party will default on its payment obligations. Interest Rate Swaps. Interest rate swap agreements are used to obtain or preserve a desired return or spread at a lower cost than through a direct investment in an instrument that yields the desired return or spread. Swaps also may protect against changes in the price of securities that an investor anticipates buying or selling at a later date. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to several years. In a standard interest rate swap transaction, two parties agree to exchange their respective commitments to pay fixed or floating rates on a predetermined notional amount. The swap agreement notional amount is the predetermined basis for calculating the obligations that the swap counterparties have agreed to exchange. Under most swap agreements, the obligations of the parties are exchanged on a net basis. The two payment streams are netted out, with each party receiving or paying, as the case may be, only the net amount of the two payments. Swap agreements are usually entered into at a zero net market value of the swap agreement commitments. The market values of the underlying commitments will change over time resulting in one of the commitments being worth more than the other and the net market value creating a risk exposure for one counterparty to the other. Swap agreements may include embedded interest rate caps, floor and collars. In interest rate cap transactions, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or cap. Interest rate floor transactions require one party, in exchange for a premium to agree to make payments to the other to the extent that interest rates fall below a specified level, or floor. In interest rate collar transactions, one party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts. Swap agreements are traded in the over-the-counter market and may be considered to be illiquid. The Fund will enter into interest rate swap agreements only if the claims-paying ability of the other party or its guarantor is considered to be investment grade by the Advisor. Generally, the unsecured senior debt or the claims-paying ability of the other party or its guarantor must be rated in one of the three highest rating categories of at least one NRSRO at the time of entering into the transaction. If there is a default by the other party to such a transaction, the Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. In certain circumstances, the Fund may seek to minimize counterparty risk by requiring the counterparty to post collateral. Currency Swaps. Currency swaps are similar to interest rate swaps, except that they involve currencies instead of interest rates. Although one or more of the other risks described in this SAI may apply, the largest risks associated with swaps include: Liquidity Risk, Credit Risk and Correlation Risk. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL SERIES, INC. Variable- or Floating-Rate Securities The Fund may invest in securities that offer a variable- or floating-rate of interest. Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (e.g., daily, monthly, semiannually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. Variable-rate demand notes include master demand notes that are obligations that permit the Fund to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the Fund as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk and Management Risk. Warrants Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Management Risk and Market Risk. When-Issued Securities and Forward Commitments When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, the Fund may lose the opportunity to obtain a price and yield considered to be advantageous. Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk and Management Risk. Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk, Interest Rate Risk, and Management Risk. The Fund cannot issue senior securities but this does not prohibit certain investment activities for which assets of the Fund are set aside, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, delayed-delivery and when-issued securities transactions, and contracts to buy or sell options, derivatives, and hedging instruments. -------------------------------------------------------------------------------- 25 -- AXP GLOBAL SERIES, INC. Security Transactions Subject to policies set by the board, AEFC is authorized to determine, consistent with the Fund's investment goal and policies, which securities will be purchased, held, or sold. The description of policies and procedures in this section also applies to any Fund subadviser. In determining where the buy and sell orders are to be placed, AEFC has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the board. In selecting broker-dealers to execute transactions, AEFC may consider the price of the security, including commission or mark-up, the size and difficulty of the order, the reliability, integrity, financial soundness, and general operation and execution capabilities of the broker, the broker's expertise in particular markets, and research services provided by the broker. The Fund, AEFC, any subadviser and American Express Financial Advisors Inc. (the Distributor) each have a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the Fund. The Fund's securities may be traded on a principal rather than an agency basis. In other words, AEFC will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. AEFC does not pay the dealer commissions. Instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The board has adopted a policy authorizing AEFC to do so to the extent authorized by law, if AEFC determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or AEFC's overall responsibilities with respect to the Fund and the other American Express mutual funds for which it acts as investment manager. Research provided by brokers supplements AEFC's own research activities. Such services include economic data on, and analysis of, U.S. and foreign economies; information on specific industries; information about specific companies, including earnings estimates; purchase recommendations for stocks and bonds; portfolio strategy services; political, economic, business, and industry trend assessments; historical statistical information; market data services providing information on specific issues and prices; and technical analysis of various aspects of the securities markets, including technical charts. Research services may take the form of written reports, computer software, or personal contact by telephone or at seminars or other meetings. AEFC has obtained, and in the future may obtain, computer hardware from brokers, including but not limited to personal computers that will be used exclusively for investment decision-making purposes, which include the research, portfolio management, and trading functions and other services to the extent permitted under an interpretation by the SEC. When paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge, AEFC must follow procedures authorized by the board. To date, three procedures have been authorized. One procedure permits AEFC to direct an order to buy or sell a security traded on a national securities exchange to a specific broker for research services it has provided. The second procedure permits AEFC, in order to obtain research, to direct an order on an agency basis to buy or sell a security traded in the over-the-counter market to a firm that does not make a market in that security. The commission paid generally includes compensation for research services. The third procedure permits AEFC, in order to obtain research and brokerage services, to cause the Fund to pay a commission in excess of the amount another broker might have charged. AEFC has advised the Fund that it is necessary to do business with a number of brokerage firms on a continuing basis to obtain such services as the handling of large orders, the willingness of a broker to risk its own money by taking a position in a security, and the specialized handling of a particular group of securities that only certain brokers may be able to offer. As a result of this arrangement, some portfolio transactions may not be effected at the lowest commission, but AEFC believes it may obtain better overall execution. AEFC has represented that under all three procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services performed or research provided. All other transactions will be placed on the basis of obtaining the best available price and the most favorable execution. In so doing, if in the professional opinion of the person responsible for selecting the broker or dealer, several firms can execute the transaction on the same basis, consideration will be given by such person to those firms offering research services. Such services may be used by AEFC in providing advice to all American Express mutual funds even though it is not possible to relate the benefits to any particular fund. Each investment decision made for the Fund is made independently from any decision made for another portfolio, fund, or other account advised by AEFC or any of its subsidiaries. When the Fund buys or sells the same security as another portfolio, fund, or account, AEFC carries out the purchase or sale in a way the Fund agrees in advance is fair. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the Fund, the Fund hopes to gain an overall advantage in execution. On occasion, the Fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL SERIES, INC. On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions. The review evaluates execution, operational efficiency, and research services. For fiscal years noted below, each Fund paid total brokerage commissions as follows. Substantially all firms through whom transactions were executed provide research services:
Oct. 31, 2003 Oct. 31, 2002 Oct. 31, 2001 Emerging Markets $2,106,670 $2,989,019 $2,846,492 Global Balanced 175,551 323,220 660,334 Global Bond 23,297 9,621 24,323 Global Equity 1,582,657 3,706,450 9,143,298 Global Technology 5,595,324 3,248,305 755,381
In fiscal year 2003, transactions on which commissions were imputed or paid, were specifically directed to firms in exchange for research services as follows: Transaction amounts Commissions Emerging Markets $ -- $ -- Global Balanced -- -- Global Bond -- -- Global Equity -- -- Global Technology 23,646,583 3,789,830 As of the end of the most recent fiscal year, Emerging Markets and Global Technology held no securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities. As of the end of the most recent fiscal year, each Fund held securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below: Value of securities Fund Name of issuer owned at end of fiscal year Global Balanced Citigroup $1,948,475 Credit Suisse Group 629,036 Morgan Stanley 641,650 Global Bond Bear Stearns Commercial Mtge Securities 681,529 Goldman Sachs Group 1,142,608 J.P. Morgan Chase 561,193 LaBranche 50,688 Lehman Brothers Holdings 493,540 Morgan Stanley, Dean Witter 2,912,576 Global Equity Citigroup 8,928,264 Credit Suisse Group 3,988,090 Morgan Stanley 5,487,000 The portfolio turnover rates in the two most recent fiscal years were as follows: Oct. 31, 2003 Oct. 31, 2002 Emerging Markets 174% 226% Global Balanced 90 99 Global Bond 117 51 Global Equity 132 123 Global Technology 546 391 Higher turnover rates may result in higher brokerage expenses and taxes. The variation in turnover rates for Global Technology can be attributed to the following factors: The past year was a period of extreme volatility for the technology sector. Many of the Fund's holdings depreciated and appreciated very rapidly during the year. This permitted us to buy stocks at attractive price levels and then sell them at significantly higher levels. The Fund has a significant tax loss position and this allowed us to take these profits without any adverse tax consequences to shareholders. -------------------------------------------------------------------------------- 27 -- AXP GLOBAL SERIES, INC. Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation Affiliates of American Express Company (of which AEFC is a wholly-owned subsidiary) may engage in brokerage and other securities transactions on behalf of the Fund according to procedures adopted by the board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. AEFC will use an American Express affiliate only if (i) AEFC determines that the Fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Fund and (ii) the affiliate charges the Fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. No brokerage commissions were paid to brokers affiliated with AEFC for the three most recent fiscal years for Emerging Markets, Global Balanced, Global Bond and Global Equity Funds. Information about brokerage commissions paid by the Fund for the last three fiscal years to brokers affiliated with AEFC is contained in the following table:
As of the end of fiscal year 2003 2002 2001 Percent of aggregate dollar amount of Aggregate dollar Percent of transactions Aggregate dollar Aggregate dollar amount of aggregate involving amount of amount of Nature of commissions brokerage payment of commissions commissions Fund Broker affiliation paid to broker commissions commissions paid to broker paid to broker Global Technology (a) (b) $495,249(c) 8.85% 14.54% $202,910(c) $77,423(c)
(a) American Enterprise Investment Services Inc. (b) Wholly-owned subsidiary of AEFC. (c) Represents brokerage clearing fees. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL SERIES, INC. Valuing Fund Shares As of the end of the most recent fiscal year, the computation looked like this:
Emerging Markets Net assets Shares outstanding Net asset value of one share Class A $155,436,111 divided by 28,459,800 equals $5.46 Class B 72,025,997 13,890,622 5.19 Class C 611,606 117,586 5.20 Class Y 17,637,842 3,192,899 5.52
Global Balanced Net assets Shares outstanding Net asset value of one share Class A $52,801,832 divided by 11,154,470 equals $4.73 Class B 32,772,150 7,041,576 4.65 Class C 644,336 138,932 4.64 Class Y 6,558,863 1,377,777 4.76
Global Bond Net assets Shares outstanding Net asset value of one share Class A $380,369,260 divided by 57,861,587 equals $6.57 Class B 157,749,689 24,002,923 6.57 Class C 4,896,742 747,827 6.55 Class Y 65,051 9,872 6.59
Global Equity Net assets Shares outstanding Net asset value of one share Class A $365,819,585 divided by 79,168,197 equals $4.62 Class B 141,588,339 32,188,495 4.40 Class C 976,538 222,859 4.38 Class Y 5,443,603 1,169,771 4.65
Global Technology Net assets Shares outstanding Net asset value of one share Class A $145,381,527 divided by 84,335,891 equals $1.72 Class B 64,386,508 42,182,314 1.53 Class C 3,999,864 2,615,766 1.53 Class Y 229,242 132,926 1.72
In determining net assets before shareholder transactions, the Fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): o Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. o Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. o Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. o Securities included in the NASDAQ National Market System for which a last-quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. o Futures and options traded on major exchanges are valued at the last-quoted sales price on their primary exchange. o Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars at the current rate of exchange. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL SERIES, INC. o Occasionally, events affecting the value of securities occur between the time the primary market on which the securities are traded closes and the close of the Exchange. If events materially affect the value of securities, the securities will be valued at their fair value according to procedures decided upon in good faith by the board. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. o Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. o Securities without a readily available market price and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When possible, bonds are valued by a pricing service independent from the Fund. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. Proxy Voting GENERAL GUIDELINES The Fund upholds a long tradition of sound and principled corporate governance. For approximately 30 years, the Board of Directors, which consists of a majority of independent directors, has voted proxies. General guidelines are: o Corporate governance matters -- The board supports proxy proposals that require changes or encourage decisions that have been shown to add shareholder value over time and votes against proxy proposals that entrench management. o Changes in capital structure -- The board votes for amendments to corporate documents that strengthen the financial condition of a business. o Stock option plans and other management compensation issues -- The board expects thoughtful consideration to be given by a company's management to developing a balanced compensation structure providing competitive current income with long-term employee incentives directly tied to the interest of shareholders and votes against proxy proposals that dilute shareholder value excessively. o Social and corporate policy issues -- The board believes that proxy proposals should address the business interests of the corporation. Each proposal is viewed in light of the circumstances of the company submitting the proposal. POLICY AND PROCEDURES The policy of the board is to vote all proxies of the companies in which the Fund holds investments, ensuring there are no conflicts between interests of Fund shareholders and those of the Fund's investment manager, AEFC. The recommendation of the management of a company as set out in the company's proxy statement is considered. In each instance in which the Fund votes against the recommendation, the board sends a letter to senior management of the company explaining the basis for its vote. This has permitted both the company's management and the Fund's board to gain better insight into issues presented by proxy proposals. In the case of foreign corporations, proxies of companies located in some countries may not be voted due to requirements of locking up the voting shares and when time constraints prohibit the processing of proxies. From time to time a proxy proposal is presented that has not been previously considered by the board or that AEFC recommends be voted different from the votes cast for similar proposals. In making recommendations to the board about voting on a proposal, AEFC relies on its own investment personnel and information obtained from outside resources, including Institutional Shareholder Services (ISS). AEFC makes the recommendation in writing. The process established by the board to vote proxies requires that either board members or officers who are independent from AEFC consider the recommendation and decide how to vote the proxy proposal. PROXY VOTING RECORD The proxy voting record will be made available on a quarterly basis after the end of the quarter for all companies whose shareholders meetings were completed during the quarter. The information is on a website maintained by ISS and can be accessed through the American Express Company's web page, www.americanexpress.com beginning Jan. 1, 2004. For anyone seeking information on how the Fund voted all proxies during a year, the information can be obtained after Aug. 1, 2004 without cost: o On the ISS web site www.americanexpress.com/funds o On a web site maintained by the Securities and Exchange Commission, www.sec.gov o By calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. -------------------------------------------------------------------------------- 30 -- AXP GLOBAL SERIES, INC. Investing in the Fund SALES CHARGE Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the CDSC and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of the Fund. Shares of the Fund are sold at the public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C, Class I (for Emerging Markets and Global Bond) and Class Y, there is no initial sales charge so the public offering price is the same as the NAV. Class A -- Calculation of the Sales Charge (for Emerging Markets, Global Balanced, Global Equity and Global Technology) Using the sales charge schedule in the table below, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal year, was determined as follows. The sales charge is paid to the Distributor by the person buying the shares.
Net asset value of one share Divided by (1.00 - 0.0575) for a sales charge Public offering price Emerging Markets $5.46 divided by 0.9425 = $5.79 Global Balanced 4.73 divided by 0.9425 = 5.02 Global Equity 4.62 divided by 0.9425 = 4.90 Global Technology 1.72 divided by 0.9425 = 1.82
Sales charges are determined as follows: Sales charge as a percentage of: Total market value Public offering price Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 Class A -- Calculation of the Sales Charge (for Global Bond) Using the sales charge schedule in the table below, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal year, for Global Bond was determined by dividing the NAV of one share, $6.57, by 0.9525 (1.00 - 0.0475) for a maximum 4.75% sales charge for a public offering price of $6.90. The sales charge is paid to the Distributor by the person buying the shares. Sales charges are determined as follows: Sales charge as a percentage of: Total market value Public offering price Net amount invested Up to $49,999 4.75% 4.99% $50,000-$99,999 4.25 4.44 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 -------------------------------------------------------------------------------- 31 -- AXP GLOBAL SERIES, INC. The initial sales charge is waived for certain qualified plans. Participants in these qualified plans may be subject to a deferred sales charge on certain redemptions. The Fund will waive the deferred sales charge on certain redemptions if the redemption is a result of a participant's death, disability, retirement, attaining age 591/2, loans, or hardship withdrawals. The deferred sales charge varies depending on the number of participants in the qualified plan and total plan assets as follows: Deferred Sales Charge Number of participants Total plan assets 1-99 100 or more Less than $1 million 4% 0% $1 million or more 0% 0% Class A -- Reducing the Sales Charge The market value of your investments in the Fund determines your sales charge. For example, suppose you have made an investment that now has a value of $60,000 and you later decide to invest $40,000 more. The value of your investments would be $100,000. As a result, your $40,000 investment qualifies for the lower 3.50% sales charge that applies to investments of at least $100,000 and up to $249,999. If you qualify for a reduced sales charge and purchase shares through different channels (for example, in a brokerage account and also directly from the Fund), you must inform the Distributor of your total holdings when placing any purchase orders. Class A -- Letter of Intent (LOI) If you intend to invest more than $50,000 over a period of time, you can reduce the sales charge in Class A by filing a LOI and committing to invest a certain amount. The agreement can start at any time and you will have up to 13 months to fulfill your commitment. The LOI start date can be backdated by up to 90 days. Your holdings in American Express mutual funds acquired more than 90 days before receipt of your signed LOI in the corporate office will not be counted towards the completion of the LOI. Your investments will be charged the sales charge that applies to the amount you have committed to invest. Five percent of the commitment amount will be placed in escrow. If your commitment amount is reached within the 13-month period, the LOI will end and the shares will be released from escrow. Once the LOI has ended, future sales charges will be determined by the total value of the new investment combined with the market value of the existing American Express mutual fund investments. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. The commitment amount does not include purchases in any class of American Express mutual funds other than Class A; purchases in American Express mutual funds held within a wrap product; and purchases of AXP Cash Management Fund and AXP Tax-Free Money Fund unless they are subsequently exchanged to Class A shares of an American Express mutual fund within the 13 month period. A LOI is not an option (absolute right) to buy shares. If you purchase shares through different channels, for example, in a brokerage account or through a third party, you must inform the Distributor about the LOI when placing any purchase orders during the period of the LOI. Class Y Shares Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC and are not subject to a distribution fee. The following investors are eligible to purchase Class Y shares: o Qualified employee benefit plans* if the plan: o uses a daily transfer recordkeeping service offering participants daily access to American Express mutual funds and has o at least $10 million in plan assets or o 500 or more participants; or o does not use daily transfer recordkeeping and has o at least $3 million invested in American Express mutual funds or o 500 or more participants. o Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code.* These institutions must have at least $10 million in American Express mutual funds. o Nonqualified deferred compensation plans* whose participants are included in a qualified employee benefit plan described above. o State sponsored college savings plans established under Section 529 of the Internal Revenue Code. * Eligibility must be determined in advance. To do so, contact your financial advisor. -------------------------------------------------------------------------------- 32 -- AXP GLOBAL SERIES, INC. SYSTEMATIC INVESTMENT PROGRAMS You decide how often to make payments -- monthly, quarterly, or semiannually. Provided your account meets the minimum balance requirement, you are not obligated to make any payments. You can omit payments or discontinue the investment program altogether. The Fund also can change the program or end it at any time. AUTOMATIC DIRECTED DIVIDENDS Dividends, including capital gain distributions, paid by another American Express mutual fund may be used to automatically purchase shares in the same class of this Fund. Dividends may be directed to existing accounts only. Dividends declared by a fund are exchanged to this Fund the following day. Dividends can be exchanged into the same class of another American Express mutual fund but cannot be split to make purchases in two or more funds. Automatic directed dividends are available between accounts of any ownership except: o Between a non-custodial account and an IRA, or 401(k) plan account or other qualified retirement account of which American Express Trust Company acts as custodian; o Between two American Express Trust Company custodial accounts with different owners (for example, you may not exchange dividends from your IRA to the IRA of your spouse); and o Between different kinds of custodial accounts with the same ownership (for example, you may not exchange dividends from your IRA to your 401(k) plan account, although you may exchange dividends from one IRA to another IRA). Dividends may be directed from accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA or UTMA accounts with identical ownership. The Fund's investment goal is described in its prospectus along with other information, including fees and expense ratios. Before exchanging dividends into another fund, you should read that fund's prospectus. You will receive a confirmation that the automatic directed dividend service has been set up for your account. REJECTION OF BUSINESS The Fund or AECSC reserves the right to reject any business, in its sole discretion. Shares of Global Balanced may not be held by persons who are residents of, or domiciled in, Brazil. Global Balanced reserves the right to redeem accounts of shareholders who establish residence or domicile in Brazil. Selling Shares You have a right to sell your shares at any time. For an explanation of sales procedures, please see the prospectus. During an emergency, the board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of the Fund to redeem shares for more than seven days. Such emergency situations would occur if: o The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or o Disposal of the Fund's securities is not reasonably practicable or it is not reasonably practicable for the Fund to determine the fair value of its net assets, or o The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should the Fund stop selling shares, the board may make a deduction from the value of the assets held by the Fund to cover the cost of future liquidations of the assets so as to distribute fairly these costs among all shareholders. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the Fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the Fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the Fund as determined by the board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should the Fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash. -------------------------------------------------------------------------------- 33 -- AXP GLOBAL SERIES, INC. Pay-out Plans You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you are redeeming a tax-qualified plan account for which American Express Trust Company acts as custodian, you can elect to receive your dividends and other distributions in cash when permitted by law. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of the Fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please consult your selling agent or write American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474, or call (800) 437-3133. Your authorization must be received at least five days before the date you want your payments to begin. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it. The following pay-out plans are designed to take care of the needs of most shareholders in a way AEFC can handle efficiently and at a reasonable cost. If you need a more irregular schedule of payments, it may be necessary for you to make a series of individual redemptions, in which case you will have to send in a separate redemption request for each pay-out. The Fund reserves the right to change or stop any pay-out plan and to stop making such plans available. Plan #1: Pay-out for a fixed period of time If you choose this plan, a varying number of shares will be redeemed at regular intervals during the time period you choose. This plan is designed to end in complete redemption of all shares in your account by the end of the fixed period. Plan #2: Redemption of a fixed number of shares If you choose this plan, a fixed number of shares will be redeemed for each payment and that amount will be sent to you. The length of time these payments continue is based on the number of shares in your account. Plan #3: Redemption of a fixed dollar amount If you decide on a fixed dollar amount, whatever number of shares is necessary to make the payment will be redeemed in regular installments until the account is closed. Plan #4: Redemption of a percentage of net asset value Payments are made based on a fixed percentage of the net asset value of the shares in the account computed on the day of each payment. Percentages range from 0.25% to 0.75%. For example, if you are on this plan and arrange to take 0.5% each month, you will get $100 if the value of your account is $20,000 on the payment date. Capital Loss Carryover For federal income tax purposes, the Fund had total capital loss carryovers at the end of the most recent fiscal year as follows: Fund Total capital loss carryovers Emerging Markets $120,289,410 Global Balanced 47,202,112 Global Bond 14,577,099 Global Equity 673,553,387 Global Technology 425,961,372 If not offset by subsequent capital gains, capital loss carryovers will expire as follows:
Fund 2006 2009 2010 2011 Emerging Markets $32,853,404 $ 87,436,006 $ -- $ -- Global Balanced -- 34,289,758 10,684,989 2,227,365 Global Bond -- 2,191,974 12,385,125 -- Global Equity -- 499,408,551 143,634,885 30,509,951 Global Technology -- 344,662,145 81,299,227 --
It is unlikely that the board will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules. -------------------------------------------------------------------------------- 34 -- AXP GLOBAL SERIES, INC. Taxes For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Example You purchase 100 shares of one fund having a public offering price of $10.00 per share. If the Fund has a sales load of 5.75%, you pay $57.50 in sales load. With a NAV of $9.425 per share, the value of your investment is $942.50. Within 91 days of purchasing that fund, you decide to exchange out of that fund, now at a NAV of $11.00 per share, up from the original NAV of $9.425, and purchase into a second fund, at a NAV of $15.00 per share. The value of your investment is now $1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load when calculating your tax gain or loss in the sale of the first fund shares. So instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50 gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the calculation of your tax gain or loss when you sell shares in the second fund. If you have a nonqualified investment in the Fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the Fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged exceeds annual contribution limitations. You should consult your tax advisor for further details about this complex subject. Net investment income dividends received should be treated as dividend income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of the Fund's dividend that is attributable to dividends the Fund received from domestic (U.S.) securities. For the most recent fiscal year, the net investment income dividends, if paid, which qualified for the corporate deduction were as follows: Fund Net investment income dividends Emerging Markets 0% Global Balanced 100 Global Bond 0 Global Equity 0 Global Technology 0 Under provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the Act), the maximum tax paid on dividends by individuals is reduced to 15% (5% for taxpayers in the 10% and 15% brackets) for tax years 2003 through 2008. The Act also reduces the maximum capital gain rate for securities sold on or after May 6, 2003 through 2008 from 20% to 15% (5% for taxpayers in the 10% and 15% brackets). The Act provides that only certain qualified dividend income (QDI) will be subject to the 15% and 5% tax rates. QDI is dividends earned from domestic corporations and qualified foreign corporations. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established U.S. securities market (ADRs), and certain other corporations eligible for relief under an income tax treaty with the U.S. that includes an exchange of information agreement (except Barbados). Excluded are passive foreign investment companies (PFICs), foreign investment companies and foreign personal holding companies. Holding periods for shares must also be met to be eligible for QDI treatment (60 days for stock and 90 days for preferreds). For the most recent fiscal year, the QDI for individuals was as follows: Fund QDI for individuals Emerging Markets 0% Global Balanced 100 Global Bond 0 Global Equity 0 Global Technology 0 The Fund may be subject to U.S. taxes resulting from holdings in a passive foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. -------------------------------------------------------------------------------- 35 -- AXP GLOBAL SERIES, INC. Income earned by the Fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the Fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the Fund will be eligible to file an election with the Internal Revenue Service under which shareholders of the Fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the Fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes. Capital gain distributions, if any, received by shareholders should be treated as long-term capital gains regardless of how long shareholders owned their shares. Short-term capital gains earned by the Fund are paid to shareholders as part of their ordinary income dividend and are taxable. Special rates on capital gains may apply to sales of precious metals, if any, owned directly by the Fund and to investments in REITs. Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition also are treated as ordinary gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders as ordinary income. Under federal tax law, by the end of a calendar year the Fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. The Fund intends to comply with federal tax law and avoid any excise tax. The Internal Revenue Code imposes two asset diversification rules that apply to the Fund as of the close of each quarter. First, as to 50% of its holdings, the Fund may hold no more than 5% of its assets in securities of one issuer and no more than 10% of any one issuer's outstanding voting securities. Second, the Fund cannot have more than 25% of its assets in any one issuer. For purposes of the excise tax distributions, "section 988" ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end. If a mutual fund is the holder of record of any share of stock on the record date for any dividend payable with respect to the stock, the dividend will be included in gross income by the Fund as of the later of (1) the date the share became ex-dividend or (2) the date the Fund acquired the share. Because the dividends on some foreign equity investments may be received some time after the stock goes ex-dividend, and in certain rare cases may never be received by the Fund, this rule may cause the Fund to pay income to its shareholders that it has not actually received. To the extent that the dividend is never received, the Fund will take a loss at the time that a determination is made that the dividend will not be received. Distributions, if any, that are in excess of the Fund's current or accumulated earnings and profits will first reduce a shareholder's tax basis in the Fund and, after the basis is reduced to zero, will generally result in capital gains to a shareholder when the shares are sold. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to Fund distributions. -------------------------------------------------------------------------------- 36 -- AXP GLOBAL SERIES, INC. Agreements INVESTMENT MANAGEMENT SERVICES AGREEMENT AEFC, a wholly-owned subsidiary of American Express Company, is the investment manager for the Fund. Under the Investment Management Services Agreement, AEFC, subject to the policies set by the board, provides investment management services. For its services, AEFC is paid a fee based on the following schedule. Each class of the Fund pays its proportionate share of the fee.
Annual rate at each asset level Assets (billions) Emerging Markets Global Balanced Global Bond Global Equity Global Technology First $0.25 1.10% 0.790% 0.770% 0.800% 0.720% Next 0.25 1.08 0.765 0.745 0.775 0.695 Next 0.25 1.06 0.740 0.720 0.750 0.670 Next 0.25 1.04 0.715 0.695 0.725 0.645 Next 1.00 1.02 0.690 0.670 0.700 0.620 Over 2.00 1.00 0.665 0.670 0.675 0.595
On the last day of the most recent fiscal year, the daily rate applied to each Fund's net assets was equal to the following percent on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Fund Daily rate Emerging Markets 1.100% Global Balanced 0.790 Global Bond 0.757 Global Equity 0.786 Global Technology 0.720 For Emerging Markets, Global Balanced, Global Equity and Global Technology, before the fee based on the asset charge is paid, it is adjusted for investment performance. The adjustment, determined monthly, will be determined by measuring the percentage difference over a rolling 12-month period between the performance of one Class A share of the Fund and the change in a Lipper Index (Index). The Lipper Indexes are as follows: Fund Lipper Index Emerging Markets Lipper Emerging Markets Funds Index Global Balanced Lipper Global Flexible Funds Index Global Equity Lipper Global Funds Index Global Technology Lipper Science and Technology Funds Index The performance difference is then used to determine the adjustment rate. The adjustment rate for Emerging Markets, Global Equity and Global Technology, computed to five decimal places, is determined in accordance with the following table: Performance difference Adjustment rate 0.00%-0.50% 0 0.50%-1.00% 6 basis points times the performance difference over 0.50% (maximum of 3 basis points if a 1% performance difference) 1.00%-2.00% 3 basis points, plus 3 basis points times the performance difference over 1.00% (maximum 6 basis points if a 2% performance difference) 2.00%-4.00% 6 basis points, plus 2 basis points times the performance difference over 2.00% (maximum 10 basis points if a 4% performance difference) 4.00%-6.00% 10 basis points, plus 1 basis point times the performance difference over 4.00% (maximum 12 basis points if a 6% performance difference) 6.00% or more 12 basis points For example, if the performance difference is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the Fund is 0.0012 per year. Where the Fund's Class A performance exceeds that of the Index, the fee paid to AEFC will increase. Where the performance of the Index exceeds the performance of the Fund's Class A shares, the fee paid to AEFC will decrease. -------------------------------------------------------------------------------- 37 -- AXP GLOBAL SERIES, INC. The adjustment rate for Global Balanced, computed to five decimal places, is determined in accordance with the following table: Performance difference Adjustment rate 0.00%-0.50% 0 0.50%-1.00% 6 basis points times the Performance Difference over 0.50% (maximum of 3 basis points if a 1% Performance Difference) 1.00%-2.00% 3 basis points, plus 3 basis points times the Performance Difference over 1.00% (maximum 6 basis points if a 2% Performance Difference) 2.00%-3.00% 6 basis points, plus 2 basis points times the Performance Difference over 2.00% (maximum of 8 basis points if a 3% Performance Difference) 3.00% or more 8 basis points For example, if the performance difference is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the Fund is 0.0008 per year. Where the Fund's Class A performance exceeds that of the Index, the fee paid to AEFC will increase. Where the performance of the Index exceeds the performance of the Fund's Class A shares, the fee paid to AEFC will decrease. The 12-month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. For the most recent fiscal year, the adjustment changed the fee as follows: Fund Adjustment increased/(decreased) fee by Emerging Markets $(100,852) Global Balanced (19,267) Global Equity (382,729) Global Technology 67,468 The management fee is paid monthly. Under the agreement, the total amount paid for the following fiscal years was as follows: Fund 2003 2002 2001 Emerging Markets $2,181,279 $2,578,135 $3,039,690 Global Balanced 702,933 882,643 1,247,975 Global Bond 4,084,088 3,677,461 3,918,640 Global Equity 3,763,415 5,986,053 8,625,604 Global Technology 1,185,180 1,358,065 2,347,216 Under the agreement, the Fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees; audit and certain legal fees; fidelity bond premiums; registration fees for shares; office expenses; postage of confirmations except purchase confirmations; consultants' fees; compensation of board members, officers and employees; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; and expenses properly payable by the Fund, approved by the board. Under the agreement, nonadvisory expenses, net of earnings credits, paid by each Fund for the following fiscal years were as follows: Fund 2003 2002 2001 Emerging Markets $477,412 $491,764 $556,047 Global Balanced 189,130 178,732 216,540 Global Bond 450,208 359,934 325,031 Global Equity 476,898 611,344 705,255 Global Technology 235,797 330,225 579,060 Basis for board approving the investment advisory contract Based on its work throughout the year and detailed analysis by the Contracts Committee of reports provided by AEFC, the independent board members determined to renew the Investment Management Services Agreement and Subadvisory Agreements (where applicable) based on: o tangible steps AEFC has taken to improve the competitive ranking and consistency of the investment performance of the Fund, including changes in leadership, portfolio managers, compensation structures, and the implementation of management practices, o continued commitment to expand the range of investment options that it offers investors, through repositioning existing funds and creating new funds, -------------------------------------------------------------------------------- 38 -- AXP GLOBAL SERIES, INC. o consistent effort to provide a management structure that imposes disciplines that ensure adherence to stated management style and expected risk characteristics, o additional time needed to evaluate the efficacy of the new AEFC management structure that has produced improved performance results in the short term, o benefit of economy of scale that results from the graduated fee structure and the reasonableness of fees in light of the fees paid by similar funds in the industry, o competitive total expenses that are either at or only slightly above the median expenses of a group of comparable funds based on a report prepared by Lipper Inc., and o reasonable level of AEFC's profitability from its mutual fund operations. Subadvisory Agreements (Emerging Markets, Global Balanced and Global Equity) The assets of the Fund are managed by a Subadviser that has been selected by AEFC, subject to the review and approval of the board. AEFC has recommended the Subadviser for the Fund to the board based upon its assessment of the skills of the Subadviser in managing other assets with goals and investment strategies substantially similar to those of the Fund. Short-term investment performance is not the only factor in selecting or terminating a Subadviser, and AEFC does not expect to make frequent changes of Subadvisers. The Subadviser has discretion, subject to oversight by the board and AEFC, to purchase and sell portfolio assets, consistent with the Fund's investment objectives, policies, and restrictions. Generally, the services that the Subadviser provides to the Fund are limited to asset management and related recordkeeping services. AEFC has entered into an advisory agreement with the Subadviser known as a Subadvisory Agreement. A Subadviser may also serve as a discretionary or non-discretionary investment advisor to management or advisory accounts that are unrelated in any manner to AEFC or its affiliates. American Express Asset Management International Inc.: American Express Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC, 50192 AXP Financial Center, Minneapolis, MN 55474, subadvises the Fund's assets. AEAMI, subject to the supervision and approval of AEFC, provides investment advisory assistance and day-to-day management of the Fund's portfolios, as well as investment research and statistical information, under a Subadvisory Agreement with AEFC. Investment decisions for the Fund are made by a team of seasoned investment professionals at Threadneedle Asset Management Limited (Threadneedle) who are associated with AEAMI. Threadneedle is also a wholly owned subsidiary of AEFC. Under the Subadvisory Agreement, the fee, based on average daily net assets that are subject to the Subadviser's investment discretion, is equal to 0.50% for Emerging Markets and 0.35% for Global Balanced and Global Equity. The total amount paid by AEFC to AEAMI for the following fiscal years was as follows: Fund 2003 2002 2001 Emerging Markets $1,033,684 $1,168,791 $1,407,470 Global Balanced 208,168 416,452 359,504 Global Equity 1,841,195 3,015,169 4,775,231 ADMINISTRATIVE SERVICES AGREEMENT The Funds have an Administrative Services Agreement with AEFC. Under this agreement, the Funds pay AEFC for providing administration and accounting services. The fee is calculated as follows:
Annual rate at each asset level Assets (billions) Emerging Markets Global Balanced Global Bond Global Equity Global Technology First $0.25 0.10% 0.060% 0.060% 0.060% 0.060% Next 0.25 0.09 0.055 0.055 0.055 0.055 Next 0.25 0.08 0.050 0.050 0.050 0.050 Next 0.25 0.07 0.045 0.045 0.045 0.045 Next 1.00 0.06 0.040 0.040 0.040 0.040 Over 2.00 0.05 0.035 0.040 0.035 0.035
-------------------------------------------------------------------------------- 39 -- AXP GLOBAL SERIES, INC. On the last day of the most recent fiscal year, the daily rate applied to each of the Fund's net assets was equal to the following percent on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Fund Daily rate Emerging Markets 0.100% Global Balanced 0.060 Global Bond 0.057 Global Equity 0.057 Global Technology 0.060 The following fees were paid under the agreement for the three most recent fiscal years. 2003 2002 2001 Emerging Markets $208,342 $234,669 $278,576 Global Balanced 56,559 71,921 98,158 Global Bond 311,211 279,674 297,761 Global Equity 304,662 463,678 710,917 Global Technology 93,713 112,662 194,084 TRANSFER AGENCY AGREEMENT The Fund has a Transfer Agency Agreement with American Express Client Service Corporation (AECSC). This agreement governs AECSC's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the Fund's shares. Under the agreement, AECSC will earn a fee from the Fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The rates for the Fund's different classes per year are the following:
Class A Class B Class C Class I Class Y Emerging Markets $19.50 $20.50 $20.00 $1.00 $17.50 Global Balanced 19.50 20.50 20.00 N/A 17.50 Global Bond 20.50 21.50 21.00 1.00 18.50 Global Equity 19.50 20.50 20.00 N/A 17.50 Global Technology 19.50 20.50 20.00 N/A 17.50
In addition, an annual closed-account fee of $5.00 per inactive account, may be charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system, generally within one year. The fees paid to AECSC may be changed by the board without shareholder approval. DISTRIBUTION AGREEMENT American Express Financial Advisors Inc. is the Fund's principal underwriter (the Distributor). The Fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing Fund shares are paid to the Distributor daily. These charges and the amount retained after paying commissions to personal financial advisors, and other expenses was as follows:
2003 2002 2001 Sales Amount Sales Amount Sales Amount charges retained by charges retained by charges retained by Fund collected the Distributor collected the Distributor collected the Distributor Emerging Markets $ 243,062 $(2,681,731) $325,336 $(4,049,970) $ 410,423 $(2,787,747) Global Balanced 122,917 45,326 152,020 46,735 260,328 67,647 Global Bond 1,009,917 537,388 515,760 274,717 468,887 343,669 Global Equity 437,154 196,939 782,415 348,443 1,754,734 602,652 Global Technology 543,360 150,041 717,011 262,977 2,013,013 510,687
Part of the sales charge may be paid to selling dealers who have agreements with the Distributor. The Distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. -------------------------------------------------------------------------------- 40 -- AXP GLOBAL SERIES, INC. SHAREHOLDER SERVICE AGREEMENT With respect to Class Y shares, 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 average daily net assets. PLAN AND AGREEMENT OF DISTRIBUTION For Class A, Class B and Class C shares, to help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, the Fund and the Distributor entered into a Plan and Agreement of Distribution (Plan) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, of the type known as a reimbursement plan, the Fund pays a fee up to actual expenses incurred at an annual rate of 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. Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material change to expenses charged under the Class A plan. Expenses covered under this Plan include sales commissions; business, employee and financial advisor expenses charged to distribution of Class A, Class B and Class C shares; and overhead appropriately allocated to the sale of Class A, Class B and Class C shares. These expenses also include costs of providing personal service to shareholders. A substantial portion of the costs are not specifically identified to any one of the American Express mutual funds. The Plan must be approved annually by the board, including a majority of the disinterested board members, if it is to continue for more than a year. At least quarterly, the board must review written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of board members who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the Distributor. The Plan (or any agreement related to it) will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the board members, including a majority of the board members who are not interested persons of the Fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested board members is the responsibility of the other disinterested board members. No board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement. For the most recent fiscal year, the Fund paid the following fees: Class of shares Funds Class A Class B Class C Emerging Markets $334,914 $ 639,893 $ 5,003 Global Balanced 130,201 337,140 7,203 Global Bond 934,595 1,630,210 40,221 Global Equity 921,298 1,518,123 9,258 Global Technology 261,243 477,623 26,874 The fee is not allocated to any one service (such as advertising, payments to underwriters, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. CUSTODIAN AGREEMENT The Fund's securities and cash are held by American Express Trust Company, 200 AXP Financial Center, Minneapolis, MN 55474, through a custodian agreement. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. For its services, the Fund pays the custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. The custodian may enter into a sub-custodian agreement with the Bank of New York, 90 Washington Street, New York, NY 10286. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of Bank of New York or in other financial institutions as permitted by law and by the Fund's sub-custodian agreement. -------------------------------------------------------------------------------- 41 -- AXP GLOBAL SERIES, INC. Organizational Information The Fund is an open-end management investment company. The Fund headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The shares of the Fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of the Fund would have the same rights to dividends and assets as every other share of that Fund. VOTING RIGHTS As a shareholder in the Fund, you have voting rights over the Fund's management and fundamental policies. You are entitled to vote based on your total dollar interest in the Fund. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. All shares have cumulative voting rights with respect to the election of board members. This means that you have as many votes as the dollar amount you own, including the fractional amount, multiplied by the number of members to be elected. DIVIDEND RIGHTS Dividends paid by the Fund, if any, with respect to each class of shares, if applicable, will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures. -------------------------------------------------------------------------------- 42 -- AXP GLOBAL SERIES, INC.
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) California Tax-Exempt Trust 4/7/86 Business Trust(2) MA 6/30 AXP(R) California Tax-Exempt Fund No AXP(R) Dimensions Series, Inc.(4) 2/20/68, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) Growth Dimensions Fund Yes AXP(R) New Dimensions Fund Yes AXP(R) Discovery Series, Inc.(4) 4/29/81, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) Core Bond Fund Yes AXP(R) Discovery Fund Yes AXP(R) Income Opportunities Fund Yes AXP(R) Limited Duration Bond Fund Yes AXP(R) Equity Series, Inc.(4) 3/18/57, 6/13/86(1) Corporation NV/MN 11/30 AXP(R) Equity Select Fund Yes AXP(R) Fixed Income Series, Inc.(4) 6/27/74, 6/31/86(1) Corporation NV/MN 8/31 AXP(R) Diversified Bond Fund(5) Yes AXP(R) Global Series, Inc. 10/28/88 Corporation MN 10/31 AXP(R) Emerging Markets Fund Yes AXP(R) Global Balanced Fund Yes AXP(R) Global Bond Fund No AXP(R) Global Equity Fund(6) Yes AXP(R) Global Technology Fund(3) No AXP(R) Government Income Series, Inc.(4) 3/12/85 Corporation MN 5/31 AXP(R) Short Duration U.S. Government Fund(5) Yes AXP(R) U.S. Government Mortgage Fund Yes AXP(R) Growth Series, Inc. 5/21/70, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) Growth Fund Yes AXP(R) Large Cap Equity Fund Yes AXP(R) Large Cap Value Fund Yes AXP(R) Quantitative Large Cap Equity Fund Yes AXP(R) Research Opportunities Fund Yes AXP(R) High Yield Income Series, Inc.(4) 8/17/83 Corporation MN 5/31 AXP(R) High Yield Bond Fund(5) Yes AXP(R) High Yield Tax-Exempt Series, Inc.(4) 12/21/78, 6/13/86(1) Corporation NV/MN 11/30 AXP(R) High Yield Tax-Exempt Fund Yes AXP(R) Income Series, Inc.(4) 2/10/45, 6/13/86(1) Corporation NV/MN 5/31 AXP(R) Selective Fund Yes AXP(R) International Series, Inc.(4) 7/18/84 Corporation MN 10/31 AXP(R) European Equity Fund No AXP(R) International Fund Yes AXP(R) Investment Series, Inc. 1/18/40, 6/13/86(1) Corporation NV/MN 9/30 AXP(R) Diversified Equity Income Fund Yes AXP(R) Mid Cap Value Fund Yes AXP(R) Mutual Yes
-------------------------------------------------------------------------------- 43 -- AXP GLOBAL SERIES, INC.
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS (continued) Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) Managed Series, Inc. 10/9/84 Corporation MN 9/30 AXP(R) Managed Allocation Fund Yes AXP(R) Market Advantage Series, Inc. 8/25/89 Corporation MN 1/31 AXP(R) Blue Chip Advantage Fund Yes AXP(R) Mid Cap Index Fund No AXP(R) S&P 500 Index Fund No AXP(R) Small Company Index Fund Yes AXP(R) Money Market Series, Inc. 8/22/75, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) Cash Management Fund Yes AXP(R) Partners Series, Inc. 3/20/01 Corporation MN 5/31 AXP(R) Partners Aggressive Growth Fund Yes AXP(R) Partners Fundamental Value Fund Yes AXP(R) Partners Growth Fund Yes AXP(R) Partners Select Value Fund Yes AXP(R) Partners Small Cap Core Fund Yes AXP(R) Partners Small Cap Value Fund No AXP(R) Partners Value Fund Yes AXP(R) Partners International Series, Inc. 5/9/01 Corporation MN 10/31 AXP(R) Partners International Aggressive Growth Fund Yes AXP(R) Partners International Core Fund Yes AXP(R) Partners International Select Value Fund Yes AXP(R) Partners International Small Cap Fund Yes AXP(R) Progressive Series, Inc.(4) 4/23/68, 6/13/86(1) Corporation NV/MN 9/30 AXP(R) Progressive Fund Yes AXP(R) Sector Series, Inc.(3),(4) 3/25/88 Corporation MN 6/30 AXP(R) Utilities Fund Yes AXP(R) Selected Series, Inc.(4) 10/5/84 Corporation MN 3/31 AXP(R) Precious Metals Fund No AXP(R) Special Tax-Exempt Series Trust 4/7/86 Business Trust(2) MA 6/30 AXP(R) Insured Tax-Exempt Fund Yes AXP(R) Massachusetts Tax-Exempt Fund No AXP(R) Michigan Tax-Exempt Fund No AXP(R) Minnesota Tax-Exempt Fund No AXP(R) New York Tax-Exempt Fund No AXP(R) Ohio Tax-Exempt Fund No AXP(R) Stock Series, Inc.(4) 2/10/45, 6/13/86(1) Corporation NV/MN 9/30 AXP(R) Stock Fund Yes AXP(R) Strategy Series, Inc. 1/24/84 Corporation MN 3/31 AXP(R) Equity Value Fund Yes AXP(R) Focused Growth Fund(3) No AXP(R) Partners Small Cap Growth Fund(3) Yes AXP(R) Small Cap Advantage Fund Yes AXP(R) Strategy Aggressive Fund Yes
-------------------------------------------------------------------------------- 44 -- AXP GLOBAL SERIES, INC.
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS (continued) Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) Tax-Exempt Series, Inc. 9/30/76, 6/13/86(1) Corporation NV/MN 11/30 AXP(R) Intermediate Tax-Exempt Fund Yes AXP(R) Tax-Exempt Bond Fund Yes AXP(R) Tax-Free Money Series, Inc.(4) 2/29/80, 6/13/86(1) Corporation NV/MN 12/31 AXP(R) Tax-Free Money Fund Yes
(1) Date merged into a Minnesota corporation incorporated on April 7, 1986. (2) Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the trust itself is unable to meet its obligations. (3) Effective Feb. 7, 2002, AXP(R) Focus 20 Fund changed its name to AXP(R) Focused Growth Fund, AXP(R) Innovations Fund changed its name to AXP(R) Global Technology Fund, AXP(R) Small Cap Growth Fund changed its name to AXP(R) Partners Small Cap Growth Fund and AXP(R) Utilities Income Fund, Inc. created a series, AXP(R) Utilities Fund. (4) Effective Nov. 13, 2002, AXP(R) Bond Fund, Inc. changed its name to AXP(R) Fixed Income Series, Inc. and created a series, AXP(R) Bond Fund, AXP(R) Discovery Fund, Inc. changed its name to AXP(R) Discovery Series, Inc. and created a series, AXP(R) Discovery Fund, AXP(R) Equity Select Fund, Inc. changed its name to AXP(R) Equity Series, Inc. and created a series, AXP(R) Equity Select Fund, AXP(R) Extra Income Fund, Inc. changed its name to AXP(R) High Yield Income Series, Inc. and created a series, AXP(R) Extra Income Fund, AXP(R) Federal Income Fund, Inc. changed its name to AXP(R) Government Income Series, Inc., AXP(R) High Yield Tax-Exempt Fund, Inc. changed its name to AXP(R) High Yield Tax-Exempt Series, Inc. and created a series, AXP(R) High Yield Tax-Exempt Fund, AXP(R) International Fund, Inc. changed its name to AXP(R) International Series, Inc., AXP(R) New Dimensions Fund, Inc. changed its name to AXP(R) Dimensions Series, Inc., AXP(R) Precious Metals Fund, Inc. changed its name to AXP(R) Selected Series, Inc. and created a series, AXP(R) Precious Metals Fund, AXP(R) Progressive Fund, Inc. changed its name to AXP(R) Progressive Series, Inc. and created a series, AXP(R) Progressive Fund, AXP(R) Selective Fund, Inc. changed its name to AXP(R) Income Series, Inc. and created a series, AXP(R) Selective Fund, AXP(R) Stock Fund, Inc. changed its name to AXP(R) Stock Series, Inc. and created a series, AXP(R) Stock Fund, AXP(R) Tax-Free Money Fund, Inc. changed its name to AXP(R) Tax-Free Money Series, Inc. and created a series, AXP(R) Tax-Free Money Fund, and AXP(R) Utilities Income Fund, Inc. changed its name to AXP(R) Sector Series, Inc. (5) Effective June 27, 2003, AXP(R) Bond Fund changed its name to AXP(R) Diversified Bond Fund, AXP(R) Federal Income Fund changed its name to AXP(R) Short Duration U.S. Government Fund and AXP(R) Extra Income Fund changed its name to AXP(R) High Yield Bond Fund. (6) Effective Oct. 20, 2003, AXP(R) Global Growth Fund changed its name to AXP(R) Global Equity Fund. -------------------------------------------------------------------------------- 45 -- AXP GLOBAL SERIES, INC. 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 86 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 Principal occupation Other directorships Committee memberships address, with Fund and during past five years age length of service ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Arne H. Carlson Board member Chair, Board Services Joint Audit, 901 S. Marquette Ave. since 1999 Corporation (provides Contracts, Minneapolis, MN 55402 administrative services Executive, Age 69 to boards). Former Investment Review, Governor of Minnesota Board Effectiveness ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Philip J. Carroll, Jr. Board member Retired Chairman and Scottish Power PLC, 901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Vulcan Materials Minneapolis, MN 55402 (engineering and Company, Inc. Age 65 construction) since 1998 (construction materials/chemicals) ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Livio D. DeSimone Board member Retired Chair of the Cargill, Joint Audit, 30 Seventh Street East since 2001 Board and Chief Incorporated Contracts, Executive Suite 3050 Executive Officer, (commodity merchants St. Paul, MN 55101-4901 Minnesota Mining and and processors), Age 69 Manufacturing (3M) General Mills, Inc. (consumer foods), Vulcan Materials Company (construction materials/chemicals), Milliken & Company (textiles and chemicals), and Nexia Biotechnologies, Inc. ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Heinz F. Hutter* Board member Retired President and Board Effectiveness, 901 S. Marquette Ave. since 1994 Chief Operating Executive, Minneapolis, MN 55402 Officer, Cargill, Investment Review Age 74 Incorporated (commodity merchants and processors) ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Anne P. Jones Board member Attorney and Consultant Joint Audit, Board 901 S. Marquette Ave. since 1985 Effectiveness, Minneapolis, MN 55402 Executive Age 68 ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Stephen R. Lewis, Jr.** Board member Retired President and Valmont Industries, Contracts, 901 S. Marquette Ave. since 2002 Professor of Economics, Inc. (manufactures Investment Review, Minneapolis, MN 55402 Carleton College irrigation systems) Executive Age 64 ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Alan G. Quasha Board member President, Quadrant Compagnie Financiere Joint Audit, 901 S. Marquette Ave. since 2002 Management, Inc. Richemont AG (luxury Investment Review Minneapolis, MN 55402 (management of private goods), Harken Age 53 equities) Energy Corporation (oil and gas exploration) and SIRIT Inc. (radio frequency identification technology) ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Alan K. Simpson Board member Former three-term Biogen, Inc. Investment Review, 1201 Sunshine Ave. since 1997 United States Senator (biopharmaceuticals) Board Effectiveness Cody, WY 82414 for Wyoming Age 71 ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Alison Taunton-Rigby Board member President, Forester Investment Review, 901 S. Marquette Ave. since 2002 Biotech since 2000. Contracts Minneapolis, MN 55402 Former President and Age 59 CEO, Aquila Biopharmaceuticals, Inc. ---------------------------------- ------------------- ------------------------- ---------------------- ----------------------
* Interested person of AXP Partners International Aggressive Growth Fund and AXP Partners Aggressive Growth Fund by reason of being a security holder of J P Morgan Chase & Co., which has a 45% interest in American Century Companies, Inc., the parent company of the subadviser of two of the AXP Partners Funds, American Century Investment Management, Inc. ** Interested person of AXP Partners International Aggressive Growth Fund by reason of being a security holder of FleetBoston Financial Corporation, parent company of Columbia Wanger Asset Management, L.P., one of the fund's subadvisers. -------------------------------------------------------------------------------- 46 -- AXP GLOBAL SERIES, INC.
Board Members Affiliated with AEFC*** Name, Position held Principal occupation Other directorships Committee memberships address, with Fund and during past five years age length of service ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Barbara H. Fraser Board member Executive Vice 1546 AXP Financial Center since 2002 President - AEFA Minneapolis, MN 55474 Products and Corporate Age 53 Marketing of 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 ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Stephen W. Roszell Board member Senior Vice President - 50238 AXP Financial Center since 2002, Vice Institutional Group of Minneapolis, MN 55474 President since AEFC Age 54 2002 ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- William F. Truscott Board member Senior Vice President - 53600 AXP Financial Center since 2001, Vice Chief Investment Minneapolis, MN 55474 President since Officer of AEFC since Age 42 2002 2001. 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 Principal occupation Other directorships Committee memberships address, with Fund and during past five years age length of service ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Jeffrey P. Fox Treasurer since Vice President - 50005 AXP Financial Center 2002 Investment Accounting, Minneapolis, MN 55474 AEFC, since 2002; Vice Age 48 President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, AEFC, 1996-2000 ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Paula R. Meyer President since Senior Vice President 596 AXP Financial Center 2002 and General Manager - Minneapolis, MN 55474 Mutual Funds, AEFC, Age 49 since 2002; Vice President and Managing Director - American Express Funds, AEFC, 2000-2002; Vice President, AEFC, 1998-2000 ---------------------------------- ------------------- ------------------------- ---------------------- ---------------------- Leslie L. Ogg Vice President, President of Board 901 S. Marquette Ave. General Counsel, Services Corporation Minneapolis, MN 55402 and Secretary Age 65 since 1978 ---------------------------------- ------------------- ------------------------- ---------------------- ----------------------
Responsibilities of board with respect to Fund's management The board initially approves an Investment Management Services Agreement and other contracts with American Express Financial Corporation (AEFC), one of AEFC's subsidiaries, and other service providers. Once the contracts are approved, the board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and AEFC's profitability in order to determine whether to continue existing contracts or negotiate new contracts. -------------------------------------------------------------------------------- 47 -- AXP GLOBAL SERIES, INC. Several committees facilitate its work Executive Committee -- Acts for the board between meetings of the board. The committee held one meeting during the last fiscal year. Joint Audit Committee -- Meets with the independent public accountant, internal auditors and corporate officers to review financial statements, reports, and compliance matters. Reports significant issues to the board and makes recommendations to the independent directors regarding the selection of the independent public accountant. The committee held four meetings during the last fiscal year. Investment Review Committee -- Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the board. The committee held four meetings during the last fiscal year. Board Effectiveness Committee -- Recommends to the board the size, structure and composition for the board; the compensation to be paid to members of the board; and a process for evaluating the board's performance. The committee also reviews candidates for board membership including candidates recommended by shareholders. To be considered, recommendations must include a curriculum vita and be mailed to the Chairman of the Board, American Express Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The committee held three meetings during the last fiscal year. Contracts Committee -- Receives and analyzes reports covering the level and quality of services provided under contracts with the Fund and advises the board regarding actions taken on these contracts during the annual review process. The committee held four meetings during the last fiscal year. BOARD MEMBERS' HOLDINGS The following table shows the Fund Board Members' ownership of American Express Funds.
Dollar range of equity securities beneficially owned on Dec. 31, 2002 Based on net asset values as of Dec. 31, 2002 Aggregate dollar range of equity securities of all Dollar range of equity securities in American Express Emerging Global Global Global Global Funds overseen Markets Balanced Bond Equity Technology by Board Member Range Range Range Range Range Range Arne H. Carlson none none none none none over $100,000 Philip J. Carroll, Jr. none none none none none none Livio D. DeSimone none none none none none over $100,000 Heinz F. Hutter none none none none none over $100,000 Anne P. Jones none none none none none over $100,000 Stephen R. Lewis, Jr. none none none none none $1-$10,000 Alan G. Quasha none none none none none none Alan K. Simpson none none none none none $50,001-$100,000 Alison Taunton-Rigby none none none none none none
-------------------------------------------------------------------------------- 48 -- AXP GLOBAL SERIES, INC. COMPENSATION FOR BOARD MEMBERS During the most recent fiscal year, the independent members of Emerging Markets Fund and Emerging Markets Portfolio boards, for attending up to 27 meetings, received the following compensation:
Compensation Table for Emerging Markets Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $ 250 $ 292 $ 44,183 Livio D. DeSimone 1,006** 1,106 120,392 Heinz F. Hutter 906 1,006 133,775 Anne P. Jones 956 1,056 138,225 Stephen R. Lewis, Jr. 1,056*** 1,156 131,015 Alan G. Quasha 900 1,000 133,225 Alan K. Simpson 750 850 119,875 Alison Taunton-Rigby 950 1,050 137,575
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $150 from the Fund and $167 from the Portfolio. *** Includes the deferred compensation in the amount of $120 from the Fund and $130 from the Portfolio. During the most recent fiscal year, the independent members of Global Balanced Fund board, for attending up to 27 meetings, received the following compensation:
Compensation Table for Global Balanced Total cash compensation from American Express Funds and Aggregate Preferred Master Trust Group Board member* compensation from the Fund paid to Board Member Philip J. Carroll, Jr. $ 292 $ 44,183 Livio D. DeSimone 1,106** 120,392 Heinz F. Hutter 1,006 133,775 Anne P. Jones 1,056 138,225 Stephen R. Lewis, Jr. 1,156*** 131,015 Alan G. Quasha 1,000 133,225 Alan K. Simpson 850 119,875 Alison Taunton-Rigby 1,050 137,575
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $167 from the Fund. *** Includes the deferred compensation in the amount of $130 from the Fund. -------------------------------------------------------------------------------- 49 -- AXP GLOBAL SERIES, INC. During the most recent fiscal year, the independent members of Global Bond Fund and World Income Portfolio boards, for attending up to 27 meetings, received the following compensation:
Compensation Table for Global Bond Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $ 292 $ 333 $ 44,183 Livio D. DeSimone 1,106** 1,265 120,392 Heinz F. Hutter 1,006 1,165 133,775 Anne P. Jones 1,056 1,215 138,225 Stephen R. Lewis, Jr. 1,156*** 1,315 131,015 Alan G. Quasha 1,000 1,158 133,225 Alan K. Simpson 850 1,008 119,875 Alison Taunton-Rigby 1,050 1,208 137,575
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $167 from the Fund and $200 from the Portfolio. *** Includes the deferred compensation in the amount of $130 from the Fund and $150 from the Portfolio. During the most recent fiscal year, the independent members of Global Equity Fund and World Growth Portfolio boards, for attending up to 27 meetings, received the following compensation:
Compensation Table for Global Equity Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $ 292 $ 375 $ 44,183 Livio D. DeSimone 1,106** 1,273 120,392 Heinz F. Hutter 1,006 1,173 133,775 Anne P. Jones 1,056 1,223 138,225 Stephen R. Lewis, Jr. 1,156*** 1,323 131,015 Alan G. Quasha 1,000 1,167 133,225 Alan K. Simpson 850 1,017 119,875 Alison Taunton-Rigby 1,050 1,217 137,575
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $167 from the Fund and $183 from the Portfolio. *** Includes the deferred compensation in the amount of $130 from the Fund and $140 from the Portfolio. -------------------------------------------------------------------------------- 50 -- AXP GLOBAL SERIES, INC. During the most recent fiscal year, the independent members of Global Technology Fund and World Technologies Portfolio boards, for attending up to 27 meetings, received the following compensation:
Compensation Table for Global Technology Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $ 250 $ 292 $ 44,183 Livio D. DeSimone 1,006** 1,106 120,392 Heinz F. Hutter 906 1,006 133,775 Anne P. Jones 956 1,056 138,225 Stephen R. Lewis, Jr. 1,056*** 1,156 131,015 Alan G. Quasha 900 1,000 133,225 Alan K. Simpson 750 850 119,875 Alison Taunton-Rigby 950 1,050 137,575
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $150 from the Fund and $167 from the Portfolio. *** Includes the deferred compensation in the amount of $120 from the Fund and $130 from the Portfolio. As of 30 days prior to the date of this SAI, the Fund's board members and officers as a group owned less than 1% of the outstanding shares of any class. Principal Holders of Securities As of 30 days prior to the date of this SAI, the following persons or entities were principal holders of the Fund shares: For the Emerging Markets Fund -- Class C shares Raymond Snapp, Bedford, IN, held 10.66%. Clients of American Enterprise Investment Services, Inc., a brokerage firm, held 12.19%. For the Global Balanced Fund Class A shares-- Clients of Charles Schwab & Co., Inc., a brokerage firm, held 5.88%. Class C shares-- Sherman D. DePonte and Carol A. DePonte, Makawao, HI, held 8.97%. For the Global Bond Fund -- Class A shares Clients of Charles Schwab & Co., Inc., a brokerage firm, held 16.82%. For the Global Technology Fund -- Class A shares Clients of Charles Schwab & Co., Inc., a brokerage firm, held 10.70%. Independent Auditors The financial statements contained in the Annual Report were audited by independent auditors, KPMG LLP, 4200 Wells Fargo Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The independent auditors also provide other accounting and tax-related services as requested by the Fund. -------------------------------------------------------------------------------- 51 -- AXP GLOBAL SERIES, INC. Appendix DESCRIPTION OF RATINGS Standard & Poor's Long-Term Debt Ratings A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: o Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. o Nature of and provisions of the obligation. o Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. Investment Grade Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. Speculative Grade Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. -------------------------------------------------------------------------------- 52 -- AXP GLOBAL SERIES, INC. Moody's Long-Term Debt Ratings Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A -- Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds that are rated Ba are judged to have speculative elements -- their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Fitch's Long-Term Debt Ratings Fitch's bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue in a timely manner. The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality. Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated. Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security. Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons. Investment Grade AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+. A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. -------------------------------------------------------------------------------- 53 -- AXP GLOBAL SERIES, INC. BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. Speculative Grade BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified, which could assist the obligor in satisfying its debt service requirements. B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C: Bonds are in imminent default in payment of interest or principal. DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery. SHORT-TERM RATINGS Standard & Poor's Commercial Paper Ratings A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. Standard & Poor's Muni Bond and Note Ratings An S&P municipal bond or note rating reflects the liquidity factors and market-access risks unique to these instruments. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Municipal bond rating symbols and definitions are as follows: Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. -------------------------------------------------------------------------------- 54 -- AXP GLOBAL SERIES, INC. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. Moody's Short-Term Ratings Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. Moody's Short-Term Muni Bonds and Notes Short-term municipal bonds and notes are rated by Moody's. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody's MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. Fitch's Short-Term Ratings Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner. Fitch short-term ratings are as follows: F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings. F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade. F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions. D: Default. Issues assigned this rating are in actual or imminent payment default. -------------------------------------------------------------------------------- 55 -- AXP GLOBAL SERIES, INC. S-6334-20 W (12/03) Investments in Securities Emerging Markets Portfolio Oct. 31, 2003 (Percentages represent value of investments compared to net assets) Common stocks (94.1%)(c) Issuer Shares Value(a) Brazil (6.4%) Beverages & tobacco (0.6%) Companhia de Bebidas das Americas ADR 65,829 $1,395,575 Energy (1.0%) Petroleo Brasileiro ADR 102,335 2,404,873 Metals (0.8%) Companhia Vale do Rio Doce ADR 44,600 2,040,450 Paper & packaging (1.4%) Aracruz Celulose ADR 125,993 3,540,403 Utilities -- telephone (2.6%) Brasil Telecom Participacoes 172,496 6,299,553 Chile (2.1%) Banks and savings & loans (0.8%) Banco Santander Chile ADR 81,759 1,942,594 Metals (1.3%) Antofagasta 175,381 3,118,980 China (6.3%) Automotive & related (1.9%) Denway Motors 5,744,000 4,733,842 Computer software & services (1.1%) Legend Group 5,802,000 2,801,744 Metals (0.9%) Yanzhou Coal Mining Cl H 2,852,000 2,093,359 Multi-industry (0.8%) Zhejiang Expressway 2,996,000 1,880,771 Utilities -- telephone (1.6%) China Mobile 1,383,500 3,928,323 Hong Kong (3.3%) Banks and savings & loans (1.3%) BOC Hong Kong Holdings 1,840,500 3,187,700 Financial services (0.9%) Cheung Kong Holdings 279,000 2,326,287 Real estate (1.1%) Sun Hung Kai Properties 326,000 2,760,150 Hungary (2.1%) Banks and savings & loans OTP Bank 419,000(b) 5,133,152 India (7.1%) Automotive & related (0.8%) Tata Motors 231,687 1,914,536 Banks and savings & loans (1.9%) Housing Development Finance 404,452(b) 4,639,775 Beverages & tobacco (1.3%) ITC 166,009(b) 3,182,084 Computer software & services (1.9%) Infosys Technologies 46,540 4,869,088 Health care products (1.2%) Cipla 101,125 2,897,860 Indonesia (1.0%) Beverages & tobacco Hanjiya Mandala Sampoerna 4,860,500 2,488,457 Israel (2.3%) Banks and savings & loans (0.8%) Bank Hapoalim 924,813(b) 1,949,250 Computer software & services (0.7%) Check Point Software Technologies 97,402(b) 1,654,860 Health care products (0.8%) Teva Pharmaceutical Inds ADR 37,510 2,133,944 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Malaysia (4.5%) Banks and savings & loans (1.8%) Malayan Banking 1,641,900 $4,407,205 Cellular telecommunications (1.7%) Maxis Communications 2,101,000 4,174,355 Leisure time & entertainment (1.0%) Resorts World 884,000 2,558,947 Mexico (8.2%) Beverages & tobacco (1.4%) Grupo Modelo Series C 1,370,539 3,457,629 Cellular telecommunications (3.1%) America Movil ADR Series L 319,524 7,604,671 Financial services (1.0%) Grupo Financiero BBVA Bancomer Cl B 3,000,000(b) 2,535,479 Multi-industry (1.1%) Grupo Aeroportuario del Sureste ADR 150,900 2,607,551 Retail -- general (0.8%) Wal-Mart de Mexico 747,254 2,081,747 Utilities -- telephone (0.8%) Telefonos de Mexico ADR Cl L 58,950 1,895,243 Peru (0.3%) Precious metals Compania de Minas Buenaventura ADR 13,600 647,632 Russia (2.9%) Energy (1.2%) Lukoil Holding ADR 35,656 2,898,832 Metals (1.0%) JSC MMC Norilsk Nickel ADR 48,600 2,510,190 Utilities -- natural gas (0.7%) Gazprom ADR 75,486 1,811,664 Singapore (1.0%) Banks and savings & loans United Overseas Bank 310,000 2,421,666 South Africa (7.6%) Banks and savings & loans (3.0%) FirstRand 2,152,700 2,544,526 Standard Bank Group 1,005,277 4,871,110 Total 7,415,636 Insurance (1.3%) Old Mutual 1,798,000 3,119,764 Multi-industry (1.0%) Imperial Holdings 290,500 2,548,985 Paper & packaging (2.3%) Sappi 450,738 5,703,029 South Korea (15.7%) Banks and savings & loans (2.0%) Kookmin Bank 137,150 5,006,236 Beverages & tobacco (1.1%) KT&G 139,050 2,678,783 Chemicals (1.8%) LG Chem 110,300 4,426,912 Electronics (9.0%) LG Electronics 71,680 3,712,703 Samsung Electronics 45,670 18,136,799 Total 21,849,502 Retail -- general (0.5%) Shinsegae 6,310 1,266,265 Telecom equipment & services (1.3%) SK Telecom 18,620 3,288,196 Taiwan (15.1%) Automotive & related (0.8%) China Motor 1,054,300 2,001,541 Banks and savings & loans (4.5%) Chinatrust Financial Holding 6,264,840 6,509,165 Taishin Financial Holdings 6,288,000 4,460,362 Total 10,969,527 Chemicals (1.7%) Formosa Chemicals & Fibre 2,640,335 4,196,559 Computer hardware (3.3%) Compal Electronics 2,349,400 3,561,269 Hon Hai Precision Inds 1,044,600 4,673,412 Total 8,234,681 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Taiwan (cont.) Electronics (3.7%) Taiwan Semiconductor Mfg 3,220,000 $6,349,963 United Microelectronics 2,911,000 2,664,668 Total 9,014,631 Industrial transportation (1.1%) Evergreen Marine 3,120,180 2,736,758 Thailand (4.0%) Banks and savings & loans (1.8%) Bangkok Bank 1,896,400(b) 4,444,502 Building materials & construction (1.1%) Siam Cement 520,100 2,633,418 Home building (1.1%) Land & Houses Public 8,865,200 2,688,781 Turkey (3.4%) Banks and savings & loans (1.1%) Akbank T.A.S. 551,591,000 2,585,002 Beverages & tobacco (0.2%) Anadolu Efes Biracilik ve Malt Sanayil 38,120,780 467,834 Food (1.1%) Migros Turk T.A.S. 191,671,032 2,636,608 Multi-industry (1.0%) Koc Holding 187,022,000 2,572,656 United Kingdom (0.8%) Metals Lonmin 114,911 1,995,805 Total common stocks (Cost: $186,815,272) $231,412,032 Preferred stocks (4.1%)(c) Issuer Shares Value(a) Brazil (2.7%) Banco Itau Holding Financeira 80,550,000 $6,599,007 South Korea (1.4%) Samsung Electronics 17,840 3,542,374 Total preferred stocks (Cost: $8,220,420) $10,141,381 Short-term security (1.9%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity Commercial paper General Electric Capital 11-03-03 1.04% $4,600,000 $4,599,601 Total short-term security (Cost: $4,599,735) $4,599,601 Total investments in securities (Cost: $199,635,427)(d) $246,153,014 Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At Oct. 31, 2003, the cost of securities for federal income tax purposes was $202,710,751 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $44,062,097 Unrealized depreciation (619,834) -------- Net unrealized appreciation $43,442,263 ----------- -------------------------------------------------------------------------------- 12 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Financial Statements Statement of assets and liabilities Emerging Markets Portfolio Oct. 31, 2003 Assets Investments in securities, at value (Note 1) (identified cost $199,635,427) $246,153,014 Cash in bank on demand deposit 73,989 Foreign currency holdings (identified cost $590,056) (Note 1) 592,277 Dividends and accrued interest receivable 139,309 Receivable for investment securities sold 6,035,654 --------- Total assets 252,994,243 ----------- Liabilities Payable for investment securities purchased 7,086,092 Accrued investment management services fee 7,447 Other accrued expenses 85,112 Total liabilities 7,178,651 --------- Net assets $245,815,592 ============ See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT
Statement of operations Emerging Markets Portfolio Year ended Oct. 31, 2003 Investment income Income: Dividends $ 5,270,409 Interest 259,318 Fee income from securities lending (Note 3) 6,708 Less foreign taxes withheld (546,431) -------- Total income 4,990,004 --------- Expenses (Note 2): Investment management services fee 2,181,279 Compensation of board members 7,891 Custodian fees 273,054 Audit fees 21,000 Other 16,240 ------ Total expenses 2,499,464 --------- Investment income (loss) -- net 2,490,540 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 18,020,396 Foreign currency transactions (714,689) -------- Net realized gain (loss) on investments 17,305,707 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 50,708,763 ---------- Net gain (loss) on investments and foreign currencies 68,014,470 ---------- Net increase (decrease) in net assets resulting from operations $70,505,010 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets Emerging Markets Portfolio Year ended Oct. 31, 2003 2002 Operations Investment income (loss) -- net $ 2,490,540 $ 1,481,912 Net realized gain (loss) on investments 17,305,707 17,153,389 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 50,708,763 4,057,136 ---------- --------- Net increase (decrease) in net assets resulting from operations 70,505,010 22,692,437 ---------- ---------- Proceeds from contributions 40,823,634 85,703,273 Fair value of withdrawals (63,961,807) (126,027,132) ----------- ------------ Net contributions (withdrawals) from partners (23,138,173) (40,323,859) ----------- ----------- Total increase (decrease) in net assets 47,366,837 (17,631,422) Net assets at beginning of year 198,448,755 216,080,177 ----------- ----------- Net assets at end of year $245,815,592 $ 198,448,755 ============ =============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Notes to Financial Statements Emerging Markets Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Emerging Markets Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests primarily in equity securities of emerging markets companies. 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. American Express Financial Corporation (AEFC) may use fair value if a security's value has been materially affected by events after the close of the primary exchanges or markets on which the security is traded and before the NAV is calculated. The fair value of a security may be different from the quoted or published price. AEFC will price a security at fair value in accordance with procedures adopted by the Portfolio and board of trustees if a reliable market quotation is not readily available. 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. -------------------------------------------------------------------------------- 16 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT 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. 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. -------------------------------------------------------------------------------- 17 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT 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, 2003 foreign currency holdings consisted of multiple denominations. 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. 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, market discount and original issue discount using the effective interest method, is accrued daily. -------------------------------------------------------------------------------- 18 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with 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 1.10% to 1.00% 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 AXP Emerging Markets Fund to the Lipper Emerging Markets Funds Index. Prior to Dec. 1, 2002, the maximum adjustment was 0.12% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference was less than 1%, the adjustment was zero. 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 began Dec. 1, 2002. The adjustment decreased the fee by $100,852 for the year ended Oct. 31, 2003. 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. Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. AEFC has a Subadvisory Agreement with American Express Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC. Investment decisions for the Portfolio are made by a team of seasoned investment professionals at Threadneedle Asset Management Limited (Threadneedle) who are associated with AEAMI. Threadneedle is also a wholly-owned subsidiary of AEFC. The Portfolio pays custodian fees to American Express Trust Company, an affiliate of AEFC. According to a Placement Agency Agreement, American Express Financial Advisors Inc. acts as placement agent of the Trust's units. -------------------------------------------------------------------------------- 19 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $341,989,946 and $350,700,616, respectively, for the year ended Oct. 31, 2003. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $6,708 for the year ended Oct. 31, 2003. 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. 4. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
Ratios/supplemental data Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Ratio of expenses to average daily net assets(a) 1.20% 1.23% 1.20% 1.17% 1.30% Ratio of net investment income (loss) to average daily net assets 1.20% .63% .79% .28% .87% Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% 143% Total return(b) 37.59% 9.39% (22.59%) (2.86%) 46.00%
Notes to financial highlights (a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio NAV and does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 20 -- AXP EMERGING MARKETS FUND -- 2003 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 Emerging Markets Portfolio (a series of World Trust) as of October 31, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended October 31, 2003. These financial statements and the financial highlights are the responsibility of portfolio 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, 2003, 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 Emerging Markets Portfolio as of October 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 21 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Emerging Markets Fund Oct. 31, 2003 Assets Investment in Portfolio (Note 1) $ 245,722,267 Capital shares receivable 56,286 ------ Total assets 245,778,553 ----------- Liabilities Capital shares payable 1,548 Accrued distribution fee 3,057 Accrued service fee 51 Accrued transfer agency fee 1,912 Accrued administrative services fee 676 Other accrued expenses 59,753 ------ Total liabilities 66,997 ------ Net assets applicable to outstanding capital stock $ 245,711,556 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 456,609 Additional paid-in capital 319,802,328 Undistributed net investment income (284,054) Accumulated net realized gain (loss) (Note 5) (120,756,753) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 46,493,426 ---------- Total -- representing net assets applicable to outstanding capital stock $ 245,711,556 ============= Net assets applicable to outstanding shares: Class A $ 155,436,111 Class B $ 72,025,997 Class C $ 611,606 Class Y $ 17,637,842 Net asset value per share of outstanding capital stock: Class A shares 28,459,800 $ 5.46 Class B shares 13,890,622 $ 5.19 Class C shares 117,586 $ 5.20 Class Y shares 3,192,899 $ 5.52 --------- -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT
Statement of operations AXP Emerging Markets Fund Year ended Oct. 31, 2003 Investment income Income: Dividends $ 5,268,503 Interest 259,224 Fee income from securities lending 6,705 Less foreign taxes withheld (546,234) -------- Total income 4,988,198 --------- Expenses (Note 2): Expenses allocated from Portfolio 2,498,565 Distribution fee Class A 334,914 Class B 639,893 Class C 5,003 Transfer agency fee 715,361 Incremental transfer agency fee Class A 54,133 Class B 42,717 Class C 387 Service fee -- Class Y 8,783 Administrative services fees and expenses 208,342 Compensation of board members 7,125 Printing and postage 101,788 Registration fees 40,117 Audit fees 7,000 Other 6,183 ----- Total expenses 4,670,311 Earnings credits on cash balances (Note 2) (2,986) ------ Total net expenses 4,667,325 --------- Investment income (loss) -- net 320,873 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 18,014,007 Foreign currency transactions (714,418) -------- Net realized gain (loss) on investments 17,299,589 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 50,690,349 ---------- Net gain (loss) on investments and foreign currencies 67,989,938 ---------- Net increase (decrease) in net assets resulting from operations $68,310,811 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 23 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets AXP Emerging Markets Fund Year ended Oct. 31, 2003 2002 Operations Investment income (loss) -- net $ 320,873 $ (1,038,828) Net realized gain (loss) on investments 17,299,589 17,148,831 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 50,690,349 4,056,336 ---------- --------- Net increase (decrease) in net assets resulting from operations 68,310,811 20,166,339 ---------- ---------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 46,522,730 92,903,611 Class B shares 4,677,343 7,961,556 Class C shares 1,881,668 691,958 Class Y shares 17,134,059 23,258,477 Payments for redemptions Class A shares (66,453,449) (116,934,256) Class B shares (Note 2) (17,438,584) (22,209,119) Class C shares (Note 2) (1,963,556) (405,813) Class Y shares (5,243,858) (23,090,767) ---------- ----------- Increase (decrease) in net assets from capital share transactions (20,883,647) (37,824,353) ----------- ----------- Total increase (decrease) in net assets 47,427,164 (17,658,014) Net assets at beginning of year 198,284,392 215,942,406 ----------- ----------- Net assets at end of year $245,711,556 $ 198,284,392 ============ =============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 24 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Notes to Financial Statements AXP Emerging Markets 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. 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 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 Emerging Markets Portfolio The Fund invests all of its assets in Emerging Markets Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of emerging markets companies. 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, 2003 was 99.96%. 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. -------------------------------------------------------------------------------- 25 -- AXP EMERGING MARKETS FUND -- 2003 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 $604,927 and accumulated net realized loss has been decreased by $604,927. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 30, 2003 2002 Class A Distributions paid from: Ordinary income $-- $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- As of Oct. 31, 2003, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 2,322,760 Accumulated long-term gain (loss) $(120,289,410) Unrealized appreciation (depreciation) $ 43,419,269 Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. -------------------------------------------------------------------------------- 26 -- AXP EMERGING MARKETS FUND -- 2003 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 0.10% to 0.05% 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 Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. 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 incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. However, the closed account fee is not being charged to the Fund until a new transfer agency system is installed. Under terms of a prior agreement that ended April 30, 2003, the Fund paid a transfer agency fee at an annual rate per shareholder account of $19 for Class A, $20 for Class B, $19.50 for Class C and $17 for Class Y. 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 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. -------------------------------------------------------------------------------- 27 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Sales charges received by the Distributor for distributing Fund shares were $177,783 for Class A, $65,171 for Class B and $108 for Class C for the year ended Oct. 31, 2003. During the year ended Oct. 31, 2003, the Fund's transfer agency fees were reduced by $2,986 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2003 Class A Class B Class C Class Y Sold 10,502,183 1,107,124 439,743 4,214,232 Issued for reinvested distributions -- -- -- -- Redeemed (15,064,186) (4,225,912) (453,986) (1,112,507) ----------- ---------- -------- ---------- Net increase (decrease) (4,562,003) (3,118,788) (14,243) 3,101,725 ---------- ---------- ------- --------- Year ended Oct. 31, 2002 Class A Class B Class C Class Y Sold 21,294,247 1,862,489 166,570 5,055,225 Issued for reinvested distributions -- -- -- -- Redeemed (26,885,521) (5,372,341) (97,581) (4,986,689) ----------- ---------- ------- ---------- Net increase (decrease) (5,591,274) (3,509,852) 68,989 68,536 ---------- ---------- ------ ------
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. 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. The Fund had no borrowings outstanding during the year ended Oct. 31, 2003. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $120,289,410 as of Oct. 31, 2003, that will expire in 2006 through 2009 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. -------------------------------------------------------------------------------- 28 -- AXP EMERGING MARKETS FUND -- 2003 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, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.00 $3.69 $ 4.81 $4.99 $3.44 Income from investment operations: Net investment income (loss) .02 (.01) -- (.02) .02 Net gains (losses) (both realized and unrealized) 1.44 .32 (1.12) (.16) 1.54 Total from investment operations 1.46 .31 (1.12) (.18) 1.56 Less distributions: Dividends from net investment income -- -- -- -- (.01) Net asset value, end of period $5.46 $4.00 $ 3.69 $4.81 $4.99 Ratios/supplemental data Net assets, end of period (in millions) $155 $132 $143 $234 $251 Ratio of expenses to average daily net assets(c) 2.02% 2.05% 2.02% 1.83% 2.03% Ratio of net investment income (loss) to average daily net assets .39% (.19%) (.02%) (.38%) .14% Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% 143% Total return(e) 36.50% 8.40% (23.28%) (3.60%) 45.13%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 29 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.83 $3.56 $ 4.67 $4.88 $3.39 Income from investment operations: Net investment income (loss) (.02) (.04) (.04) (.07) (.05) Net gains (losses) (both realized and unrealized) 1.38 .31 (1.07) (.14) 1.54 Total from investment operations 1.36 .27 (1.11) (.21) 1.49 Net asset value, end of period $5.19 $3.83 $ 3.56 $4.67 $4.88 Ratios/supplemental data Net assets, end of period (in millions) $72 $65 $73 $120 $130 Ratio of expenses to average daily net assets(c) 2.80% 2.83% 2.79% 2.60% 2.81% Ratio of net investment income (loss) to average daily net assets (.39%) (.95%) (.80%) (1.14%) (.63%) Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% 143% Total return(e) 35.51% 7.58% (23.77%) (4.30%) 43.87%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 30 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $3.84 $3.56 $ 4.68 $5.64 Income from investment operations: Net investment income (loss) (.02) (.03) (.04) (.01) Net gains (losses) (both realized and unrealized) 1.38 .31 (1.08) (.95) Total from investment operations 1.36 .28 (1.12) (.96) Net asset value, end of period $5.20 $3.84 $ 3.56 $4.68 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $-- $-- Ratio of expenses to average daily net assets(c) 2.80% 2.85% 2.79% 2.60%(d) Ratio of net investment income (loss) to average daily net assets (.41%) (1.13%) (.63%) (2.06%)(d) Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% Total return(e) 35.42% 7.87% (23.93%) (17.02%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 31 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.04 $3.72 $ 4.83 $4.99 $3.45 Income from investment operations: Net investment income (loss) .03 -- .01 (.01) .02 Net gains (losses) (both realized and unrealized) 1.45 .32 (1.12) (.15) 1.53 Total from investment operations 1.48 .32 (1.11) (.16) 1.55 Less distributions: Dividends from net investment income -- -- -- -- (.01) Net asset value, end of period $5.52 $4.04 $ 3.72 $4.83 $4.99 Ratios/supplemental data Net assets, end of period (in millions) $18 $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.87% 1.59% 1.84% 1.66% 1.88% Ratio of net investment income (loss) to average daily net assets .54% .19% .21% (.29%) 1.18% Portfolio turnover rate (excluding short-term securities) 174% 226% 193% 143% 143% Total return(e) 36.63% 8.60% (22.98%) (3.21%) 45.29%
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. (f) Not annualized. -------------------------------------------------------------------------------- 32 -- AXP EMERGING MARKETS FUND -- 2003 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 Emerging Markets Fund (a series of AXP Global Series, Inc.) as of October 31, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended October 31, 2003. 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 Emerging Markets Fund as of October 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 33 -- AXP EMERGING MARKETS FUND -- 2003 ANNUAL REPORT Investments in Securities AXP Global Balanced Fund Oct. 31, 2003 (Percentages represent value of investments compared to net assets) Common stocks (63.7%)(c) Issuer Shares Value(a) Australia (0.6%) Metals BHP Billiton 66,120 $549,849 Barbados (0.3%) Energy equipment & services Nabors Inds 8,344(b) 315,403 Bermuda (0.9%) Insurance (0.5%) RenaissanceRe Holdings 9,900 445,302 Multi-industry conglomerates (0.4%) Accenture Cl A 18,221(b) 426,371 Brazil (0.8%) Metals (0.3%) Companhia Vale do Rio Doce ADR 7,514 303,566 Paper & packaging (0.5%) Aracruz Celulose ADR 16,255 456,766 Canada (0.5%) Energy EnCana 13,919 478,065 China (1.7%) Multi-industry (0.7%) Swire Pacific Cl A 100,000 610,376 Real estate investment trust (0.5%) Henderson Land Development 112,000 470,170 Retail -- general (0.5%) Esprit Holdings 154,500 485,442 Finland (0.5%) Machinery Kone Cl B 8,570 447,820 France (1.6%) Computer software & services (0.3%) Atos Origin 4,781(b) 319,024 Energy (0.8%) Total 4,278 664,913 Telecom equipment & services (0.5%) Alcatel 37,939 500,581 Germany (1.7%) Automotive & related (0.8%) Porsche 1,567 769,678 Computer software & services (0.6%) T-Online Intl 39,579(b) 512,098 Textiles & apparel (0.3%) Puma AG Rudolf Dassler Sport 2,026 295,534 Hong Kong (0.5%) Real estate (0.5%) Sun Hung Kai Properties 58,000 491,070 Ireland (0.5%) Banks and savings & loans Anglo Irish Bank 39,838 478,400 Italy (1.4%) Banks and savings & loans (0.4%) UniCredito Italiano 76,708 378,094 Energy (0.5%) Eni 28,801 457,353 Retail -- general (0.5%) Bulgari 53,738 486,020 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Japan (5.1%) Automotive & related (0.5%) Toyota Motor 15,000 $427,071 Cellular telecommunications (0.4%) NTT DoCoMo 187 404,839 Chemicals (0.5%) Shin-Etsu Chemical 11,800 439,005 Electronics (0.5%) Seiko Epson 13,800 497,094 Financial services (0.5%) Nomura Holdings 26,000 446,518 Health care products (0.4%) Chugai Pharmaceutical 23,700 337,601 Industrial transportation (0.5%) East Japan Railway 100 452,995 Media (0.4%) Tokyo Broadcasting System 26,000 416,482 Multi-industry (1.4%) Canon 16,000 774,276 Mitsubishi 47,000 487,806 Total 1,262,082 Mexico (1.1%) Beverages & tobacco (0.3%) Coca-Cola Femsa ADR 14,287(b) 288,597 Cellular telecommunications (0.5%) America Movil ADR Series L 18,792 447,249 Financial services (0.3%) Grupo Financiero BBVA Bancomer Cl B 383,632(b) 324,230 Netherlands (0.8%) Food (0.4%) Koninklijke Numico 15,718(b) 354,663 Utilities -- telephone (0.4%) Koninklijke (Royal) 46,859(b) 356,257 South Korea (1.5%) Electronics LG Electronics 10,790 558,874 Samsung Electronics 2,190 869,708 Total 1,428,582 Sweden (1.1%) Building materials & construction (0.5%) SKF AB Cl B 13,585 480,648 Insurance (0.6%) Skandia Forsakrings 136,769 501,432 Switzerland (3.8%) Banks and savings & loans (1.4%) Credit Suisse Group 17,853 629,036 UBS 11,803 724,788 Total 1,353,824 Health care products (1.2%) Actelion 3,330(b) 316,703 Nobel Biocare Holding 3,247 288,141 Synthes-Stratec 508 466,401 Total 1,071,245 Insurance (0.7%) Swiss Life Holding 4,011(b) 680,340 Multi-industry (0.5%) Adecco 7,411 437,051 Taiwan (0.6%) Electronics Taiwan Semiconductor Mfg 305,440 602,339 United Kingdom (6.8%) Banks and savings & loans (1.2%) Barclays 35,668 300,818 Standard Chartered 47,297 756,456 Total 1,057,274 Cellular telecommunications (0.3%) Vodafone Group 132,980 279,255 Energy (0.5%) BP 64,735 449,295 Financial services (1.2%) HSBC Holdings 69,458 1,043,121 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United Kingdom (cont.) Health care products (1.0%) AstraZeneca 13,282 $623,876 GlaxoSmithKline 15,118 323,759 Total 947,635 Media (0.5%) United Business Media 53,101 418,109 Metals (0.5%) Rio Tinto 20,273 491,608 Retail -- grocery (1.0%) Tesco 103,030 413,052 William Morrison Supermarkets 126,430 480,581 Total 893,633 Telecom equipment & services (0.6%) mm02 543,992(b) 590,802 United States (31.9%) Aerospace & defense (1.9%) Boeing 23,090 888,734 United Technologies 10,644 901,440 Total 1,790,174 Banks and savings & loans (3.2%) Bank of America 5,584 422,876 North Fork Bancorporation 16,370 638,103 U.S. Bancorp 24,115 656,410 Wachovia 15,048 690,251 Wells Fargo 8,948 503,951 Total 2,911,591 Beverages & tobacco (0.7%) PepsiCo 12,851 614,535 Broker dealers (0.7%) Morgan Stanley 11,694 641,650 Cable (0.9%) Comcast Cl A 23,848(b) 808,924 Chemicals (0.3%) Ecolab 11,397 306,465 Computer hardware (2.4%) Cisco Systems 26,450(b) 554,921 Dell 33,778(b) 1,220,062 EMC 32,797(b) 453,910 Total 2,228,893 Computer software & services (3.1%) BEA Systems 29,986(b) 416,805 First Data 15,707 560,740 Intl Business Machines 3,171 283,741 Microsoft 40,396 1,056,356 Siebel Systems 38,691(b) 487,120 Total 2,804,762 Electronics (1.6%) Intel 33,043 1,092,072 Lam Research 13,806(b) 396,784 Total 1,488,856 Energy (1.0%) EOG Resources 7,382 311,077 Exxon Mobil 15,909 581,951 Total 893,028 Finance companies (1.4%) Citigroup 27,375 1,297,575 Financial services (0.3%) SLM 7,852 307,484 Food (0.5%) Wrigley (Wm) Jr 8,255 465,582 Health care products (3.8%) Amgen 9,757(b) 602,592 Gilead Sciences 6,965(b) 380,150 Johnson & Johnson 17,095 860,391 Lilly (Eli) 4,024 268,079 Pfizer 9,461 298,968 St. Jude Medical 8,752(b) 509,016 Zimmer Holdings 8,725(b) 556,742 Total 3,475,938 Health care services (0.5%) WellPoint Health Networks 4,808(b) 427,431 Household products (1.9%) Colgate-Palmolive 10,728 570,622 Procter & Gamble 12,475 1,226,168 Total 1,796,790 Insurance (0.5%) American Intl Group 8,056 490,046 Leisure time & entertainment (0.8%) Carnival 22,587 788,512 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Media (0.6%) Fox Entertainment Group Cl A 20,706(b) $573,557 Metals (0.5%) Phelps Dodge 8,219(b) 507,441 Multi-industry (1.9%) 3M 11,047 871,277 General Electric 15,073 437,268 Weight Watchers Intl 11,361(b) 419,221 Total 1,727,766 Precious metals (0.5%) Freeport McMoRan Cooper & Gold Cl B 12,641 489,839 Retail -- general (1.4%) Staples 26,747(b) 717,355 Wal-Mart Stores 10,455 616,322 Total 1,333,677 Telecom equipment & services (0.6%) Motorola 43,355 586,593 Utilities -- electric (0.4%) Cinergy 9,221 334,815 Utilities -- telephone (0.5%) SBC Communications 18,753 449,698 Total common stocks (Cost: $55,403,921) $59,064,393 Preferred stock (0.7%)(c) Issuer Shares Value(a) Germany ProSiebenSat.1 Media 43,809 $674,796 Total preferred stock (Cost: $640,174) $674,796 Bonds (32.2%)(c) Issuer Coupon Principal Value(a) rate amount Australia (0.6%) New South Wales Treasury (Australian Dollar) 04-01-04 7.00% 600,000 $428,962 03-01-08 8.00 200,000 154,273 Total 583,235 Austria (3.6%) Oesterreich Kontrollbank (Japanese Yen) 03-22-10 1.80 347,000,000 3,328,216 Canada (1.8%) Govt of Canada (Canadian Dollar) 02-01-06 7.00 720,000 600,265 06-01-08 6.00 800,000 655,951 Province of British Columbia (Canadian Dollar) 12-01-06 5.25 500,000 396,415 Total 1,652,631 Denmark (1.2%) Kingdom of Denmark (Danish Krone) 11-15-04 4.00 615,000 97,669 08-15-05 5.00 6,000,000 973,576 Total 1,071,245 France (4.3%) Govt of France (European Monetary Unit) 10-25-09 4.00 1,500,000 1,757,747 04-25-10 5.50 1,800,000 2,276,797 Total 4,034,544 Germany (7.1%) Allgemeine Hypo Bank (European Monetary Unit) 09-02-09 5.00 850,000 1,039,674 Bundesrepublik Deutschland (European Monetary Unit) 01-05-06 6.00 150,000 185,696 01-04-08 5.25 1,285,000 1,594,941 07-04-08 4.75 725,000 887,908 07-04-10 5.25 250,000 311,999 06-20-16 6.00 434,598 575,380 07-04-27 6.50 1,475,000 2,078,004 Total 6,673,602 Italy (5.1%) Buoni Poliennali Del Tes (European Monetary Unit) 11-01-09 4.25 3,200,000 3,792,774 11-01-29 5.25 800,000 952,655 Total 4,745,429 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Norway (1.2%) Govt of Norway (Norwegian Krone) 11-30-04 5.75% 2,350,000 $341,730 05-15-09 5.50 5,000,000 740,162 Total 1,081,892 Supra-National (0.6%) Intl Bank Reconstruction & Development (Japanese Yen) 02-18-08 2.00 55,000,000 531,196 United Kingdom (1.4%) Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-07 9.50 170,000(b,d) 3,400 United Kingdom Treasury (British Pound) 12-07-05 8.50 700,000 1,279,694 Total 1,283,094 United States (5.3%) Citicorp (Deutsche Mark) 09-19-09 6.25 1,000,000 650,900 ConocoPhillips (U.S. Dollar) 03-15-28 7.13 200,000 209,403 Federal Natl Mtge Assn (U.S. Dollar) 05-15-11 6.00 1,520,000 1,675,689 Intl Paper (European Monetary Unit) 08-11-06 5.38 560,000 675,317 U.S. Treasury (U.S. Dollar) 02-15-06 5.63 500,000 540,762 08-15-13 4.25 937,000 933,336 02-15-26 6.00 169,000 185,649 Total 4,871,056 Total bonds (Cost: $24,963,866) $29,856,140 Total investments in securities (Cost: $81,007,961)(e) $89,595,329 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) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Oct. 31, 2003, is as follows: Security Acquisition Cost dates Greater Beijing First Expressways (U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 $57,064 (e) At Oct. 31, 2003, the cost of securities for federal income tax purposes was $81,141,664 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $9,193,628 Unrealized depreciation (739,963) -------- Net unrealized appreciation $8,453,665 ---------- -------------------------------------------------------------------------------- 15 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Balanced Fund Oct. 31, 2003 Assets Investments in securities, at value (Note 1) (identified cost $81,007,961) $ 89,595,329 Cash in bank on demand deposit 627,987 Foreign currency holdings (identified cost $1,923,950) (Note 1) 1,921,294 Capital shares receivable 2,356 Dividends and accrued interest receivable 606,620 Receivable for investment securities sold 94,082 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 18,784 ------ Total assets 92,866,452 ---------- Liabilities Accrued investment management services fee 2,012 Accrued distribution fee 1,281 Accrued service fee 18 Accrued transfer agency fee 732 Accrued administrative services fee 153 Other accrued expenses 85,075 ------ Total liabilities 89,271 ------ Net assets applicable to outstanding capital stock $ 92,777,181 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 197,128 Additional paid-in capital 131,340,507 Excess of distributions over net investment income (43,245) Accumulated net realized gain (loss) (Note 7) (47,335,816) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) 8,618,607 --------- Total -- representing net assets applicable to outstanding capital stock $ 92,777,181 ============ Net assets applicable to outstanding shares: Class A $ 52,801,832 Class B $ 32,772,150 Class C $ 644,336 Class Y $ 6,558,863 Net asset value per share of outstanding capital stock: Class A shares 11,154,470 $ 4.73 Class B shares 7,041,576 $ 4.65 Class C shares 138,932 $ 4.64 Class Y shares 1,377,777 $ 4.76 --------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT
Statement of operations AXP Global Balanced Fund Year ended Oct. 31, 2003 Investment income Income: Dividends $ 1,098,991 Interest 1,395,698 Fee income from securities lending (Note 3) 379 Less foreign taxes withheld (86,876) ------- Total income 2,408,192 --------- Expenses (Note 2): Investment management services fee 702,933 Distribution fee Class A 130,201 Class B 337,140 Class C 7,203 Transfer agency fee 260,952 Incremental transfer agency fee Class A 15,448 Class B 15,873 Class C 300 Service fee -- Class Y 4,903 Administrative services fees and expenses 56,559 Compensation of board members 7,891 Custodian fees 40,425 Printing and postage 68,988 Registration fees 46,570 Audit fees 19,500 Other 5,854 ----- Total expenses 1,720,740 Earnings credits on cash balances (Note 2) (98) --- Total net expenses 1,720,642 --------- Investment income (loss) -- net 687,550 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (1,825,063) Foreign currency transactions (487,073) -------- Net realized gain (loss) on investments (2,312,136) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,670,500 ---------- Net gain (loss) on investments and foreign currencies 13,358,364 ---------- Net increase (decrease) in net assets resulting from operations $14,045,914 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets AXP Global Balanced Fund Year ended Oct. 31, 2003 2002 Operations and distributions Investment income (loss) -- net $ 687,550 $ 1,285,246 Net realized gain (loss) on investments (2,312,136) (10,651,422) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,670,500 (2,044,378) ---------- ---------- Net increase (decrease) in net assets resulting from operations 14,045,914 (11,410,554) ---------- ----------- Distributions to shareholders from: Net investment income Class A (444,097) (398,116) Class B -- (62,042) Class C (2) (1,400) Class Y (55,350) (16,493) ------- ------- Total distributions (499,449) (478,051) -------- -------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 8,267,331 23,355,046 Class B shares 3,172,163 5,643,206 Class C shares 163,435 437,256 Class Y shares 3,877,067 3,051,849 Reinvestment of distributions at net asset value Class A shares 426,497 380,548 Class B shares -- 60,167 Class C shares 2 1,391 Class Y shares 55,338 16,486 Payments for redemptions Class A shares (17,397,690) (42,926,054) Class B shares (Note 2) (10,981,624) (18,768,163) Class C shares (Note 2) (338,285) (187,066) Class Y shares (1,696,600) (1,568,467) ---------- ---------- Increase (decrease) in net assets from capital share transactions (14,452,366) (30,503,801) ----------- ----------- Total increase (decrease) in net assets (905,901) (42,392,406) Net assets at beginning of year 93,683,082 136,075,488 ---------- ----------- Net assets at end of year $ 92,777,181 $ 93,683,082 ============ ============ Undistributed (excess of distributions over) net investment income $ (43,245) $ 128,128 ------------ ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 18 -- AXP GLOBAL BALANCED FUND -- 2003 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. American Express Financial Corporation (AEFC) may use fair value if a security's value has been materially affected by events after the close of the primary exchanges or markets on which the security is traded and before the NAV is calculated. The fair value of a security may be different from the quoted or published price. AEFC will price a security at fair value in accordance with procedures adopted by the Fund and board if a reliable market quotation is not readily available. 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. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL BALANCED FUND -- 2003 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. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT 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, 2003 foreign currency consisted of multiple denominations. 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. Illiquid Securities As of Oct. 31, 2003, investments in securities included issues that are illiquid which the Fund currently limits to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities as of Oct. 31, 2003 was $3,400 representing .004% of net assets. These securities are valued at fair value according to methods selected in good faith by the board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. 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. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $359,474 and accumulated net realized loss has been decreased by $388,654 resulting in a net reclassification adjustment to decrease paid-in capital by $29,180. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2003 2002 Class A Distributions paid from: Ordinary income $444,097 $398,116 Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- 62,042 Long-term capital gain -- -- Class C Distributions paid from: Ordinary income 2 1,400 Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income 55,350 16,493 Long-term capital gain -- -- As of Oct. 31, 2003, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated long-term gain (loss) $(47,202,112) Unrealized appreciation (depreciation) $ 8,441,658 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, market discount and original issue discount using the effective interest method, is accrued daily. -------------------------------------------------------------------------------- 22 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES The Fund has agreements with 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 0.665% 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. Prior to Dec. 1, 2002, the maximum adjustment was 0.12% of the Fund's average daily net assets after deducting 1% from the performance difference. If the performance difference was less than 1%, the adjustment was zero. On Nov. 13, 2002, shareholders approved modification of the performance incentive adjustment calculation by adjusting the performance difference intervals, changing the maximum adjustment to 0.08% and reducing the amount of the performance difference for which no adjustment is made to 0.50%. The effect of the modifications began Dec. 1, 2002. The adjustment decreased the fee by $19,267 for the year ended Oct. 31, 2003. AEFC has a Subadvisory Agreement with American Express Asset Management International Inc. (AEAMI), a wholly owned subsidiary of AEFC. Investment decisions for the Fund are made by a team of seasoned investment professionals at Threadneedle Asset Management Limited (Threadneedle) who are associated with AEAMI. Threadneedle is also a wholly-owned subsidiary of AEFC. 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. Under a deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. -------------------------------------------------------------------------------- 23 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. 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 incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. However, the closed account fee is not being charged to the Fund until a new transfer agency system is installed. Under terms of a prior agreement that ended April 30, 2003, the Fund paid a transfer agency fee at an annual rate per shareholder account of $19 for Class A, $20 for Class B, $19.50 for Class C and $17 for Class Y. 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 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 $96,955 for Class A, $25,918 for Class B and $44 for Class C for the year ended Oct. 31, 2003. During the year ended Oct. 31, 2003, the Fund's custodian and transfer agency fees were reduced by $98 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to American Express Trust Company, an affiliate of AEFC. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $79,565,605 and $94,336,428, respectively, for the year ended Oct. 31, 2003. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $379 for the year ended Oct. 31, 2003. 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. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2003 Class A Class B Class C Class Y Sold 1,893,751 744,690 38,196 880,736 Issued for reinvested distributions 94,345 -- -- 12,132 Redeemed (4,039,134) (2,576,965) (77,229) (382,383) ---------- ---------- ------- -------- Net increase (decrease) (2,051,038) (1,832,275) (39,033) 510,485 ---------- ---------- ------- ------- 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 ---------- ---------- ------ -------
5. FORWARD FOREIGN CURRENCY CONTRACTS As of Oct. 31, 2003, 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. 6, 2003 2,200,000 2,574,000 $16,645 $-- European Monetary Unit U.S. Dollar Nov. 6, 2003 1,340,000 1,559,800 2,139 -- European Monetary Unit U.S. Dollar ------- --- Total $18,784 $-- ------- ---
6. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. 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. The Fund had no borrowings outstanding during the year ended Oct. 31, 2003. -------------------------------------------------------------------------------- 25 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT 7. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $47,202,112 as of Oct. 31, 2003, that will expire in 2009 through 2011 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. 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, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.08 $4.53 $ 6.27 $6.61 $5.79 Income from investment operations: Net investment income (loss) .05 .07 .07 .08 .09 Net gains (losses) (both realized and unrealized) .64 (.50) (1.27) .12 .82 Total from investment operations .69 (.43) (1.20) .20 .91 Less distributions: Dividends from net investment income (.04) (.02) (.03) (.03) (.07) Distributions from realized gains -- -- (.51) (.51) (.02) Total distributions (.04) (.02) (.54) (.54) (.09) Net asset value, end of period $4.73 $4.08 $ 4.53 $6.27 $6.61 Ratios/supplemental data Net assets, end of period (in millions) $53 $54 $80 $110 $100 Ratio of expenses to average daily net assets(c) 1.60% 1.48% 1.45% 1.31% 1.40% Ratio of net investment income (loss) to average daily net assets 1.03% 1.38% 1.18% 1.26% 1.43% Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% 99% Total return(e) 16.91% (9.48%) (20.63%) 2.62% 15.53%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.01 $4.47 $ 6.21 $6.58 $5.77 Income from investment operations: Net investment income (loss) -- .04 .01 .04 .03 Net gains (losses) (both realized and unrealized) .64 (.49) (1.24) .12 .83 Total from investment operations .64 (.45) (1.23) .16 .86 Less distributions: Dividends from net investment income -- (.01) -- (.02) (.03) Distributions from realized gains -- -- (.51) (.51) (.02) Total distributions -- (.01) (.51) (.53) (.05) Net asset value, end of period $4.65 $4.01 $ 4.47 $6.21 $6.58 Ratios/supplemental data Net assets, end of period (in millions) $33 $36 $53 $77 $68 Ratio of expenses to average daily net assets(c) 2.37% 2.25% 2.21% 2.07% 2.16% Ratio of net investment income (loss) to average daily net assets .27% .61% .42% .51% .66% Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% 99% Total return(e) 15.96% (10.19%) (21.21%) 1.95% 14.89%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 27 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $3.99 $4.46 $ 6.21 $6.58 Income from investment operations: Net investment income (loss) -- .03 .02 .01 Net gains (losses) (both realized and unrealized) .65 (.49) (1.24) (.38) Total from investment operations .65 (.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 $4.64 $3.99 $ 4.46 $6.21 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $-- Ratio of expenses to average daily net assets(c) 2.36% 2.24% 2.21% 2.07%(d) Ratio of net investment income (loss) to average daily net assets .26% .60% .41% .47%(d) Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% Total return(e) 16.29% (10.34%) (21.17%) (5.62%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $4.10 $4.56 $ 6.30 $6.62 $5.79 Income from investment operations: Net investment income (loss) .07 .07 .08 .10 .09 Net gains (losses) (both realized and unrealized) .64 (.50) (1.28) .13 .84 Total from investment operations .71 (.43) (1.20) .23 .93 Less distributions: Dividends from net investment income (.05) (.03) (.03) (.04) (.08) Distributions from realized gains -- -- (.51) (.51) (.02) Total distributions (.05) (.03) (.54) (.55) (.10) Net asset value, end of period $4.76 $4.10 $ 4.56 $6.30 $6.62 Ratios/supplemental data Net assets, end of period (in millions) $7 $4 $2 $1 $-- Ratio of expenses to average daily net assets(c) 1.43% 1.30% 1.31% 1.20% 1.15% Ratio of net investment income (loss) to average daily net assets 1.21% 1.52% 1.35% 1.51% 1.65% Portfolio turnover rate (excluding short-term securities) 90% 99% 173% 110% 99% Total return(e) 17.32% (9.55%) (20.40%) 2.99% 15.76%
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. (f) Not annualized. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL BALANCED FUND -- 2003 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, 2003, 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, 2003 and the financial highlights for each of the years in the five-year period ended October 31, 2003. 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, 2003, 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, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 30 -- AXP GLOBAL BALANCED FUND -- 2003 ANNUAL REPORT Investments in Securities World Income Portfolio Oct. 31, 2003 (Percentages represent value of investments compared to net assets) Bonds (93.9%)(c) Issuer Coupon Principal Value(a) rate amount Australia (1.3%) Burns Philp Capital Property (U.S. Dollar) Sr Sub Nts 02-15-11 10.75% $100,000(d) $105,500 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 8,000,000 6,170,928 Telstra (U.S. Dollar) 04-01-12 6.38 500,000 550,249 Total 6,826,677 Austria (1.4%) Republic of Austria (European Monetary Unit) 10-20-07 5.50 5,900,000 7,378,191 Brazil (0.6%) Federal Republic of Brazil (U.S. Dollar) 10-22-10 9.25 2,000,000 1,995,000 04-15-14 8.00 1,317,609 1,228,670 Total 3,223,670 Canada (3.2%) Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 380,000 284,470 CanWest Media (U.S. Dollar) Series B 04-15-13 7.63 250,000 273,125 Cascades (U.S. Dollar) Sr Nts 02-15-13 7.25 40,000(d) 41,400 02-15-13 7.25 160,000 167,200 Conoco Funding (U.S. Dollar) 10-15-11 6.35 600,000 668,083 Corus Entertainment (U.S. Dollar) Sr Sub Nts 03-01-12 8.75 150,000 165,188 Norampac (U.S. Dollar) Sr Nts 06-01-13 6.75 250,000(d) 260,000 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,400,000 5,307,963 Province of Ontario (Canadian Dollar) 03-08-06 5.90 3,300,000 2,643,480 (Japanese Yen) 01-25-10 1.88 340,000,000 3,258,047 Province of Quebec (Japanese Yen) (MBIA Insured) 05-09-13 1.60 150,000,000(m) 1,385,819 (U.S. Dollar) 12-01-05 6.50 3,200,000 2,583,501 Rogers Cable (U.S. Dollar) 06-15-13 6.25 250,000 250,000 Sun Media (U.S. Dollar) 02-15-13 7.63 200,000 214,000 Videotron Ltee (U.S. Dollar) Sr Nts 01-15-14 6.88 125,000(d) 128,125 Total 17,630,401 Colombia (0.2%) Republic of Colombia (U.S. Dollar) 01-23-12 10.00 1,230,000 1,291,500 Croatia (0.2%) Croatia (European Monetary Unit) 03-14-11 6.75 660,000 842,441 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Denmark (1.0%) Kingdom of Denmark (Danish Krone) 03-15-06 8.00% 16,000,000 $2,779,937 Realkredit Danmark (Danish Krone) 01-01-05 4.00 18,000,000 2,858,528 Total 5,638,465 Dominican Republic (0.1%) Dominican Republic (U.S. Dollar) 01-23-13 9.04 610,000(d) 469,700 Finland (2.1%) Republic of Finland (European Monetary Unit) 07-04-06 2.75 10,095,000 11,671,328 France (6.9%) Cie Financement Foncier (European Monetary Unit) 06-24-05 5.00 1,900,000 2,289,807 Crown Euro Holdings (U.S. Dollar) 03-01-13 10.88 40,000 45,600 Dexia Municipal Agency (European Monetary Unit) 04-26-07 5.38 4,700,000 5,817,725 France Telecom (U.S. Dollar) 03-01-06 8.70 700,000 783,941 Govt of France (European Monetary Unit) 04-25-05 6.05 8,710,000 10,827,884 01-12-07 3.75 9,600,000 11,360,312 10-25-11 5.00 4,600,000 5,651,126 Michelin Finance Luxembourg (European Monetary Unit) 04-16-09 6.13 500,000 628,283 Vivendi Universal (U.S. Dollar) Sr Nts 07-15-08 6.25 275,000(d) 288,200 Total 37,692,878 Germany (11.5%) Allgemeine Hypo Bank (European Monetary Unit) 09-02-09 5.00% 1,860,000 2,275,050 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 150,000,000 1,359,594 Bundesrepublik Deutschland (European Monetary Unit) 07-04-27 6.50 11,770,000 16,581,769 DaimlerChrysler North American Holding (European Monetary Unit) 01-16-07 5.63 670,000 812,437 Depfa Pfandbriefbank (European Monetary Unit) 01-15-10 5.50 2,200,000 2,764,261 Deutsche Bank (European Monetary Unit) 07-28-09 4.25 500,000 586,530 Deutsche Telekom Intl Finance (European Monetary Unit) 05-29-07 7.50 500,000 649,210 (U.S. Dollar) 07-22-13 5.25 1,200,000 1,191,024 Eurohypo (European Monetary Unit) 07-05-10 5.75 2,200,000 2,799,872 Federal Republic of Germany (European Monetary Unit) 07-04-08 4.13 2,850,000 3,391,375 07-04-09 4.50 9,200,000 11,078,950 01-04-10 5.38 10,760,000 13,522,802 Hypothekenbk In Essen (European Monetary Unit) 07-06-09 4.25 2,400,000 2,832,074 Westfaelische Hypobank (European Monetary Unit) 04-24-06 4.75 2,300,000 2,778,960 Total 62,623,908 Greece (3.3%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75 7,600,000 8,769,948 05-18-11 5.35 7,200,000 8,983,497 Total 17,753,445 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Hungary (1.8%) Govt of Hungary (Hungarian Forint) 04-12-05 7.75% 1,510,000,000 $6,563,636 02-12-11 7.50 700,000,000 3,050,188 Total 9,613,824 Ireland (--%) JSG Funding (U.S. Dollar) Sr Nts 10-01-12 9.63 125,000 138,750 Italy (4.4%) Buoni Poliennali Del Tes (European Monetary Unit) 01-01-04 .01 6,800,000 7,982,517 11-01-26 7.25 6,686,283 10,172,106 Republic of Italy (Japanese Yen) 03-27-08 3.80 500,000,000 5,173,734 Telecom Italia (European Monetary Unit) 02-01-07 5.63 500,000 612,561 Total 23,940,918 Japan (4.0%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 650,000,000 5,934,505 Govt of Japan (Japanese Yen) 12-21-09 1.70 970,000,000 9,252,892 06-20-12 1.40 700,000,000 6,411,996 Total 21,599,393 Malaysia (0.3%) Petronas Capital (U.S. Dollar) 05-22-12 7.00 1,500,000(d) 1,670,130 Mexico (0.6%) United Mexican States (U.S. Dollar) 03-03-15 6.63 3,150,000 3,236,625 Netherlands (1.8%) Bank of Nederlandse Gemeenten (British Pound) 08-06-07 7.38% 1,100,000 2,002,255 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 4,400,000 5,401,185 Intl Nederland Bank (European Monetary Unit) Sr Nts 01-29-09 4.25 600,000 706,967 RWE Finance (European Monetary Unit) 10-26-07 5.50 500,000 616,705 Vodafone Finance (European Monetary Unit) 05-27-09 4.75 740,000 881,365 Total 9,608,477 New Zealand (1.1%) Govt of New Zealand (New Zealand Dollar) 11-15-06 8.00 8,800,000 5,723,440 Norway (1.9%) A/S Eksportfinans (Japanese Yen) 06-21-10 1.80 340,000,000 3,227,073 Govt of Norway (Norwegian Krone) 11-30-04 5.75 49,800,000 7,241,772 Total 10,468,845 Peru (0.3%) Republic of Peru (U.S. Dollar) 02-21-12 9.13 870,000 972,225 02-06-15 9.88 430,000 502,025 Total 1,474,250 Poland (0.5%) Republic of Poland (Polish Zloty) 02-12-06 8.50 9,700,000 2,497,808 Romania (0.1%) Govt of Romania (European Monetary Unit) 05-08-12 8.50 430,000 577,606 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Russia (0.1%) Federation of Russia (U.S. Dollar) 03-31-30 5.00% $570,000(d,i) $531,525 South Korea (0.1%) Korea Development Bank (Japanese Yen) 06-25-08 .98 70,000,000 619,621 Spain (4.4%) Govt of Spain (European Monetary Unit) 10-31-07 4.25 9,400,000 11,264,198 01-31-10 4.00 8,200,000 9,582,794 La Caixa De Barcelona (European Monetary Unit) 03-04-10 3.50 2,500,000 2,815,820 Total 23,662,812 Supra-National (2.8%) European Investment Bank (British Pound) 12-07-11 5.50 3,000,000 5,154,991 Inter-American Development Bank (Japanese Yen) 07-08-09 1.90 1,035,000,000 10,006,168 Total 15,161,159 Sweden (0.4%) Govt of Sweden (Swedish Krona) 04-20-06 3.50 19,000,000 2,421,749 Ukraine (0.1%) Govt of Ukraine (U.S. Dollar) 06-11-13 7.65 540,000(d) 535,275 United Kingdom (3.1%) British Telecom (U.S. Dollar) 12-15-10 8.38 700,000 845,362 Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-04 9.25 3,500,000(b,o) 70,000 06-15-07 9.50 8,750,000(b,o) 175,000 HSBC Holdings (U.S. Dollar) Sub Nts 12-12-12 5.25 500,000 507,544 United Kingdom Treasury (British Pound) 12-07-07 7.25% 3,900,000 7,186,595 11-25-10 6.25 2,900,000 5,285,912 03-07-12 5.00 1,600,000 2,708,059 Total 16,778,472 United States (34.3%) Airgas (U.S. Dollar) 10-01-11 9.13 195,000 217,913 Allied Waste North America (U.S. Dollar) Series B 04-01-08 8.88 200,000 221,000 ANR Pipeline (U.S. Dollar) Sr Nts 03-15-10 8.88 160,000 174,400 Apogent Technologies (U.S. Dollar) Sr Sub Nts 05-15-13 6.50 175,000(d) 181,125 ASIF Global Financing (U.S. Dollar) 01-17-13 4.90 1,600,000(d) 1,583,712 AT&T (U.S. Dollar) 03-15-09 6.00 10,000 10,650 (U.S. Dollar) Sr Nts 11-15-11 7.80 230,000(i) 260,653 AT&T Broadband (U.S. Dollar) 03-15-13 8.38 106,000 128,132 AT&T Wireless Services (U.S. Dollar) Sr Nts 03-01-11 7.88 500,000 571,341 Ball (U.S. Dollar) 12-15-12 6.88 335,000 345,887 Bank of America (U.S. Dollar) Sr Nts 02-01-07 5.25 1,000,000 1,068,180 (U.S. Dollar) Sub Nts 08-15-13 4.75 800,000 780,797 Bear Stearns Commercial Mtge Securities (U.S. Dollar) Series 2003-T10 Cl A1 03-13-40 4.00 682,607 681,529 Boise Cascade (U.S. Dollar) Sr Nts 11-01-10 6.50 30,000 30,520 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) CBD Media/Finance (U.S. Dollar) Sr Sub Nts 06-01-11 8.63% $120,000(d) $128,699 Centerpoint Energy (U.S. Dollar) 02-15-11 7.75 130,000 145,772 Chiquita Brands Intl (U.S. Dollar) Sr Nts 03-15-09 10.56 225,000 245,813 Choctaw Resort Development Enterprises (U.S. Dollar) Sr Nts 04-01-09 9.25 150,000 162,000 Cincinnati Bell (U.S. Dollar) 07-15-13 7.25 125,000(d) 126,726 01-15-14 8.38 50,000(d,h) 51,425 Citibank Credit Card Issuance Trust (U.S. Dollar) Series 2003-A5 Cl A5 04-07-08 2.50 500,000 499,780 (U.S. Dollar) Series 2003-A6 Cl A6 05-17-10 2.90 500,000 490,500 Citicorp (Deutsche Mark) 09-19-09 6.25 10,800,000 7,029,712 Coast Hotels & Casino (U.S. Dollar) 04-01-09 9.50 150,000 159,750 Comcast (U.S. Dollar) 03-15-11 5.50 1,100,000 1,134,915 Compass Minerals Group (U.S. Dollar) 08-15-11 10.00 200,000 223,000 Consumers Energy (U.S. Dollar) 1st Mtge 04-15-08 4.25 550,000(d) 552,304 Cott Beverages (U.S. Dollar) 12-15-11 8.00 150,000 162,000 CSC Holdings (U.S. Dollar) Sr Nts 12-15-07 7.88 150,000 153,375 D.R. Horton (U.S. Dollar) Sr Nts 05-01-13 6.88 150,000 157,875 DaimlerChrysler NA Holding (U.S. Dollar) 06-04-08 4.05 800,000 777,320 Del Monte (U.S. Dollar) Series B 05-15-11 9.25 200,000 221,000 Dex Media West/Finance (U.S. Dollar) Sr Nts 08-15-10 8.50 55,000(d) 59,813 (U.S. Dollar) Sr Sub Nts 08-15-13 9.88 50,000(d) 56,875 DirectTV Holdings/Finance (U.S. Dollar) Sr Nts 03-15-13 8.38 150,000 168,375 Domino's (U.S. Dollar) Sr Sub Nts 07-01-11 8.25 75,000(d) 79,313 DRS Technologies (U.S. Dollar) Sr Sub Nts 11-01-13 6.88 155,000(d) 155,775 EchoStar (U.S. Dollar) Sr Nts 10-01-08 5.75 125,000(d) 124,531 El Paso Production Holding (U.S. Dollar) 06-01-13 7.75 150,000(d) 144,000 Emmis Communications (U.S. Dollar) Series B 03-15-09 8.13 250,000 261,562 Federal Home Loan Mtge Corp (European Monetary Unit) 01-15-06 5.25 1,800,000 2,191,383 (U.S. Dollar) 07-01-17 6.00 1,053,416 1,094,894 09-01-17 6.50 834,176 875,273 05-01-18 5.50 1,485,112 1,529,970 10-01-18 5.00 1,095,941 1,113,668 04-01-33 6.00 2,834,140 2,924,257 08-01-33 6.50 664,956 691,633 11-01-33 5.00 1,350,000(h) 1,328,913 Federal Natl Mtge Assn (U.S. Dollar) 01-01-09 5.74 1,220,225 1,305,632 01-01-13 4.92 524,967 528,953 02-01-13 4.87 1,364,719 1,382,272 03-01-17 5.50 1,563,125 1,610,036 03-01-17 6.00 554,867 577,115 04-01-17 6.50 1,505,967 1,595,832 08-01-18 4.50 2,464,694 2,464,020 11-01-18 5.00 4,900,000(h) 4,976,563 11-01-18 6.00 1,250,000(h) 1,300,000 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Federal Natl Mtge Assn (cont.) (U.S. Dollar) (cont.) 11-15-18 5.00% $2,500,000 $2,570,019 11-16-18 5.50 2,500,000(h) 2,573,438 07-01-23 5.00 1,427,335 1,429,235 05-01-32 7.00 1,794,692 1,889,573 05-01-32 7.50 1,264,251 1,347,155 06-01-32 7.00 1,096,052 1,162,174 07-01-32 6.50 1,037,695 1,078,074 08-01-32 6.50 1,141,454 1,185,870 11-01-32 7.50 2,184,706 2,327,968 03-01-33 5.50 2,890,078 2,919,509 03-01-33 6.00 3,882,672 3,986,898 04-01-33 6.00 3,683,239 3,791,275 05-01-33 6.00 993,723 1,022,876 06-01-33 5.50 1,969,885 1,988,904 07-01-33 5.50 871,800 881,313 07-01-33 7.00 1,941,752 2,044,301 11-01-33 5.50 5,200,000(h) 5,247,121 11-01-33 6.50 7,600,000(h) 7,894,499 Collateralized Mtge Obligation (U.S. Dollar) 03-25-13 4.38 620,000(f) 597,218 10-25-42 7.50 870,538(f) 953,239 Fisher Scientific Intl (U.S. Dollar) Sr Sub Nts 09-01-13 8.00 135,000(d,h) 145,125 Ford Motor (U.S. Dollar) 10-01-28 6.63 650,000 533,158 Gap (U.S. Dollar) 09-15-07 6.90 40,000 43,500 Gaylord Entertainment (U.S. Dollar) Sr Nts 11-15-13 8.00 20,000(d,h) 20,500 GE Financial Assurance (Japanese Yen) 06-20-11 1.60 130,000,000 1,140,795 General Electric (U.S. Dollar) 02-01-13 5.00 1,000,000 1,005,910 General Electric Capital (European Monetary Unit) 06-20-07 5.13 500,000 612,170 Georgia Pacific (U.S. Dollar) Sr Nts 02-01-10 8.88 185,000 211,363 GMAC (U.S. Dollar) 09-15-06 6.13 2,500,000 2,642,654 Goldman Sachs Group (U.S. Dollar) 05-15-09 6.65 500,000 562,948 07-15-13 4.75 600,000 579,660 Govt Natl Mtge Assn (U.S. Dollar) 03-15-33 7.00 379,649 402,426 10-15-33 5.50 2,000,000 2,027,522 Collateralized Mtge Obligation Interest Only (U.S. Dollar) 01-20-32 6.00 5,700,000(f,j) 659,472 Grant Prideco Escrow (U.S. Dollar) 12-15-09 9.00 250,000 270,000 Graphic Packaging Intl (U.S. Dollar) Sr Nts 08-15-11 8.50 45,000(d) 49,613 Gulfterra Energy Partner (U.S. Dollar) Sr Nts 06-01-10 6.25 90,000(d) 90,675 Hilton Hotels (U.S. Dollar) 12-01-12 7.63 200,000 221,000 Host Marriott LP (U.S. Dollar) Sr Nts 11-01-13 7.13 75,000(d,h) 75,000 Household Finance (U.S. Dollar) 10-15-11 6.38 1,500,000 1,639,307 Intl Paper (European Monetary Unit) 08-11-06 5.38 700,000 844,145 IPALCO Enterprises (U.S. Dollar) 11-14-08 8.38 250,000 272,500 J.P. Morgan Chase (U.S. Dollar) Sub Nts 02-01-11 6.75 500,000 561,193 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Johnsondiversey Holdings (U.S. Dollar) (Zero coupon through 05-15-07, thereafter 10.67%) 05-15-13 22.08% $80,000(d,n) $59,600 Jorgensen Earle M. (U.S. Dollar) 06-01-12 9.75 50,000 54,250 Joy Global (U.S. Dollar) Series B 03-15-12 8.75 60,000 66,300 Key Energy Services (U.S. Dollar) Series C 03-01-08 8.38 130,000 140,075 (U.S. Dollar) Sr Nts 05-01-13 6.38 70,000 70,350 Kinetic Concepts (U.S. Dollar) Sr Sub Nts 05-15-13 7.38 100,000(d) 102,500 Kraft Foods (U.S. Dollar) 10-01-08 4.00 1,100,000 1,098,581 L-3 Communications (U.S. Dollar) 06-15-12 7.63 250,000 271,250 LaBranche (U.S. Dollar) Sr Nts 08-15-04 9.50 50,000 50,688 Lamar Media (U.S. Dollar) 01-01-13 7.25 75,000 78,938 Lehman Brothers Holdings (U.S. Dollar) 08-07-08 3.50 500,000 493,540 MacDermid (U.S. Dollar) 07-15-11 9.13 35,000 39,025 MBNA Credit Card Master Note Trust (U.S. Dollar) Series 2003-A1 Cl A1 07-15-10 3.30 500,000 498,100 Merisant (U.S. Dollar) 07-15-13 9.50 115,000(d) 124,200 Meritage (U.S. Dollar) 06-01-11 9.75 145,000 160,950 Metris Master Trust (U.S. Dollar) Series 2001-3 Cl C 07-21-08 2.82% $400,000(d,i) 340,000 MGM Mirage (U.S. Dollar) 10-01-09 6.00 125,000 125,625 Mohegan Tribal Gaming (U.S. Dollar) Sr Sub Nts 07-15-09 6.38 40,000(d) 40,800 Morgan Stanley, Dean Witter (European Monetary Unit) 03-16-06 5.25 2,400,000 2,912,576 Morris Publishing (U.S. Dollar) Sr Sub Nts 08-01-13 7.00 65,000(d) 66,300 Nalco (U.S. Dollar) Sr Nts 11-15-11 7.75 50,000(d,h) 52,000 NeighborCare (U.S. Dollar) Sr Sub Nts 11-15-13 6.88 25,000(d,h) 25,330 Newfield Exploration (U.S. Dollar) Sr Sub Nts 08-15-12 8.38 340,000 375,700 Nextel Communications (U.S. Dollar) Sr Nts 10-31-13 6.88 300,000 303,000 Nissan Auto Receivables Owner Trust (U.S. Dollar) Series 2003-A Cl A4 07-15-08 2.61 500,000 499,550 Norcraft Companies LP/Finance (U.S. Dollar) Sr Sub Nts 11-01-11 9.00 90,000(d) 94,500 Nortek (U.S. Dollar) Sr Sub Nts Series B 06-15-11 9.88 75,000 80,813 Northwest Pipeline (U.S. Dollar) 03-01-10 8.13 10,000 11,025 NVR (U.S. Dollar) Sr Nts 06-15-10 5.00 375,000 365,625 Offshore Logistics (U.S. Dollar) 06-15-13 6.13 30,000 28,800 Overseas Private Investment (U.S. Dollar) U.S. Govt Guaranty Series 1996A 01-15-09 6.99 4,166,666 4,592,540 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Owens-Brockway Glass (U.S. Dollar) 05-15-11 7.75% $115,000 $121,325 Park Place Entertainment (U.S. Dollar) Sr Sub Nts 05-15-11 8.13 85,000 92,863 Peabody Energy (U.S. Dollar) Series B 03-15-13 6.88 175,000 184,187 Qwest (U.S. Dollar) 11-01-04 7.20 150,000 153,750 Raytheon (U.S. Dollar) 04-01-13 5.38 550,000 544,973 Ryland Group (U.S. Dollar) Sr Nts 06-01-08 5.38 310,000 319,300 SBC Communications (U.S. Dollar) 08-15-12 5.88 300,000 317,379 Schuler Homes (U.S. Dollar) 07-15-09 9.38 85,000 95,306 Scotts (U.S. Dollar) Sr Sub Nts 11-15-13 6.63 15,000(d) 15,225 Silgan Holdings (U.S. Dollar) Sr Sub Nts 11-15-13 6.75 125,000(d,h) 125,174 SLM (U.S. Dollar) 03-17-08 3.63 550,000 549,731 Smurfit-Stone Container (U.S. Dollar) 10-01-12 8.25 85,000 89,250 Southern Natural Gas (U.S. Dollar) 03-15-10 8.88 175,000 190,750 Sprint Capital (U.S. Dollar) 03-15-12 8.38 400,000 456,584 SPX (U.S. Dollar) Sr Nts 06-15-11 6.25 255,000 255,638 Stone Container (U.S. Dollar) Sr Nts 07-01-12 8.38 210,000 221,550 Susquehanna Media (U.S. Dollar) Sr Sub Nts 04-15-13 7.38% $40,000 41,300 TD Funding (U.S. Dollar) 07-15-11 8.38 180,000(d) 192,150 Teco Energy (U.S. Dollar) Sr Nts 06-15-10 7.50 45,000 46,238 Time Warner (U.S. Dollar) 05-01-12 6.88 1,000,000 1,107,194 Toll (U.S. Dollar) 02-01-09 8.13 65,000 68,250 Tom Brown (U.S. Dollar) 09-15-13 7.25 20,000 20,900 Toyota Motor Credit (Japanese Yen) 06-09-08 .75 197,000,000 1,786,838 TRAINS 10-2002 (U.S. Dollar) 01-15-12 6.96 2,964,000(d,e) 3,369,030 Transcontinental Gas Pipeline (U.S. Dollar) Series B 08-15-11 7.00 175,000 186,813 U.S. Treasury (U.S. Dollar) 11-15-05 5.75 315,000(g) 339,363 08-15-07 3.25 1,175,000 1,195,242 08-15-13 4.25 33,800,000 33,667,841 02-15-26 6.00 5,390,000 5,921,001 02-15-31 5.38 5,700,000 5,890,369 United Rentals (U.S. Dollar) Sr Sub Nts 11-15-13 7.75 30,000(d,h) 29,775 United States Steel (U.S. Dollar) Sr Nts 05-15-10 9.75 75,000 79,313 Verizon Pennsylvania (U.S. Dollar) Series A 11-15-11 5.65 1,060,000 1,101,626 Wachovia (U.S. Dollar) 08-15-08 3.50 400,000 397,744 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 16 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Washington Mutual (U.S. Dollar) Sr Nts 01-15-07 5.63% $2,500,000(g) $2,693,107 WCI Communities (U.S. Dollar) Sr Sub Nts 10-01-13 7.88 35,000(d) 36,225 Wells Fargo (U.S. Dollar) Sr Nts 02-15-07 5.13 1,000,000 1,066,211 Weyerhaeuser (U.S. Dollar) 03-15-12 6.75 1,100,000 1,190,788 William Carter (U.S. Dollar) Series B 08-15-11 10.88 100,000 113,250 Williams Companies (U.S. Dollar) 03-15-12 8.13 75,000 81,000 XTO Energy (U.S. Dollar) Sr Nts 04-15-12 7.50 260,000 291,200 04-15-13 6.25 160,000 164,000 Total 186,752,042 Total bonds (Cost: $488,546,016) $510,055,325 Short-term securities (14.2%)(l) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agency (8.3%) Federal Natl Mtge Assn Disc Nts 12-17-03 1.08% $20,000,000 $19,974,436 01-07-04 1.06 15,000,000 14,972,100 01-14-04 1.07 10,000,000 9,979,400 Total 44,925,936 Commercial paper (5.9%) Fleet Funding 11-14-03 1.06 5,000,000(k) 4,997,939 Greyhawk Funding LLC 01-16-04 1.10 5,000,000(k) 4,988,494 ING US Funding 12-10-03 1.06 5,000,000 4,994,055 Northern Rock 02-24-04 1.12 5,800,000(k) 5,778,878 UBS Finance (Delaware) 11-03-03 1.04 11,300,000 11,299,022 Total 32,058,388 Total short-term securities (Cost: $76,980,246) $76,984,324 Total investments in securities (Cost: $565,526,262)(p) $587,039,649 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) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Notes to investments in securities (continued) (g) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 6 to the financial statements): Type of security Notional amount Purchase contracts Eurodollar, Sept. 2007, 90-day $27,250,000 German bund, Dec. 2003, 10-year 5,812,500 (h) At Oct. 31, 2003, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $23,754,981. (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, 2003. (j) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing of future cash flows as of Oct. 31, 2003. (k) 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. (l) At Oct. 31, 2003, cash or short-term securities were designated to cover open call options on futures written as follows (see Note 7 to the financial statements):
Issuer Notional Exercise Expiration Value(a) amount price date U.S Treasury Notes Nov. 2003, 10-year $5,900,000 $110 Nov. 2003 $151,187 At Oct. 31, 2003, cash or short-term securities were designated to cover open put options on futures written as follows (see Note 7 to the financial statements): Issuer Notional Exercise Expiration Value(a) amount price date U.S Treasury Notes Nov. 2003, 10-year $5,900,000 $110 Nov. 2003 $15,672
(m) The following abbreviation is used in the portfolio security description to identify the insurer of the issue: MBIA -- Municipal Bond Investors Assurance (n) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the annualized effective yield from the date of acquisition to maturity. (o) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Oct. 31, 2003, is as follows: Security Acquisition Cost dates Greater Beijing First Expressways (U.S. Dollar) 9.25% Sr Nts 2004 06-12-97 $ 410,923 (U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 1,192,681 (p) At Oct. 31, 2003, the cost of securities for federal income tax purposes was $565,526,262 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $25,147,752 Unrealized depreciation (3,634,365) ---------- Net unrealized appreciation $21,513,387 ----------- -------------------------------------------------------------------------------- 18 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities World Income Portfolio Oct. 31, 2003 Assets Investments in securities, at value (Note 1)* (identified cost $565,526,262) $587,039,649 Foreign currency holdings (identified cost $3,491,673) (Note 1) 3,482,206 Dividends and accrued interest receivable 8,246,975 Receivable for investment securities sold 333,767 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 100,121 ------- Total assets 599,202,718 ----------- Liabilities Disbursements in excess of cash on demand deposit 169,528 Payable for investment securities purchased 23,883,450 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 124,330 Payable upon return of securities loaned (Note 4) 31,751,250 Accrued investment management services fee 11,262 Other accrued expenses 55,893 Options contracts written, at value (premiums received $167,310) (Note 7) 166,859 ------- Total liabilities 56,162,572 ---------- Net assets $543,040,146 ============ * Including securities on loan, at value (Note 4) $ 30,679,572 ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT
Statement of operations World Income Portfolio Year ended Oct. 31, 2003 Investment income Income: Interest $22,115,819 Fee income from securities lending (Note 4) 12,208 Less foreign taxes withheld (7,009) ------ Total income 22,121,018 ---------- Expenses (Note 2): Investment management services fee 4,084,088 Compensation of board members 9,066 Custodian fees 187,191 Audit fees 25,500 Other 13,295 ------ Total expenses 4,319,140 --------- Investment income (loss) -- net 17,801,878 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 20,933,458 Foreign currency transactions (2,947,788) Futures contracts (212,635) Options contracts written (Note 7) 228,612 ------- Net realized gain (loss) on investments 18,001,647 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 33,085,822 ---------- Net gain (loss) on investments and foreign currencies 51,087,469 ---------- Net increase (decrease) in net assets resulting from operations $68,889,347 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets World Income Portfolio Year ended Oct. 31, 2003 2002 Operations Investment income (loss) -- net $ 17,801,878 $ 17,765,639 Net realized gain (loss) on investments 18,001,647 (13,975,131) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 33,085,822 28,002,434 ---------- ---------- Net increase (decrease) in net assets resulting from operations 68,889,347 31,792,942 ---------- ---------- Proceeds from contributions 39,684,999 27,551,027 Fair value of withdrawals (68,855,691) (58,048,238) ----------- ----------- Net contributions (withdrawals) from partners (29,170,692) (30,497,211) ----------- ----------- Total increase (decrease) in net assets 39,718,655 1,295,731 Net assets at beginning of year 503,321,491 502,025,760 ----------- ----------- Net assets at end of year $543,040,146 $503,321,491 ============ ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL BOND FUND -- 2003 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 obligations 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. American Express Financial Corporation (AEFC) may use fair value if a security's value has been materially affected by events after the close of the primary exchanges or markets on which the security is traded and before the NAV is calculated. The fair value of a security may be different from the quoted or published price. AEFC will price a security at fair value in accordance with procedures adopted by the Portfolio and board of trustees if a reliable market quotation is not readily available. 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. -------------------------------------------------------------------------------- 22 -- AXP GLOBAL BOND FUND -- 2003 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. As of Oct. 31, 2003, foreign currency holdings consisted of multiple denominations. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Illiquid securities As of Oct. 31, 2003, investments in securities included issues that are illiquid which the Portfolio currently limits to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities as of Oct. 31, 2003 was $245,000 representing 0.05% of net assets. These securities are valued at fair value according to methods selected in good faith by the board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. -------------------------------------------------------------------------------- 23 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Securities purchased on a forward-commitment basis Delivery and payment for securities that have been purchased by the Portfolio on a forward-commitment basis, including when-issued securities and 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, 2003, the Portfolio has entered into outstanding when-issued securities of $23,754,981. 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, market discount and original issue 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 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. Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. The Portfolio 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. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $598,097,621 and $616,568,163, respectively, for the year ended Oct. 31, 2003. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES As of Oct. 31, 2003, securities valued at $30,679,572 were on loan to brokers. For collateral, the Portfolio received $31,751,250 in cash. Income from securities lending amounted to $12,208 for the year ended Oct. 31, 2003. The risks to the Portolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 5. FORWARD FOREIGN CURRENCY CONTRACTS As of Oct. 31, 2003, 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. 7, 2003 18,900,000 21,970,778 $ 1,397 $ -- European Monetary Unit U.S. Dollar Nov. 7, 2003 2,315,000 2,733,089 42,131 -- European Monetary Unit U.S. Dollar Nov. 14, 2003 1,375,333 15,500,000 24,353 -- U.S. Dollar Mexican Peso Nov. 14, 2003 1,367,446 15,500,000 32,240 -- U.S. Dollar Mexican Peso Nov. 25, 2003 12,958,249 1,410,000,000 -- 124,330 U.S. Dollar Japanese Yen -------- -------- Total $100,121 $124,330 -------- --------
6. INTEREST RATE FUTURES CONTRACTS As of Oct. 31, 2003, investments in securities included securities valued at $673,297 that were pledged as collateral to cover initial margin deposits on 50 open purchase contracts denominated in Euros and 109 open purchase contracts. The notional market value of the open purchase contracts denominated in Euros as of Oct. 31, 2003 was $6,553,594 with a net unrealized gain of $49,306. The notional market value of the open purchase contracts denominated in U.S. dollars as of Oct. 31, 2003 was $25,824,825 with a net unrealized loss of $268,848. See "Summary of significant accounting policies" and "Notes to investments in securities." -------------------------------------------------------------------------------- 25 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT 7. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows: Year ended Oct. 31, 2003 Puts Calls Contracts Premiums Contracts Premiums Balance Oct. 31, 2002 -- $ -- -- $ -- Opened 466 308,107 1,103 977,809 Closed (407) (253,952) (1,044) (864,654) ---- -------- ------ -------- Balance Oct. 31, 2003 59 $ 54,155 59 $ 113,155 -- --------- -- --------- 8. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
Ratios/supplemental data Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Ratio of expenses to average daily net assets(a) .80% .79% .78% .78% .77% Ratio of net investment income (loss) to average daily net assets 3.29% 3.66% 5.27% 5.98% 5.90% Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% 48% Total return(b) 13.99% 6.89% 11.29% (4.29%) --%
Notes to financial highlights (a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio NAV and does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL BOND FUND -- 2003 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, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended October 31, 2003. These financial statements and the financial highlights are the responsibility of portfolio 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, 2003, 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 World Income Portfolio as of October 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 27 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Bond Fund Oct. 31, 2003 Assets Investment in Portfolio (Note 1) $542,908,102 Capital shares receivable 400,853 ------- Total assets 543,308,955 ----------- Liabilities Capital shares payable 152,274 Accrued distribution fee 7,082 Accrued transfer agency fee 3,203 Accrued administrative services fee 849 Other accrued expenses 64,805 ------ Total liabilities 228,213 ------- Net assets applicable to outstanding capital stock $543,080,742 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 826,222 Additional paid-in capital 529,380,582 Undistributed net investment income 5,836,050 Accumulated net realized gain (loss) (Note 5) (14,370,439) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 21,408,327 ---------- Total -- representing net assets applicable to outstanding capital stock $543,080,742 ============ Net assets applicable to outstanding shares: Class A $380,369,260 Class B $157,749,689 Class C $ 4,896,742 Class Y $ 65,051 Net asset value per share of outstanding capital stock: Class A shares 57,861,587 $ 6.57 Class B shares 24,002,923 $ 6.57 Class C shares 747,827 $ 6.55 Class Y shares 9,872 $ 6.59 ----- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT
Statement of operations AXP Global Bond Fund Year ended Oct. 31, 2003 Investment income Income: Interest $22,112,403 Fee income from securities lending 12,205 Less foreign taxes withheld (7,007) ------ Total income 22,117,601 ---------- Expenses (Note 2): Expenses allocated from Portfolio 4,318,134 Distribution fee Class A 934,595 Class B 1,630,210 Class C 40,221 Transfer agency fee 1,032,815 Incremental transfer agency fee Class A 72,987 Class B 60,182 Class C 1,799 Service fee -- Class Y 31 Administrative services fees and expenses 311,211 Compensation of board members 7,891 Printing and postage 139,749 Registration fees 54,408 Audit fees 8,500 Other 10,470 ------ Total expenses 8,623,203 Earnings credits on cash balances (Note 2) (5,862) ------ Total net expenses 8,617,341 --------- Investment income (loss) -- net 13,500,260 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 20,927,943 Foreign currency transactions (2,947,445) Futures contracts (212,623) Options contracts written 228,557 ------- Net realized gain (loss) on investments 17,996,432 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 33,079,008 ---------- Net gain (loss) on investments and foreign currencies 51,075,440 ---------- Net increase (decrease) in net assets resulting from operations $64,575,700 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets AXP Global Bond Fund Year ended Oct. 31, 2003 2002 Operations and distributions Investment income (loss) -- net $ 13,500,260 $ 14,015,228 Net realized gain (loss) on investments 17,996,432 (13,978,629) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 33,079,008 28,002,459 ---------- ---------- Net increase (decrease) in net assets resulting from operations 64,575,700 28,039,058 ---------- ---------- Distributions to shareholders from: Net investment income Class A (12,438,109) (9,644,735) Class B (3,958,002) (2,850,093) Class C (103,214) (18,570) Class Y (1,009) (1,859) ------ ------ Total distributions (16,500,334) (12,515,257) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 118,383,281 85,865,445 Class B shares 50,004,285 39,838,214 Class C shares 3,603,615 2,477,135 Class Y shares 41,942 39,390 Reinvestment of distributions at net asset value Class A shares 11,408,319 9,451,955 Class B shares 3,683,453 2,694,998 Class C shares 93,681 18,429 Class Y shares 985 2,055 Payments for redemptions Class A shares (130,390,225) (112,854,832) Class B shares (Note 2) (63,154,212) (40,086,791) Class C shares (Note 2) (1,678,853) (813,795) Class Y shares (55,411) (34,448) ------- ------- Increase (decrease) in net assets from capital share transactions (8,059,140) (13,402,245) ---------- ----------- Total increase (decrease) in net assets 40,016,226 2,121,556 Net assets at beginning of year 503,064,516 500,942,960 ----------- ----------- Net assets at end of year $ 543,080,742 $ 503,064,516 ============= ============= Undistributed net investment income $ 5,836,050 $ 1,228,206 ------------- -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 30 -- AXP GLOBAL BOND FUND -- 2003 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 invests primarily in debt obligations 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, 2003 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. -------------------------------------------------------------------------------- 31 -- AXP GLOBAL BOND FUND -- 2003 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 increased by $7,607,918 and accumulated net realized loss has been increased by $7,607,918. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2003 2002 Class A Distributions paid from: Ordinary income $12,438,109 $9,644,735 Long-term capital gain -- -- Class B Distributions paid from: Ordinary income 3,958,002 2,850,093 Long-term capital gain -- -- Class C Distributions paid from: Ordinary income 103,214 18,570 Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income 1,009 1,859 Long-term capital gain -- -- As of Oct. 31, 2003, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 7,210,151 Accumulated long-term gain (loss) $(14,577,099) Unrealized appreciation (depreciation) $ 20,240,886 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. -------------------------------------------------------------------------------- 32 -- AXP GLOBAL BOND FUND -- 2003 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 Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $20.50 o Class B $21.50 o Class C $21.00 o Class Y $18.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. However, the closed account fee is not being charged to the Fund until a new transfer agency system is installed. Under terms of a prior agreement that ended April 30, 2003, the Fund paid a transfer agency fee at an annual rate per shareholder account of $19.50 for Class A, $20.50 for Class B, $20 for Class C and $17.50 for Class Y. 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 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. -------------------------------------------------------------------------------- 33 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Sales charges received by the Distributor for distributing Fund shares were $867,579 for Class A, $140,300 for Class B and $2,038 for Class C for the year ended Oct. 31, 2003. During the year ended Oct. 31, 2003, the Fund's transfer agency fees were reduced by $5,862 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2003 Class A Class B Class C Class Y Sold 18,346,322 7,797,131 562,338 6,300 Issued for reinvested distributions 1,795,377 578,536 14,712 154 Redeemed (20,340,957) (9,764,130) (260,976) (9,193) ----------- ---------- -------- ------ Net increase (decrease) (199,258) (1,388,463) 316,074 (2,739) -------- ---------- ------- ------ 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 ---------- ------- ------- -----
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. 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. The Fund had no borrowings outstanding during the year ended Oct. 31, 2003. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $14,577,099 as of Oct. 31, 2003, 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. -------------------------------------------------------------------------------- 34 -- AXP GLOBAL BOND FUND -- 2003 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, 2003 2002 2001 2000 1999 Net asset value, beginning of period $6.00 $5.81 $5.39 $5.87 $6.17 Income from investment operations: Net investment income (loss) .18 .19 .27 .34 .33 Net gains (losses) (both realized and unrealized) .60 .17 .30 (.63) (.36) Total from investment operations .78 .36 .57 (.29) (.03) Less distributions: Dividends from net investment income (.21) (.17) (.15) (.19) (.26) Distributions from realized gains -- -- -- -- (.01) Total distributions (.21) (.17) (.15) (.19) (.27) Net asset value, end of period $6.57 $6.00 $5.81 $5.39 $5.87 Ratios/supplemental data Net assets, end of period (in millions) $380 $348 $355 $389 $598 Ratio of expenses to average daily net assets(c) 1.36% 1.34% 1.32% 1.30% 1.22% Ratio of net investment income (loss) to average daily net assets 2.73% 3.12% 4.75% 5.49% 5.49% Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% 48% Total return(e) 13.25% 6.24% 10.83% (5.16%) (.35%)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 35 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $5.99 $5.79 $5.38 $5.87 $6.17 Income from investment operations: Net investment income (loss) .12 .13 .21 .29 .28 Net gains (losses) (both realized and unrealized) .62 .19 .31 (.62) (.35) Total from investment operations .74 .32 .52 (.33) (.07) Less distributions: Dividends from net investment income (.16) (.12) (.11) (.16) (.22) Distributions from realized gains -- -- -- -- (.01) Total distributions (.16) (.12) (.11) (.16) (.23) Net asset value, end of period $6.57 $5.99 $5.79 $5.38 $5.87 Ratios/supplemental data Net assets, end of period (in millions) $158 $152 $145 $155 $235 Ratio of expenses to average daily net assets(c) 2.12% 2.10% 2.09% 2.07% 1.98% Ratio of net investment income (loss) to average daily net assets 1.97% 2.36% 3.99% 4.73% 4.72% Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% 48% Total return(e) 12.39% 5.59% 9.73% (5.77%) (1.10%)
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $5.98 $5.79 $5.38 $5.52 Income from investment operations: Net investment income (loss) .13 .14 .21 .10 Net gains (losses) (both realized and unrealized) .60 .18 .31 (.24) Total from investment operations .73 .32 .52 (.14) Less distributions: Dividends from net investment income (.16) (.13) (.11) -- Net asset value, end of period $6.55 $5.98 $5.79 $5.38 Ratios/supplemental data Net assets, end of period (in millions) $5 $3 $1 $-- Ratio of expenses to average daily net assets(c) 2.14% 2.10% 2.09% 2.07%(d) Ratio of net investment income (loss) to average daily net assets 1.89% 2.29% 3.84% 4.80%(d) Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% Total return(e) 12.41% 5.51% 9.84% (2.49%)(f)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 36 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $6.01 $5.80 $5.40 $5.87 $6.17 Income from investment operations: Net investment income (loss) .19 .20 .29 .35 .34 Net gains (losses) (both realized and unrealized) .61 .19 .27 (.62) (.36) Total from investment operations .80 .39 .56 (.27) (.02) Less distributions: Dividends from net investment income (.22) (.18) (.16) (.20) (.27) Distributions from realized gains -- -- -- -- (.01) Total distributions (.22) (.18) (.16) (.20) (.28) Net asset value, end of period $6.59 $6.01 $5.80 $5.40 $5.87 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(c) 1.18% 1.17% 1.16% 1.14% 1.07% Ratio of net investment income (loss) to average daily net assets 2.69% 3.29% 4.90% 5.75% 5.63% Portfolio turnover rate (excluding short-term securities) 117% 51% 24% 48% 48% Total return(e) 13.54% 6.72% 10.71% (4.88%) (.19%)
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. (f) Not annualized. -------------------------------------------------------------------------------- 37 -- AXP GLOBAL BOND FUND -- 2003 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, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended October 31, 2003. 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, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 38 -- AXP GLOBAL BOND FUND -- 2003 ANNUAL REPORT Investments in Securities World Growth Portfolio Oct. 31, 2003 (Percentages represent value of investments compared to net assets) Common stocks (98.2%)(c) Issuer Shares Value(a) Australia (2.1%) Media (1.1%) News ADR 151,800 $5,411,670 Metals (1.0%) BHP Billiton 621,035 5,164,481 Barbados (0.8%) Energy equipment & services Nabors Inds 105,799(b) 3,999,202 Bermuda (2.1%) Insurance (1.0%) RenaissanceRe Holdings 112,100 5,042,258 Multi-industry conglomerates (1.1%) Accenture Cl A 236,972(b) 5,545,145 Brazil (1.3%) Metals (0.5%) Companhia Vale do Rio Doce ADR 63,520 2,566,208 Paper & packaging (0.8%) Aracruz Celulose ADR 137,406 3,861,109 Canada (0.5%) Chemicals Potash 32,310 2,543,766 China (2.6%) Financial services (0.7%) Hong Kong Exchanges & Clearing 1,822,000 3,965,103 Multi-industry (0.8%) Swire Pacific Cl A 634,500 3,872,838 Real estate investment trust (1.0%) Henderson Land Development 1,261,000 5,293,612 Finland (0.5%) Machinery Kone Cl B 48,298 2,523,782 France (2.3%) Computer software & services (0.8%) Atos Origin 60,623(b) 4,045,221 Energy (1.0%) Total 32,879 5,110,260 Telecom equipment & services (0.5%) Alcatel 200,447 2,644,773 Germany (4.8%) Automotive & related (1.1%) Porsche 11,037 5,421,149 Computer software & services (1.3%) SAP 18,088 2,631,567 T-Online Intl 335,000(b) 4,334,439 Total 6,966,006 Health care products (0.5%) Altana 43,280 2,727,468 Insurance (1.1%) Muenchener Rueckversicherungs-Gesellschaft 46,082 5,495,780 Textiles & apparel (0.8%) Puma Rudolf Dassler Sport 28,529 4,161,540 Hong Kong (1.0%) Real estate (1.0%) Sun Hung Kai Properties 602,000 5,096,965 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Ireland (0.5%) Banks and savings & loans Anglo Irish Bank 224,508 $2,696,033 Italy (2.9%) Banks and savings & loans (1.1%) Banco Popolare di Verona e Novara 349,352 5,401,419 Energy (0.8%) Eni 243,462 3,866,116 Retail -- general (1.0%) Bulgari 605,686 5,477,976 Japan (7.4%) Automotive & related (0.7%) Toyota Motor 126,600 3,604,475 Cellular telecommunications (0.9%) NTT DoCoMo 2,113 4,574,467 Chemicals (0.9%) Shin-Etsu Chemical 124,900 4,646,755 Electronics (1.0%) Seiko Epson 155,100 5,586,901 Financial services (1.0%) Nomura Holdings 291,000 4,997,571 Industrial transportation (1.0%) East Japan Railway 1,122 5,082,603 Multi-industry (1.9%) Canon 133,000 6,436,167 Mitsubishi 369,000 3,829,799 Total 10,265,966 Malaysia (1.1%) Leisure time & entertainment Resorts World Berhad 1,873,000 5,421,842 Mexico (2.3%) Beverages & tobacco (0.5%) Coca-Cola Femsa ADR 120,770(b) 2,439,554 Cellular telecommunications (1.0%) America Movil ADR Series L 226,941 5,401,196 Financial services (0.8%) Grupo Financiero BBVA Bancomer Cl B 4,864,460(b) 4,111,245 Netherlands (1.0%) Food (0.5%) Koninklijke Numico 110,725(b) 2,498,413 Utilities -- telephone (0.5%) Koninklijke (Royal) 341,479(b) 2,596,180 South Korea (1.7%) Electronics Samsung Electronics 22,360 8,879,763 Sweden (0.8%) Machinery Atlas Copco Cl A 117,852 4,139,478 Switzerland (4.0%) Banks and savings & loans (1.8%) Credit Suisse Group 113,188 3,988,090 UBS 86,758 5,327,559 Total 9,315,649 Health care products (2.3%) Actelion 70,369(b) 6,692,524 Nobel Biocare Holding 27,452 2,436,112 Synthes-Stratec 2,790 2,561,531 Total 11,690,167 Insurance (1.7%) Swiss Life Holding 50,862(b) 8,627,133 Taiwan (1.0%) Electronics Taiwan Semiconductor Mfg 2,583,320 5,094,406 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United Kingdom (7.5%) Banks and savings & loans (0.8%) Standard Chartered 245,791 $3,931,118 Cellular telecommunications (0.8%) Vodafone Group 1,873,539 3,934,383 Computer software & services (0.5%) lastminute.com 545,627(b) 2,745,296 Energy (0.7%) BP 547,227 3,798,040 Financial services (1.7%) HSBC Holdings 550,456 8,266,746 Health care products (1.0%) AstraZeneca 112,277 5,273,824 Metals (1.0%) Rio Tinto 214,488 5,201,205 Retail -- grocery (1.0%) Tesco 650,000 2,605,877 William Morrison Supermarkets 712,503 2,708,341 Total 5,314,218 United States (48.2%) Aerospace & defense (2.4%) Boeing 174,275 6,707,845 United Technologies 65,000(b) 5,504,850 Total 12,212,695 Banks and savings & loans (5.0%) Bank of America 47,783 3,618,607 North Fork Bancorporation 207,571 8,091,117 U.S. Bancorp 203,856 5,548,960 Wachovia 125,000 5,733,750 Wells Fargo 47,276 2,662,584 Total 25,655,018 Beverages & tobacco (1.0%) PepsiCo 108,635 5,194,926 Broker dealers (1.1%) Morgan Stanley 100,000 5,487,000 Cable (1.1%) Comcast Special Cl A 167,483(b) 5,463,295 Computer hardware (4.4%) Apple Computer 228,637(b) 5,233,501 Cisco Systems 188,419(b) 3,953,031 Dell 214,153(b) 7,735,206 EMC 396,067(b) 5,481,567 Total 22,403,305 Computer software & services (2.9%) Adobe Systems 61,253 2,685,332 BEA Systems 292,483(b) 4,065,514 Microsoft 314,519 8,224,672 Total 14,975,518 Electronics (3.2%) Amphenol Cl A 66,597(b) 3,912,574 Intel 248,800 8,222,840 Lam Research 150,000(b) 4,311,000 Total 16,446,414 Energy (1.7%) EOG Resources 93,599 3,944,262 Exxon Mobil 134,480 4,919,278 Total 8,863,540 Finance companies (1.7%) Citigroup 188,360 8,928,264 Financial services (0.5%) SLM 66,373 2,599,167 Food (1.1%) Wrigley (Wm) Jr 100,000 5,640,000 Health care products (7.3%) Amgen 123,720(b) 7,640,947 Gilead Sciences 90,575(b) 4,943,584 Johnson & Johnson 154,834 7,792,794 Myogen 300,000(b) 4,800,000 St. Jude Medical 114,173(b) 6,640,302 Zimmer Holdings 90,000(b) 5,742,900 Total 37,560,527 Health care services (1.3%) WellPoint Health Networks 75,000(b) 6,667,500 Household products (2.5%) Colgate-Palmolive 90,685 4,823,535 Procter & Gamble 81,120 7,973,285 Total 12,796,820 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Insurance (1.0%) American Intl Group 85,126 $5,178,215 Leisure time & entertainment (1.0%) Carnival 152,749 5,332,468 Machinery (1.3%) Deere & Co 114,294 6,928,502 Media (0.9%) Fox Entertainment Group Cl A 175,037(b) 4,848,525 Multi-industry (2.2%) 3M 70,213 5,537,699 ITT Inds 61,523 4,182,949 Weight Watchers Intl 37,194(b) 1,372,459 Total 11,093,107 Precious metals (1.3%) Freeport McMoRan Cooper & Gold Cl B 178,094 6,901,143 Retail -- general (1.8%) Staples 154,161(b) 4,134,598 Wal-Mart Stores 88,381 5,210,060 Total 9,344,658 Utilities -- electric (0.8%) Cinergy 108,266 3,931,138 Utilities -- natural gas (0.7%) Kinder Morgan 70,599 3,780,576 Total common stocks (Cost: $474,348,660) $504,570,795 Preferred stock & other (0.6%)(c) Issuer Shares Value(a) Germany Muenchener Rueckversicherung- Gesellschaft Rights 46,082(b) $380,885 ProSiebenSat.1 Media 185,168 2,852,166 Total preferred stock & other (Cost: $2,705,832) $3,233,051 Short-term security (1.0%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity Commercial paper General Electric Capital 11-03-03 1.04% $5,200,000 $5,199,549 Total short-term security (Cost: $5,199,700) $5,199,549 Total investments in securities (Cost: $482,254,192)(d) $513,003,395 Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At Oct. 31, 2003, the cost of securities for federal income tax purposes was $482,660,547 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $36,200,032 Unrealized depreciation (5,857,184) ---------- Net unrealized appreciation $30,342,848 ----------- -------------------------------------------------------------------------------- 13 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities World Growth Portfolio Oct. 31, 2003 Assets Investments in securities, at value (Note 1) (identified cost $482,254,192) $513,003,395 Foreign currency holdings (identified cost $8,535,824) (Note 1) 8,530,527 Dividends and accrued interest receivable 1,349,436 Receivable for investment securities sold 1,326,813 --------- Total assets 524,210,171 ----------- Liabilities Disbursements in excess of cash on demand deposit 5,807,277 Payable for investment securities purchased 4,333,688 Accrued investment management services fee 11,103 Other accrued expenses 49,799 ------ Total liabilities 10,201,867 ---------- Net assets $514,008,304 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT
Statement of operations World Growth Portfolio Year ended Oct. 31, 2003 Investment income Income: Dividends $ 9,869,928 Interest 95,374 Fee income from securities lending (Note 3) 29,000 Less foreign taxes withheld (752,577) -------- Total income 9,241,725 --------- Expenses (Note 2): Investment management services fee 3,763,415 Compensation of board members 9,191 Custodian fees 101,239 Audit fees 27,000 Other 16,238 ------ Total expenses 3,917,083 --------- Investment income (loss) -- net 5,324,642 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) (27,481,179) Foreign currency transactions (86,386) ------- Net realized gain (loss) on investments (27,567,565) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 109,515,236 ----------- Net gain (loss) on investments and foreign currencies 81,947,671 ---------- Net increase (decrease) in net assets resulting from operations $ 87,272,313 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets World Growth Portfolio Year ended Oct. 31, 2003 2002 Operations Investment income (loss) -- net $ 5,324,642 $ 5,803,520 Net realized gain (loss) on investments (27,567,565) (131,918,088) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 109,515,236 9,918,976 ----------- --------- Net increase (decrease) in net assets resulting from operations 87,272,313 (116,195,592) ---------- ------------ Proceeds from contributions 2,304,809 44,021,250 Fair value of withdrawals (163,329,472) (375,713,758) ------------ ------------ Net contributions (withdrawals) from partners (161,024,663) (331,692,508) ------------ ------------ Total increase (decrease) in net assets (73,752,350) (447,888,100) Net assets at beginning of year 587,760,654 1,035,648,754 ----------- ------------- Net assets at end of year $ 514,008,304 $ 587,760,654 ============= ==============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Notes to Financial Statements World Growth Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Growth Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests primarily in equity securities of companies around the world, including companies located in developed and emerging countries. 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. American Express Financial Corporation (AEFC) may use fair value if a security's value has been materially affected by events after the close of the primary exchanges or markets on which the security is traded and before the NAV is calculated. The fair value of a security may be different from the quoted or published price. AEFC will price a security at fair value in accordance with procedures adopted by the Portfolio and board of trustees if a reliable market quotation is not readily available. 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. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT 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. 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. As of Oct 31, 2003, foreign currency holdings consisted of multiple denominations. -------------------------------------------------------------------------------- 18 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT 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. 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, market discount and original issue 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 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 0.8% to 0.675% 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 AXP Global Equity Fund (formerly AXP Global Growth Fund) to the Lipper Global Funds Index. Prior to Dec. 1, 2002, the maximum adjustment was 0.12% of the Portfolio's average daily net assets after deducting 1% from the performance difference. If the performance difference was less than 1%, the adjustment was zero. 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 began Dec. 1, 2002. The adjustment decreased the fee by $382,729 for the year ended Oct. 31, 2003. 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. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. AEFC has a Subadvisory Agreement with American Express Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC. Investment decisions for the Portfolio are made by a team of seasoned investment professionals at Threadneedle Asset Management Limited (Threadneedle) who are associated with AEAMI. Threadneedle is also a wholly-owned subsidiary of AEFC. The Portfolio 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 $678,292,195 and $818,119,889, respectively, for the year ended Oct. 31, 2003. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $29,000 for the year ended Oct. 31, 2003. 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. 4. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
Ratios/supplemental data Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Ratio of expenses to average daily net assets(a) .74% .72% .62% .73% .78% Ratio of net investment income (loss) to average daily net assets 1.01% .67% .95% .27% .61% Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% 83% Total return(b) 18.91% (15.58%) (34.42%) 4.95% 24.16%
Notes to financial highlights (a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio NAV and does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL EQUITY FUND -- 2003 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 Growth Portfolio (a series of World Trust) as of October 31, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended Oct. 31, 2003. These financial statements and the financial highlights are the responsibility of portfolio 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, 2003, 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 World Growth Portfolio as of October 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 21 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Equity Fund Oct. 31, 2003 Assets Investment in Portfolio (Note 1) $ 513,950,900 Capital shares receivable 13,744 ------ Total assets 513,964,644 ----------- Liabilities Capital shares payable 25,573 Accrued distribution fee 6,424 Accrued service fee 15 Accrued transfer agency fee 4,714 Accrued administrative services fee 808 Other accrued expenses 99,045 ------ Total liabilities 136,579 ------- Net assets applicable to outstanding capital stock $ 513,828,065 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 1,127,493 Additional paid-in capital 1,155,698,652 Undistributed net investment income 97,478 Accumulated net realized gain (loss) (Note 5) (673,959,704) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,864,146 ---------- Total -- representing net assets applicable to outstanding capital stock $ 513,828,065 ============== Net assets applicable to outstanding shares: Class A $ 365,819,585 Class B $ 141,588,339 Class C $ 976,538 Class Y $ 5,443,603 Net asset value per share of outstanding capital stock: Class A shares 79,168,197 $ 4.62 Class B shares 32,188,495 $ 4.40 Class C shares 222,859 $ 4.38 Class Y shares 1,169,771 $ 4.65 --------- --------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT
Statement of operations AXP Global Equity Fund Year ended Oct. 31, 2003 Investment income Income: Dividends $ 9,868,970 Interest 95,840 Fee income from securities lending 28,996 Less foreign taxes withheld (752,504) -------- Total income 9,241,302 --------- Expenses (Note 2): Expenses allocated from Portfolio 3,916,705 Distribution fee Class A 921,298 Class B 1,518,123 Class C 9,258 Transfer agency fee 1,816,134 Incremental transfer agency fee Class A 139,134 Class B 101,824 Class C 740 Service fee -- Class Y 6,215 Administrative services fees and expenses 304,662 Compensation of board members 7,891 Printing and postage 255,275 Registration fees 47,225 Audit fees 9,000 Other 10,793 ------ Total expenses 9,064,277 Earnings credits on cash balances (Note 2) (6,954) ------ Total net expenses 9,057,323 --------- Investment income (loss) -- net 183,979 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (27,480,700) Foreign currency transactions (86,501) ------- Net realized gain (loss) on investments (27,567,201) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 109,506,308 ----------- Net gain (loss) on investments and foreign currencies 81,939,107 ---------- Net increase (decrease) in net assets resulting from operations $ 82,123,086 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 23 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets AXP Global Equity Fund Year ended Oct. 31, 2003 2002 Operations Investment income (loss) -- net $ 183,979 $ (1,935,522) Net realized gain (loss) on investments (27,567,201) (131,909,877) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 109,506,308 9,920,003 ----------- --------- Net increase (decrease) in net assets resulting from operations 82,123,086 (123,925,396) ---------- ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 35,389,682 153,444,115 Class B shares 6,481,182 14,910,622 Class C shares 483,450 413,384 Class Y shares 1,478,386 2,888,855 Payments for redemptions Class A shares (134,289,060) (377,354,000) Class B shares (Note 2) (60,198,322) (112,290,601) Class C shares (Note 2) (553,226) (484,202) Class Y shares (4,612,498) (5,560,351) ---------- ---------- Increase (decrease) in net assets from capital share transactions (155,820,406) (324,032,178) ------------ ------------ Total increase (decrease) in net assets (73,697,320) (447,957,574) Net assets at beginning of year 587,525,385 1,035,482,959 ----------- ------------- Net assets at end of year $ 513,828,065 $ 587,525,385 ============= ============== Undistributed net investment income $ 97,478 $ -- ------------- --------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Notes to Financial Statements AXP Global Equity Fund (formerly AXP Global Growth 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. 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 Growth Portfolio The Fund invests all of its assets in World Growth Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of companies around the world that are positioned to meet market needs in a changing world economy. 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, 2003 was 99.99%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. -------------------------------------------------------------------------------- 25 -- AXP GLOBAL EQUITY FUND -- 2003 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 $86,501 and accumulated net realized loss has been decreased by $86,501. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2003 2002 Class A Distributions paid from: Ordinary income $-- $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- As of Oct. 31, 2003, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 97,478 Accumulated long-term gain (loss) $(673,553,387) Unrealized appreciation (depreciation) $ 30,457,829 Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL EQUITY FUND -- 2003 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 0.035% 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. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. 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 incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. However, the closed account fee is not being charged to the Fund until a new transfer agency system is installed. Under terms of a prior agreement that ended April 30, 2003, the Fund paid a transfer agency fee at an annual rate per shareholder account of $19 for Class A, $20 for Class B, $19.50 for Class C and $17 for Class Y. 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 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. -------------------------------------------------------------------------------- 27 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT 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 $315,749 for Class A, $121,320 for Class B and $85 for Class C for the year ended Oct. 31, 2003. During the year ended Oct. 31, 2003, the Fund's transfer agency fees were reduced by $6,954 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2003 Class A Class B Class C Class Y Sold 8,499,668 1,658,622 121,148 359,435 Issued for reinvested distributions -- -- -- -- Redeemed (33,041,539) (15,356,093) (137,322) (1,146,272) ----------- ----------- -------- ---------- Net increase (decrease) (24,541,871) (13,697,471) (16,174) (786,837) ----------- ----------- ------- -------- Year ended Oct. 31, 2002 Class A Class B Class C Class Y Sold 33,048,514 3,279,173 90,882 631,685 Issued for reinvested distributions -- -- -- -- Redeemed (81,570,654) (25,562,545) (113,161) (1,189,052) ----------- ----------- -------- ---------- Net increase (decrease) (48,522,140) (22,283,372) (22,279) (557,367) ----------- ----------- ------- --------
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. 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. The Fund had no borrowings outstanding during the year ended Oct. 31, 2003. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund has a capital loss carry-over of $673,553,387 as of Oct. 31, 2003, that will expire in 2009 through 2011 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. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL EQUITY FUND -- 2003 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, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.92 $4.69 $ 8.74 $ 9.18 $7.80 Income from investment operations: Net investment income (loss) .01 -- .02 (.02) .02 Net gains (losses) (both realized and unrealized) .69 (.77) (2.71) .58 1.78 Total from investment operations .70 (.77) (2.69) .56 1.80 Less distributions: Dividends from and in excess of net investment income -- -- (.02) (.04) (.05) Distributions from realized gains -- -- (1.34) (.96) (.37) Total distributions -- -- (1.36) (1.00) (.42) Net asset value, end of period $4.62 $3.92 $ 4.69 $ 8.74 $9.18 Ratios/supplemental data Net assets, end of period (in millions) $366 $406 $714 $1,356 $1,260 Ratio of expenses to average daily net assets(c) 1.50% 1.39% 1.18% 1.22% 1.25% Ratio of net investment income (loss) to average daily net assets .26% .01% .39% (.21%) .14% Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% 83% Total return(e) 17.86% (16.42%) (34.83%) 4.74% 23.59%
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.76 $4.53 $ 8.53 $9.01 $7.68 Income from investment operations: Net investment income (loss) (.03) (.04) (.02) (.08) (.05) Net gains (losses) (both realized and unrealized) .67 (.73) (2.64) .56 1.75 Total from investment operations .64 (.77) (2.66) .48 1.70 Less distributions: Distributions from realized gains -- -- (1.34) (.96) (.37) Net asset value, end of period $4.40 $3.76 $ 4.53 $8.53 $9.01 Ratios/supplemental data Net assets, end of period (in millions) $142 $173 $309 $575 $464 Ratio of expenses to average daily net assets(c) 2.27% 2.16% 1.95% 1.98% 2.02% Ratio of net investment income (loss) to average daily net assets (.52%) (.77%) (.38%) (.95%) (.62%) Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% 83% Total return(e) 17.02% (17.00%) (35.38%) 3.89% 22.66%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $3.75 $4.52 $ 8.54 $ 9.57 Income from investment operations: Net investment income (loss) (.03) (.04) (.02) (.01) Net gains (losses) (both realized and unrealized) .66 (.73) (2.64) (1.02) Total from investment operations .63 (.77) (2.66) (1.03) Less distributions: Dividends from and in excess of net investment income -- -- (.02) -- Distributions from realized gains -- -- (1.34) -- Total distributions -- -- (1.36) -- Net asset value, end of period $4.38 $3.75 $ 4.52 $ 8.54 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $1 Ratio of expenses to average daily net assets(c) 2.29% 2.19% 1.95% 1.98%(d) Ratio of net investment income (loss) to average daily net assets (.52%) (.78%) (.42%) (1.15%)(d) Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% Total return(e) 16.80% (17.04%) (35.37%) (10.76%)(f)
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $3.94 $4.70 $ 8.76 $ 9.20 $7.81 Income from investment operations: Net investment income (loss) .02 .01 .04 (.01) .03 Net gains (losses) (both realized and unrealized) .69 (.77) (2.73) .58 1.78 Total from investment operations .71 (.76) (2.69) .57 1.81 Less distributions: Dividends from and in excess of net investment income -- -- (.03) (.05) (.05) Distributions from realized gains -- -- (1.34) (.96) (.37) Total distributions -- -- (1.37) (1.01) (.42) Net asset value, end of period $4.65 $3.94 $ 4.70 $ 8.76 $9.20 Ratios/supplemental data Net assets, end of period (in millions) $5 $8 $12 $20 $26 Ratio of expenses to average daily net assets(c) 1.30% 1.21% 1.01% 1.05% 1.13% Ratio of net investment income (loss) to average daily net assets .43% .18% .55% (.06%) .24% Portfolio turnover rate (excluding short-term securities) 132% 123% 218% 131% 83% Total return(e) 18.02% (16.17%) (34.78%) 4.86% 23.86%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 30 -- AXP GLOBAL EQUITY FUND -- 2003 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) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. -------------------------------------------------------------------------------- 31 -- AXP GLOBAL EQUITY FUND -- 2003 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 Equity Fund (formerly AXP Global Growth Fund) (a series of AXP Global Series, Inc.) as of October 31, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended October 31, 2003. 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 Equity Fund as of October 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 32 -- AXP GLOBAL EQUITY FUND -- 2003 ANNUAL REPORT Investments in Securities World Technologies Portfolio Oct. 31, 2003 (Percentages represent value of investments compared to net assets) Common stocks (94.7%) Issuer Shares Value(a) Cable (4.5%) Comcast Special Cl A 90,000(b) $2,935,800 NTL 110,000(b) 6,790,300 Total 9,726,100 Cellular telecommunications (1.3%) NII Holdings Cl B 35,000(b) 2,698,150 Computer hardware (17.0%) Cisco Systems 372,600(b) 7,817,148 Dell 172,000(b) 6,212,640 EMC 164,000(b) 2,269,760 Hewlett-Packard 630,000 14,055,300 NVIDIA 210,000(b) 3,712,800 SimpleTech 285,000(b) 2,237,250 Total 36,304,898 Computer software & services (26.9%) Affiliated Computer Services Cl A 53,000(b) 2,593,290 Art Technology Group 1,050,000(b) 2,005,500 Ascential Software 258,000(b) 5,725,020 Aspen Technology 258,750(b) 2,070,000 Dot Hill Systems 202,000(b) 2,708,820 Fiserv 64,000(b) 2,260,480 Internap Network Services 1,329,975(b) 1,476,272 Interwoven 983,000(b) 3,725,570 M-Systems Flash Disk Pioneers 100,000(b,c) 1,980,000 MAXIMUS 120,000(b) 4,189,200 Microsoft 384,000 10,041,600 MRO Software 113,200(b) 1,431,980 OPNET Technologies 100,000(b) 1,404,000 Oracle 585,000(b) 6,996,600 PeopleSoft 100,000(b) 2,076,000 Synopsys 40,000(b) 1,268,800 TALX 31,100 673,626 UBI Soft Entertainment 70,000(b,c) 2,263,039 Vignette 1,140,000(b) 2,861,400 Total 57,751,197 Electronics (28.8%) Analog Devices 125,000(b) 5,541,250 ASML Holding 180,000(b,c) 3,159,000 Atmel 213,000(b) 1,201,320 DSP Group 50,000(b) 1,194,000 FormFactor 51,500(b) 1,283,895 Intel 195,000 6,444,750 Jabil Circuit 75,000(b) 2,088,750 KLA-Tencor 78,000(b) 4,471,740 LG Electronics 38,000(c) 1,968,230 MEMC Electronic Materials 368,000(b) 4,121,600 Photon Dynamics 60,000(b) 2,269,200 Samsung Electronics 7,400(c) 2,938,741 Silicon Laboratories 49,000(b) 2,645,020 Solectron 745,000(b) 4,127,300 STMicroelectronics 120,000(c) 3,196,800 Trimble Navigation 278,000(b) 7,686,700 United Microelectronics ADR 700,000(c) 3,675,000 Vishay Intertechnology 205,000(b) 3,843,750 Total 61,857,046 Engineering & construction (1.3%) Quanta Services 345,000(b) 2,822,100 Leisure time & entertainment (2.5%) Imax 580,000(b,c) 5,248,420 Lodging & gaming (0.5%) Scientific Games Cl A 80,000(b) 1,064,000 Media (0.5%) iVillage 350,000(b) 1,025,500 Multi-industry (2.8%) Accenture Cl A 96,250(b,c) 2,252,250 Sony ADR 43,000(c) 1,513,600 Zebra Technologies Cl A 37,500(b) 2,135,625 Total 5,901,475 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Telecom equipment & services (8.5%) Corning 253,000(b) $2,777,940 Nokia ADR 587,000(c) 9,973,130 Westell Technologies Cl A 663,000(b) 5,522,790 Total 18,273,860 Total common stocks (Cost: $184,347,250) $202,672,746 Preferred stocks & other (0.3%)(b,f) Issuer Shares Value(a) Bluestream Ventures LP 1,500,000(e) $553,938 Marketsoft Cv 225,410 112,705 Paxonet Communications Series C 106,383(d) -- Portera Series G 425,374(d) -- Sun Hill Software 25,751 1,288 Total preferred stocks & other (Cost: $4,555,118) $667,931 Short-term securities (4.2%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (3.3%) Federal Home Loan Mtge Corp Disc Nt 12-04-03 1.06% $600,000 $599,435 Federal Natl Mtge Assn Disc Nts 12-17-03 1.05 300,000 299,617 01-07-04 1.05 900,000 898,326 01-28-04 1.07 2,400,000 2,394,094 01-28-04 1.08 2,700,000 2,692,790 Total 6,884,262 Commercial paper (0.9%) BASF 11-24-03 1.06 1,300,000(g) 1,299,073 Fairway Finance 11-10-03 1.07 700,000(g) 699,790 Total 1,998,863 Total short-term securities (Cost: $8,882,783) $8,883,125 Total investments in securities (Cost: $197,785,151)(h) $212,223,802 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 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. (c) Foreign security values are stated in U.S. dollars. As of Oct. 31, 2003, the value of foreign securities represented 17.8% of net assets. (d) Negligible market value. (e) The share amount for Limited Liability Companies (LLC) or Limited Partnerships (LP) represents capital contributions. At Oct. 31, 2003, the amount of capital committed to the LLC or LP for future investment was $1,000,000. (f) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Oct. 31, 2003, is as follows: Security Acquisition Cost dates Bluestream Ventures LP 06-28-00 thru 09-23-03 $1,430,113 Marketsoft Cv 12-11-00 1,100,001 Paxonet Communications Series C 04-04-01 thru 04-23-01 300,000 Portera Series G 11-10-00 1,425,003 Sun Hill Software (formerly Vcommerce) 07-21-00 300,001 (g) 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. (h) At Oct. 31, 2003, the cost of securities for federal income tax purposes was $198,140,516 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $19,186,194 Unrealized depreciation (5,102,908) ---------- Net unrealized appreciation $14,083,286 ----------- -------------------------------------------------------------------------------- 11 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Financial Statements Statement of assets and liabilities World Technologies Portfolio Oct. 31, 2003 Assets Investments in securities, at value (Note 1)* (identified cost $197,785,151) $212,223,802 Cash in bank on demand deposit 9,313 Dividends and accrued interest receivable 55,466 Receivable for investment securities sold 14,593,881 ---------- Total assets 226,882,462 ----------- Liabilities Payable for investment securities purchased 8,120,109 Payable upon return of securities loaned (Note 4) 4,750,000 Accrued investment management services fee 4,236 Other accrued expenses 35,915 ------ Total liabilities 12,910,260 ---------- Net assets $213,972,202 ============ * Including securities on loan, at value (Note 4) $ 4,714,700 ------------ See accompanying notes to financial statements. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT
Statement of operations World Technologies Portfolio Year ended Oct. 31, 2003 Investment income Income: Dividends $ 391,982 Interest 323,082 Fee income from securities lending (Note 4) 42,823 Less foreign taxes withheld (27,516) ------- Total income 730,371 ------- Expenses (Note 2): Investment management services fee 1,185,180 Compensation of board members 7,891 Custodian fees 72,143 Audit fees 21,000 Other 15,425 ------ Total expenses 1,301,639 Earnings credits on cash balances (Note 2) (250) ---- Total net expenses 1,301,389 --------- Investment income (loss) -- net (571,018) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 64,902,476 Foreign currency transactions (8,704) ------ Net realized gain (loss) on investments 64,893,772 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 18,832,116 ---------- Net gain (loss) on investments and foreign currencies 83,725,888 ---------- Net increase (decrease) in net assets resulting from operations $83,154,870 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets World Technologies Portfolio Year ended Oct. 31, 2003 2002 Operations Investment income (loss) -- net $ (571,018) $ (960,315) Net realized gain (loss) on investments 64,893,772 (86,891,957) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 18,832,116 15,298,490 ---------- ---------- Net increase (decrease) in net assets resulting from operations 83,154,870 (72,553,782) ---------- ----------- Proceeds from contributions 22,782,493 12,839,018 Fair value of withdrawals (12,875,419) (37,231,532) ----------- ----------- Net contributions (withdrawals) from partners 9,907,074 (24,392,514) --------- ----------- Total increase (decrease) in net assets 93,061,944 (96,946,296) Net assets at beginning of year 120,910,258 217,856,554 ----------- ----------- Net assets at end of year $213,972,202 $120,910,258 ============ ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Notes to Financial Statements World Technologies Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Technologies Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. The Portfolio invests in equity securities of companies in the information technology industry throughout the world. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which securities are normally traded. American Express Financial Corporation (AEFC) may use fair value if a security's value has been materially affected by events after the close of the primary exchanges or markets on which the security is traded and before the NAV is calculated. The fair value of a security may be different from the quoted or published price. AEFC will price a security at fair value in accordance with procedures adopted by the Portfolio and board of trustees if a reliable market quotation is not readily available. 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. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Illiquid securities As of Oct. 31, 2003, investments in securities included issues that are illiquid which the Portfolio currently limits to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities as of Oct. 31, 2003 was $667,931 representing 0.31% of net assets. These securities are valued at fair value according to methods selected in good faith by the board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. -------------------------------------------------------------------------------- 16 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Securities purchased on a forward-commitment basis Delivery and payment for securities that have been purchased by the Portfolio on a forward-commitment basis, including when-issued securities and future capital commitments for limited partnership interests, can take place one month or more after the transaction date. During this period, when-issued securities are subject to market fluctuations, and they may affect the Portfolio's net assets the same as owned securities. The Portfolio designates cash or liquid securities at least equal to the amount of its forward-commitments. As of Oct. 31, 2003, the Portfolio has entered into outstanding future capital commitments for limited partnership interests of $1,000,000. Federal taxes For federal income tax purposes the Portfolio qualifies as a partnership and each investor in the Portfolio is treated as the owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore does not pay any income dividends or capital gain distributions. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue 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 AEFC to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of the Portfolio's average daily net assets in reducing percentages from 0.72% to 0.595% annually. On Nov. 13, 2002, shareholders approved the addition of the performance incentive adjustment that may adjust the management fee upward or downward based upon a comparison of the performance of Class A shares of the AXP Global Technology Fund to the Lipper Science and Technology Funds Index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The first adjustment was made on June 1, 2003 and covered the six-month period beginning Dec. 1, 2002. The adjustment increased the fee by $67,468 for the year ended Oct. 31, 2003. 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. Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT During the year ended Oct. 31, 2003, the Portfolio's custodian fees were reduced by $250 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 $800,351,844 and $794,939,151, respectively, for the year ended Oct. 31, 2003. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $495,249 for the year ended Oct. 31, 2003. 4. LENDING OF PORTFOLIO SECURITIES As of Oct. 31, 2003, securities valued at $4,714,700 were on loan to brokers. For collateral, the Portfolio received $4,750,000 in cash. Income from securities lending amounted to $42,823 for the year ended Oct. 31, 2003. The risks to the Portfolio of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 5. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
Ratios/supplemental data Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Ratio of expenses to average daily net assets(a) .84% .77% .75% .74% 1.14% Ratio of net investment income (loss) to average daily net assets (.37%) (.51%) (.11%) .10% (.98%) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% 113% Total return(b) 68.97% (34.78%) (69.21%) 66.70% 109.53%
Notes to financial highlights (a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Total return is based on a calculated Portfolio NAV and does not reflect payment of a sales charge. -------------------------------------------------------------------------------- 18 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Independent Auditors' Report THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Technologies Portfolio (a series of World Trust) as of October 31, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended October 31, 2003. These financial statements and the financial highlights are the responsibility of portfolio 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, 2003, 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 the financial highlights referred to above present fairly, in all material respects, the financial position of World Technologies Portfolio as of October 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 19 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Technology Fund Oct. 31, 2003 Assets Investment in Portfolio (Note 1) $ 213,943,279 Capital shares receivable 123,191 ------- Total assets 214,066,470 ----------- Liabilities Capital shares payable 21,930 Accrued distribution fee 2,876 Accrued service fee 1 Accrued transfer agency fee 3,107 Accrued administrative services fee 353 Other accrued expenses 41,062 ------ Total liabilities 69,329 ------ Net assets applicable to outstanding capital stock $ 213,997,141 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 1,292,669 Additional paid-in capital 624,584,419 Undistributed net investment income 148,698 Accumulated net realized gain (loss) (Note 5) (426,465,386) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 14,436,741 ---------- Total -- representing net assets applicable to outstanding capital stock $ 213,997,141 ============= Net assets applicable to outstanding shares: Class A $ 145,381,527 Class B $ 64,386,508 Class C $ 3,999,864 Class Y $ 229,242 Net asset value per share of outstanding capital stock: Class A shares 84,335,891 $ 1.72 Class B shares 42,182,314 $ 1.53 Class C shares 2,615,766 $ 1.53 Class Y shares 132,926 $ 1.72 ------- -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT
Statement of operations AXP Global Technology Fund Year ended Oct. 31, 2003 Investment income Income: Dividends $ 391,927 Interest 323,035 Fee income from securities lending 42,817 Less foreign taxes withheld (27,512) ------- Total income 730,267 ------- Expenses (Note 2): Expenses allocated from Portfolio 1,301,206 Distribution fee Class A 261,243 Class B 477,623 Class C 26,874 Transfer agency fee 999,213 Incremental transfer agency fee Class A 74,212 Class B 58,920 Class C 2,856 Service fee -- Class Y 114 Administrative services fees and expenses 93,713 Compensation of board members 7,125 Printing and postage 42,448 Registration fees 55,623 Audit fees 7,000 Other 8,673 ----- Total expenses 3,416,843 Earnings credits on cash balances (Note 2) (1,281) ------ Total net expenses 3,415,562 --------- Investment income (loss) -- net (2,685,295) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 64,893,085 Foreign currency transactions (8,703) ------ Net realized gain (loss) on investments 64,884,382 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 18,829,617 ---------- Net gain (loss) on investments and foreign currencies 83,713,999 ---------- Net increase (decrease) in net assets resulting from operations $81,028,704 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT
Statements of changes in net assets AXP Global Technology Fund Year ended Oct. 31, 2003 2002 Operations Investment income (loss) -- net $ (2,685,295) $ (3,613,346) Net realized gain (loss) on investments 64,884,382 (86,881,115) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 18,829,617 15,296,644 ---------- ---------- Net increase (decrease) in net assets resulting from operations 81,028,704 (75,197,817) ---------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 40,338,279 37,783,172 Class B shares 11,875,873 14,424,364 Class C shares 1,324,959 1,493,914 Class Y shares 138,070 76,038 Payments for redemptions Class A shares (30,612,393) (54,052,105) Class B shares (Note 2) (10,091,766) (19,608,355) Class C shares (Note 2) (704,810) (1,832,580) Class Y shares (29,506) (46,571) ------- ------- Increase (decrease) in net assets from capital share transactions 12,238,706 (21,762,123) ---------- ----------- Total increase (decrease) in net assets 93,267,410 (96,959,940) Net assets at beginning of year 120,729,731 217,689,671 ----------- ----------- Net assets at end of year $213,997,141 $120,729,731 ============ ============ Undistributed net investment income $ 148,698 $ 86,706 ------------ ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Notes to Financial Statements AXP Global Technology Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AXP Global Technology Fund (a series of AXP Global Series, Inc.) is registered under the Investment Company Act of 1940 (as amended) as 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 Technologies Portfolio The Fund invests all of its assets in World Technologies Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests in equity securities of companies in the information technology industry throughout the world. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund as of Oct. 31, 2003 was 99.99%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. -------------------------------------------------------------------------------- 23 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 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 increased by $2,747,287 and accumulated net realized loss has been decreased by $8,703 resulting in a net reclassification adjustment to decrease paid-in capital by $2,755,990. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2003 2002 Class A Distributions paid from: Ordinary income $-- $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- As of Oct. 31, 2003, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ -- Accumulated long-term gain (loss) $(425,961,372) Unrealized appreciation (depreciation) $ 14,081,425 Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 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 0.035% 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. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. 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 incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. In addition, there is an annual closed-account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. However, the closed account fee is not being charged to the Fund until a new transfer agency system is installed. Under terms of a prior agreement that ended April 30, 2003, the Fund paid a transfer agency fee at an annual rate per shareholder account of $19 for Class A, $20 for Class B, $19.50 for Class C and $17 for Class Y. 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 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. -------------------------------------------------------------------------------- 25 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT 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 $470,632 for Class A, $72,179 for Class B and $549 for Class C for the year ended Oct. 31, 2003. During the year ended Oct. 31, 2003, the Fund's transfer agency fees were reduced by $1,281 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2003 Class A Class B Class C Class Y Sold 29,664,616 9,892,297 1,093,757 97,979 Issued for reinvested distributions -- -- -- -- Redeemed (23,738,698) (8,875,386) (608,977) (21,555) ----------- ---------- -------- ------- Net increase (decrease) 5,925,918 1,016,911 484,780 76,424 --------- --------- ------- ------ Year ended Oct. 31, 2002 Class A Class B Class C Class Y Sold 24,601,849 10,522,166 1,103,099 50,002 Issued for reinvested distributions -- -- -- -- Redeemed (37,466,707) (16,160,687) (1,796,278) (29,205) ----------- ----------- ---------- ------- Net increase (decrease) (12,864,858) (5,638,521) (693,179) 20,797 ----------- ---------- -------- ------
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by Deutsche Bank, whereby the Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. 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. The Fund had no borrowings outstanding during the year ended Oct. 31, 2003. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes the Fund has a capital loss carry-over of $425,961,372 as of Oct. 31, 2003, that will expire in 2009 through 2010, if not offset by capital gains. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $1.03 $1.60 $ 5.26 $ 11.27 $ 5.41 Income from investment operations: Net investment income (loss) (.02) (.03) (.02) (.01) (.08) Net gains (losses) (both realized and unrealized) .71 (.54) (3.64) 7.05 5.94 Total from investment operations .69 (.57) (3.66) 7.04 5.86 Less distributions: Distributions from realized gains -- -- -- (1.29) -- Tax return of capital -- -- -- (11.76)(i) -- Total distributions -- -- -- (13.05) -- Net asset value, end of period $1.72 $1.03 $ 1.60 $ 5.26 $11.27 Ratios/supplemental data Net assets, end of period (in thousands) $145,382 $80,831 $146,139 $319,164 $7,435 Ratio of expenses to average daily net assets(c) 1.94% 1.91% 1.63% 1.24%(e) 1.11%(e) Ratio of net investment income (loss) to average daily net assets (1.47%) (1.65%) (.99%) (.38%) (1.01%) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% 113% Total return(j) 66.99% (35.62%) (69.58%) 66.58% 108.32%
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 27 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $ .92 $1.44 $ 4.77 $ 11.02 $ 5.33 Income from investment operations: Net investment income (loss) (.03) (.04) (.04) (.04) (.14) Net gains (losses) (both realized and unrealized) .64 (.48) (3.29) 6.84 5.83 Total from investment operations .61 (.52) (3.33) 6.80 5.69 Less distributions: Distributions from realized gains -- -- -- (1.29) -- Tax return of capital -- -- -- (11.76)(i) -- Total distributions -- -- -- (13.05) -- Net asset value, end of period $1.53 $ .92 $ 1.44 $ 4.77 $11.02 Ratios/supplemental data Net assets, end of period (in thousands) $64,387 $37,877 $67,425 $138,545 $220 Ratio of expenses to average daily net assets(c) 2.75% 2.71% 2.42% 2.01%(f) 1.86%(f) Ratio of net investment income (loss) to average daily net assets (2.27%) (2.45%) (1.78%) (1.16%) (1.76%) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% 113% Total return(j) 66.30% (36.11%) (69.81%) 65.25% 106.72%
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000(b) Net asset value, beginning of period $ .92 $1.44 $ 4.77 $5.05 Income from investment operations: Net investment income (loss) (.03) (.04) (.04) (.01) Net gains (losses) (both realized and unrealized) .64 (.48) (3.29) (.27) Total from investment operations .61 (.52) (3.33) (.28) Net asset value, end of period $1.53 $ .92 $ 1.44 $4.77 Ratios/supplemental data Net assets, end of period (in thousands) $4,000 $1,964 $4,069 $3,298 Ratio of expenses to average daily net assets(c) 2.72% 2.69% 2.42% 2.01%(d),(g) Ratio of net investment income (loss) to average daily net assets (2.26%) (2.39%) (1.84%) (1.17%)(d) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% Total return(j) 66.30% (36.11%) (69.81%) (5.54%)(k)
See accompanying notes to financial highlights. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2003 2002 2001 2000 1999 Net asset value, beginning of period $1.03 $1.60 $ 5.25 $ 11.27 $ 5.41 Income from investment operations: Net investment income (loss) (.02) (.03) (.02) -- (.08) Net gains (losses) (both realized and unrealized) .71 (.54) (3.63) 7.03 5.94 Total from investment operations .69 (.57) (3.65) 7.03 5.86 Less distributions: Distributions from realized gains -- -- -- (1.29) -- Tax return of capital -- -- -- (11.76)(i) -- Total distributions -- -- -- (13.05) -- Net asset value, end of period $1.72 $1.03 $ 1.60 $ 5.25 $11.27 Ratios/supplemental data Net assets, end of period (in thousands) $229 $58 $57 $88 $225 Ratio of expenses to average daily net assets(c) 1.69% 1.72% 1.49% .94%(h) 1.11%(h) Ratio of net investment income (loss) to average daily net assets (1.25%) (1.61%) (.89%) (.80%) (1.01%) Portfolio turnover rate (excluding short-term securities) 546% 391% 233% 116% 113% Total return(j) 66.99% (35.63%) (69.52%) 66.27% 108.32%
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) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class A would have been 1.45% and 1.22% for the periods ended Oct. 31, 2000 and 1999, respectively. (f) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class B would have been 2.26% and 1.97% for the periods ended Oct. 31, 2000 and 1999, respectively. (g) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class C would have been 2.26% for the period ended Oct. 31, 2000. (h) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses for Class Y would have been 1.19% and 1.12% for the periods ended Oct. 31, 2000 and 1999, respectively. (i) A distibution payable to a single corporate shareholder. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. Prior to April 19, 2000, the Fund had not engaged in a broad public offering of its shares, or been subject to redemption requests. It had sold shares only to a single investor. One factor impacting the Fund's 2000 and 1999 performance was the high concentration in technology investments, particularly in securities of internet and communication companies. These investments performed well and had a greater effect on the Fund's performance than similar investments made by other funds because of high concentration, the lack of cash flows and the smaller size of the Fund. There is no assurance that the Fund's future investments will result in the same level of performance. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT Independent Auditors' Report THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of AXP Global Technology Fund (a series of AXP Global Series, Inc.) as of October 31, 2003, 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, 2003, and the financial highlights for each of the years in the five-year period ended October 31, 2003. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Global Technology Fund as of October 31, 2003, 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 12, 2003 -------------------------------------------------------------------------------- 30 -- AXP GLOBAL TECHNOLOGY FUND -- 2003 ANNUAL REPORT PART C. OTHER INFORMATION Item 23. Exhibits (a)(1) Articles of Incorporation, dated October 28, 1988, filed as Exhibit 1 to Registration Statement No. 33-25824, are incorporated by reference. (a)(2) Articles of Amendment, dated October 10, 1990, filed as Exhibit 1 to Registrant's Post Effective Amendment No. 9 to Registration Statement No. 33-25824, are incorporated by reference. (a)(3) Articles of Amendment, dated June 16, 1999, filed electronically as Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, are incorporated by reference. (a)(4) Articles of Amendment of AXP Global Series, Inc., dated November 14, 2002, filed electronically as Exhibit (a)(4) to Registration Statement No. 33-25824 on or about Dec. 20, 2002, are incorporated by reference. (b) By-laws, as amended January 11, 2001, filed electronically as Exhibit (b) to Registrant's Post-Effective Amendment No. 36 to Registration Statement No. 33-25824 filed on or about Dec. 20, 2001, are incorporated by reference. (c) Instruments Defining Rights of Security Holders: Not Applicable. (d)(1) Investment Management Services Agreement between IDS Global Series, Inc., on behalf of IDS Global Bond Fund and IDS Global Growth Fund, and American Express Financial Corporation, dated March 20, 1995, filed electronically as Exhibit 5(a) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. The agreement for IDS Global Bond and IDS Global Growth Fund was assumed by corresponding Portfolios when each Fund adopted the master/feeder structure. IDS Emerging Markets Fund and IDS Innovations Fund are part of a master/feeder structure. Therefore, the Investment Management Services Agreement is with the corresponding Portfolios. (d)(2) Investment Management Services Agreement between AXP Global Series, Inc., on behalf of its underlying series AXP Global Balanced Fund, and American Express Financial Corporation dated December 1, 2002 filed electronically as Exhibit (d)(6) to Registration Statement No. 33-25824 on or about Dec. 20, 2002, is incorporated by reference. (d)(3) Investment Advisory Agreement between American Express Financial Corporation and American Express Asset Management International Inc. dated Feb. 11, 1999, for AXP Global Balanced Fund filed as Exhibit (d)(6) to AXP Variable Portfolio - Investment Series, Inc.'s Post-Effective Amendment No. 37, to Registration Statement No. 2-73115 filed on or about May 28, 1999, is incorporated by reference. (d)(4) Addendum to Investment Advisory Agreement dated June 26, 2000 between American Express Financial Corporation and American Express Asset Management International Inc. for AXP Global Balanced Fund filed as Exhibit (d)(4) to AXP International Fund, Inc.'s Post-Effective Amendment No. 33, to Registration Statement No. 2-92309 filed on or about December 21, 2000, is incorporated by reference. (e) Distribution Agreement, dated July 8, 1999, between AXP Utilities Income Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (e) to AXP Utilities Income Fund, Inc. Post-Effective Amendment No. 22 to Registration Statement No. 33-20872 filed on or about August 27, 1999. Registrant's Distribution Agreement differs from the one incorporated by reference only by the fact that Registrant is one executing party. (f) All employees are eligible to participate in a profit sharing plan. Entry into the plan is Jan. 1 or July 1. The Registrant contributes each year an amount up to 15% of their annual salaries, the maximum deductible amount permitted under Section 404(a) of the Internal Revenue Code. (g)(1) Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Global Bond Fund and IDS Global Growth Fund, and American Express Trust Company, dated March 20, 1995, filed electronically as Exhibit 8(a) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(2) Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Emerging Markets Fund, IDS Global Balanced Fund and IDS Innovations Fund, and American Express Trust Company, dated November 13, 1996, filed electronically as Exhibit 8(b) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(3) Addendum to the Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Global Bond Fund and IDS Global Growth Fund, American Express Trust Company and American Express Financial Corporation, dated May 13, 1996, filed electronically as Exhibit 8(e) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(4) Addendum to the Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Emerging Markets Fund and IDS Innovations Fund, American Express Trust Company and American Express Financial Corporation, dated November 13, 1996, filed electronically as Exhibit 8(d) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(5) Custodian Agreement Amendment between IDS International Fund, Inc. and American Express Trust Company, dated October 9, 1997, filed electronically on or about December 23, 1997 as Exhibit 8(c) to IDS International Fund, Inc.'s Post-Effective Amendment No. 26 to Registration Statement No. 2-92309, is incorporated by reference. Registrant's Custodian Agreement Amendments differ from the one incorporated by reference only by the fact that Registrant is one executing party. (g)(6) Custodian Agreement, dated May 13, 1999, between American Express Trust Company and The Bank of New York is incorporated by reference to Exhibit (g)(3) to IDS Precious Metals Fund, Inc Post -Effective Amendment No. 33 to Registration Statement File No. 2-93745 filed on or about May 24, 1999. (g)(7) Custodian Agreement First Amendment between American Express Trust Company and The Bank of New York, dated December 1, 2000, filed electronically as Exhibit (g)(4) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002 is incorporated by reference. (g)(8) Custodian Agreement Second Amendment between American Express Trust Company and The Bank of New York, dated June 7, 2001, filed electronically as Exhibit (g)(5) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002 is incorporated by reference. (g)(9) Custodian Agreement Amendment between American Express Trust Company and The Bank of New York, dated January 31, 2002, filed electronically as Exhibit (g)(6) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002 is incorporated by reference. (g)(10) Custodian Agreement Amendment between American Express Trust Company and The Bank of New York, dated April 29, 2003, filed electronically as Exhibit (g)(8) to AXP Partners Series, Inc. Post-Effective Amendment No. 7 to Registration Statement No. 333-57852, filed on or about May 22, 2003 is incorporated by reference. (h)(1) Administrative Services Agreement between IDS Global Series, Inc., on behalf of IDS Global Bond Fund and IDS Global Growth Fund, and American Express Financial Corporation, dated March 20, 1995, filed electronically as Exhibit 9(f) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (h)(2) Administrative Services Agreement between IDS Global Series, Inc., on behalf of IDS Emerging Markets Fund, IDS Global Balanced Fund and IDS Innovations Fund, and American Express Financial Corporation, dated November 13, 1996, filed electronically as Exhibit 9(g) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (h)(3) Amendment to Administrative Services Agreement between AXP Growth Series, Inc. and American Express Financial Corporation, dated June 3, 2002, filed electronically on or about June 12, 2002 as Exhibit (h)(7) to AXP Growth Series, Inc. Post-Effective Amendment No. 71 to Registration Statement No. 2-38355, is incorporated by reference. Registrant's Amendments to Administrative Services Agreements differ from the one incorporated by reference only by the fact that Registrant is one executing party. (h)(4) Class Y Shareholder Service Agreement between IDS Precious Metals Fund, Inc. and American Express Financial Advisors Inc., dated May 9, 1997, filed electronically on or about May 27, 1997 as Exhibit 9(e) to IDS Precious Metals Fund, Inc.'s Post-Effective Amendment No. 30 to Registration Statement No. 2-93745, is incorporated by reference. Registrant's Class Y Shareholder Service Agreement, on behalf of IDS Emerging Markets Fund, IDS Global Balanced Fund, IDS Global Bond Fund and IDS Global Growth Fund, differs from the one incorporated by reference only by the fact that Registrant is one executing party. Registrant's Class Y Shareholder Service Agreement, on behalf of AXP Innovations Fund, differs from the one incorporated by reference only by the fact that Registrant is one executing party and it is dated March 15, 2000. (h)(5) Transfer Agency Agreement between AXP Global Series, Inc., on behalf of AXP Emerging Markets Fund, AXP Global Balanced Fund, AXP Global Bond Fund, AXP Global Growth Fund and AXP Global Technology Fund, and American Express Client Service Corporation, dated May 1, 2003, filed electronically on or about Oct. 23, 2003 as Exhibit (h)(5) to Registrant's Post-Effective Amendment No. 39 to Registration Statement No. 33-25824 is incorporated by reference. (h)(6) Class I Shares Transfer Agency Agreement between the American Express Funds and American Express Client Service Corporation dated Nov. 13, 2003 filed electronically on or about Nov. 25, 2003 as Exhibit (h)(9), is incorporated by reference to AXP Stock Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-11358. (h)(7) License Agreement, dated January 12, 1989, filed as Exhibit 9(b) to Registrant's Post-Effective Amendment No. 1 to Registration Statement No. 33-25824, is incorporated by reference. (h)(8) License Agreement, dated June 17, 1999, between the American Express Funds and American Express Company, filed electronically on or about September 23, 1999 as Exhibit (h)(4) to AXP Stock Fund, Inc.'s Post-Effective Amendment No. 98 to Registration Statement No. 2-11358, is incorporated by reference. (h)(9) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Emerging Markets Fund, and Strategist World Fund, Inc., on behalf of Strategist Emerging Markets Fund, dated March 10, 2000, filed electronically as Exhibit (h)(7) to Registrant's Post- Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(10) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Global Bond Fund, and Strategist World Fund, Inc., on behalf of Strategist World Income Fund, dated March 10, 2000, filed electronically as Exhibit (h)(8) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(11) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Global Growth Fund, and Strategist World Fund, Inc., on behalf of Strategist World Growth Fund, dated March 10, 2000, filed electronically as Exhibit (h)(9) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(12) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Innovations Fund, and Strategist World Fund, Inc., on behalf of Strategist World Technologies Fund, dated March 10, 2000, filed electronically as Exhibit (h)(10) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(13) Fee Waiver Agreement between American Express Financial Corporation, American Express Client Service Corporation and AXP Emerging Markets Fund, dated Nov. 1, 2003, is filed electronically herewith. (h)(14) Fee Waiver Agreement between American Express Financial Corporation, American Express Client Service Corporation and AXP Global Technology Fund, dated Nov. 1, 2003, is filed electronically herewith. (i) Opinion and consent of counsel as to the legality of the securities being registered is filed electronically herewith. (j) Independent Auditors' Consent is filed electronically herewith. (k) Omitted Financial Statements: None. (l) Agreement made in consideration for providing initial capital between IDS Global Series, Inc. and IDS Financial Corporation, filed as Exhibit 13 to Registration Statement No. 33-25824, is incorporated by reference. (m)(1) Plan and Agreement of Distribution, dated July 1, 1999, between AXP Discovery Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (m) to AXP Discovery Fund, Inc. Post-Effective Amendment No. 36 to Registration Statement File No. 2-72174 filed on or about July 30, 1999. Registrant's Plan and Agreement of Distribution differs from the one incorporated by reference only by the fact that Registrant is one executing party. (m)(2) Plan and Agreement of Distribution for Class C shares, dated March 9, 2000, between AXP Bond Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (m)(2) to AXP Bond Fund, Inc.'s Post-Effective Amendment No. 51 to Registration Statement File No. 2-51586 filed on or about June 14, 2000. Registrant's Plan and Agreement of Distribution for Class C shares differs from the one incorporated by reference only by the fact that Registrant is one executing party. (n) Rule 18f-3 Plan, dated March 9, 2000, is incorporated by reference to Exhibit (n) to AXP Bond Fund, Inc.'s Post-Effective Amendment No. 51 to Registration Statement File No. 2-51586 filed on or about June 26, 2000. (o) Reserved. (p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about March 30, 2000, as Exhibit (p)(1) to AXP Market Advantage Series, Inc. Post-Effective Amendment No. 24 to Registration Statement No. 33-30770 is incorporated by reference. (p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's investment advisor and principal underwriter dated May 2003, filed electronically on or about Aug. 15, 2003, as Exhibit (p)(2) to AXP Fixed Income Series, Inc. Post-Effective Amendment No. 55 to Registration Statement No. 2-51586, is incorporated by reference. (q)(1) Directors'/Trustees' Power of Attorney, to sign Amendments to this Registration Statement, dated Jan. 8, 2003, filed electronically as Exhibit (q)(1) on or about Oct. 23, 2003 to Registrant's Post-Effective Amendment No. 39 to Registration Statement No. 33-25824 is incorporated by reference. (q)(2) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated Jan. 9, 2002, filed electronically as Exhibit (q)(2) to Registrant's Post-Effective Amendment No. 37 to Registration Statement No. 33-25824 on or about October 23, 2002 is incorporated by reference. (q)(3) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated September 17, 2002, filed electronically as Exhibit (q)(3) to Registrant's Post-Effective Amendment No. 37 to Registration Statement No. 33-25824 on or about October 23, 2002 is incorporated by reference. (q)(4) Trustees' Power of Attorney, to sign Amendments to this Registration Statement, dated Jan. 8, 2003, filed electronically as Exhibit (q)(4) on or about Oct. 23, 2003 to Registrant's Post-Effective Amendment No. 39 to Registration Statement No. 33-25824 is incorporated by reference. (q)(5) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated Jan. 9, 2002, filed electronically as Exhibit (q)(5) is incorporated by reference to AXP Global Series, Inc. Post-Effective Amendment No. 37 filed on or about October 23, 2002. (q)(6) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated September 18, 2002, filed electronically as Exhibit (q)(6) to Registrant's Post-Effective Amendment No. 37 to Registration Statement No. 33-25824 on or about October 23, 2002 is incorporated by reference. Item 24. Persons Controlled by or Under Common Control with the Registrant: None. Item 25. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940.
Item 26. Business and Other Connections of Investment Adviser (American Express Financial Corporation) Directors and officers of American Express Financial Corporation who are directors and/or officers of one or more other companies: Name and Title Other company(s) Address* Title within other company(s) ------------------------- ----------------------- ------------------------- ----------------------- Ruediger Adolf American Express Financial Senior Vice President Senior Vice President Advisors Inc. Gumer C. Alvero American Centurion Life 20 Madison Ave. Extension Director and Vice President - Annuities Vice President - General Assurance Company P.O. Box 5555 Manager Annuities Albany, NY 12205-0555 American Enterprise Life Director, Chairman of the Board and Insurance Company Executive Vice President - Annuities American Express Financial Vice President - General Manager Advisors Inc. Annuities American Express Insurance Director and Vice President Agency of Alabama Inc. American Express Insurance Director and Vice President Agency of Arizona Inc. American Express Insurance Director and Vice President Agency of Idaho Inc. American Express Insurance Director and Vice President Agency of Maryland Inc. American Express Insurance Director and Vice President Agency of Massachusetts Inc. American Express Insurance Director and Vice President Agency of Nevada Inc. American Express Insurance Director and Vice President Agency of New Mexico Inc. American Express Insurance Director and Vice President Agency of Oklahoma Inc. American Express Insurance Director and Vice President Agency of Wyoming Inc. American Partners Life 1751 AXP Financial Center Director, President Insurance Company Minneapolis MN 55474 and Chief Executive Officer IDS Insurance Agency of Director and Vice President Arkansas Inc. IDS Life Insurance Company Director and Executive Vice President - Annuities IDS Life Insurance Company P.O. Box 5144 Director and Vice President - Annuities of New York Albany, NY 12205 IDS Life Series Fund, Inc. Director and Chairman of the Board IDS Life Variable Annuity Manager and Chairman of the Board Funds A & B Ward D. Armstrong American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Retirement Services and Asset Retirement Services Management and Asset Management American Express Asset Director and President Management Group Inc. American Express Trust Director and Chairman of Company the Board Kenwood Capital Management LLC Manager Northwinds Marketing Manager Group LLC John M. Baker American Express Financial Vice President - Plan Vice President - Plan Sponsor Advisors Inc. Sponsor Services Services American Express Asset Vice President Management Group Inc. American Express Trust Director and Senior Vice President Company Dudley Barksdale American Express Financial Vice President - Service Vice President - Service Advisors Inc. Development Development Timothy V. Bechtold American Centurion Life 20 Madison Ave. Extension Director, President and Chief Vice President - Assurance Company P.O. Box 5555 Executive Officer Insurance Products Albany, NY 12205-0555 American Express Financial Vice President - Insurance Advisors Inc. Products American Express Insurance Director, President and Chief Agency of Alabama Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Arizona Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Idaho Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Maryland Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Massachusetts Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Nevada Inc. Executive Officer American Express Insurance Director, President and Chief Agency of New Mexico Inc. Executive Officer American Express Insurance Director and President and Chief Agency of Oklahoma Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Wyoming Inc. Executive Officer American Partners Life Director and Chairman of the Board Insurance Company and Vice President-Insurance Products IDS Insurance Agency of Director, President and Chief Arkansas Inc. Executive Officer IDS Life Insurance Company Director and President IDS Life Insurance Company P.O. Box 5144 Director, President and Chief of New York Albany, NY 12205 Executive Officer IDS Life Series Fund, Inc. Director, President and Chief Executive Officer IDS Life Variable Annuity Manager, President and Chief Funds A & B Executive Officer IDS REO 1, LLC President IDS REO 2, LLC President Arthur H. Berman American Express Senior Vice President and Senior Vice President and Financial Advisors Inc. Chief Financial Officer Chief Financial Officer American Express Director Trust Company Walter S. Berman Advisory Capital Partners LLC Treasurer Director, Senior Vice President and Treasurer Advisory Capital Strategies Treasurer Group Inc. Advisory Convertible Arbitrage LLC Treasurer Advisory Credit Opportunities Treasurer GP LLC Advisory Quantitative Treasurer Equity (General Partner) LLC Advisory Select LLC Treasurer American Centurion Life Treasurer Assurance Company American Enterprise Life Vice Pesident and Treasurer Insurance Company American Enterprise REO 1, LLC Treasurer American Express Asset Management Treasurer Group, Inc. American Express Director and Treasurer Certificate Company American Express Client Treasurer Service Corporation American Express Corporation Treasurer American Express Financial Director, Senior Vice President Advisors Inc. and Treasurer American Express Financial Treasurer Advisors Japan Inc. American Express Insurance Treasurer Agency of Alabama Inc. American Express Insurance Treasurer Agency of Arizona Inc. American Express Insurance Treasurer Agency of Idaho Inc. American Express Insurance Treasurer Agency of Maryland Inc. American Express Insurance Treasurer Agency of Massachusetts Inc. American Express Insurance Treasurer Agency of Nevada Inc. American Express Insurance Treasurer Agency of New Mexico Inc. American Express Insurance Treasurer Agency of Oklahoma Inc. American Express Insurance Treasurer Agency of Wyoming Inc. American Partners Life Vice Pesident and Treasurer Insurance Company American Express Property Treasurer Casualty Insurance Agency American Express Property Treasurer Casualty Insurance Agency of Kentucky, Inc. American Express Property Treasurer Casualty Insurance Agency of Maryland, Inc. American Express Property Treasurer Casualty Insurance Agency of Pennsylvania, Inc. American Express Personal Treasurer Trust Services, FSB AMEX Assurance Company Treasurer IDS Cable Corporation Treasurer IDS Cable II Corporation Treasurer IDS Capital Holdings Inc. Treasurer IDS Insurance Agency of Treasurer Arkansas, Inc. IDS Life Insurance Company Vice Pesident and Treasurer IDS Life Insurance Company Vice Pesident and Treasurer of New York IDS Management Corporation Treasurer IDS Partnership Services Treasurer Corporation IDS Property Casualty Treasurer Insurance Company IDS Realty Corporation Treasurer IDS REO 1, LLC Treasurer IDS REO 2, LLC Treasurer Robert C. Bloomer American Express Vice President - Technologies Vice President - Financial Advisors Inc. Technologies Leslie H. Bodell American Express Vice President - Technologies Vice President - Financial Advisors Inc. Technologies Kenneth I. Chenault American Express Company World Financial Center Chairman and Chief Director 200 Vesey Street Operating Officer New York, NY 10285 Kenneth J. Ciak AMEX Assurance Company Director, President and Chief Vice President and General Executive Officer Manager - IDS Property Casualty American Express Financial Vice President and General Advisors Inc. Manager - IDS Property Casualty American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Kentucky Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Maryland Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Pennsylvania Inc. IDS Property Casualty 1 WEG Blvd. Director, President and Chief Insurance Company DePere, WI 54115 Executive Officer Paul A. Connolly American Express Financial Vice President - Retail Distribution Vice President - Retail Advisors Inc. Services Distribution Services James M. Cracchiolo American Express Financial Director, Chairman of the Board, Director, Chairman of Advisors Inc. President and Chief Executive Officer the Board, President and Chief Executive Officer Colleen Curran American Express Financial Vice President and Vice President and Assistant Advisors Inc. Assistant General Counsel General Counsel Luz Maria Davis American Express Financial Vice President - AEFA Vice President - AEFA Advisors Inc. Communications Communications William V. Elliott American Express Financial Vice President - Financial Vice President - Financial Advisors Inc. Planning and Advice Planning and Advice Benjamin R. Field American Express Vice President - Finance Education & Vice President - Finance Financial Advisors Inc. Planning Services Education & Planning Services Giunero Floro American Express Vice President - Creative Services Vice President - Creative Financial Advisors Inc. Services Terrence J. Flynn American Express Vice President - Brokerage Clearing Vice President - Brokerage Financial Advisors Inc. Operations Clearing Operations American Enterprise Senior Vice President Investment Services Inc. Jeffery P. Fox American Express Vice President - Investment Accounting Vice President - Financial Advisors Inc. Investment Accounting IDS Life Series, Inc. Chief Financial Officer IDS Life Variable Annuity Chief Financial Officer Funds A & B Barbara H. Fraser American Express Financial Executive Vice President - Chief Executive Vice Advisors Inc. Marketing Officer President - Chief Marketing Officer IDS Life Insurance Company Director, Chairman of the Board and Chief Executive Officer American Express Trust Company Vice President Gordon M. Fines American Express Asset Senior Vice President - Vice President - Senior Management Group Inc. Growth Spectrum Portfolio Manager I American Express Financial Vice President - Senior Advisors Inc. Portfolio Manager I Peter A. Gallus American Express Financial Vice President - Vice President - Investment Advisors Inc. Investment Administration Administration Kenwood Capital Management LLC Manager IDS Capital Holdings Inc. Vice President and Controller Steve Guida American Enterprise Vice President Vice President - New Investment Services Inc. Business and Service American Express Financial Vice President - New Advisors Inc. Business and Service Teresa A. Hanratty American Express Financial Senior Vice Senior Vice Advisors Inc. President - Field Management President - Field Management Lorraine R. Hart AMEX Assurance Company Vice President - Vice President - Investment Investments Administration Officer American Centurion Life 20 Madison Ave. Extension Vice President - Investments Assurance Company P.O. Box 5555 Albany, NY 12205-0555 American Enterprise Life 829 AXP Financial Center Vice President - Investments Insurance Company Minneapolis, MN 55474 American Enterprise 829 AXP Financial Center Vice President REO 1, LLC Minneapolis, MN 55474 American Express Vice President - Investments Certificate Company American Express Director, President and Chief Corporation Executive Officer American Express International Vice President - Investments Deposit Company American Express Financial Vice President - Investment Advisors Inc. Administration Officer American Express Vice President - Investments International Deposit Company American Partners Life 1751 AXP Financial Center Director and Vice Insurance Company Minneapolis, MN 55474 President - Investments IDS Life Insurance Company Vice President - Investments IDS Life Insurance Company P.O. Box 5144 Vice President - Investments of New York Albany, NY 12205 IDS Life Series Fund, Inc. Vice President - Investments IDS Life Variable Annuity Vice President - Investments Funds A and B IDS Property Casualty 1 WEG Blvd. Vice President - Investment Officer Insurance Company DePere, WI 54115 IDS REO 1, LLC Vice President IDS REO 2, LLC Vice President Investors Syndicate Director and Vice Development Corp. President - Investments Janis K. Heaney American Express Financial Vice President - Incentive Vice President - Incentive Advisors Inc. Management Management Brian M. Heath American Express Financial Senior Vice President and Senior Vice President Advisors Inc. General Sales Manager and General Sales Manager Henry Heitman American Express Financial Vice President - Brokerage Vice President - Brokerage Advisors Inc. Product Development Product Development Carol A. Holton American Centurion Life 20 Madison Ave. Extension Director, Vice President - Third Vice President - Third Party Assurance Company Albany, NY 12205-0555 Party Distribution Distribution American Enterprise Life 829 AXP Financial Center Director, President and Insurance Company Minneapolis, MN 55474 Chief Executive Officer American Enterprise 829 AXP Financial Center President REO 1, LLC Minneapolis, MN 55474 American Express Financial Vice President - Third Advisors Inc. Party Distribution IDS Life Insurance Company 20 Madison Ave. Extension Director of New York P.O. Box 5555 Albany, NY 12205-0555 Debra A. Hutchinson American Express Financial Vice President - Technologies I Vice President - Advisors Inc. Technologies I James M. Jensen American Express Financial Vice President - Advice Vice President - Advice and Advisors Inc. and Retail Distribution Retail Distribution Group, Group Product, Product, Compensation and Compensation and Field Field Administration Administration Nancy E. Jones American Express Financial Vice President - Business Development Vice President - Advisors Inc. Strategy Business Development Strategy William A. Jones American Express Vice President - Technologies III Vice President - Financial Advisors Inc. Technologies III John C. Junek American Express Financial Senior Vice President and Senior Vice President Advisors Inc. General Counsel and General Counsel Investors Syndicate Director Development Corp. Ora J. Kaine American Express Financial Vice President - Retail Vice President - Retail Advisors Inc. Distribution Services and Distribution Services and Chief of Staff Chief of Staff Theresa A. Kaminski Vice President - Compliance Michelle M. Keeley American Express Senior Vice President - Fixed Income Senior Vice President - Financial Advisors Inc. Fixed Income American Express Asset Director Management Group, Inc. Claire Kolmodin American Express Financial Vice President - Strategic Vice President - Strategic Advisors Inc. Initiatives Initiatives Christopher J. Kopka Advisory Capital Partners LLC Money Laundering Prevention Officer Advisory Capital Strategies Money Laundering Group Inc. Prevention Officer Advisory Convertible Arbitrage LLC Money Laundering Prevention Officer Advisory Credit Opportunities Money Laundering GP LLC Prevention Officer Advisory Quantitative Money Laundering Equity (General Partner) LLC Prevention Officer Advisory Select LLC Money Laundering Prevention Officer American Enterprise Money Laundering Investment Services, Inc. Prevention Officer American Enterprise Life Money Laundering Insurance Company Prevention Officer American Express Asset Management Money Laundering Group, Inc. Prevention Officer American Express Asset Management Money Laundering International, Inc. Prevention Officer American Express Money Laundering Certificate Company Prevention Officer American Express Client Money Laundering Service Corporation Prevention Officer American Express Corporation Money Laundering Prevention Officer American Express Financial Money Laundering Advisors Inc. Prevention Officer American Express Financial Money Laundering Advisors Japan Inc. Prevention Officer American Express Financial Money Laundering Corporation Prevention Officer American Express Insurance Money Laundering Agency of Alabama Inc. Prevention Officer American Express Insurance Money Laundering Agency of Arizona Inc. Prevention Officer American Express Insurance Money Laundering Agency of Idaho Inc. Prevention Officer American Express Insurance Money Laundering Agency of Maryland Inc. Prevention Officer American Express Insurance Money Laundering Agency of Massachusetts Inc. Prevention Officer American Express Insurance Money Laundering Agency of Nevada Inc. Prevention Officer American Express Insurance Money Laundering Agency of New Mexico Inc. Prevention Officer American Express Insurance Money Laundering Agency of Oklahoma Inc. Prevention Officer American Express Insurance Money Laundering Agency of Wyoming Inc. Prevention Officer American Express Property Money Laundering Casualty Insurance Agency Prevention Officer American Express Property Money Laundering Casualty Insurance Agency Prevention Officer of Kentucky, Inc. American Express Property Money Laundering Casualty Insurance Agency Prevention Officer of Maryland, Inc. American Express Property Money Laundering Casualty Insurance Agency Prevention Officer of Pennsylvania, Inc. Boston Equity General Money Laundering Partner LLC Prevention Officer IDS Cable II Corporation Money Laundering Prevention Officer IDS Insurance Agency of Money Laundering Arkansas, Inc. Prevention Officer IDS Life Series Fund, Inc. Money Laundering Prevention Officer IDS Life Variable Annuity Money Laundering Funds A & B Prevention Officer IDS Property Casualty Money Laundering Insurance Company Prevention Officer Lori J. Larson American Express Financial Vice President - Brokerage Vice President - Brokerage Advisors Inc. and Direct Services and Direct Services Daniel E. Laufenberg American Express Financial Vice President and Chief Vice President and Chief Advisors Inc. U.S. Economist U.S. Economist Jane W. Lee American Express Financial Vice President and General Vice President and General Advisors Inc. Manager Platinum Financial Manager Platinum Financial Services Services Catherine M. Libbe American Express Vice President - Marketing & Product Vice President - Financial Advisors Inc. Services Marketing & Product Services Diane D. Lyngstad American Express Financial Vice President - Lead Vice President - Lead Advisors Inc. Financial Officer, Financial Officer, U.S. Retail Group U.S. Retail Group American Express Client Vice President and Chief Service Corporation Financial Officer Thomas A. Mahowald American Express Financial Vice President and Director of Vice President and Director Advisors Inc. Equity Research of Equity Research Timothy J. Masek American Express Financial Vice President and Director Vice President and Director Advisors Inc. of Fixed Income Research of Fixed Income Research Mark T. McGannon American Express Financial Vice President and Vice President and Advisors Inc. General Manager - Products Sales General Manager - Products Sales Brian J. McGrane American Express Vice President - LFO Finance Vice President - Financial Advisors Inc. LFO Finance Advisory Capital Partners LLC Vice President and Chief Financial Officer Advisory Capital Vice President and Chief Financial Strategies Group Inc. Officer Advisory Convertible Vice President and Chief Financial Arbitrage LLC Officer Advisory Credit Vice President and Chief Financial Opportunities GP LLC Officer Advisory Quantitative Equity Vice President and Chief Financial (General Partner) LLC Officer Advisory Select LLC Vice President and Chief Financial Officer American Express Asset Vice President and Chief Financial Management Group Inc. Officer Boston Equity General Vice President and Chief Financial Partner LLC Officer Sarah M. McKenzie American Express Financial Vice President - Vice President - Advisors Inc. Managed and Brokerage Products Managed and Brokerage Products American Express Personal Director Trust Services, FSB Timothy S. Meehan American Express Secretary Secretary Financial Advisors Inc. American Enterprise Investment Services Secretary American Enterprise REO 1, LLC Secretary American Express Asset Secretary Management Group Inc. American Express Asset Secretary Management International Inc. American Express Client Service Secretary Corporation American Express Financial Secretary Advisors Inc. Japan American Express Insurance Secretary Agency of Alabama Inc. American Express Insurance Secretary Agency of Arizona Inc. American Express Insurance Secretary Agency of Idaho Inc. American Express Insurance Secretary Agency of Maryland Inc. American Express Insurance Secretary Agency of Massachusetts Inc. American Express Insurance Secretary Agency of Nevada Inc. American Express Insurance Secretary Agency of New Mexico Inc. American Express Insurance Secretary Agency of Oklahoma Inc. American Express Insurance Secretary Agency of Wyoming Inc. American Express Personal Secretary Trust Services, FSB American Express Property Secretary Casualty Insurance Agency American Express Property Casualty Secretary Insurance Agency of Kentucky Inc. American Express Property Casualty Secretary Insurance Agency of Maryland Inc. American Express Property Casualty Secretary Insurance Agency of Pennslyvania Inc. Amex Assurance Company Secretary IDS Cable Corporation Secretary IDS Cable II Corporation Secretary IDS Capital Holdings Inc. Secretary IDS Insurance Agency of Secretary Arkansas Inc. IDS Life Insurance Company Secretary IDS Management Corporation Secretary IDS Partnership Services Corporation Secretary IDS Property Casualty Secretary Insurance Company IDS Realty Company Secretary IDS REO 1, LLC Secretary IDS REO 2, LLC Secretary Investors Syndicate Development Corp. Secretary Paula R. Meyer American Express Financial Senior Vice President and General Senior Vice President Advisors Inc. Manager - Mutual Funds and General Manager - Mutual Funds American Express Certificate Director, President Chairman of the Company Board and Chief Executive Officer American Express Director and President International Deposit Company American Express Director Trust Company Investors Syndicate Director, President and Chief Development Corp. Executive Officer Barry J. Murphy American Express Client Director, Chairman of the Board, Executive Vice President - Service Corporation President and Chief Executive Officer U.S. Retail Group American Express Financial Executive Vice President - Advisors Inc. U.S. Retail Group IDS Life Insurance Company Director Rebecca Nash American Express Financial Vice President - Vice President - Corporation Service Operations Service Operations AMEX Assurance Company Vice President - Service Operations IDS Property Casualty Vice President - Insurance Company Service Operations Balakrish R. Natarajan American Express Financial Vice President - Finance Vice President - Finance Advisors Inc. Francois B. Odouard American Express Financial Vice President - Brokerage Vice President - Advisors Inc. Brokerage Michael J. O'Keefe American Express Financial Vice President - Advisory Vice President - Advisory Advisors Inc. Business Systems Business Systems Kristi L. Petersen American Express Financial Vice President - SPS and Vice President - SPS and Advisors Inc. External Products External Products IDS Cable Corporation Director, President and Chief Executive Officer IDS Cable II Corporation Director, President and Chief Executive Officer IDS Futures Corporation Director, President and Chief Executive Officer IDS Management Corporation Director, President and Chief Executive Officer IDS Partnership Services Director, President and Chief Executive Corporation Officer IDS Realty Corporation Director, President and Chief Executive Officer Ronald W. Powell American Express Financial Vice President and Vice President and Assistant Advisors Inc. Assistant General Counsel General Counsel Kenwood Capital Management LLC Chief Legal Officer Teresa J. Rasmussen American Express Financial Vice President and Vice President and Assistant Advisors Inc. Assistant General Counsel General Counsel American Centurion Life Counsel and Secretary Assurance Company American Enterprise Life Director Insurance Company American Express Corporation Director, Vice President and Secretary IDS Life Insurance Company Vice President, General Counsel and Assistant Secretary IDS Life Insurance Company 20 Madison Ave. Extension Assistant General Counsel and of New York Albany, NY 12205-0555 Assistant Secretary American Partners Director, Vice President, Life Insurance Company General Counsel and Secretary Mark A. Riordan American Express Vice President - Finance Vice President - Finance Financial Advisors Inc. Emerging Technologies Emerging Technologies Daniel J. Rivera American Express Vice President - Senior Vice President - Senior Financial Advisors Inc. Portfolio Manager II Portfolio Manager II ReBecca K. Roloff American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Field Management and Field Management Financial Advisory Services and Financial Advisory Services Stephen W. Roszell Advisory Capital Director Senior Vice President - Strategies Group Inc. Institutional Group Advisory Select LLC Director American Express Asset Director and Chief Management Group Inc. Executive Officer American Express Asset Director and Executive Vice President Management International, Inc. American Express Asset Director Management International, (Japan) Ltd. American Express Asset Director Management Ltd. American Express Financial Senior Vice President - Advisors Inc. Institutional Group American Express Financial Director Advisors Japan Inc. American Express Trust Director Company IDS Life Insurance Company Director Northwinds Marketing Manager Group LLC Andrew C. Schell American Express Financial Vice President - Client Vice President - Client Advisors Inc. Development and Migration Development and Migration Peter B. Schofield American Express Vice President - Auditing Vice President - Auditing Financial Advisors Inc. Gary A. Scott American Express Vice President - Client Acquisition Vice President - Financial Advisors Inc. Marketing Client Acquisition Marketing Bridget Sperl American Enterprise Director, President and Chief Senior Vice President - Investment Services Inc. Executive Officer Client Service Organization American Express Client Director and Senior Vice President Service Corporation American Express Financial Senior Vice President - Advisors Inc. Client Service Organization IDS Life Insurance Company Executive Vice President - Client Service IDS Property Casualty Director Insurance Company Jacqueline M. Sinjem American Express Financial Vice President - Plan Vice President - Plan Financial Corporation Sponsor Services Sponsor Services American Express Financial Vice President - Plan Advisors Inc. Sponsor Services American Express Trust Vice President - Plan Company Sponsor Services Lisa A. Steffes American Express Financial Vice President - Marketing Vice President - Marketing Advisors Inc. Offer Development Offer Development AMEX Assurance Company Director IDS Property Casualty 1 WEG Blvd. Director Insurance Company DePere, WI 54115 David K. Stewart American Express Vice President - AEFA Controller Vice President - Financial Advisors Inc. AEFA Controller Caroline Stockdale-Boon American Express Senior Vice President - Senior Vice President - Financial Advisors Inc. Human Resources Human Resources Jeffrey J. Stremcha American Express Financial Vice President - Technologies I Vice President - Advisors Inc. Technologies I John T. Sweeney American Express Financial Vice President - Lead Vice President - Lead Advisors Inc. Financial Officer, Products Group Financial Officer, Products Group AMEX Assurance Company Director American Centurion Life Vice President - Finance Assurance Company American Enterprise Vice President - Finance Life Insurance Company American Express Insurance Director and Vice President Agency of Alabama Inc. American Express Insurance Director and Vice President Agency of Arizona Inc. American Express Insurance Director and Vice President Agency of Idaho Inc. American Express Insurance Director and Vice President Agency of Maryland Inc. American Express Insurance Director and Vice President Agency of Massachusetts Inc. American Express Insurance Director and Vice President Agency of Nevada Inc. American Express Insurance Director and Vice President Agency of New Mexico Inc. American Express Insurance Director and Vice President Agency of Oklahoma Inc. American Express Insurance Director and Vice President Agency of Wyoming Inc. American Express Certificate Vice President - Finance Company American Partners Vice President - Finance Life Insurance Company IDS Cable Corporation Director IDS Cable II Corporation Director IDS Insurance Agency of Director and Vice President Arkansas Inc. IDS Life Insurance Company Director and Executive Vice President - Finance IDS Life Insurance Company Vice President - Finance New York IDS Partnership Director Services Corporation IDS Property Casualty Director Insurance Company IDS Realty Corporation Director William F. "Ted" Truscott Advisory Capital Strategies Director Senior Vice President - Group Inc. Chief Investment Officer American Express Asset Director and Chairman of the Board, Management Group Inc. Chief Investment Officer American Express Asset Director Management International Inc. American Express Financial Senior Vice President - Advisors Inc. Chief Investment Officer IDS Capital Holdings Inc. Director and President Kenwood Capital Management LLC Manager George F. Tsafaridis American Express Vice President - Quality & Service Support Vice President - Financial Advisors Inc. Quality & Service Support Peter S. Velardi American Express Senior Vice President - Field Management Senior Vice President - Financial Advisors Inc. Field Management Andrew O. Washburn American Express Vice President - Mutual Fund Marketing Vice President - Financial Advisors Inc. Mutual Fund Marketing Beth E. Weimer American Express Financial Vice President - Chief Compliance Officer Vice President Advisors Inc. Chief Compliance Officer American Enterprise Chief Compliance Officer Investment Services Inc. American Express Asset Chief Compliance Officer Management Group Inc. American Express Asset Chief Compliance Officer Management International Inc. IDS Life Insurance Company Chief Compliance Officer Jeffery A. Williams American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Cross-Sell/Strategic Cross-Sell/Strategic Management Management William J. Williams American Express Senior Vice President - Field Management Senior Vice President - Financial Advisors Inc. Field Management Dianne L. Wilson American Express Vice President - Insurance Operations Vice President - Financial Advisors Inc. Insurance Operations Amex Assurance Company Director and Senior Vice President American Express Property Vice President Casualty Insurance Agency of Kentucky Inc. American Express Property Vice President Casualty Insurance Agency of Maryland Inc. American Express Property Vice President Casualty Insurance Agency of Pennsylvania Inc. IDS Property Casualty Company Director and Senior Vice President Michael D. Wolf American Express Asset Executive Vice President Vice President - Senior Management Group Inc. Portfolio Manager American Express Financial Vice President - Senior Advisors Inc. Portfolio Manager Michael R. Woodward American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Field Management Field Management American Centurion Life 20 Madison Ave. Extension Director Assurance Company Albany, NY 12205-0555 IDS Life Insurance Company P.O. Box 5144 Director of New York Albany, NY 12205 David L. Yowan American Enterprise 829 AXP Financial Center Treasurer Vice President and Corporate REO 1, LLC Minneapolis, MN 55474 Treasurer American Express Personal Treasurer Trust Services, FSB American Express Property Treasurer Casualty Insurance Agency of Kentucky Inc. Investors Syndicate Vice President and Development Corporation Treasurer Kenwood Capital Management LLC Treasurer * Unless otherwise noted, address is 70100 AXP Financial Center, Minneapolis, MN 55474.
Item 27. Principal Underwriters. (a) American Express Financial Advisors acts as principal underwriter for the following investment companies: AXP California Tax-Exempt Trust; AXP Dimensions Series, Inc.; AXP Discovery Series, Inc.; AXP Equity Series, Inc.; AXP Fixed Income Series, Inc.; AXP Global Series, Inc.; AXP Government Income Series, Inc.; AXP Growth Series, Inc.; AXP High Yield Income Series, Inc.; AXP High Yield Tax-Exempt Series, Inc.; AXP Income Series, Inc.; AXP International Series, Inc.; AXP Investment Series, Inc.; AXP Managed Series, Inc.; AXP Market Advantage Series, Inc.; AXP Money Market Series, Inc.; AXP Partners Series, Inc.; AXP Partners International Series, Inc.; AXP Progressive Series, Inc.; AXP Sector Series, Inc.; AXP Selected Series, Inc.; AXP Special Tax-Exempt Series Trust; AXP Stock Series, Inc.; AXP Strategy Series, Inc.; AXP Tax-Exempt Series, Inc.; AXP Tax-Free Money Series, Inc.; Growth Trust; Growth and Income Trust; Income Trust; Tax-Free Income Trust; World Trust; American Express Certificate Company. (b) As to each director, officer or partner of the principal underwriter: Name and Principal Position and Offices with Offices with Registrant Business Address* Underwriter Ruediger Adolf Senior Vice President None Gumer C. Alvero Vice President - General None Manager Annuities Ward D. Armstrong Senior Vice President - None Retirement Services and Asset Management John M. Baker Vice President - Plan None Sponsor Services Dudley Barksdale Vice President - Service None Development Timothy V. Bechtold Vice President - None Insurance Products Arthur H. Berman Senior Vice President - Chief None Financial Officer - Finance Walter S. Berman Director, Senior Vice President - None and Treasurer Robert C. Bloomer Vice President - Technologies III None Leslie H. Bodell Vice President - Technologies I None Rob Bohli Group Vice President - None 10375 Richmond Avenue #600 South Texas Houston, TX 77042 Walter K. Booker Group Vice President - None 61 South Paramus Road New Jersey Mack-Cali Office Center IV, 3rd Floor Paramus, NJ 07652 Bruce J. Bordelon Group Vice President - None 1333 N. California Blvd., Northern California Suite 200 Walnut Creek, CA 94596 Kenneth J. Ciak Vice President and None IDS Property Casualty General Manager - IDS 1400 Lombardi Avenue Property Casualty Green Bay, WI 54304 Paul A. Connolly Vice President - Relationship None Leader Retail Distribution Services James M. Cracchiolo Director, Chairman, President and None Chief Executive Officer Colleen Curran Vice President and None Assistant General Counsel Luz Maria Davis Vice President - AEFA None Communications Arthur E. DeLorenzo Group Vice President - None 4 Atrium Drive, #100 Upstate New York/Vermont Albany, NY 12205 Scott M. DiGiammarino Group Vice President - None Suite 500, 8045 Leesburg Washington D.C./Baltimore Pike Vienna, VA 22182 Kenneth Dykman Group Vice President - None 6000 28th Street South East Greater Michigan Suite 200 Grand Rapids, MI 49546 Bradford L. Drew Group Vice President - None 1000 S. Pine Island Road Southern Florida Suite 510 Plantation, FL 33324 William V. Elliot Vice President - Financial None Planning and Advice Benjamin R. Field Vice President - Finanace None Education and Planning Services Gordon M. Fines Vice President - Senior None Portfolio Manager I Giunero Floro Vice President - Creative None Services Terrence J. Flynn Vice President - Brokerage None Clearing Operations Jeffrey P. Fox Vice President - Investment Treasurer Accounting Barbara H. Fraser Executive Vice President - None AEFA Products and Corporate Marketing Peter A. Gallus Vice President - None Investment Administration Gary W. Gassmann Group Vice President - None 2677 Central Park Boulevard Detroit Metro Suite 350 Southfield, MN 48076 Steven Guida Vice President - None New Business and Service Teresa A. Hanratty Senior Vice President - None Suites 6&7 Field Management 169 South River Road Bedford, NH 03110 Lorraine R. Hart Vice President - Investments None Administration Officer Janis K. Heaney Vice President - None Incentive Management Brian M. Heath Senior Vice President None Suite 150 and General Sales Manager 801 E. Campbell Road Richardson, TX 75081 Henry Heitman Vice President - Brokerage None Product Development Jon E. Hjelm Group Vice President - None 655 Metro Place South Ohio Valley Suite 570 Dublin, OH 43017 David X. Hockenberry Group Vice President - None 830 Crescent Centre Drive Mid South Suite 490 Franklin, TN 37067-7217 Carol A. Holton Vice President - Third None Party Distribution Debra A. Hutchinson Vice President - Technologies I None Diana R. Iannarone Group Vice President - None 3030 N.W. Expressway Great Plains Suite 900 Oklahoma City, OK 73112 Theodore M. Jenkin Group Vice President - None 6000 Freedom Square Drive Steel Cities Suite 300 Cleveland, OH 44131 James M. Jensen Vice President - None Advice and Retail Distribution Group Product, Compensation and Field Administration Jody M. Johnson Group Vice President - None Twin Cities Metro Nancy Jones Vice President - Interactive None Business Development William A. Jones Vice President - Technologies III None John C. Junek Senior Vice President, None General Counsel Ora J. Kaine Vice President - None Retail Distribution Services and Chief of Staff Theresa Kaminski Vice President - Compliance None Michelle M. Keeley Senior Vice President - None Fixed Income Raymond G. Kelly Group Vice President - None Suite 250 Northern Texas 801 East Campbell Road Richardson, TX 75081 Claire Kolmodin Vice President - Strategic None Initiatives Christopher J. Kopka Money Laundering Prevention Non Officer Mitre Kutanovski Group Vice President - None 125 South Wacker Drive Chicago Metro Suite 1550 Chicago, IL 60606 Lori J. Larson Vice President - None Brokerage and Direct Services Daniel E. Laufenberg Vice President and Chief None U.S. Economist Jane W. Lee Vice President and General None Manager Platinum Financial Services Catherine M. Libbe Vice President - Marketing None & Product Services Diane D. Lyngstad Vice President - Lead Financial None Officer, U.S. Retail Group Thomas A. Mahowald Vice President and Director of None Equity Research Timothy J. Masek Vice President and None Director of Fixed Income Research Mark T. McGannon Vice President and General None Sales Manager - Products Brian J. McGrane Vice President - LFO Finance None Dean O. McGill Group Vice President - None 11835 W. Olympic Blvd Los Angeles Metro Suite 900 East Los Angeles, CA 90064 Sarah M. McKenzie Vice President - Managed and None Brokerage Products Timothy S. Meehan Secretary None Penny Meier Vice President - Business None Transformation/Six Sigma Paula R. Meyer Senior Vice President and President General Manager - Mutual Funds Barry J. Murphy Executive Vice President - None U.S. Retail Group Rebecca Nash Vice President - Service Non Operations Balakrish R. Natarnjan Vice President - Finance None Thomas V. Nicolosi Group Vice President - None Suite 220 New York Metro Area 500 Mamaroneck Ave. Harrison, NY 10528 Patrick H. O'Connell Group Vice President - None Commerce Center One Southern New England 333 East River Hartford, CT 06108-4200 Francois B. Odouard Vice President - Brokerage None Michael J. O'Keefe Vice President - None Advisory Business Systems Kristi L. Petersen Vice President - SPS and None External Products John G. Poole Group Vice President - None 14755 North Outer Forty Road Gateway/Springfield Suite 500 Chesterfield, MO 63017 Larry M. Post Group Vice President - None 2 Constitution Plaza New England Charlestown, MA 02129 Ronald W. Powell Vice President and None Assistant General Counsel Teresa J. Rasmussen Vice President and None Assistant General Counsel Ralph D. Richardson III Group Vice President - None Suite 800 Carolinas Arboretum Plaza One 9442 Capital of Texas Hyw. N. Austin, TX 78759 Mark Riordan Vice President - Finance None Emerging Technologies Daniel J. Rivera Vice President - Senior None Portfolio Manager II ReBecca K. Roloff Senior Vice President - None Field Management and Financial Advisory Services Stephen W. Roszell Senior Vice President - Board member and Institutional Group Vice President Maximillian G. Roth Group Vice President - None 1400 Lombardi Avenue Wisconsin/Upper Michigan Suite 202 Green Bay, WI 54304 Russell L. Scalfano Group Vice President - None Suite 201 Illinois/Indiana/Kentucky 101 Plaza East Blvd. Evansville, IN 47715 Andrew C. Schell Vice President - Client Development None and Migration Peter B. Schofield Vice President - Auditing None Gary A. Scott Vice President - Client None Acquisition Marketing Jacqueline M. Sinjem Vice President - Plan None Sponsor Services Albert L. Soule Group Vice President - None 6925 Union Park Center Western Frontier Suite 200 Midvale, UT 84047 Bridget Sperl Senior Vice President - None Client Service Organization Paul J. Stanislaw Group Vice President - None Suite 1100 Southern California/Hawaii Two Park Plaza Irvine, CA 92614 Lisa A. Steffes Vice President - None Marketing Offer Development David K. Stewart Vice President - AEFA Controller None Caroline Stockdale-Boon Senior Vice President - None Human Resources Jeffrey J. Stremcha Technologies I None John T. Sweeney Vice President - Lead Financial None Officer, Products Group Craig P. Taucher Group Vice President - None Suite 150 Georgia/North Florida 4190 Belfort Rd. Jackonville, FL 32216 Neil G. Taylor Group Vice President - None 188 106th Avenue NE Pacific Northwest Suite 640 Bellevue, WA 98004-5902 William F. "Ted" Truscott Senior Vice President - Board member and Chief Investment Officer Vice President George F. Tsafaridis Vice President - Quality & None Service Support Janet M. Vandenbark Group Vice President - None 3951 Westerre Parkway, Suite 250 Virginia Richmond, VA 23233 Peter S. Velardi Senior Vice President - None Field Management Andrew O. Washburn Vice President - None Mutual Fund Marketing Donald F. Weaver Group Vice President - None 3500 Market Street, Eastern Pennsylvania/ Suite 200 Delaware Camp Hill, PA 17011 Beth E. Weimer Vice President and None Chief Compliance Officer Jeffrey A. Williams Senior Vice President - None Cross-Sell/Strategic Management William J. Williams Senior Vice President - None Field Management Dianne L. Wilson Vice President - Insurance None Operations Michael D. Wolf Vice President - Senior None Portfolio Manager Michael R. Woodward Senior Vice President - None 32 Ellicott St Field Management Suite 100 Batavia, NY 14020
* Business address is: 70100 AXP Financial Center, Minneapolis, MN 55474 unless otherwise noted. Item 27 (c). Not Applicable. Item 28. Location of Accounts and Records American Express Financial Corporation 70100 AXP Financial Center Minneapolis, MN 55474 Item 29. Management Services Not Applicable. Item 30. Undertakings Not Applicable. SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, AXP Global Series, Inc., certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis and State of Minnesota on the 19th day of December, 2003. AXP GLOBAL SERIES, INC. By /s/ Paula R. Meyer ----------------------- Paula R. Meyer, President By /s/ Jeffrey P. Fox --------------------- Jeffrey P. Fox, Treasurer Pursuant to the requirements of the Securities Act, this Amendment to its Registration Statement has been signed below by the following persons in the capacities indicated on the 19th day of December, 2003. Signature Capacity /s/ Arne H. Carlson* Chair of the Board --------------------- Arne H. Carlson Director -------------------------- Philip J. Carroll, Jr. /s/ Livio D. DeSimone* Director ----------------------- Livio D. DeSimone /s/ Barbara H. Fraser* Director ------------------------ Barbara H. Fraser /s/ Heinz F. Hutter* Director ---------------------- Heinz F. Hutter /s/ Anne P. Jones* Director ------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.* Director ----------------------------- Stephen R. Lewis, Jr. Signature Capacity /s/ Alan G. Quasha* ---------------------- Director Alan G. Quasha /s/ Stephen W. Roszell* Director ------------------------- Stephen W. Roszell /s/ Alan K. Simpson* Director --------------------- Alan K. Simpson /s/ Alison Taunton-Rigby* Director --------------------------- Alison Taunton-Rigby /s/ William F. Truscott* Director ------------------------- William F. Truscott * Signed pursuant to Directors'/Trustees' Power of Attorney, dated Jan. 8, 2003, filed electronically as Exhibit (q)(1) on or about Oct. 23, 2003 to Registrant's Post-Effective Amendment No. 39 to Registration Statement No. 33-25824, by: /s/ Leslie L. Ogg ------------------ Leslie L. Ogg SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, WORLD TRUST consents to the filing of this Amendment to the Registration Statement signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis and State of Minnesota on the 19th day of December, 2003. WORLD TRUST By /s/ Paula R. Meyer --------------------- Paula R. Meyer, President By /s/ Jeffrey P. Fox -------------------- Jeffrey P. Fox Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 19th day of December, 2003. Signature Capacity /s/ Arne H. Carlson** Chair of the Board --------------------- Arne H. Carlson Trustee -------------------------- Philip J. Carroll, Jr. /s/ Livio D. DeSimone** Trustee ----------------------- Livio D. DeSimone /s/ Barbara H. Fraser** Trustee ------------------------ Barbara H. Fraser /s/ Heinz F. Hutter** Trustee ---------------------- Heinz F. Hutter /s/ Anne P. Jones** Trustee ------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.** Trustee ----------------------------- Stephen R. Lewis, Jr. /s/ Alan G. Quasha** Trustee ---------------------- Alan G. Quasha Signature Capacity /s/ Stephen W. Roszell** Trustee ------------------------- Stephen W. Roszell /s/ Alan K. Simpson** Trustee --------------------- Alan K. Simpson /s/ Alison Taunton-Rigby** Trustee --------------------------- Alison Taunton-Rigby /s/ William F. Truscott** Trustee ------------------------- William F. Truscott ** Signed pursuant to Trustees' Power of Attorney, dated Jan. 8, 2003, filed electronically on or about Oct. 23, 2003 as Exhibit (q)(4) to Registrant's Post-Effective Amendment No. 39 to Registration Statement No. 33-25824, by: /s/ Leslie L. Ogg ------------------ Leslie L. Ogg CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 40 TO REGISTRATION STATEMENT NO. 33-25824 This Post-Effective Amendment contains the following papers and documents: The facing sheet. Part A. Prospectuses for: AXP Emerging Markets Fund. The prospectus supplement for AXP Emerging Markets Fund Class I shares. AXP Global Balanced Fund AXP Global Bond Fund The prospectus supplement for AXP Global Bond Fund Class I shares. AXP Global Equity Fund AXP Global Technology Fund Part B. Statements of Additional Information for: AXP Emerging Markets Fund AXP Global Balanced Fund AXP Global Bond Fund AXP Global Equity Fund AXP Global Technology Fund Financial statements for: AXP Emerging Markets Fund AXP Global Balanced Fund AXP Global Bond Fund AXP Global Equity Fund AXP Global Technology Fund Part C. Other information. Exhibits The signatures.