N-CSRS 1 global-ncsr.txt AXP GLOBAL SERIES, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5696 ------------ AXP GLOBAL SERIES, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 50606 AXP Financial Center, Minneapolis, Minnesota 55474 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (612) 330-9283 ----------------- Date of fiscal year end: 10/31 -------------- Date of reporting period: 4/30 -------------- AXP(R) Emerging Markets Fund Semiannual Report for the Period Ended April 30, 2004 AXP Emerging Markets Fund seeks to provide shareholders with long-term capital growth. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Questions & Answers with Portfolio Management 4 Investments in Securities 10 Financial Statements (Portfolio) 13 Notes to Financial Statements (Portfolio) 16 Financial Statements (Fund) 20 Notes to Financial Statements (Fund) 23 Proxy Voting 31 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- 2 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Fund Snapshot AS OF APRIL 30, 2004 PORTFOLIO MANAGERS Portfolio manager Julian Thompson* Since 1/00 Years in industry 10 Portfolio manager Jules Mort* Since 10/03 Years in industry 6 * The Fund is managed by a team led by Julian Thompson and Jules Mort. FUND OBJECTIVE For investors seeking long-term growth of capital. Inception dates A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96 Ticker symbols A: IDEAX B: IEMBX C: -- Y: -- Total net assets $279.0 million Number of holdings 69 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL COUNTRY COMPOSITION Percentage of portfolio assets (pie chart) South Korea 20.8% Taiwan 13.5% Mexico 9.6% Brazil 7.7% India 6.9% Russia 6.6% South Africa 5.8% Israel 4.6% Thailand 3.5% Malaysia 3.2% Indonesia 2.8% Turkey 2.6% Hong Kong 2.1% Hungary 1.4% United Kingdom 1.3% Other* 7.6% * Includes China, Estonia, Peru and Short-term securities. TOP TEN HOLDINGS Percentage of portfolio assets Samsung Electronics (South Korea) 8.3% Lukoil ADR (Russia) 4.3 America Movil ADR Series L (Mexico) 4.1 Anglo American (South Africa) 3.8 Taiwan Semiconductor Mfg (Taiwan) 3.6 Banco Itau Holding Financeira (Brazil) 2.6 Teva Pharmaceutical Inds ADR (Israel) 2.5 Chinatrust Financial Holding (Taiwan) 2.4 Kookmin Bank (South Korea) 2.3 Housing Development Finance (India) 2.2 For further detail about these holdings, please refer to the section entitled "Investments in Securities." There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of small- and medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Some of these companies also may have fewer financial resources. Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, Portfolio Managers Julian Thompson and Jules Mort discuss AXP Emerging Markets Fund's results and positioning for the first half of fiscal year 2004. Q: How did AXP Emerging Markets Fund perform for the six months ended April 30, 2004? A: AXP Emerging Markets Fund rose 9.24% (Class A shares excluding sales charge) for the six-month period ended April 30, 2004. This was slightly less than the Fund's benchmark, the MSCI Emerging Markets Free Index, which rose 9.38% over the same period. The Fund's peer group, represented by the Lipper Emerging Markets Fund Index, was up 10.47% for the same time frame. Q: How did market conditions and country positioning affect performance during the period? A: Strong commodity prices, good export growth in Asia and a decline in the value of the U.S. dollar in 2003 helped provide attractive, positive returns for emerging market investors. However, the six months ended April 30, 2004 was an unusual and volatile time. We positioned the Fund a bit too conservatively last autumn, which was a period when emerging markets fared especially well. However, this worked in our favor towards the end of the period when the prospect of higher U.S. interest rates and the strengthening U.S. dollar contributed to a sharp retreat in many emerging markets. (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2004 12% (bar 3) (bar 1) (bar 2) +10.47% 9% +9.24% +9.38% 6% 3% 0% (bar 1) AXP Emerging Markets Fund Class A (excluding sales charge) (bar 2) MSCI Emerging Markets Free Index(1) (unmanaged) (bar 3) Lipper Emerging Markets Funds Index(2) (1) 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. (2) 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. Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 4 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> Another source of positive returns for the Fund since October was its higher-than-index position in Russia.(end callout quote) The Fund's country positioning generally worked well. We maintained a lower-than-index position in China, which was the worst performing market in Asia for the six months ended April 30. This position helped the Fund's performance. It appeared to us last October that stocks in China were overvalued and that an investment "bubble" was building which would need tighter monetary conditions. The Chinese government authorities have tried to slow down the economy by imposing loan quotas, but there has been no sign of a slowdown as yet. While the market has
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class Y (Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) as of April 30, 2004 6 months* +9.24% +2.96% +8.60% +4.60% +8.80% +7.80% +9.34% +9.34% 1 year +48.74% +40.18% +47.55% +43.55% +47.72% +47.72% +49.03% +49.03% 5 years +4.84% +3.61% +4.01% +3.84% N/A N/A +5.10% +5.10% Since inception +2.80% +1.99% +2.00% +2.00% +0.08% +0.08% +2.99% +2.99% as of March 31, 2004 6 months* +30.29% +22.81% +29.75% +25.75% +29.44% +28.44% +30.17% +30.17% 1 year +71.67% +61.82% +70.03% +66.03% +69.87% +69.87% +71.76% +71.76% 5 years +10.06% +8.76% +9.20% +9.06% N/A N/A +10.31% +10.31% Since inception +4.13% +3.29% +3.32% +3.32% +2.55% +2.55% +4.31% +4.31%
The performance information shown represents the past performance and is not a guarantee of future results. The investment return and principal value of your investment and returns will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (888) 723-8476 or visiting www.americanexpress.com/funds. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. * Not annualized. (1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. -------------------------------------------------------------------------------- 5 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Questions & Answers corrected, more measures appear necessary to slow things down. We gradually reduced the Fund's equity holdings in China from 6.3% at the start of the fiscal period to just 1% of the portfolio by the end of April. In Latin America, a higher-than-index position in Mexico was a positive factor for the Fund while a higher-than-index position in Brazil detracted from results. Our position in Mexico at the end of the period was large (approximately 10% of the Fund). Mexican stocks rose by 10% for the fiscal period, which contributed significantly to the Fund's performance. On the other hand, Brazil languished as investors feared that Brazil's high debt levels could be more severely affected in the coming months by rising U.S. interest rates. While overall economic growth in Mexico remains lackluster, the consumer sector is growing strongly, and most of the Fund's Mexican holdings are concentrated in that area. America Movil, a cellular telecommunications operator based in Mexico, was one of the top contributors to Fund performance during the fiscal period. Since last autumn, Mexican stocks have been boosted by the growing strength of the U.S. economy. The Mexican industrial sector is closely linked with U.S. demand, given that 90% of Mexican exports end up in the U.S. market. Mexico had previously suffered from competition with China but seems to have regained some competitiveness recently. However, the Mexican equity market is mostly linked to domestic consumption, which has been very strong on the back of low interest rates and increased credit penetration. Above all, Mexico offers good earnings growth which is reflected in the Mexican companies within the Fund's portfolio. Another source of positive returns for the Fund since October was its higher-than-index position in Russia. The highest global oil prices in 20 years have helped the Russian economy post huge trade surpluses. While political risks in Russia are substantial and contributed to a sharp market sell off in April, the Fund's Russian stock holdings worked well during the fiscal period. Our holdings in Russia include Lukoil, one of the country's largest oil exporters, and Mobile TeleSystems, a wireless telecommunications company. The Fund also benefited from having a substantially lower-than-index position in South Africa. The South African market was disappointing, falling 6% in U.S. dollar terms over the fiscal period. -------------------------------------------------------------------------------- 6 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Questions & Answers Q: What other changes did you make to the portfolio since the end of October? A: The Fund began the fiscal year with 57% of its assets in Asia, a higher-than-benchmark position. We reduced this weighting to approximately 52% by the end of April. In addition to cutting the portfolio's exposure to China because of its overheating economy, we reduced holdings in Thailand and Taiwan. One factor affecting several Asian markets that influenced our decision was a flood of new stock issuance that was difficult for equity markets to absorb ($14 billion in public offerings in the first calendar quarter of 2004). During the period, we underestimated the impact that an overheating China would have on the rest of Asia, particularly on Taiwan, which also faced political concerns. We began the fiscal year with a higher-than-index position in Taiwan, which hurt the Fund's six-month return even though we reduced our holdings there. Elsewhere in Asia, we increased the Fund's position in South Korea, which we felt would be less influenced by a slowdown in China. Within other areas of the portfolio, we reduced our positioning in Brazil and Chile; increased the Fund's exposure to Eastern Europe and Israel and increased the Fund's cash position. We also added to the Fund's Russian stock holdings. In terms of sectors, we have positioned the Fund to focus on each country's domestic economy rather than global commodities. Therefore, we have maintained lower-than-index positions in materials and energy, while holding higher-than-index positions in financials, consumer staples and telecommunications. Q: What is the Fund's tactical view and strategy for the months ahead? A: Our outlook has changed since our last report to you in autumn 2003. It appears that the global economy is moving into a period of dollar strength. Also, U.S. interest rates are likely to increase more quickly than the market had expected. A stronger U.S. dollar and rising interest rates change the near term outlook for emerging markets quite significantly. We will lessen our exposure to domestic economies in interest rate sensitive markets, such as Brazil and Turkey. -------------------------------------------------------------------------------- 7 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Questions & Answers (bar chart)
Historical Economic Growth in Emerging Markets and Economists' Current Expectations GDP Growth (%) REGION Asia Latin America Europe, Middle East and Africa 7 Year Average 2.2% 1.0% 2.0% 2001 2.6% 1.1% 1.1% 2002 4.8% -1.5% 2.8% 2003 estimate 5.1% 1.0% 3.2% 2004 estimate 5.5% 4.7% 3.7%
Source: Threadneedle Asset Management as of 4/30/04 The graph above shows the seven year average Gross Domestic Product (GDP) growth in different regions from 2001 (actual) to 2004 (estimated). The bars depict GDP growth in Asia, Latin America and the Europe-Middle East-Africa region, respectively. GDP is the value of goods and services provided in each area. -------------------------------------------------------------------------------- 8 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Questions & Answers There has also been growing concern about China. To regain confidence in this market, we need to see evidence of a soft landing. Until we see a cooling of China's economy, we believe certain Asian equity markets may remain under pressure. We have therefore adopted a more defensive position within the portfolio by reducing exposure to global commodities in favor of domestic sectors. We have also moved to a lower-than-index position in Asia and have reduced our position in Latin America. At the same time we have increased the Fund's holding in the Europe, Middle East and Africa region, given that countries in this region tend to have a more defensive tilt. For example, in emerging Europe, we purchased Gedeon Richter, a pharmaceutical manufacturer in Hungary that produces generic drugs and is enjoying strong growth in the U.S. market. China apart, many emerging market economies appear fundamentally sound for the medium term (as illustrated by the emerging market gross domestic product (GDP) growth rate chart on page 8). While the interest rate cycle has clearly bottomed in the United States, with higher rates expected in the second half of the year, emerging economies are well positioned to withstand a higher cost of capital. Leverage is much lower throughout the emerging markets universe than it was in previous tightening cycles. We therefore expect the asset class to remain relatively resilient in the face of rising U.S. rates and expect current levels of growth to be sustained, with the possible exception of China. The Fund is positioned to benefit from a pick up in the domestic credit cycle, particularly in Asia, and is focused on strong growth franchises supported by good cash flow and high quality management. Stocks in this area continue to be attractively valued, in our view. -------------------------------------------------------------------------------- 9 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Investments in Securities Emerging Markets Portfolio April 30, 2004 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (88.6%)(c) Issuer Shares Value(a) Brazil (5.0%) Metals (2.0%) Companhia Vale do Rio Doce ADR 141,917 $5,547,536 Paper & packaging (0.9%) Aracruz Celulose ADR 82,482 2,568,489 Utilities -- telephone (2.1%) Brasil Telecom Participacoes ADR 189,766 5,882,746 China (0.9%) Automotive & related Denway Motors 5,276,000 2,519,919 Estonia (0.6%) Banks and savings & loans Hansabank 206,664 1,582,058 Hong Kong (2.1%) Multi-industry (1.1%) New World Development 3,690,400 2,957,393 Real estate (1.0%) Sun Hung Kai Properties 326,000 2,800,580 Hungary (1.3%) Health care products Gedeon Richter 36,892 3,758,907 India (6.7%) Automotive & related (0.9%) Tata Motors 231,687 2,462,667 Banks and savings & loans (3.4%) Housing Development Finance 460,384 6,154,319 State Bank of India 90,114 3,509,940 Total 9,664,259 Beverages & tobacco (1.4%) ITC 166,009 4,012,832 Computer software & services (1.0%) Infosys Technologies 23,136 2,676,252 Indonesia (2.7%) Automotive & related (0.6%) Astra Intl 2,531,500 1,659,523 Banks and savings & loans (1.0%) Bank Rakyat Indonesia 13,512,500(b) 2,680,743 Telecom equipment & services (1.1%) Telekomunikasi Indonesia ADR 178,067 3,223,013 Israel (4.5%) Computer software & services (1.2%) Check Point Software Technologies 148,026(b) 3,468,249 Electronics (0.7%) Orbotech 98,700(b) 2,084,544 Health care products (2.6%) Teva Pharmaceutical Inds ADR 112,710 6,938,428 Malaysia (3.2%) Banks and savings & loans (0.8%) Malayan Banking 773,200 2,136,474 Cellular telecommunications (1.2%) Maxis Communications 1,498,200 3,430,089 Leisure time & entertainment (1.2%) Resorts World 1,228,100 3,231,842 Mexico (9.4%) Beverages & tobacco (1.9%) Coca-Cola Femsa ADR 120,000(b) 2,551,200 Fomento Economico Mexicano ADR 62,649 2,739,014 Total 5,290,214 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Mexico (cont.) Cellular telecommunications (4.0%) America Movil ADR Series L 333,537 $11,273,551 Media (1.4%) Grupo Televisa ADR 91,000 3,966,690 Real estate (0.8%) Consorcio 828,000(b) 2,259,369 Retail -- general (1.3%) Wal-Mart de Mexico 1,217,521 3,553,770 Peru (0.7%) Precious metals Compania de Minas Buenaventura ADR 90,309 1,954,287 Russia (6.5%) Energy (4.2%) Lukoil ADR 107,756 11,745,404 Utilities -- natural gas (0.5%) Gazprom ADR 42,990(d) 1,328,391 Utilities -- telephone (1.8%) Mobile Telesystems ADR 46,127 4,979,871 South Africa (5.8%) Banks and savings & loans (2.0%) FirstRand 2,152,700 2,960,267 Standard Bank Group 471,422 2,709,912 Total 5,670,179 Metals (3.8%) Anglo American 521,162 10,376,805 South Korea (18.7%) Banks and savings & loans (3.3%) Kookmin Bank 165,720 6,188,010 Shinhan Financial Group 169,550 2,955,923 Total 9,143,933 Beverages & tobacco (2.1%) KT&G 226,860 5,763,366 Chemicals (0.4%) LG Chem 30,040 1,213,893 Electronics (8.9%) Samsung Electronics 48,140 22,859,318 Samsung SDI 15,600 1,994,885 Total 24,854,203 Insurance (1.0%) Samsung Fire & Marine 42,590 2,832,072 Retail -- general (1.1%) Shinsegae 13,090 2,957,246 Telecom equipment & services (1.9%) SK Telecom 18,620 3,174,765 SK Telecom ADR 106,585 2,153,017 Total 5,327,782 Taiwan (13.2%) Banks and savings & loans (4.4%) Chinatrust Financial Holding 6,264,840 6,703,477 Taishin Financial Holdings 6,288,000 5,484,378 Total 12,187,855 Chemicals (0.7%) Formosa Chemicals & Fibre 1,365,335 1,964,275 Computer hardware (0.7%) Hon Hai Precision Inds 476,600 1,871,316 Electronics (5.4%) Acer 1,746,000 2,459,597 Taiwan Semiconductor Mfg 5,784,000 9,968,229 Yageo 5,214,000(b) 2,828,600 Total 15,256,426 Insurance (1.0%) Cathay Financial Holding 1,623,000 2,870,069 Telecom equipment & services (1.0%) Taiwan Cellular 3,074,000 2,810,125 Thailand (3.5%) Banks and savings & loans (1.8%) Kasikornbank Public 2,557,200(b) 3,099,830 Kiatnakin Finance 1,908,700 1,872,444 Total 4,972,274 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Thailand (cont.) Building materials & construction (0.6%) Siam Cement 343,700 $1,803,974 Home building (1.1%) Land & Houses Public 11,385,000 2,930,905 Turkey (2.6%) Banks and savings & loans (0.9%) Akbank T.A.S. 551,591,000 2,568,254 Food (0.9%) Migros Turk T.A.S. 479,177,580 2,400,113 Furniture & appliances (0.8%) Arcelik 421,949,085 2,262,302 United Kingdom (1.3%) Metals Lonmin 203,211 3,590,607 Total common stocks (Cost: $219,481,217) $247,266,064 Preferred stocks (4.3%)(c) Issuer Shares Value(a) Brazil (2.5%) Banco Itau Holding Financeira 90,010,000 $7,177,468 South Korea (1.8%) Samsung Electronics 17,840 4,927,673 Total preferred stocks (Cost: $9,075,294) $12,105,141 Short-term securities (5.3%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agency (1.2%) Federal Home Loan Mtge Corp Disc Nts 05-04-04 1.02% $1,500,000 $1,499,838 05-18-04 1.00 1,900,000 1,899,084 Total 3,398,922 Commercial paper (4.1%) Dexia (Delaware) 05-20-04 1.03 3,500,000 3,497,997 Household Finance 05-03-04 1.03 2,900,000 2,899,751 Societe General North America 06-04-04 1.04 5,000,000 4,994,945 Total 11,392,693 Total short-term securities (Cost: $14,791,995) $14,791,615 Total investments in securities (Cost: $243,348,506)(e) $274,162,820 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) 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. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of April 30, 2004, the value of these securities amounted to $1,328,391 or 0.5% of net assets. (e) At April 30, 2004, the cost of securities for federal income tax purposes was approximately $243,349,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 41,668,000 Unrealized depreciation (10,854,000) ----------- Net unrealized appreciation $ 30,814,000 ------------ -------------------------------------------------------------------------------- 12 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities Emerging Markets Portfolio April 30, 2004 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $243,348,506) $274,162,820 Foreign currency holdings (identified cost $2,939,066) (Note 1) 2,921,173 Dividends and accrued interest receivable 481,847 Receivable for investment securities sold 2,724,768 Unrealized appreciation on foreign currency contracts held, at value (Note 4) 144 --- Total assets 280,290,752 ----------- Liabilities Disbursements in excess of cash on demand deposit 45,202 Payable for investment securities purchased 1,089,449 Accrued investment management services fee 8,547 Other accrued expenses 76,785 ------ Total liabilities 1,219,983 --------- Net assets $279,070,769 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT
Statement of operations Emerging Markets Portfolio Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 3,315,835 Interest 47,965 Fee income from securities lending (Note 3) 256 Less foreign taxes withheld (400,047) -------- Total income 2,964,009 --------- Expenses (Note 2): Investment management services fee 1,370,999 Compensation of board members 5,542 Custodian fees 141,450 Audit fees 10,500 Other 3,052 ----- Total expenses 1,531,543 Earnings credits on cash balances (Note 2) (171) ---- Total net expenses 1,531,372 --------- Investment income (loss) -- net 1,432,637 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 37,082,709 Foreign currency transactions (230,607) -------- Net realized gain (loss) on investments 36,852,102 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (15,713,215) ----------- Net gain (loss) on investments and foreign currencies 21,138,887 ---------- Net increase (decrease) in net assets resulting from operations $ 22,571,524 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets Emerging Markets Portfolio April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 1,432,637 $ 2,490,540 Net realized gain (loss) on investments 36,852,102 17,305,707 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (15,713,215) 50,708,763 ----------- ---------- Net increase (decrease) in net assets resulting from operations 22,571,524 70,505,010 ---------- ---------- Proceeds from contributions 16,561,254 40,823,634 Fair value of withdrawals (5,877,601) (63,961,807) ---------- ----------- Net contributions (withdrawals) from partners 10,683,653 (23,138,173) ---------- ----------- Total increase (decrease) in net assets 33,255,177 47,366,837 Net assets at beginning of period 245,815,592 198,448,755 ----------- ----------- Net assets at end of period $279,070,769 $245,815,592 ============ ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements Emerging Markets Portfolio (Unaudited as to April 30, 2004) 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. Pursuant to procedures adopted by the Board of Trustees of the portfolios, American Express Financial Corporations (AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with the procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair NAV. 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. -------------------------------------------------------------------------------- 16 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT 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 April 30, 2004 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. -------------------------------------------------------------------------------- 17 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT 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 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. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the fee by $132,186 for the six months ended April 30, 2004. 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. During the six months ended April 30, 2004, the Portfolio's custodian fees were reduced by $171 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. -------------------------------------------------------------------------------- 18 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $175,886,315 and $179,448,278, respectively, for the six months ended April 30, 2004. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $256 for the six months ended April 30, 2004. 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. FORWARD FOREIGN CURRENCY CONTRACTS As of April 30, 2004, the Portfolio has a forward foreign currency exchange contract that obligates it to deliver currency at a specified future date. The unrealized appreciation and/or depreciation on this contract is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contract are as follows: Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation May 6, 2004 574,713 23,000,000 $144 $-- U.S. Dollar Thai Baht 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, 2004(e) 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) 1.12%(c) 1.20% 1.23% 1.20% 1.17% Ratio of net investment income (loss) to average daily net assets 1.04%(c) 1.20% .63% .79% .28% Portfolio turnover rate (excluding short-term securities) 68% 174% 226% 193% 143% Total return(b) 9.61%(d) 37.59% 9.39% (22.59%) (2.86%)
(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. (c) Adjusted to an annual basis. (d) Not annualized. (e) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 19 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Emerging Markets Fund April 30, 2004 (Unaudited) Assets Investment in Portfolio (Note 1) $278,968,482 Capital shares receivable 327,305 ------- Total assets 279,295,787 ----------- Liabilities Capital shares payable 30,843 Accrued distribution fee 3,482 Accrued service fee 49 Accrued transfer agency fee 1,976 Accrued administrative services fee 769 Other accrued expenses 233,432 ------- Total liabilities 270,551 ------- Net assets applicable to outstanding capital stock $279,025,236 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 479,697 Additional paid-in capital 334,081,699 Excess of distributions over net investment income (2,403,300) Accumulated net realized gain (loss) (Note 5) (83,918,360) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,785,500 ---------- Total -- representing net assets applicable to outstanding capital stock $279,025,236 ============ Net assets applicable to outstanding shares: Class A $178,950,037 Class B $ 78,900,001 Class C $ 1,056,158 Class I $ 2,344,153 Class Y $ 17,774,887 Net asset value per share of outstanding capital stock: Class A shares 30,345,850 $ 5.90 Class B shares 14,059,792 $ 5.61 Class C shares 187,663 $ 5.63 Class I shares 393,539 $ 5.96 Class Y shares 2,982,888 $ 5.96 --------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 20 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT
Statement of operations AXP Emerging Markets Fund Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 3,314,582 Interest 47,951 Fee income from securities lending 256 Less foreign taxes withheld (399,895) -------- Total income 2,962,894 --------- Expenses (Note 2): Expenses allocated from Portfolio 1,530,795 Distribution fee Class A 219,320 Class B 396,155 Class C 3,971 Transfer agency fee 327,418 Incremental transfer agency fee Class A 24,841 Class B 18,605 Class C 121 Service fee -- Class Y 9,344 Administrative services fees and expenses 135,096 Compensation of board members 5,217 Printing and postage 51,575 Registration fees 26,303 Audit fees 3,500 Other 8,655 ----- Total expenses 2,760,916 Earnings credits on cash balances (Note 2) (1,842) ------ Total net expenses 2,759,074 --------- Investment income (loss) -- net 203,820 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 37,068,896 Foreign currency transactions (230,503) -------- Net realized gain (loss) on investments 36,838,393 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (15,707,926) ----------- Net gain (loss) on investments and foreign currencies 21,130,467 ---------- Net increase (decrease) in net assets resulting from operations $ 21,334,287 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 21 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets AXP Emerging Markets Fund April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 203,820 $ 320,873 Net realized gain (loss) on investments 36,838,393 17,299,589 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (15,707,926) 50,690,349 ----------- ---------- Net increase (decrease) in net assets resulting from operations 21,334,287 68,310,811 ---------- ---------- Distributions to shareholders from: Net investment income Class A (1,739,642) -- Class B (347,197) -- Class C (2,977) -- Class I -- -- Class Y (233,250) -- Total distributions (2,323,066) -- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 30,185,118 46,522,730 Class B shares 8,838,997 4,677,343 Class C shares 512,761 1,881,668 Class I shares 2,544,260 -- --------- ---------- Class Y shares 1,366,070 17,134,059 --------- ---------- Reinvestment of distributions at net asset value Class A shares 1,720,981 -- Class B shares 343,336 -- Class C shares 2,764 -- Class Y shares 233,251 -- Payments for redemptions Class A shares (20,315,476) (66,453,449) Class B shares (Note 2) (8,126,451) (17,438,584) Class C shares (Note 2) (92,885) (1,963,556) Class I shares (1,782) -- Class Y shares (2,908,485) (5,243,858) ---------- ---------- Increase (decrease) in net assets from capital share transactions 14,302,459 (20,883,647) ---------- ----------- Total increase (decrease) in net assets 33,313,680 47,427,164 Net assets at beginning of period 245,711,556 198,284,392 ----------- ----------- Net assets at end of period $279,025,236 $245,711,556 ============ ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements AXP Emerging Markets Fund (Unaudited as to April 30, 2004) 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. Effective March 4, 2004, the Fund offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares have no sales charge and are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. As of April 30, 2004, American Express Financial Corporation (AEFC) and the AXP Portfolio Builder Funds owned 100% of Class I shares. 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 April 30, 2004 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). -------------------------------------------------------------------------------- 23 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. 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. Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.10% 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. -------------------------------------------------------------------------------- 24 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL 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. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. In addition, AECSC is entitled to charge 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 currently not effective. 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 $306,875 for Class A, $21,254 for Class B and $8 for Class C for the six months ended April 30, 2004. Effective Nov. 1, 2003, AEFC and its affiliates have agreed to waive certain fees and expenses until Oct. 31, 2004. Under this agreement net expenses will not exceed 1.99% for Class A, 2.75% for Class B, 2.75% for Class C, 1.47% for Class I and 1.82% for Class Y. During the six months ended April 30, 2004, the Fund's transfer agency fees were reduced by $1,842 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 25 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2004 Class A Class B Class C Class I* Class Y Sold 4,933,729 1,515,041 86,703 393,817 226,187 Issued for reinvested distributions 308,420 64,537 518 -- 41,430 Redeemed (3,356,099) (1,410,408) (17,144) (278) (477,628) ---------- ---------- ------- ---- -------- Net increase (decrease) 1,886,050 169,170 70,077 393,539 (210,011) --------- ------- ------ ------- -------- * Inception date was March 4, 2004. Year ended Oct. 31, 2003 Class A Class B Class C Class I Class Y Sold 10,502,183 1,107,124 439,743 N/A 4,214,232 Issued for reinvested distributions -- -- -- N/A -- Redeemed (15,064,186) (4,225,912) (453,986) N/A (1,112,507) ----------- ---------- -------- ----- ---------- Net increase (decrease) (4,562,003) (3,118,788) (14,243) N/A 3,101,725 ---------- ---------- ------- ----- ---------
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 six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 26 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL 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, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $5.46 $4.00 $3.69 $ 4.81 $4.99 Income from investment operations: Net investment income (loss) .01 .02 (.01) -- (.02) Net gains (losses) (both realized and unrealized) .49 1.44 .32 (1.12) (.16) Total from investment operations .50 1.46 .31 (1.12) (.18) Less distributions: Dividends from net investment income (.06) -- -- -- -- Net asset value, end of period $5.90 $5.46 $4.00 $ 3.69 $4.81 Ratios/supplemental data Net assets, end of period (in millions) $179 $155 $132 $143 $234 Ratio of expenses to average daily net assets(b) 1.80%(c) 2.02% 2.05% 2.02% 1.83% Ratio of net investment income (loss) to average daily net assets .36%(c) .39% (.19%) (.02%) (.38%) Portfolio turnover rate (excluding short-term securities) 68% 174% 226% 193% 143% Total return(d) 9.24%(e) 36.50% 8.40% (23.28%) (3.60%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 27 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $5.19 $3.83 $3.56 $ 4.67 $4.88 Income from investment operations: Net investment income (loss) (.01) (.02) (.04) (.04) (.07) Net gains (losses) (both realized and unrealized) .46 1.38 .31 (1.07) (.14) Total from investment operations .45 1.36 .27 (1.11) (.21) Less distributions: Dividends from net investment income (.03) -- -- -- -- Net asset value, end of period $5.61 $5.19 $3.83 $ 3.56 $4.67 Ratios/supplemental data Net assets, end of period (in millions) $79 $72 $65 $73 $120 Ratio of expenses to average daily net assets(b) 2.56%(c) 2.80% 2.83% 2.79% 2.60% Ratio of net investment income (loss) to average daily net assets (.40%)(c) (.39%) (.95%) (.80%) (1.14%) Portfolio turnover rate (excluding short-term securities) 68% 174% 226% 193% 143% Total return(d) 8.60%(e) 35.51% 7.58% (23.77%) (4.30%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 28 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(g) 2003 2002 2001 2000(b) Net asset value, beginning of period $5.20 $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) .46 1.38 .31 (1.08) (.95) Total from investment operations .46 1.36 .28 (1.12) (.96) Less distributions: Dividends from net investment income (.03) -- -- -- -- Net asset value, end of period $5.63 $5.20 $3.84 $ 3.56 $4.68 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $-- $-- Ratio of expenses to average daily net assets(c) 2.55%(d) 2.80% 2.85% 2.79% 2.60%(d) Ratio of net investment income (loss) to average daily net assets (.38%)(d) (.41%) (1.13%) (.63%) (2.06%)(d) Portfolio turnover rate (excluding short-term securities) 68% 174% 226% 193% 143% Total return(e) 8.80%(f) 35.42% 7.87% (23.93%) (17.02%)(f)
(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. (g) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 29 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT Class I Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(b) Net asset value, beginning of period $6.54 Income from investment operations: Net investment income (loss) (.04) Net gains (losses) (both realized and unrealized) (.54) Total from investment operations (.58) Net asset value, end of period $5.96 Ratios/supplemental data Net assets, end of period (in millions) $2 Ratio of expenses to average daily net assets(c) 1.42%(d) Ratio of net investment income (loss) to average daily net assets .66%(d) Portfolio turnover rate (excluding short-term securities) 68% Total return(e) (8.87%)(f) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was March 4, 2004 (Unaudited). (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. -------------------------------------------------------------------------------- 30 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $5.52 $4.04 $3.72 $ 4.83 $4.99 Income from investment operations: Net investment income (loss) .02 .03 -- .01 (.01) Net gains (losses) (both realized and unrealized) .49 1.45 .32 (1.12) (.15) Total from investment operations .51 1.48 .32 (1.11) (.16) Less distributions: Dividends from net investment income (.07) -- -- -- -- Net asset value, end of period $5.96 $5.52 $4.04 $ 3.72 $4.83 Ratios/supplemental data Net assets, end of period (in millions) $18 $18 $-- $-- $-- Ratio of expenses to average daily net assets(b) 1.62%(c) 1.87% 1.59% 1.84% 1.66% Ratio of net investment income (loss) to average daily net assets .55%(c) .54% .19% .21% (.29%) Portfolio turnover rate (excluding short-term securities) 68% 174% 226% 193% 143% Total return(d) 9.34%(e) 36.63% 8.60% (22.98%) (3.21%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the Web site americanexpress.com/funds; or by searching the Web site of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, after Aug. 1, 2004, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available at http://www.sec.gov. -------------------------------------------------------------------------------- 31 -- AXP EMERGING MARKETS FUND -- 2004 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Global Balanced Fund Semiannual Report for the Period Ended April 30, 2004 AXP Global Balanced Fund seeks to provide shareholders with a balance of growth of capital and current income. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Questions & Answers with Portfolio Management 4 Investments in Securities 8 Financial Statements 14 Notes to Financial Statements 17 Proxy Voting 27 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- 2 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Fund Snapshot AS OF APRIL 30, 2004 PORTFOLIO MANAGERS Portfolio manager Since Years in industry Equity Alex Lyle* 10/03 23 Stephen Thornber* 10/03 16 Fixed Income Nic Pifer, CFA** 2/03 13 * The Fund is managed by a team led by Alex Lyle and Stephen Thornber in London. ** The Fund is managed by a team led by Nic Pifer in Minneapolis. FUND OBJECTIVE For investors seeking a balance of growth of capital and current income. Inception dates A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96 Ticker symbols A: IDGAX B: IGBBX C: -- Y: AGBYX Total net assets $98.2 million Number of holdings 144 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. Equities STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL Bonds DURATION SHORT INT. LONG X HIGH X MEDIUM QUALITY LOW COUNTRY COMPOSITION Percentage of portfolio assets (pie chart) United States 36.2% Germany 9.1% United Kingdom 7.5% Japan 7.3% France 7.1% Italy 6.0% Switzerland 4.0% Austria 3.8% Canada 2.6% Bermuda 2.4% Denmark 1.9% Brazil 1.6% China 1.2% Hong Kong 1.2% Other* 6.2% * Includes Australia, Belgium, Greece, Ireland, Israel, Mexico, Netherlands, Norway, Singapore, Supra-National and Taiwan. TOP TEN HOLDINGS Percentage of portfolio assets Buoni Poliennali Del Tes (Italy) 4.25% 2009 4.2% Oesterreich Kontrollbank (Austria) 1.80% 2010 3.5 Govt of France (France) 5.50% 2010 2.5 Bundesrepublik Deutschland (Germany) 6.50% 2027 2.3 Govt of France (France) 4.00% 2009 1.9 Bundesrepublik Deutschland (Germany) 5.25% 2008 1.7 Federal Natl Mtge Assn (United States) 6.00% 2011 1.7 Citigroup (United States) 1.5 Samsung Electronics (South Korea) 1.4 United Kingdom Treasury (United Kingdom) 8.50% 2005 1.4 For further detail about these holdings, please refer to the section entitled "Investments in Securities."There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of small- and medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Some of these companies also may have fewer financial resources. Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, Portfolio Managers Alex Lyle and Stephen Thornber, of Threadneedle Asset Management, and Nic Pifer discuss the Fund's positioning and results for the semiannual period ended April 30, 2004. Threadneedle portfolio managers assumed responsibility for the equity portion of the Fund on Oct. 20, 2003. Q: How did AXP Global Balanced Fund perform for the six-month period ended April 30, 2004? A: AXP Global Balanced Fund's Class A shares gained 4.65%, excluding sales charge, for the six months ended April 30, 2004. The Fund's benchmark, the MSCI All Country World Free Index, rose 8.70%, and the Lipper Global Flexible Funds Index, representing the Fund's peer group, rose 6.23% for the period. The CitiGroup World Government Bond Index returned 3.10% for the same period. Q: What factors most significantly affected performance? A: A weakening U.S. dollar versus other world currencies helped performance during the beginning of the period for both the equity and fixed income portions of the Fund. However, a rebound in the U.S. dollar versus other world currencies hurt performance later in the period. As the value of the U.S. dollar declines, the currency value of foreign investments typically improves and vice versa. Within the equity portion of the Fund, we made several major changes when we took over management in late October. We began to see the effect of these changes throughout the semiannual period. First, a strong cyclical focus was (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2004 10% (bar 2) 8% +8.70% (bar 4) 6% (bar 1) +6.23% +4.65% 4% (bar 3) +3.10% 2% 0% (bar 1) AXP Global Balanced Fund Class A (excluding sales charge) (bar 2) MSCI All Country World Free Index(1) (unmanaged) (bar 3) CitiGroup World Government Bond Index(2) (unmanaged) (bar 4) Lipper Global Flexible Funds Index(3) (1) Morgan Stanley Capital International (MSCI) All Country World Free Index, an unmanaged index, is compiled from a composite of securities markets of 47 countries, including Canada, the United States, and 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) 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. (3) 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. Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 4 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> Positives to performance during the period were asset allocation where our greater-than-index stance in Japan and Latin America did well for us.(end callout quote) put in place, because we are optimistic about global growth. Historically, stocks in these sectors benefit from a growing global economy. We have a higher-than-index position in the industrial, financials and information technology sectors. On the other hand, we have lower-than-index positions in energy, consumer staples, health care, telecommunications and utilities. These areas tend to underperform in times of global growth.
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class Y (Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) as of April 30, 2004 6 months* +4.65% -1.37% +4.30% +0.30% +4.31% +3.31% +4.83% +4.83% 1 year +16.37% +9.68% +15.48% +11.48% +15.51% +15.51% +16.60% +16.60% 5 years -1.54% -2.70% -2.28% -2.45% N/A N/A -1.29% -1.29% Since inception +3.08% +2.27% +2.31% +2.31% -5.36% -5.36% +3.30% +3.30% as of March 31, 2004 6 months* +11.30% +4.90% +10.82% +6.82% +10.86% +9.86% +11.45% +11.45% 1 year +26.58% +19.31% +25.50% +21.50% +25.63% +25.63% +26.74% +26.74% 5 years -0.38% -1.56% -1.13% -1.30% N/A N/A -0.13% -0.13% Since inception +3.59% +2.76% +2.81% +2.81% -4.65% -4.65% +3.81% +3.81%
The performance information shown represents the past performance and is not a guarantee of future results. The investment return and principal value of your investment and returns will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (888) 723-8476 or visiting www.americanexpress.com/funds. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. * Not annualized. (1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. -------------------------------------------------------------------------------- 5 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Questions & Answers Next, we added more mid-cap stocks and reduced the number of large-cap stocks. Unlike large company stocks, mid-cap stocks, as well as small-cap stocks, have better growth characteristics when the economy is picking up. We have found some very interesting opportunities in mid-sized companies. Positives to performance during the period were asset allocation where our greater-than-index stance in Japan and Latin America did well for us. Stock selection, however, took a back seat to the allocation decision. In Japan, for example, we were invested in globally oriented companies rather than companies focused on the Japanese domestic economy. Evidence pointed out that the economic recovery in Japan was broadening into the domestic side and the domestic stocks performed stronger than the international names that we owned. During the period, results were negatively affected by the Fund's stock specific events. First, Adecco, the outsourcing and personnel group, announced concerns over accounting irregularities of the U.S. subsidiary. This became a significant concern for the Fund, as the stock was down 40% in a day. Also, Swiss Life, an insurance company, announced plans to buy the portion of an Italian bank that they did not already own. This was a drain on the stock and, in turn, the Fund. Seiko Epson, the Japanese electronics company, had poor results and raised concerns over its future margins. For the fixed income portion of the Fund's portfolio, country allocation and duration positioning contributed positively to the Fund's performance. In particular, the Fund benefited from a higher-than-index position in European bonds and a lower-than-index position in Japanese bonds. The portfolio's shorter-than-benchmark duration also helped protect the Fund when global interest rates rose sharply at the end of the period. Currency positioning had little net effect on performance, adding value early in the period, but hurting performance by a roughly equivalent amount later on. Overall, it was a volatile six-month period for both the U.S. and overseas bond markets. We started the period stuck in an interest rate trading range. We knew the global economy was accelerating, but inflation was still relatively low. With inflation low, major central banks appeared content to keep short-term interest rates at highly accommodative levels. This patience kept longer-term interest rates at relatively stable levels through February. However, this stability gave way to significant volatility in the last few months of the period amid shifting expectations for the U.S. economy. In early April we got an extremely strong payroll employment report that prompted fears of Federal Reserve tightening. This theme continued in May, when the bond market got a second strong payroll report that suggested the Fed might raise rates as early as June. This shift in expectations caused the U.S. bond market to perform poorly towards the end of the period, with 10-year Treasury yields rising 64 basis points (0.64%) in April alone. Bond yields also rose in the major foreign markets, but to a lesser extent. This relationship follows a pattern seen in recent years in which the U.S. bond market has tended to -------------------------------------------------------------------------------- 6 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Questions & Answers outperform other major markets when yields are declining but underperform when yields are rising. Q: What changes did you make to the portfolio? A: We believe the Fund is poised to participate fully as the global economic recovery strengthens. Traditionally, strong rallies occur when the economy is recovering, and we believe the Fund, with its mid-cap focus, is positioned to fully participate in future rallies. We have moved from the early cyclicals such as basic industries, chemicals, steel and the material stocks, the mining stocks, into the later cyclicals and into particular financial cyclicals. We have increased the Fund's weighting in the reinsurance companies and the investment banks and market related financials. Therefore, we still retain a cyclical focus, but we are moving the focus within the cyclicals. Within the Fund's equity component, we also continue to have a clear preference for emerging markets and the material markets. We are broadly neutral in Europe, have a lower-than-index position in the U.S., principally because of the valuation of that market and a higher-than-index position in Japan, Asia and Latin America. We have been changing the basis of the Fund's Japanese holdings more into the domestic-focused firms, so we bought some retailers and one of the local banks as well to get a more domestic focus on the Japanese portfolio and reduce exposure to the international trading names. The fixed income portion of the Fund invests primarily in government bonds and high-quality substitutes, such as agency issues and other national issues. Given the improving outlook for global growth, we shortened the Fund's duration by roughly half a year during the period. This change reduced the Fund's interest rate risk from a neutral to a below-benchmark position. We have maintained the Fund's higher-than-index position in European government obligations this period. Q: How do you intend to manage the Fund in the coming months? A: In the equity portion, we are looking beyond the cyclical rally as part of our longer-term investment strategy. Cyclical rallies tend to be fairly short lived and we are very mindful that we want to be ahead of the game rather than behind it. Over time, we may shift into undervalued long-term growth stocks. We are doing a lot of work to identify what we term as growth at a reasonable price. We will not sell all the Fund's cyclical stocks, but what we want to do is identify the cyclical stocks that have a secondary story as we are looking for the true restructuring or turnaround situations rather than just capitalizing on market volatility and recovery. Within the fixed income portion of the Fund, we will continue to run the portfolio with a below-benchmark level of interest rate risk until global yields rise to levels that fully account for the acceleration in global growth and the likelihood that the Federal Reserve will soon begin raising short-term interest rates. As always, we remain focused on careful security selection as we seek opportunities to add attractively valued bonds. -------------------------------------------------------------------------------- 7 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Investments in Securities AXP Global Balanced Fund April 30, 2004 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (61.2%)(c) Issuer Shares Value(a) Austria (0.3%) Utilities -- telephone Telekom Austria 21,500(b) $315,523 Bermuda (2.3%) Insurance (1.5%) PartnerRe 11,848 678,890 RenaissanceRe Holdings 16,192 853,157 Total 1,532,047 Multi-industry (0.8%) Accenture Cl A 31,365(b) 745,546 Brazil (1.6%) Metals (0.8%) Companhia Vale do Rio Doce ADR 20,258 791,885 Paper & packaging (0.5%) Aracruz Celulose ADR 16,255 506,181 Utilities -- telephone (0.3%) Brasil Telecom Participacoes ADR 8,367 259,377 Canada (0.9%) Banks and savings & loans (0.3%) TSX Group 8,638 314,888 Energy (0.6%) EnCana 13,919 545,963 China (1.2%) Real estate investment trust (0.5%) Henderson Land Development 112,000 502,622 Retail -- general (0.7%) Esprit Holdings 154,500 633,919 France (2.2%) Automotive & related (0.5%) Renault 6,722 501,296 Energy (1.1%) Total 5,404 998,936 Multi-industry (0.4%) Sanofi-Synthelabo 6,686 424,521 Telecom equipment & services (0.2%) Alcatel 16,235(b) 241,758 Germany (0.9%) Banks and savings & loans (0.6%) Hypo Real Estate Holding 22,367(b) 610,673 Building materials & construction (0.3%) Hochtief 11,056 309,140 Greece (0.5%) Utilities -- electric Public Power 18,659 472,999 Hong Kong (1.1%) Multi-industry (0.6%) New World Development 759,600 608,724 Real estate (0.5%) Sun Hung Kai Properties 58,000 498,262 Ireland (0.7%) Banks and savings & loans Anglo Irish Bank 39,838 651,459 Israel (0.8%) Computer software & services Check Point Software Technologies 35,109(b) 822,604 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 8 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Italy (0.8%) Energy Eni 39,594 $804,474 Japan (7.1%) Automotive & related (1.0%) Toyota Motor 28,200 1,018,263 Banks and savings & loans (0.8%) Mitsubishi Tokyo Financial Group 84 746,498 Cellular telecommunications (0.4%) NTT DoCoMo 187 370,615 Chemicals (0.5%) Shin-Etsu Chemical 11,800 476,271 Financial services (0.4%) Nomura Holdings 26,000 421,647 Health care products (0.5%) Chugai Pharmaceutical 31,700 479,086 Machinery (1.1%) Amada 81,000 455,213 Komatsu 107,000 609,077 Total 1,064,290 Media (0.5%) Tokyo Broadcasting System 26,000 517,647 Multi-industry (1.4%) Canon 16,000 838,370 Ricoh 27,000 537,557 Total 1,375,927 Retail -- general (0.5%) Seven-Eleven Japan 14,000 475,113 Mexico (0.8%) Cellular telecommunications America Movil ADR Series L 23,190 783,822 Netherlands (0.7%) Food Koninklijke Numico 25,200(b) 697,379 Singapore (0.5%) Real estate City Developments 126,000 451,746 South Korea (1.8%) Electronics Samsung Electronics 2,850 1,353,324 Samsung SDI 3,540 452,685 Total 1,806,009 Switzerland (3.9%) Banks and savings & loans (0.9%) UBS 11,803 839,881 Health care products (2.2%) Actelion 4,392(b) 482,442 Nobel Biocare Holding 4,615 626,321 Roche Holding 3,106 326,190 Synthes 679 738,773 Total 2,173,726 Insurance (0.8%) Swiss Life Holding 5,724(b) 782,354 Taiwan (0.5%) Electronics Taiwan Semiconductor Mfg 305,440 526,400 United Kingdom (5.6%) Aerospace & defense (0.6%) Rolls-Royce Group 141,387 581,828 Rolls-Royce Group Cl B 7,069,350(b) 12,566 Total 594,394 Broker dealers (0.3%) ICAP 58,315 285,585 Cellular telecommunications (1.0%) Vodafone Group 389,680 948,993 Computer software & services (0.3%) lastminute.com 85,723(b) 292,953 Energy (0.4%) BP 42,199 365,688 Health care products (0.6%) AstraZeneca 13,282 622,598 Industrial services (0.5%) BOC Group 30,879 497,583 Industrial transportation (0.3%) Peninsular & Oriental Steam Navigation 75,264 289,319 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United Kingdom (cont.) Retail -- grocery (1.0%) Tesco 103,030 $455,576 William Morrison Supermarkets 126,430 538,257 Total 993,833 Telecom equipment & services (0.6%) mm02 323,704(b) 575,416 United States (26.9%) Aerospace & defense (0.3%) Lockheed Martin 6,798 324,265 Banks and savings & loans (0.9%) Bank of America 5,142 413,880 Wells Fargo 8,948 505,203 Total 919,083 Beverages & tobacco (0.7%) PepsiCo 12,851 700,251 Broker dealers (1.5%) AmeriTrade Holding 29,600(b) 362,304 Bear Stearns Companies 6,255 501,276 Morgan Stanley 11,694 600,955 Total 1,464,535 Cellular telecommunications (0.9%) American Tower Cl A 44,585(b) 555,083 Nextel Communications Cl A 15,800(b) 376,988 Total 932,071 Chemicals (0.3%) Ecolab 11,397 339,631 Computer hardware (1.5%) Cisco Systems 17,933(b) 374,262 Dell 30,364(b) 1,053,934 Total 1,428,196 Computer software & services (3.0%) Adobe Systems 12,000 496,080 First Data 6,864 311,557 Intl Business Machines 3,171 279,587 Iron Mountain 8,500(b) 386,835 Microsoft 47,165 1,224,875 State Street 6,371 310,905 Total 3,009,839 Electronics (0.5%) Intel 17,250 443,843 Energy (1.2%) Exxon Mobil 7,889 335,677 Valero Energy 12,683 808,668 Total 1,144,345 Finance companies (1.5%) Citigroup 29,899 1,437,843 Financial services (0.4%) Moody's 6,108 394,027 Food (0.5%) Wrigley (Wm) Jr 8,255 509,334 Furniture & appliances (0.5%) Mohawk Inds 5,929(b) 457,363 Health care products (4.6%) Amgen 12,669(b) 712,885 Gilead Sciences 9,736(b) 592,241 Johnson & Johnson 17,095 923,643 Laboratory Corp of America Holdings 16,949(b) 673,553 Lilly (Eli) 4,024 297,011 Pfizer 18,382 657,340 St. Jude Medical 5,059(b) 385,799 Zimmer Holdings 4,678(b) 373,538 Total 4,616,010 Health care services (0.2%) WellPoint Health Networks 1,632(b) 182,278 Household products (1.1%) Procter & Gamble 10,533 1,113,865 Industrial transportation (0.3%) Norfolk Southern 12,976 309,089 Insurance (1.1%) American Intl Group 8,056 577,212 Prudential Financial 11,502 505,398 Total 1,082,610 Machinery (0.5%) Deere & Co 7,401 503,564 Media (0.4%) DIRECTV Group 21,423(b) 383,472 Multi-industry (1.1%) General Electric 36,104 1,081,315 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Retail -- drugstores (0.7%) Walgreen 19,575 $674,946 Retail -- general (2.1%) Circuit City Stores 30,000 350,400 Home Depot 22,539 793,148 Staples 13,647 351,547 Wal-Mart Stores 10,455 595,935 Total 2,091,030 Telecom equipment & services (0.6%) Crown Castle Intl 39,219(b) 547,105 Utilities -- electric (0.5%) Duke Energy 22,886 481,980 Total common stocks (Cost: $55,758,200) $60,137,723 Preferred stock (0.9%)(c) Issuer Shares Value(a) Germany Porsche 1,359 $842,565 Total preferred stock (Cost: $654,061) $842,565 Bonds (31.3%)(c) Issuer Coupon Principal Value(a) rate amount Australia (0.2%) New South Wales Treasury (Australian Dollar) 03-01-08 8.00% 200,000 $154,912 Austria (3.4%) Oesterreich Kontrollbank (Japanese Yen) 03-22-10 1.80 347,000,000 3,311,478 Belgium (0.3%) Govt of Belgium (European Monetary Unit) 03-28-08 5.75 225,000 294,847 Canada (1.6%) Govt of Canada (Canadian Dollar) 12-01-06 7.00 720,000 577,039 06-01-08 6.00 800,000 635,877 Province of British Columbia (Canadian Dollar) 12-01-06 5.25 500,000 384,004 Total 1,596,920 Denmark (1.8%) Kingdom of Denmark (Danish Krone) 11-15-04 4.00 615,000 99,931 08-15-05 5.00 6,000,000 996,673 Rheinische Hypbk (European Monetary Unit) 09-24-08 4.25 550,000 681,573 Total 1,778,177 France (4.6%) French Treasury Note (European Monetary Unit) 07-12-08 3.00 300,000 355,965 Govt of France (European Monetary Unit) 10-25-09 4.00 1,500,000 1,837,430 04-25-10 5.50 1,800,000 2,368,614 Total 4,562,009 Germany (7.2%) Allgemeine Hypo Bank (European Monetary Unit) 09-02-09 5.00 850,000(d) 1,083,151 Bundesrepublik Deutschland (European Monetary Unit) 01-05-06 6.00 150,000 190,084 01-04-08 5.25 1,285,000 1,652,759 07-04-08 4.75 725,000 918,694 07-04-10 5.25 250,000 325,289 06-20-16 6.00 434,598 600,834 07-04-27 6.50 1,475,000 2,169,454 Total 6,940,265 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Greece (0.3%) Hellenic Republic (European Monetary Unit) 05-20-13 4.60% 200,000 $246,006 Italy (5.0%) Buoni Poliennali Del Tes (European Monetary Unit) 11-01-09 4.25 3,200,000 3,960,287 11-01-29 5.25 800,000 989,878 Total 4,950,165 Norway (0.3%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 2,100,000 330,925 Supra-National (0.5%) Intl Bank Reconstruction & Development (Japanese Yen) 02-18-08 2.00 55,000,000 527,030 United Kingdom (1.7%) Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-07 9.50 170,000(b,e) 3,400 United Kingdom Treasury (British Pound) 12-07-05 8.50 700,000 1,319,278 03-07-08 5.00 190,000 339,906 Total 1,662,584 United States (4.4%) ConocoPhillips (U.S. Dollar) 03-15-28 7.13 200,000 210,139 Federal Natl Mtge Assn (U.S. Dollar) 05-15-11 6.00 1,520,000 1,650,619 Intl Paper (European Monetary Unit) 08-11-06 5.38 560,000 701,839 U.S. Treasury (U.S. Dollar) 01-31-06 1.88 535,000 532,242 02-15-08 3.00 200,000 198,570 02-15-14 4.00 914,000 878,011 02-15-26 6.00 169,000 182,758 Total 4,354,178 Total bonds (Cost: $25,564,400) $30,709,496 Short-term securities (3.7%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity Commercial paper Dexia Delaware LLC 05-20-04 1.03% $2,000,000 $1,998,855 Old Line Funding 05-03-04 1.03 1,600,000(f) 1,599,863 Total short-term securities (Cost: $3,598,821) $3,598,718 Total investments in securities (Cost: $85,575,482)(g) $95,288,502 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the board. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of April 30, 2004, the value of these securities amounted to $1,083,151 or 1.1% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at April 30, 2004, is as follows: Security Acquisition Cost date Greater Beijing First Expressways (U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 $57,064 (f) 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. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of April 30, 2004, the value of these securities amounted to $1,599,863 or 1.6% of net assets. (g) At April 30, 2004, the cost of securities for federal income tax purposes was approximately $85,575,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $11,132,000 Unrealized depreciation (1,418,000) ---------- Net unrealized appreciation $ 9,714,000 ----------- -------------------------------------------------------------------------------- 13 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Balanced Fund April 30, 2004 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $85,575,482) $ 95,288,502 Cash in bank on demand deposit 514,890 Foreign currency holdings (identified cost $989,729) (Note 1) 975,908 Capital shares receivable 38,901 Dividends and accrued interest receivable 803,329 Receivable for investment securities sold 1,461,855 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 29,486 ------ Total assets 99,112,871 ---------- Liabilities Capital shares payable 4,970 Payable for investment securities purchased 800,890 Accrued investment management services fee 2,136 Accrued distribution fee 1,298 Accrued service fee 27 Accrued transfer agency fee 708 Accrued administrative services fee 162 Other accrued expenses 68,832 ------ Total liabilities 879,023 ------- Net assets applicable to outstanding capital stock $ 98,233,848 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 199,579 Additional paid-in capital 132,639,838 Undistributed net investment income 271,152 Accumulated net realized gain (loss) (Note 7) (44,602,852) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) 9,726,131 --------- Total -- representing net assets applicable to outstanding capital stock $ 98,233,848 ============ Net assets applicable to outstanding shares: Class A $ 54,786,205 Class B $ 32,745,963 Class C $ 752,077 Class Y $ 9,949,603 Net asset value per share of outstanding capital stock: Class A shares 11,058,549 $ 4.95 Class B shares 6,748,459 $ 4.85 Class C shares 155,521 $ 4.84 Class Y shares 1,995,361 $ 4.99 --------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT
Statement of operations AXP Global Balanced Fund Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 487,928 Interest 691,480 Fee income from securities lending (Note 3) 2,001 Less foreign taxes withheld (28,486) ------- Total income 1,152,923 --------- Expenses (Note 2): Investment management services fee 348,736 Distribution fee Class A 68,955 Class B 167,325 Class C 3,571 Transfer agency fee 119,318 Incremental transfer agency fee Class A 6,795 Class B 6,416 Class C 94 Service fee -- Class Y 4,142 Administrative services fees and expenses 28,186 Compensation of board members 5,542 Custodian fees 22,180 Printing and postage 24,390 Registration fees 19,925 Audit fees 9,750 Other 4,337 ----- Total expenses 839,662 Earnings credits on cash balances (Note 2) (1,136) ------ Total net expenses 838,526 ------- Investment income (loss) -- net 314,397 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 2,981,659 Foreign currency transactions (248,695) -------- Net realized gain (loss) on investments 2,732,964 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,107,524 --------- Net gain (loss) on investments and foreign currencies 3,840,488 --------- Net increase (decrease) in net assets resulting from operations $4,154,885 ==========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT
Statements of changes in net assets AXP Global Balanced Fund April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 314,397 $ 687,550 Net realized gain (loss) on investments 2,732,964 (2,312,136) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,107,524 15,670,500 --------- ---------- Net increase (decrease) in net assets resulting from operations 4,154,885 14,045,914 --------- ---------- Distributions to shareholders from: Net investment income Class A -- (444,097) Class C -- (2) Class Y -- (55,350) --------- ---------- Total distributions -- (499,449) --------- ---------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 6,551,184 8,267,331 Class B shares 2,674,804 3,172,163 Class C shares 155,088 163,435 Class Y shares 5,694,667 3,877,067 Reinvestment of distributions at net asset value Class A shares -- 426,497 Class C shares -- 2 Class Y shares -- 55,338 Payments for redemptions Class A shares (7,022,330) (17,397,690) Class B shares (Note 2) (4,119,424) (10,981,624) Class C shares (Note 2) (73,829) (338,285) Class Y shares (2,558,378) (1,696,600) ---------- ---------- Increase (decrease) in net assets from capital share transactions 1,301,782 (14,452,366) --------- ----------- Total increase (decrease) in net assets 5,456,667 (905,901) Net assets at beginning of period 92,777,181 93,683,082 ---------- ---------- Net assets at end of period $98,233,848 $ 92,777,181 =========== ============ Undistributed (excess of distributions over) net investment income $ 271,152 $ (43,245) ----------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 16 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Notes to Financial Statements AXP Global Balanced Fund (Unaudited as to April 30, 2004) 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. -------------------------------------------------------------------------------- 17 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT 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. Pursuant to procedures adopted by the Board of Directors of the funds, American Express Financial Corporation (AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with the procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair NAV. 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 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. -------------------------------------------------------------------------------- 18 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. As of April 30, 2004 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 April 30, 2004, 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 April 30, 2004 was $3,400 representing 0.003% of nets 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. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. 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. -------------------------------------------------------------------------------- 19 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Dividends to shareholders Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 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. The maximum adjustment is 0.08% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the fee by $36,889 for the six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 20 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL 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, AECSC is entitled to charge 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 currently not effective. 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 $85,768 for Class A, $11,914 for Class B and $82 for Class C for the six months ended April 30, 2004. During the six months ended April 30, 2004, the Fund's custodian and transfer agency fees were reduced by $1,136 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 $37,044,090 and $39,053,594, respectively, for the six months ended April 30, 2004. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $2,001 for the six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 21 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2004 Class A Class B Class C Class Y Sold 1,307,517 543,176 31,369 1,123,423 Issued for reinvested distributions -- -- -- -- Redeemed (1,403,438) (836,293) (14,780) (505,839) ---------- -------- ------- -------- Net increase (decrease) (95,921) (293,117) 16,589 617,584 ------- -------- ------ ------- 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 ---------- ---------- ------- -------
5. FORWARD FOREIGN CURRENCY CONTRACTS As of April 30, 2004, the Fund has a forward foreign currency exchange contract that obligates it to deliver currency at specified future date. The unrealized appreciation and/or depreciation on this contract is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contract are as follows:
Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation May 10, 2004 3,607,000 4,350,042 $29,486 $ -- European Monetary Unit U.S. Dollar
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 six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 22 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT 8. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $4.73 $4.08 $4.53 $ 6.27 $6.61 Income from investment operations: Net investment income (loss) .02 .05 .07 .07 .08 Net gains (losses) (both realized and unrealized) .20 .64 (.50) (1.27) .12 Total from investment operations .22 .69 (.43) (1.20) .20 Less distributions: Dividends from net investment income -- (.04) (.02) (.03) (.03) Distributions from realized gains -- -- -- (.51) (.51) Total distributions -- (.04) (.02) (.54) (.54) Net asset value, end of period $4.95 $4.73 $4.08 $ 4.53 $6.27 Ratios/supplemental data Net assets, end of period (in millions) $55 $53 $54 $80 $110 Ratio of expenses to average daily net assets(b) 1.46%(d) 1.60% 1.48% 1.45% 1.31% Ratio of net investment income (loss) to average daily net assets .89%(d) 1.03% 1.38% 1.18% 1.26% Portfolio turnover rate (excluding short-term securities) 40% 90% 99% 173% 110% Total return(c) 4.65%(e) 16.91% (9.48%) (20.63%) 2.62%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. (d) Adjusted to an annual basis. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 23 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $4.65 $4.01 $4.47 $ 6.21 $6.58 Income from investment operations: Net investment income (loss) .01 -- .04 .01 .04 Net gains (losses) (both realized and unrealized) .19 .64 (.49) (1.24) .12 Total from investment operations .20 .64 (.45) (1.23) .16 Less distributions: Dividends from net investment income -- -- (.01) -- (.02) Distributions from realized gains -- -- -- (.51) (.51) Total distributions -- -- (.01) (.51) (.53) Net asset value, end of period $4.85 $4.65 $4.01 $ 4.47 $6.21 Ratios/supplemental data Net assets, end of period (in millions) $33 $33 $36 $53 $77 Ratio of expenses to average daily net assets(b) 2.23%(d) 2.37% 2.25% 2.21% 2.07% Ratio of net investment income (loss) to average daily net assets .13%(d) .27% .61% .42% .51% Portfolio turnover rate (excluding short-term securities) 40% 90% 99% 173% 110% Total return(c) 4.30%(e) 15.96% (10.19%) (21.21%) 1.95%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. (d) Adjusted to an annual basis. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 24 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(g) 2003 2002 2001 2000(b) Net asset value, beginning of period $4.64 $3.99 $4.46 $ 6.21 $6.58 Income from investment operations: Net investment income (loss) .01 -- .03 .02 .01 Net gains (losses) (both realized and unrealized) .19 .65 (.49) (1.24) (.38) Total from investment operations .20 .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 $4.84 $4.64 $3.99 $ 4.46 $6.21 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $1 $-- Ratio of expenses to average daily net assets(c) 2.22%(e) 2.36% 2.24% 2.21% 2.07%(e) Ratio of net investment income (loss) to average daily net assets .15%(e) .26% .60% .41% .47%(e) Portfolio turnover rate (excluding short-term securities) 40% 90% 99% 173% 110% Total return(d) 4.31%(f) 16.29% (10.34%) (21.17%) (5.62%)(f)
(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) Total return does not reflect payment of a sales charge. (e) Adjusted to an annual basis. (f) Not annualized. (g) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 25 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $4.76 $4.10 $4.56 $ 6.30 $6.62 Income from investment operations: Net investment income (loss) .02 .07 .07 .08 .10 Net gains (losses) (both realized and unrealized) .21 .64 (.50) (1.28) .13 Total from investment operations .23 .71 (.43) (1.20) .23 Less distributions: Dividends from net investment income -- (.05) (.03) (.03) (.04) Distributions from realized gains -- -- -- (.51) (.51) Total distributions -- (.05) (.03) (.54) (.55) Net asset value, end of period $4.99 $4.76 $4.10 $ 4.56 $6.30 Ratios/supplemental data Net assets, end of period (in millions) $10 $7 $4 $2 $1 Ratio of expenses to average daily net assets(b) 1.29%(d) 1.43% 1.30% 1.31% 1.20% Ratio of net investment income (loss) to average daily net assets 1.10%(d) 1.21% 1.52% 1.35% 1.51% Portfolio turnover rate (excluding short-term securities) 40% 90% 99% 173% 110% Total return(c) 4.83%(e) 17.32% (9.55%) (20.40%) 2.99%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. (d) Adjusted to an annual basis. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 26 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the Web site americanexpress.com/funds; or by searching the Web site of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, after Aug. 1, 2004, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available at http://www.sec.gov. -------------------------------------------------------------------------------- 27 --- AXP GLOBAL BALANCED FUND --- 2004 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Global Bond Fund Semiannual Report for the Period Ended April 30, 2004 AXP Global Bond Fund seeks to provide shareholders with high total return through income and growth of capital. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) > Table of Contents Fund Snapshot 3 Questions & Answers with Portfolio Management 4 Investments in Securities 9 Financial Statements (Portfolio) 19 Notes to Financial Statements (Portfolio) 22 Financial Statements (Fund) 27 Notes to Financial Statements (Fund) 30 Proxy Voting 39 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- 2 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Fund Snapshot AS OF APRIL 30, 2004 PORTFOLIO MANAGER Portfolio manager Nic Pifer, CFA* Since 5/00 Years in industry 13 * The Fund is managed by a team of portfolio managers led by Nic Pifer in Minneapolis. FUND OBJECTIVE For investors seeking high total return through income and growth of capital. Inception dates A: 3/20/89 B: 3/20/95 C: 6/26/00 Y: 3/20/95 Ticker symbols A: IGBFX B: IGLOX C: AGBCX Y: -- Total net assets $546.4 million Number of holdings 279 Average weighted life* 6.4 years Effective duration** 4.6 years * Average weighted life is the average number of years that each dollar of unpaid principal due on a security remains outstanding. ** Effective duration measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out of 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. DURATION SHORT INT. LONG X X HIGH MEDIUM QUALITY LOW COUNTRY COMPOSITION Percentage of portfolio assets (pie chart) United States 40.2% Germany 8.1% Spain 6.7% Italy 5.9% Japan 5.0% France 4.7% Greece 4.1% United Kingdom 3.5% Netherlands 3.1% Supra-National 2.7% Canada 2.4% Finland 2.1% Austria 2.0% Australia 1.6% Norway 1.6% New Zealand 1.4% Denmark 1.0% Other* 3.9% * Includes Brazil, Colombia, Croatia, Hungary, Ireland, Luxembourg, Malaysia, Mexico, Poland, Romania, South Korea and Sweden. CREDIT QUALITY SUMMARY Percentage of portfolio assets AAA bonds 54.6% AA bonds 20.1 A bonds 9.8 BBB bonds 4.9 Non-investment grade bonds 3.6 Individual security ratings are based on information from Standard & Poor's Corp. and Moody's Investors Service. If a rating is unavailable, the rating is determined through an internal analysis, if appropriate. 0.7% of the portfolio rating above was determined through internal analysis. For further detail about these holdings, please refer to the section entitled "Investments in Securities." There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, Portfolio Manager Nic Pifer in Minneapolis discusses the Fund's positioning and results for first half of fiscal year 2004. Q: How did AXP Global Bond Fund perform for the six months ended April 30, 2003? A: AXP Global Bond Fund's Class A shares rose 3.04%, excluding sales charge, for the six months ended April 30, 2004. The Fund outperformed both its current benchmark, the Lehman Brothers Global Aggregate Index, which increased 2.81% for the period and the Fund's peer group, the Lipper Global Income Funds Index, which returned 2.89% over the same time frame. Q: What factors most affected Fund performance during the annual period? A: The Fund's country selection was a positive over the semiannual period. European government bonds outperformed U.S. and Japanese government bonds by quite a wide margin. The Fund held a higher-than-index position in Euro-denominated bonds and a lower-than-index position in Japan and the U.S. bond markets, both of which were weak amid improving economic growth prospects. The Fund's duration and yield curve positioning also were positive contributors to total return for the six months ended April 30. The Fund's yield curve positioning worked particularly well in the U.S., where investors saw a flattening of the curve, a trend that we believe may continue. (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2004 4% (bar 1) 3% +3.04% (bar 2) (bar 3) +2.81% +2.89% 2% 1% 0% (bar 1) AXP Global Bond Fund Class A (excluding sales charge) (bar 2) Lehman Brothers Global Aggregate Index(1) (unmanaged) (bar 3) Lipper Global Income Funds Index(2) (1) Lehman Brothers Global Aggregate Index, an unmanaged market capitalization weighted benchmark, tracks the performance of investment grade fixed income securities denominated in 13 currencies. It is widely recognized by investors as a measurement index for portfolios of global debt securities. The index reflects the reinvestment of all income and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Global Income Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Past performance is no guarantee of future results. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 4 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> Our conservative approach paid off as interest rates climbed in April.(end callout quote) Our fixed-income sector allocation also enhanced the Fund's six-month results. We had a modest position in high yield bonds and that sector performed well over the period. The Fund also had a lower-than-index position in mortgage securities, and this also worked well in April as the mortgage market suffered its biggest setback since last July.
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class Y (Inception dates) (3/20/89) (3/20/95) (6/26/00) (3/20/95) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) as of April 30, 2004 6 months* +3.04% -1.86% +2.64% -1.36% +2.51% +1.51% +2.96% +2.96% 1 year +6.31% +1.26% +5.51% +1.51% +5.41% +5.41% +6.32% +6.32% 5 years +5.21% +4.19% +4.42% +4.25% N/A N/A +5.40% +5.40% 10 years +6.06% +5.55% N/A N/A N/A N/A N/A N/A Since inception N/A N/A +5.55% +5.55% +7.11% +7.11% +6.32% +6.32% as of March 31, 2004 6 months* +5.97% +0.93% +5.56% +1.56% +5.60% +4.60% +6.05% +6.05% 1 year +12.07% +6.74% +11.22% +7.22% +11.14% +11.14% +12.24% +12.24% 5 years +6.05% +5.03% +5.24% +5.08% N/A N/A +6.25% +6.25% 10 years +6.40% +5.88% N/A N/A N/A N/A N/A N/A Since inception N/A N/A +6.03% +6.03% +8.34% +8.34% +6.82% +6.82%
The performance information shown represents the past performance and is not a guarantee of future results. The investment return and principal value of your investment and returns will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (888) 723-8476 or visiting www.americanexpress.com/funds. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. * Not annualized. (1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 4.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. -------------------------------------------------------------------------------- 5 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Questions & Answers During the fiscal period, currency fluctuations had a mixed effect on Fund returns. The U.S. dollar was very weak at the beginning of the six-month period, particularly in November and December. This augmented the Fund's results. Since December, however, the dollar has regained quite a bit of ground. Since the Fund typically leaves its foreign currency exposure unhedged, returns on the Fund's non-dollar denominated bonds were negatively affected as the U.S. dollar rebounded in value. Essentially, the Fund gave up in the spring what it had earned from currency changes last autumn. Q: How have global bond market conditions changed since last autumn? A: Overall, it was a volatile six-month period for both the U.S. and overseas bond markets. We started the period stuck in an interest rate trading range. We knew the global economy was accelerating, but inflation was still relatively low. With inflation low, major central banks appeared content to keep short-term interest rates at low levels. This patience kept longer-term interest rates at relatively stable levels through February. However, this stability gave way to significant volatility in the last few months of the period amid shifting expectations for the U.S. economy. In early April we got an extremely strong payroll employment report that prompted fears of Federal Reserve tightening. This theme continued in May, when the bond market got a second strong payroll report that suggested the Fed might raise rates as early as June. This shift in expectations caused the U.S. bond market to perform poorly towards the end of the period, with 10-year Treasury yields rising 64 basis points (0.64%) in April alone. Bond yields also rose in the major foreign markets, but to a lesser extent. This relationship follows a pattern seen in recent years in which the U.S. bond market has tended to outperform other major markets when yields are declining but underperform when yields are rising. Q: What changes did you make to the Fund and how is it currently positioned? A: We started the fiscal year fairly neutral in terms of duration relative to the Fund's benchmark. We shortened duration modestly in January and February, and shortened duration more aggressively in March, to the point where we were about four-tenths of a year lower than the index going into April, an especially difficult period for the bond market. As of April 30, the Fund's duration was about -------------------------------------------------------------------------------- 6 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Questions & Answers half a year shorter than the index. At the beginning of the six month period the Fund's duration was approximately 4.9 years, which was pretty much neutral to the index. At the end of the period it was 4.6 years. Our longer-term view is that the value of the U.S. dollar will again decline. So we used the rebound in the U.S. dollar this past winter to increase Fund weightings in some established foreign markets such as Europe, and decrease the Fund's weighting in the U.S. market. We also added slightly to the Fund's holdings of investment grade corporate bonds beginning in late January. The Fund had a relatively low 1.6% position in emerging market debt at the start of the period and we took that down further to 1.0% as of April 30, the lowest weighting in many years. We remain fairly positive on the economic fundamentals of the sector but felt that yield differences relative to higher quality debt had simply tightened in too far following the very strong performance seen in the sector in calendar year 2003. This low weighting meant that the Fund was fairly well insulated from the sharp sell-off in emerging market debt in April, when investors began to worry about the impact of higher global interest rates on emerging market countries. Q: How do you intend to manage the Fund in the coming months? A: In terms of central bank policy, which is critically important for bond markets, it appears that the Federal Reserve may start tightening as early as June. Growth in the U.S. has been quite strong in the last few months. Also, inflation indicators have started moving higher, not just on the overall level because of high energy prices, but also on several core measures. Clearly, policy is at very expansionary levels and the Fed needs to start normalizing short-term rates in our view. After the sharp sell-off in April and May, the pressing question for the U.S. bond market is how much of the impending tightening cycle is now discounted in longer-term bond yields. In our view, fair value for 10-year U.S. Treasuries lies closer to 5.5%, meaning that part of the adjustment has taken place but part is yet to come. With this in mind, we will continue to run the portfolio short duration relative to its benchmark until we see these higher yields. -------------------------------------------------------------------------------- 7 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Questions & Answers For other parts of the world, Europe is also starting to look better economically and we do not expect the European Central Bank will ease policy again. That said, Europe continues to lag the U.S. business cycle, and we expect the ECB to stay on hold through the balance of the year before starting a modest tightening cycle in early 2005. So that probably means for the short-run European bonds have the potential to outperform U.S. Treasuries. Japan in our view continues to look unattractive, in part because the recovery is doing better and in part because yields remain at such low levels. In terms of currency markets, the key structural negatives in place for the U.S. dollar, such as our large trade and current account imbalances, have not gone away. In our view, these negatives will start to exert more influence again in the months ahead now that global investors have started adjusting to the prospect of a Fed tightening cycle beginning in the next few months. We expect the dollar to decline over the balance of 2004, although charting the exact course of that decline remains tricky. Overall, we believe the economic outlook argues for being defensive on interest rate risk and fairly cautious on sector exposures. -------------------------------------------------------------------------------- 8 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Investments in Securities World Income Portfolio April 30, 2004 (Unaudited) (Percentages represent value of investments compared to net assets) Bonds (95.6%)(c) Issuer Coupon Principal Value(a) rate amount Australia (1.7%) Burns Philp Capital Property (U.S. Dollar) Sr Sub Nts 02-15-11 10.75% $200,000 $217,000 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 8,000,000 6,196,475 Queensland Treasury (Australian Dollar) 06-14-05 6.50 3,000,000 2,187,033 Telstra (U.S. Dollar) 04-01-12 6.38 500,000 546,085 Total 9,146,593 Austria (2.0%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 8,500,000 11,154,910 Brazil (0.4%) Federal Republic of Brazil (U.S. Dollar) 04-15-14 8.00 1,254,865 1,145,943 01-20-34 8.25 1,200,000 883,200 Total 2,029,143 Canada (2.4%) Ainsworth Lumber (U.S. Dollar) Sr Nts 03-15-14 6.75 40,000(d) 39,600 Canada Housing Trust (Canadian Dollar) 06-15-06 5.53 3,220,000 2,478,456 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 380,000(d) 280,307 CanWest Media (U.S. Dollar) Series B 04-15-13 7.63 250,000 266,250 Cascades (U.S. Dollar) Sr Nts 02-15-13 7.25 200,000 208,500 Corus Entertainment (U.S. Dollar) Sr Sub Nts 03-01-12 8.75 200,000 220,500 Norampac (U.S. Dollar) Sr Nts 06-01-13 6.75 260,000 270,400 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,400,000 5,169,834 Province of Ontario (Canadian Dollar) 03-08-06 5.90 3,300,000 2,543,209 Province of Quebec (Japanese Yen) (MBIA Insured) 05-09-13 1.60 150,000,000(j) 1,378,268 Sun Media (U.S. Dollar) 02-15-13 7.63 200,000 213,000 Videotron Ltee (U.S. Dollar) 01-15-14 6.88 125,000 126,250 Total 13,194,574 Colombia (0.1%) Republic of Colombia (U.S. Dollar) 01-23-12 10.00 490,000 521,850 Croatia (0.2%) Croatia (European Monetary Unit) 03-14-11 6.75 660,000 879,236 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Denmark (1.1%) Kingdom of Denmark (Danish Krone) 03-15-06 8.00% 16,000,000 $2,824,071 Realkredit Danmark (Danish Krone) 01-01-06 4.00 17,800,000 2,929,167 Total 5,753,238 Finland (2.2%) Republic of Finland (European Monetary Unit) 07-04-07 5.00 9,400,000 11,952,586 France (4.8%) Cie Financement Foncier (European Monetary Unit) 06-24-05 5.00 1,900,000 2,344,783 Dexia Municipal Agency (European Monetary Unit) 04-26-07 5.38 4,700,000 6,013,185 France Telecom (U.S. Dollar) 03-01-06 8.20 700,000(e) 761,352 Govt of France (European Monetary Unit) 04-25-12 5.00 4,400,000 5,636,749 04-25-13 4.00 9,400,000 11,162,704 Vivendi Universal (U.S. Dollar) Sr Nts 07-15-08 6.25 375,000 393,750 Total 26,312,523 Germany (8.4%) Allgemeine Hypo Bank (European Monetary Unit) 09-02-09 5.00 1,860,000(d) 2,370,189 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 150,000,000 1,349,065 Bundesrepublik Deutschland (European Monetary Unit) 07-04-13 3.75 9,600,000 11,179,105 07-04-27 6.50 7,470,000 10,986,997 Bundesschatzanweisungen (European Monetary Unit) 12-16-05 2.75 6,300,000 7,589,880 Depfa Pfandbriefbank (European Monetary Unit) 01-15-10 5.50 2,200,000 2,875,665 Deutsche Bank (European Monetary Unit) 07-28-09 4.25 500,000 614,728 Eurohypo (European Monetary Unit) 07-05-10 5.75 2,200,000 2,912,466 Hypothekenbk In Essen (European Monetary Unit) 07-06-09 4.25 2,400,000 2,961,356 Westfaelische Hypobank (European Monetary Unit) 04-24-06 4.75 2,300,000 2,865,890 Total 45,705,341 Greece (4.2%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75 7,600,000 9,118,671 05-18-11 5.35 6,300,000 8,191,045 10-22-22 5.90 4,200,000 5,623,132 Total 22,932,848 Hungary (0.5%) Govt of Hungary (Hungarian Forint) 04-12-05 7.75 565,000,000 2,624,241 Ireland (--%) JSG Funding (U.S. Dollar) Sr Nts 10-01-12 9.63 125,000 140,625 Italy (6.1%) Buoni Poliennali Del Tes (European Monetary Unit) 03-01-07 4.50 8,800,000 11,018,931 10-15-07 5.00 8,700,000 11,073,026 11-01-26 7.25 3,486,283 5,498,280 Republic of Italy (Japanese Yen) 03-27-08 3.80 500,000,000 5,078,643 Telecom Italia (European Monetary Unit) 02-01-07 5.63 500,000 633,488 Total 33,302,368 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Japan (5.1%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40% 650,000,000 $5,907,002 Govt of Japan (Japanese Yen) 03-20-09 0.70 390,000,000 3,533,541 12-21-09 1.70 970,000,000 9,211,094 03-22-10 1.70 320,000,000 3,036,296 06-20-12 1.40 700,000,000 6,377,386 Total 28,065,319 Luxembourg (0.2%) Michelin Finance Luxembourg (European Monetary Unit) 04-16-09 6.13 500,000 655,155 Telecom Italia Capital (U.S. Dollar) 11-15-13 5.25 530,000(d) 522,541 Total 1,177,696 Malaysia (0.3%) Petronas Capital (U.S. Dollar) 05-22-12 7.00 1,500,000(d) 1,652,862 Mexico (0.7%) United Mexican States (Japanese Yen) 06-06-06 6.75 62,000,000 630,453 (U.S. Dollar) 03-03-15 6.63 3,150,000 3,173,625 Total 3,804,078 Netherlands (3.2%) Bank of Nederlandse Gemeenten (British Pound) 08-06-07 7.38 1,100,000 2,075,496 Deutsche Telekom Intl Finance (European Monetary Unit) 05-29-07 7.50 500,000 668,905 (U.S. Dollar) 07-22-13 5.25 1,200,000 1,191,323 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 8,700,000 11,103,627 Intl Nederland Bank (European Monetary Unit) Sr Nts 01-29-09 4.25 600,000 737,296 RWE Finance (European Monetary Unit) 10-26-07 5.50 500,000 642,268 Vodafone Finance (European Monetary Unit) 05-27-09 4.75 740,000 918,853 Total 17,337,768 New Zealand (1.5%) Govt of New Zealand (New Zealand Dollar) 02-15-05 6.50 3,400,000 2,141,004 11-15-06 8.00 8,800,000 5,791,535 Total 7,932,539 Norway (1.6%) A/S Eksportfinans (Japanese Yen) 06-21-10 1.80 340,000,000 3,218,806 Govt of Norway (Norwegian Krone) 05-16-11 6.00 36,800,000 5,799,069 Total 9,017,875 Poland (0.9%) Republic of Poland (Polish Zloty) 02-12-06 8.50 11,600,000 2,963,592 11-24-09 6.00 9,000,000 2,106,664 Total 5,070,256 Romania (0.1%) Govt of Romania (European Monetary Unit) 05-08-12 8.50 430,000 601,683 South Korea (0.1%) Korea Development Bank (Japanese Yen) 06-25-08 0.98 70,000,000 627,961 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Spain (6.9%) Govt of Spain (European Monetary Unit) 10-31-07 4.25% 8,950,000 $11,156,210 07-30-09 5.15 9,500,000 12,291,780 01-31-10 4.00 9,400,000 11,477,240 La Caixa De Barcelona (European Monetary Unit) 03-04-10 3.50 2,500,000 2,950,518 Total 37,875,748 Supra-National (2.8%) European Investment Bank (British Pound) 12-07-11 5.50 3,000,000 5,410,048 Inter-American Development Bank (Japanese Yen) 07-08-09 1.90 1,035,000,000 9,934,350 Total 15,344,398 Sweden (0.5%) Govt of Sweden (Swedish Krona) 04-20-06 3.50 19,000,000 2,515,357 United Kingdom (3.5%) British Telecom (U.S. Dollar) 12-15-10 8.38 700,000 833,201 Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-04 9.25 3,500,000(b,k) 70,000 06-15-07 9.50 8,750,000(b,k) 175,000 HSBC Holdings (U.S. Dollar) Sub Nts 12-12-12 5.25 2,430,000 2,451,554 United Kingdom Treasury (British Pound) 12-07-07 7.25 3,900,000 7,486,561 11-25-10 6.25 2,900,000 5,537,449 03-07-12 5.00 1,600,000 2,850,134 Total 19,403,899 United States (34.1%) Aesop Funding II LLC (U.S. Dollar) Series 2002-1A Cl A1 10-20-06 3.85 500,000(f) 510,564 Airgas (U.S. Dollar) 10-01-11 9.13 195,000 220,350 Allied Waste North America (U.S. Dollar) Series B 04-01-08 8.88 200,000 222,000 Apogent Technologies (U.S. Dollar) Sr Sub Nts 05-15-13 6.50 175,000 181,563 Arvinmeritor (U.S. Dollar) 02-15-09 6.80 75,000 76,500 ASIF Global Financing (U.S. Dollar) 01-17-13 4.90 3,800,000(d) 3,744,444 AT&T (U.S. Dollar) 03-15-09 6.00 10,000 10,014 (U.S. Dollar) Sr Nts 11-15-11 8.05 230,000 252,370 AT&T Wireless Services (U.S. Dollar) Sr Nts 03-01-11 7.88 500,000 575,909 Ball (U.S. Dollar) 12-15-12 6.88 335,000 355,100 Bank of America (U.S. Dollar) Sr Nts 02-01-07 5.25 1,000,000 1,054,022 09-15-12 4.88 1,100,000 1,088,116 (U.S. Dollar) Sub Nts 08-15-13 4.75 800,000 772,987 Bear Stearns Commercial Mtge Securities (U.S. Dollar) Series 2003-T10 Cl A1 03-13-40 4.00 664,690(f) 654,553 Boise Cascade (U.S. Dollar) Sr Nts 11-01-10 6.50 90,000 94,050 Boyd Gaming (U.S. Dollar) Sr Sub Nts 04-15-14 6.75 75,000(d) 73,875 Caesars Entertainment (U.S. Dollar) Sr Sub Nts 05-15-11 8.13 85,000 93,925 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 12 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) CBD Media/Finance (U.S. Dollar) 06-01-11 8.63% $60,000 $64,050 Centerpoint Energy (U.S. Dollar) 02-15-11 7.75 130,000 145,560 Charter Communication Holdings LLC/Capital (U.S. Dollar) Sr Nts 04-30-12 8.00 45,000(d) 44,325 04-30-14 8.38 15,000(d) 14,775 Chesapeake Energy (U.S. Dollar) Sr Nts 01-15-16 6.88 80,000(d) 82,300 Chiquita Brands Intl (U.S. Dollar) Sr Nts 03-15-09 10.56 225,000 246,094 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 7.25 125,000 121,250 Citigroup (European Monetary Unit) Sr Nts 05-21-10 3.88 5,900,000 7,024,409 Comcast (U.S. Dollar) 03-15-11 5.50 2,150,000 2,204,222 Comcast Cable Communication Holdings (U.S. Dollar) 03-15-13 8.38 106,000 126,472 Compass Minerals Group (U.S. Dollar) 08-15-11 10.00 200,000 228,000 Consumers Energy (U.S. Dollar) 1st Mtge Series C 04-15-08 4.25 550,000 549,712 Cott Beverages (U.S. Dollar) 12-15-11 8.00 500,000 545,000 CS First Boston Mtge Securities (U.S. Dollar) Series 2004-C1 Cl A2 01-15-37 3.52 500,000(f) 489,464 CSC Holdings (U.S. Dollar) Sr Nts 12-15-07 7.88 150,000 159,750 04-15-12 6.75 40,000(d) 39,600 CSK Auto (U.S. Dollar) 01-15-14 7.00 60,000(d) 59,250 D.R. Horton (U.S. Dollar) Sr Nts 05-01-13 6.88 150,000 156,750 DaimlerChrysler NA Holding (European Monetary Unit) 01-16-07 5.63 670,000 846,421 (U.S. Dollar) 06-04-08 4.05 800,000 784,800 Del Monte (U.S. Dollar) Series B 05-15-11 9.25 200,000 220,500 Dex Media West/Finance (U.S. Dollar) Sr Nts 08-15-10 8.50 55,000(d) 59,400 DirecTV Holdings/Finance (U.S. Dollar) Sr Nts 03-15-13 8.38 150,000 169,500 Dominos (U.S. Dollar) Sr Sub Nts 07-01-11 8.25 125,000 135,000 DRS Technologies (U.S. Dollar) Sr Sub Nts 11-01-13 6.88 80,000 80,400 EchoStar DBS (U.S. Dollar) Sr Nts 10-01-08 5.75 125,000(d) 125,313 El Paso Natl Gas (U.S. Dollar) Sr Nts Series A 08-01-10 7.63 160,000 164,800 Emmis Operating (U.S. Dollar) 05-15-12 6.88 70,000(d,h) 69,650 Federal Home Loan Mtge Corp (European Monetary Unit) 01-15-06 5.25 1,800,000 2,252,009 (U.S. Dollar) 07-01-17 6.00 739,829 772,869 09-01-17 6.50 695,001 735,706 05-01-18 5.50 1,314,560 1,349,989 10-01-18 5.00 1,041,646 1,052,803 04-01-33 6.00 2,643,113 2,720,086 08-01-33 6.50 549,025 571,806 11-01-33 5.00 1,542,537 1,498,550 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Federal Home Loan Mtge Corp (cont.) Collateralized Mtge Obligation (U.S. Dollar) 11-15-18 5.00% $2,500,000(f) $2,541,890 11-15-28 4.50 1,082,592(f) 1,086,529 Federal Natl Mtge Assn (U.S. Dollar) 01-01-09 5.74 1,210,337 1,289,334 01-01-13 4.92 521,577 527,652 02-01-13 4.87 1,355,531 1,357,830 12-01-13 4.98 4,980,121 4,982,771 03-01-17 5.50 1,419,006 1,464,557 03-01-17 6.00 434,716 453,649 04-01-17 6.50 1,332,554 1,421,794 06-01-17 6.00 1,113,754 1,162,259 08-01-18 4.50 2,359,775 2,325,577 11-01-18 5.50 2,408,740 2,481,040 12-01-18 5.00 4,724,687 4,770,944 07-01-23 5.00 1,370,574 1,353,160 12-01-31 6.50 562,819 588,250 05-01-32 7.00 1,675,710 1,771,495 05-01-32 7.50 1,039,214 1,111,649 06-01-32 7.00 887,415 945,810 07-01-32 6.50 785,369 817,597 08-01-32 6.50 2,925,115 3,048,470 09-01-32 6.50 619,629 648,924 11-01-32 7.50 1,489,872 1,593,720 03-01-33 5.50 2,749,069 2,747,348 03-01-33 6.00 3,476,123 3,557,725 04-01-33 6.00 3,582,973 3,676,015 05-01-33 6.00 913,490 937,215 06-01-33 5.50 4,709,237 4,713,426 07-01-33 5.50 815,757 815,505 07-01-33 7.00 1,499,317 1,585,054 09-01-33 5.50 2,110,164 2,106,888 11-01-33 6.50 3,781,808 3,943,369 FirstEnergy (U.S. Dollar) Series B 11-15-11 6.45 78,000 82,029 Fisher Scientific Intl (U.S. Dollar) Sr Sub Nts 09-01-13 8.00 75,000 82,125 Ford Motor (U.S. Dollar) 10-01-28 6.63 650,000 583,353 GE Financial Assurance Holdings (Japanese Yen) 06-20-11 1.60 130,000,000 1,146,042 General Electric (U.S. Dollar) 02-01-13 5.00 1,000,000 995,779 General Electric Capital (European Monetary Unit) 06-20-07 5.13 500,000 634,253 Georgia Gulf (U.S. Dollar) Sr Nts 12-15-13 7.13 55,000(d) 57,888 Georgia-Pacific (U.S. Dollar) 02-01-10 8.88 185,000 213,675 GMAC (U.S. Dollar) 03-02-11 7.25 3,700,000 3,949,269 Goldman Sachs Group (U.S. Dollar) 05-15-09 6.65 500,000 553,209 07-15-13 4.75 600,000 571,596 Govt Natl Mtge Assn (U.S. Dollar) 10-15-33 5.50 1,925,427 1,927,915 Collateralized Mtge Obligation Interest Only (U.S. Dollar) 01-20-32 2.83 3,820,082(f,g) 549,991 Grant Prideco Escrow (U.S. Dollar) 12-15-09 9.00 250,000 278,125 Graphic Packaging Intl (U.S. Dollar) Sr Nts 08-15-11 8.50 35,000 38,675 Gulfterra Energy Partner (U.S. Dollar) Sr Nts 06-01-10 6.25 280,000 289,800 Hilton Hotels (U.S. Dollar) 12-01-12 7.63 200,000 224,999 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Host Marriott LP (U.S. Dollar) Sr Nts 11-01-13 7.13% $75,000 $76,125 Intl Paper (European Monetary Unit) 08-11-06 5.38 700,000 877,299 IPALCO Enterprises (U.S. Dollar) 11-14-08 8.38 250,000 277,500 J.P. Morgan Chase (U.S. Dollar) Sub Nts 02-01-11 6.75 500,000 558,557 03-15-14 4.88 410,000 392,094 Jorgensen Earle M. (U.S. Dollar) 06-01-12 9.75 50,000 56,000 Joy Global (U.S. Dollar) Series B 03-15-12 8.75 60,000 67,200 Key Energy Services (U.S. Dollar) Series C 03-01-08 8.38 130,000 138,450 (U.S. Dollar) Sr Nts 05-01-13 6.38 70,000 68,950 Kraft Foods (U.S. Dollar) 10-01-08 4.00 1,100,000 1,095,369 L-3 Communications (U.S. Dollar) 06-15-12 7.63 250,000 267,500 Lamar Media (U.S. Dollar) 01-01-13 7.25 75,000 80,625 Lehman Brothers Holdings (U.S. Dollar) 08-07-08 3.50 500,000 490,575 MacDermid (U.S. Dollar) 07-15-11 9.13 35,000 39,375 Manitowoc (U.S. Dollar) 11-01-13 7.13 200,000 209,000 Meritage (U.S. Dollar) 06-01-11 9.75 145,000 161,494 Metris Master Trust (U.S. Dollar) Series 2001-3 Cl C 07-21-08 2.80 400,000(d,f) 394,832 MGM Mirage (U.S. Dollar) 10-01-09 6.00 125,000 127,188 (U.S. Dollar) Sr Nts 02-27-14 5.88 65,000 62,563 Mohegan Tribal Gaming (U.S. Dollar) Sr Sub Nts 04-01-12 8.00 150,000 162,750 Morgan Stanley, Dean Witter (European Monetary Unit) 03-16-06 5.25 2,400,000 3,003,769 Morris Publishing (U.S. Dollar) Sr Sub Nts 08-01-13 7.00 65,000(d) 65,325 NeighborCare (U.S. Dollar) Sr Sub Nts 11-15-13 6.88 25,000(d) 25,500 Newfield Exploration (U.S. Dollar) Sr Sub Nts 08-15-12 8.38 340,000 377,400 Nextel Communications (U.S. Dollar) Sr Nts 10-31-13 6.88 300,000 305,250 Nissan Auto Receivables Owner Trust (U.S. Dollar) Series 2003-A Cl A4 07-15-08 2.61 500,000(f) 498,295 Norcraft Companies LP/Finance (U.S. Dollar) Sr Sub Nts 11-01-11 9.00 90,000(d) 95,175 Nortek Holdings (U.S. Dollar) Sr Sub Nts Series B 06-15-11 9.88 75,000 84,188 Northwest Pipeline (U.S. Dollar) 03-01-10 8.13 10,000 10,850 Offshore Logistics (U.S. Dollar) 06-15-13 6.13 155,000 147,250 Omnicare (U.S. Dollar) Sr Sub Nts 06-01-13 6.13 140,000 141,400 Overseas Private Investment (U.S. Dollar) U.S. Govt Guaranty Series 1996A 09-15-08 6.99 3,750,000 4,086,150 Owens-Brockway Glass (U.S. Dollar) 05-15-11 7.75 115,000 120,463 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Peabody Energy (U.S. Dollar) Series B 03-15-13 6.88% $395,000 $410,800 Pemex Project Funding Master Trust (U.S. Dollar) 12-15-14 7.38 450,000 469,314 Qwest (U.S. Dollar) 11-01-04 7.20 150,000 151,875 03-15-12 9.13 175,000(d) 189,000 Raytheon (U.S. Dollar) 04-01-13 5.38 550,000 551,397 Ryland Group (U.S. Dollar) Sr Nts 06-01-08 5.38 310,000 316,200 SBC Communications (U.S. Dollar) 08-15-12 5.88 300,000 312,447 Schuler Homes (U.S. Dollar) 07-15-09 9.38 85,000 93,925 Scotts (U.S. Dollar) Sr Sub Nts 11-15-13 6.63 15,000(d) 15,638 Seneca Gaming (U.S. Dollar) Sr Nts 05-01-12 7.25 10,000(d,h) 10,163 Service Corp Intl (U.S. Dollar) 04-15-09 7.70 30,000 32,025 Silgan Holdings (U.S. Dollar) Sr Sub Nts 11-15-13 6.75 125,000 125,625 Smurfit-Stone Container (U.S. Dollar) 10-01-12 8.25 85,000 90,950 Southern Natural Gas (U.S. Dollar) 03-15-10 8.88 175,000 193,375 Sprint Capital (U.S. Dollar) 03-15-12 8.38 860,000 1,009,336 SPX (U.S. Dollar) Sr Nts 06-15-11 6.25 275,000 274,313 Station Casinos (U.S. Dollar) Sr Nts 04-01-12 6.00 140,000(d) 140,875 Stone Container (U.S. Dollar) Sr Nts 07-01-12 8.38 210,000 224,700 Susquehanna Media (U.S. Dollar) Sr Sub Nts 04-15-13 7.38 140,000 147,875 TD Funding (U.S. Dollar) 07-15-11 8.38 135,000 142,763 Time Warner (U.S. Dollar) 05-01-12 6.88 1,950,000 2,131,857 Toyota Motor Credit (Japanese Yen) 06-09-08 0.75 297,000,000 2,692,590 Transcontinental Gas Pipeline (U.S. Dollar) Series B 08-15-11 7.00 175,000 186,375 Triad Hospitals (U.S. Dollar) Sr Nts 05-15-12 7.00 140,000(h) 136,556 TRW Automotive (U.S. Dollar) Sr Nts 02-15-13 9.38 70,000 80,150 U.S. Treasury (U.S. Dollar) 02-15-07 2.25 992,000(l) 978,592 02-15-14 4.00 26,840,000 25,783,175 08-15-23 6.25 7,585,000(l) 8,428,240 02-15-26 6.00 5,390,000(l) 5,828,778 United Auto Group (U.S. Dollar) 03-15-12 9.63 75,000 83,813 United States Steel (U.S. Dollar) Sr Nts 05-15-10 9.75 50,000 57,500 Vail Resorts (U.S. Dollar) Sr Sub Nts 02-15-14 6.75 60,000(d) 58,800 Valmont Inds (U.S. Dollar) 05-01-14 6.88 140,000(d,h) 139,995 Verizon Pennsylvania (U.S. Dollar) Series A 11-15-11 5.65 3,660,000(l) 3,789,271 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 16 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Wachovia (U.S. Dollar) 08-15-08 3.50% $400,000 $395,212 Wachovia Bank Commercial Mtge Trust (U.S. Dollar) Series 2003-C8 Cl A2 11-15-35 3.89 1,250,000 1,238,637 Washington Mutual Bank FA (U.S. Dollar) Sub Nts 06-15-11 6.88 2,000,000(f) 2,236,761 Wells Fargo (U.S. Dollar) Sr Nts 02-15-07 5.13 1,000,000 1,052,635 Weyerhaeuser (U.S. Dollar) 03-15-12 6.75 1,100,000 1,205,881 William Carter (U.S. Dollar) Series B 08-15-11 10.88 150,000 172,500 Williams Companies (U.S. Dollar) 03-15-12 8.13 170,000 184,875 Total 186,388,346 Total bonds (Cost: $505,193,611) $522,465,861 Short-term securities (7.3%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agency (5.1%) Federal Natl Mtge Assn Disc Nts 05-05-04 1.02% $7,000,000 $6,999,094 05-19-04 1.00 5,700,000 5,697,197 06-02-04 1.00 10,000,000 9,991,285 06-09-04 1.00 5,000,000 4,994,718 Total 27,682,294 Commercial paper (2.2%) Household Finance 05-03-04 1.03 4,400,000 4,399,622 ING (US) Funding LLC 07-16-04 1.07 3,300,000 3,292,755 Receivables Capital 05-13-04 1.05 4,500,000(i) 4,498,342 Total 12,190,719 Total short-term securities (Cost: $39,872,842) $39,873,013 Total investments in securities (Cost: $545,066,453)(m) $562,338,874 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. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of April 30, 2004, the value of these securities amounted to $10,371,622 or 1.9% of net assets. (e) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on April 30, 2004. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Notes to investments in securities (continued) (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. (g) 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 and amount of future cash flows as of April 30, 2004. (h) At April 30, 2004, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $360,000. (i) 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. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of April 30, 2004, the value of these securities amounted to $4,498,342 or 0.8% of net assets. (j) The following abbreviation is used in the portfolio security description to identify the insurer of the issue: MBIA -- MBIA Insurance Corporation (k) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at April 30, 2004, is as follows: Security Acquisition Cost dates Greater Beijing First Expressways (U.S. Dollar) 9.25% Sr Nts 2004 6-12-97 $ 410,923 (U.S. Dollar) 9.50% Sr Nts 2007 6-12-97 1,192,681 (l) 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 Sale contracts U.S. Treasury Notes, June 2004, 10-year $24,500,000 (m) At April 30, 2004, the cost of securities for federal income tax purposes was approximately $545,066,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $22,563,000 Unrealized depreciation (5,290,000) ---------- Net unrealized appreciation $17,273,000 ----------- -------------------------------------------------------------------------------- 18 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities World Income Portfolio April 30, 2004 (Unaudited) Assets Investments in securities, at value (Note 1)* (identified cost $545,066,453) $562,338,874 Foreign currency holdings (identified cost $30) (Note 1) 29 Dividends and accrued interest receivable 8,521,346 Receivable for investment securities sold 5,795,561 --------- Total assets 576,655,810 ----------- Liabilities Disbursements in excess of cash on demand deposit 108,672 Payable for investment securities purchased 5,852,049 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 82,041 Payable upon return of securities loaned (Note 4) 23,950,000 Accrued investment management services fee 11,278 Other accrued expenses 51,089 ------ Total liabilities 30,055,129 ---------- Net assets $546,600,681 ============ * Including securities on loan, at value (Note 4) $ 23,054,880 ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 19 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Statement of operations World Income Portfolio Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 721 Interest 11,270,182 Fee income from securities lending (Note 4) 33,397 ------ Total income 11,304,300 ---------- Expenses (Note 2): Investment management services fee 2,105,193 Compensation of board members 6,058 Custodian fees 95,650 Audit fees 12,750 Other 8,015 ----- Total expenses 2,227,666 Earnings credits on cash balances (Note 2) (403) ---- Total net expenses 2,227,263 --------- Investment income (loss) -- net 9,077,037 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 13,339,307 Foreign currency transactions (1,012,263) Futures contracts (598,836) Options contracts written (Note 7) 167,310 ------- Net realized gain (loss) on investments 11,895,518 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,121,373) ---------- Net gain (loss) on investments and foreign currencies 8,774,145 --------- Net increase (decrease) in net assets resulting from operations $17,851,182 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets World Income Portfolio April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 9,077,037 $ 17,801,878 Net realized gain (loss) on investments 11,895,518 18,001,647 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,121,373) 33,085,822 ---------- ---------- Net increase (decrease) in net assets resulting from operations 17,851,182 68,889,347 ---------- ---------- Proceeds from contributions 18,244,464 39,684,999 Fair value of withdrawals (32,535,111) (68,855,691) ----------- ----------- Net contributions (withdrawals) from partners (14,290,647) (29,170,692) ----------- ----------- Total increase (decrease) in net assets 3,560,535 39,718,655 Net assets at beginning of period 543,040,146 503,321,491 ----------- ----------- Net assets at end of period $546,600,681 $543,040,146 ============ ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements World Income Portfolio (Unaudited as to April 30, 2004) 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. Pursuant to procedures adopted by the Board of Trustees of the portfolios, American Express Financial Corporations (AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with the procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair NAV. 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. -------------------------------------------------------------------------------- 22 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL 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 April 30, 2004, foreign currency holdings were comprised of Australian dollars. -------------------------------------------------------------------------------- 23 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL 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. Illiquid securities As of April 30, 2004, 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 April 30, 2004 was $245,000 representing 0.04% 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. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Portfolio. 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 April 30, 2004, the Portfolio has entered into outstanding when-issued securities of $360,000. The Portfolio 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 Portfolio to "roll over" its purchase commitments, the Portfolio 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. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL 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 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. During the six months ended April 30, 2004, the Portfolio's custodian fees were reduced by $403 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 $312,865,844 and $309,350,398, respectively, for the six months ended April 30, 2004. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES As of April 30, 2004, securities valued at $23,054,880 were on loan to brokers. For collateral, the Portfolio received $23,950,000 in cash. Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending amounted to $33,397 for the six months ended April 30, 2004. 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. FORWARD FOREIGN CURRENCY CONTRACTS As of April 30, 2004, the Portfolio has a forward foreign currency exchange contract that obligates it to deliver currency at a specified future date. The unrealized appreciation and/or depreciation on this contract is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contract are as follows:
Currency to Currency to Unrealized Unrealized Exchange date be delivered be received appreciation depreciation June 6, 2004 12,853,236 1,410,000,000 $-- $82,041 U.S. Dollar Japanese Yen
-------------------------------------------------------------------------------- 25 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT 6. INTEREST RATE FUTURES CONTRACTS As of April 30, 2004, investments in securities included securities valued at $648,220 that were pledged as collateral to cover initial margin deposits on 245 open sale contracts. The notional market value of the open sale contracts as of April 30, 2004 was $27,072,500 with a net unrealized gain of $1,129,942. See "Summary of significant accounting policies" and "Notes to investments in securities." 7. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows:
Six months ended April 30, 2004 Puts Calls Contracts Premiums Contracts Premiums Balance Oct. 31, 2003 59 $ 54,155 59 $ 113,155 Exercised -- -- (59) (113,155) Expired (59) (54,155) -- -- Balance April 30, 2004 -- $ -- -- $ -- ---- -------- ---- ---------
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, 2004(e) 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) .80%(c) .80% .79% .78% .78% Ratio of net investment income (loss) to average daily net assets 3.24%(c) 3.29% 3.66% 5.27% 5.98% Portfolio turnover rate (excluding short-term securities) 58% 117% 51% 24% 48% Total return(b) 3.20%(d) 13.99% 6.89% 11.29% (4.29%)
(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. (c) Adjusted to an annual basis. (d) Not annualized. (e) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 26 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP Global Bond Fund April 30, 2004 (Unaudited) Assets Investment in Portfolio (Note 1) $546,464,373 Capital shares receivable 241,990 ------- Total assets 546,706,363 ----------- Liabilities Capital shares payable 249,746 Accrued distribution fee 7,133 Accrued transfer agency fee 3,061 Accrued administrative services fee 849 Other accrued expenses 69,130 ------ Total liabilities 329,919 ------- Net assets applicable to outstanding capital stock $546,376,444 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 826,738 Additional paid-in capital 529,650,729 Undistributed net investment income 88,993 Accumulated net realized gain (loss) (Note 5) (2,477,623) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 18,287,607 ---------- Total -- representing net assets applicable to outstanding capital stock $546,376,444 ============ Net assets applicable to outstanding shares: Class A $374,838,999 Class B $161,928,491 Class C $ 5,237,060 Class I $ 4,298,940 Class Y $ 72,954 Net asset value per share of outstanding capital stock: Class A shares 56,713,413 $ 6.61 Class B shares 24,504,889 $ 6.61 Class C shares 795,525 $ 6.58 Class I shares 648,951 $ 6.62 Class Y shares 11,012 $ 6.62 ------ ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 27 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Statement of operations AXP Global Bond Fund Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 721 Interest 11,268,200 Fee income from securities lending 33,389 ------ Total income 11,302,310 ---------- Expenses (Note 2): Expenses allocated from Portfolio 2,226,716 Distribution fee Class A 485,829 Class B 820,481 Class C 25,932 Transfer agency fee 461,495 Incremental transfer agency fee Class A 34,374 Class B 22,555 Class C 333 Service fee -- Class Y 38 Administrative services fees and expenses 158,879 Compensation of board members 5,542 Printing and postage 59,500 Registration fees 35,800 Audit fees 4,250 Other 10,926 ------ Total expenses 4,352,650 Earnings credits on cash balances (Note 2) (2,419) ------ Total net expenses 4,350,231 --------- Investment income (loss) -- net 6,952,079 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 13,338,550 Foreign currency transactions (1,014,208) Futures contracts (598,836) Options contracts written 167,310 ------- Net realized gain (loss) on investments 11,892,816 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,120,720) ---------- Net gain (loss) on investments and foreign currencies 8,772,096 --------- Net increase (decrease) in net assets resulting from operations $15,724,175 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 28 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets AXP Global Bond Fund April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 6,952,079 $ 13,500,260 Net realized gain (loss) on investments 11,892,816 17,996,432 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,120,720) 33,079,008 ---------- ---------- Net increase (decrease) in net assets resulting from operations 15,724,175 64,575,700 ---------- ---------- Distributions to shareholders from: Net investment income Class A (9,297,975) (12,438,109) Class B (3,287,569) (3,958,002) Class C (104,663) (103,214) Class I (6,977) -- Class Y (1,952) (1,009) ------ ------ Total distributions (12,699,136) (16,500,334) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 47,598,982 118,383,281 Class B shares 24,159,495 50,004,285 Class C shares 1,210,585 3,603,615 Class I shares 4,392,529 -- Class Y shares 13,381 41,942 Reinvestment of distributions at net asset value Class A shares 8,593,979 11,408,319 Class B shares 3,059,909 3,683,453 Class C shares 91,695 93,681 Class I shares 6,904 -- Class Y shares 1,952 985 Payments for redemptions Class A shares (64,049,300) (130,390,225) Class B shares (Note 2) (23,799,855) (63,154,212) Class C shares (Note 2) (979,926) (1,678,853) Class I shares (21,727) -- Class Y shares (7,940) (55,411) ------ ------- Increase (decrease) in net assets from capital share transactions 270,663 (8,059,140) ------- ---------- Total increase (decrease) in net assets 3,295,702 40,016,226 Net assets at beginning of period 543,080,742 503,064,516 ----------- ----------- Net assets at end of period $546,376,444 $ 543,080,742 ============ ============= Undistributed net investment income $ 88,993 $ 5,836,050 ------------ -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 29 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements AXP Global Bond Fund (Unaudited as to April 30, 2004) 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. Effective March 4, 2004, the Fund offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares have no sales charges and are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. As of April 30, 2004, American Express Financial Corporation (AEFC) and the AXP Portfolio Builder Funds owned 100% of Class I shares. 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 April 30, 2004 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). -------------------------------------------------------------------------------- 30 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. 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. 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. 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. -------------------------------------------------------------------------------- 31 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL 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 $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. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. In addition, AECSC is entitled to charge 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 currently not effective. 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 $521,767 for Class A, $54,164 for Class B and $1,185 for Class C for the six months ended April 30, 2004. During the six months ended April 30, 2004, the Fund's transfer agency fees were reduced by $2,419 as a result of earnings credits from overnight cash balances. -------------------------------------------------------------------------------- 32 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2004 Class A Class B Class C Class I* Class Y Sold 7,023,881 3,565,252 179,492 651,094 2,007 Issued for reinvested distributions 1,273,699 453,211 13,641 1,005 289 Redeemed (9,445,754) (3,516,497) (145,435) (3,148) (1,156) ---------- ---------- -------- ------ ------ Net increase (decrease) (1,148,174) 501,966 47,698 648,951 1,140 ---------- ------- ------ ------- ----- * Inception date was March 4, 2004. Year ended Oct. 31, 2003 Class A Class B Class C Class I Class Y Sold 18,346,322 7,797,131 562,338 N/A 6,300 Issued for reinvested distributions 1,795,377 578,536 14,712 N/A 154 Redeemed (20,340,957) (9,764,130) (260,976) N/A (9,193) ----------- ---------- -------- ----- ------ Net increase (decrease) (199,258) (1,388,463) 316,074 N/A (2,739) -------- ---------- ------- ----- ------
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 six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 33 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL 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, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $6.57 $6.00 $5.81 $5.39 $5.87 Income from investment operations: Net investment income (loss) .09 .18 .19 .27 .34 Net gains (losses) (both realized and unrealized) .11 .60 .17 .30 (.63) Total from investment operations .20 .78 .36 .57 (.29) Less distributions: Dividends from net investment income (.16) (.21) (.17) (.15) (.19) Net asset value, end of period $6.61 $6.57 $6.00 $5.81 $5.39 Ratios/supplemental data Net assets, end of period (in millions) $375 $380 $348 $355 $389 Ratio of expenses to average daily net assets(b) 1.33%(c) 1.36% 1.34% 1.32% 1.30% Ratio of net investment income (loss) to average daily net assets 2.71%(c) 2.73% 3.12% 4.75% 5.49% Portfolio turnover rate (excluding short-term securities) 58% 117% 51% 24% 48% Total return(d) 3.04%(e) 13.25% 6.24% 10.83% (5.16%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 34 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $6.57 $5.99 $5.79 $5.38 $5.87 Income from investment operations: Net investment income (loss) .08 .12 .13 .21 .29 Net gains (losses) (both realized and unrealized) .10 .62 .19 .31 (.62) Total from investment operations .18 .74 .32 .52 (.33) Less distributions: Dividends from net investment income (.14) (.16) (.12) (.11) (.16) Net asset value, end of period $6.61 $6.57 $5.99 $5.79 $5.38 Ratios/supplemental data Net assets, end of period (in millions) $162 $158 $152 $145 $155 Ratio of expenses to average daily net assets(b) 2.08%(c) 2.12% 2.10% 2.09% 2.07% Ratio of net investment income (loss) to average daily net assets 1.96%(c) 1.97% 2.36% 3.99% 4.73% Portfolio turnover rate (excluding short-term securities) 58% 117% 51% 24% 48% Total return(d) 2.64%(e) 12.39% 5.59% 9.73% (5.77%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 35 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(g) 2003 2002 2001 2000(b) Net asset value, beginning of period $6.55 $5.98 $5.79 $5.38 $5.52 Income from investment operations: Net investment income (loss) .08 .13 .14 .21 .10 Net gains (losses) (both realized and unrealized) .09 .60 .18 .31 (.24) Total from investment operations .17 .73 .32 .52 (.14) Less distributions: Dividends from net investment income (.14) (.16) (.13) (.11) -- Net asset value, end of period $6.58 $6.55 $5.98 $5.79 $5.38 Ratios/supplemental data Net assets, end of period (in millions) $5 $5 $3 $1 $-- Ratio of expenses to average daily net assets(c) 2.07%(d) 2.14% 2.10% 2.09% 2.07%(d) Ratio of net investment income (loss) to average daily net assets 1.98%(d) 1.89% 2.29% 3.84% 4.80%(d) Portfolio turnover rate (excluding short-term securities) 58% 117% 51% 24% 48% Total return(e) 2.51%(f) 12.41% 5.51% 9.84% (2.49%)(f)
(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. (g) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 36 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Class I Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(b) Net asset value, beginning of period $6.77 Income from investment operations: Net investment income (loss) .05 Net gains (losses) (both realized and unrealized) (.15) Total from investment operations (.10) Less distributions: Dividends from net investment income (.05) Net asset value, end of period $6.62 Ratios/supplemental data Net assets, end of period (in millions) $4 Ratio of expenses to average daily net assets(c) .95%(d) Ratio of net investment income (loss) to average daily net assets 3.45%(d) Portfolio turnover rate (excluding short-term securities) 58% Total return(e) (1.50%)(f) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was March 4, 2004 (Unaudited). (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 -- 2004 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $6.59 $6.01 $5.80 $5.40 $5.87 Income from investment operations: Net investment income (loss) .09 .19 .20 .29 .35 Net gains (losses) (both realized and unrealized) .11 .61 .19 .27 (.62) Total from investment operations .20 .80 .39 .56 (.27) Less distributions: Dividends from net investment income (.17) (.22) (.18) (.16) (.20) Net asset value, end of period $6.62 $6.59 $6.01 $5.80 $5.40 Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(b) 1.16%(c) 1.18% 1.17% 1.16% 1.14% Ratio of net investment income (loss) to average daily net assets 2.90%(c) 2.69% 3.29% 4.90% 5.75% Portfolio turnover rate (excluding short-term securities) 58% 117% 51% 24% 48% Total return(d) 2.96%(e) 13.54% 6.72% 10.71% (4.88%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 38 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the Web site americanexpress.com/funds; or by searching the Web site of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, after Aug. 1, 2004, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available at http://www.sec.gov. -------------------------------------------------------------------------------- 39 -- AXP GLOBAL BOND FUND -- 2004 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Global Equity Fund Semiannual Report for the Period Ended April 30, 2004 AXP Global Equity Fund seeks to provide shareholders with long-term capital growth. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Questions & Answers with Portfolio Management 4 Investments in Securities 9 Financial Statements (Portfolio) 13 Notes to Financial Statements (Portfolio) 16 Financial Statements (Fund) 20 Notes to Financial Statements (Fund) 23 Proxy Voting 31 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- 2 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Fund Snapshot AS OF APRIL 30, 2004 PORTFOLIO MANAGERS Portfolio manager Since Years in industry Dominic Rossi* 10/03 17 Stephen Thornber* 10/03 16 * The Fund is managed by a team led by Dominic Rossi and Stephen Thornber. FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates A: 5/29/90 B: 3/20/95 C: 6/26/00 Y: 3/20/95 Ticker symbols A: IGLGX B: IDGBX C: -- Y: IDGYX Total net assets $490.0 million Number of holdings 99 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL COUNTRY COMPOSITION Percentage of portfolio assets (pie chart) United States 37.6% Japan 12.9% United Kingdom 7.9% Switzerland 5.4% Germany 4.4% France 4.2% South Korea 3.6% Bermuda 3.5% Hong Kong 3.1% Brazil 2.8% Italy 2.6% China 2.0% Israel 1.5% Mexico 1.2 Canada 1.1% Other* 6.2% * Includes Austria, Barbados, Finland, Greece, Ireland, Malaysia, Netherlands, Singapore and Spain. CREDIT QUALITY SUMMARY Percentage of portfolio assets Vodafone Group (United Kingdom) 3.0% Samsung Electronics (South Korea) 2.9 Citigroup (United States) 2.7 Total (France) 2.5 Johnson & Johnson (United States) 2.4 Microsoft (United States) 2.0 Dell (United States) 2.0 Canon (Japan) 1.8 Procter & Gamble (United States) 1.8 Toyota Motor (Japan) 1.7 For further detail about these holdings, please refer to the section entitled "Investments in Securities." There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of small- and medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Some of these companies also may have fewer financial resources. Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Dominic Rossi and Stephen Thornber of Threadneedle Asset Management in London describe the Fund's positioning and results for the six months ended April 30, 2004. Threadneedle portfolio managers assumed responsibility for the Fund on Oct. 20, 2003. Q: How did AXP Global Equity Fund perform for the six months ended April 30, 2004? A: AXP Global Equity Fund's Class A shares, excluding sales charge, rose 5.22% over the six-month period. The Fund underperformed its benchmark, the MSCI All Country World Free Index, which advanced 8.70% for the reporting period. The Fund also underperformed the Lipper Global Funds Index, representing the Fund's peer group, which rose 9.24% during the same timeframe. Q: What factors most significantly affected performance? A: When we assumed responsibility for the Fund in late October, we made substantial changes to give the Fund a stronger cyclical focus. After these changes were made, cyclical stocks became the mainstay of the Fund. The rationale for the change was to catch the strong cyclical rally that the equity market had been enjoying for much of calendar year 2003. Unfortunately, cyclical stocks offered mediocre performance in the last months of 2003. Although cyclicals had a strong start in 2004, performing very well in January, they subsequently dropped (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2004 10% (bar 2) (bar 3) 8% +8.70% +9.24% 6% (bar 1) +5.22% 4% 2% 0% (bar 1) AXP Global Equity Fund Class A (excluding sales charge) (bar 2) MSCI All Country World Free Index(1) (unmanaged) (bar 3) Lipper Global Funds Index(2) (1) Morgan Stanley Capital International (MSCI) All Country World Free Index, an unmanaged index, is compiled from a composite of securities markets of 47 countries, including Canada, the United States and 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Global 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. Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 4 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> Our asset allocation strategy related to the geographic balance of the Fund has been beneficial and contributed positively to performance over the six months.(end callout quote) again when the market chose to favor defensive stocks. This on-again, off-again market behavior dragged down the performance of cyclical stocks, and negatively impacted the Fund since it so heavily favored cyclical stocks during this six-month period.
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class Y (Inception dates) (5/29/90) (3/20/95) (6/26/00) (3/20/95) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) as of April 30, 2004 6 months* +5.22% -0.83% +4.77% +0.77% +5.02% +4.02% +5.42% +5.42% 1 year +21.84% +14.84% +21.00% +17.00% +21.05% +21.05% +22.25% +22.25% 5 years -6.13% -7.24% -6.85% -6.99% N/A N/A -5.94% -5.94% 10 years +2.00% +1.39% N/A N/A N/A N/A N/A N/A Since inception N/A N/A +2.67% +2.67% -12.94% -12.94% +3.63% +3.63% as of March 31, 2004 6 months* +14.38% +7.80% +14.11% +10.11% +13.91% +12.91% +14.53% +14.53% 1 year +34.98% +27.22% +34.37% +30.37% +34.18% +34.18% +35.35% +35.35% 5 years -4.92% -6.04% -5.62% -5.77% N/A N/A -4.73% -4.73% 10 years +2.42% +1.82% N/A N/A N/A N/A N/A N/A Since inception N/A N/A +3.08% +3.08% -12.46% -12.46% +4.03% +4.03%
The performance information shown represents the past performance and is not a guarantee of future results. The investment return and principal value of your investment and returns will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (888) 723-8476 or visiting www.americanexpress.com/funds. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. * Not annualized. (1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. -------------------------------------------------------------------------------- 5 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers The sector allocation of the Fund has also hurt performance during this reporting period. The Fund had a greater-than-index position in materials and information technology. These sectors had very strong earnings in the first few months of 2004. The Fund maintained a less-than-index position in consumer staples and utilities. As mentioned above, these defensive areas returned to favor in the marketplace in the last few months of the reporting period. We maintained a lower-than-index position in pharmaceuticals for most of the reporting period. Our asset allocation strategy related to the geographic balance of the Fund has been beneficial and contributed positively to performance over the six months. For example, we maintained a greater-than-index position in emerging markets and Latin America, where we believe there is still much value to be had. Late in the period (late February-early March), we increased our allocation to Japan and now have a greater-than-index position there. We believe deflation in Japan is nearing an end, and that recent indications, such as strong GDP results are promising. The Fund maintained its less-than-index position in the U.S., largely due to high valuations there. Although the Fund's position is substantially lower than the index, the Fund has 37.6% of its assets allocated to U.S. investments versus nearly half of the index on April 30, 2004. Stock selection was another key contributor to performance. Nobel Biocare, a small-cap stock, is a Swiss manufacturer of dental implants that was a strong contributor to performance. Esprit, a Hong Kong retailer, helped the Fund's performance, as did Samsung, the electronics company in South Korea, which is one of our largest holdings. All three companies have been strong performers and we continue to hold these stocks. We are always watching for medium sized biotechnology and other promising medical companies. We also added Actelion, a Swiss company that has a new cardiovascular drug that we are excited about. During the period we had disappointing results from some companies. One example was Swiss Life, an insurance company that has been a turnaround situation and had performed extremely well in the Fund for a time. Swiss Life announced a rights issue in order to fund the acquisition of an Italian bank that they already partially owned. This acquisition was a drain on the stock and, in turn, the Fund. We have significantly reduced our holding in Swiss Life. Another stock that had some problematic performance during the period was Myogen, a biotechnology company in the U.S. We bought the company based on its success. At any given time, the company has a number of its new drugs in test mode. -------------------------------------------------------------------------------- 6 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers In early 2004, the company had a very promising drug in the late stages of clinical trials. Unfortunately, this drug failed some of its clinical trials and it had to be dropped. The stock reacted poorly to that episode and this, in turn, impacted the Fund. We think the company -- not just one product -- holds promise. We believe that the stock is now even more undervalued than when we first bought it. So we have retained Myogen and continue to have faith in it. Q: What changes did you make to the Fund? A: Beginning in October 2003 and continuing into the current fiscal year we made the following changes to the Fund: o We reduced the Fund's substantial large-cap stock focus -- When we took over the Fund, we felt the Fund had taken on too much risk by focusing on the large-cap segment of the market. We substantially reduced the large-cap holdings to better align the Fund with its peer group and Threadneedle's investment strategy. o We added a strong cyclical focus -- We have been optimistic about global growth, and for that reason, skewed the Fund toward cyclical stocks. Historically, cyclical stocks benefit from a growing global economy. o We added more mid-cap stocks -- Unlike large company stocks, mid-cap stocks, as well as small-cap stocks, tend to benefit more as the economy accelerates. Mid-cap stocks afford opportunities to gain exposure to niche growth markets and valuations remain attractive. o We added more emerging markets stocks -- For some time, the Threadneedle team has been bullish on Asia and Latin America. Asia demonstrated attractive growth rates and cheap valuations. Latin America also showed attractive valuations and its growth has been leveraged to the U.S. economic recovery. We wanted the Fund to have a more active position in these areas, so we increased our positioning in the Far East and Latin American emerging markets. o We changed some country and regional allocations -- We added slightly to the Fund's position in Europe. Europe provided some attractive opportunities, although its economic recovery has lagged the United States and Asia. We reduced our position in the United States and Japan. Both of these nations' economies continued to improve, but valuations were high, in our view. Later in the period, we added to the Japanese position. -------------------------------------------------------------------------------- 7 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers Several broad themes continue to play out in our sector strategy over the period. Although we have reduced our overall technology position, we favor software over hardware and see good value in proven software companies such as Microsoft, Adobe Systems (U.S.) and Check Point Software Technologies (Israel). In the hardware subsector, we see the migration of hardware technology from some highly capitalized companies in the U.S. to Asia. We have also increased our positions in wireless communications companies and certain health care companies, such as medical and biotechnology companies. Q: How is the Fund currently positioned and how do you intend to manage the Fund in the months ahead? A: We no longer have a cyclical slant to the portfolio. We have moved toward more strong cash flow and growth-oriented stocks. Threadneedle's dynamic style espouses selection of what we believe are the best stocks regardless of growth or value slant and regardless of market capitalization. With this said, we believe that large-cap growth stocks are now coming back into favor. On a broader level, with the stabilization of the U.S. dollar, we have seen a flight of capital moving from Japan and emerging markets to the U.S. The U.S. economy looks so good that it is likely that the Federal Reserve will soon raise interest rates there. This likelihood was expected and we believe it was priced into the market for much of this six-month period. What was not expected was the incredible increase in the price of oil. Equity markets are historically tolerant of increases in oil prices, but the latest increases were quite high and will impact all countries, but especially those significant importers, such as Japan, Korea and Brazil. Currently equity markets are reacting to oil prices, not interest rates, in our view. However, markets have the potential to be incredibly resilient, and we maintain a positive outlook for equities given all of the economic drivers that we are seeing. -------------------------------------------------------------------------------- 8 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Investments in Securities World Growth Portfolio April 30, 2004 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (98.4%)(c) Issuer Shares Value(a) Austria (0.5%) Utilities -- telephone Telekom Austria 172,791(b) $2,535,793 Barbados (0.8%) Insurance Everest Re Group 43,931 3,742,043 Bermuda (3.5%) Insurance (2.1%) PartnerRe 88,560 5,074,488 RenaissanceRe Holdings 95,564 5,035,267 Total 10,109,755 Multi-industry (1.4%) Accenture Cl A 292,801(b) 6,959,880 Brazil (2.8%) Metals (1.4%) Companhia Vale do Rio Doce ADR 180,542 7,057,387 Paper & packaging (0.7%) Aracruz Celulose ADR 105,000 3,269,700 Utilities -- telephone (0.7%) Brasil Telecom Participacoes ADR 110,106 3,413,286 Canada (1.1%) Energy EnCana 132,921 5,213,728 China (2.0%) Real estate investment trust (1.1%) Henderson Land Development 1,187,000 5,326,897 Retail -- general (0.9%) Esprit Holdings 1,055,000 4,328,705 Finland (0.5%) Energy equipment & services Fortum 217,422 2,435,408 France (4.2%) Automotive & related (0.6%) Renault 38,436 2,866,382 Energy (2.5%) Total 66,955 12,376,718 Multi-industry (1.1%) Sanofi-Synthelabo 81,263 5,159,710 Germany (3.2%) Automotive & related (0.5%) Continental 57,244 2,483,219 Banks and savings & loans (1.3%) Hypo Real Estate Holding 242,695(b) 6,626,157 Computer software & services (0.9%) SAP 28,088 4,256,650 Utilities -- electric (0.5%) RWE 58,431 2,534,711 Greece (0.8%) Utilities -- electric Public Power 158,070 4,007,022 Hong Kong (3.1%) Financial services (0.7%) Hong Kong Exchanges & Clearing 1,822,000 3,644,421 Multi-industry (1.3%) New World Development 7,671,600 6,147,825 Real estate (1.1%) Sun Hung Kai Properties 602,000 5,171,622 Ireland (0.9%) Banks and savings & loans Anglo Irish Bank 277,495 4,537,790 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Israel (1.5%) Computer software & services Check Point Software Technologies 316,105(b) $7,406,340 Italy (2.6%) Banks and savings & loans (1.0%) Banco Popolare di Verona e Novara 303,036 5,038,953 Energy (1.6%) Eni 383,344 7,788,810 Japan (12.9%) Automotive & related (1.7%) Toyota Motor 232,200 8,384,417 Banks and savings & loans (1.5%) Mitsubishi Tokyo Financial Group 806 7,162,823 Cellular telecommunications (0.5%) NTT DoCoMo 1,270 2,517,014 Chemicals (1.0%) Shin-Etsu Chemical 124,900 5,041,213 Financial services (1.1%) Nomura Holdings 346,000 5,611,148 Machinery (1.8%) Amada 654,000 3,675,421 Komatsu 876,000 4,986,461 Total 8,661,882 Multi-industry (3.0%) Canon 172,000 9,012,489 Ricoh 251,000 4,997,285 Total 14,009,774 Real estate (1.2%) Daito Trust Construction 101,800 3,445,538 Mitsui Fudosan 215,000 2,364,027 Total 5,809,565 Retail -- general (0.5%) Seven-Eleven Japan 71,000 2,409,502 Retail -- grocery (0.7%) Aeon 79,000 3,460,271 Malaysia (0.5%) Leisure time & entertainment Resorts World 878,900 2,312,895 Mexico (1.2%) Cellular telecommunications America Movil ADR Series L 176,185 5,955,053 Netherlands (0.9%) Food Koninklijke Numico 152,662(b) 4,224,735 Singapore (0.8%) Real estate City Developments 1,155,000 4,141,002 South Korea (3.6%) Automotive & related (0.7%) Hyundai Motor 93,400 3,563,214 Electronics (2.9%) Samsung Electronics 29,340 13,932,123 Spain (0.5%) Media Antena 3 Television 50,927(b) 2,586,846 Switzerland (5.4%) Banks and savings & loans (1.3%) UBS 86,758 6,173,552 Health care products (2.5%) Actelion 47,704(b) 5,240,073 Nobel Biocare Holding 31,738 4,307,300 Synthes 2,790 3,035,606 Total 12,582,979 Insurance (1.6%) Swiss Life Holding 55,778(b) 7,623,711 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United Kingdom (7.8%) Aerospace & defense (0.3%) Rolls-Royce Group 383,568 $1,578,438 Rolls-Royce Group Cl B 19,178,400(b) 34,092 Total 1,612,530 Cellular telecommunications (3.1%) Vodafone Group 6,075,020 14,794,575 Computer software & services (0.7%) lastminute.com 1,035,260(b) 3,537,936 Health care products (1.3%) AstraZeneca 136,677 6,406,780 Media (0.5%) EMAP 170,266 2,616,539 Retail -- grocery (1.4%) Tesco 650,000 2,874,158 William Morrison Supermarkets 979,907 4,171,812 Total 7,045,970 Telecom equipment & services (0.5%) mm02 1,284,961(b) 2,284,148 United States (37.3%) Banks and savings & loans (0.9%) Wachovia 33,317 1,524,253 Wells Fargo 47,276 2,669,203 Total 4,193,456 Beverages & tobacco (0.6%) PepsiCo 58,306 3,177,094 Broker dealers (2.1%) AmeriTrade Holding 196,250(b) 2,402,100 Bear Stearns Companies 58,232 4,666,712 Morgan Stanley 63,982 3,288,035 Total 10,356,847 Cable (0.4%) Cox Communications Cl A 67,081(b) 2,192,878 Cellular telecommunications (1.5%) American Tower Cl A 399,529(b) 4,974,136 Nextel Communications Cl A 100,500(b) 2,397,930 Total 7,372,066 Computer hardware (2.5%) Apple Computer 104,094(b) 2,678,339 Dell 274,153(b) 9,515,850 Total 12,194,189 Computer software & services (3.3%) Adobe Systems 60,300 2,492,802 Microsoft 376,183 9,769,473 State Street 76,031 3,710,313 Total 15,972,588 Energy (1.5%) Valero Energy 112,731 7,187,729 Finance companies (2.6%) Citigroup 269,678 12,968,815 Financial services (0.8%) Goldman Sachs Group 41,999 4,052,904 Food (0.9%) Wrigley (Wm) Jr 68,363 4,217,997 Furniture & appliances (0.5%) Mohawk Inds 31,429(b) 2,424,433 Health care products (8.5%) Amgen 100,702(b) 5,666,502 Gilead Sciences 90,575(b) 5,509,677 Johnson & Johnson 219,932 11,882,925 Laboratory Corp of America Holdings 171,359(b) 6,809,807 Myogen 291,000(b) 3,355,230 St. Jude Medical 72,570(b) 5,534,188 Zimmer Holdings 38,044(b) 3,037,813 Total 41,796,142 Household products (1.8%) Procter & Gamble81,120 8,578,440 Insurance (1.8%) American Intl Group 75,131 5,383,136 Prudential Financial 79,799 3,506,368 Total 8,889,504 Media (0.8%) DIRECTV Group 227,359(b) 4,069,726 Multi-industry (1.0%) General Electric 163,276 4,890,116 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 11 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Retail -- drugstores (0.8%) Walgreen 109,179 $3,764,492 Retail -- general (2.5%) Home Depot 177,503 6,246,331 Staples 154,161 3,971,187 Wal-Mart Stores 39,068 2,226,876 Total 12,444,394 Telecom equipment & services (1.0%) Crown Castle Intl 351,190(b) 4,899,100 Utilities -- electric (1.5%) Duke Energy 359,305 7,566,963 Total common stocks (Cost: $454,694,723) $482,110,982 Preferred stock (1.1%)(c) Issuer Shares Value(a) Germany Porsche 8,761 $5,431,720 Total preferred stock (Cost: $4,439,478) $5,431,720 Total investments in securities (Cost: $459,134,201)(d) $487,542,702 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 April 30, 2004, the cost of securities for federal income tax purposes was approximately $459,134,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 40,667,000 Unrealized depreciation (12,258,000) ----------- Net unrealized appreciation $ 28,409,000 ------------ -------------------------------------------------------------------------------- 12 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Financial Statements Statement of assets and liabilities World Growth Portfolio April 30, 2004 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $459,134,201) $487,542,702 Foreign currency holdings (identified cost $3,058,801) (Note 1) 3,051,434 Dividends and accrued interest receivable 1,855,682 Receivable for investment securities sold 13,548,344 ---------- Total assets 505,998,162 ----------- Liabilities Bank overdraft 1,400,029 Payable for investment securities purchased 14,384,764 Accrued investment management services fee 10,694 Other accrued expenses 42,327 ------ Total liabilities 15,837,814 ---------- Net assets $490,160,348 ============ See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT
Statement of operations World Growth Portfolio Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 4,152,499 Interest 1,207 Fee income from securities lending (Note 3) 58,793 Less foreign taxes withheld (259,404) -------- Total income 3,953,095 --------- Expenses (Note 2): Investment management services fee 1,719,410 Compensation of board members 5,933 Custodian fees 73,922 Audit fees 13,500 Other 5,279 ----- Total expenses 1,818,044 Earnings credits on cash balances (Note 2) (312) ---- Total net expenses 1,817,732 --------- Investment income (loss) -- net 2,135,363 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 29,434,854 Foreign currency transactions (31,355) ------- Net realized gain (loss) on investments 29,403,499 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,337,798) ---------- Net gain (loss) on investments and foreign currencies 27,065,701 ---------- Net increase (decrease) in net assets resulting from operations $29,201,064 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets World Growth Portfolio April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 2,135,363 $ 5,324,642 Net realized gain (loss) on investments 29,403,499 (27,567,565) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,337,798) 109,515,236 ---------- ----------- Net increase (decrease) in net assets resulting from operations 29,201,064 87,272,313 ---------- ---------- Proceeds from contributions 952,752 2,304,809 Fair value of withdrawals (54,001,772) (163,329,472) ----------- ------------ Net contributions (withdrawals) from partners (53,049,020) (161,024,663) ----------- ------------ Total increase (decrease) in net assets (23,847,956) (73,752,350) Net assets at beginning of period 514,008,304 587,760,654 ----------- ----------- Net assets at end of period $490,160,348 $ 514,008,304 ============ =============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 15 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements World Growth Portfolio (Unaudited as to April 30, 2004) 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. Pursuant to procedures adopted by the Board of Trustees of the portfolios, American Express Financial Corporations (AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with the procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair NAV. 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 GLOBAL EQUITY FUND -- 2004 SEMIANNUAL 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 April 30, 2004, foreign currency holdings consisted of multiple denominations. -------------------------------------------------------------------------------- 17 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL 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 to the Lipper Global 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 adjustment decreased the fee by $305,156 for the six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 18 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT 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. During the six months ended April 30, 2004, the Portfolio's custodian fees were reduced by $312 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 $330,275,049 and $377,629,629, respectively, for the six months ended April 30, 2004. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $58,793 for the six months ended April 30, 2004. 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, 2004(e) 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) .70%(c) .74% .72% .62% .73% Ratio of net investment income (loss) to average daily net assets .83%(c) 1.01% .67% .95% .27% Portfolio turnover rate (excluding short-term securities) 65% 132% 123% 218% 131% Total return(b) 5.61%(d) 18.91% (15.58%) (34.42%) 4.95%
(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. (c) Adjusted to an annual basis. (d) Not annualized. (e) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 19 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Equity Fund April 30, 2004 (Unaudited) Assets Investment in Portfolio (Note 1) $ 490,099,683 Capital shares receivable 69,663 ------ Total assets 490,169,346 ----------- Liabilities Capital shares payable 32,204 Accrued distribution fee 6,163 Accrued service fee 13 Accrued transfer agency fee 4,209 Accrued administrative services fee 780 Other accrued expenses 92,321 ------ Total liabilities 135,690 ------- Net assets applicable to outstanding capital stock $ 490,033,656 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 1,022,330 Additional paid-in capital 1,105,278,313 Net operating loss (234,127) Accumulated net realized gain (loss) (Note 5) (644,559,558) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,526,698 ---------- Total -- representing net assets applicable to outstanding capital stock $ 490,033,656 ============== Net assets applicable to outstanding shares: Class A $ 350,489,908 Class B $ 134,032,621 Class C $ 980,888 Class Y $ 4,530,239 Net asset value per share of outstanding capital stock: Class A shares 72,048,015 $ 4.86 Class B shares 29,047,608 $ 4.61 Class C shares 213,388 $ 4.60 Class Y shares 923,994 $ 4.90 ------- --------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 20 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT
Statement of operations AXP Global Equity Fund Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 4,152,007 Interest 1,214 Fee income from securities lending 58,786 Less foreign taxes withheld (259,373) -------- Total income 3,952,634 --------- Expenses (Note 2): Expenses allocated from Portfolio 1,817,518 Distribution fee Class A 459,065 Class B 707,913 Class C 4,902 Transfer agency fee 757,372 Incremental transfer agency fee Class A 58,368 Class B 40,371 Class C 277 Service fee -- Class Y 2,441 Administrative services fees and expenses 147,760 Compensation of board members 5,542 Printing and postage 136,965 Registration fees 35,525 Audit fees 4,500 Other 11,136 ------ Total expenses 4,189,655 Earnings credits on cash balances (Note 2) (3,053) ------ Total net expenses 4,186,602 --------- Investment income (loss) -- net (233,968) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 29,431,485 Foreign currency transactions (31,339) ------- Net realized gain (loss) on investments 29,400,146 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,337,448) ---------- Net gain (loss) on investments and foreign currencies 27,062,698 ---------- Net increase (decrease) in net assets resulting from operations $26,828,730 ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 21 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets AXP Global Equity Fund April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ (233,968) $ 183,979 Net realized gain (loss) on investments 29,400,146 (27,567,201) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,337,448) 109,506,308 ---------- ----------- Net increase (decrease) in net assets resulting from operations 26,828,730 82,123,086 ---------- ---------- Distributions to shareholders from: Net investment income Class A (95,223) -- Class Y (2,414) -- ---------- ---------- Total distributions (97,637) -- ---------- ---------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 12,262,266 35,389,682 Class B shares 4,151,595 6,481,182 Class C shares 189,323 483,450 Class Y shares 716,527 1,478,386 Reinvestment of distributions at net asset value Class A shares 93,330 -- Class Y shares 2,414 -- Payments for redemptions Class A shares (47,035,674) (134,289,060) Class B shares (Note 2) (18,759,359) (60,198,322) Class C shares (Note 2) (234,648) (553,226) Class Y shares (1,911,276) (4,612,498) ---------- ---------- Increase (decrease) in net assets from capital share transactions (50,525,502) (155,820,406) ----------- ------------ Total increase (decrease) in net assets (23,794,409) (73,697,320) Net assets at beginning of period 513,828,065 587,525,385 ----------- ----------- Net assets at end of period $490,033,656 $ 513,828,065 ============ ============= Undistributed (excess of distributions over) net investment income $ (234,127) $ 97,478 ------------ -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 22 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements AXP Global Equity Fund (Unaudited as to April 30, 2004) 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 April 30, 2004 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 EQUITY FUND -- 2004 SEMIANNUAL 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. Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.06% to 0.035% annually. A minor portion of additional administrative 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. -------------------------------------------------------------------------------- 24 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT In addition, AECSC is entitled to charge 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 currently not effective. 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 $209,402 for Class A, $56,457 for Class B and $72 for Class C for the six months ended April 30, 2004. During the six months ended April 30, 2004, the Fund's transfer agency fees were reduced by $3,053 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2004 Class A Class B Class C Class Y Sold 2,478,647 888,051 40,582 144,878 Issued for reinvested distributions 19,607 -- -- 504 Redeemed (9,618,436) (4,028,938) (50,053) (391,159) ---------- ---------- ------- -------- Net increase (decrease) (7,120,182) (3,140,887) (9,471) (245,777) ---------- ---------- ------ -------- 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) ----------- ----------- ------- --------
-------------------------------------------------------------------------------- 25 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT 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 six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 26 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL 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, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $4.62 $3.92 $4.69 $ 8.74 $ 9.18 Income from investment operations: Net investment income (loss) -- .01 -- .02 (.02) Net gains (losses) (both realized and unrealized) .24 .69 (.77) (2.71) .58 Total from investment operations .24 .70 (.77) (2.69) .56 Less distributions: Dividends from and in excess of net investment income -- -- -- (.02) (.04) Distributions from realized gains -- -- -- (1.34) (.96) Total distributions -- -- -- (1.36) (1.00) Net asset value, end of period $4.86 $4.62 $3.92 $ 4.69 $ 8.74 Ratios/supplemental data Net assets, end of period (in millions) $350 $366 $406 $714 $1,356 Ratio of expenses to average daily net assets(b) 1.41%(d) 1.50% 1.39% 1.18% 1.22% Ratio of net investment income (loss) to average daily net assets .12%(d) .26% .01% .39% (.21%) Portfolio turnover rate (excluding short-term securities) 65% 132% 123% 218% 131% Total return(c) 5.22%(e) 17.86% (16.42%) (34.83%) 4.74%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. (d) Adjusted to an annual basis. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 27 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $4.40 $3.76 $4.53 $ 8.53 $9.01 Income from investment operations: Net investment income (loss) -- (.03) (.04) (.02) (.08) Net gains (losses) (both realized and unrealized) .21 .67 (.73) (2.64) .56 Total from investment operations .21 .64 (.77) (2.66) .48 Less distributions: Distributions from realized gains -- -- -- (1.34) (.96) Net asset value, end of period $4.61 $4.40 $3.76 $ 4.53 $8.53 Ratios/supplemental data Net assets, end of period (in millions) $134 $142 $173 $309 $575 Ratio of expenses to average daily net assets(b) 2.19%(d) 2.27% 2.16% 1.95% 1.98% Ratio of net investment income (loss) to average daily net assets (.65%)(d) (.52%) (.77%) (.38%) (.95%) Portfolio turnover rate (excluding short-term securities) 65% 132% 123% 218% 131% Total return(c) 4.77%(e) 17.02% (17.00%) (35.38%) 3.89%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. (d) Adjusted to an annual basis. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 28 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(g) 2003 2002 2001 2000(b) Net asset value, beginning of period $4.38 $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) .22 .66 (.73) (2.64) (1.02) Total from investment operations .22 .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 $4.60 $4.38 $3.75 $ 4.52 $ 8.54 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $1 $1 Ratio of expenses to average daily net assets(c) 2.19%(e) 2.29% 2.19% 1.95% 1.98%(e) Ratio of net investment income (loss) to average daily net assets (.64%)(e) (.52%) (.78%) (.42%) (1.15%)(e) Portfolio turnover rate (excluding short-term securities) 65% 132% 123% 218% 131% Total return(d) 5.02%(f) 16.80% (17.04%) (35.37%) (10.76%)(f)
(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) Total return does not reflect payment of a sales charge. (e) Adjusted to an annual basis. (f) Not annualized. (g) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 29 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(f) 2003 2002 2001 2000 Net asset value, beginning of period $4.65 $3.94 $4.70 $ 8.76 $9.20 Income from investment operations: Net investment income (loss) -- .02 .01 .04 (.01) Net gains (losses) (both realized and unrealized) .25 .69 (.77) (2.73) .58 Total from investment operations .25 .71 (.76) (2.69) .57 Less distributions: Dividends from and in excess of net investment income -- -- -- (.03) (.05) Distributions from realized gains -- -- -- (1.34) (.96) Total distributions -- -- -- (1.37) (1.01) Net asset value, end of period $4.90 $4.65 $3.94 $ 4.70 $8.76 Ratios/supplemental data Net assets, end of period (in millions) $5 $5 $8 $12 $20 Ratio of expenses to average daily net assets(b) 1.23%(d) 1.30% 1.21% 1.01% 1.05% Ratio of net investment income (loss) to average daily net assets .28%(d) .43% .18% .55% (.06%) Portfolio turnover rate (excluding short-term securities) 65% 132% 123% 218% 131% Total return(c) 5.42%(e) 18.02% (16.17%) (34.78%) 4.86%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of a sales charge. (d) Adjusted to an annual basis. (e) Not annualized. (f) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 30 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the Web site americanexpress.com/funds; or by searching the Web site of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, after Aug. 1, 2004, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available at http://www.sec.gov. -------------------------------------------------------------------------------- 31 -- AXP GLOBAL EQUITY FUND -- 2004 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Global Technology Fund Semiannual Report for the Period Ended April 30, 2004 AXP Global Technology Fund seeks to provide shareholders with long-term capital growth. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Questions & Answers with Portfolio Management 4 Investments in Securities 9 Financial Statements (Portfolio) 12 Notes to Financial Statements (Portfolio) 15 Financial Statements (Fund) 19 Notes to Financial Statements (Fund) 22 Proxy Voting 29 (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- 2 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Fund Snapshot AS OF APRIL 30, 2004 PORTFOLIO MANAGERS Portfolio manager Since Years in industry Telis Bertsekas 6/02 7 Nina Hughes 6/02 5 FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96 Ticker symbols A: AXIAX B: INVBX C: AXICX Y: -- Total net assets $216.3 million Number of holdings 65 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL SECTOR COMPOSITION Percentage of portfolio assets (pie chart) Electronics 31.9% Computer software & services 28.2% Computer hardware 12.9% Cellular communications 9.8% Short-term securities 5.4% Telecom equipment & services 5.1% Media 4.2% Utilities - telephone 1.3% Retail - general 1.0$ Other 0.2% TOP TEN HOLDINGS Percentage of portfolio assets Cisco Systems (Computer hardware) 4.9% Dell (Computer hardware) 4.3 Analog Devices (Electronics) 4.1 Intel (Electronics) 4.0 Western Wireless Cl A (Cellular telecommunications) 3.8 EMC (Computer hardware) 3.4 Alamosa Holdings (Cellular telecommunications) 3.0 Yahoo! (Media) 2.9 MAXIMUS (Computer software & services) 2.7 Samsung Electronics (Electronics) 2.5 For further detail about these holdings, please refer to the section entitled "Investments in Securities." There are special risk considerations associated with international investing related to market currency, economic, political and other factors. This Fund is subject to greater volatility than a more broadly invested fund because it is invested in a specific sector. Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of small- and medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Fund holdings are subject to change. -------------------------------------------------------------------------------- 3 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, Portfolio Managers Telis Bertsekas and Nina Hughes discuss AXP(R) Global Technology Fund's positioning and results for the first half of fiscal year 2004. Q: How did AXP Global Technology Fund perform for the six months ended April 30, 2004? A: AXP Global Technology Fund's Class A shares gained 0.58% (excluding sales charge) for the six months ended April 30, 2004. This outpaced the Fund's benchmark, the unmanaged Goldman Sachs Technology Composite Index, which fell 3.58% during the period. The Fund also outperformed the Lipper Science and Technology Funds Index, representing the Fund's peer group, which fell 4.01% over the same period. Q: What factors most significantly affected performance during the semiannual period? A: Corporate earnings reports from many technology companies were strong during the semiannual period. However, the sector overall lagged the broader equity market. Following an extended period of outperformance by the technology sector, market expectations during these six months became progressively optimistic. We attribute the Fund's strong relative returns primarily to effective stock selection and, to a lesser degree, to industry allocation. The Fund also benefited from its multi-cap approach. (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2004 5.0% 2.5% (bar 1) 0.0% +0.58% -2.5% (bar 2) (bar 3) -3.58% -4.01% -5.0% (bar 1) AXP Global Technology Fund Class A (excluding sales charge) (bar 2) The Goldman Sachs Technology Composite Index(1) (unmanaged) (bar 3) Lipper Science and Technology Funds Index(2) (1) 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. (2) The Lipper Science and Technology Funds Index, published by Lipper Inc., includes the 30 largest funds that are generally similar to the Fund, although some funds in the index may have somewhat different investment policies or objectives. Past performance is no guarantee of future results. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of Class B, Class C and Class Y may vary from that shown above because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. -------------------------------------------------------------------------------- 4 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> We attribute the Fund's strong relative returns primarily to effective stock selection and, to a lesser degree, to industry allocation.(end callout quote) The flexibility to invest in large-cap, mid-cap, and small-cap stocks within the technology sector enabled us to seek the most attractive individual investment opportunities wherever they are and to emphasize whatever market capitalization may be in favor at any given time.
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class Y (Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5) as of April 30, 2004 6 months* +0.58% -5.21% +0.00% -4.00% +0.00% -1.00% +0.58% +0.58% 1 year +40.65% +32.57% +40.37% +36.37% +40.37% +40.37% +40.65% +40.65% 5 years -7.29% -8.38% -7.98% -8.02% N/A N/A -7.29% -7.29% Since inception +2.87% +2.06% +2.11% +2.11% -26.70% -26.70% +2.87% +2.87% as of March 31, 2004 6 months* +21.29% +14.29% +20.29% +16.29% +21.01% +20.01% +21.94% +21.94% 1 year +69.37% +59.59% +67.68% +63.68% +68.69% +68.69% +70.27% +70.27% 5 years -6.13% -7.24% -6.87% -6.92% N/A N/A -6.03% -6.03% Since inception +4.07% +3.24% +3.26% +3.26% -25.49% -25.49% +4.14% +4.14%
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 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 of performance. The performance information shown represents the past performance and is not a guarantee of future results. The investment return and principal value of your investment and returns will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (888) 723-8476 or visiting www.americanexpress.com/funds. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. * Not annualized. (1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. -------------------------------------------------------------------------------- 5 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers The Fund's biggest contributor to performance for the semiannual period was a small-cap company known as Blue Coat Systems. Blue Coat Systems is an Internet security firm that provides a Web security appliance designed to protect businesses' computer networks against Web-based viruses, unfiltered communications, and undesirable Web content. Another small-cap winner for the Fund was iVillage, an online women's network. Following a period where bankruptcy threatened, iVillage became profitable sooner than most anticipated under a new management and sales team. We sold the Fund's positions in Blue Coat Systems and iVillage during the first calendar quarter of 2004 when they hit the respective price target we had established for each. The Fund also benefited from a lower-than-index position in semiconductors, which performed poorly during the semiannual period. At the same time, Samsung Electronics, the large-cap Korean-based consumer electronics and semiconductor leader, was a top performer for the Fund. Samsung Electronics' share price rose during the period, as it gained market share and continued to execute well. The Fund was further helped during the six-month period from a higher-than-index position in telecommunications services. We sought companies trading at attractive valuations that were actively adding subscribers and that may benefit from ongoing industry consolidation. Indeed, Sprint PCS, which was rolled into Sprint Corp. during the semiannual period, was a strong performer for the Fund in this industry. Finally, the Fund benefited from a significantly lower-than-index position in software giant Microsoft, whose share price suffered during the period primarily from a widespread reluctance among businesses to sign site-wide license agreements with the company. Of course, there were disappointments as well. Detracting from the Fund's performance during the semiannual period was Photon Dynamics, a semiconductor firm that provides LCD flat panel testing technology to most of the major electronics manufacturers, including Panasonic, Samsung, Sony, and Toshiba. Due to strong demand, the firm built out its infrastructure somewhat ahead of expectations, which temporarily depressed its share price. However, we believe Photon Dynamics' fundamental prospects remain strong and so we continued to hold this stock. Another semiconductor holding that disappointed was industry leader Intel. Due to an inventory back-up of notebook computers among the manufacturers, Intel did not ship as much of its product. This delayed -------------------------------------------------------------------------------- 6 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers Intel's flow of revenues, and its share price declined. Again, we continue to hold this stock, as its fundamental prospects, including a line of new products, remain attractive. Q: What changes did you make to the portfolio and how is it currently positioned? A: In the last months of 2003, we maintained an aggressive stance in the portfolio. This posture enabled the Fund to take advantage of the strong performance of many technology stocks during the fourth quarter, as information technology demand strengthened toward the end of many businesses' fiscal years. Indeed, while the level of capital spending was still well below the peak of early 2000, computer and related capital goods orders surged during the fourth quarter of 2003. We were able to take profits during the first quarter of 2004 in several names that had experienced significant gains over the prior months. In the first months of 2004, we gradually shifted into a more conservative stance based on the realization that technology sector share prices had already moved sharply higher. We moved to a more defensive posture, by expanding our focus on well-established large-cap industry leaders over small-cap and mid-cap companies. We increased both the number of large-sized companies in the portfolio and the allocation of assets to large-sized companies, as valuations became more attractive and growth prospects improved. We also shifted to a more balanced portfolio from an industry perspective. For example, we reduced the portfolio's higher-than-index position in telecommunications industry and increased its allocation to semiconductors, though we still maintained a lower-than-index position. Toward the end of the semiannual period, we slightly reduced the Fund's allocation to the networking industry and increased its position in computer software. While this repositioning resulted in a portfolio turnover rate of 209% for the semiannual period, it also helped Fund performance relative to its peer group. Throughout the period, we continued to seek growth stocks with reasonable valuations using traditional fundamental analysis. At the end of the semiannual period, the Fund held greater-than-benchmark positions in computer hardware and computer software, neutral positions in telecommunications services & equipment and networking, and less-than-benchmark positions in semiconductors and computer services. We continue to believe that the flexibility to move between the technology -------------------------------------------------------------------------------- 7 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Questions & Answers sub-sectors and avoid others completely if conditions warrant is a competitive advantage over some of our more targeted peers. Q: How do you intend to manage the Fund in the coming months? A: We see several positive factors for the technology sector ahead. First quarter demand for information technology is typically down following the close of many businesses' fiscal years at the end of the calendar year. However, this historically leads to a seasonal uptick in corporate demand during the second quarter. Corporate earnings reports for the first quarter of 2004 were generally strong in the sector, and we believe market expectations and earnings should be more in line for the remainder of the year than they were over the last several months. Capital spending has been on an upward trend. There remain several new exciting products on the horizon. We intend to continue to look for indicators that the global economy is continuing to improve, keeping a particularly close watch on developments in Asia and on enterprise and consumer spending trends. All of that said, we believe that effective stock picking will be more important than the overall economy going forward. We remain focused on seeking those individual technology companies with the best fundamental prospects at the most reasonable prices, as we continue to find select opportunities to add value to the portfolio. -------------------------------------------------------------------------------- 8 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Investments in Securities World Technologies Portfolio April 30, 2004 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (98.3%) Issuer Shares Value(a) Cellular telecommunications (10.2%) Alamosa Holdings 927,300(b) $6,676,560 Nextel Communications Cl A 100,000(b) 2,386,000 NTT DoCoMo ADR 74,700(c) 1,501,470 Vodafone Group ADR 125,000(c) 3,067,500 Western Wireless Cl A 406,000(b) 8,452,920 Total 22,084,450 Computer hardware (13.4%) Cisco Systems 530,000(b) 11,061,100 Dell 282,000(b) 9,788,220 EMC 689,000(b) 7,689,240 Exabyte 675,400(b) 479,534 Total 29,018,094 Computer software & services (29.4%) Activision 240,000(b) 3,614,400 Actuate 582,000(b) 1,903,140 Affiliated Computer Services Cl A 91,700(b) 4,447,450 Aspen Technology 571,000(b) 3,711,500 Check Point Software Technologies 185,000(b,c) 4,334,550 E.piphany 538,000(b) 2,356,440 First Data 50,000 2,269,500 Juniper Networks 238,000(b) 5,207,440 Macromedia 188,000(b) 3,872,800 MAXIMUS 176,000(b) 6,160,000 Microsoft 91,000 2,363,270 MRO Software 110,000(b) 1,466,300 OPNET Technologies 100,000(b) 1,458,000 Oracle 350,000(b) 3,927,000 Paychex 60,000 2,236,800 PeopleSoft 160,000(b) 2,700,800 Quest Software 290,000(b) 3,262,500 SAP ADR 85,000(c) 3,168,800 SeaChange Intl 249,000(b) 2,893,380 Take-Two Interactive Software 75,000(b) 2,166,750 Total 63,520,820 Electronics (33.3%) Agere Systems Cl A 2,479,000(b) 5,602,540 Analog Devices 216,300 9,214,381 Cypress Semiconductor 240,000(b) 3,352,800 FormFactor 136,000(b) 2,392,240 Integrated Alarm Services Group 114,000(b) 1,105,800 Integrated Silicon Solutions 274,000(b) 3,762,020 Intel 353,000 9,082,690 LG Electronics 42,000(c) 2,549,361 Natl Semiconductor 79,000(b) 3,222,410 OmniVision Technologies 160,000(b) 3,568,320 Open Solutions 110,000(b) 2,720,300 Photon Dynamics 169,000(b) 5,239,000 PLX Technology 163,000(b) 2,115,740 Samsung Electronics 12,000(c) 5,698,209 Semtech 165,000(b) 3,468,300 SpatiaLight 268,925(b) 1,089,146 Taiwan Semiconductor Mfg ADR 543,000(c) 5,174,790 United Microelectronics ADR 471,000(c) 2,449,200 Total 71,807,247 Media (4.3%) iVillage 450,000(b) 2,880,000 Yahoo! 129,000(b) 6,509,340 Total 9,389,340 Retail -- general (1.1%) Circuit City Stores 200,000 2,336,000 Telecom equipment & services (5.3%) Motorola 308,000 5,621,000 Nextel Partners Cl A 170,000(b) 2,269,500 Research in Motion 40,800(b,c) 3,539,808 Total 11,430,308 Utilities -- telephone (1.3%) Sprint (FON Group) 163,000 2,916,070 Total common stocks (Cost: $226,403,824) $212,502,329 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 9 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Preferred stocks & other (--%)(b) Issuer Shares Value(a) Marketsoft Cv 225,410(f) $11,001 Paxonet Communications Series C 106,383(d,f) -- Portera Series G 425,374(d,f) -- UBI Soft Entertainment Warrants 5,712 27,371 Sun Hill Software 25,751(d,f) -- Total preferred stocks & other (Cost: $3,144,679) $38,372 Option purchased (0.2%) Issuer Contracts Exercise Expiration Value(a) price date Call Phil Semiconductor 385 $450 May 2004 $435,050 Total option purchased (Cost: $929,654) $435,050 Short-term securities (5.6%) Issuer Annualized Amount Value(a) yield on date payable at of purchase maturity U.S. government agencies (4.7%) Federal Home Loan Bank Disc Nt 05-28-04 1.00% $800,000 $799,394 Federal Home Loan Mtge Corp Disc Nt 06-01-04 1.00 1,600,000 1,598,615 Federal Natl Mtge Assn Disc Nts 05-03-04 1.02 2,800,000 2,799,773 06-30-04 1.03 5,000,000 4,992,185 Total 10,189,967 Commercial paper (0.9%) SPARC LLC 05-10-04 1.06 2,000,000(e) 1,999,411 Total short-term securities (Cost: $12,188,791) $12,189,378 Total investments in securities (Cost: $242,666,948)(g) $225,165,129 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 10 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL 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 April 30, 2004, the value of foreign securities represented 14.6% of net assets. (d) Negligible market value. (e) 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. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of April 30, 2004, the value of these securities amounted to $1,999,411 or 0.9% of net assets. (f) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at April 30, 2004, is as follows: Security Acquisition Cost dates 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 07-21-00 300,001 (g) At April 30, 2004, the cost of securities for federal income tax purposes was approximately $242,667,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 6,434,000 Unrealized depreciation (23,936,000) ----------- Net unrealized depreciation $(17,502,000) ------------ -------------------------------------------------------------------------------- 11 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Financial Statements Statement of assets and liabilities World Technologies Portfolio April 30, 2004 (Unaudited) Assets Investments in securities, at value (Note 1)* (identified cost $242,666,948) $225,165,129 Cash in bank on demand deposit 68,239 Dividends and accrued interest receivable 7,200 Receivable for investment securities sold 24,161,814 ---------- Total assets 249,402,382 ----------- Liabilities Payable for investment securities purchased 20,896,910 Payable upon return of securities loaned (Note 4) 12,189,200 Accrued investment management services fee 4,353 Other accrued expenses 32,201 ------ Total liabilities 33,122,664 ---------- Net assets $216,279,718 ============ *Including securities on loan, at value (Note 4) $ 10,535,360 ------------ See accompanying notes to financial statements. -------------------------------------------------------------------------------- 12 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT
Statement of operations World Technologies Portfolio Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 190,187 Interest 27,951 Fee income from securities lending (Note 4) 44,289 Less foreign taxes withheld (12,002) ------- Total income 250,425 ------- Expenses (Note 2): Investment management services fee 944,936 Compensation of board members 5,542 Custodian fees 30,832 Audit fees 10,500 Other 344 --- Total expenses 992,154 Earnings credits on cash balances (Note 2) (244) ---- Total net expenses 991,910 ------- Investment income (loss) -- net (741,485) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 34,441,956 Foreign currency transactions (16,848) ------- Net realized gain (loss) on investments 34,425,108 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (31,940,470) ----------- Net gain (loss) on investments and foreign currencies 2,484,638 --------- Net increase (decrease) in net assets resulting from operations $ 1,743,153 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 13 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets World Technologies Portfolio April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ (741,485) $ (571,018) Net realized gain (loss) on investments 34,425,108 64,893,772 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (31,940,470) 18,832,116 ----------- ---------- Net increase (decrease) in net assets resulting from operations 1,743,153 83,154,870 --------- ---------- Proceeds from contributions 8,613,185 22,782,493 Fair value of withdrawals (8,048,822) (12,875,419) ---------- ----------- Net contributions (withdrawals) from partners 564,363 9,907,074 ------- --------- Total increase (decrease) in net assets 2,307,516 93,061,944 Net assets at beginning of period 213,972,202 120,910,258 ----------- ----------- Net assets at end of period $216,279,718 $213,972,202 ============ ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 14 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements World Technologies Portfolio (Unaudited as to April 30, 2004) 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. Pursuant to procedures adopted by the Board of Trustees of the portfolios, American Express Financial Corporation (AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with the procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair NAV. 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. -------------------------------------------------------------------------------- 15 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL 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. -------------------------------------------------------------------------------- 16 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL 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. Illiquid securities As of April 30, 2004, 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 April 30, 2004 was $11,001 representing 0.005% 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. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Portfolio. 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. 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 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 adjustment increased the fee by $105,649 for the six months ended April 30, 2004. 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. -------------------------------------------------------------------------------- 17 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL 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. During the six months ended April 30, 2004, the Portfolio's custodian fees were reduced by $244 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 $466,057,361 and $460,852,056, respectively, for the six months ended April 30, 2004. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $48,870 for the six months ended April 30, 2004. 4. LENDING OF PORTFOLIO SECURITIES As of April 30, 2004, securities valued at $10,535,360 were on loan to brokers. For collateral, the Portfolio received $12,189,200 in cash. Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending amounted to $44,289 for the six months ended April 30, 2004. 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, 2004(e) 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) .85%(c) .84% .77% .75% .74% Ratio of net investment income (loss) to average daily net assets (.63%)(c) (.37%) (.51%) (.11%) .10% Portfolio turnover rate (excluding short-term securities) 209% 546% 391% 233% 116% Total return(b) .78%(d) 68.97% (34.78%) (69.21%) 66.70%
(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. (c) Adjusted to an annual basis. (d) Not annualized. (e) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 18 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Technology Fund April 30, 2004 (Unaudited) Assets Investment in Portfolio (Note 1) $ 216,250,548 Capital shares receivable 25,117 ------ Total assets 216,275,665 ----------- Liabilities Capital shares payable 83,300 Accrued distribution fee 2,938 Accrued service fee 1 Accrued transfer agency fee 2,828 Accrued administrative services fee 362 Other accrued expenses 47,842 ------ Total liabilities 137,271 ------- Net assets applicable to outstanding capital stock $ 216,138,394 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 1,301,439 Additional paid-in capital 626,276,124 Net operating loss (1,894,817) Accumulated net realized gain (loss) (Note 5) (392,044,926) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (17,499,426) ----------- Total -- representing net assets applicable to outstanding capital stock $ 216,138,394 ============= Net assets applicable to outstanding shares: Class A $ 147,476,545 Class B $ 63,995,543 Class C $ 4,291,309 Class Y $ 374,997 Net asset value per share of outstanding capital stock: Class A shares 85,202,497 $ 1.73 Class B shares 41,919,593 $ 1.53 Class C shares 2,805,231 $ 1.53 Class Y shares 216,542 $ 1.73 ------- -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 19 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT
Statement of operations AXP Global Technology Fund Six months ended April 30, 2004 (Unaudited) Investment income Income: Dividends $ 190,161 Interest 27,942 Fee income from securities lending 44,289 Less foreign taxes withheld (12,000) ------- Total income 250,392 ------- Expenses (Note 2): Expenses allocated from Portfolio 991,779 Distribution fee Class A 198,156 Class B 348,141 Class C 22,777 Transfer agency fee 464,985 Incremental transfer agency fee Class A 34,651 Class B 26,713 Class C 706 Service fee -- Class Y 169 Administrative services fees and expenses 68,879 Compensation of board members 5,150 Printing and postage 74,962 Registration fees 49,682 Audit fees 3,500 Other 4,756 ----- Total expenses 2,295,006 Earnings credits on cash balances (Note 2) (1,099) ------ Total net expenses 2,293,907 --------- Investment income (loss) -- net (2,043,515) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 34,437,306 Foreign currency transactions (16,846) ------- Net realized gain (loss) on investments 34,420,460 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (31,936,167) ----------- Net gain (loss) on investments and foreign currencies 2,484,293 --------- Net increase (decrease) in net assets resulting from operations $ 440,778 ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 20 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT
Statements of changes in net assets AXP Global Technology Fund April 30, 2004 Oct. 31, 2003 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ (2,043,515) $ (2,685,295) Net realized gain (loss) on investments 34,420,460 64,884,382 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (31,936,167) 18,829,617 ----------- ---------- Net increase (decrease) in net assets resulting from operations 440,778 81,028,704 ------- ---------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 22,226,159 40,338,279 Class B shares 6,268,965 11,875,873 Class C shares 925,820 1,324,959 Class Y shares 284,964 138,070 Payments for redemptions Class A shares (20,536,553) (30,612,393) Class B shares (Note 2) (6,716,673) (10,091,766) Class C shares (Note 2) (619,671) (704,810) Class Y shares (132,536) (29,506) -------- ------- Increase (decrease) in net assets from capital share transactions 1,700,475 12,238,706 --------- ---------- Total increase (decrease) in net assets 2,141,253 93,267,410 Net assets at beginning of period 213,997,141 120,729,731 ----------- ----------- Net assets at end of period $216,138,394 $213,997,141 ============ ============ Undistributed (excess of distributions over) net investment income $ (1,894,817) $ 148,698 ------------ ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 21 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Notes to Financial Statements AXP Global Technology Fund (Unaudited as to April 30, 2004) 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 April 30, 2004 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. -------------------------------------------------------------------------------- 22 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL 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. Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets in reducing percentages from 0.06% to 0.035% annually. A minor portion of additional administrative 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. -------------------------------------------------------------------------------- 23 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT In addition, AECSC is entitled to charge 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 currently not effective. 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 $330,199 for Class A, $55,685 for Class B and $577 for Class C for the six months ended April 30, 2004. During the six months ended April 30, 2004, the Fund's transfer agency fees were reduced by $1,099 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2004 Class A Class B Class C Class Y Sold 11,906,365 3,801,068 562,762 155,274 Issued for reinvested distributions -- -- -- -- Redeemed (11,039,759) (4,063,789) (373,297) (71,658) ----------- ---------- -------- ------- Net increase (decrease) 866,606 (262,721) 189,465 83,616 ------- -------- ------- ------ 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 --------- --------- ------- ------
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 six months ended April 30, 2004. -------------------------------------------------------------------------------- 24 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL 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, 2004(h) 2003 2002 2001 2000 Net asset value, beginning of period $1.72 $1.03 $1.60 $ 5.26 $ 11.27 Income from investment operations: Net investment income (loss) (.01) (.02) (.03) (.02) (.01) Net gains (losses) (both realized and unrealized) .02 .71 (.54) (3.64) 7.05 Total from investment operations .01 .69 (.57) (3.66) 7.04 Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(e) Total distributions -- -- -- -- (13.05) Net asset value, end of period $1.73 $1.72 $1.03 $ 1.60 $ 5.26 Ratios/supplemental data Net assets, end of period (in thousands) $147,477 $145,382 $80,831 $146,139 $319,164 Ratio of expenses to average daily net assets(b) 1.72%(c) 1.94% 1.91% 1.63% 1.24%(d) Ratio of net investment income (loss) to average daily net assets (1.50%)(c) (1.47%) (1.65%) (.99%) (.38%) Portfolio turnover rate (excluding short-term securities) 209% 546% 391% 233% 116% Total return(f) .58%(g) 66.99% (35.62%) (69.58%) 66.58%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class A would have been 1.45% for the period ended Oct. 31, 2000. (e) A distibution payable to a single corporate shareholder. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 25 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(h) 2003 2002 2001 2000 Net asset value, beginning of period $1.53 $ .92 $1.44 $ 4.77 $ 11.02 Income from investment operations: Net investment income (loss) (.02) (.03) (.04) (.04) (.04) Net gains (losses) (both realized and unrealized) .02 .64 (.48) (3.29) 6.84 Total from investment operations -- .61 (.52) (3.33) 6.80 Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(e) Total distributions -- -- -- -- (13.05) Net asset value, end of period $1.53 $1.53 $ .92 $ 1.44 $ 4.77 Ratios/supplemental data Net assets, end of period (in thousands) $63,996 $64,387 $37,877 $67,425 $138,545 Ratio of expenses to average daily net assets(b) 2.50%(c) 2.75% 2.71% 2.42% 2.01%(d) Ratio of net investment income (loss) to average daily net assets (2.28%)(c) (2.27%) (2.45%) (1.78%) (1.16%) Portfolio turnover rate (excluding short-term securities) 209% 546% 391% 233% 116% Total return(f) --%(g) 66.30% (36.11%) (69.81%) 65.25%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class B would have been 2.26% for the period ended Oct. 31, 2000. (e) A distibution payable to a single corporate shareholder. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 26 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(h) 2003 2002 2001 2000(b) Net asset value, beginning of period $1.53 $ .92 $1.44 $ 4.77 $5.05 Income from investment operations: Net investment income (loss) (.02) (.03) (.04) (.04) (.01) Net gains (losses) (both realized and unrealized) .02 .64 (.48) (3.29) (.27) Total from investment operations -- .61 (.52) (3.33) (.28) Net asset value, end of period $1.53 $1.53 $ .92 $ 1.44 $4.77 Ratios/supplemental data Net assets, end of period (in thousands) $4,291 $4,000 $1,964 $4,069 $3,298 Ratio of expenses to average daily net assets(c) 2.45%(d) 2.72% 2.69% 2.42% 2.01%(d),(e) Ratio of net investment income (loss) to average daily net assets (2.24%)(d) (2.26%) (2.39%) (1.84%) (1.17%)(d) Portfolio turnover rate (excluding short-term securities) 209% 546% 391% 233% 116% Total return(f) --%(g) 66.30% (36.11%) (69.81%) (5.54%)(g)
(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 ratio of expenses for Class C would have been 2.26% for the period ended Oct. 31, 2000. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2004 (Unaudited). -------------------------------------------------------------------------------- 27 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(h) 2003 2002 2001 2000 Net asset value, beginning of period $1.72 $1.03 $1.60 $ 5.25 $ 11.27 Income from investment operations: Net investment income (loss) (.01) (.02) (.03) (.02) -- Net gains (losses) (both realized and unrealized) .02 .71 (.54) (3.63) 7.03 Total from investment operations .01 .69 (.57) (3.65) 7.03 Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(e) Total distributions -- -- -- -- (13.05) Net asset value, end of period $1.73 $1.72 $1.03 $ 1.60 $ 5.25 Ratios/supplemental data Net assets, end of period (in thousands) $375 $229 $58 $57 $88 Ratio of expenses to average daily net assets(b) 1.53%(c) 1.69% 1.72% 1.49% .94%(d) Ratio of net investment income (loss) to average daily net assets (1.31%)(c) (1.25%) (1.61%) (.89%) (.80%) Portfolio turnover rate (excluding short-term securities) 209% 546% 391% 233% 116% Total return(f) .58%(g) 66.99% (35.63%) (69.52%) 66.27%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class Y would have been 1.19% for the period ended Oct. 31, 2000. (e) A distibution payable to a single corporate shareholder. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2004 (Unaudited). 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 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. -------------------------------------------------------------------------------- 28 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the Web site americanexpress.com/funds; or by searching the Web site of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, after Aug. 1, 2004, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available at http://www.sec.gov. -------------------------------------------------------------------------------- 29 --- AXP GLOBAL TECHNOLOGY FUND -- 2004 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Submission of matters to a vote of security holders. Not applicable. Item 10. Controls and Procedures. (a) The registrant's Principal Executive Officer and Principal Financial Officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the registrant's disclosure controls and procedures by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) At the date of filing this Form N-CSR, the registrant's Principal Executive Officer and Principal Financial Officer are aware of no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 11. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) AXP GLOBAL SERIES, INC. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date July 1, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date July 1, 2004 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date July 1, 2004