-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EX9D/Ju1EDSbtDG5ZuUWLIfExvfS/3ImBltr3H/D0ineOJpMde4vwjfI+hdBUTjq BJXTBlFW++u2sjj4PdsTiA== 0000820027-04-001063.txt : 20041221 0000820027-04-001063.hdr.sgml : 20041221 20041221161912 ACCESSION NUMBER: 0000820027-04-001063 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20041221 DATE AS OF CHANGE: 20041221 EFFECTIVENESS DATE: 20041230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GLOBAL SERIES INC CENTRAL INDEX KEY: 0000842918 IRS NUMBER: 411850486 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-25824 FILM NUMBER: 041217577 BUSINESS ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER STREET 2: H27/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126712772 MAIL ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER STREET 2: H27/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: IDS GLOBAL SERIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: IDS GLOBAL BOND FUND INC DATE OF NAME CHANGE: 19901011 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP GLOBAL SERIES INC CENTRAL INDEX KEY: 0000842918 IRS NUMBER: 411850486 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05696 FILM NUMBER: 041217578 BUSINESS ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER STREET 2: H27/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126712772 MAIL ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER STREET 2: H27/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: IDS GLOBAL SERIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: IDS GLOBAL BOND FUND INC DATE OF NAME CHANGE: 19901011 485BPOS 1 partabc.txt AXP GLOBAL SERIES, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 43 (File No. 33-25824) [X] --------- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 45 (File No. 811-5696) [X] ------- AXP GLOBAL SERIES, INC. 50606 AXP Financial Center Minneapolis, Minnesota 55474 Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810 Minneapolis, MN 55402-3268 (612) 330-9283 Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on December 30, 2004 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485. If appropriate, check the following box: [ ] This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment. AXP Threadneedle Emerging Markets Fund, AXP Global Bond Fund, AXP Threadneedle Global Equity Fund and AXP Global Technology Fund, series of the Registrant, have adopted a master/feeder operating structure. This Post-Effective Amendment includes a signature page for World Trust, the master fund. AXP(R) Global Bond Fund AXP Global Bond Fund seeks to provide shareholders with high total return through income and growth of capital. Prospectus Dec. 30, 2004 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 4p Past Performance 6p Fees and Expenses 8p Investment Manager 9p Other Securities and Investment Strategies 10p Buying and Selling Shares 11p Valuing Fund Shares 11p Investment Options 12p Purchasing Shares 13p Transactions Through Third Parties 15p Sales Charges 16p Exchanging/Selling Shares 21p Distributions and Taxes 24p Master/Feeder Structure 26p Financial Highlights 27p - -------------------------------------------------------------------------------- 2p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS The Fund GOAL AXP Global Bond Fund (the Fund) seeks to provide shareholders with high total return through income and growth of capital. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified mutual fund that invests primarily in debt obligations of U.S. and foreign issuers. Under normal market conditions, at least 80% of the Fund's net assets will be invested in investment-grade corporate or government debt obligations, including money market instruments, of issuers located in at least three different countries. Although the Fund emphasizes high and medium-quality debt securities, it may assume some credit risk to achieve higher dividends and /or capital appreciation by buying below investment-grade bonds (junk bonds). The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's goal, American Express Financial Corporation (AEFC), the Fund's investment manager, chooses investments by: o Considering opportunities and risks by credit rating and currency. o Identifying investment-grade U.S. and foreign bonds. o Identifying below investment-grade U.S. and foreign bonds. o Identifying bonds that can take advantage of currency movements and interest rate differences among nations. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o The security is overvalued. o The security continues to meet the standards described above. AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From time to time, AEFC may purchase derivative instruments to hedge against currency fluctuations. Unusual Market Conditions During unusual market conditions, the Fund may invest more of its assets in money market securities than during normal market conditions. Although the Fund primarily will invest in these securities to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, AEFC may make frequent securities trades that could result in increased fees, expenses, and taxes. - -------------------------------------------------------------------------------- 3p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Interest Rate Risk Foreign/Emerging Markets Risk Credit Risk Liquidity Risk Diversification Risk Derivatives Risk Sector/Concentration Risk Interest Rate Risk The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity of a bond, the greater its sensitivity to changes in interest rates. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in emerging market countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. - -------------------------------------------------------------------------------- 4p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation, such as payments due on a bond or a note. The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. They have greater price fluctuations and are more likely to experience a default. Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Diversification Risk The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, it may be more susceptible to a single economic, political or regulatory occurrence than a diversified fund. In addition, a fund investing a significant portion of its investments in a single region is more susceptible to economic, political or regulatory events than a fund investing more broadly. Derivatives Risk Just as with securities in which the Fund invests directly, derivatives are subject to a number of risks, including market, correlation, liquidity, interest rate and credit risk. In addition, gains or losses involving derivatives may be substantial, because a relatively small price movement in the underlying security, currency or index may result in a substantial gain or loss for the Fund. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk. - -------------------------------------------------------------------------------- 5p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year shown on the chart below, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) - -4.73% +19.20% +7.78% +2.98% +7.49% -4.11% +2.40% +1.51% +14.02% +13.27% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 During the period shown in the bar chart, the highest return for a calendar quarter was +6.97% (quarter ended June 30, 1995) and the lowest return for a calendar quarter was -4.49% (quarter ended March 31, 1994). The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown above because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2004 was +2.56%. - -------------------------------------------------------------------------------- 6p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2003) Since Since 1 year 5 years 10 years inception (B&Y) inception (C) Global Bond: Class A Return before taxes +7.89% +4.17% +5.21% N/A N/A Return after taxes on distributions +6.39% +2.79% +3.33% N/A N/A Return after taxes on distributions and sale of fund shares +5.08% +2.67% +3.24% N/A N/A Class B Return before taxes +8.59% +4.24% N/A +6.03%(a) N/A Class C Return before taxes +12.51% N/A N/A N/A +8.49%(b) Class Y Return before taxes +13.61% +5.41% N/A +6.81%(a) N/A Lehman Brothers Global Aggregate Index (reflects no deduction for fees, expenses or taxes) +12.51% +5.43% +6.82% +6.85%(c) +9.33%(d) Lipper Global Income Funds Index +13.21% +5.60% +5.69% +6.94%(c) +8.78%(d)
(a) Inception date was March 20, 1995. (b) Inception date was June 26, 2000. (c) Measurement period started April 1, 1995. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. Past performance for Class Y for the periods prior to March 20, 1995 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses. After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there are no distributions or if the distributions are small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. - -------------------------------------------------------------------------------- 7p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. The Lehman Brothers Global Aggregate Index, an unmanaged market capitalization weighted benchmark, tracks the performance of investment grade fixed income securities denominated in 13 currencies. The index reflects the reinvestment of all income and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Global Income Funds Index includes the 30 largest global income funds tracked by Lipper Inc. The index's returns include net reinvested dividends. FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 4.75% none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none(b) 5% 1%(c) none
Annual Fund Operating Expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees 0.75% 0.75% 0.75% 0.75% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(e) 0.34% 0.35% 0.34% 0.42% Total 1.34% 2.10% 2.09% 1.17% (a) This charge may be reduced depending on the value of your total investments in American Express Funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Investment Manager." (e) Other expenses include an administrative services fee, a shareholder service fee for Class Y, a transfer agency fee and other nonadvisory expenses. - -------------------------------------------------------------------------------- 8p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. Also assume that the operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated:
1 year 3 years 5 years 10 years Class A(a) $605 $880 $1,175 $2,016 Class B $613(b) $958(b) $1,230(b) $2,241(c) Class C $212 $655 $1,125 $2,425 Class Y $119 $372 $ 645 $1,425
(a) Includes a 4.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years Class A(a) $605 $880 $1,175 $2,016 Class B $213 $658 $1,130 $2,241(b) Class C $212 $655 $1,125 $2,425 Class Y $119 $372 $ 645 $1,425
(a) Includes a 4.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in World Income Portfolio (the Portfolio), which is managed by AEFC. The team that manages the Portfolio is led by: Nicholas Pifer, CFA, Portfolio Manager o Managed the Portfolio since 2000. o Leader of the global sector team. o Joined AEFC in 2000. o Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. o Began investment career in 1990. o MA, Johns Hopkins University School of Advanced International Studies. AEFC's investment professionals who manage fixed income funds are organized into teams. Each team specializes in a particular sector of the fixed income market. - -------------------------------------------------------------------------------- 9p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS AEFC The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.75% of the Portfolio's average daily net assets. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. In addition to managing investments for all of the AXP funds, AEFC manages investments for itself and its affiliates. For institutional clients, AEFC and its subsidiaries also provide investment management and related services such as separate account asset management, institutional trust and custody, and employee benefit plan administration, as well as investment products. AEFC also serves as investment manager to the AXP Portfolio Builder Series, a group of six funds-of-funds (the Portfolio Builder Funds) that provide asset-allocation services to shareholders by investing in shares of other AXP Funds, including the Fund. The Fund may experience relatively large purchases or redemptions from the Portfolio Builder Funds. Although AEFC seeks to minimize the impact of these transactions by structuring them over a reasonable period of time, the Fund may experience increased expenses as it buys and sells portfolio securities to manage transactions for the Portfolio Builder Funds. In addition, because the Portfolio Builder Funds may own a substantial portion of the Fund, a redemption by the Portfolio Builder Funds could cause the Fund's expense ratio to increase as the Fund's fixed costs would be spread over a smaller asset base. AEFC monitors expense levels and is committed to offering funds that are competitively priced. AEFC will report to the Fund's Board of Directors on the steps it has taken to manage any potential conflicts. The Fund has received an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. Before the Fund may rely on the order, holders of a majority of the Fund's outstanding voting securities will need to approve operating the Fund in this manner. If shareholder approval is received, the Fund may add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. There is no assurance shareholder approval will be received, and no changes will be made without shareholder approval until that time. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may use other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as preferred stocks and convertible securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. - -------------------------------------------------------------------------------- 10p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Portfolio Holdings Disclosure The Fund's Board of Directors has adopted policies and procedures which govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio securities held by the Fund. A description of these policies and procedures is included in the Fund's Statement of Additional Information. Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc. (the Distributor), you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. Good form or good order means that your instructions have been received in the form required by the Distributor. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, refer to the sections on "Purchasing Shares" and "Exchanging/Selling Shares," or contact your financial advisor. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations obtained from outside pricing services approved by the Board. Certain short-term securities are valued at amortized cost. When reliable market quotations are not readily available, securities are generally priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of a security held by the Fund is materially affected by events that occur after the close of the primary market on which the security is traded but prior to the time as of which the Fund's NAV is determined. Valuing securities at fair value involves reliance on judgment. The fair value of a security is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of foreign securities, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the net asset value of the Fund's shares may change on days when shareholders will not be able to purchase or redeem the Fund's shares. - -------------------------------------------------------------------------------- 11p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00%. Shares sold less than a year after purchase are subject to a CDSC. 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. The Fund also offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y - ----------------- --------------- --------------- --------------- -------------- Availability Available to Available to Available to Limited to all all all qualifying investors. investors. investors. institutional investors. - ----------------- --------------- --------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase purchase. price is price is price is Lower sales invested in invested in invested in charge for shares of the shares of the shares of the larger Fund. Fund. Fund. investments. - ----------------- --------------- --------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over CDSC during applies if $1,000,000, the first you sell your 1% CDSC year shares less applies if decreasing to than one year you sell your 0% after six after shares less years. purchase. than one year after purchase. - ----------------- --------------- --------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee - ----------------- --------------- --------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. - ----------------- --------------- --------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. - -------------------------------------------------------------------------------- 12p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $100,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $100,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. PURCHASING SHARES To purchase shares through entities other than the Distributor, please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. - -------------------------------------------------------------------------------- 13p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: - -------------------------------- ----------------------------------------------- Individual or joint account The individual or one of the owners listed on the joint account - -------------------------------- ----------------------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) - -------------------------------- ----------------------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) - -------------------------------- ----------------------------------------------- An irrevocable trust, pension The legal entity (not the personal trust or estate representative or trustee, unless no legal entity is designated in the account title) - -------------------------------- ----------------------------------------------- Sole proprietorship or The owner single-owner LLC - -------------------------------- ----------------------------------------------- Partnership or multi-member The partnership LLC - -------------------------------- ----------------------------------------------- Corporate or LLC electing The corporation corporate status on Form 8837 - -------------------------------- ----------------------------------------------- Association, club or The organization tax-exempt organization - -------------------------------- ----------------------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at www.irs.gov. Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300 for any reason, including a market decline, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). - -------------------------------------------------------------------------------- 14p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 297-7378 for brokerage accounts (800) 967-4377 for wrap accounts TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other information related to buying or selling shares, please refer to the appropriate section in the prospectus. - -------------------------------------------------------------------------------- 15p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 4.75% 4.99% $50,000-$99,999 4.25 4.44 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. You may be able to reduce the sales charge on Class A shares, based on the combined market value of your accounts. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase: o Your current investment in this Fund, and o Previous investments you and members of your primary household group have made in Class A, Class B or Class C shares in this and other American Express mutual funds, provided your investment was subject to a sales charge. o Your primary household group consists of you, your spouse or domestic partner, and your unmarried children under age 21 sharing a mailing address. For purposes of this policy a domestic partner is an individual who shares your primary residence and with whom you own joint property. If you or any member of your primary household group elects to separate from the primary household group (for example, by asking that account statements be sent to separate addresses), your assets will no longer be combined for purposes of reducing your sales charge. - -------------------------------------------------------------------------------- 16p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS The following accounts are eligible to be included in determining the sales charge on your purchase: o Individual or joint accounts held directly at the Fund; o Individual or joint accounts held through American Express Brokerage; o Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that are subject to a sales charge and are not part of a group billing as described under "Other Class A sales charge policies"; o UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; o Revocable trust accounts for which you or a member of your primary household group, individually, is the beneficiary; o Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and o Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are not eligible to be included in determining the sales charge on your purchase: o Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); o Investments in AXP Tax-Free Money Fund; o Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts, including American Express Strategic Portfolio Service Advantage (SPS); o Investments in Class D, Class E, or Class Y shares; o Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and o Charitable and irrevocable trust accounts. If you purchase American Express mutual fund shares through different channels, for example, through a firm other than the Distributor, and you want to include those assets toward a reduced sales charge, you must inform the Distributor in writing about the other accounts when placing your purchase order. When placing your purchase order, you must provide the Distributor with your most recent account statement and contact information regarding the other accounts. A selling agent other than the Distributor may require additional information. Unless you provide the Distributor or your financial advisor with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. For more information on rights of accumulation, please see the SAI. - -------------------------------------------------------------------------------- 17p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Other Class A sales charge policies o Group billing: Purchases made through a payroll deduction program offered by an employer retirement plan that has elected to take advantage of the Distributor's group billing service, may be added together to reduce sales charges for all shares purchased through the plan. o Letter of Intent: If you intend to invest $50,000 or more over a period of 13 months, you can reduce the sales charges in Class A by completing a letter of intent form and filing it with the Distributor. The letter of intent may apply to purchases made up to 90 days before it is received in good order by the Distributor. Your holdings in American Express mutual funds acquired more than 90 days before receipt of your signed letter of intent in the Distributor's corporate office will not be counted towards the completion of the letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. If you do not complete and file the form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. o direct rollovers from American Express Retirement Services, provided that the rollover involves a transfer of Class Y shares in this Fund to Class A shares in this Fund. - -------------------------------------------------------------------------------- 18p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. o repurchases. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide the Distributor or your financial advisor with information about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You also may view this information about sales charges and breakpoints free of charge on the Fund's website. Go to www.americanexpress.com/funds and click on the hyperlink "Sales Charge Discount Information." - -------------------------------------------------------------------------------- 19p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. - -------------------------------------------------------------------------------- 20p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS EXCHANGING/SELLING SHARES To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. Exchanges You may exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. Market timing is frequent or short-term trading by certain shareholders intended to profit at the expense of other shareholders by selling shares of a fund shortly after purchase. Market timing may adversely impact a fund's performance by preventing the portfolio manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest in securities which trade on overseas securities markets may be vulnerable to market timers who seek to take advantage of changes in the values of securities between the close of overseas markets and the close of U.S. markets, which is generally the time at which a fund's NAV is calculated. To the extent that the Fund has significant holdings of foreign securities, the risks of market timing may be greater than for funds that do not have significant foreign holdings. See "Principal Investment Strategies" for a discussion of the kinds of securities in which the Fund invests. See also "Valuing Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund's Board of Directors has adopted a policy that is designed to detect and deter market timing. The Fund seeks to enforce this policy through the Distributor and its transfer agent as follows: o The Fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging. Under the Fund's procedures, there is no set number of transactions in the Fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the Fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the Fund in any 90-day period. Accounts held by a retirement plan or financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit. The Distributor does seek the assistance of retirement plans and financial intermediaries in applying similar restrictions on the sub-accounts of their participants or clients. o If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the Fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a retirement plan or other financial intermediary. The Fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - -------------------------------------------------------------------------------- 21p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS o Although the Fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The Fund receives purchase and sale orders through retirement plans and financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. - -------------------------------------------------------------------------------- 22p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 297-7378 for brokerage accounts (800) 862-7919 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 - -------------------------------------------------------------------------------- 23p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100* o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends will generally be composed of ordinary dividend income (which may include interest income, short-term capital gains and non-qualifying dividends). It is unlikely the Fund will distribute qualifying dividend income, which is eligible for preferential tax rates under current tax law. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. - -------------------------------------------------------------------------------- 24p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). You may not create a tax loss, based on paying a sales charge, by exchanging shares within 91 days of purchase. If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - -------------------------------------------------------------------------------- 25p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund | V The Fund buys units in the Portfolio | V The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. - -------------------------------------------------------------------------------- 26p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .17 .18 .19 .27 .34 Net gains (losses) (both realized and unrealized) .52 .60 .17 .30 (.63) ----- ----- ----- ----- ----- Total from investment operations .69 .78 .36 .57 (.29) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.24) (.21) (.17) (.15) (.19) ----- ----- ----- ----- ----- Net asset value, end of period $7.02 $6.57 $6.00 $5.81 $5.39 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $389 $380 $348 $355 $389 Ratio of expenses to average daily net assets(b) 1.34% 1.36% 1.34% 1.32% 1.30% Ratio of net investment income (loss) to average daily net assets 2.66% 2.73% 3.12% 4.75% 5.49% Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(c) 10.70% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 27p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .14 .12 .13 .21 .29 Net gains (losses) (both realized and unrealized) .50 .62 .19 .31 (.62) ----- ----- ----- ----- ----- Total from investment operations .64 .74 .32 .52 (.33) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.19) (.16) (.12) (.11) (.16) ----- ----- ----- ----- ----- Net asset value, end of period $7.02 $6.57 $5.99 $5.79 $5.38 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $142 $158 $152 $145 $155 Ratio of expenses to average daily net assets(b) 2.10% 2.12% 2.10% 2.09% 2.07% Ratio of net investment income (loss) to average daily net assets 1.90% 1.97% 2.36% 3.99% 4.73% Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(c) 9.83% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 28p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .14 .13 .14 .21 .10 Net gains (losses) (both realized and unrealized) .49 .60 .18 .31 (.24) ----- ----- ----- ----- ----- Total from investment operations .63 .73 .32 .52 (.14) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.19) (.16) (.13) (.11) -- ----- ----- ----- ----- ----- Net asset value, end of period $6.99 $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) 2.09% 2.14% 2.10% 2.09% 2.07%(d) Ratio of net investment income (loss) to average daily net assets 1.91% 1.89% 2.29% 3.84% 4.80%(d) Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(e) 9.72% 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. - -------------------------------------------------------------------------------- 29p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .18 .19 .20 .29 .35 Net gains (losses) (both realized and unrealized) .52 .61 .19 .27 (.62) ----- ----- ----- ----- ----- Total from investment operations .70 .80 .39 .56 (.27) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.25) (.22) (.18) (.16) (.20) ----- ----- ----- ----- ----- Net asset value, end of period $7.04 $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) 1.17% 1.18% 1.17% 1.16% 1.14% Ratio of net investment income (loss) to average daily net assets 2.83% 2.69% 3.29% 4.90% 5.75% Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(c) 10.86% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 30p -- AXP GLOBAL BOND FUND -- 2004 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Website address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IGBFX Class B:IGLOX Class C: AGBCX Class Y:-- (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6309-99 Y (12/04) AXP(R) Global Bond Fund Supplement to the Dec. 30, 2004 Prospectus This supplement describes the Fund's Class I shares. The caption headings used in this Supplement correspond to the caption headings used in the prospectus. You may purchase Class I shares only if you are an eligible investor, as described under the caption "Buying and Selling Shares" below. PAST PERFORMANCE Class I has not been in existence for a full calendar year, and therefore performance information is not shown. The performance table is intended to indicate some of the risks of investing in the Fund by showing changes in the Fund's performance over time. Please note that you will find performance returns, after the deduction of certain taxes, for other classes of shares of the Fund, together with returns of one or more broad measures of market performance, in the performance table of the prospectus. Past performance for Class I for the period prior to March 4, 2004 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses. The use of blended performance (Class I performance blended with Class A performance for periods before March 4, 2004) generally results in lower performance than Class I shares would have achieved had they been offered for the entire period. FEES AND EXPENSES Fund investors pay various expenses. The table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. The table is supplemented as follows: Shareholder Fees (fees paid directly from your investment) Class I Maximum sales charge (load) imposed on purchases (as a percentage of offering price) none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none Annual Fund Operating Expenses (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class I Management fees 0.75% Distribution (12b-1) fees 0.00% Other expenses(a) 0.14% Total 0.89% (a) Other expenses include an administrative services fee and other nonadvisory expenses. Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The table is supplemented as follows: 1 year 3 years 5 years 10 years Class I $91 $284 $494 $1,100 BUYING AND SELLING SHARES The description of Investment Options is supplemented as follows: If you are an eligible investor, you may purchase Class I shares at net asset value without an initial sales charge or CDSC on redemption. Class I shares do not have annual distribution and service fees, and do not convert to any other class of shares. The following eligible investors may purchase Class I shares: o Any fund distributed by American Express Financial Advisors Inc. (AEFA), if the fund seeks to achieve its investment objective by investing primarily in shares of the Fund and other American Express Funds. In addition, AEFA, in its sole discretion, may accept investments from other purchasers not listed above. The discussion of buying and selling shares is supplemented as follows: You may purchase, redeem or exchange Class I shares only through AEFA (see the back cover of the prospectus for address and telephone number). You may exchange your Class I shares only for Class I shares of another American Express Fund. FINANCIAL HIGHLIGHTS The Financial Highlights table is intended to help you understand the Fund's financial performance. It is supplemented as follows: 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) .16 Net gains (losses) (both realized and unrealized) .24 ----- Total from investment operations .40 ----- Less distributions: Dividends from net investment income (.14) ----- Net asset value, end of period $7.03 ----- Ratios/supplemental data Net assets, end of period (in millions) $24 Ratio of expenses to average daily net assets(c) .89%(d) Ratio of net investment income (loss) to average daily net assets 3.07%(d) Portfolio turnover rate (excluding short-term securities) 92% Total return(e) 6.06%(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. S-6309-79 Y (12/04) AXP(R) Global Technology Fund AXP Global Technology Fund seeks to provide shareholders with long-term capital growth. Prospectus Dec. 30, 2004 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 4p Past Performance 5p Fees and Expenses 8p Investment Manager 9p Other Securities and Investment Strategies 10p Buying and Selling Shares 11p Valuing Fund Shares 11p Investment Options 12p Purchasing Shares 13p Transactions Through Third Parties 15p Sales Charges 16p Exchanging/Selling Shares 20p Distributions and Taxes 24p Master/Feeder Structure 26p Financial Highlights 27p - -------------------------------------------------------------------------------- 2p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS The Fund GOAL AXP Global Technology Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified mutual fund that focuses on equity securities of companies in the information technology industry throughout the world. Although the Fund may invest in securities of issuers located in any country, at any given time the portfolio may hold primarily securities of issuers located in the U.S. Because of the multinational character of the technology industry, the headquarters, principal operations and primary sources of revenues of the companies in which the Fund invests may be located in the U.S. or outside the U.S. Under normal market conditions, at least 80% of the Fund's net assets are invested in securities of companies in the technology industry. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's goal, American Express Financial Corporation (AEFC), the Fund's investment manager, chooses investments by: o Identifying companies that AEFC believes to be principally engaged in the development, advancement, production, and/or use of products or services related to information processing, data processing, and/or information presentation. o Identifying companies with: o high demand for their products and/or services, o competitive market position, and o effective management. o Considering opportunities and risks within the technology, telecommunications, and media sectors. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o The security is overvalued relative to alternative investments. o The company or the security continues to meet the standards described above. o The company meets earnings expectations. o The company's industry experiences a broad down-turn. Unusual Market Conditions During unusual market conditions, the Fund may invest more of its assets in money market securities than during normal market conditions. Although the Fund primarily will invest in these securities to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, AEFC may make frequent securities trades that could result in increased fees, expenses, and taxes. - -------------------------------------------------------------------------------- 3p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Issuer Risk Market Risk Diversification Risk Sector Risk Style Risk Issuer Risk An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. Market Risk The market value of securities may drop, and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Diversification Risk The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, the Fund may be more susceptible to a single economic, political or regulatory event than a diversified fund. Sector Risk The fund may invest a significant part of its total assets in securities of companies primarily engaged in the technology, media or telecommunications sectors. This may result in greater market fluctuations than would happen with a fund invested in a wider variety of companies. As these sectors increase or decrease in favor with the investing public, the price of securities of companies that rely heavily on those sectors could become increasingly sensitive to downswings in the economy. Style Risk AEFC purchases growth stocks based on the expectation that the companies will have strong growth in earnings. The price paid often reflects an expected rate of growth. If that growth fails to occur, the price of the stock may decline quickly. - -------------------------------------------------------------------------------- 4p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year that the Fund has existed, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) +7.56% +41.51% +145.12% -23.19% -53.79% -42.08% 72.64% 1997 1998 1999 2000 2001 2002 2003 During the period shown in the bar chart, the highest return for a calendar quarter was +86.25% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -48.48% (quarter ended March 31, 2001). The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown above because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2004 was -8.20%. Prior to April 19, 2000, the Fund had not engaged in a broad public offering of its shares, or been subject to redemption requests. It had sold shares only to a single investor. One factor impacting the Fund's 1999 performance was the high concentration in technology investments, particularly in securities of internet and communication companies. These investments performed well and had a greater effect on the Fund's performance than similar investments made by other funds because of the high concentration, the lack of cash flows and the smaller size of the Fund. There is no assurance that the Fund's future investments will result in the same level or performance. AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.82% for Class A, 2.59% for Class B, 2.59% for Class C and 1.63% for Class Y. - -------------------------------------------------------------------------------- 5p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2003)(a) Since Since 1 year 5 years inception (A,B,Y) inception (C) Global Technology: Class A Return before taxes +62.67% -3.89% +2.96%(b) N/A Return after taxes on distributions +62.67% -8.62% -0.62%(b) N/A Return after taxes on distributions and sale of fund shares +40.73% -2.68% +3.01%(b) N/A Class B Return before taxes +66.53% -3.55% +3.03%(b) N/A Class C Return before taxes +70.53% N/A N/A -27.64%(c) Class Y Return before taxes +72.64% -2.75% +3.82%(b) N/A GSTI(R) Composite Index (reflects no deduction for fees, expenses or taxes) +54.19% +4.55% +6.49%(d) -23.75%(e) Lipper Science and Technology Funds Index +51.31% -2.89% +4.28%(d) -24.69%(e)
(a) AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.82% for Class A, 2.59% for Class B, 2.59% for Class C and 1.63% for Class Y. (b) Inception date was Nov. 13, 1996. (c) Inception date was June 26, 2000. (d) Measurement period started Dec. 1, 1996. (e) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. - -------------------------------------------------------------------------------- 6p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there are no distributions or if the distributions are small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. Goldman Sachs Technology Index(R) Composite Index (GSTI(R) Composite Index), an unmanaged index published by Goldman Sachs, is a market capitalization-weighted index of over 200 stocks designed to measure the performance of companies in the technology sector. The Lipper Science and Technology Funds Index includes the 30 largest science and technology funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 7p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75% none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none(b) 5% 1%(c) none
Annual Fund Operating Expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 0.83% 0.83% 0.83% 0.83% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.66% 0.69% 0.66% 0.72% Total 1.74% 2.52% 2.49% 1.55% (a) This charge may be reduced depending on the value of your total investments in American Express Funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Investment Manager." AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.82% for Class A; 2.59% for Class B; 2.59% for Class C and 1.63% for Class Y. (e) Includes the impact of a performance incentive adjustment fee that increased the management fee by 0.11% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder service fee for Class Y, a transfer agency fee and other nonadvisory expenses. - -------------------------------------------------------------------------------- 8p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. Also assume that operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated:
1 year 3 years 5 years 10 years Class A(a) $742 $1,092 $1,465 $2,513 Class B $655(b) $1,085(b) $1,441(b) $2,668(c) Class C $252 $ 776 $1,326 $2,830 Class Y $158 $ 490 $ 846 $1,851
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years Class A(a) $742 $1,092 $1,465 $2,513 Class B $255 $ 785 $1,341 $2,668(b) Class C $252 $ 776 $1,326 $2,830 Class Y $158 $ 490 $ 846 $1,851
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.82% for Class A, 2.59% for Class B, 2.59% for Class C and 1.63% for Class Y. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in World Technologies Portfolio (the Portfolio), which is managed by AEFC. Nina Hughes, Portfolio Manager o Managed the Portfolio since 2002. o Joined AEFC in 2002. o Prior to that, Equity Analyst at Tudor Investment Corporation covering software, infrastructure and service companies, 1998 to 2002, Software Quality Engineer for Baxter Healthcare, 1995 to 1997. o MBA, Babson College. - -------------------------------------------------------------------------------- 9p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS AEFC The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.83% of the Portfolio's average daily net assets. Beginning Dec. 1, 2002, the fee will be subject to an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. In certain circumstances, the Board may approve a change in the index. The maximum adjustment (increase or decrease) will be 0.12% of the Portfolio's average net assets on an annual basis. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. In addition to managing investments for all of the AXP funds, AEFC manages investments for itself and its affiliates. For institutional clients, AEFC and its subsidiaries also provide investment management and related services such as separate account asset management, institutional trust and custody, and employee benefit plan administration, as well as investment products. AEFC also serves as investment manager to the AXP Portfolio Builder Series, a group of six affiliated funds-of-funds (the Portfolio Builder Funds) that provide asset-allocation services to shareholders by investing in shares of other AXP Funds, including the Fund. The Fund may experience relatively large purchases or redemptions from the Portfolio Builder Funds. Although AEFC seeks to minimize the impact of these transactions by structuring them over a reasonable period of time, the Fund may experience increased expenses as it buys and sells portfolio securities to manage transactions for the Portfolio Builder Funds. In addition, because the Portfolio Builder Funds may own a substantial portion of the Fund, a redemption by the Portfolio Builder Funds could cause the Fund's expense ratio to increase as the Fund's fixed costs would be spread over a smaller asset base. AEFC monitors expense levels and is committed to offering funds that are competitively priced. AEFC will report to the Fund's Board of Directors on the steps it has taken to manage any potential conflicts. The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may use other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as money market securities and debt securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Funds policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. - -------------------------------------------------------------------------------- 10p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. Portfolio Holdings Disclosure The Fund's Board of Directors has adopted policies and procedures which govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio securities held by the Fund. A description of these policies and procedures is included in the Fund's Statement of Additional Information. Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc. (the Distributor), you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. Good form or good order means that your instructions have been received in the form required by the Distributor. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, refer to the sections on "Purchasing Shares" and "Exchanging/Selling Shares," or contact your financial advisor. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations obtained from outside pricing services approved by the Board. Certain short-term securities are valued at amortized cost. When reliable market quotations are not readily available, securities are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of a security held by the Fund is materially affected by events that occur after the close of the primary market on which the security is traded but prior to the time as of which the Fund's NAV is determined. Valuing securities at fair value involves reliance on judgment. The fair value of a security is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of foreign securities, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the net asset value of the Fund's shares may change on days when shareholders will not be able to purchase or redeem the Fund's shares. - -------------------------------------------------------------------------------- 11p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00% (may be subject to a CDSC). 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. The Fund also offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. Class A Class B Class C Class Y - ----------------- --------------- --------------- --------------- -------------- Availability Available to Available to Available to Limited to all all all qualifying investors. investors. investors. institutional investors. - ----------------- --------------- --------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase purchase. price is price is price is Lower sales invested in invested in invested in charge for shares of the shares of the shares of the larger Fund. Fund. Fund. investments. - ----------------- --------------- --------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over CDSC during applies if $1,000,000, the first you sell your 1% CDSC year shares less applies if decreasing to than one year you sell your 0% after six after shares less years. purchase. than one year after purchase. - ----------------- --------------- --------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee - ----------------- --------------- --------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. - ----------------- --------------- --------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. - -------------------------------------------------------------------------------- 12p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $100,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $100,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. PURCHASING SHARES To purchase shares through entities other than the Distributor, please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. - -------------------------------------------------------------------------------- 13p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: - -------------------------------- ----------------------------------------------- Individual or joint account The individual or one of the owners listed on the joint account - -------------------------------- ----------------------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) - -------------------------------- ----------------------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) - -------------------------------- ----------------------------------------------- An irrevocable trust, pension The legal entity (not the personal trust or estate representative or trustee, unless no legal entity is designated in the account title) - -------------------------------- ----------------------------------------------- Sole proprietorship or The owner single-owner LLC - -------------------------------- ----------------------------------------------- Partnership or multi-member The partnership LLC - -------------------------------- ----------------------------------------------- Corporate or LLC electing The corporation corporate status on Form 8837 - -------------------------------- ----------------------------------------------- Association, club or The organization tax-exempt organization - -------------------------------- ----------------------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at www.irs.gov. Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300 for any reason, including a market decline, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). - -------------------------------------------------------------------------------- 14p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 297-7378 for brokerage accounts (800) 967-4377 for wrap accounts TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other information related to buying or selling shares, please refer to the appropriate section in the prospectus. - -------------------------------------------------------------------------------- 15p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. You may be able to reduce the sales charge on Class A shares, based on the combined market value of your accounts. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase: o Your current investment in this Fund, and o Previous investments you and members of your primary household group have made in Class A, Class B or Class C shares in this and other American Express mutual fund, provided your investment was subject to a sales charge. o Your primary household group consists of you, your spouse or domestic partner, and your unmarried children under age 21 sharing a mailing address. For purposes of this policy a domestic partner is an individual who shares your primary residence and with whom you own joint property. If you or any member of your primary household group elects to separate from the primary household group (for example, by asking that account statements be sent to separate addresses), your assets will no longer be combined for purposes of reducing your sales charge. The following accounts are eligible to be included in determining the sales charge on your purchase: o Individual or joint accounts held directly at the Fund; o Individual or joint accounts held through American Express Brokerage; o Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that are subject to a sales charge and are not part of a group billing as described under "Other Class A sales charge policies"; o UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; o Revocable trust accounts for which you or a member of your primary household group, individually, is the beneficiary; - -------------------------------------------------------------------------------- 16p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS o Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and o Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are not eligible to be included in determining the sales charge on your purchase: o Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); o Investments in AXP Tax-Free Money Fund; o Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts, including American Express Strategic Portfolio Service Advantage (SPS); o Investments in Class D, Class E, or Class Y shares; o Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and o Charitable and irrevocable trust accounts. If you purchase American Express mutual fund shares through different channels, for example, through a firm other than the Distributor, and you want to include those assets toward a reduced sales charge, you must inform the Distributor in writing about the other accounts when placing your purchase order. When placing your purchase order, you must provide the Distributor with your most recent account statement and contact information regarding the other accounts. A selling agent other than the Distributor may require additional information. Unless you provide the Distributor or your financial advisor with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. For more information on rights of accumulation, please see the SAI. Other Class A sales charge policies o Group billing: Purchases made through a payroll deduction program offered by an employer retirement plan that has elected to take advantage of the Distributor's group billing service, may be added together to reduce sales charges for all shares purchased through the plan. o Letter of Intent: If you intend to invest $50,000 or more over a period of 13 months, you can reduce the sales charges in Class A by completing a letter of intent form and filing it with the Distributor. The letter of intent may apply to purchases made up to 90 days before it is received in good order by the Distributor. Your holdings in American Express mutual funds acquired more than 90 days before receipt of your signed letter of intent in the Distributor's corporate office will not be counted towards the completion of the letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. If you do not complete and file the form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. For more details, please contact your financial advisor or see the SAI. - -------------------------------------------------------------------------------- 17p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. o direct rollovers from American Express Retirement Services, provided that the rollover involves a transfer of Class Y shares in this Fund to Class A shares in this Fund. o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. o repurchases. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide the Distributor or your financial advisor with information about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. - -------------------------------------------------------------------------------- 18p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS You also may view this information about sales charges and breakpoints free of charge on the Fund's website. Go to www.americanexpress.com/funds and click on the hyperlink "Sales Charge Discount Information." Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. - -------------------------------------------------------------------------------- 19p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. Exchanges You may exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. Market timing is frequent or short-term trading by certain shareholders intended to profit at the expense of other shareholders by selling shares of a fund shortly after purchase. Market timing may adversely impact a fund's performance by preventing the portfolio manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest in securities which trade on overseas securities markets may be vulnerable to market timers who seek to take advantage of changes in the values of securities between the close of overseas markets and the close of U.S. markets, which is generally the time at which a fund's NAV is calculated. To the extent that the Fund has significant holdings of foreign securities, the risks of market timing may be greater than for funds that do not have significant foreign holdings. See "Principal Investment Strategies" for a discussion of the kinds of securities in which the Fund invests. See also "Valuing Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. - -------------------------------------------------------------------------------- 20p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS The Fund's Board of Directors has adopted a policy that is designed to detect and deter market timing. The Fund seeks to enforce this policy through the Distributor and its transfer agent as follows: o The Fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging. Under the Fund's procedures, there is no set number of transactions in the Fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the Fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the Fund in any 90-day period. Accounts held by a retirement plan or financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit. The Distributor does seek the assistance of retirement plans and financial intermediaries in applying similar restrictions on the sub-accounts of their participants or clients. o If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the Fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a retirement plan or other financial intermediary. The Fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. o Although the Fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The Fund receives purchase and sale orders through retirement plans and financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. - -------------------------------------------------------------------------------- 21p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. - -------------------------------------------------------------------------------- 22p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS By telephone (800) 297-7378 for brokerage accounts (800) 862-7919 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100* o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. - -------------------------------------------------------------------------------- 23p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include non-qualifying dividends, interest income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). - -------------------------------------------------------------------------------- 24p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS You may not create a tax loss, based on paying a sales charge, by exchanging shares within 91 days of purchase. If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - -------------------------------------------------------------------------------- 25p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund | V The Fund buys units in the Portfolio | V The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. - -------------------------------------------------------------------------------- 26p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.03) (.02) (.03) (.02) (.01) Net gains (losses) (both realized and unrealized) .14 .71 (.54) (3.64) 7.05 ----- ----- ----- ------ ------- Total from investment operations .11 .69 (.57) (3.66) 7.04 ----- ----- ----- ------ ------- Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(b) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (13.05) ----- ----- ----- ------ ------- Net asset value, end of period $1.83 $1.72 $1.03 $ 1.60 $ 5.26 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in thousands) $146,066 $145,382 $80,831 $146,139 $319,164 Ratio of expenses to average daily net assets(c) 1.74% 1.94% 1.91% 1.63% 1.24%(d) Ratio of net investment income (loss) to average daily net assets (1.48%) (1.47%) (1.65%) (.99%) (.38%) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(e) 6.40% 66.99% (35.62%) (69.58%) 66.58%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) A distibution payable to a single corporate shareholder. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class A would have been 1.45% for the period ended Oct. 31, 2000. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 27p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.04) (.03) (.04) (.04) (.04) Net gains (losses) (both realized and unrealized) .11 .64 (.48) (3.29) 6.84 ----- ----- ----- ------ ------- Total from investment operations .07 .61 (.52) (3.33) 6.80 ----- ----- ----- ------ ------- Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(b) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (13.05) ----- ----- ----- ------ ------- Net asset value, end of period $1.60 $1.53 $ .92 $ 1.44 $ 4.77 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in thousands) $59,344 $64,387 $37,877 $67,425 $138,545 Ratio of expenses to average daily net assets(c) 2.52% 2.75% 2.71% 2.42% 2.01%(d) Ratio of net investment income (loss) to average daily net assets (2.26%) (2.27%) (2.45%) (1.78%) (1.16%) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(e) 4.58% 66.30% (36.11%) (69.81%) 65.25%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) A distibution payable to a single corporate shareholder. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class B would have been 2.26% for the period ended Oct. 31, 2000. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 28p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.04) (.03) (.04) (.04) (.01) Net gains (losses) (both realized and unrealized) .12 .64 (.48) (3.29) (.27) ----- ----- ----- ------ ----- Total from investment operations .08 .61 (.52) (3.33) (.28) ----- ----- ----- ------ ----- Net asset value, end of period $1.61 $1.53 $ .92 $ 1.44 $4.77 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in thousands) $3,953 $4,000 $1,964 $4,069 $3,298 Ratio of expenses to average daily net assets(c) 2.49% 2.72% 2.69% 2.42% 2.01%(d),(e) Ratio of net investment income (loss) to average daily net assets (2.23%) (2.26%) (2.39%) (1.84%) (1.17%)(d) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(f) 5.23% 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. - -------------------------------------------------------------------------------- 29p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.02) (.02) (.03) (.02) -- Net gains (losses) (both realized and unrealized) .13 .71 (.54) (3.63) 7.03 ----- ----- ----- ------ ------- Total from investment operations .11 .69 (.57) (3.65) 7.03 ----- ----- ----- ------ ------- Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(b) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (13.05) ----- ----- ----- ------ ------- Net asset value, end of period $1.83 $1.72 $1.03 $ 1.60 $ 5.25 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in thousands) $413 $229 $58 $57 $88 Ratio of expenses to average daily net assets(c) 1.55% 1.69% 1.72% 1.49% .94%(d) Ratio of net investment income (loss) to average daily net assets (1.28%) (1.25%) (1.61%) (.89%) (.80%) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(e) 6.40% 66.99% (35.63%) (69.52%) 66.27%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) A distibution payable to a single corporate shareholder. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class Y would have been 1.19% for the period ended Oct. 31, 2000. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 30p -- AXP GLOBAL TECHNOLOGY FUND -- 2004 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Website address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: AXIAX Class B:INVBX Class C: AXICX Class Y:-- (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6395-99 H (12/04) AXP(R) Global Technology Fund Supplement to the Dec. 30, 2004 Prospectus This supplement describes the Fund's Class I shares. The caption headings used in this Supplement correspond to the caption headings used in the prospectus. You may purchase Class I shares only if you are an eligible investor, as described under the caption "Buying and Selling Shares" below. PAST PERFORMANCE Class I has not been in existence for a full calendar year, and therefore performance information is not shown. The performance table is intended to indicate some of the risks of investing in the Fund by showing changes in the Fund's performance over time. Please note that you will find performance returns, after the deduction of certain taxes, for other classes of shares of the Fund, together with returns of one or more broad measures of market performance, in the performance table of the prospectus. Past performance for Class I for the period prior to March 4, 2004 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses. The use of blended performance (Class I performance blended with Class A performance for periods before March 4, 2004) generally results in lower performance than Class I shares would have achieved had they been offered for the entire period. FEES AND EXPENSES Fund investors pay various expenses. The table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. The table is supplemented as follows: Shareholder Fees (fees paid directly from your investment) Class I Maximum sales charge (load) imposed on purchases (as a percentage of offering price) none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none Annual Fund operating expenses (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class I Management fees(a) 0.83% Distribution (12b-1) fees 0.00% Other expenses(b) 0.20% Total(c) 1.03% (a) Includes the impact of a performance incentive adjustment fee that increased the Fund's management fee by 0.11% for the most recent fiscal year. (b) Other expenses include an administrative services fee and other nonadvisory expenses. (c) American Express Financial Corporation (AEFC) and its affiliates have contractually agreed to waive certain fees and to absorb certain other Fund expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.13% for Class I. Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The table is supplemented as follows: 1 year 3 years 5 years 10 years Class I $105 $328 $570 $1,264 BUYING AND SELLING SHARES The description of Investment Options is supplemented as follows: If you are an eligible investor, you may purchase Class I shares at net asset value without an initial sales charge or CDSC on redemption. Class I shares do not have annual distribution and service fees, and do not convert to any other class of shares. The following eligible investors may purchase Class I shares: o Any fund distributed by American Express Financial Advisors Inc. (AEFA), if the fund seeks to achieve its investment objective by investing primarily in shares of the Fund and other American Express Funds. In addition, AEFA, in its sole discretion, may accept investments from other purchasers not listed above. The discussion of buying and selling shares is supplemented as follows: You may purchase, redeem or exchange Class I shares only through AEFA (see the back cover of the prospectus for address and telephone number). You may exchange your Class I shares only for Class I shares of another American Express Fund. FINANCIAL HIGHLIGHTS The Financial Highlights table is intended to help you understand the Fund's financial performance. It is supplemented as follows: Class I Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(b) Net asset value, beginning of period $1.70 ----- Income from investment operations: Net investment income (loss) (.02) Net gains (losses) (both realized and unrealized) .15 ----- Total from investment operations .13 ----- Net asset value, end of period $1.83 ----- Ratios/supplemental data Net assets, end of period (in thousands) $11 Ratio of expenses to average daily net assets(c) 1.03%(d) Ratio of net investment income (loss) to average daily net assets (.73%)(d) Portfolio turnover rate (excluding short-term securities) 349% Total return(e) 7.65%(f) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was July 15, 2004. (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. S-6395-79 H (12/04) AXP(R) Threadneedle Emerging Markets Fund AXP Threadneedle Emerging Markets Fund seeks to provide shareholders with long-term capital growth. Prospectus Dec. 30, 2004 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 5p Past Performance 6p Fees and Expenses 9p Investment Manager 10p Other Securities and Investment Strategies 12p Buying and Selling Shares 12p Valuing Fund Shares 13p Investment Options 13p Purchasing Shares 15p Transactions Through Third Parties 17p Sales Charges 17p Exchanging/Selling Shares 22p Distributions and Taxes 25p Master/Feeder Structure 27p Financial Highlights 28p - -------------------------------------------------------------------------------- 2p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS The Fund GOAL AXP Threadneedle Emerging Markets Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in equity securities of emerging markets companies. Emerging markets are countries characterized as developing or emerging by either the World Bank or the United Nations. Under normal market conditions, at least 80% of the Fund's net assets will be invested in securities of companies that are located in emerging markets countries, or that earn 50% or more of their total revenues from goods or services produced in emerging market countries or from sales made in emerging markets countries. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. American Express Financial Corporation (AEFC) serves as the investment manager to the Fund and is responsible for oversight of the Fund's investment process and for administration of the Fund. AEFC has entered into an agreement with Threadneedle International Limited (Threadneedle), an indirect wholly-owned subsidiary of AEFC, to act as subadviser to the Fund. Threadneedle chooses investments by: o Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. o Conducting detailed research on companies in a consistent strategic and macroeconomic framework. o Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. o Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. - -------------------------------------------------------------------------------- 3p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Using the global sector strategy, the Fund's portfolio management team constructs the portfolio by selecting geographic regions in which to invest and by investing in most of the stocks on two core lists of holdings, the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the portfolio management team. These discretionary holdings will typically make up a much smaller portion of the Fund. o The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. o The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by: o Evaluating the opportunities and risks within regions and sectors; o Assessing valuations; and o Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. o Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. Unusual Market Conditions During weak or declining markets, the Fund may invest more of its assets in money market securities than during normal market conditions. The Fund will invest in these securities primarily to avoid losses, however this type of investment also could prevent the Fund from achieving its investment objective. During these times, the Fund may make frequent securities trades that could result in increased fees, expenses, and taxes. - -------------------------------------------------------------------------------- 4p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Foreign/Emerging Markets Risk Issuer Risk Sector/Concentration Risk Liquidity Risk Market Risk The market value of securities may drop, and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Issuer Risk An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. - -------------------------------------------------------------------------------- 5p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk. Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year that the Fund has existed, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) +6.26% -30.26% +79.03% -33.03% -3.85% -3.06% +40.60% 1997 1998 1999 2000 2001 2002 2003 During the period shown in the bar chart, the highest return for a calendar quarter was +37.49% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -27.03% (quarter ended Sept. 30, 1998). The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown above because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2004 was +6.11%. AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.99% for Class A, 2.75% for Class B, 2.75% for Class C and 1.82% for Class Y. - -------------------------------------------------------------------------------- 6p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2003)(a) Since Since 1 year 5 years inception (A,B&Y) inception (C) Threadneedle Emerging Markets: Class A Return before taxes +32.53% +8.17% +1.66%(b) N/A Return after taxes on distributions +32.22% +8.12% +1.46%(b) N/A Return after taxes on distributions and sale of fund shares +21.33% +7.08% +1.30%(b) N/A Class B Return before taxes +35.49% +8.48% +1.73%(b) N/A Class C Return before taxes +39.42% N/A N/A -0.68%(c) Class Y Return before taxes +40.95% +9.75% +2.71%(b) N/A MSCI Emerging Markets Free Index (reflects no deduction for fees, expenses or taxes) +56.28% +10.62% +1.33%(d) +2.27%(e) Lipper Emerging Markets Funds Index +56.95% +11.02% +1.57%(d) +2.87%(e)
(a) AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.99% for Class A, 2.75% for Class B, 2.75% for Class C and 1.82% for Class Y. (b) Inception date was Nov. 13, 1996. (c) Inception date was June 26, 2000. (d) Measurement period started Dec. 1, 1996. (e) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. - -------------------------------------------------------------------------------- 7p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there are no distributions or if the distributions are small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. MSCI Emerging Markets Free Index, an unmanaged market capitalization-weighted index, is compiled from a composite of securities markets of 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Emerging Markets Funds Index includes the 30 largest emerging markets funds tracked by Lipper Inc. The index's return include net reinvested dividends. - -------------------------------------------------------------------------------- 8p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75% none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none(b) 5% 1%(c) none
Annual Fund Operating Expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 1.01% 1.01% 1.01% 1.01% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.57% 0.58% 0.59% 0.64% Total 1.83% 2.59% 2.60% 1.65% (a) This charge may be reduced depending on the value of your total investments in American Express Funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Investment Manager." AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.99% for Class A; 2.75% for Class B; 2.75% for Class C and 1.82% for Class Y. (e) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.08% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder service fee for Class Y, a transfer agency fee and other nonadvisory expenses. - -------------------------------------------------------------------------------- 9p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. Also assume that the operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated:
1 year 3 years 5 years 10 years Class A(a) $750 $1,118 $1,509 $2,604 Class B $662(b) $1,106(b) $1,476(b) $2,743(c) Class C $263 $ 809 $1,381 $2,938 Class Y $168 $ 521 $ 898 $1,960
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years Class A(a) $750 $1,118 $1,509 $2,604 Class B $262 $ 806 $1,376 $2,743(b) Class C $263 $ 809 $1,381 $2,938 Class Y $168 $ 521 $ 898 $1,960
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. AEFC and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.99% for Class A, 2.75% for Class B, 2.75% for Class C and 1.82% for Class Y. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in Emerging Markets Portfolio (the Portfolio). The team that manages the Portfolio is led by: Julian A.S. Thompson, Portfolio Manager o Managed the Portfolio since 2000. o Joined AEFC in 1999. o Began investment career in 1993 as an Investment Manager for Stewart Ivory, a Scottish investment company, from 1993 to 1999. o BA and Ph.D., Magdalene College, Cambridge University. and Jules Mort, Deputy Portfolio Manager o Managed the Portfolio since 2003. o Joined Threadneedle in 2001 as a fund manager. - -------------------------------------------------------------------------------- 10p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS o Began investment career in 1997 as an Analyst and Portfolio Manager, Baillie Gifford & Co., 1997 to 2001. o MSc, University of Stirling. Threadneedle International Limited (Subadviser), an indirect wholly-owned subsidiary of AEFC, at 60 St. Mary Axe, London EC3A 8JQ, England, subadvises the Fund's assets. AEFC The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 1.01% of the Portfolio's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. In certain circumstances, the Board may approve a change in the index. The maximum adjustment (increase or decrease) is 0.12% of the Portfolio's average net assets on an annual basis. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. In addition to managing investments for all of the AXP funds, AEFC manages investments for itself and its affiliates. For institutional clients, AEFC and its subsidiaries also provide investment management and related services such as separate account asset management, institutional trust and custody, and employee benefit plan administration, as well as investment products. AEFC also serves as investment manager to the AXP Portfolio Builder Series, a group of six funds-of-funds (the Portfolio Builder Funds) that provide asset-allocation services to shareholders by investing in shares of other AXP Funds, including the Fund. The Fund may experience relatively large purchases or redemptions from the Portfolio Builder Funds. Although AEFC seeks to minimize the impact of these transactions by structuring them over a reasonable period of time, the Fund may experience increased expenses as it buys and sells portfolio securities to manage transactions for the Portfolio Builder Funds. In addition, because the Portfolio Builder Funds may own a substantial portion of the Fund, a redemption by the Portfolio Builder Funds could cause the Fund's expense ratio to increase as the Fund's fixed costs would be spread over a smaller asset base. AEFC monitors expense levels and is committed to offering funds that are competitively priced. AEFC will report to the Fund's Board of Directors on the steps it has taken to manage any potential conflicts. - -------------------------------------------------------------------------------- 11p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may use other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments such as money market securities and debt securities. Additionally, the Fund may use derivative instruments, such as futures, options, and forward contracts, to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. Portfolio Holdings Disclosure The Fund's Board of Directors has adopted policies and procedures which govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio securities held by the Fund. A description of these policies and procedures is included in the Fund's Statement of Additional Information. Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc. (the Distributor), you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. Good form or good order means that your instructions have been received in the form required by the Distributor. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, refer to the sections on "Purchasing Shares" and "Exchanging/Selling Shares," or contact your financial advisor. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. - -------------------------------------------------------------------------------- 12p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations obtained from outside pricing services approved by the Board. Certain short-term securities are valued at amortized cost. When reliable market quotations are not readily available, securities are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of a security held by the Fund is materially affected by events that occur after the close of the primary market on which the security is traded but prior to the time as of which the Fund's NAV is determined. Valuing securities at fair value involves reliance on judgment. The fair value of a security is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of foreign securities or securities that trade infrequently, or both, fair valuation may be used more frequently than for other funds. The Fund uses a third-party service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the net asset value of the Fund's shares may change on days when shareholders will not be able to purchase or redeem the Fund's shares. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00%. Shares sold less than a year after purchase are subject to a CDSC. 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. The Fund also offers an additional class of shares, Class I, exclusively to certain institutional investors. Class I shares are made available through a separate prospectus supplement provided to investors eligible to purchase the shares. - -------------------------------------------------------------------------------- 13p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y - ----------------- --------------- --------------- --------------- -------------- Availability Available to Available to Available to Limited to all all all qualifying investors. investors. investors. institutional investors. - ----------------- --------------- --------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase purchase. price is price is price is Lower sales invested in invested in invested in charge for shares of the shares of the shares of the larger Fund. Fund. Fund. investments. - ----------------- --------------- --------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over CDSC during applies if $1,000,000, the first you sell your 1% CDSC year shares less applies if decreasing to than one year you sell your 0% after six after shares less years. purchase. than one year after purchase. - ----------------- --------------- --------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee - ----------------- --------------- --------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. - ----------------- --------------- --------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $100,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $100,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. - -------------------------------------------------------------------------------- 14p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS PURCHASING SHARES To purchase shares through entities other than the Distributor, please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: - -------------------------------- ----------------------------------------------- Individual or joint account The individual or one of the owners listed on the joint account - -------------------------------- ----------------------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) - -------------------------------- ----------------------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) - -------------------------------- ----------------------------------------------- An irrevocable trust, pension The legal entity (not the personal trust or estate representative or trustee, unless no legal entity is designated in the account title) - -------------------------------- ----------------------------------------------- Sole proprietorship or The owner single-owner LLC - -------------------------------- ----------------------------------------------- Partnership or multi-member The partnership LLC - -------------------------------- ----------------------------------------------- Corporate or LLC electing The corporation corporate status on Form 8837 - -------------------------------- ----------------------------------------------- Association, club or The organization tax-exempt organization - -------------------------------- ----------------------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at www.irs.gov. - -------------------------------------------------------------------------------- 15p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300 for any reason, including a market decline, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 297-7378 for brokerage accounts (800) 967-4377 for wrap accounts - -------------------------------------------------------------------------------- 16p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. You may be able to reduce the sales charge on Class A shares, based on the combined market value of your accounts. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase: o Your current investment in this Fund, and o Previous investments you and members of your primary household group have made in Class A, Class B or Class C shares in this and other American Express mutual funds, provided your investment was subject to a sales charge. o Your primary household group consists of you, your spouse or domestic partner, and your unmarried children under age 21 sharing a mailing address. For purposes of this policy a domestic partner is an individual who shares your primary residence and with whom you own joint property. If you or any member of your primary household group elects to separate from the primary household group (for example, by asking that account statements be sent to separate addresses), your assets will no longer be combined for purposes of reducing your sales charge. - -------------------------------------------------------------------------------- 17p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS The following accounts are eligible to be included in determining the sales charge on your purchase: o Individual or joint accounts held directly at the Fund; o Individual or joint accounts held through American Express Brokerage; o Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that are subject to a sales charge and are not part of a group billing as described under "Other Class A sales charge policies"; o UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; o Revocable trust accounts for which you or a member of your primary household group, individually, is the beneficiary; o Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and o Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are not eligible to be included in determining the sales charge on your purchase: o Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); o Investments in AXP Tax-Free Money Fund; o Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts, including American Express Strategic Portfolio Service Advantage (SPS); o Investments in Class D, Class E, or Class Y shares; o Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and o Charitable and irrevocable trust accounts. If you purchase American Express mutual fund shares through different channels, for example, through a firm other than the Distributor, and you want to include those assets toward a reduced sales charge, you must inform the Distributor in writing about the other accounts when placing your purchase order. When placing your purchase order, you must provide the Distributor with your most recent account statement and contact information regarding the other accounts. A selling agent other than the Distributor may require additional information. Unless you provide the Distributor or your financial advisor with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. For more information on rights of accumulation, please see the SAI. - -------------------------------------------------------------------------------- 18p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Other Class A sales charge policies o Group billing: Purchases made through a payroll deduction program offered by an employer retirement plan that has elected to take advantage of the Distributor's group billing service, may be added together to reduce sales charges for all shares purchased through the plan. o Letter of Intent: If you intend to invest $50,000 or more over a period of 13 months, you can reduce the sales charges in Class A by completing a letter of intent form and filing it with the Distributor. The letter of intent may apply to purchases made up to 90 days before it is received in good order by the Distributor. Your holdings in American Express mutual funds acquired more than 90 days before receipt of your signed letter of intent in the Distributor's corporate office will not be counted towards the completion of the letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. If you do not complete and file the form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. o direct rollovers from American Express Retirement Services, provided that the rollover involves a transfer of Class Y shares in this Fund to Class A shares in this Fund. - -------------------------------------------------------------------------------- 19p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. o repurchases. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide the Distributor or your financial advisor with information about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You also may view this information about sales charges and breakpoints free of charge on the Fund's website. Go to www.americanexpress.com/funds and click on the hyperlink "Sales Charge Discount Information." - -------------------------------------------------------------------------------- 20p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. - -------------------------------------------------------------------------------- 21p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS EXCHANGING/SELLING SHARES To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. Exchanges You may exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. Market timing is frequent or short-term trading by certain shareholders intended to profit at the expense of other shareholders by selling shares of a fund shortly after purchase. Market timing may adversely impact a fund's performance by preventing the portfolio manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest in securities which trade on overseas securities markets may be vulnerable to market timers who seek to take advantage of changes in the values of securities between the close of overseas markets and the close of U.S. markets, which is generally the time at which a fund's NAV is calculated. To the extent that the Fund has significant holdings of foreign securities or securities that trade infrequently, or both, the risks of market timing may be greater than for funds that do not have such holdings. See "Principal Investment Strategies" for a discussion of the investment strategies that may result in the Fund's investing in one or more of these asset classes. See also "Valuing Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund's Board of Directors has adopted a policy that is designed to detect and deter market timing. The Fund seeks to enforce this policy through the Distributor and its transfer agent as follows: o The Fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging. Under the Fund's procedures, there is no set number of transactions in the Fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the Fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the Fund in any 90-day period. Accounts held by a retirement plan or financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit. The Distributor does seek the assistance of retirement plans and financial intermediaries in applying similar restrictions on the sub-accounts of their participants or clients. - -------------------------------------------------------------------------------- 22p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS o If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the Fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a retirement plan or other financial intermediary. The Fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. o Although the Fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The Fund receives purchase and sale orders through retirement plans and financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. - -------------------------------------------------------------------------------- 23p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 297-7378 for brokerage accounts (800) 862-7919 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 - -------------------------------------------------------------------------------- 24p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100* o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include non-qualifying dividends, interest income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. - -------------------------------------------------------------------------------- 25p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). You may not create a tax loss, based on paying a sales charge, by exchanging shares within 91 days of purchase. If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - -------------------------------------------------------------------------------- 26p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund | V The Fund buys units in the Portfolio | V The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. - -------------------------------------------------------------------------------- 27p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .03 .02 (.01) -- (.02) Net gains (losses) (both realized and unrealized) .84 1.44 .32 (1.12) (.16) ----- ----- ----- ------ ----- Total from investment operations .87 1.46 .31 (1.12) (.18) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.06) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $6.27 $5.46 $4.00 $ 3.69 $4.81 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $191 $155 $132 $143 $234 Ratio of expenses to average daily net assets(b) 1.83% 2.02% 2.05% 2.02% 1.83% Ratio of net investment income (loss) to average daily net assets .41% .39% (.19%) (.02%) (.38%) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(c) 16.09% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 28p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.02) (.02) (.04) (.04) (.07) Net gains (losses) (both realized and unrealized) .81 1.38 .31 (1.07) (.14) ----- ----- ----- ------ ----- Total from investment operations .79 1.36 .27 (1.11) (.21) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.03) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $5.95 $5.19 $3.83 $ 3.56 $4.67 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $73 $72 $65 $73 $120 Ratio of expenses to average daily net assets(b) 2.59% 2.80% 2.83% 2.79% 2.60% Ratio of net investment income (loss) to average daily net assets (.32%) (.39%) (.95%) (.80%) (1.14%) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(c) 15.18% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 29p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.01) (.02) (.03) (.04) (.01) Net gains (losses) (both realized and unrealized) .81 1.38 .31 (1.08) (.95) ----- ----- ----- ------ ----- Total from investment operations .80 1.36 .28 (1.12) (.96) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.03) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $5.97 $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) 2.60% 2.80% 2.85% 2.79% 2.60%(d) Ratio of net investment income (loss) to average daily net assets (.34%) (.41%) (1.13%) (.63%) (2.06%)(d) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(e) 15.37% 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. - -------------------------------------------------------------------------------- 30p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .04 .03 -- .01 (.01) Net gains (losses) (both realized and unrealized) .86 1.45 .32 (1.12) (.15) ----- ----- ----- ------ ----- Total from investment operations .90 1.48 .32 (1.11) (.16) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.07) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $6.35 $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) 1.65% 1.87% 1.59% 1.84% 1.66% Ratio of net investment income (loss) to average daily net assets .61% .54% .19% .21% (.29%) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(c) 16.50% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 31p -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Website address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IDEAX Class B:IEMBX Class C: -- Class Y:-- (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6354-99 M (12/04) AXP(R) Threadneedle Emerging Markets Fund Supplement to the Dec. 30, 2004 Prospectus This supplement describes the Fund's Class I shares. The caption headings used in this Supplement correspond to the caption headings used in the prospectus. You may purchase Class I shares only if you are an eligible investor, as described under the caption "Buying and Selling Shares" below. PAST PERFORMANCE Class I has not been in existence for a full calendar year, and therefore performance information is not shown. The performance table is intended to indicate some of the risks of investing in the Fund by showing changes in the Fund's performance over time. Please note that you will find performance returns, after the deduction of certain taxes, for other classes of shares of the Fund, together with returns of one or more broad measures of market performance, in the performance table of the prospectus. Past performance for Class I for the period prior to March 4, 2004 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, but not for other differences in annual Fund operating expenses. The use of blended performance (Class Iperformance blended with Class A performance for periods before March 4, 2004) generally results in lower performance than Class I shares would have achieved had they been offered for the entire period. FEES AND EXPENSES Fund investors pay various expenses. The table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. The table is supplemented as follows: Shareholder Fees (fees paid directly from your investment) Class I Maximum sales charge (load) imposed on purchases (as a percentage of offering price) none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none Annual Fund Operating Expenses (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class I Management fees(a) 1.01% Distribution (12b-1) fees 0.00% Other expenses(b) 0.34% Total(c) 1.35% (a) Includes the impact of a performance incentive adjustment fee that decreased the Fund's management fee by 0.08% for the most recent fiscal year. (b) Other expenses include an administrative services fee and other nonadvisory expenses. (c) American Express Financial Corporation (AEFC) and its affiliates have contractually agreed to waive certain fees and to absorb certain other Fund expenses until Oct. 31, 2005, and will not be reimbursed by the Fund. Under this agreement, net expenses will not exceed 1.47% for Class I. Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The table is supplemented as follows: 1 year 3 years 5 years 10 years Class I $137 $428 $740 $1,629 BUYING AND SELLING SHARES The description of Investment Options is supplemented as follows: If you are an eligible investor, you may purchase Class I shares at net asset value without an initial sales charge or CDSC on redemption. Class I shares do not have annual distribution and service fees, and do not convert to any other class of shares. The following eligible investors may purchase Class I shares: o Any fund distributed by American Express Financial Advisors Inc. (AEFA), if the fund seeks to achieve its investment objective by investing primarily in shares of the Fund and other American Express Funds. In addition, AEFA, in its sole discretion, may accept investments from other purchasers not listed above. The discussion of buying and selling shares is supplemented as follows: You may purchase, redeem or exchange Class I shares only through AEFA (see the back cover of the prospectus for address and telephone number). You may exchange your Class I shares only for Class I shares of another American Express Fund. FINANCIAL HIGHLIGHTS The Financial Highlights table is intended to help you understand the Fund's financial performance. It is supplemented as follows: 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) .01 Net gains (losses) (both realized and unrealized) (.19) ----- Total from investment operations (.18) ----- Net asset value, end of period $6.36 ----- Ratios/supplemental data Net assets, end of period (in millions) $13 Ratio of expenses to average daily net assets(c) 1.35%(d) Ratio of net investment income (loss) to average daily net assets .79%(d) Portfolio turnover rate (excluding short-term securities) 128% Total return(e) (2.75%)(f) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was March 4, 2004. (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. S-6354-79 M (12/04) AXP(R) Threadneedle Global Balanced Fund AXP Threadneedle Global Balanced Fund seeks to provide shareholders with a balance of growth of capital and current income. Prospectus Dec. 30, 2004 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 5p Past Performance 7p Fees and Expenses 9p Investment Manager 10p Other Securities and Investment Strategies 12p Buying and Selling Shares 12p Valuing Fund Shares 12p Investment Options 13p Purchasing Shares 15p Transactions Through Third Parties 17p Sales Charges 17p Exchanging/Selling Shares 21p Distributions and Taxes 25p Financial Highlights 27p - -------------------------------------------------------------------------------- 2p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS The Fund GOAL AXP Threadneedle Global Balanced Fund (the Fund) seeks to provide shareholders with a balance of growth of capital and current income. Because any investment involves risk, achieving this goal cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in a combination of equity and debt securities of issuers throughout the world. No less than 25% of the Fund's total assets will be invested in government, agency and corporate debt securities or debt convertible securities. These securities may be of any maturity. No more than 20% of the Fund's net assets will be invested in bonds rated below investment grade (junk bonds). American Express Financial Corporation (AEFC) serves as the investment manager to the Fund and is responsible for oversight of the Fund's investment process and for administration of the Fund. With respect to equity securities, AEFC has entered into an agreement with Threadneedle International Limited (Threadneedle), an indirect wholly-owned subsidiary of AEFC, to act as subadviser to the Fund. Threadneedle chooses investments by: o Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. o Conducting detailed research on companies in a consistent strategic and macroeconomic framework. o Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. o Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. The equity portfolio is constructed using the global sector strategy and contains securities primarily from two lists of holdings. Core securities include all stocks on the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the portfolio management team. These discretionary holdings will typically make up a much smaller portion of the Fund. o The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) All Country World Free Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. - -------------------------------------------------------------------------------- 3p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS o The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by: o Evaluating the opportunities and risks within regions and sectors; o Assessing valuations; and o Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. o Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. With respect to debt securities, AEFC chooses debt obligations by: o Considering opportunities and risks by credit ratings and currency. o Identifying investment-grade U.S. and foreign bonds. o Identifying below investment-grade U.S. and foreign bonds. o Focusing on bonds that contribute to portfolio diversification. o Identifying bonds that can take advantage of currency movements and interest rate differences among nations. In evaluating whether to sell a security, AEFC considers, among other factors, whether: o The security is overvalued relative to alternative investments. o The security has reached AEFC's price objective. o The company or the security continues to meet the standards described above. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. Unusual Market Conditions During weak or declining markets, the Fund may invest more of its assets in money market securities than during normal market conditions. The Fund will invest in these securities primarily to avoid losses, however this type of investment also could prevent the Fund from achieving its investment objective. During these times, the Fund may make frequent securities trades that could result in increased fees, expenses, and taxes. - -------------------------------------------------------------------------------- 4p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Foreign Risk Interest Rate Risk Sector/Concentration Risk Liquidity Risk Credit Risk Issuer Risk Small and Medium Company Risk Market Risk The market value of securities may drop, and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Foreign Risk The following are all components of foreign risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Interest Rate Risk The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity of a bond, the greater its sensitivity to changes in interest rates. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk. - -------------------------------------------------------------------------------- 5p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation, such as payments due on a bond or a note. The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Junk bonds have greater price fluctuations and are more likely to experience a default than investment grade bonds. Issuer Risk An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Small and Medium Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. - -------------------------------------------------------------------------------- 6p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year that the Fund has existed, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) +10.09% +19.54% +18.64% -10.36% -16.50% -10.38% +21.76% 1997 1998 1999 2000 2001 2002 2003 During the period shown in the bar chart, the highest return for a calendar quarter was +16.18% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -12.40% (quarter ended March 31, 2001). The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown above because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2004 was +2.57%. - -------------------------------------------------------------------------------- 7p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2003) Since Since 1 year 5 years inception (A,B&Y) inception (C) Threadneedle Global Balanced: Class A Return before taxes +14.75% -1.80% +2.54%(a) N/A Return after taxes on distributions +14.64% -2.94% +1.49%(a) N/A Return after taxes on distributions and sale of fund shares +9.72% -2.05% +1.65%(a) N/A Class B Return before taxes +16.88% -1.55% +2.62%(a) N/A Class C Return before taxes +20.94% N/A N/A -5.46%(b) Class Y Return before taxes +22.01% -0.41% +3.60%(a) N/A MSCI All Country World Free Index (reflects no deduction for fees, expenses or taxes) +34.63% +0.02% +4.69%(c) -5.80%(d) Citigroup World Government Bond Index (reflects no deduction for fees, expenses or taxes) +14.91% +5.75% +6.05%(c) +9.66%(d) Lipper Global Flexible Funds Index +25.03% +4.27% +5.98%(c) -0.19%(d)
(a) Inception date was Nov. 13, 1996. (b) Inception date was June 26, 2000. (c) Measurement period started Dec. 1, 1996. (d) Measurement period started July 1, 2000. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there are no distributions or if the distributions are small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. - -------------------------------------------------------------------------------- 8p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. MSCI All Country World Free Index, an unmanaged index of equity securities, is compiled from a composite of securities markets of 47 countries, including Canada, the United States, and 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. Citigroup World Government Bond Index, an unmanaged market capitalization weighted benchmark, tracks the performance of the 17 government bond markets around the world. It is widely recognized by investors as a measurement index for portfolios of government bond securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Global Flexible Funds Index includes the 10 largest global flexible (balanced) funds tracked by Lipper Inc. The index's returns include net reinvested dividends. FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75% none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none(b) 5% 1%(c) none
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(d) 0.72% 0.72% 0.72% 0.72% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(e) 0.52% 0.53% 0.52% 0.60% Total 1.49% 2.25% 2.24% 1.32% (a) This charge may be reduced depending on the value of your total investments in American Express Funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.07% for the most recent fiscal year. (e) Other expenses include an administrative services fee, a shareholder service fee for Class Y, a transfer agency fee and other nonadvisory expenses. - -------------------------------------------------------------------------------- 9p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. Also, assume that the operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated:
1 year 3 years 5 years 10 years Class A(a) $718 $1,019 $1,342 $2,257 Class B $628(b) $1,004(b) $1,306(b) $2,398(c) Class C $227 $ 701 $1,201 $2,579 Class Y $134 $ 419 $ 724 $1,595
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years Class A(a) $718 $1,019 $1,342 $2,257 Class B $228 $ 704 $1,206 $2,398(b) Class C $227 $ 701 $1,201 $2,579 Class Y $134 $ 419 $ 724 $1,595
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The team that manages the equity portion of the Fund's portfolio is led by: Alex Lyle, Portfolio Manager o Head of managed funds. o Managed the Fund since 2003. o Joined Threadneedle in 1994, where he managed the U.K. equity investments for some large insurance clients and has run a wide range of portfolios. o Began investment career in 1980. o MA, Oxford University. and Stephen Thornber, Deputy Portfolio Manager o Head of global oil sector. o Managed the Fund since 2003. o Joined Threadneedle in 1993. o Began investment career in 1987. o BA, Plymouth Polytechnic. - -------------------------------------------------------------------------------- 10p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Threadneedle International Limited (Subadviser), an indirect wholly-owned subsidiary of AEFC, is located at 60 St. Mary Axe, London EC3A 8JQ, England. The team that manages the fixed income portion of the Fund's portfolio is led by: Nicholas Pifer, CFA, Co-Portfolio Manager o Managed the Fund since 2003. o Leader of the global sector team. o Joined AEFC in 2000. o Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. o Began investment career in 1990. o MA, Johns Hopkins University School of Advanced International Studies. AEFC's investment professionals who manage fixed income funds are organized into teams. Each team specializes in a particular sector of the fixed income market. AEFC The Fund pays AEFC a fee for managing its assets. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.72% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The maximum adjustment (increase or decrease) is 0.08% of the Fund's average net assets on an annual basis. The adjustment is completed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper, Inc. In certain circumstances, the Board may approve a change in the index. Under the agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Fund, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. In addition to managing investments for all of the AXP funds, AEFC manages investments for itself and its affiliates. For institutional clients, AEFC and its subsidiaries also provide investment management and related services such as separate account asset management, institutional trust and custody, and employee benefit plan administration, as well as investment products. The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. - -------------------------------------------------------------------------------- 11p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may use other investment strategies that are not principal investment strategies. The Fund's policies permit investments in other instruments, such as preferred stocks, convertible securities and money market securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. Portfolio Holdings Disclosure The Fund's Board of Directors has adopted policies and procedures which govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio securities held by the Fund. A description of these policies and procedures is included in the Fund's Statement of Additional Information. Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc. (the Distributor), you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. Good form or good order means that your instructions have been received in the form required by the Distributor. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, refer to the sections on "Purchasing Shares" and "Exchanging/Selling Shares," or contact your financial advisor. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations obtained from outside pricing services approved by the Board. Certain short-term securities are valued at amortized cost. - -------------------------------------------------------------------------------- 12p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS When reliable market quotations are not readily available, securities are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of a security held by the Fund is materially affected by events that occur after the close of the primary market on which the security is traded but prior to the time as of which the Fund's NAV is determined. Valuing securities at fair value involves reliance on judgment. The fair value of a security is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of foreign securities, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. The Fund's securities are valued primarily on the basis of market quotations. However, securities will be valued at fair value if reliable quotations are not readily available. Securities also will be valued at fair value if their value has been materially affected by events after the close of the primary exchanges or markets on which they trade and before the NAV is calculated. This occurs most commonly with foreign securities, but may occur in other cases. The Board has adopted fair value procedures for pricing securities under certain circumstances. These procedures are used (1) when market prices for securities are not readily available, (2) when available prices are deemed unreliable, or (3) when a significant event has occurred that is not reflected in available prices. The fair value of a security is likely to be different from the quoted or published price. Fair value procedures are approved by the Fund's Board of Directors. Certain short-term securities are valued at amortized cost. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the net asset value of the Fund's shares may change on days when shareholders will not be able to purchase or redeem the Fund's shares. INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00%. Shares sold less than a year after purchase are subject to a CDSC. 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. - -------------------------------------------------------------------------------- 13p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y - ----------------- --------------- --------------- --------------- -------------- Availability Available to Available to Available to Limited to all all all qualifying investors. investors. investors. institutional investors. - ----------------- --------------- --------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase purchase. price is price is price is Lower sales invested in invested in invested in charge for shares of the shares of the shares of the larger Fund. Fund. Fund. investments. - ----------------- --------------- --------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over CDSC during applies if $1,000,000, the first you sell your 1% CDSC year shares less applies if decreasing to than one year you sell your 0% after six after shares less years. purchase. than one year after purchase. - ----------------- --------------- --------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee - ----------------- --------------- --------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. - ----------------- --------------- --------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $100,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $100,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. - -------------------------------------------------------------------------------- 14p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS PURCHASING SHARES To purchase shares through entities other than the Distributor, please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: - -------------------------------- ----------------------------------------------- Individual or joint account The individual or one of the owners listed on the joint account - -------------------------------- ----------------------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) - -------------------------------- ----------------------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) - -------------------------------- ----------------------------------------------- An irrevocable trust, pension The legal entity (not the personal trust or estate representative or trustee, unless no legal entity is designated in the account title) - -------------------------------- ----------------------------------------------- Sole proprietorship or The owner single-owner LLC - -------------------------------- ----------------------------------------------- Partnership or multi-member The partnership LLC - -------------------------------- ----------------------------------------------- Corporate or LLC electing The corporation corporate status on Form 8837 - -------------------------------- ----------------------------------------------- Association, club or The organization tax-exempt organization - -------------------------------- ----------------------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at www.irs.gov. - -------------------------------------------------------------------------------- 15p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300 for any reason, including a market decline, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 297-7378 for brokerage accounts (800) 967-4377 for wrap accounts - -------------------------------------------------------------------------------- 16p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other information related to buying or selling shares, please refer to the appropriate section in the prospectus. SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. You may be able to reduce the sales charge on Class A shares, based on the combined market value of your accounts. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase: o Your current investment in this Fund, and o Previous investments you and members of your primary household group have made in Class A, Class B or Class C shares in this and other American Express mutual funds, provided your investment was subject to a sales charge. o Your primary household group consists of you, your spouse or domestic partner, and your unmarried children under age 21 sharing a mailing address. For purposes of this policy a domestic partner is an individual who shares your primary residence and with whom you own joint property. If you or any member of your primary household group elects to separate from the primary household group (for example, by asking that account statements be sent to separate addresses), your assets will no longer be combined for purposes of reducing your sales charge. - -------------------------------------------------------------------------------- 17p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS The following accounts are eligible to be included in determining the sales charge on your purchase: o Individual or joint accounts held directly at the Fund; o Individual or joint accounts held through American Express Brokerage; o Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that are subject to a sales charge and are not part of a group billing as described under "Other Class A sales charge policies"; o UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; o Revocable trust accounts for which you or a member of your primary household group, individually, is the beneficiary; o Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and o Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are not eligible to be included in determining the sales charge on your purchase: o Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); o Investments in AXP Tax-Free Money Fund; o Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts, including American Express Strategic Portfolio Service Advantage (SPS); o Investments in Class D, Class E, or Class Y shares; o Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and o Charitable and irrevocable trust accounts. If you purchase American Express mutual fund shares through different channels, for example, through a firm other than the Distributor, and you want to include those assets toward a reduced sales charge, you must inform the Distributor in writing about the other accounts when placing your purchase order. When placing your purchase order, you must provide the Distributor with your most recent account statement and contact information regarding the other accounts. A selling agent other than the Distributor may require additional information. Unless you provide the Distributor or your financial advisor with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. For more information on rights of accumulation, please see the SAI. - -------------------------------------------------------------------------------- 18p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Other Class A sales charge policies o Group billing: Purchases made through a payroll deduction program offered by an employer retirement plan that has elected to take advantage of the Distributor's group billing service, may be added together to reduce sales charges for all shares purchased through the plan. o Letter of Intent: If you intend to invest $50,000 or more over a period of 13 months, you can reduce the sales charges in Class A by completing a letter of intent form and filing it with the Distributor. The letter of intent may apply to purchases made up to 90 days before it is received in good order by the Distributor. Your holdings in American Express mutual funds acquired more than 90 days before receipt of your signed letter of intent in the Distributor's corporate office will not be counted towards the completion of the letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. If you do not complete and file the form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. o direct rollovers from American Express Retirement Services, provided that the rollover involves a transfer of Class Y shares in this Fund to Class A shares in this Fund. o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. - -------------------------------------------------------------------------------- 19p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. o repurchases. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide the Distributor or your financial advisor with information about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You also may view this information about sales charges and breakpoints free of charge on the Fund's website. Go to www.americanexpress.com/funds and click on the hyperlink "Sales Charge Discount Information." Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. - -------------------------------------------------------------------------------- 20p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. Exchanges You may exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. Market timing is frequent or short-term trading by certain shareholders intended to profit at the expense of other shareholders by selling shares of a fund shortly after purchase. Market timing may adversely impact a fund's performance by preventing the portfolio manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest in securities which trade on overseas securities markets may be vulnerable to market timers who seek to take advantage of changes in the values of securities between the close of overseas markets and the close of U.S. markets, which is generally the time at which a fund's NAV is calculated. To the extent that the Fund has significant holdings of foreign securities, the risks of market timing may be greater than for funds that do not have significant foreign holdings. See "Principal Investment Strategies" for a discussion of the kinds of securities in which the Fund invests. See also "Valuing Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. - -------------------------------------------------------------------------------- 21p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS The Fund's Board of Directors has adopted a policy that is designed to detect and deter market timing. The Fund seeks to enforce this policy through the Distributor and its transfer agent as follows: o The Fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging. Under the Fund's procedures, there is no set number of transactions in the Fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the Fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the Fund in any 90-day period. Accounts held by a retirement plan or financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit. The Distributor does seek the assistance of retirement plans and financial intermediaries in applying similar restrictions on the sub-accounts of their participants or clients. o If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the Fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a retirement plan or other financial intermediary. The Fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. o Although the Fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The Fund receives purchase and sale orders through retirement plans and financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. - -------------------------------------------------------------------------------- 22p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o delivery instructions, if applicable o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. - -------------------------------------------------------------------------------- 23p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS By telephone (800) 297-7378 for brokerage accounts (800) 862-7919 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100* o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. - -------------------------------------------------------------------------------- 24p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include non-qualifying dividends, interest income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. - -------------------------------------------------------------------------------- 25p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). You may not create a tax loss, based on paying a sales charge, by exchanging shares within 91 days of purchase. If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - -------------------------------------------------------------------------------- 26p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .04 .05 .07 .07 .08 Net gains (losses) (both realized and unrealized) .51 .64 (.50) (1.27) .12 ----- ----- ----- ------ ----- Total from investment operations .55 .69 (.43) (1.20) .20 ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.03) (.04) (.02) (.03) (.03) Distributions from realized gains -- -- -- (.51) (.51) ----- ----- ----- ------ ----- Total distributions (.03) (.04) (.02) (.54) (.54) ----- ----- ----- ------ ----- Net asset value, end of period $5.25 $4.73 $4.08 $ 4.53 $6.27 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $57 $53 $54 $80 $110 Ratio of expenses to average daily net assets(b) 1.49% 1.60% 1.48% 1.45% 1.31% Ratio of net investment income (loss) to average daily net assets .83% 1.03% 1.38% 1.18% 1.26% Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(c) 11.62% 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. - -------------------------------------------------------------------------------- 27p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .49 .64 (.49) (1.24) .12 ----- ----- ----- ------ ----- Total from investment operations .50 .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 $5.15 $4.65 $4.01 $ 4.47 $6.21 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $30 $33 $36 $53 $77 Ratio of expenses to average daily net assets(b) 2.25% 2.37% 2.25% 2.21% 2.07% Ratio of net investment income (loss) to average daily net assets .08% .27% .61% .42% .51% Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(c) 10.75% 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. - -------------------------------------------------------------------------------- 28p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .48 .65 (.49) (1.24) (.38) ----- ----- ----- ------ ----- Total from investment operations .49 .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 $5.13 $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) 2.24% 2.36% 2.24% 2.21% 2.07%(d) Ratio of net investment income (loss) to average daily net assets .08% .26% .60% .41% .47%(d) Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(e) 10.56% 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) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. - -------------------------------------------------------------------------------- 29p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .05 .07 .07 .08 .10 Net gains (losses) (both realized and unrealized) .51 .64 (.50) (1.28) .13 ----- ----- ----- ------ ----- Total from investment operations .56 .71 (.43) (1.20) .23 ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.04) (.05) (.03) (.03) (.04) Distributions from realized gains -- -- -- (.51) (.51) ----- ----- ----- ------ ----- Total distributions (.04) (.05) (.03) (.54) (.55) ----- ----- ----- ------ ----- Net asset value, end of period $5.28 $4.76 $4.10 $ 4.56 $6.30 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $13 $7 $4 $2 $1 Ratio of expenses to average daily net assets(b) 1.32% 1.43% 1.30% 1.31% 1.20% Ratio of net investment income (loss) to average daily net assets 1.00% 1.21% 1.52% 1.35% 1.51% Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(c) 11.74% 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. - -------------------------------------------------------------------------------- 30p -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Website address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IDGAX Class B:IGBBX Class C: -- Class Y:AGBYX (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6352-99 L (12/04) AXP(R) Threadneedle Global Equity Fund AXP Threadneedle Global Equity Fund seeks to provide shareholders with long-term capital growth. Prospectus Dec. 30, 2004 Please note that this Fund: o is not a bank deposit o is not federally insured o is not endorsed by any bank or government agency o is not guaranteed to achieve its goal As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents TAKE A CLOSER LOOK AT: The Fund 3p Goal 3p Principal Investment Strategies 3p Principal Risks 5p Past Performance 6p Fees and Expenses 8p Investment Manager 9p Other Securities and Investment Strategies 10p Buying and Selling Shares 11p Valuing Fund Shares 11p Investment Options 12p Purchasing Shares 13p Transactions Through Third Parties 15p Sales Charges 16p Exchanging/Selling Shares 20p Distributions and Taxes 24p Master/Feeder Structure 26p Financial Highlights 27p - ------------------------------------------------------------------------------- 2p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS The Fund GOAL AXP Threadneedle Global Equity Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this goal cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its assets in a master portfolio rather than by directly investing in and managing its own portfolio of securities. The master portfolio has the same goal and investment policies as the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in equity securities of companies around the world, including companies located in developed and emerging countries. American Express Financial Corporation (AEFC) serves as the investment manager to the Fund and is responsible for oversight of the Fund's investment process and for administration of the Fund. AEFC has entered into an agreement with Threadneedle International Limited (Threadneedle), an indirect wholly-owned subsidiary of AEFC, to act as subadviser to the Fund. Threadneedle chooses investments by: o Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. o Conducting detailed research on companies in a consistent strategic and macroeconomic framework. o Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. o Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. - ------------------------------------------------------------------------------- 3p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Using the global sector strategy, the Fund's portfolio management team constructs the portfolio by investing in most of the stocks on two core lists of holdings, the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the portfolio management team. These discretionary holdings will typically make up a much smaller portion of the Fund. o The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) All Country World Free Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. o The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by: o Evaluating the opportunities and risks within regions and sectors; o Assessing valuations; and o Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. o Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. Unusual Market Conditions During weak or declining markets, the Fund may invest more of its assets in money market securities than during normal market conditions. The Fund will invest in these securities primarily to avoid losses, however this type of investment also could prevent the Fund from achieving its investment objective. During these times, the Fund may make frequent securities trades that could result in increased fees, expenses, and taxes. - ------------------------------------------------------------------------------- 4p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: Market Risk Foreign/Emerging Markets Risk Small and Medium Company Risk Issuer Risk Market Risk The market value of securities may drop, and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Small and Medium Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. - ------------------------------------------------------------------------------- 5p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Issuer Risk An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. PAST PERFORMANCE The following bar chart and table indicate the risks and variability of investing in the Fund by showing: o how the Fund's performance has varied for each full calendar year shown on the chart below, and o how the Fund's average annual total returns compare to recognized indexes. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. (bar chart) CLASS A PERFORMANCE (based on calendar years) - -7.39% +6.36% +14.89% +7.18% +26.16% +37.02% -23.37% -22.29% -23.38% +25.16% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 During the period shown in the bar chart, the highest return for a calendar quarter was +32.17% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -18.41% (quarter ended Sept. 30, 2001). The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart; if reflected, returns would be lower than those shown. The performance of other classes may vary from that shown above because of differences in expenses. The Fund's Class A year-to-date return at Sept. 30, 2004 was +3.07%. - ------------------------------------------------------------------------------- 6p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2003) Since Since 1 year 5 years 10 years inception (B&Y) inception (C) Threadneedle Global Equity: Class A Return before taxes +17.96% -5.91% +1.22% N/A N/A Return after taxes on distributions +17.96% -7.07% -0.19% N/A N/A Return after taxes on distributions and sale of fund shares +11.68% -5.06% +0.50% N/A N/A Class B Return before taxes +20.06% -5.66% N/A +2.85%(a) N/A Class C Return before taxes +23.86% N/A N/A N/A -13.96%(b) Class Y Return before taxes +24.99% -4.63% N/A +3.79%(a) N/A MSCI All Country World Free Index (reflects no deduction for fees, expenses or taxes) +34.63% +0.02% +7.15% +7.18%(c) -5.80%(d) Lipper Global Funds Index +31.96% +2.04% +6.53% +7.79%(c) -5.33%(d) Lipper Global Large-Cap Core Funds Index(e) +26.77% +0.83% N/A N/A -7.33%(d)
(a) Inception date was March 20, 1995. (b) Inception date was June 26, 2000. (c) Measurement period started April 1, 1995. (d) Measurement period started July 1, 2000. (e) Effective June 2004, the Fund was included in a second Lipper peer group. Before-Tax Returns This table shows total returns from hypothetical investments in Class A, Class B, Class C and Class Y shares of the Fund. These returns are compared to the indexes shown for the same periods. The performance of different classes varies because of differences in sales charges and fees. Past performance for Class Y for the periods prior to March 20, 1995 may be calculated based on the performance of Class A, adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses. After-Tax Returns After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there are no distributions or if the distributions are small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes - ------------------------------------------------------------------------------- 7p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. For purposes of this calculation we assumed: o the maximum sales charge for Class A shares, o sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B shares, o no sales charge for Class C shares, o no sales charge for Class Y shares, and o no adjustments for taxes paid by an investor on the reinvested income and capital gains. MSCI All Country World Free Index, an unmanaged index, is compiled from a composite of securities markets of 47 countries, including Canada, the United States and 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Global Funds Index includes the 30 largest global funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Lipper Global Large-Cap Core Funds Index includes the 10 largest global large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C Class Y Maximum sales charge (load) imposed on purchases(a) (as a percentage of offering price) 5.75% none none none Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) none(b) 5% 1%(c) none
Annual Fund Operating Expenses(d) (expenses that are deducted from Fund assets) As a percentage of average daily net assets: Class A Class B Class C Class Y Management fees(e) 0.67% 0.67% 0.67% 0.67% Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00% Other expenses(f) 0.49% 0.51% 0.52% 0.56% Total 1.41% 2.18% 2.19% 1.23% (a) This charge may be reduced depending on the value of your total investments in American Express Funds. See "Sales Charges." (b) For Class A purchases over $1,000,000 on which no sales charge is assessed, a 1% sales charge applies if you sell your shares less than one year after purchase. (c) For Class C purchases, a 1% sales charge applies if you sell your shares less than one year after purchase. (d) Both in this table and the following example, fund operating expenses include expenses charged by both the Fund and its Master Portfolio as described under "Investment Manager." (e) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.12% for the most recent fiscal year. (f) Other expenses include an administrative services fee, a shareholder service fee for Class Y, a transfer agency fee and other nonadvisory expenses. - ------------------------------------------------------------------------------- 8p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Examples These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Assume you invest $10,000 and the Fund earns a 5% annual return each year. Also assume that the operating expenses remain the same each year. You would pay the following expenses if you redeem all of your shares at the end of the time periods indicated:
1 year 3 years 5 years 10 years Class A(a) $710 $996 $1,303 $2,173 Class B $621(b) $982(b) $1,270(b) $2,322(c) Class C $222 $685 $1,175 $2,528 Class Y $125 $391 $ 677 $1,494
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years Class A(a) $710 $996 $1,303 $2,173 Class B $221 $682 $1,170 $2,322(b) Class C $222 $685 $1,175 $2,528 Class Y $125 $391 $ 677 $1,494
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. These examples do not represent actual expenses, past or future. Actual expenses may be higher or lower than those shown. INVESTMENT MANAGER The Fund's assets are invested in World Growth Portfolio (the Portfolio). The team that manages the Portfolio is led by: Dominic Rossi, Portfolio Manager o Head of international equities. o Managed the Portfolio since 2003. o Joined Threadneedle in 1997 as head of international equities. o Began investment career in 1986. o MBA, City University, London. and Stephen Thornber, Deputy Portfolio Manager o Head of global oil sector. o Managed the Portfolio since 2003. o Joined Threadneedle in 1993 as a fund manager. o Began investment career in 1987. o BA, Plymouth Polytechnic. - ------------------------------------------------------------------------------- 9p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Threadneedle International Limited (Subadviser), an indirect wholly-owned subsidiary of AEFC, at 60 St. Mary Axe, London EC3A 8JQ, England, subadvises the Fund's assets. AEFC The Portfolio pays AEFC a fee for managing its assets. The Fund pays its proportionate share of the fee. Under the Investment Management Services Agreement, the fee for the most recent fiscal year was 0.67% of the Portfolio's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. In certain circumstances, the Board may approve a change in the index. The maximum adjustment (increase or decrease) is 0.12% of the Portfolio's average net assets on an annual basis. Under the agreement, the Portfolio also pays taxes, brokerage commissions, and nonadvisory expenses. AEFC or an affiliate may make payments from its own resources, which include profits from management fees paid by the Portfolio, to compensate broker-dealers or other persons for providing distribution assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, is a wholly-owned subsidiary of American Express Company, a financial services company with headquarters at American Express Tower, World Financial Center, New York, New York 10285. In addition to managing investments for all of the AXP funds, AEFC manages investments for itself and its affiliates. For institutional clients, AEFC and its subsidiaries also provide investment management and related services such as separate account asset management, institutional trust and custody, and employee benefit plan administration, as well as investment products. The Fund operates under an order from the Securities and Exchange Commission that permits AEFC, subject to the approval of the Board of Directors, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. OTHER SECURITIES AND INVESTMENT STRATEGIES The Fund may invest in other securities and may use other investment strategies that are not principal investment strategies. The Fund's policies permit investment in other instruments, such as preferred stocks, convertible securities, and money market securities. Additionally, the Fund may use derivative instruments to produce incremental earnings, to hedge existing positions, and to increase flexibility. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio manager is not required to use derivatives. For more information on strategies and holdings, see the Fund's Statement of Additional Information (SAI) and its annual and semiannual reports. Portfolio Holdings Disclosure The Fund's Board of Directors has adopted policies and procedures which govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio securities held by the Fund. A description of these policies and procedures is included in the Fund's Statement of Additional Information. - ------------------------------------------------------------------------------- 10p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Buying and Selling Shares The public offering price for Class A shares of the Fund is the net asset value (NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In addition to buying and selling shares through the Fund's distributor, American Express Financial Advisors Inc. (the Distributor), you may buy or sell shares through third parties, including 401(k) plans, banks, brokers, and investment advisers. Where authorized by the Fund, orders in good form are priced using the NAV next determined after your order is placed with the third party. Good form or good order means that your instructions have been received in the form required by the Distributor. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, refer to the sections on "Purchasing Shares" and "Exchanging/Selling Shares," or contact your financial advisor. If you buy or redeem shares through a third party, consult that firm to determine whether your order will be priced at the time it is placed with the third party or at the time it is placed with the Fund. The third party may charge a fee for its services. VALUING FUND SHARES The NAV is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. AEFC calculates the NAV as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. The Fund's securities are valued primarily on the basis of market quotations obtained from outside pricing services approved by the Board. Certain short-term securities are valued at amortized cost. When reliable market quotations are not readily available, securities are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of a security held by the Fund is materially affected by events that occur after the close of the primary market on which the security is traded but prior to the time as of which the Fund's NAV is determined. Valuing securities at fair value involves reliance on judgment. The fair value of a security is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of foreign securities, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the net asset value of the Fund's shares may change on days when shareholders will not be able to purchase or redeem the Fund's shares. - ------------------------------------------------------------------------------- 11p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS INVESTMENT OPTIONS 1. Class A shares are sold to the public with a sales charge at the time of purchase and an annual distribution (12b-1) fee of 0.25%. 2. Class B shares are sold to the public with a contingent deferred sales charge (CDSC) and an annual distribution fee of 1.00%. 3. Class C shares are sold to the public without a sales charge at the time of purchase and with an annual distribution fee of 1.00%. Shares sold less than a year after purchase are subject to CDSC. 4. Class Y shares are sold to qualifying institutional investors without a sales charge or distribution fee. Please see the SAI for information on eligibility to purchase Class Y shares. Investment options summary The Fund offers different classes of shares. There are differences among the fees and expenses for each class. Not everyone is eligible to buy every class. After determining which classes you are eligible to buy, decide which class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each class: Class A Class B Class C Class Y - ----------------- --------------- --------------- --------------- -------------- Availability Available to Available to Available to Limited to all all all qualifying investors. investors. investors. institutional investors. - ----------------- --------------- --------------- --------------- -------------- Initial Sales Yes. Payable No. Entire No. Entire No. Entire Charge at time of purchase purchase purchase purchase. price is price is price is Lower sales invested in invested in invested in charge for shares of the shares of the shares of the larger Fund. Fund. Fund. investments. - ----------------- --------------- --------------- --------------- -------------- Deferred Sales On purchases Maximum 5% 1% CDSC None. Charge over CDSC during applies if $1,000,000, the first you sell your 1% CDSC year shares less applies if decreasing to than one year you sell your 0% after six after shares less years. purchase. than one year after purchase. - ----------------- --------------- --------------- --------------- -------------- Distribution Yes.* 0.25% Yes.* 1.00% Yes.* 1.00% Yes. 0.10% and/or Shareholder Service Fee - ----------------- --------------- --------------- --------------- -------------- Conversion to N/A Yes, No. No. Class A automatically in ninth calendar year of ownership. - ----------------- --------------- --------------- --------------- -------------- * The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows it to pay distribution and servicing-related expenses for the sale of Class A, Class B and Class C shares. Because these fees are paid out of the Fund's assets on an on-going basis, the fees may cost long-term shareholders more than paying other types of sales charges imposed by some mutual funds. - ------------------------------------------------------------------------------- 12p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Should you purchase Class A, Class B or Class C shares? If your investments in American Express mutual funds total $100,000 or more, Class A shares may be the better option because the sales charge is reduced for larger purchases. If you qualify for a waiver of the sales charge, Class A shares will be the best option. If you invest less than $100,000, consider how long you plan to hold your shares. Class B shares have a higher annual distribution fee than Class A shares and a CDSC for six years. Class B shares convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for one year or longer. Unlike Class B shares, Class C shares do not convert to Class A. As a result, you will pay a 1% distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), generally you should consider Class B shares if you intend to hold your shares for more than six years. Consider Class C shares if you intend to hold your shares less than six years. To help you determine what investment is best for you, consult your financial advisor. PURCHASING SHARES To purchase shares through entities other than the Distributor, please consult your selling agent. The following section explains how you can purchase shares from the Distributor. If you do not have an existing American Express mutual fund account, you will need to establish a brokerage account. Your financial advisor will help you fill out and submit an application. Once your account is set up, you can choose among several convenient ways to invest. When you purchase, your order will be priced at the next NAV calculated after your order is accepted by the Fund. If your application does not specify which class of shares you are purchasing, we will assume you are investing in Class A shares. Important: When you open an account, you must provide your correct Taxpayer Identification Number (TIN), which is either your Social Security or Employer Identification number. If you do not provide and certify the correct TIN, you could be subject to backup withholding of 28% of taxable distributions and proceeds from certain sales and exchanges. You also could be subject to further penalties, such as: o a $50 penalty for each failure to supply your correct TIN, o a civil penalty of $500 if you make a false statement that results in no backup withholding, and o criminal penalties for falsifying information. You also could be subject to backup withholding, if the IRS notifies us to do so, because you failed to report required interest or dividends on your tax return. - ------------------------------------------------------------------------------- 13p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS How to determine the correct TIN For this type of account: Use the Social Security or Employer Identification number of: - -------------------------------- ----------------------------------------------- Individual or joint account The individual or one of the owners listed on the joint account - -------------------------------- ----------------------------------------------- Custodian account of a minor The minor (Uniform Gifts/Transfers to Minors Act) - -------------------------------- ----------------------------------------------- A revocable living trust The grantor-trustee (the person who puts the money into the trust) - -------------------------------- ----------------------------------------------- An irrevocable trust, pension The legal entity (not the personal trust or estate representative or trustee, unless no legal entity is designated in the account title) - -------------------------------- ----------------------------------------------- Sole proprietorship or The owner single-owner LLC - -------------------------------- ----------------------------------------------- Partnership or multi-member The partnership LLC - -------------------------------- ----------------------------------------------- Corporate or LLC electing The corporation corporate status on Form 8837 - -------------------------------- ----------------------------------------------- Association, club or The organization tax-exempt organization - -------------------------------- ----------------------------------------------- For details on TIN requirements, contact your financial advisor to obtain a copy of federal Form W-9, "Request for Taxpayer Identification Number and Certification." You also may obtain the form on the Internet at www.irs.gov. Methods of purchasing shares By mail Once your account has been established, send your check to: American Express Funds 70200 AXP Financial Center Minneapolis, MN 55474 Minimum amounts Initial investment: $2,000* Additional investments: $500** Account balances: $300 Qualified account balances: none If your Fund account balance falls below $300 for any reason, including a market decline, you will be asked to increase it to $300 or establish a scheduled investment plan. If you do not do so within 30 days, your shares can be sold and the proceeds mailed to you. * $1,000 for tax qualified accounts. ** $100 minimum add-on for existing mutual fund accounts outside of a brokerage account (direct at fund accounts). - ------------------------------------------------------------------------------- 14p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS By scheduled investment plan Minimum amounts Initial investment: $2,000* Additional investments: $100** Account balances: none (on a scheduled investment plan with monthly payments) If your Fund account balance is below $2,000, you must make payments at least monthly. * $100 for direct at fund accounts. ** $50 minimum per payment for qualified accounts in a direct at fund account. By wire or electronic funds transfer Please contact your financial advisor or selling agent for specific instructions. Minimum wire purchase amount: $1,000 or new account minimum, as applicable. By telephone If you have a brokerage account, you may use the money in your account to make initial and subsequent purchases. To place your order, call: (800) 297-7378 for brokerage accounts (800) 967-4377 for wrap accounts TRANSACTIONS THROUGH THIRD PARTIES You may buy or sell shares through certain 401(k) plans, banks, broker-dealers, financial advisors or other investment professionals. These organizations may charge you a fee for this service and may have different policies. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. The Fund and the Distributor are not responsible for the failure of one of these organizations to carry out its obligations to its customers. Some organizations may receive compensation from the Distributor or its affiliates for shareholder recordkeeping and similar services. Where authorized by the Fund, some organizations may designate selected agents to accept purchase or sale orders on the Fund's behalf. To buy or sell shares through third parties or to determine if there are policy differences, please consult your selling agent. For other information related to buying or selling shares, please refer to the appropriate section in the prospectus. - ------------------------------------------------------------------------------- 15p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS SALES CHARGES Class A -- initial sales charge alternative When you purchase Class A shares, you pay a sales charge as shown in the following table: Sales charge as percentage of: Total market value Public offering price* Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00 * Offering price includes the sales charge. You may be able to reduce the sales charge on Class A shares, based on the combined market value of your accounts. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase: o Your current investment in this Fund, and o Previous investments you and members of your primary household group have made in Class A, Class B or Class C shares in this and other American Express mutual funds, provided your investment was subject to a sales charge. o Your primary household group consists of you, your spouse or domestic partner, and your unmarried children under age 21 sharing a mailing address. For purposes of this policy a domestic partner is an individual who shares your primary residence and with whom you own joint property. If you or any member of your primary household group elects to separate from the primary household group (for example, by asking that account statements be sent to separate addresses), your assets will no longer be combined for purposes of reducing your sales charge. - ------------------------------------------------------------------------------- 16p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS The following accounts are eligible to be included in determining the sales charge on your purchase: o Individual or joint accounts held directly at the Fund; o Individual or joint accounts held through American Express Brokerage; o Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that are subject to a sales charge and are not part of a group billing as described under "Other Class A sales charge policies"; o UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; o Revocable trust accounts for which you or a member of your primary household group, individually, is the beneficiary; o Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and o Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are not eligible to be included in determining the sales charge on your purchase: o Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); o Investments in AXP Tax-Free Money Fund; o Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts, including American Express Strategic Portfolio Service Advantage (SPS); o Investments in Class D, Class E, or Class Y shares; o Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and o Charitable and irrevocable trust accounts. If you purchase American Express mutual fund shares through different channels, for example, through a firm other than the Distributor, and you want to include those assets toward a reduced sales charge, you must inform the Distributor in writing about the other accounts when placing your purchase order. When placing your purchase order, you must provide the Distributor with your most recent account statement and contact information regarding the other accounts. A selling agent other than the Distributor may require additional information. Unless you provide the Distributor or your financial advisor with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. For more information on rights of accumulation, please see the SAI. - ------------------------------------------------------------------------------- 17p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Other Class A sales charge policies o Group billing: Purchases made through a payroll deduction program offered by an employer retirement plan that has elected to take advantage of the Distributor's group billing service, may be added together to reduce sales charges for all shares purchased through the plan. o Letter of Intent: If you intend to invest $50,000 or more over a period of 13 months, you can reduce the sales charges in Class A by completing a letter of intent form and filing it with the Distributor. The letter of intent may apply to purchases made up to 90 days before it is received in good order by the Distributor. Your holdings in American Express mutual funds acquired more than 90 days before receipt of your signed letter of intent in the Distributor's corporate office will not be counted towards the completion of the letter of intent. If purchasing shares in a brokerage account or through a third party, you must request the reduced sales charge when you buy shares. If you do not complete and file the form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. For more details, please contact your financial advisor or see the SAI. Waivers of the sales charge for Class A shares Sales charges do not apply to: o current or retired board members, officers or employees of the Fund or AEFC or its subsidiaries, their spouses or domestic partners, children and parents. o current or retired American Express financial advisors, employees of financial advisors, their spouses or domestic partners, children and parents. o registered representatives and other employees of brokers, dealers or other financial institutions having a sales agreement with the Distributor, including their spouses, domestic partners, children and parents. o qualified employee benefit plans offering participants daily access to American Express mutual funds. Eligibility must be determined in advance. For assistance, please contact your financial advisor. Participants in certain qualified plans where the initial sales charge is waived may be subject to a deferred sales charge of up to 4%. o shareholders who have at least $1 million in American Express mutual funds. If the investment is sold less than one year after purchase, a CDSC of 1% will be charged. o direct rollovers from American Express Retirement Services, provided that the rollover involves a transfer of Class Y shares in this Fund to Class A shares in this Fund. o purchases made: o with dividend or capital gain distributions from this Fund or from the same class of another American Express mutual fund, o through or under a wrap fee product or other investment product sponsored by the Distributor or another authorized broker-dealer, investment advisor, bank or investment professional, o within the University of Texas System ORP, o within a segregated separate account offered by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, o through or under a subsidiary of AEFC offering Personal Trust Services' Asset-Based pricing alternative. - ------------------------------------------------------------------------------- 18p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS o shareholders whose original purchase was in a Strategist fund merged into an American Express fund in 2000. o repurchases. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide the Distributor or your financial advisor with information about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You also may view this information about sales charges and breakpoints free of charge on the Fund's website. Go to www.americanexpress.com/funds and click on the hyperlink "Sales Charge Discount Information." Class B and Class C -- contingent deferred sales charge (CDSC) alternative For Class B, the CDSC is based on the sale amount and the number of calendar years -- including the year of purchase -- between purchase and sale. The following table shows how CDSC percentages on sales decline after a purchase: If the sale is made during the: The CDSC percentage rate is: First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh year 0% For Class C, a 1% CDSC is charged if you sell your shares less than one year after purchase. For both Class B and Class C, if the amount you are selling causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC is based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you never have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. - ------------------------------------------------------------------------------- 19p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Example Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. Waivers of the sales charge for Class B and Class C shares The CDSC will be waived on sales of shares: o in the event of the shareholder's death, o held in trust for an employee benefit plan, or o held in IRAs or certain qualified plans if American Express Trust Company is the custodian, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: o at least 59 1/2 years old AND o taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR o selling under an approved substantially equal periodic payment arrangement. EXCHANGING/SELLING SHARES To sell or exchange shares held with entities other than the Distributor, please consult your selling agent. The following section explains how you can exchange or sell shares held with the Distributor. Exchanges You may exchange your Fund shares at no charge for shares of the same class of any other publicly offered American Express mutual fund. Exchanges into AXP Tax-Free Money Fund may only be made from Class A shares. For complete information on the other fund, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after we receive your transaction request in good order. Market timing is frequent or short-term trading by certain shareholders intended to profit at the expense of other shareholders by selling shares of a fund shortly after purchase. Market timing may adversely impact a fund's performance by preventing the portfolio manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. - ------------------------------------------------------------------------------- 20p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Funds that invest in securities which trade on overseas securities markets may be vulnerable to market timers who seek to take advantage of changes in the values of securities between the close of overseas markets and the close of U.S. markets, which is generally the time at which a fund's NAV is calculated. To the extent that the Fund has significant holdings of foreign securities, the risks of market timing may be greater than for funds that do not have significant foreign holdings. See "Principal Investment Strategies" for a discussion of the kinds of securities in which the Fund invests. See also "Valuing Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund's Board of Directors has adopted a policy that is designed to detect and deter market timing. The Fund seeks to enforce this policy through the Distributor and its transfer agent as follows: o The Fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging. Under the Fund's procedures, there is no set number of transactions in the Fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the Fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the Fund in any 90-day period. Accounts held by a retirement plan or financial intermediary for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit. The Distributor does seek the assistance of retirement plans and financial intermediaries in applying similar restrictions on the sub-accounts of their participants or clients. o If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the Fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a retirement plan or other financial intermediary. The Fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. o Although the Fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The Fund receives purchase and sale orders through retirement plans and financial intermediaries where market timing activity may not always be successfully detected. Other exchange policies: o Exchanges must be made into the same class of shares of the new fund. o If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. o Once we receive your exchange request, you cannot cancel it. o Shares of the new fund may not be used on the same day for another exchange. o If your shares are pledged as collateral, the exchange will be delayed until written approval is received from the secured party. - ------------------------------------------------------------------------------- 21p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Selling Shares You may sell your shares at any time. The payment will be mailed within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order by the Fund, minus any applicable CDSC. You can change your mind after requesting a sale and use all or part of the proceeds to purchase new shares in the same account from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV rather than the offering price on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. To take advantage of this waiver, send a written request within 90 days of the date your sale request was processed and include your account number. This privilege may be limited or withdrawn at any time and use of this option may have tax consequences. The Fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. If you decide to sell your shares within 30 days of a telephoned-in address change, a written request is required. Important: If you request a sale of shares you recently purchased by a check or money order that is not guaranteed, the Fund will wait for your check to clear. It may take up to 10 days from the date of purchase before payment is made. Payment may be made earlier if your bank provides evidence satisfactory to the Fund and the Distributor that your check has cleared. Ways to request an exchange or sale of shares By regular or express mail American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 Include in your letter: o your account number o the name of the fund(s) o the class of shares to be exchanged or sold o your Social Security number or Employer Identification number o the dollar amount or number of shares you want to exchange or sell o specific instructions regarding delivery or exchange destination o signature(s) of registered account owner(s) (All signatures may be required. Contact your financial advisor for more information.) o any paper certificates of shares you hold Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. - ------------------------------------------------------------------------------- 22p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS The express mail delivery charges you pay will vary depending on domestic or international delivery instructions. By telephone (800) 297-7378 for brokerage accounts (800) 862-7919 for direct at fund accounts (800) 967-4377 for wrap accounts o The Fund and the Distributor will use reasonable procedures to confirm authenticity of telephone exchange or sale requests. o Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing the Distributor. Each registered owner must sign the request. o Acting on your instructions, your financial advisor may conduct telephone transactions on your behalf. o Telephone privileges may be modified or discontinued at any time. Minimum sale amount: $100 Maximum sale amount: $100,000 By wire You can wire money from your account to your bank account. Contact your financial advisor or the Distributor at the above numbers for additional information. o Minimum amount: $1,000 o Pre-authorization is required. o A service fee may be charged against your account for each wire sent. By scheduled payout plan o Minimum payment: $100* o Contact your financial advisor or the Distributor to set up regular payments. o Purchasing new shares while under a payout plan may be disadvantageous because of the sales charges. * Minimum is $50 in a direct at fund account. Electronic transactions The ability to initiate transactions via the internet may be unavailable or delayed at certain times (for example, during periods of unusual market activity). The Fund and the Distributor are not responsible for any losses associated with unexecuted transactions. In addition, the Fund and the Distributor are not responsible for any losses resulting from unauthorized transactions if reasonable security measures are followed to validate the investor's identity. The Fund may modify or discontinue electronic privileges at any time. - ------------------------------------------------------------------------------- 23p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Distributions and Taxes As a shareholder you are entitled to your share of the Fund's net income and net gains. The Fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Fund's net investment income is distributed to you as dividends. Dividends may be composed of qualifying dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include non-qualifying dividends, interest income and short-term capital gains. Capital gains are realized when a security is sold for a higher price than was paid for it. Each realized capital gain or loss is long-term or short-term depending on the length of time the Fund held the security. Realized capital gains and losses offset each other. The Fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains are included in net investment income. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the Fund, unless: o you request distributions in cash, or o you direct the Fund to invest your distributions in the same class of any publicly offered American Express mutual fund for which you have previously opened an account. We reinvest the distributions for you at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. - ------------------------------------------------------------------------------- 24p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS TAXES Distributions are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Income received by the Fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the Fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). You may not create a tax loss, based on paying a sales charge, by exchanging shares within 91 days of purchase. If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. Selling shares held in an IRA or qualified retirement account may subject you to federal taxes, penalties and reporting requirements. Please consult your tax advisor. Important: This information is a brief and selective summary of some of the tax rules that apply to this Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - ------------------------------------------------------------------------------- 25p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Master/Feeder Structure This Fund uses a master/feeder structure. This means that the Fund (a feeder fund) invests all of its assets in the Portfolio (the master fund). The master/feeder structure offers the potential for reduced costs because it spreads fixed costs of portfolio management over a larger pool of assets. The Fund may withdraw its assets from the Portfolio at any time if the Fund's board determines that it is best. In that event, the board would consider what action should be taken, including whether to hire an investment advisor to manage the Fund's assets directly or to invest all of the Fund's assets in another pooled investment entity. Here is an illustration of the structure: Investors buy shares in the Fund | V The Fund buys units in the Portfolio | V The Portfolio invests in securities, such as stocks or bonds Other feeders may include mutual funds and institutional accounts. These feeders buy the Portfolio's securities on the same terms and conditions as the Fund and pay their proportionate share of the Portfolio's expenses. However, their operating costs and sales charges are different from those of the Fund. Therefore, the investment returns for other feeders are different from the returns of the Fund. - ------------------------------------------------------------------------------- 26p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS Financial Highlights The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, is included in the annual report which, if not included with this prospectus, is available upon request.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .54 .69 (.77) (2.71) .58 ----- ----- ----- ------ ------ Total from investment operations .54 .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 $5.16 $4.62 $3.92 $ 4.69 $ 8.74 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $364 $366 $406 $714 $1,356 Ratio of expenses to average daily net assets(b) 1.41% 1.50% 1.39% 1.18% 1.22% Ratio of net investment income (loss) to average daily net assets .07% .26% .01% .39% (.21%) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(c) 11.72% 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. - ------------------------------------------------------------------------------- 27p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.03) (.04) (.02) (.08) Net gains (losses) (both realized and unrealized) .50 .67 (.73) (2.64) .56 ----- ----- ----- ------ ----- Total from investment operations .47 .64 (.77) (2.66) .48 ----- ----- ----- ------ ----- Less distributions: Distributions from realized gains -- -- -- (1.34) (.96) ----- ----- ----- ------ ----- Net asset value, end of period $4.87 $4.40 $3.76 $ 4.53 $8.53 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $104 $142 $173 $309 $575 Ratio of expenses to average daily net assets(b) 2.18% 2.27% 2.16% 1.95% 1.98% Ratio of net investment income (loss) to average daily net assets (.66%) (.52%) (.77%) (.38%) (.95%) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(c) 10.68% 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. - ------------------------------------------------------------------------------- 28p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.02) (.03) (.04) (.02) (.01) Net gains (losses) (both realized and unrealized) .49 .66 (.73) (2.64) (1.02) ----- ----- ----- ------ ------ Total from investment operations .47 .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 $4.85 $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% 2.29% 2.19% 1.95% 1.98%(d) Ratio of net investment income (loss) to average daily net assets (.69%) (.52%) (.78%) (.42%) (1.15%)(d) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(e) 10.73% 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) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. - ------------------------------------------------------------------------------- 29p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .01 .02 .01 .04 (.01) Net gains (losses) (both realized and unrealized) .54 .69 (.77) (2.73) .58 ----- ----- ----- ------ ------ Total from investment operations .55 .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 $5.20 $4.65 $3.94 $ 4.70 $ 8.76 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $4 $5 $8 $12 $20 Ratio of expenses to average daily net assets(b) 1.23% 1.30% 1.21% 1.01% 1.05% Ratio of net investment income (loss) to average daily net assets .25% .43% .18% .55% (.06%) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(c) 11.88% 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. - ------------------------------------------------------------------------------- 30p -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 PROSPECTUS This Fund, along with the other American Express mutual funds, is distributed by American Express Financial Advisors Inc. and can be purchased from an American Express financial advisor or from other authorized broker-dealers or third parties. The Funds can be found under the "Amer Express" banner in most mutual fund quotations. Additional information about the Fund and its investments is available in the Fund's Statement of Additional Information (SAI), and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, contact your selling agent or American Express Client Service Corporation. American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 Website address: americanexpress.com/funds You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at (http://www.sec.gov). Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #811-5696 Ticker Symbol Class A: IGLGX Class B:IDGBX Class C: -- Class Y:IDGYX (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 S-6334-99 X (12/04) AXP(R) GLOBAL SERIES, INC. STATEMENT OF ADDITIONAL INFORMATION FOR AXP(R) GLOBAL BOND FUND AXP(R) GLOBAL TECHNOLOGY FUND AXP(R) THREADNEEDLE EMERGING MARKETS FUND AXP(R) THREADNEEDLE GLOBAL BALANCED FUND AXP(R) THREADNEEDLE GLOBAL EQUITY FUND (singularly and collectively where the context requires, referred to as the Fund) DEC. 30, 2004 This Statement of Additional Information (SAI) is not a prospectus. It should be read together with the prospectus and the financial statements contained in the most recent Annual Report to shareholders (Annual Report) that may be obtained, without charge, from your financial advisor or by writing to American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474 or by calling (800) 862-7919. The Independent Registered Public Accounting Firm's Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities, contained in the Annual Report are incorporated in this SAI by reference. No other portion of the Annual Report, however, is incorporated by reference. The prospectus for the Fund, dated the same date as this SAI, also is incorporated in this SAI by reference. Table of Contents Mutual Fund Checklist p. 3 Fundamental Investment Policies p. 4 Investment Strategies and Types of Investments p. 7 Information Regarding Risks and Investment Strategies p. 9 Security Transactions p. 26 Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation p. 28 Valuing Fund Shares p. 28 Portfolio Holdings Disclosure p. 30 Proxy Voting p. 31 Investing in the Fund p. 32 Selling Shares p. 35 Pay-out Plans p. 35 Capital Loss Carryover p. 36 Taxes p. 36 Agreements p. 38 Organizational Information p. 45 Board Members and Officers p. 49 Control Persons and Principal Holders of Securities p. 55 Independent Registered Public Accounting Firm p. 55 Appendix: Description of Ratings p. 56 - -------------------------------------------------------------------------------- 2 -- AXP GLOBAL SERIES, INC. Mutual Fund Checklist [X] Mutual funds are NOT guaranteed or insured by any bank or government agency. You can lose money. [X] Mutual funds ALWAYS carry investment risks. Some types carry more risk than others. [X] A higher rate of return typically involves a higher risk of loss. [X] Past performance is not a reliable indicator of future performance. [X] ALL mutual funds have costs that lower investment return. [X] You can buy some mutual funds by contacting them directly. Others, like this one, are sold mainly through brokers, banks, financial planners, or insurance agents. If you buy through these financial professionals, you generally will pay a sales charge. [X] Shop around. Compare a mutual fund with others of the same type before you buy. OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING Develop a Financial Plan Have a plan -- even a simple plan can help you take control of your financial future. Review your plan with your advisor at least once a year or more frequently if your circumstances change. Dollar-Cost Averaging An investment technique that works well for many investors is one that eliminates random buy and sell decisions. One such system is dollar-cost averaging. Dollar-cost averaging involves building a portfolio through the investment of fixed amounts of money on a regular basis regardless of the price or market condition. This may enable an investor to smooth out the effects of the volatility of the financial markets. By using this strategy, more shares will be purchased when the price is low and less when the price is high. As the accompanying chart illustrates, dollar-cost averaging tends to keep the average price paid for the shares lower than the average market price of shares purchased, although there is no guarantee. While this does not ensure a profit and does not protect against a loss if the market declines, it is an effective way for many shareholders who can continue investing through changing market conditions to accumulate shares to meet long-term goals. Dollar-cost averaging Regular Market price Shares investment of a share acquired $100 $ 6.00 16.7 100 4.00 25.0 100 4.00 25.0 100 6.00 16.7 100 5.00 20.0 --- ---- ---- $500 $25.00 103.4 Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5) The average price you paid for each share: $4.84 ($500 divided by 103.4) Diversify Diversify your portfolio. By investing in different asset classes and different economic environments you help protect against poor performance in one type of investment while including investments most likely to help you achieve your important goals. Understand Your Investment Know what you are buying. Make sure you understand the potential risks, rewards, costs, and expenses associated with each of your investments. - -------------------------------------------------------------------------------- 3 -- AXP GLOBAL SERIES, INC. Fundamental Investment Policies Throughout this SAI, the funds are referred to as follows: AXP Global Bond Fund (Global Bond) AXP Global Technology Fund (Global Technology) AXP Threadneedle Emerging Markets Fund (Emerging Markets) AXP Threadneedle Global Balanced Fund (Global Balanced) AXP Threadneedle Global Equity Fund (Global Equity) Emerging Markets pursues its investment objective by investing all of its assets in Emerging Markets Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. Emerging Markets Portfolio has the same investment objectives, policies and restrictions as the Fund. Global Bond pursues its investment objective by investing all of its assets in World Income Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. World Income Portfolio has the same investment objectives, policies and restrictions as the Fund. Global Equity pursues its investment objective by investing all of its assets in World Growth Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. World Growth Portfolio has the same investment objectives, policies and restrictions as the Fund. Global Technology pursues its investment objective by investing all of its assets in World Technologies Portfolio of World Trust, a separate investment company, rather than by directly investing in and managing its own portfolio of securities. World Technologies Portfolio has the same invesmtent objectives, policies and restrictions as the Fund. Emerging Markets Portfolio, World Income Portfolio, World Growth Portfolio and World Technologies Portfolio singularly and collectively, where the context requires, referred to as the Portfolio. References to "Fund" in this SAI, where applicable, refer to the Fund and Portfolio, collectively, to the Fund, singularly, or to the Portfolio, singularly. Fundamental investment policies adopted by the Fund cannot be changed without the approval of a majority of the outstanding voting securities of the Fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Notwithstanding any of the Fund's other investment policies, the Fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the Fund for the purpose of having those assets managed as part of a combined pool. The policies below are fundamental policies that apply to the Fund and may be changed only with shareholder approval. Unless holders of a majority of the outstanding voting securities agree to make the change, the Fund will not: Emerging Markets o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The Fund has no current intention to borrow to a material extent. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. - -------------------------------------------------------------------------------- 4 -- AXP GLOBAL SERIES, INC. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Global Balanced o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The Fund has no current intention to borrow to a material extent. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Global Bond o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The Fund has no current intention to borrow to a material extent. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. - -------------------------------------------------------------------------------- 5 -- AXP GLOBAL SERIES, INC. Global Equity o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The Fund has no current intention to borrow to a material extent. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means up to 25% of the Fund's total assets, based on current market value at time of purchase, can be invested in any one industry. o Purchase more than 10% of the outstanding voting securities of an issuer. o Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except that up to 25% of the Fund's total assets may be invested without regard to this 5% limitation. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Global Technology o Act as an underwriter (sell securities for others). However, under the securities laws, the Fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. o Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The Fund has no current intention to borrow to a material extent. o Make cash loans if the total commitment amount exceeds 5% of the Fund's total assets. o Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. o Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. o Make a loan of any part of its assets to American Express Financial Corporation (AEFC), to the board members and officers of AEFC or to its own board members and officers. o Lend Fund securities in excess of 30% of its net assets. o Issue senior securities, except as permitted under the 1940 Act. Except for the fundamental investment policies listed above, the other investment policies described in each Fund's prospectus and in this SAI are not fundamental and may be changed by the board at any time. - -------------------------------------------------------------------------------- 6 -- AXP GLOBAL SERIES, INC. Investment Strategies and Types of Investments This table shows various investment strategies and investments that many funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager may make on behalf of the Fund. For a description of principal risks, please see each Fund's prospectus. Notwithstanding the Fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion.
Allowable for the Fund Emerging Global Global Global Global Investment strategies and types of investments Markets Balanced Bond Equity Technology Agency and Government Securities yes yes yes yes yes Borrowing yes yes yes yes yes Cash/Money Market Instruments yes yes yes yes yes Collateralized Bond Obligations yes yes yes yes yes Commercial Paper yes yes yes yes yes Common Stock yes yes yes yes yes Convertible Securities yes yes yes yes yes Corporate Bonds yes yes yes yes yes Debt Obligations yes yes yes yes yes Depositary Receipts yes yes yes yes yes Derivative Instruments (including Options and Futures) yes yes yes yes yes Exchange-Traded Funds yes yes yes yes yes Foreign Currency Transactions yes yes yes yes yes Foreign Securities yes yes yes yes yes Funding Agreements yes yes yes yes yes High-Yield (High-Risk) Securities (Junk Bonds) yes yes yes yes yes Illiquid and Restricted Securities yes yes yes yes yes Indexed Securities yes yes yes yes yes Inflation Protected Securities yes yes yes yes yes Inverse Floaters no yes yes no no Investment Companies yes yes yes yes yes Lending of Portfolio Securities yes yes yes yes yes Loan Participations yes yes yes yes yes Mortgage- and Asset-Backed Securities yes yes yes yes yes Mortgage Dollar Rolls no yes yes no no Municipal Obligations yes yes yes yes yes Preferred Stock yes yes yes yes yes Real Estate Investment Trusts yes yes yes yes yes Repurchase Agreements yes yes yes yes yes Reverse Repurchase Agreements yes yes yes yes yes Short Sales no no no no no Sovereign Debt yes yes yes yes yes Structured Products yes yes yes yes yes Swap Agreements no no no no no Variable- or Floating-Rate Securities yes yes yes yes yes Warrants yes yes yes yes yes When-Issued Securities and Forward Commitments yes yes yes yes yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes yes yes yes yes
- -------------------------------------------------------------------------------- 7 -- AXP GLOBAL SERIES, INC. The following are guidelines that may be changed by the board at any time: Emerging Markets o The Fund may invest up to 20% of its net assets in bonds. o The Fund may invest up to 10% of its net assets in bonds rated below investment grade, including Brady bonds. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Global Balanced o The Fund may not purchase debt securities rated lower than B by Moody's Investors Service Inc. or the equivalent. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Global Bond o The Fund may not purchase debt securities rated lower than B by Moody's Investors Service Inc. or the equivalent. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Global Equity o The Fund may invest up to 20% of its net assets in bonds. o The Fund will not invest more than 5% of its net assets in bonds below investment grade, including Brady bonds. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. - -------------------------------------------------------------------------------- 8 -- AXP GLOBAL SERIES, INC. Global Technology o The Fund may invest up to 20% of its net assets in bonds. o The Fund will not invest more than 5% of its net assets in bonds below investment grade, including Brady bonds. o No more than 5% of the Fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. o No more than 10% of the Fund's net assets will be held in securities and other instruments that are illiquid. o Ordinarily, less than 25% of the Fund's total assets are invested in money market instruments. o The Fund will not buy on margin or sell short, except the Fund may make margin payments in connection with transactions in derivative instruments. o The Fund will not invest more than 10% of its total assets in securities of investment companies. o The Fund will not invest in a company to control or manage it. Information Regarding Risks and Investment Strategies RISKS The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). Please remember that a mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with the Fund at any time (for a description of principal risks, please see the prospectus): Call/Prepayment Risk The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This type of risk is closely related to reinvestment risk. Correlation Risk The risk that a given transaction may fail to achieve its objectives due to an imperfect relationship between markets. Certain investments may react more negatively than others in response to changing market conditions. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation, such as payments due on a bond or a note. The price of junk bonds may react more to the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Junk bonds have greater price fluctuations and are more likely to experience a default than investment grade bonds. Derivatives Risk Just as with securities in which the fund invests directly, derivatives are subject to a number of risks, including market, correlation, liquidity, interest rate, and credit risk. In addition, gains or losses involving derivatives may be substantial, because a relatively small price movement in the underlying security, currency or index may result in a substantial gain or loss for the fund. Diversification Risk A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the fund's performance, the fund may be more susceptible to a single economic, political or regulatory event than a diversified fund. Event Risk Occasionally, the value of a security may be seriously and unexpectedly changed by a natural or industrial accident or occurrence. Foreign/Emerging Markets Risk The following are all components of foreign/emerging markets risk: Country risk includes the political, economic, and other conditions of a country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. - -------------------------------------------------------------------------------- 9 -- AXP GLOBAL SERIES, INC. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in emerging market countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. Inflation Risk Also known as purchasing power risk, inflation risk measures the effects of continually rising prices on investments. If an investment's yield is lower than the rate of inflation, your money will have less purchasing power as time goes on. Interest Rate Risk The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity of a bond, the greater its sensitivity to changes in interest rates. Issuer Risk An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Legal/Legislative Risk Congress and other governmental units have the power to change existing laws affecting securities. A change in law might affect an investment adversely. Leverage Risk Some derivative investments (such as options, futures, or options on futures) require little or no initial payment and base their price on a security, a currency, or an index. A small change in the value of the underlying security, currency, or index may cause a sizable gain or loss in the price of the instrument. Liquidity Risk Securities may be difficult or impossible to sell at the time that the Fund would like. The Fund may have to lower the selling price, sell other investments, or forego an investment opportunity. Management Risk The risk that a strategy or selection method utilized by the investment manager may fail to produce the intended result. When all other factors have been accounted for and the investment manager chooses an investment, there is always the possibility that the choice will be a poor one. Market Risk The market value of securities may drop, and you may lose money. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of all securities may move up and down, sometimes rapidly and unpredictably. Reinvestment Risk The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. Sector/Concentration Risk Investments that are concentrated in a particular issuer, geographic region, or industry will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk. Small and Medium Company Risk Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. - -------------------------------------------------------------------------------- 10 -- AXP GLOBAL SERIES, INC. INVESTMENT STRATEGIES The following information supplements the discussion of the Fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes many strategies that many mutual funds use and types of securities that they purchase. Please refer to the section titled Investment Strategies and Types of Investments to see which are applicable to the Fund. Agency and Government Securities The U.S. government and its agencies issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities, including mortgage pass through certificates of the Government National Mortgage Association (GNMA), are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and Reinvestment Risk. Borrowing A fund may borrow money for temporary or emergency purposes, to make other investments or to engage in other transactions permissible under the 1940 Act that may be considered a borrowing (such as derivative instruments). Borrowings are subject to costs (in addition to any interest that may be paid) and typically reduce a fund's total return. Except as qualified above, however, a fund may not buy securities on margin. Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk and Management Risk. Cash/Money Market Instruments Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. A fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types of instruments generally offer low rates of return and subject a fund to certain costs and expenses. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk, Inflation Risk, and Management Risk. Collateralized Bond Obligations Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, earns them investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield (High-Risk) Securities (Junk Bonds).) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, and Management Risk. - -------------------------------------------------------------------------------- 11 -- AXP GLOBAL SERIES, INC. Commercial Paper Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk, Liquidity Risk, and Management Risk. Common Stock Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Event Risk, Issuer Risk, Legal/Legislative Risk, Management Risk, Market Risk, and Small and Medium Company Risk. Convertible Securities Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Call/Prepayment Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and Reinvestment Risk. Corporate Bonds Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government agency or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield (High-Risk) Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. - -------------------------------------------------------------------------------- 12 -- AXP GLOBAL SERIES, INC. Debt Obligations Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a specified rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High-Yield (High-Risk) Securities (Junk Bonds).) All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating organization or their rating systems, the Fund will attempt to use comparable ratings as standards for selecting investments. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. Depositary Receipts Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, Management Risk, and Market Risk. Derivative Instruments Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward-based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange-traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. - -------------------------------------------------------------------------------- 13 -- AXP GLOBAL SERIES, INC. Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Options on many securities are listed on options exchanges. If a fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indices (such as the S&P 500 Index), foreign currencies and other financial instruments and indices. A fund may engage in futures and related options transactions to produce incremental earnings, to hedge existing positions, and to increase flexibility. The fund intends to comply with Rule 4.5 of the Commodity Futures Trading Commission (CFTC), under which a mutual fund is exempt from the definition of a "commodity pool operator." The fund, therefore, is not subject to registration or regulation as a pool operator, meaning that the fund may invest in futures contracts without registering with the CFTC. Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. - -------------------------------------------------------------------------------- 14 -- AXP GLOBAL SERIES, INC. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. Options on Stock Indexes. Options on stock indexes are securities traded on national securities exchanges. An option on a stock index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Tax and Accounting Treatment. As permitted under federal income tax laws and to the extent a fund is allowed to invest in futures contracts, a fund would intend to identify futures contracts as mixed straddles and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If a fund is using short futures contracts for hedging purposes, the fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Federal income tax treatment of gains or losses from transactions in options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, a fund would either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The IRS has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (a fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last-quoted sales price on their primary exchange. Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange-traded derivatives since they often can only be closed out with the other party to the transaction. - -------------------------------------------------------------------------------- 15 -- AXP GLOBAL SERIES, INC. Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Leverage Risk, Liquidity Risk, and Management Risk. Exchange-Traded Funds Exchange-traded funds (ETFs) represent shares of ownership in mutual funds, unit investment trusts or depositary receipts. ETFs hold portfolios of securities that closely track the performance and dividend yield of specific domestic or foreign market indexes. Although one or more of the other risks described in this SAI may apply, the largest risks associated with ETFs include: Management Risk and Market Risk. Foreign Currency Transactions Investments in foreign countries usually involve currencies of foreign countries. In addition, a fund may hold cash and cash-equivalent investments in foreign currencies. As a result, the value of a fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, a fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing a fund's NAV to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. Spot Rates and Derivative Instruments. A fund may conduct its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts). (See also Derivative Instruments.) These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, a fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. A fund may enter into forward contracts for a variety of reasons. A fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When a fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, a fund would be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. A fund may enter into forward contracts when management of the fund believes the currency of a particular foreign country may decline in value relative to another currency. When selling currencies forward in this fashion, a fund may seek to hedge the value of foreign securities it holds against an adverse move in exchange rates. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. A fund would not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate it to deliver an amount of foreign currency in excess of the value of its securities or other assets denominated in that currency. A fund may designate cash or securities in an amount equal to the value of the fund's total assets committed to consummating forward contracts entered into under the circumstance set forth immediately above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the fund's commitments on such contracts. This method of protecting the value of the fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. A fund also may enter into forward contracts when its management believes the currency of a particular country will increase in value relative to another currency. A fund may buy currencies forward to gain exposure to a currency without incurring the additional costs of purchasing securities denominated in that currency. When buying a currency forward in this fashion, a fund would hold cash or cash equivalents equal to the value of the forward contract in order to avoid the use of leverage. - -------------------------------------------------------------------------------- 16 -- AXP GLOBAL SERIES, INC. At maturity of a forward contract, a fund may either deliver (if a contract to sell) or take delivery of (if a contract to buy) the foreign currency or terminate its contractual obligation by entering into an offsetting contract with the same currency trader, the same maturity date, and covering the same amount of foreign currency. If a fund engages in an offsetting transaction, it would incur a gain or loss to the extent there has been movement in forward contract prices. If a fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to buy or sell the foreign currency. Although a fund values its assets each business day in terms of U.S. dollars, it may not intend to convert its foreign currencies into U.S. dollars on a daily basis. It would do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a fund at one rate, while offering a lesser rate of exchange should a fund desire to resell that currency to the dealer. Options on Foreign Currencies. A fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes and to gain exposure to foreign currencies. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, a fund may buy put options on the foreign currency. If the value of the currency does decline, a fund would have the right to sell the currency for a fixed amount in dollars and would offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities a fund plans to buy, or where a fund would benefit from increased exposure to the currency, a fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. As in the case of other types of options, however, the benefit to a fund derived from purchases of foreign currency options would be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. A fund may write options on foreign currencies for the same types of purposes. For example, when a fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option would most likely not be exercised and the diminution in value of securities would be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option when a foreign currency is expected to appreciate, a fund could write a put option on the relevant currency. If rates move in the manner projected, the put option would expire unexercised and allow the fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if a fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. - -------------------------------------------------------------------------------- 17 -- AXP GLOBAL SERIES, INC. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Foreign Currency Futures and Related Options. A fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. A fund may use currency futures for the same purposes as currency forward contracts, subject to Commodity Futures Trading Commission (CFTC) limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect a fund against price decline if the issuer's creditworthiness deteriorates. Because the value of a fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of a fund's investments denominated in that currency over time. A fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The fund would not enter into an option or futures position that exposes the fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Correlation Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk. Foreign Securities Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). - -------------------------------------------------------------------------------- 18 -- AXP GLOBAL SERIES, INC. The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The introduction of a single currency, the euro, on Jan. 1, 1999 for participating European nations in the Economic and Monetary Union ("EU") presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after Jan. 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other EU countries such as the United Kingdom and Denmark into the euro and the admission of other non-EU countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk, Issuer Risk, and Management Risk. Funding Agreements A Fund may invest in funding agreements issued by domestic insurance companies. Funding agreements are short-term, privately placed, debt obligations of insurance companies that offer a fixed- or floating-rate of interest. These investments are not readily marketable and therefore are considered to be illiquid securities. (See also Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with funding agreements include: Credit Risk and Liquidity Risk. High-Yield (High-Risk) Securities (Junk Bonds) High yield (high-risk) securities are sometimes referred to as junk bonds. They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers. Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield (high-risk) securities include: Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and Management Risk. - -------------------------------------------------------------------------------- 19 -- AXP GLOBAL SERIES, INC. Illiquid and Restricted Securities Illiquid securities are securities that are not readily marketable. These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. To the extent a fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for the securities. Disposing of illiquid or restricted securities may involve time-consuming negotiations and legal expense, and it may be difficult or impossible for a fund to sell the investment promptly and at an acceptable price. In determining the liquidity of Rule 144A securities, which are unregistered securities offered to qualified institutional buyers, and interest-only and principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S. government or its agencies and instrumentalities the investment manager, under guidelines established by the board, will consider any relevant factors including the frequency of trades, the number of dealers willing to purchase or sell the security and the nature of marketplace trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk and Management Risk. Indexed Securities The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk, Management Risk, and Market Risk. Inflation Protected Securities Inflation is a general rise in prices of goods and services. Inflation erodes the purchasing power of an investor's assets. For example, if an investment provides a total return of 7% in a given year and inflation is 3% during that period, the inflation-adjusted, or real, return is 4%. Inflation protected securities are debt securities whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. One type of inflation-protected debt security is issued by the U.S. Treasury. The principal of these securities is adjusted for inflation as indicated by the Consumer Price Index for Urban Consumers (CPI) and interest is paid on the adjusted amount. The CPI is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. If the CPI falls, the principal value of inflation-protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Conversely, if the CPI rises, the principal value of inflation-protected securities will be adjusted upward, and consequently the interest payable on these securities will be increased. Repayment of the original bond principal upon maturity is guaranteed in the case of U.S. Treasury inflation-protected securities, even during a period of deflation. However, the current market value of the inflation-protected securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal. Other issuers of inflation-protected debt securities include other U.S. government agencies or instrumentalities, corporations and foreign governments. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure. Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. By contrast, a fund holding these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders. Although one or more of the other risks described in this SAI may apply, the largest risks associated with inflation-protected securities include: Interest Rate Risk and Market Risk. - -------------------------------------------------------------------------------- 20 -- AXP GLOBAL SERIES, INC. Inverse Floaters Inverse floaters are created by underwriters using the interest payment on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. The remainder, minus a servicing fee, is paid to holders of inverse floaters. As interest rates go down, the holders of the inverse floaters receive more income and an increase in the price for the inverse floaters. As interest rates go up, the holders of the inverse floaters receive less income and a decrease in the price for the inverse floaters. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with inverse floaters include: Interest Rate Risk and Management Risk. Investment Companies Investing in securities issued by registered and unregistered investment companies may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Management Risk and Market Risk. Lending of Portfolio Securities A fund may lend certain of its portfolio securities. The current policy of the Fund's board is to make these loans, either long- or short-term, to broker-dealers. In making loans, the lender receives the market price in cash, U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the board. If the market price of the loaned securities goes up, the lender will get additional collateral on a daily basis. If the market price of the loaned securities goes down, the borrower may request that some collateral be returned. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the lender receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The lender may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The lender will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the lending of portfolio securities include: Credit Risk and Management Risk. Loan Participations Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk and Management Risk. Mortgage- and Asset-Backed Securities Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. - -------------------------------------------------------------------------------- 21 -- AXP GLOBAL SERIES, INC. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Asset-backed securities have structural characteristics similar to mortgage-backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset-backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage- and asset-backed securities include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and Management Risk. Mortgage Dollar Rolls Mortgage dollar rolls are investments in which an investor sells mortgage-backed securities for delivery in the current month and simultaneously contracts to purchase substantially similar securities on a specified future date. While an investor foregoes principal and interest paid on the mortgage-backed securities during the roll period, the investor is compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk, Interest Rate Risk, and Management Risk. Municipal Obligations Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) - -------------------------------------------------------------------------------- 22 -- AXP GLOBAL SERIES, INC. Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Event Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market Risk. Preferred Stock Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk, Management Risk, and Market Risk. Real Estate Investment Trusts Real estate investment trusts (REITs) are pooled investment vehicles that manage a portfolio of real estate or real estate related loans to earn profits for their shareholders. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property, such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels, and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Similar to investment companies, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements under the tax law. The failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. A fund will indirectly bear its proportionate share of any expenses paid by a REIT in which it invests. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Issuer Risk, Management Risk, Market Risk and Interest Rate Risk. Repurchase Agreements Repurchase agreements may be entered into with certain banks or non-bank dealers. In a repurchase agreement, the purchaser buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the purchaser's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk and Management Risk. Reverse Repurchase Agreements In a reverse repurchase agreement, an investor sells a security and enters into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk, Interest Rate Risk, and Management Risk. Short Sales With short sales, an investor sells a security that it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the investor must borrow the security to make delivery to the buyer. The investor is obligated to replace the security that was borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the investor sold the security. A fund that is allowed to engage in short sales will designate cash or liquid securities to cover its open short positions. Those funds also may engage in "short sales against the box," a form of short-selling that involves selling a security that an investor owns (or has an unconditioned right to purchase) for delivery at a - -------------------------------------------------------------------------------- 23 -- AXP GLOBAL SERIES, INC. specified date in the future. This technique allows an investor to hedge protectively against anticipated declines in the market of its securities. If the value of the securities sold short increased between the date of the short sale and the date on which the borrowed security is replaced, the investor loses the opportunity to participate in the gain. A "short sale against the box" will result in a constructive sale of appreciated securities thereby generating capital gains to the Fund. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Management Risk and Market Risk. Sovereign Debt A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk, Foreign/Emerging Markets Risk, and Management Risk. Structured Products Structured products are over-the-counter financial instruments created specifically to meet the needs of one or a small number of investors. The instrument may consist of a warrant, an option, or a forward contract embedded in a note or any of a wide variety of debt, equity, and/or currency combinations. Risks of structured products include the inability to close such instruments, rapid changes in the market, and defaults by other parties. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured products include: Credit Risk, Liquidity Risk, and Management Risk. Swap Agreements Swap agreements obligate one party to make payments to the other party based on the change in the market value of an index or other asset. In return, the other party agrees to make payments to the first party based on the return of another index or asset. Swap agreements entail the risk that a party will default on its payment obligations. Interest Rate Swaps. Interest rate swap agreements are used to obtain or preserve a desired return or spread at a lower cost than through a direct investment in an instrument that yields the desired return or spread. Swaps also may protect against changes in the price of securities that an investor anticipates buying or selling at a later date. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to several years. In a standard interest rate swap transaction, two parties agree to exchange their respective commitments to pay fixed or floating rates on a predetermined notional amount. The swap agreement notional amount is the predetermined basis for calculating the obligations that the swap counterparties have agreed to exchange. Under most swap agreements, the obligations of the parties are exchanged on a net basis. The two payment streams are netted out, with each party receiving or paying, as the case may be, only the net amount of the two payments. Swap agreements are usually entered into at a zero net market value of the swap agreement commitments. The market values of the underlying commitments will change over time resulting in one of the commitments being worth more than the other and the net market value creating a risk exposure for one counterparty to the other. Swap agreements may include embedded interest rate caps, floor and collars. In interest rate cap transactions, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or cap. Interest rate floor transactions require one party, in exchange for a premium to agree to make payments to the other to the extent that interest rates fall below a specified level, or floor. In interest rate collar transactions, one party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts. Swap agreements are traded in the over-the-counter market and may be considered to be illiquid. The Fund will enter into interest rate swap agreements only if the claims-paying ability of the other party or its guarantor is considered to be investment grade by the Advisor. Generally, the unsecured senior debt or the claims-paying ability of the other party or its guarantor must be rated in - -------------------------------------------------------------------------------- 24 -- AXP GLOBAL SERIES, INC. one of the three highest rating categories of at least one NRSRO at the time of entering into the transaction. If there is a default by the other party to such a transaction, the Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. In certain circumstances, the Fund may seek to minimize counterparty risk by requiring the counterparty to post collateral. Currency Swaps. Currency swaps are similar to interest rate swaps, except that they involve currencies instead of interest rates. Although one or more of the other risks described in this SAI may apply, the largest risks associated with swaps include: Liquidity Risk, Credit Risk and Correlation Risk. Variable- or Floating-Rate Securities Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (e.g., daily, monthly, semiannually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. Variable-rate demand notes include master demand notes that are obligations that permit the investor to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the investor as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the lender's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk and Management Risk. Warrants Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Management Risk and Market Risk. When-Issued Securities and Forward Commitments When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, the Fund may lose the opportunity to obtain a price and yield considered to be advantageous. Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk and Management Risk. Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk, Interest Rate Risk, and Management Risk. - -------------------------------------------------------------------------------- 25 -- AXP GLOBAL SERIES, INC. The Fund cannot issue senior securities but this does not prohibit certain investment activities for which assets of the Fund are set aside, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, delayed-delivery and when-issued securities transactions, and contracts to buy or sell options, derivatives, and hedging instruments. Security Transactions Subject to policies set by the board, AEFC is authorized to determine, consistent with the Fund's investment goal and policies, which securities will be purchased, held, or sold. The description of policies and procedures in this section also applies to any Fund subadviser. In determining where the buy and sell orders are to be placed, AEFC has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the board. In selecting broker-dealers to execute transactions, AEFC may consider the price of the security, including commission or mark-up, the size and difficulty of the order, the reliability, integrity, financial soundness, and general operation and execution capabilities of the broker, the broker's expertise in particular markets, and research services provided by the broker. The Fund, AEFC, any subadviser and American Express Financial Advisors Inc. (the Distributor) each have a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the Fund. The Fund's securities may be traded on a principal rather than an agency basis. In other words, AEFC will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. AEFC does not pay the dealer commissions. Instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The board has adopted a policy authorizing AEFC to do so to the extent authorized by law, if AEFC determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or AEFC's overall responsibilities with respect to the Fund and the other American Express mutual funds for which it acts as investment manager. Research provided by brokers supplements AEFC's own research activities. Such services include economic data on, and analysis of, U.S. and foreign economies; information on specific industries; information about specific companies, including earnings estimates; purchase recommendations for stocks and bonds; portfolio strategy services; political, economic, business, and industry trend assessments; historical statistical information; market data services providing information on specific issues and prices; and technical analysis of various aspects of the securities markets, including technical charts. Research services may take the form of written reports, computer software, or personal contact by telephone or at seminars or other meetings. AEFC has obtained, and in the future may obtain, computer hardware from brokers, including but not limited to personal computers that will be used exclusively for investment decision-making purposes, which include the research, portfolio management, and trading functions and other services to the extent permitted under an interpretation by the SEC. When paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge, AEFC must follow procedures authorized by the board. To date, three procedures have been authorized. One procedure permits AEFC to direct an order to buy or sell a security traded on a national securities exchange to a specific broker for research services it has provided. The second procedure permits AEFC, in order to obtain research, to direct an order on an agency basis to buy or sell a security traded in the over-the-counter market to a firm that does not make a market in that security. The commission paid generally includes compensation for research services. The third procedure permits AEFC, in order to obtain research and brokerage services, to cause the Fund to pay a commission in excess of the amount another broker might have charged. AEFC has advised the Fund that it is necessary to do business with a number of brokerage firms on a continuing basis to obtain such services as the handling of large orders, the willingness of a broker to risk its own money by taking a position in a security, and the specialized handling of a particular group of securities that only certain brokers may be able to offer. As a result of this arrangement, some portfolio transactions may not be effected at the lowest commission, but AEFC believes it may obtain better overall execution. AEFC has represented that under all three procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services performed or research provided. All other transactions will be placed on the basis of obtaining the best available price and the most favorable execution. In so doing, if in the professional opinion of the person responsible for selecting the broker or dealer, several firms can execute the transaction on the same basis, consideration will be given by such person to those firms offering research services. Such services may be used by AEFC in providing advice to all American Express mutual funds even though it is not possible to relate the benefits to any particular fund. - -------------------------------------------------------------------------------- 26 -- AXP GLOBAL SERIES, INC. Each investment decision made for the Fund is made independently from any decision made for another portfolio, fund, or other account advised by AEFC or any of its subsidiaries. When the Fund buys or sells the same security as another portfolio, fund, or account, AEFC carries out the purchase or sale in a way the Fund agrees in advance is fair. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the Fund, the Fund hopes to gain an overall advantage in execution. On occasion, the Fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. On a periodic basis, AEFC makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions. The review evaluates execution, operational efficiency, and research services. For fiscal years noted below, each Fund paid total brokerage commissions as follows. Substantially all firms through whom transactions were executed provide research services: Fiscal year 2004 Fiscal year 2003 Fiscal year 2002 Emerging Markets $2,022,969 $2,106,670 $2,989,019 Global Balanced 189,252 175,551 323,220 Global Bond 7,760 23,297 9,621 Global Equity 1,992,985 1,582,657 3,706,450 Global Technology 4,193,021 5,595,324 3,248,305 In fiscal year 2004, transactions on which commissions were imputed or paid, were specifically directed to firms in exchange for research services were as follows: Transaction amounts Commissions Emerging Markets $ -- $ -- Global Balanced -- -- Global Bond -- -- Global Equity -- -- Global Technology 21,309,491 84,503 As of the end of the most recent fiscal year, Emerging Markets and Global Technology held no securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities. As of the end of the most recent fiscal year, each Fund held securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below:
Value of securities Fund Name of issuer owned at end of fiscal year Global Balanced Ameritrade Holding $ 209,622 Bear Stearns Companies 592,661 Citigroup 1,725,816 Goldman Sachs Group 540,599 Global Bond Bear Stearns Commercial Mtge Securities 2,268,820 Citigroup 3,380,448 CS First Boston Mtge Securities 248,320 Goldman Sachs Group 557,710 LB-UBS Commercial Mtge Trust 2,269,733 J.P. Morgan Chase & Co. 1,793,898 Morgan Stanley Capital 1 1,016,380 Morgan Stanley Group 3,181,144 Global Equity Ameritrade Holding 5,251,617 Bear Stearns Companies 3,564,211 Citigroup 18,148,572 Goldman Sachs Group 6,145,996
- -------------------------------------------------------------------------------- 27 -- AXP GLOBAL SERIES, INC. The portfolio turnover rates in the two most recent fiscal years were as follows: Fiscal year 2004 Fiscal year 2003 Emerging Markets 128% 174% Global Balanced 74 90 Global Bond 92 117 Global Equity 104 132 Global Technology 349 546 Higher turnover rates may result in higher brokerage expenses and taxes. A higher turnover rate is the result of more frequent trading of portfolio securities, which may produce capital gains that are taxable to shareholders when distributed. Frequent trading by portfolio managers may also increase the amount of commissions or mark-ups paid to broker-dealers when the Fund buys and sells securities. Brokerage Commissions Paid to Brokers Affiliated with American Express Financial Corporation Affiliates of American Express Company (of which AEFC is a wholly-owned subsidiary) may engage in brokerage and other securities transactions on behalf of the Fund according to procedures adopted by the board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. AEFC will use an American Express affiliate only if (i) AEFC determines that the Fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Fund and (ii) the affiliate charges the Fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. No brokerage commissions were paid to brokers affiliated with AEFC for the three most recent fiscal years for Emerging Markets, Global Balanced, Global Bond and Global Equity Funds. Information about brokerage commissions paid by the Fund for the last three fiscal years to brokers affiliated with AEFC is contained in the following table:
As of the end of fiscal year 2004 2003 2002 Percent of aggregate dollar amount of Aggregate dollar Percent of transactions Aggregate dollar Aggregate dollar amount of aggregate involving amount of amount of Nature of commissions brokerage payment of commissions commissions Fund Broker affiliation paid to broker commissions commissions paid to broker paid to broker Global Technology American Enterprise (1) $97,718* 2.33% 4.97% $495,249* $202,910* Investment Series Inc.
* Represents brokerage clearing fees. (1) Wholly-owned subsidiary of AEFC. Valuing Fund Shares As of the end of the most recent fiscal year, the computation looked like this:
Emerging Markets Net assets Shares outstanding Net asset value of one share Class A $190,500,049 divided by 30,359,602 equals $6.27 Class B 73,255,622 12,316,180 5.95 Class C 1,211,363 203,071 5.97 Class I 12,706,944 1,999,415 6.36 Class Y 18,013,900 2,838,508 6.35
- -------------------------------------------------------------------------------- 28 -- AXP GLOBAL SERIES, INC.
Global Balanced Net assets Shares outstanding Net asset value of one share Class A $56,802,615 divided by 10,819,137 equals $5.25 Class B 29,946,507 5,813,358 5.15 Class C 788,884 153,660 5.13 Class Y 12,506,399 2,368,527 5.28 Global Bond Net assets Shares outstanding Net asset value of one share Class A $388,702,892 divided by 55,378,028 equals $7.02 Class B 141,856,065 20,209,576 7.02 Class C 4,716,721 674,551 6.99 Class I 24,020,955 3,414,514 7.03 Class Y 78,443 11,149 7.04 Global Equity Net assets Shares outstanding Net asset value of one share Class A $364,487,949 divided by 70,705,385 equals $5.16 Class B 103,737,319 21,300,358 4.87 Class C 958,277 197,511 4.85 Class Y 4,482,992 862,149 5.20 Global Technology Net assets Shares outstanding Net asset value of one share Class A $146,065,605 divided by 79,952,878 equals $1.83 Class B 59,344,328 36,990,705 1.60 Class C 3,952,783 2,457,559 1.61 Class I 10,781 5,882 1.83 Class Y 412,777 225,433 1.83
In determining net assets before shareholder transactions, the Fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): o Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. o Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. o Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. o Securities included in the NASDAQ National Market System for which a last-quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. o Futures and options traded on major exchanges are valued at the last-quoted sales price on their primary exchange. o Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars at the current rate of exchange. o Occasionally, events affecting the value of securities occur between the time the primary market on which the securities are traded closes and the close of the Exchange. If events materially affect the value of securities, the securities will be valued at their fair value according to procedures decided upon in good faith by the board. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. o Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. o Securities without a readily available market price and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When possible, bonds are valued by a pricing service independent from the Fund. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. - -------------------------------------------------------------------------------- 29 -- AXP GLOBAL SERIES, INC. Portfolio Holdings Disclosure The Fund's board of directors and AEFC believe that the investment ideas of AEFC and any Fund Subadviser with respect to management of a Fund should benefit the Fund and its shareholders, and do not want to afford speculators an opportunity to profit by anticipating Fund trading strategies or by using Fund portfolio holdings information for stock picking. However, the Fund's board also believes that knowledge of the Fund's portfolio holdings can assist shareholders in monitoring their investments, making asset allocation decisions, and evaluating portfolio management techniques. The Fund's board has therefore adopted AEFC's policies and approved AEFC's procedures, including AEFC's oversight of Subadviser practices relating to disclosure of the Funds' portfolio securities. These policies and procedures are intended to protect the confidentiality of Fund portfolio holdings information and generally prohibit the release of such information until such information is made public, unless such persons have been authorized to receive such information on a selective basis, as described below. It is the policy of the Fund not to provide or permit others to provide holdings information on a selective basis, and AEFC does not intend to selectively disclose holdings information or expect that such holdings information will be selectively disclosed, except where necessary for the Fund's operation or where there are legitimate business purposes for doing so and, in any case, where conditions are met that are designed to protect the interests of the Fund and its shareholders. Although AEFC seeks to limit the selective disclosure of portfolio holdings information and generally monitors recipients' usage of that information, there can be no assurance that these policies will protect the Fund from the potential misuse of holdings information by individuals or firms in possession of that information. Under no circumstances may AEFC, its affiliates or any employee thereof receive any consideration or compensation for disclosing such holdings information. A complete schedule of the Fund's portfolio holdings is available semi-annually and annually in shareholder reports filed on Form N-CSR and, after the first and third fiscal quarters, in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC in accordance with federal securities laws and are generally available within sixty (60) days of the end of the Fund's fiscal quarter, on the Securities and Exchange Commission's Website. Once holdings information is filed with the SEC, it will also be posted on the website (www.americanexpress.com), and it may be mailed, e-mailed or otherwise transmitted to any person. In addition, AEFC makes publicly available, on a monthly basis, information regarding the Fund's top ten holdings (including name and percentage of a Fund's assets invested in each such holding) and the percentage breakdown of a Fund's investments by country, sector and industry, as applicable. This holdings information is generally made available through the website, marketing communications (including printed advertisements and sales literature), and/or telephone customer service centers that support the Fund. This holdings information is generally not released until it is at least 30 days old. From time to time, AEFC may make partial or complete Fund holdings information that is not publicly available on the website or otherwise available in advance of the time restrictions noted above (1) to its directors, officers, and employees, and those of its affiliated and unaffiliated service providers that require the information in the normal course of business in order to provide services to the Fund (including, without limitation, custodians, auditors, subadvisers, financial printers, pricing services, proxy voting services, and parties that deliver analytical, statistical, trading or other investment related services), and (2) to facilitate the review and/or rating of the Fund by ratings and rankings agencies (including, for example, Morningstar, Inc., Thomson Financial and Lipper Inc.). In such situations, the information is released subject to confidentiality agreements, duties imposed under applicable policies and procedures (e.g., applicable codes of ethics) designed to prevent the misuse of confidential information, general duties under applicable laws and regulations, or other such duties of confidentiality. In addition, the Fund discloses holdings information as required by federal or state securities laws, and may disclose holdings information in response to requests by governmental authorities. The Fund's board has adopted the policies of AEFC and approved the procedures AEFC has established to ensure that the Fund's holdings information is only disclosed in accordance with these policies. Before any selective disclosure of holdings information is permitted, the person seeking to disclose such holdings information must submit a written request to the Portfolio Holdings Committee ("PHC"). The PHC is comprised of members from AEFC's General Counsel's Office, Compliance, and Communications. The PHC has been authorized by the Funds' board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of the Fund and its shareholders, and to safeguard against improper use of holdings information. Factors considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure was authorized. Before portfolio holdings may be selectively disclosed, requests approved by the PHC must also be authorized by the Fund's Chief Compliance Officer or the Fund's General Counsel. On at least an annual basis the PHC reviews the approved recipients of selective disclosure and, where appropriate, requires a resubmission of the request, in order to re-authorize any ongoing arrangements. These procedures are intended to be reasonably - -------------------------------------------------------------------------------- 30 -- AXP GLOBAL SERIES, INC. designed to protect the confidentiality of Fund holdings information and to prohibit their release to individual investors, institutional investors, intermediaries that distribute the Funds' shares, and other parties, until such holdings information is made public or unless such persons have been authorized to receive such holdings information on a selective basis, as set forth above. Although AEFC has set up these procedures to monitor and control selective disclosure of holdings information, there can be no assurance that these procedures will protect the Fund from the potential misuse of holdings information by individuals or firms in possession of that information. Proxy Voting GENERAL GUIDELINES The Fund upholds a long tradition of sound and principled corporate governance. For approximately 30 years, the Board of Directors, which consists of a majority of independent directors, has voted proxies. General guidelines are: o Corporate governance matters -- The board supports proxy proposals that require changes or encourage decisions that have been shown to add shareholder value over time and votes against proxy proposals that entrench management. o Changes in capital structure -- The board votes for amendments to corporate documents that strengthen the financial condition of a business. o Stock option plans and other management compensation issues -- The board expects thoughtful consideration to be given by a company's management to developing a balanced compensation structure providing competitive current income with long-term employee incentives directly tied to the interest of shareholders and votes against proxy proposals that dilute shareholder value excessively. o Social and corporate policy issues -- The board believes that proxy proposals should address the business interests of the corporation. Such proposals typically request that the company disclose or amend certain business practices but lack a compelling economic impact on shareholder value. In general, these matters are primarily the responsibility of management and should be reviewed by the corporation's board of directors, unless they have a substantial impact on the value of the Fund's investment. Each proposal is viewed in light of the circumstances of the company submitting the proposal. POLICY AND PROCEDURES The policy of the board is to vote all proxies of the companies in which the Fund holds investments, ensuring there are no conflicts between interests of Fund shareholders and those of the Fund's investment manager, AEFC. The recommendation of the management of a company as set out in the company's proxy statement is considered. In each instance in which the Fund votes against the recommendation, the board sends a letter to senior management of the company explaining the basis for its vote. This has permitted both the company's management and the Fund's board to gain better insight into issues presented by proxy proposals. In the case of foreign corporations, proxies of companies located in some countries may not be voted due to requirements of locking up the voting shares and when time constraints prohibit the processing of proxies. From time to time a proxy proposal is presented that has not been previously considered by the board or that AEFC recommends be voted different from the votes cast for similar proposals. In making recommendations to the board about voting on a proposal, AEFC relies on its own investment personnel (or the investment personnel of the Fund's subadviser) and information obtained from outside resources, including Institutional Shareholder Services (ISS). AEFC makes the recommendation in writing. The process established by the board to vote proxies requires that either board members or officers who are independent from AEFC consider the recommendation and decide how to vote the proxy proposal. PROXY VOTING RECORD The proxy voting record is available on a quarterly basis after the end of the quarter for all companies whose shareholders meetings were completed during the quarter. The information is on a website maintained by ISS and can be accessed through American Express Company's web page, www.americanexpress.com. For anyone seeking information on how the Fund voted all proxies during a year, the information can be obtained without cost: o On the ISS website accessible through www.americanexpress.com/funds o On a website maintained by the Securities and Exchange Commission, www.sec.gov o By calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. - -------------------------------------------------------------------------------- 31 -- AXP GLOBAL SERIES, INC. Investing in the Fund SALES CHARGE Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the CDSC and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of the Fund. Shares of the Fund are sold at the public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C, Class I (for Emerging Markets, Global Technology and Global Bond) and Class Y, there is no initial sales charge so the public offering price is the same as the NAV. Class A -- Calculation of the Sales Charge (for Emerging Markets, Global Balanced, Global Equity and Global Technology) Using the sales charge schedule in the table below, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal year, was determined as follows. The sales charge is paid to the Distributor by the person buying the shares.
Divided by (1.00 - 0.0575) Net asset value of one share for a sales charge Public offering price Emerging Markets $6.27 divided by 0.9425 = $6.65 Global Balanced 5.25 divided by 0.9425 = 5.57 Global Equity 5.16 divided by 0.9425 = 5.47 Global Technology 1.83 divided by 0.9425 = 1.94
Sales charges are determined as follows: Sales charge as a percentage of: Total market value Public offering price Net amount invested Up to $49,999 5.75% 6.10% $50,000-$99,999 4.75 4.99 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00
Class A -- Calculation of the Sales Charge (for Global Bond) Using the sales charge schedule in the table below, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal year, for Global Bond was determined by dividing the NAV of one share, $7.02, by 0.9525 (1.00 - 0.0475) for a maximum 4.75% sales charge for a public offering price of $7.37. The sales charge is paid to the Distributor by the person buying the shares.
Sales charges are determined as follows: Sales charge as a percentage of: Total market value Public offering price Net amount invested Up to $49,999 4.75% 4.99% $50,000-$99,999 4.25 4.44 $100,000-$249,999 3.50 3.63 $250,000-$499,999 2.50 2.56 $500,000-$999,999 2.00 2.04 $1,000,000 or more 0.00 0.00
- -------------------------------------------------------------------------------- 32 -- AXP GLOBAL SERIES, INC. The initial sales charge is waived for certain qualified plans. Participants in these qualified plans may be subject to a deferred sales charge on certain redemptions. The Fund will waive the deferred sales charge on certain redemptions if the redemption is a result of a participant's death, disability, retirement, attaining age 59 1/2, loans, or hardship withdrawals. The deferred sales charge varies depending on the number of participants in the qualified plan and total plan assets as follows: Deferred Sales Charge Number of participants Total plan assets 1-99 100 or more Less than $1 million 4% 0% $1 million or more 0% 0% Class A -- Reducing the Sales Charge For purposes of reducing the sales charge: o If multiple trustees are listed on a revocable trust account, the account will be included only in the household group of the grantor-trustee (the person who put the money into the trust). o If the parents or guardians of a minor child who is the beneficiary of one or more UGMA/UTMA accounts are not members of the same primary household group, the Distributor will use its discretion in assigning such accounts to one of the primary household groups. Under most circumstances the Distributor will consider the child's primary domicile to be the appropriate household group in which to include the UGMA/UTMA account(s). Your primary household group consists of you, your spouse or domestic partner, and your unmarried children under age 21 sharing a mailing address. For purposes of this policy a domestic partner is an individual who shares your primary residence and with whom you own joint property. If you or any member of your primary household group elects to separate from the primary household group (for example, by asking that account statements be sent to separate addresses), your assets will no longer be combined for purposes of reducing your sales charge. Class A -- Letter of Intent (LOI) If you intend to invest $50,000 or more over a period of time, you can reduce the sales charge in Class A by completing a LOI form and committing to invest a certain amount. The LOI must be filed with the Distributor. The LOI can start at any time and you will have up to 13 months to fulfill your commitment. The LOI start date can be backdated by up to 90 days. Your holdings in American Express mutual funds acquired more than 90 days before receipt of your signed LOI in the Distributor's corporate office will not be counted towards the completion of the LOI. Your investments will be charged the sales charge that applies to the amount you have committed to invest. Five percent of the commitment amount will be placed in escrow. If your commitment amount is reached within the 13-month period, the LOI will end and the shares will be released from escrow. Once the LOI has ended, future sales charges will be determined by the total value of the new investment combined with the market value of the existing American Express mutual fund investments. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. The commitment amount does not include purchases in any class of American Express mutual funds other than Class A; purchases in American Express mutual funds held within a wrap product; and purchases of AXP Cash Management Fund and AXP Tax-Free Money Fund unless they are subsequently exchanged to Class A shares of an American Express mutual fund within the 13 month period. A LOI is not an option (absolute right) to buy shares. If you purchase shares through different channels, for example, in a brokerage account or through a third party, you must inform the Distributor in writing about the LOI when placing any purchase orders during the period of the LOI. If you do not complete and file the LOI form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. - -------------------------------------------------------------------------------- 33 -- AXP GLOBAL SERIES, INC. Class Y Shares Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC and are not subject to a distribution fee. The following investors are eligible to purchase Class Y shares: o Qualified employee benefit plans* if the plan: o uses a daily transfer recordkeeping service offering participants daily access to American Express mutual funds and has o at least $10 million in plan assets or o 500 or more participants; or o does not use daily transfer recordkeeping and has o at least $3 million invested in American Express mutual funds or o 500 or more participants. A plan that qualifies for investment in Class Y may continue to invest in Class Y even if it subsequently falls below the required level of assets or participants. o Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code.* These institutions must have at least $10 million in American Express mutual funds. o Nonqualified deferred compensation plans* whose participants are included in a qualified employee benefit plan described above. o State sponsored college savings plans established under Section 529 of the Internal Revenue Code. * Eligibility must be determined in advance. To do so, contact your financial advisor. SYSTEMATIC INVESTMENT PROGRAMS You decide how often to make payments -- monthly, quarterly, or semiannually. Provided your account meets the minimum balance requirement, you are not obligated to make any payments. You can omit payments or discontinue the investment program altogether. The Fund also can change the program or end it at any time. AUTOMATIC DIRECTED DIVIDENDS Dividends, including capital gain distributions, paid by another American Express mutual fund may be used to automatically purchase shares in the same class of this Fund. Dividends may be directed to existing accounts only. Dividends declared by a fund are exchanged to this Fund the following day. Dividends can be exchanged into the same class of another American Express mutual fund but cannot be split to make purchases in two or more funds. Automatic directed dividends are available between accounts of any ownership except: o Between a non-custodial account and an IRA, or 401(k) plan account or other qualified retirement account of which American Express Trust Company acts as custodian; o Between two American Express Trust Company custodial accounts with different owners (for example, you may not exchange dividends from your IRA to the IRA of your spouse); and o Between different kinds of custodial accounts with the same ownership (for example, you may not exchange dividends from your IRA to your 401(k) plan account, although you may exchange dividends from one IRA to another IRA). Dividends may be directed from accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA or UTMA accounts with identical ownership. The Fund's investment goal is described in its prospectus along with other information, including fees and expense ratios. Before exchanging dividends into another fund, you should read that fund's prospectus. You will receive a confirmation that the automatic directed dividend service has been set up for your account. REJECTION OF BUSINESS The Fund or AECSC reserves the right to reject any business, in its sole discretion. Shares of Global Balanced may not be held by persons who are residents of, or domiciled in, Brazil. Global Balanced reserves the right to redeem accounts of shareholders who establish residence or domicile in Brazil. - -------------------------------------------------------------------------------- 34 -- AXP GLOBAL SERIES, INC. Selling Shares You have a right to sell your shares at any time. For an explanation of sales procedures, please see the prospectus. During an emergency, the board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of the Fund to redeem shares for more than seven days. Such emergency situations would occur if: o The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or o Disposal of the Fund's securities is not reasonably practicable or it is not reasonably practicable for the Fund to determine the fair value of its net assets, or o The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should the Fund stop selling shares, the board may make a deduction from the value of the assets held by the Fund to cover the cost of future liquidations of the assets so as to distribute these costs fairly among all shareholders. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the Fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the Fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the Fund as determined by the board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should the Fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash. Pay-out Plans You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you are redeeming a tax-qualified plan account for which American Express Trust Company acts as custodian, you can elect to receive your dividends and other distributions in cash when permitted by law. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of the Fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please consult your selling agent or write American Express Client Service Corporation, 70100 AXP Financial Center, Minneapolis, MN 55474, or call (800) 437-3133. Your authorization must be received at least five days before the date you want your payments to begin. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it. The following pay-out plans are designed to take care of the needs of most shareholders in a way AEFC can handle efficiently and at a reasonable cost. If you need a more irregular schedule of payments, it may be necessary for you to make a series of individual redemptions, in which case you will have to send in a separate redemption request for each pay-out. The Fund reserves the right to change or stop any pay-out plan and to stop making such plans available. Plan #1: Pay-out for a fixed period of time If you choose this plan, a varying number of shares will be redeemed at regular intervals during the time period you choose. This plan is designed to end in complete redemption of all shares in your account by the end of the fixed period. Plan #2: Redemption of a fixed number of shares If you choose this plan, a fixed number of shares will be redeemed for each payment and that amount will be sent to you. The length of time these payments continue is based on the number of shares in your account. Plan #3: Redemption of a fixed dollar amount If you decide on a fixed dollar amount, whatever number of shares is necessary to make the payment will be redeemed in regular installments until the account is closed. Plan #4: Redemption of a percentage of net asset value Payments are made based on a fixed percentage of the net asset value of the shares in the account computed on the day of each payment. Percentages range from 0.25% to 0.75%. For example, if you are on this plan and arrange to take 0.5% each month, you will get $100 if the value of your account is $20,000 on the payment date. - -------------------------------------------------------------------------------- 35 -- AXP GLOBAL SERIES, INC. Capital Loss Carryover For federal income tax purposes, the Fund had total capital loss carryovers at the end of the most recent fiscal year as follows: Fund Total capital loss carryovers Emerging Markets $ 75,392,313 Global Balanced 43,431,051 Global Bond 11,113,313 Global Equity 631,430,152 Global Technology 407,294,569 If not offset by subsequent capital gains, capital loss carryovers will expire as follows: Fund 2009 2010 2011 Emerging Markets $ 75,392,313 $ -- $ -- Global Balanced 30,518,697 10,684,989 2,227,365 Global Bond -- 11,113,313 -- Global Equity 457,285,316 143,634,885 30,509,951 Global Technology 325,995,342 81,299,227 -- It is unlikely that the board will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules. Taxes For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held more than one year). If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. Example You purchase 100 shares of one fund having a public offering price of $10.00 per share. If the Fund has a sales load of 5.75%, you pay $57.50 in sales load. With a NAV of $9.425 per share, the value of your investment is $942.50. Within 91 days of purchasing that fund, you decide to exchange out of that fund, now at a NAV of $11.00 per share, up from the original NAV of $9.425, and purchase into a second fund, at a NAV of $15.00 per share. The value of your investment is now $1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load when calculating your tax gain or loss in the sale of the first fund shares. So instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50 gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the calculation of your tax gain or loss when you sell shares in the second fund. If you have a nonqualified investment in the Fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the Fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged exceeds annual contribution limitations. You should consult your tax advisor for further details about this complex subject. Net investment income dividends received should be treated as dividend income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of the Fund's dividend that is attributable to dividends the Fund received from domestic (U.S.) securities. For the most recent fiscal year, the net investment income dividends, if paid, which qualified for the corporate deduction were as follows: Fund Net investment income dividends Emerging Markets 0.00% Global Balanced 15.07 Global Bond 0.00 Global Equity 100.00 Global Technology 0.00 - -------------------------------------------------------------------------------- 36 -- AXP GLOBAL SERIES, INC. Under provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the Act), the maximum tax paid on dividends by individuals is reduced to 15% (5% for taxpayers in the 10% and 15% brackets) for tax years 2003 through 2008. The Act also reduces the maximum capital gain rate for securities sold on or after May 6, 2003 through 2008 from 20% to 15% (5% for taxpayers in the 10% and 15% brackets). The Act provides that only certain qualified dividend income (QDI) will be subject to the 15% and 5% tax rates. QDI is dividends earned from domestic corporations and qualified foreign corporations. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established U.S. securities market (ADRs), and certain other corporations eligible for relief under an income tax treaty with the U.S. that includes an exchange of information agreement (except Barbados). Excluded are passive foreign investment companies (PFICs), foreign investment companies and foreign personal holding companies. Holding periods for shares must also be met to be eligible for QDI treatment (60 days for stock and 90 days for preferreds). For the most recent fiscal year, the QDI for individuals was as follows: Fund QDI for individuals Emerging Markets 10.85% Global Balanced 37.57 Global Bond 0.00 Global Equity 100.00 Global Technology 0.00 The Fund may be subject to U.S. taxes resulting from holdings in a passive foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. Income earned by the Fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the Fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the Fund will be eligible to file an election with the Internal Revenue Service under which shareholders of the Fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the Fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes. Capital gain distributions, if any, received by shareholders should be treated as long-term capital gains regardless of how long shareholders owned their shares. Short-term capital gains earned by the Fund are paid to shareholders as part of their ordinary income dividend and are taxable. Special rates on capital gains may apply to sales of precious metals, if any, owned directly by the Fund and to investments in REITs. Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition also are treated as ordinary gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of the Fund's investment company taxable income to be distributed to its shareholders as ordinary income. Under federal tax law, by the end of a calendar year the Fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. The Fund intends to comply with federal tax law and avoid any excise tax. The Internal Revenue Code imposes two asset diversification rules that apply to the Fund as of the close of each quarter. First, as to 50% of its holdings, the Fund may hold no more than 5% of its assets in securities of one issuer and no more than 10% of any one issuer's outstanding voting securities. Second, the Fund cannot have more than 25% of its assets in any one issuer. For purposes of the excise tax distributions, "section 988" ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end. - -------------------------------------------------------------------------------- 37 -- AXP GLOBAL SERIES, INC. If a mutual fund is the holder of record of any share of stock on the record date for any dividend payable with respect to the stock, the dividend will be included in gross income by the Fund as of the later of (1) the date the share became ex-dividend or (2) the date the Fund acquired the share. Because the dividends on some foreign equity investments may be received some time after the stock goes ex-dividend, and in certain rare cases may never be received by the Fund, this rule may cause the Fund to pay income to its shareholders that it has not actually received. To the extent that the dividend is never received, the Fund will take a loss at the time that a determination is made that the dividend will not be received. Distributions, if any, that are in excess of the Fund's current or accumulated earnings and profits will first reduce a shareholder's tax basis in the Fund and, after the basis is reduced to zero, will generally result in capital gains to a shareholder when the shares are sold. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to Fund distributions. Agreements INVESTMENT MANAGEMENT SERVICES AGREEMENT AEFC, a wholly-owned subsidiary of American Express Company, is the investment manager for the Fund. Under the Investment Management Services Agreement, AEFC, subject to the policies set by the board, provides investment management services. For its services, AEFC is paid a fee based on the following schedule. Each class of the Fund pays its proportionate share of the fee.
Annual rate at each asset level Assets (billions) Emerging Markets Global Balanced Global Bond Global Equity Global Technology First $0.25 1.10% 0.790% 0.770% 0.800% 0.720% Next 0.25 1.08 0.765 0.745 0.775 0.695 Next 0.25 1.06 0.740 0.720 0.750 0.670 Next 0.25 1.04 0.715 0.695 0.725 0.645 Next 1.00 1.02 0.690 0.670 0.700 0.620 Over 2.00 1.00 0.665 0.670 0.675 0.595
On the last day of the most recent fiscal year, the daily rate applied to each Fund's net assets was equal to the following percent on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Fund Daily rate Emerging Markets 1.097% Global Balanced 0.790 Global Bond 0.754 Global Equity 0.788 Global Technology 0.720 For Emerging Markets, Global Balanced, Global Equity and Global Technology, before the fee based on the asset charge is paid, it is adjusted for the Funds' performance relative to the Lipper Indexes (individually "Index") presented in the table below. If the Index ceases to be published for a period of more than 90 days, changes in any material respect, or otherwise becomes impracticable to use for purposes of the adjustment, no adjustment will be made until the Board approves a substitute index. The adjustment, determined monthly, will be determined by measuring the percentage difference over a rolling 12-month period between the performance of one Class A share of the Fund and the change in a Lipper Index. The Lipper Indexes are as follows: Fund Lipper Index Emerging Markets Lipper Emerging Markets Funds Index Global Balanced Lipper Global Flexible Funds Index Global Equity Lipper Global Funds Index Global Technology Lipper Science and Technology Funds Index The performance difference is then used to determine the adjustment rate. - -------------------------------------------------------------------------------- 38 -- AXP GLOBAL SERIES, INC. The adjustment rate for Emerging Markets, Global Equity and Global Technology, computed to five decimal places, is determined in accordance with the following table: Performance difference Adjustment rate 0.00%-0.50% 0 0.50%-1.00% 6 basis points times the performance difference over 0.50% (maximum of 3 basis points if a 1% performance difference) 1.00%-2.00% 3 basis points, plus 3 basis points times the performance difference over 1.00% (maximum 6 basis points if a 2% performance difference) 2.00%-4.00% 6 basis points, plus 2 basis points times the performance difference over 2.00% (maximum 10 basis points if a 4% performance difference) 4.00%-6.00% 10 basis points, plus 1 basis point times the performance difference over 4.00% (maximum 12 basis points if a 6% performance difference) 6.00% or more 12 basis points For example, if the performance difference is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the Fund is 0.0012 per year. Where the Fund's Class A performance exceeds that of the Index, the fee paid to AEFC will increase. Where the performance of the Index exceeds the performance of the Fund's Class A shares, the fee paid to AEFC will decrease. The adjustment rate for Global Balanced, computed to five decimal places, is determined in accordance with the following table: Performance difference Adjustment rate 0.00%-0.50% 0 0.50%-1.00% 6 basis points times the Performance Difference over 0.50% (maximum of 3 basis points if a 1% Performance Difference) 1.00%-2.00% 3 basis points, plus 3 basis points times the Performance Difference over 1.00% (maximum 6 basis points if a 2% Performance Difference) 2.00%-3.00% 6 basis points, plus 2 basis points times the Performance Difference over 2.00% (maximum of 8 basis points if a 3% Performance Difference) 3.00% or more 8 basis points For example, if the performance difference is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the Fund is 0.0008 per year. Where the Fund's Class A performance exceeds that of the Index, the fee paid to AEFC will increase. Where the performance of the Index exceeds the performance of the Fund's Class A shares, the fee paid to AEFC will decrease. The 12-month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. For the most recent fiscal year, the adjustment changed the fee as follows: Fund Adjustment increased/(decreased) fee by Emerging Markets $(232,104) Global Balanced (66,573) Global Equity (570,426) Global Technology 234,130 The management fee is paid monthly. Under the agreement, the total amount paid for the following fiscal years was as follows: Fund 2004 2003 2002 Emerging Markets $2,770,886 $2,181,279 $2,578,135 Global Balanced 699,824 702,933 882,643 Global Bond 4,143,714 4,084,088 3,677,461 Global Equity 3,302,062 3,763,415 5,986,053 Global Technology 1,812,789 1,185,180 1,358,065 - -------------------------------------------------------------------------------- 39 -- AXP GLOBAL SERIES, INC. Under the agreement, the Fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees; audit and certain legal fees; fidelity bond premiums; registration fees for shares; office expenses; postage of confirmations except purchase confirmations; consultants' fees; compensation of board members, officers and employees; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; and expenses properly payable by the Fund, approved by the board. Under the agreement, nonadvisory expenses, net of earnings credits, paid by each Fund for the following fiscal years were as follows: Fund 2004 2003 2002 Emerging Markets $519,598 $477,412 $491,764 Global Balanced 171,229 189,130 178,732 Global Bond 427,277 450,208 359,934 Global Equity 506,708 476,898 611,344 Global Technology 304,625 235,797 330,225 Basis for board approving the investment advisory contract For Global Bond, Global Technology, Emerging Markets, Global Balanced and Global Equity Contracts between the Fund and AEFC or its affiliates, including the investment advisory contract, were renewed in April 2004, generally based on data as of the end of calendar year 2003. In renewing the contracts, members of the contracts committee first reviewed detailed written reports prepared by AEFC, then the reports were reviewed by all other board members. The reports were presented in meetings at which board members asked questions in order to further understand the data. In addition, data prepared by independent sources, including Lipper Inc. (detailed fund data) and Strategic Insight (industry trends) was considered. The board obtained representations that it had received all the information that AEFC believed was reasonably necessary to evaluate the terms of the contract. The factors used by the board and the conclusions drawn are set forth below. The board considered that: o AEFC must provide those services necessary to effectively manage the Fund's assets and to provide shareholders a range of investment options to meet long-term investment goals. These services include implementing investment decisions, managing cash flow, administering effective compliance programs, developing products, accessing distribution, and operating processes to compute daily net assets and maintain financial records. The board reviewed the services using surveys and benchmarks that are available from commercial providers, trade associations, and internal standards; compared those services with services required by other types of clients of AEFC; and considered the allocation of costs among the services. Based on these comparisons the board concluded that the services provided by AEFC were those provided by other investment managers that offer mutual funds through personal investment advisers, the prices paid for the services were in line with those charged by these management companies, and the services are in the interest of shareholders. o AEFC should be paid a fee that allows it to offer competitive compensation, make necessary investments and earn an appropriate profit. The board considered the benefits derived by AEFC from the use of commission dollars to buy services and from other business relationships with Fund shareholders, compared publicly-available profitability reports of other investment managers, and concluded that the level of overall profitability in 2003 was appropriate in the short term though it may be too low on an ongoing basis. Additionally for Global Bond The board considered that: o over time AEFC's portfolio management team should achieve investment performance net of fees above the median of funds with the same investment goals. The Fund's investment performance for the partial-year period Jan. 31, 2003 through Dec. 31, 2003, which is approximately the time the team has managed the Fund, was slightly below the median of its Lipper competitive group. o the portfolio management team AEFC has assigned to manage the Fund should maintain a consistent investment style through a variety of market conditions. The performance record for the one-year period, which is slightly below median, is consistent with the expected results of that investment style in light of recent market conditions. o AEFC must provide quality services at a fair price with shareholders benefiting from economies of scale as assets increase. To assist the board in making an assessment, Lipper provided an analysis of a small comparison group comprised of funds substantially similar to the Fund and a larger comparison group that excluded funds that differ significantly. The board found that the graduated fee scale set a fair price that recognized the potential economies of scale. - -------------------------------------------------------------------------------- 40 -- AXP GLOBAL SERIES, INC. Additionally for Global Technology The board considered that: o over time AEFC's portfolio management team should achieve investment performance net of fees above the median of funds with the same investment goals. The Fund's investment performance for the period June 6, 2002, through Dec. 31, 2003, which is the time the team has managed the Fund, was above the median of its Lipper competitive group. o the portfolio management team AEFC has assigned to manage the Fund should maintain a consistent investment style through a variety of market conditions. The performance record for the one-year period, which is above median, is consistent with the expected results of that investment style in light of recent market conditions. o AEFC must provide quality services at a fair price with shareholders benefiting from economies of scale as assets increase. To assist the board in making an assessment, Lipper provided an analysis of a small comparison group comprised of funds substantially similar to the Fund and a larger comparison group that excluded funds that differ significantly. The board found that the graduated fee scale set a fair price that recognized the potential economies of scale. To the extent investment performance exceeded or failed to achieve the standard required by the performance incentive adjustment provision in the contract, AEFC's fees were adjusted accordingly. The performance incentive adjustment for the period ended Dec. 31, 2003, resulted in a increase in AEFC's investment management fee. Also, consistent with AEFC's pricing philosophy, an expense cap has been established to limit expenses. Additionally for Emerging Markets, Global Balanced and Global Equity The board considered that: o over time AEFC's portfolio management team should achieve investment performance net of fees above the median of funds with the same investment goals. The Fund's investment performance for the partial-year period ended Dec. 31, 2003, was below the median of its Lipper competitive group. Because Threadneedle did not begin managing the Fund until October 2003, this benchmark was not considered. o the portfolio management team AEFC has assigned to manage the Fund should maintain a consistent investment style through a variety of market conditions. With the exception of Emerging Markets, because the Fund's portfolio manager had not managed the Fund for the one-year period necessary to provide sufficient data to make a meaningful evaluation of the Fund's performance against its Lipper peer group, that benchmark was not considered, but the board did consider Threadneedle's historical performance in managing similar investment products. o AEFC must provide quality services at a fair price with shareholders benefiting from economies of scale as assets increase. To assist the board in making an assessment, Lipper provided an analysis of a small comparison group comprised of funds substantially similar to the Fund and a larger comparison group that excluded funds that differ significantly. The board found that the graduated fee scale set a fair price that recognized the potential economies of scale. To the extent investment performance exceeded or failed to achieve the standard required by the performance incentive adjustment provision in the contract, AEFC's fees were adjusted accordingly. The performance incentive adjustment for the period ended Dec. 31, 2003, resulted in a decrease in AEFC's investment management fee. Also, consistent with AEFC's pricing philosophy, an expense cap has been established to limit expenses for Emerging Markets. Subadvisory Agreements (Emerging Markets, Global Balanced and Global Equity) The assets of the Fund are managed by a Subadviser that has been selected by AEFC, subject to the review and approval of the board. AEFC has recommended the Subadviser for the Fund to the board based upon its assessment of the skills of the Subadviser in managing other assets with goals and investment strategies substantially similar to those of the Fund. Short-term investment performance is not the only factor in selecting or terminating a Subadviser, and AEFC does not expect to make frequent changes of Subadvisers. The Subadviser has discretion, subject to oversight by the board and AEFC, to purchase and sell portfolio assets, consistent with the Fund's investment objectives, policies, and restrictions. Generally, the services that the Subadviser provides to the Fund are limited to asset management and related recordkeeping services. AEFC has entered into an advisory agreement with the Subadviser known as a Subadvisory Agreement. A Subadviser may also serve as a discretionary or non-discretionary investment advisor to management or advisory accounts that are unrelated in any manner to AEFC or its affiliates. - -------------------------------------------------------------------------------- 41 -- AXP GLOBAL SERIES, INC. Threadneedle International Limited: Threadneedle International Limited (Threadneedle), an indirect wholly owned subsidiary of AEFC, 60 St. Mary Axe, London EC3A 8JQ, England, subadvises the assets in Emerging Markets, Global Balanced and Global Equity. Threadneedle, subject to supervision and approval of AEFC, provides day-to-day management of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with AEFC. Under the Subadvisory Agreement, the fee, based on average daily net assets that are subject to the Subadviser's investment discretion is equal to: Assets (billions) Emerging Markets Global Balanced Global Equity First $0.15 0.45% 0.35% 0.35% Next 0.50 0.40 0.30 0.30 Next 0.50 0.35 0.25 0.25 Over 1.15 0.30 0.20 0.20 The Subadvisory Agreement with Threadneedle provides for a performance incentive adjustment ("PIA") to Threadneedle's monthly subadvisory fee. The adjustment for Threadneedle is based on the performance of one Class A share of the Fund and the change in the Lipper peer group index that appears in the prospectus for the Fund (Index). The performance of the Fund and the Index will be calculated using the same method as described above for the performance incentive adjustment paid to AEFC under the terms of the Investment Management Services Agreement. The amount of the adjustment to the fees payable to Threadneedle, whether positive or negative, shall be equal to one-half (1/2) of the PIA made to the investment management fee that AEFC is currently entitled to under the terms of the Advisory Agreement. The PIA was effective Dec. 1, 2004. The total amount paid by AEFC to Threadneedle for the following fiscal years was as follows: Fund 2004 Emerging Markets $361,626 Global Balanced 96,408 Global Equity 449,149 Former Subadviser: American Express Asset Management International Inc. (AEAMI) subadvised the assets in Emerging Markets, Global Balanced and Global Equity from fund inception until July 2004. The total amount paid by AEFC to AEAMI for each fund for the following fiscal years was follows: Fund 2004 2003 2002 Emerging Markets $942,983 $1,033,684 $1,168,791 Global Balanced 151,173 208,168 416,452 Global Equity 484,676 1,841,195 3,015,169 ADMINISTRATIVE SERVICES AGREEMENT The Funds have an Administrative Services Agreement with AEFC. Under this agreement, the Funds pay AEFC for providing administration and accounting services. The fee is calculated as follows:
Annual rate at each asset level Assets (billions) Emerging Markets Global Balanced Global Bond Global Equity Global Technology First $0.25 0.10% 0.060% 0.060% 0.060% 0.060% Next 0.25 0.09 0.055 0.055 0.055 0.055 Next 0.25 0.08 0.050 0.050 0.050 0.050 Next 0.25 0.07 0.045 0.045 0.045 0.045 Next 1.00 0.06 0.040 0.040 0.040 0.040 Over 2.00 0.05 0.035 0.040 0.035 0.035
On the last day of the most recent fiscal year, the daily rate applied to each of the Fund's net assets was equal to the following percent on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Fund Daily rate Emerging Markets 0.098% Global Balanced 0.060 Global Bond 0.057 Global Equity 0.058 Global Technology 0.060 - -------------------------------------------------------------------------------- 42 -- AXP GLOBAL SERIES, INC. The following fees were paid under the agreement for the three most recent fiscal years. 2004 2003 2002 Emerging Markets $271,857 $208,342 $234,669 Global Balanced 59,047 56,559 71,921 Global Bond 314,640 311,211 279,674 Global Equity 284,795 304,662 463,678 Global Technology 131,702 93,713 112,662 TRANSFER AGENCY AGREEMENT The Fund has a Transfer Agency Agreement with American Express Client Service Corporation (AECSC) located at 70100 AXP Financial Center, Minneapolis, MN 55474. This agreement governs AECSC's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the Fund's shares. Under the agreement, AECSC will earn a fee from the Fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The rates for the Fund's different classes per year are the following:
Class A Class B Class C Class I Class Y Emerging Markets $19.50 $20.50 $20.00 $1.00 $17.50 Global Balanced 19.50 20.50 20.00 N/A 17.50 Global Bond 20.50 21.50 21.00 1.00 18.50 Global Equity 19.50 20.50 20.00 N/A 17.50 Global Technology 19.50 20.50 20.00 1.00 17.50
In addition, an annual closed-account fee of $5.00 per inactive account, may be charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system, generally within one year. The fees paid to AECSC may be changed by the board without shareholder approval. DISTRIBUTION AGREEMENT American Express Financial Advisors Inc., located at 200 AXP Financial Center, Minneapolis, MN 55474, is the Fund's principal underwriter (the Distributor). The Fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing Fund shares are paid to the Distributor daily. These charges and the amount retained after paying commissions to personal financial advisors, and other expenses was as follows:
2004 2003 2002 Sales Amount Sales Amount Sales Amount charges retained by charges retained by charges retained by Fund collected the Distributor collected the Distributor collected the Distributor Emerging Markets $556,829 $(6,660,972) $ 243,062 $(2,681,731) $325,336 $(4,049,970) Global Balanced 150,501 57,629 122,917 45,326 152,020 46,735 Global Bond 956,580 536,364 1,009,917 537,388 515,760 274,717 Global Equity 467,198 203,564 437,154 196,939 782,415 348,443 Global Technology 591,744 208,704 543,360 150,041 717,011 262,977
Part of the sales charge may be paid to selling dealers who have agreements with the Distributor. The Distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. SHAREHOLDER SERVICE AGREEMENT With respect to Class Y shares, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of average daily net assets. - -------------------------------------------------------------------------------- 43 -- AXP GLOBAL SERIES, INC. PLAN AND AGREEMENT OF DISTRIBUTION For Class A, Class B and Class C shares, to help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, the Fund and the Distributor entered into a Plan and Agreement of Distribution (Plan) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, of the type known as a reimbursement plan, the Fund pays a fee up to actual expenses incurred at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material increase to expenses charged under the Class A plan. Expenses covered under this Plan include sales commissions; business, employee and financial advisor expenses charged to distribution of Class A, Class B and Class C shares; and overhead appropriately allocated to the sale of Class A, Class B and Class C shares. These expenses also include costs of providing personal service to shareholders. A substantial portion of the costs are not specifically identified to any one of the American Express mutual funds. The Plan must be approved annually by the board, including a majority of the disinterested board members, if it is to continue for more than a year. At least quarterly, the board must review written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of board members who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the Distributor. The Plan (or any agreement related to it) will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the board members, including a majority of the board members who are not interested persons of the Fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested board members is the responsibility of the other disinterested board members. No board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement. For the most recent fiscal year, the Fund paid the following fees: Class of shares Funds Class A Class B Class C Emerging Markets $438,042 $ 756,560 $ 9,336 Global Balanced 136,721 320,051 7,301 Global Bond 952,565 1,560,487 50,444 Global Equity 894,340 1,283,273 9,589 Global Technology 375,071 644,615 42,622 The fee is not allocated to any one service (such as advertising, payments to underwriters, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. CUSTODIAN AGREEMENT The Fund's securities and cash are held by American Express Trust Company, 200 AXP Financial Center, Minneapolis, MN 55474, through a custodian agreement. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. For its services, the Fund pays the custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. The custodian may enter into a sub-custodian agreement with the Bank of New York, 90 Washington Street, New York, NY 10286. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of Bank of New York or in other financial institutions as permitted by law and by the Fund's sub-custodian agreement. - -------------------------------------------------------------------------------- 44 -- AXP GLOBAL SERIES, INC. Organizational Information The Fund is an open-end management investment company. The Fund headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The shares of the Fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of the Fund would have the same rights to dividends and assets as every other share of that Fund. VOTING RIGHTS As a shareholder in the Fund, you have voting rights over the Fund's management and fundamental policies. You are entitled to vote based on your total dollar interest in the Fund. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. All shares have cumulative voting rights with respect to the election of board members. This means that you have as many votes as the dollar amount you own, including the fractional amount, multiplied by the number of members to be elected. DIVIDEND RIGHTS Dividends paid by the Fund, if any, with respect to each class of shares, if applicable, will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures. - -------------------------------------------------------------------------------- 45 -- AXP GLOBAL SERIES, INC.
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) California Tax-Exempt Trust 4/7/86 Business Trust(2) MA 6/30 AXP(R) California Tax-Exempt Fund No AXP(R) Dimensions Series, Inc. 2/20/68, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) New Dimensions Fund Yes AXP(R) Discovery Series, Inc. 4/29/81, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) Core Bond Fund Yes AXP(R) Discovery Fund Yes AXP(R) Income Opportunities Fund Yes AXP(R) Inflation Protected Securities Fund No AXP(R) Limited Duration Bond Fund Yes AXP(R) Equity Series, Inc. 3/18/57, 6/13/86(1) Corporation NV/MN 11/30 AXP(R) Equity Select Fund Yes AXP(R) Fixed Income Series, Inc. 6/27/74, 6/31/86(1) Corporation NV/MN 8/31 AXP(R) Diversified Bond Fund(3) Yes AXP(R) Global Series, Inc. 10/28/88 Corporation MN 10/31 AXP(R) Global Bond Fund No AXP(R) Global Technology Fund No AXP(R) Threadneedle Emerging Markets Fund(6) Yes AXP(R) Threadneedle Global Balanced Fund(6) Yes AXP(R) Threadneedle Global Equity Fund(4),(6) Yes AXP(R) Government Income Series, Inc. 3/12/85 Corporation MN 5/31 AXP(R) Short Duration U.S. Government Fund(3) Yes AXP(R) U.S. Government Mortgage Fund Yes AXP(R) Growth Series, Inc. 5/21/70, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) Growth Fund Yes AXP(R) Large Cap Equity Fund Yes AXP(R) Large Cap Value Fund Yes AXP(R) Quantitative Large Cap Equity Fund Yes AXP(R) High Yield Income Series, Inc. 8/17/83 Corporation MN 5/31 AXP(R) High Yield Bond Fund(3) Yes AXP(R) High Yield Tax-Exempt Series, Inc. 12/21/78, 6/13/86(1) Corporation NV/MN 11/30 AXP(R) High Yield Tax-Exempt Fund Yes AXP(R) Income Series, Inc. 2/10/45, 6/13/86(1) Corporation NV/MN 5/31 AXP(R) Selective Fund Yes AXP(R) International Series, Inc. 7/18/84 Corporation MN 10/31 AXP(R) Threadneedle European Equity Fund(6) No AXP(R) Threadneedle International Fund(6) Yes AXP(R) Investment Series, Inc. 1/18/40, 6/13/86(1) Corporation NV/MN 9/30 AXP(R) Diversified Equity Income Fund Yes AXP(R) Mid Cap Value Fund Yes AXP(R) Mutual Yes
- -------------------------------------------------------------------------------- 46 -- AXP GLOBAL SERIES, INC.
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS (continued) Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) Managed Series, Inc. 10/9/84 Corporation MN 9/30 AXP(R) Managed Allocation Fund Yes AXP(R) Market Advantage Series, Inc. 8/25/89 Corporation MN 1/31 AXP(R) Portfolio Builder Conservative Fund No AXP(R) Portfolio Builder Moderate Conservative Fund No AXP(R) Portfolio Builder Moderate Fund No AXP(R) Portfolio Builder Moderate Aggressive Fund No AXP(R) Portfolio Builder Aggressive Fund No AXP(R) Portfolio Builder Total Equity Fund No AXP(R) S&P 500 Index Fund No AXP(R) Small Company Index Fund Yes AXP(R) Money Market Series, Inc. 8/22/75, 6/13/86(1) Corporation NV/MN 7/31 AXP(R) Cash Management Fund Yes AXP(R) Partners Series, Inc. 3/20/01 Corporation MN 5/31 AXP(R) Partners Aggressive Growth Fund Yes AXP(R) Partners Fundamental Value Fund Yes AXP(R) Partners Growth Fund Yes AXP(R) Partners Select Value Fund Yes AXP(R) Partners Small Cap Core Fund Yes AXP(R) Partners Small Cap Value Fund No AXP(R) Partners Value Fund Yes AXP(R) Partners International Series, Inc. 5/9/01 Corporation MN 10/31 AXP(R) Partners International Aggressive Growth Fund Yes AXP(R) Partners International Core Fund Yes AXP(R) Partners International Select Value Fund Yes AXP(R) Partners International Small Cap Fund Yes AXP(R) Sector Series, Inc. 3/25/88 Corporation MN 6/30 AXP(R) Dividend Opportunity Fund(5) Yes AXP(R) Real Estate Fund No AXP(R) Selected Series, Inc. 10/5/84 Corporation MN 3/31 AXP(R) Precious Metals Fund No AXP(R) Special Tax-Exempt Series Trust 4/7/86 Business Trust(2) MA 6/30 AXP(R) Insured Tax-Exempt Fund Yes AXP(R) Massachusetts Tax-Exempt Fund No AXP(R) Michigan Tax-Exempt Fund No AXP(R) Minnesota Tax-Exempt Fund No AXP(R) New York Tax-Exempt Fund No AXP(R) Ohio Tax-Exempt Fund No AXP(R) Stock Series, Inc. 2/10/45, 6/13/86(1) Corporation NV/MN 9/30 AXP(R) Stock Fund Yes
- -------------------------------------------------------------------------------- 47 -- AXP GLOBAL SERIES, INC.
FUND HISTORY TABLE FOR ALL PUBLICLY OFFERED AMERICAN EXPRESS FUNDS (continued) Date of Form of State of Fiscal Fund organization organization organization year end Diversified AXP(R) Strategy Series, Inc. 1/24/84 Corporation MN 3/31 AXP(R) Equity Value Fund Yes AXP(R) Partners Small Cap Growth Fund Yes AXP(R) Small Cap Advantage Fund Yes AXP(R) Strategy Aggressive Fund Yes AXP(R) Tax-Exempt Series, Inc. 9/30/76, 6/13/86(1) Corporation NV/MN 11/30 AXP(R) Intermediate Tax-Exempt Fund Yes AXP(R) Tax-Exempt Bond Fund Yes AXP(R) Tax-Free Money Series, Inc. 2/29/80, 6/13/86(1) Corporation NV/MN 12/31 AXP(R) Tax-Free Money Fund Yes
(1) Date merged into a Minnesota corporation incorporated on April 7, 1986. (2) Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the trust itself is unable to meet its obligations. (3) Effective June 27, 2003, AXP(R) Bond Fund changed its name to AXP(R) Diversified Bond Fund, AXP(R) Federal Income Fund changed its name to AXP(R) Short Duration U.S. Government Fund and AXP(R) Extra Income Fund changed its name to AXP(R) High Yield Bond Fund. (4) Effective Oct. 20, 2003, AXP(R) Global Growth Fund changed its name to AXP(R) Global Equity Fund. (5) Effective Feb. 18, 2004, AXP(R) Utilities Fund changed its name to AXP(R) Dividend Opportunity Fund. (6) Effective July 9, 2004, AXP(R) Emerging Markets Fund changed its name to AXP(R) Threadneedle Emerging Markets Fund, AXP(R) European Equity Fund changed its name to AXP(R) Threadneedle European Equity Fund, AXP(R) Global Balanced Fund changed its name to AXP(R) Threadneedle Global Balanced Fund, AXP(R) Global Equity Fund changed its name to AXP(R) Threadneedle Global Equity Fund, and AXP(R) International Fund changed its name to AXP(R) Threadneedle International Fund. - -------------------------------------------------------------------------------- 48 -- AXP GLOBAL SERIES, INC. Board Members and Officers Shareholders elect a board that oversees the Fund's operations. The board appoints officers who are responsible for day-to-day business decisions based on policies set by the board. The following is a list of the Fund's board members. Each member oversees 14 Master Trust portfolios and 89 American Express mutual funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the board.
Independent Board Members Name, address, age Position held with Principal occupation Other directorships Committee Fund and length of during past five years memberships service - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Arne H. Carlson Board member since Chair, Board Services Joint Audit, 901 S. Marquette Ave. 1999 Corporation (provides Contracts, Minneapolis, MN 55402 administrative services Executive, Age 70 to boards). Former Investment Governor of Minnesota Review, Board Effectiveness - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Philip J. Carroll, Jr. Board member since Retired Chairman and Scottish Power PLC, Joint Audit, 901 S. Marquette Ave. 2002 CEO, Fluor Corporation Vulcan Materials Executive, Minneapolis, MN 55402 (engineering and Company, Inc. Investment Review Age 67 construction) since 1998 (construction materials/chemicals) - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Livio D. DeSimone Board member since Retired Chair of the Cargill, Incorporated Joint Audit, 30 Seventh Street East 2001 Board and Chief (commodity merchants Contracts, Suite 3050 Executive Officer, and processors), Executive St. Paul, MN 55101-4901 Minnesota Mining and General Mills, Inc. Age 70 Manufacturing (3M) (consumer foods), Vulcan Materials Company (construction materials/chemicals), Milliken & Company (textiles and chemicals), and Nexia Biotechnologies, Inc. - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Patricia M. Flynn Board member since Trustee Professor of BostonFed Bancorp, Inc. Investment 901 S. Marquette Ave. 2004 Economics and (holding company) and Review, Contracts Minneapolis, MN 55402 Management, Bentley its subsidiary Boston Age 53 College since 2002; Federal Savings Bank former Dean, McCallum Graduate School of Business, Bentley College from 1999 to 2002 - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Anne P. Jones Board member since Attorney and Consultant Joint Audit, 901 S. Marquette Ave. 1985 Board Minneapolis, MN 55402 Effectiveness, Age 69 Executive - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Stephen R. Lewis, Jr.* Board member since Retired President and Valmont Industries, Contracts, 901 S. Marquette Ave. 2002 Professor of Economics, Inc. (manufactures Investment Minneapolis, MN 55402 Carleton College irrigation systems) Review, Age 65 Executive, Board Effectiveness - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Catherine James Paglia Board member since Director, Enterprise Strategic Distribution, Investment 901 S. Marquette Ave. 2004 Asset Management, Inc. Inc. (transportation, Review, Joint Minneapolis, MN 55402 (private real estate distribution and Audit Age 52 and asset management logistics consultants) company) since 1999 - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Alan K. Simpson Board member since Former three-term Investment 1201 Sunshine Ave. 1997 United States Senator Review, Board Cody, WY 82414 for Wyoming Effectiveness Age 73 - ------------------------------- --------------------- ------------------------- ------------------------- ------------------- Alison Taunton-Rigby Board member since Founder and Chief Hybridon, Inc. Investment 901 S. Marquette Ave. 2002 Executive Officer, (biotechnology) Review, Contracts Minneapolis, MN 55402 RiboNovix, Inc. since Age 60 2004; President, Forester Biotech since 2000; prior to that, President and CEO, Aquila Biopharmaceuticals, Inc. - ------------------------------- --------------------- ------------------------- ------------------------- -------------------
* Interested person of AXP Partners International Aggressive Growth Fund by reason of being a security holder of Bank of America Corporation, parent company of Columbia Wanger Asset Management, L.P., one of the fund's subadvisers. - -------------------------------------------------------------------------------- 49 -- AXP GLOBAL SERIES, INC.
Board Member Affiliated with AEFC** Name, address, age Position held with Principal occupation Other directorships Committee Fund and length of during past five years memberships service - ------------------------------- -------------------- -------------------------- ------------------------- -------------------- William F. Truscott Board member Senior Vice President - 53600 AXP Financial Center since 2001, Vice Chief Investment Officer Minneapolis, MN 55474 President since of AEFC since 2001. Age 44 2002 Former Chief Investment Officer and Managing Director, Zurich Scudder Investments - ------------------------------- -------------------- -------------------------- ------------------------- -------------------- ** Interested person by reason of being an officer, director and/or employee of AEFC. The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Truscott, who is vice president, the Fund's other officers are: Other Officers Name, address, age Position held with Principal occupation Other directorships Committee Fund and length of during past five years memberships service - ------------------------------- -------------------- -------------------------- ------------------------- -------------------- Jeffrey P. Fox Treasurer since Vice President - 105 AXP Financial Center 2002 Investment Accounting, Minneapolis, MN 55474 AEFC, since 2002; Vice Age 49 President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, AEFC, 1996-2000 - ------------------------------- -------------------- -------------------------- ------------------------- -------------------- Paula R. Meyer President since Senior Vice President 596 AXP Financial Center 2002 and General Manager - Minneapolis, MN 55474 Mutual Funds, AEFC, Age 50 since 2002; Vice President and Managing Director - American Express Funds, AEFC, 2000-2002; Vice President, AEFC, 1998-2000 - ------------------------------- -------------------- -------------------------- ------------------------- -------------------- Leslie L. Ogg Vice President, President of Board 901 S. Marquette Ave. General Counsel, Services Corporation Minneapolis, MN 55402 and Secretary Age 66 since 1978 - ------------------------------- -------------------- -------------------------- ------------------------- --------------------
Responsibilities of board with respect to Fund's management The board initially approves an Investment Management Services Agreement and other contracts with American Express Financial Corporation (AEFC), its subsidiaries, and other service providers. Once the contracts are approved, the board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and AEFC's profitability in order to determine whether to continue existing contracts or negotiate new contracts. Several committees facilitate its work Executive Committee -- Acts for the board between meetings of the board. The committee held one meeting during the last fiscal year. Joint Audit Committee -- Meets with the independent public accountant, internal auditors and corporate officers to review financial statements, reports, and compliance matters. Reports significant issues to the board and makes recommendations to the independent directors regarding the selection of the independent public accountant. The committee held five meetings during the last fiscal year. Investment Review Committee -- Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the board. The committee held four meetings during the last fiscal year. Board Effectiveness Committee -- Recommends to the board the size, structure and composition for the board; the compensation to be paid to members of the board; and a process for evaluating the board's performance. The committee also reviews candidates for board membership including candidates recommended by shareholders. To be considered, recommendations must include a curriculum vita and be mailed to the Chairman of the Board, American Express Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The committee held four meetings during the last fiscal year. - -------------------------------------------------------------------------------- 50 -- AXP GLOBAL SERIES, INC. Contracts Committee -- Receives and analyzes reports covering the level and quality of services provided under contracts with the Fund and advises the board regarding actions taken on these contracts during the annual review process. The committee held seven meetings during the last fiscal year. BOARD MEMBERS' HOLDINGS The following table shows the Fund Board Members' ownership of American Express Funds. Dollar range of equity securities beneficially owned on Dec. 31, 2003
Based on net asset values as of Dec. 31, 2003 Aggregate dollar range of equity securities of all Dollar range of equity securities in American Express Emerging Global Global Global Global Funds overseen Markets Balanced Bond Equity Technology by Board Member Range Range Range Range Range Range Arne H. Carlson none none none none none over $100,000 Philip J. Carroll, Jr.* none none none none none none Livio D. DeSimone* none none none none none over $100,000 Patricia M. Flynn none none none none none none Anne P. Jones none none $50,001-$100,000 none none over $100,000 Stephen R. Lewis, Jr.* none none none none none $1-$10,000 Catherine James Paglia none none none none none none Alan K. Simpson none none none none none $50,001-$100,000 Alison Taunton-Rigby none none none none none none William F. Truscott $10,001-$50,000 none none none $10,001-$50,000 over $100,000
* Three independent directors have deferred compensation and invested in share equivalents. As of Dec. 31, 2003, each owned: Philip J. Carroll, Jr. AXP Global Technology Fund $10,001-$50,000 Livio D. DeSimone AXP High Yield Bond Fund $1-$10,000 AXP Partners Small Cap Value Fund $1-$10,000 AXP Small Cap Advantage Fund $1-$10,000 Stephen R. Lewis, Jr. AXP Equity Select Fund $1-$10,000 AXP Diversified Equity Income Fund $1-$10,000 As of 30 days prior to the date of this SAI, each Fund's board members and officers as a group owned less than 1% of the outstanding shares of any class. - -------------------------------------------------------------------------------- 51 -- AXP GLOBAL SERIES, INC. COMPENSATION FOR BOARD MEMBERS During the most recent fiscal year, the independent members of Emerging Markets Fund and Emerging Markets Portfolio boards, for attending up to 30 meetings, received the following compensation:
Compensation Table for Emerging Markets Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $1,035** $1,077 $ 0 Livio D. DeSimone 1,062*** 1,112 0 Patricia M. Flynn 0 0 0 Anne P. Jones 1,162 1,212 155,542 Stephen R. Lewis, Jr. 1,312**** 1,362 103,918 Catherine James Paglia 0 0 0 Alan K. Simpson 1,008 1,058 141,392 Alison Taunton-Rigby 1,108 1,158 150,542
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $1,035 from the Fund and $1,077 from the Portfolio. *** Includes the deferred compensation in the amount of $1,062 from the Fund and $1,112 from the Portfolio. **** Includes the deferred compensation in the amount of $514 from the Fund and $535 from the Portfolio. During the most recent fiscal year, the independent members of Global Balanced Fund board, for attending up to 30 meetings, received the following compensation:
Compensation Table for Global Balanced Total cash compensation from American Express Funds and Aggregate Preferred Master Trust Group Board member* compensation from the Fund paid to Board Member Philip J. Carroll, Jr. $1,069** $ 0 Livio D. DeSimone 1,104*** 0 Patricia M. Flynn 0 0 Anne P. Jones 1,204 155,542 Stephen R. Lewis, Jr. 1,354**** 103,918 Catherine James Paglia 0 0 Alan K. Simpson 1,050 141,392 Alison Taunton-Rigby 1,150 150,542
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $1,069 from the Fund. *** Includes the deferred compensation in the amount of $1,104 from the Fund. **** Includes the deferred compensation in the amount of $532 from the Fund. - -------------------------------------------------------------------------------- 52 -- AXP GLOBAL SERIES, INC. During the most recent fiscal year, the independent members of Global Bond Fund and World Income Portfolio boards, for attending up to 30 meetings, received the following compensation:
Compensation Table for Global Bond Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $1,069** $1,169 $ 0 Livio D. DeSimone 1,104*** 1,220 0 Patricia M. Flynn 0 0 0 Anne P. Jones 1,204 1,320 155,542 Stephen R. Lewis, Jr. 1,354**** 1,470 103,918 Catherine James Paglia 0 0 0 Alan K. Simpson 1,050 1,167 141,392 Alison Taunton-Rigby 1,150 1,267 150,542
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $1,069 from the Fund and $1,169 from the Portfolio. *** Includes the deferred compensation in the amount of $1,104 from the Fund and $1,220 from the Portfolio. **** Includes the deferred compensation in the amount of $532 from the Fund and $580 from the Portfolio. During the most recent fiscal year, the independent members of Global Equity Fund and World Growth Portfolio boards, for attending up to 30 meetings, received the following compensation:
Compensation Table for Global Equity Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $1,069** $1,160 $ 0 Livio D. DeSimone 1,104*** 1,204 0 Patricia M. Flynn 0 0 0 Anne P. Jones 1,204 1,304 155,542 Stephen R. Lewis, Jr. 1,354**** 1,454 103,918 Catherine James Paglia 0 0 0 Alan K. Simpson 1,050 1,150 141,392 Alison Taunton-Rigby 1,150 1,250 150,542
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $1,069 from the Fund and $1,160 from the Portfolio. *** Includes the deferred compensation in the amount of $1,104 from the Fund and $1,204 from the Portfolio. **** Includes the deferred compensation in the amount of $532 from the Fund and $570 from the Portfolio. - -------------------------------------------------------------------------------- 53 -- AXP GLOBAL SERIES, INC. During the most recent fiscal year, the independent members of Global Technology Fund and World Technologies Portfolio boards, for attending up to 30 meetings, received the following compensation:
Compensation Table for Global Technology Total cash compensation from American Express Funds and Aggregate Aggregate Preferred Master Trust Group Board member* compensation from the Fund compensation from the Portfolio paid to Board Member Philip J. Carroll, Jr. $ 977** $1,069 $ 0 Livio D. DeSimone 1,004*** 1,104 0 Patricia M. Flynn 0 0 0 Anne P. Jones 1,104 1,204 155,542 Stephen R. Lewis, Jr. 1,254**** 1,354 103,918 Catherine James Paglia 0 0 0 Alan K. Simpson 950 1,050 141,392 Alison Taunton-Rigby 1,050 1,150 150,542
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. ** Includes the deferred compensation in the amount of $977 from the Fund and $1,069 from the Portfolio. *** Includes the deferred compensation in the amount of $1,004 from the Fund and $1,104 from the Portfolio. **** Includes the deferred compensation in the amount of $495 from the Fund and $532 from the Portfolio. - -------------------------------------------------------------------------------- 54 -- AXP GLOBAL SERIES, INC. Control Persons and Principal Holders of Securities The following table identifies those investors who owned 5% or more of any class of the Fund's shares as of 30 days prior to the date of this SAI.
Fund Name, city and state of investor Class A Class B Class C Class I Class Y Emerging Markets Raymond T Snapp, Bedford, IN N/A N/A 5.59% N/A N/A Charles Schwab & Co., Inc. a brokerage firm 9.72% N/A N/A N/A N/A Clients of American Enterprise Investment Services Inc., a brokerage firm N/A N/A 6.40% N/A N/A Portfolio Builder Moderate Aggressive Fund N/A N/A N/A 33.15% N/A American Express Trust Company for the benefit of American Express Trust Retirement Service Plans, Minneapolis, MN N/A N/A N/A N/A 95.28% Global Balanced Sherman D Deponte and Carol A Deponte, as Trustees of the Sherman D Deponte Profit Sharing Plan U/A N/A N/A 6.35% N/A N/A Charles Schwab & Co., Inc. a brokerage firm 9.68% N/A N/A N/A N/A American Express Trust Company for the benefit of American Express Trust Retirement Service Plans, Minneapolis, MN N/A N/A N/A N/A 99.96% Global Bond Portfolio Builder Moderate Aggressive Fund N/A N/A N/A 42.46% N/A Charles Schwab & Co., Inc. a brokerage firm N/A N/A N/A N/A 100.00% Global Equity American Express Trust Company for the benefit of American Express Trust Retirement Service Plans, Minneapolis, MN N/A N/A N/A N/A 90.29% Global Technology Charles Schwab & Co., Inc. a brokerage firm 11.74% N/A N/A N/A N/A American Express Trust Company for the benefit of American Express Trust Retirement Service Plans, Minneapolis, MN N/A N/A N/A N/A 92.26%
The following investors owned 25% or more of the Fund's shares (all share classes taken together) as of 30 days prior to the date of this SAI, and are therefore presumed to control the following Funds: Emerging Markets: None Global Balanced: None Global Bond: None Global Equity: None Global Technology: None Independent Registered Public Accounting Firm The financial statements contained in the Annual Report were audited by the independent registered public accounting firm, KPMG LLP, 4200 Wells Fargo Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The independent registered public accounting firm also provides other accounting and tax-related services as requested by the Fund. - -------------------------------------------------------------------------------- 55 -- AXP GLOBAL SERIES, INC. Appendix DESCRIPTION OF RATINGS Standard & Poor's Long-Term Debt Ratings A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: o Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. o Nature of and provisions of the obligation. o Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. Investment Grade Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. Speculative Grade Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. - -------------------------------------------------------------------------------- 56 -- AXP GLOBAL SERIES, INC. Moody's Long-Term Debt Ratings Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A -- Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds that are rated Ba are judged to have speculative elements -- their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Fitch's Long-Term Debt Ratings Fitch's bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue in a timely manner. The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality. Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated. Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security. Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons. Investment Grade AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+. A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. - -------------------------------------------------------------------------------- 57 -- AXP GLOBAL SERIES, INC. BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. Speculative Grade BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified, which could assist the obligor in satisfying its debt service requirements. B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C: Bonds are in imminent default in payment of interest or principal. DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery. SHORT-TERM RATINGS Standard & Poor's Commercial Paper Ratings A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. Standard & Poor's Muni Bond and Note Ratings An S&P municipal bond or note rating reflects the liquidity factors and market-access risks unique to these instruments. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Municipal bond rating symbols and definitions are as follows: Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. - -------------------------------------------------------------------------------- 58 -- AXP GLOBAL SERIES, INC. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. Moody's Short-Term Ratings Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. Moody's Short-Term Muni Bonds and Notes Short-term municipal bonds and notes are rated by Moody's. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody's MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. Fitch's Short-Term Ratings Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner. Fitch short-term ratings are as follows: F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings. F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade. F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions. D: Default. Issues assigned this rating are in actual or imminent payment default. - -------------------------------------------------------------------------------- 59 -- AXP GLOBAL SERIES, INC. S-6334-20 X (12/04) Investments in Securities World Income Portfolio Oct. 31, 2004 (Percentages represent value of investments compared to net assets) Bonds (95.7%)(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% $270,000 $302,400 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 8,000,000 6,459,998 Queensland Treasury (Australian Dollar) 06-14-05 6.50 3,000,000 2,262,396 Telstra (U.S. Dollar) 04-01-12 6.38 500,000 554,218 Total 9,579,012 Austria (2.2%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 8,500,000 12,038,224 Brazil (0.2%) Federal Republic of Brazil (U.S. Dollar) 04-15-14 8.00 1,192,122 1,184,254 Canada (2.4%) Ainsworth Lumber (U.S. Dollar) Sr Nts 10-01-12 7.25 115,000(d) 116,438 Canada Housing Trust (Canadian Dollar) 06-15-06 5.53 3,220,000 2,742,301 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 380,000(d) 314,889 CanWest Media (U.S. Dollar) Series B 04-15-13 7.63 250,000 271,875 Cascades (U.S. Dollar) Sr Nts 02-15-13 7.25 125,000 135,000 Corus Entertainment (U.S. Dollar) Sr Sub Nts 03-01-12 8.75 165,000 183,975 Norampac (U.S. Dollar) Sr Nts 06-01-13 6.75 260,000 274,300 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,400,000 5,820,169 Province of Ontario (Canadian Dollar) 03-08-06 5.90 3,300,000 2,809,213 Rogers Cable (U.S. Dollar) 06-15-13 6.25 70,000 69,825 Russel Metals (U.S. Dollar) Sr Nts 03-01-14 6.38 140,000 140,000 Shaw Communications (U.S. Dollar) Sr Nts 04-06-11 7.25 200,000 220,000 Sun Media (U.S. Dollar) 02-15-13 7.63 200,000 217,000 Videotron Ltee (U.S. Dollar) 01-15-14 6.88 125,000 131,250 Total 13,446,235 Denmark (0.6%) Realkredit Danmark (Danish Krone) Series 10D 01-01-06 4.00 17,800,000 3,116,785 Finland (2.3%) Republic of Finland (European Monetary Unit) 07-04-07 5.00 9,400,000 12,742,889 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount France (2.0%) Compagnie de Financement Foncier (European Monetary Unit) 02-02-06 2.75% 2,000,000 $2,571,477 France Telecom (U.S. Dollar) 03-01-06 8.20 700,000 744,690 Govt of France (European Monetary Unit) 04-25-12 5.00 5,700,000 7,939,333 Total 11,255,500 Germany (11.3%) Allgemeine HypothekenBank Rheinboden (European Monetary Unit) Series 501 09-02-09 5.00 1,860,000(d) 2,560,603 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 301,000,000 2,842,551 Bundesrepublik Deutschland (European Monetary Unit) 07-04-10 5.25 2,750,000 3,857,039 07-04-13 3.75 9,600,000 12,227,386 07-04-27 6.50 7,470,000 12,226,549 Bundesschatzanweisungen (European Monetary Unit) 12-16-05 2.75 15,310,000 19,689,751 DePfa Deutsche Pfandbriefbank (European Monetary Unit) Series G6 01-15-10 5.50 2,200,000 3,105,875 Deutsche Bank (European Monetary Unit) 07-28-09 4.25 500,000 664,983 Rheinische Hypothekenbank (European Monetary Unit) 07-05-10 5.75 2,200,000 3,146,427 Westfaelische HypotheKenbank (European Monetary Unit) 04-24-06 4.75 2,300,000 3,040,364 Total 63,361,528 Greece (4.0%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75 7,600,000 9,763,445 04-19-07 4.65 4,780,000 6,410,876 10-22-22 5.90 4,200,000 6,252,679 Total 22,427,000 Italy (8.6%) Buoni Poliennali Del Tesoro (European Monetary Unit) 03-01-07 4.50 8,800,000 11,751,958 10-15-07 5.00 8,700,000 11,840,229 02-01-13 4.75 9,300,000 12,724,866 11-01-26 7.25 3,486,283 6,085,661 Republic of Italy (Japanese Yen) 03-27-08 3.80 500,000,000 5,263,192 Telecom Italia (European Monetary Unit) 02-01-07 5.63 500,000 676,690 Total 48,342,596 Japan (5.3%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 650,000,000 6,246,052 Govt of Japan (Japanese Yen) 03-20-09 0.70 390,000,000 3,712,260 12-21-09 1.70 970,000,000 9,652,830 03-22-10 1.70 320,000,000 3,184,647 06-20-12 1.40 700,000,000 6,744,601 Total 29,540,390 Luxembourg (0.6%) BCP Caylux Holdings Luxembourg (U.S. Dollar) Sr Sub Nts 06-15-14 9.63 55,000(d) 61,600 Michelin Finance Luxembourg (European Monetary Unit) 04-16-09 6.13 500,000 705,512 Telecom Italia Capital (U.S. Dollar) 09-30-34 6.00 2,555,000(d) 2,511,266 Total 3,278,378 Malaysia (0.3%) Petronas Capital (U.S. Dollar) 05-22-12 7.00 1,500,000(d) 1,729,628 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mexico (0.5%) United Mexican States (Japanese Yen) 06-06-06 6.75% 62,000,000 $644,104 (U.S. Dollar) 03-03-15 6.63 1,550,000 1,661,600 Total 2,305,704 Netherlands (3.1%) Bank Nederlandse Gemeenten (British Pound) 08-06-07 7.38 1,100,000 2,145,153 Deutsche Telekom Intl Finance (European Monetary Unit) 05-29-07 7.50 500,000 709,311 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 8,700,000 12,115,915 ING Bank (European Monetary Unit) Sr Nts 01-29-09 4.25 600,000 797,822 RWE Finance (European Monetary Unit) 10-26-07 5.50 500,000 685,731 Vodafone Finance (European Monetary Unit) 05-27-09 4.75 740,000 999,751 Total 17,453,683 New Zealand (1.5%) Govt of New Zealand (New Zealand Dollar) 11-15-06 8.00 8,800,000 6,247,454 11-15-11 6.00 3,530,000 2,413,471 Total 8,660,925 Norway (1.8%) Eksportfinans (Japanese Yen) 06-21-10 1.80 340,000,000 3,384,809 Govt of Norway (Norwegian Krone) 05-16-11 6.00 36,800,000 6,527,976 Total 9,912,785 Poland (1.1%) Republic of Poland (Polish Zloty) 02-12-06 8.50 11,600,000 3,484,349 11-24-09 6.00 9,000,000 2,540,531 Total 6,024,880 South Korea (0.1%) Korea Development Bank (Japanese Yen) Series 21RG 06-25-08 0.98 70,000,000 662,580 Spain (7.9%) Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 2,500,000 3,181,957 Govt of Spain (European Monetary Unit) 10-31-07 4.25 8,950,000 11,945,748 07-30-09 5.15 12,000,000 16,713,018 01-31-10 4.00 9,400,000 12,472,134 Total 44,312,857 Supra-National (2.9%) European Investment Bank (British Pound) 12-07-11 5.50 3,000,000 5,670,123 Inter-American Development Bank (Japanese Yen) 07-08-09 1.90 1,035,000,000 10,379,275 Total 16,049,398 Sweden (0.5%) Govt of Sweden (Swedish Krona) 04-20-06 3.50 19,000,000 2,720,081 United Kingdom (3.5%) BT Group (U.S. Dollar) 12-15-10 8.38 700,000 849,421 Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-07 9.50 8,750,000(b,h,l) -- United Kingdom Treasury (British Pound) 03-07-12 5.00 5,910,000 11,045,450 09-07-14 5.00 4,210,000 7,895,326 Total 19,790,197 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (31.4%) Aesop Funding II LLC (U.S. Dollar) Series 2002-1A Cl A1 10-20-06 3.85% $500,000(d) $505,289 Airgas (U.S. Dollar) 10-01-11 9.13 195,000 219,375 Allied Waste North America (U.S. Dollar) Series B 04-01-08 8.88 100,000 106,000 AmeriCredit Automobile Receivables Trust (U.S. Dollar) Series 2004-DF Cl A3 07-06-09 2.98 800,000(g) 799,878 ASIF Global Financing XIX (U.S. Dollar) 01-17-13 4.90 6,855,000(d) 7,001,697 AT&T Wireless Services (U.S. Dollar) Sr Nts 03-01-11 7.88 500,000 595,653 Ball (U.S. Dollar) 12-15-12 6.88 335,000 362,637 Bank of America (U.S. Dollar) Sr Nts 02-01-07 5.25 1,000,000 1,047,924 Sub Nts (U.S. Dollar) 08-15-13 4.75 800,000 804,549 Bear Stearns Commercial Mtge Securities (U.S. Dollar) Series 2003-T10 Cl A1 03-13-40 4.00 646,223(f) 647,586 Series 2004-PWR5 Cl A5 07-11-42 4.98 1,000,000(f) 1,018,890 Series 2004-T16 Cl A3 02-13-46 4.03 600,000(f,g) 602,344 Boise Cascade LLC (U.S. Dollar) Sr Sub Nts 10-15-14 7.13 120,000(d) 125,257 Boyd Gaming (U.S. Dollar) Sr Sub Nts 12-15-12 7.75 35,000 38,588 04-15-14 6.75 75,000 78,656 Caesars Entertainment (U.S. Dollar) Sr Sub Nts 05-15-11 8.13 235,000 274,656 Cardinal Health (U.S. Dollar) 06-15-15 4.00 1,700,000 1,501,928 Case New Holland (U.S. Dollar) Sr Nts 06-01-09 6.00 40,000(d) 40,000 Chesapeake Energy (U.S. Dollar) Sr Nts 06-15-14 7.50 75,000 83,438 08-15-14 7.00 65,000 70,525 01-15-16 6.88 20,000 21,400 Choctaw Resort Development Enterprise (U.S. Dollar) Sr Nts 04-01-09 9.25 150,000 160,875 Citigroup (European Monetary Unit) Sr Nts 05-21-10 3.88 2,600,000 3,380,448 Comcast (U.S. Dollar) 03-15-11 5.50 2,150,000 2,267,368 Comcast Cable Communication Holdings (U.S. Dollar) 03-15-13 8.38 106,000 130,052 Compass Minerals Group (U.S. Dollar) 08-15-11 10.00 200,000 224,000 Cott Beverages (U.S. Dollar) 12-15-11 8.00 300,000 327,750 CS First Boston Mtge Securities (U.S. Dollar) Series 2004-C1 Cl A2 01-15-37 3.52 250,000(f) 248,320 CSC Holdings (U.S. Dollar) Sr Nts 12-15-07 7.88 150,000 161,625 DaimlerChrysler NA Holding (European Monetary Unit) 01-16-07 5.63 670,000 904,088 (U.S. Dollar) 11-15-13 6.50 400,000 436,400 Del Monte (U.S. Dollar) Series B 05-15-11 9.25 200,000 221,000 Dex Media West LLC/Finance (U.S. Dollar) Sr Nts Series B 08-15-10 8.50 55,000 62,700 DIRECTV Holdings LLC/Finance (U.S. Dollar) Sr Nts 03-15-13 8.38 150,000 171,562 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Dobson Cellular Systems (U.S. Dollar) 11-01-11 6.96% $30,000(d,e,g) $30,825 11-01-11 8.38 30,000(d,g) 30,938 Domino's Pizza (U.S. Dollar) Sr Sub Nts 07-01-11 8.25 125,000 136,875 DPL (U.S. Dollar) Sr Nts 09-01-11 6.88 150,000 163,500 DR Horton (U.S. Dollar) Sr Nts 05-01-13 6.88 150,000 162,375 09-15-14 5.63 350,000 346,938 DRS Technologies (U.S. Dollar) Sr Sub Nts 11-01-13 6.88 80,000 84,000 Earle M Jorgensen (U.S. Dollar) 06-01-12 9.75 50,000 55,500 Echostar DBS (U.S. Dollar) 10-01-14 6.63 125,000(d) 127,813 (U.S. Dollar) Sr Nts 10-01-08 5.75 60,000 61,350 El Paso Natural Gas (U.S. Dollar) Sr Nts Series A 08-01-10 7.63 160,000 173,000 Emmis Operating (U.S. Dollar) Sr Sub Nts 05-15-12 6.88 70,000 73,500 Encore Acquisition (U.S. Dollar) Sr Sub Nts 04-15-14 6.25 540,000 553,499 Federal Home Loan Mtge Corp (European Monetary Unit) 01-15-06 5.25 1,800,000 2,379,991 (U.S. Dollar) 01-15-12 5.75 7,475,000 8,224,533 09-01-17 6.50 576,687(f) 611,086 05-01-18 5.50 1,137,976(f) 1,179,540 10-01-18 5.00 979,439(f) 1,002,717 04-01-33 6.00 2,379,113(f) 2,477,720 08-01-33 6.50 405,458(f) 426,404 11-01-33 5.00 1,529,533(f) 1,531,538 Collateralized Mtge Obligation (U.S. Dollar) 11-15-28 4.50 1,044,714(f) 1,065,973 Federal Natl Mtge Assn (U.S. Dollar) 01-01-09 5.74 1,200,129(f) 1,283,934 01-01-13 4.92 518,089(f) 538,555 02-01-13 4.87 1,346,069(f) 1,390,549 10-01-13 5.11 395,120(f) 412,304 12-01-13 4.98 4,949,571(f) 5,124,895 03-01-17 5.50 1,245,622(f) 1,295,445 03-01-17 6.00 365,079(f) 383,350 04-01-17 6.50 1,269,311(f) 1,353,990 06-01-17 6.00 897,710(f) 942,636 07-01-17 6.00 508,657(f) 536,312 08-01-18 4.50 2,197,838(f) 2,210,629 11-01-18 5.50 2,180,194(f) 2,262,701 12-01-18 5.00 4,327,409(f) 4,432,161 07-01-23 5.00 1,278,882(f) 1,292,787 12-01-31 6.50 483,455(f) 511,647 05-01-32 7.00 1,543,195(f) 1,639,410 05-01-32 7.50 865,365(f) 927,025 06-01-32 7.00 727,970(f) 775,957 07-01-32 6.50 451,694(f) 475,744 08-01-32 6.50 2,425,287(f) 2,555,754 09-01-32 6.50 559,104(f) 590,845 11-01-32 7.50 1,299,444(f) 1,392,035 03-01-33 5.50 2,518,101(f) 2,572,434 03-01-33 6.00 3,092,087(f) 3,211,035 04-01-33 6.00 1,645,372(f) 1,712,497 05-01-33 6.00 807,338(f) 839,526 06-01-33 5.50 4,173,695(f) 4,269,007 09-01-33 5.50 2,634,429(f) 2,687,599 11-01-33 6.50 2,959,632(f) 3,119,899 Ford Motor (U.S. Dollar) 10-01-28 6.63 485,000 437,608 GE Financial Assurance Holdings (Japanese Yen) 06-20-11 1.60 130,000,000 1,220,645 General Electric Capital (European Monetary Unit) 06-20-07 5.13 500,000 676,726 Georgia Gulf (U.S. Dollar) Sr Nts 12-15-13 7.13 55,000 59,263 Georgia-Pacific (U.S. Dollar) 02-01-10 8.88 185,000 217,838 (U.S. Dollar) Sr Nts 07-15-08 7.38 300,000 329,999 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) GMAC (U.S. Dollar) 03-02-11 7.25% $1,300,000 $1,379,261 Goldman Sachs Group (U.S. Dollar) 05-15-09 6.65 500,000 557,710 Govt Natl Mtge Assn (U.S. Dollar) 10-15-33 5.50 1,765,401(f) 1,809,953 Collateralized Mtge Obligation Interest Only (U.S. Dollar) 01-20-32 0.00 2,740,864(f,i) 319,730 Grant Prideco Escrow (U.S. Dollar) 12-15-09 9.00 250,000 280,625 Graphic Packaging Intl (U.S. Dollar) Sr Nts 08-15-11 8.50 35,000 39,463 Greenwich Capital Commerical Funding (U.S. Dollar) Series 2004-GG1 Cl A4 06-10-36 4.76 1,100,000(f) 1,136,032 GS Mtge Securities (U.S. Dollar) Series 2004-GG2 Cl A6 08-10-38 5.40 740,000(f) 777,511 Hilton Hotels (U.S. Dollar) 12-01-12 7.63 200,000 236,000 Host Marriott LP (U.S. Dollar) Sr Nts 08-15-12 7.00 55,000(d) 59,400 IASIS Healthcare LLC/Capital (U.S. Dollar) Sr Sub Nts 06-15-14 8.75 25,000(d) 26,875 Innophos (U.S. Dollar) Sr Sub Nts 08-15-14 8.88 50,000(d) 53,875 Intl Paper (European Monetary Unit) 08-11-06 5.38 505,000 672,633 IPALCO Enterprises (U.S. Dollar) 11-14-08 8.38 250,000 279,375 Jefferson Smurfit (U.S. Dollar) 10-01-12 8.25 85,000 94,350 Joy Global (U.S. Dollar) Series B 03-15-12 8.75 60,000 67,800 JPMorgan Chase & Co (U.S. Dollar) Sub Nts 02-01-11 6.75 1,590,000 1,793,898 Key Energy Services (U.S. Dollar) Series C 03-01-08 8.38 130,000 137,150 (U.S. Dollar) Sr Nts 05-01-13 6.38 70,000 72,188 Kraft Foods (U.S. Dollar) 10-01-08 4.00 1,100,000 1,111,209 L-3 Communications (U.S. Dollar) 06-15-12 7.63 250,000 275,000 La Quinta Properties (U.S. Dollar) Sr Nts 08-15-12 7.00 25,000(d) 26,844 Lamar Media (U.S. Dollar) 01-01-13 7.25 50,000 54,250 LB-UBS Commercial Mtge Trust (U.S. Dollar) Series 2004-C6 Cl A2 08-15-29 4.19 1,250,000(f) 1,265,124 Series 2004-C7 Cl A2 10-15-29 3.99 1,000,000(f,g) 1,004,609 Lubrizol (U.S. Dollar) Sr Nts 10-01-09 4.63 270,000 272,645 10-01-14 5.50 270,000 272,240 MacDermid (U.S. Dollar) 07-15-11 9.13 35,000 39,113 Manitowoc (U.S. Dollar) 11-01-13 7.13 200,000 214,500 Meritage Homes (U.S. Dollar) 06-01-11 9.75 145,000 161,675 Metropolitan Edison (U.S. Dollar) 03-15-13 4.95 1,010,000 1,012,067 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) MGM Mirage (U.S. Dollar) 10-01-09 6.00% $45,000 $46,406 (U.S. Dollar) Sr Nts 02-27-14 5.88 50,000 49,250 Metris Master Trust (U.S. Dollar) Series 2004-2 Cl M 10-20-10 2.44 450,000(e,g) 450,000 Mohegan Tribal Gaming Authority (U.S. Dollar) Sr Sub Nts 04-01-12 8.00 150,000 165,750 08-15-14 7.13 25,000(d) 26,688 Morgan Stanley Capital I (U.S. Dollar) Series 2004-HQ4 Cl A5 04-14-40 4.59 1,000,000(f) 1,016,380 Morgan Stanley Group (European Monetary Unit) 03-16-06 5.25 2,400,000 3,181,144 NeighborCare (U.S. Dollar) Sr Sub Nts 11-15-13 6.88 25,000 26,125 Newfield Exploration (U.S. Dollar) Sr Sub Nts 08-15-12 8.38 340,000 388,025 09-01-14 6.63 80,000(d) 85,800 Nextel Communications (U.S. Dollar) Sr Nts 10-31-13 6.88 185,000 201,419 Nissan Auto Receivables Owner Trust (U.S. Dollar) Series 2003-A Cl A4 07-15-08 2.61 500,000 498,172 Norcraft LP/Finance (U.S. Dollar) Sr Sub Nts 11-01-11 9.00 80,000 86,400 Northwest Pipeline (U.S. Dollar) 03-01-10 8.13 10,000 11,213 Northwestern (U.S. Dollar) 11-01-14 5.88 15,000(d,g) 15,469 Offshore Logistics (U.S. Dollar) 06-15-13 6.13 140,000 144,900 Overseas Private Investment (U.S. Dollar) U.S. Govt Guaranty Series 1996A 09-15-08 6.99 3,333,333 3,614,233 Owens-Illinois Glass Container (U.S. Dollar) 05-15-11 7.75 115,000 125,063 Pacific Energy Partners LP/Finance (U.S. Dollar) Sr Nts 06-15-14 7.13 60,000(d) 64,500 PanAmSat (U.S. Dollar) 08-15-14 9.00 40,000(d) 42,200 Peabody Energy (U.S. Dollar) Series B 03-15-13 6.88 295,000 323,763 Pemex Project Funding Master Trust (U.S. Dollar) 12-15-14 7.38 450,000 498,600 Plains Exploration & Production (U.S. Dollar) Sr Nts 06-15-14 7.13 125,000 138,750 Pride Intl (U.S. Dollar) Sr Nts 07-15-14 7.38 30,000(d) 33,750 Prudential Financial (U.S. Dollar) 09-20-14 5.10 1,650,000 1,654,402 Qwest (U.S. Dollar) 03-15-12 9.13 325,000(d) 366,438 Schuler Homes (U.S. Dollar) 07-15-09 9.38 85,000 92,225 Silgan Holdings (U.S. Dollar) Sr Sub Nts 11-15-13 6.75 125,000 128,750 Southern Star Central (U.S. Dollar) 08-01-10 8.50 100,000 110,500 Speedway Motorsports (U.S. Dollar) Sr Sub Nts 06-01-13 6.75 70,000 73,500 Sprint Capital (U.S. Dollar) 11-15-28 6.88 1,500,000 1,610,887 Station Casinos (U.S. Dollar) Sr Nts 04-01-12 6.00 100,000 104,500 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Susquehanna Media (U.S. Dollar) Sr Sub Nts 04-15-13 7.38% $140,000 $148,050 Time Warner (U.S. Dollar) 05-15-29 6.63 1,635,000 1,740,199 Toyota Motor Credit (Japanese Yen) 06-09-08 0.75 297,000,000 2,841,407 Transcontinental Gas Pipe Line (U.S. Dollar) Series B 08-15-11 7.00 175,000 194,688 Triad Hospitals (U.S. Dollar) Sr Nts 05-15-12 7.00 140,000 149,800 TRW Automotive (U.S. Dollar) Sr Nts 02-15-13 9.38 70,000 80,500 U.S. Treasury (U.S. Dollar) 09-15-09 3.38 11,110,000(j) 11,156,007 08-15-14 4.25 2,425,000 2,467,816 08-15-23 6.25 7,585,000(m) 8,959,781 02-15-26 6.00 3,700,000(m) 4,270,466 02-15-31 5.38 660,000 716,848 United Auto Group (U.S. Dollar) 03-15-12 9.63 25,000 27,813 US Bank NA Minnesota (U.S. Dollar) 08-01-11 6.38 1,150,000 1,289,320 Valmont Inds (U.S. Dollar) 05-01-14 6.88 140,000(d) 144,550 Verizon Pennsylvania (U.S. Dollar) Series A 11-15-11 5.65 3,660,000(m) 3,896,985 Wachovia (U.S. Dollar) 08-15-08 3.50 400,000 400,236 Wachovia Bank Commercial Mtge Trust (U.S. Dollar) Series 2003-C8 Cl A2 11-15-35 3.89 1,250,000(f) 1,255,751 Wachovia Bank NA (U.S. Dollar) Sub Nts 11-01-14 4.80 450,000 449,631 Washington Mutual Bank FA (U.S. Dollar) Sub Nts 06-15-11 6.88 950,000 1,079,994 08-15-14 5.65 1,375,000 1,435,431 Wells Fargo Bank NA (U.S. Dollar) Sub Nts 02-01-11 6.45 2,380,000 2,681,028 William Carter (U.S. Dollar) Series B 08-15-11 10.88 150,000 168,000 Williams Companies (U.S. Dollar) 03-15-12 8.13 170,000 199,749 Total 175,857,171 Total bonds (Cost: $490,583,757) $535,792,680 Short-term securities (4.9%)(k) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies (2.7%) Federal Natl Mtge Assn Disc Nts 12-01-04 1.73% $5,000,000 $4,992,069 12-13-04 1.85 5,000,000 4,988,444 12-29-04 1.74 5,000,000 4,985,260 Total 14,965,773 Commercial paper (2.2%) Pacific Life Insurance 11-01-04 1.85 7,300,000 7,298,874 Ranger Funding Company LLC 12-09-04 1.92 5,000,000 4,989,067 Total 12,287,941 Total short-term securities (Cost: $27,252,911) $27,253,714 Total investments in securities (Cost: $517,836,668)(n) $563,046,394 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 19 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Oct. 31, 2004, the value of these securities amounted to $16,102,632 or 2.9% 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 Oct. 31, 2004. (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) At Oct. 31, 2004, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $2,935,844. (h) Negligible market value. (i) 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 at Oct. 31, 2004. (j) At Oct. 31, 2004 security was partially or fully on loan. See Note 4 to the financial statements. (k) Cash collateral received from security lending activity is invested in short-term securities and represents 1.5% of net assets. See Note 4 to the financial statements. 3.4% of net assets is the Portfolio's cash equivalent position. (l) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Oct. 31, 2004, is as follows: Security Acquisition Cost dates Greater Beijing First Expressways 6-12-97 to 9-16-98 $118,924 (U.S. Dollar) 9.50% Sr Nts 2007 (m) 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, Dec. 2004, 5-year $ 2,100,000 U.S. Treasury Notes, Dec. 2004, 10-year 18,700,000 (n) At Oct. 31, 2004, the cost of securities for federal income tax purposes was $517,850,150 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $45,610,275 Unrealized depreciation (414,031) -------- Net unrealized appreciation $45,196,244 ----------- - -------------------------------------------------------------------------------- 20 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.americanexpress.com/funds. - -------------------------------------------------------------------------------- 21 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Financial Statements Statement of assets and liabilities World Income Portfolio Oct. 31, 2004 Assets Investments in securities, at value (Note 1)* (identified cost $517,836,668) $563,046,394 Foreign currency holdings (identified cost $28) (Note 1) 30 Dividends and accrued interest receivable 8,056,797 Receivable for investment securities sold 2,219,678 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 573,777 ------- Total assets 573,896,676 ----------- Liabilities Disbursements in excess of cash on demand deposit 24,664 Payable for investment securities purchased 5,980,166 Payable upon return of securities loaned (Note 4) 8,170,000 Accrued investment management services fee 11,483 Other accrued expenses 59,930 ------ Total liabilities 14,246,243 ---------- Net assets $559,650,433 ============ * Including securities on loan, at value (Note 4) $ 8,033,120 ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statement of operations World Income Portfolio Year ended Oct. 31, 2004 Investment income Income: Dividends $ 721 Interest 21,939,247 Fee income from securities lending (Note 4) 64,314 Less foreign taxes withheld (4,128) ------ Total income 22,000,154 ---------- Expenses (Note 2): Investment management services fee 4,143,714 Compensation of board members 9,273 Custodian fees 178,550 Audit fees 27,000 Other 20,427 ------ Total expenses 4,378,964 Earnings credits on cash balances (Note 2) (415) ---- Total net expenses 4,378,549 --------- Investment income (loss) -- net 17,621,605 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 17,615,533 Foreign currency transactions (964,510) Futures contracts (266,951) Options contracts written (Note 7) 54,155 ------ Net realized gain (loss) on investments 16,438,227 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 24,402,177 ---------- Net gain (loss) on investments and foreign currencies 40,840,404 ---------- Net increase (decrease) in net assets resulting from operations $58,462,009 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statements of changes in net assets World Income Portfolio Year ended Oct. 31, 2004 2003 Operations Investment income (loss) -- net $ 17,621,605 $ 17,801,878 Net realized gain (loss) on investments 16,438,227 18,001,647 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 24,402,177 33,085,822 ---------- ---------- Net increase (decrease) in net assets resulting from operations 58,462,009 68,889,347 ---------- ---------- Proceeds from contributions 20,341,237 39,684,999 Fair value of withdrawals (62,192,959) (68,855,691) ----------- ----------- Net contributions (withdrawals) from partners (41,851,722) (29,170,692) ----------- ----------- Total increase (decrease) in net assets 16,610,287 39,718,655 Net assets at beginning of year 543,040,146 503,321,491 ----------- ----------- Net assets at end of year $559,650,433 $543,040,146 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Notes to Financial Statements World Income Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Income Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. The Portfolio invests primarily in debt obligations of U.S. and foreign issuers. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. 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 these 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 net asset value (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. - -------------------------------------------------------------------------------- 25 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2004, foreign currency holdings consisted primarily of Australian Dollars. - -------------------------------------------------------------------------------- 26 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Illiquid securities At Oct. 31, 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 at Oct. 31, 2004 was $0. 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. At Oct. 31, 2004, the Portfolio has entered into outstanding when-issued securities of $2,935,844. 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. Guarantees and indemnifications Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. 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. - -------------------------------------------------------------------------------- 27 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT 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 that declines from 0.77% to 0.67% annually as the Portfolio's assets increase. 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 year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced by $415 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 $526,825,956 and $542,178,896, respectively, for the year ended Oct. 31, 2004. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES At Oct. 31, 2004, securities valued at $8,033,120 were on loan to brokers. For collateral, the Portfolio received $8,170,000 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 $64,314 for the year ended Oct. 31, 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. - -------------------------------------------------------------------------------- 28 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT 5. FORWARD FOREIGN CURRENCY CONTRACTS At Oct. 31, 2004, the Portfolio has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows: Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation Nov. 10, 2004 2,811,900 3,900,000 $105,446 $-- U.S. Dollar Australian Dollar Nov. 15, 2004 12,864,964 1,410,000,000 468,331 -- U.S. Dollar Japanese Yen -------- --- Total $573,777 $-- -------- --- 6. INTEREST RATE FUTURES CONTRACTS At Oct. 31, 2004, investments in securities included securities valued at $519,548 that were pledged as collateral to cover initial margin deposits on 208 open sale contracts. The notional market value of the open sale contracts at Oct. 31, 2004 was $23,575,063 with a net unrealized loss of $284,160. 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: Year ended Oct. 31, 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 Oct. 31, 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 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) .79% .80% .79% .78% .78% Ratio of net investment income (loss) to average daily net assets 3.20% 3.29% 3.66% 5.27% 5.98% Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(b) 11.21% 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. - -------------------------------------------------------------------------------- 29 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Income Portfolio (a series of World Trust) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of World Income Portfolio as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 30 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Bond Fund Oct. 31, 2004 Assets Investment in Portfolio (Note 1) $559,503,575 Capital shares receivable 175,033 ------- Total assets 559,678,608 ----------- Liabilities Capital shares payable 224,413 Accrued distribution fee 6,636 Accrued transfer agency fee 2,645 Accrued administrative services fee 864 Other accrued expenses 68,974 ------ Total liabilities 303,532 ------- Net assets applicable to outstanding capital stock $559,375,076 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 796,878 Additional paid-in capital 509,779,712 Undistributed net investment income 14,144,995 Accumulated net realized gain (loss) (Note 5) (11,150,536) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 45,804,027 ---------- Total -- representing net assets applicable to outstanding capital stock $559,375,076 ============ Net assets applicable to outstanding shares: Class A $388,702,892 Class B $141,856,065 Class C $ 4,716,721 Class I $ 24,020,955 Class Y $ 78,443 Net asset value per share of outstanding capital stock: Class A shares 55,378,028 $ 7.02 Class B shares 20,209,576 $ 7.02 Class C shares 674,551 $ 6.99 Class I shares 3,414,514 $ 7.03 Class Y shares 11,149 $ 7.04 ------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statement of operations AXP Global Bond Fund Year ended Oct. 31, 2004 Investment income Income: Dividends $ 721 Interest 21,934,535 Fee income from securities lending 64,297 Less foreign taxes withheld (4,127) ------ Total income 21,995,426 ---------- Expenses (Note 2): Expenses allocated from Portfolio 4,377,451 Distribution fee Class A 952,565 Class B 1,560,487 Class C 50,444 Transfer agency fee 990,258 Incremental transfer agency fee Class A 72,785 Class B 49,525 Class C 1,287 Service fee -- Class Y 75 Administrative services fees and expenses 314,640 Compensation of board members 8,432 Printing and postage 115,000 Registration fees 52,454 Audit fees 9,000 Other 13,067 ------ Total expenses 8,567,470 Earnings credits on cash balances (Note 2) (5,511) ------ Total net expenses 8,561,959 --------- Investment income (loss) -- net 13,433,467 ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 17,611,292 Foreign currency transactions (964,257) Futures contracts (266,865) Options contracts written 54,142 ------ Net realized gain (loss) on investments 16,434,312 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 24,395,700 ---------- Net gain (loss) on investments and foreign currencies 40,830,012 ---------- Net increase (decrease) in net assets resulting from operations $54,263,479 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statements of changes in net assets AXP Global Bond Fund Year ended Oct. 31, 2004 2003 Operations and distributions Investment income (loss) -- net $ 13,433,467 $ 13,500,260 Net realized gain (loss) on investments 16,434,312 17,996,432 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 24,395,700 33,079,008 ---------- ---------- Net increase (decrease) in net assets resulting from operations 54,263,479 64,575,700 ---------- ---------- Distributions to shareholders from: Net investment income Class A (13,588,587) (12,438,109) Class B (4,397,000) (3,958,002) Class C (141,492) (103,214) Class I (208,980) -- Class Y (2,872) (1,009) ------ ------ Total distributions (18,338,931) (16,500,334) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 90,482,357 118,383,281 Class B shares 34,513,320 50,004,285 Class C shares 1,609,678 3,603,615 Class I shares 22,849,823 -- Class Y shares 13,380 41,942 Reinvestment of distributions at net asset value Class A shares 12,568,801 11,408,319 Class B shares 4,090,856 3,683,453 Class C shares 124,689 93,681 Class I shares 208,773 -- Class Y shares 2,872 985 Payments for redemptions Class A shares (119,978,418) (130,390,225) Class B shares (Note 2) (63,787,048) (63,154,212) Class C shares (Note 2) (2,223,406) (1,678,853) Class I shares (97,951) -- Class Y shares (7,940) (55,411) ------ ------- Increase (decrease) in net assets from capital share transactions (19,630,214) (8,059,140) ----------- ---------- Total increase (decrease) in net assets 16,294,334 40,016,226 Net assets at beginning of year 543,080,742 503,064,516 ----------- ----------- Net assets at end of year $ 559,375,076 $ 543,080,742 ============= ============= Undistributed net investment income $ 14,144,995 $ 5,836,050 ------------- -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Notes to Financial Statements AXP Global Bond Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. 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. At Oct. 31, 2004, AEFC and the AXP Portfolio Builder Series funds owned 100% of Class I shares, which represents 4.29% of the Fund's net assets. 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 at Oct. 31, 2004 was 99.97%. - -------------------------------------------------------------------------------- 34 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT All securities held by the Portfolio 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, AEFC utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these 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. 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. Guarantees and indemnifications Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. 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. - -------------------------------------------------------------------------------- 35 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $13,214,409 and accumulated net realized gain has been decreased by $13,214,409. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2004 2003 Class A Distributions paid from: Ordinary income $13,588,587 $12,438,109 Long-term capital gain -- -- Class B Distributions paid from: Ordinary income 4,397,000 3,958,002 Long-term capital gain -- -- Class C Distributions paid from: Ordinary income 141,492 103,214 Long-term capital gain -- -- Class I* Ordinary income 208,980 N/A Long-term capital gain -- N/A Class Y Distributions paid from: Ordinary income 2,872 1,009 Long-term capital gain -- -- * Inception date was March 4, 2004. At Oct. 31, 2004, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 16,119,649 Accumulated long-term gain (loss) $(11,113,313) Unrealized appreciation (depreciation) $ 43,792,150 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 that declines from 0.06% to 0.04% annually as the Fund's assets increase. 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. - -------------------------------------------------------------------------------- 36 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $20.50 o Class B $21.50 o Class C $21.00 o Class Y $18.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. 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 $828,307 for Class A, $125,976 for Class B and $2,297 for Class C for the year ended Oct. 31, 2004. During the year ended Oct. 31, 2004, the Fund's transfer agency fees were reduced by $5,511 as a result of earnings credits from overnight cash balances. - -------------------------------------------------------------------------------- 37 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004 Class A Class B Class C Class I* Class Y Sold 13,443,824 5,113,276 239,474 3,398,078 2,007 Issued for reinvested distributions 1,868,388 607,744 18,597 31,012 426 Redeemed (17,795,771) (9,514,367) (331,347) (14,576) (1,156) ----------- ---------- -------- ------- ------ Net increase (decrease) (2,483,559) (3,793,347) (73,276) 3,414,514 1,277 ---------- ---------- ------- --------- ----- * 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 The Bank of New York, whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with Deutsche Bank. The Fund had no borrowings outstanding during the year ended Oct. 31, 2004. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $11,113,313 at Oct. 31, 2004, that if not offset by capital gains will expire in 2010. 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. - -------------------------------------------------------------------------------- 38 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .17 .18 .19 .27 .34 Net gains (losses) (both realized and unrealized) .52 .60 .17 .30 (.63) ----- ----- ----- ----- ----- Total from investment operations .69 .78 .36 .57 (.29) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.24) (.21) (.17) (.15) (.19) ----- ----- ----- ----- ----- Net asset value, end of period $7.02 $6.57 $6.00 $5.81 $5.39 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $389 $380 $348 $355 $389 Ratio of expenses to average daily net assets(b) 1.34% 1.36% 1.34% 1.32% 1.30% Ratio of net investment income (loss) to average daily net assets 2.66% 2.73% 3.12% 4.75% 5.49% Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(c) 10.70% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 39 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .14 .12 .13 .21 .29 Net gains (losses) (both realized and unrealized) .50 .62 .19 .31 (.62) ----- ----- ----- ----- ----- Total from investment operations .64 .74 .32 .52 (.33) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.19) (.16) (.12) (.11) (.16) ----- ----- ----- ----- ----- Net asset value, end of period $7.02 $6.57 $5.99 $5.79 $5.38 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $142 $158 $152 $145 $155 Ratio of expenses to average daily net assets(b) 2.10% 2.12% 2.10% 2.09% 2.07% Ratio of net investment income (loss) to average daily net assets 1.90% 1.97% 2.36% 3.99% 4.73% Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(c) 9.83% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 40 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .14 .13 .14 .21 .10 Net gains (losses) (both realized and unrealized) .49 .60 .18 .31 (.24) ----- ----- ----- ----- ----- Total from investment operations .63 .73 .32 .52 (.14) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.19) (.16) (.13) (.11) -- ----- ----- ----- ----- ----- Net asset value, end of period $6.99 $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) 2.09% 2.14% 2.10% 2.09% 2.07%(d) Ratio of net investment income (loss) to average daily net assets 1.91% 1.89% 2.29% 3.84% 4.80%(d) Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(e) 9.72% 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. - -------------------------------------------------------------------------------- 41 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL 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) .16 Net gains (losses) (both realized and unrealized) .24 ----- Total from investment operations .40 ----- Less distributions: Dividends from net investment income (.14) ----- Net asset value, end of period $7.03 ----- Ratios/supplemental data Net assets, end of period (in millions) $24 Ratio of expenses to average daily net assets(c) .89%(d) Ratio of net investment income (loss) to average daily net assets 3.07%(d) Portfolio turnover rate (excluding short-term securities) 92% Total return(e) 6.06%(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. - -------------------------------------------------------------------------------- 42 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .18 .19 .20 .29 .35 Net gains (losses) (both realized and unrealized) .52 .61 .19 .27 (.62) ----- ----- ----- ----- ----- Total from investment operations .70 .80 .39 .56 (.27) ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.25) (.22) (.18) (.16) (.20) ----- ----- ----- ----- ----- Net asset value, end of period $7.04 $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) 1.17% 1.18% 1.17% 1.16% 1.14% Ratio of net investment income (loss) to average daily net assets 2.83% 2.69% 3.29% 4.90% 5.75% Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48% Total return(c) 10.86% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 43 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of AXP Global Bond Fund (a series of AXP Global Series, Inc.) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Global Bond Fund as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 44 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT Investments in Securities World Technologies Portfolio Oct. 31, 2004 (Percentages represent value of investments compared to net assets) Common stocks (96.7%) Issuer Shares Value(a) Cellular telecommunications (3.0%) Nextel Communications Cl A 29,500(b) $781,455 Vodafone Group ADR 167,500(c) 4,319,825 Western Wireless Cl A 43,400(b) 1,264,676 Total 6,365,956 Computer hardware (14.0%) Cisco Systems 378,400(b) 7,269,064 Dell 321,300(b) 11,264,778 EMC 565,000(b) 7,271,550 Gateway 598,400(b) 3,500,640 Total 29,306,032 Computer software & services (31.4%) Affiliated Computer Services Cl A 71,600(b) 3,905,780 BEA Systems 254,500(b) 2,066,540 Blue Coat Systems 167,000(b) 2,907,470 Business Objects ADR 123,500(b,c,d) 3,151,720 Citrix Systems 262,600(b) 6,336,538 Cognizant Technology Solutions Cl A 59,900(b) 2,036,600 i2 Technologies 2,820,000(b) 1,974,000 Informatica 697,000(b) 5,443,570 Juniper Networks 261,000(b) 6,945,210 Lexar Media 258,500(b) 1,747,460 Macromedia 234,500(b) 6,364,330 McDATA Cl A 165,700(b) 1,040,596 Microsoft 73,300 2,051,667 Ness Technologies 153,600(b,c) 2,030,592 OPNET Technologies 100,000(b) 764,500 Oracle 169,100(b) 2,140,806 Paychex 125,000 4,099,250 Telvent GIT 60,000(b,c,d) 553,800 TIBCO Software 581,000(b) 5,647,320 VERITAS Software 218,000(b) 4,769,840 Total 65,977,589 Electronics (23.0%) Amkor Technology 583,800(b) 2,907,324 Analog Devices 133,700 5,382,762 ASML Holding 150,500(b,c) 2,144,625 Broadcom Cl A 132,000(b) 3,570,600 Cypress Semiconductor 270,500(b) 2,848,365 Genesis Microchip 191,200(b) 2,709,304 Intel 241,000 5,364,660 Marvell Technology Group 70,700(b,c) 2,019,899 Micron Technology 158,000(b) 1,924,440 Open Solutions 40,000(b) 1,126,600 Samsung Electronics 16,900(c) 6,638,557 Semtech 96,500(b) 2,014,920 Spatialight 268,925(b,d) 1,750,702 Taiwan Semiconductor Mfg ADR 282,000(c) 2,134,740 Texas Instruments 237,000 5,794,651 Total 48,332,149 Leisure time & entertainment (2.3%) Gemstar-TV Guide Intl 856,500(b) 4,924,875 Media (11.0%) eBay 38,300(b) 3,738,463 iVillage 550,000(b) 2,818,750 Sirius Satellite Radio 491,000(b,d) 1,914,900 XM Satellite Radio Holdings Cl A 90,500(b) 2,924,960 Yahoo! 322,500(b) 11,671,275 Total 23,068,348 Retail -- general (1.6%) Best Buy 55,500 3,286,710 Telecom equipment & services (6.6%) CIENA 982,000(b) 2,425,540 Corning 381,500(b) 4,368,175 JDS Uniphase 588,000(b) 1,863,960 Nokia ADR 342,300(c) 5,278,266 Total 13,935,941 Utilities -- telephone (3.7%) AT&T 221,400 3,788,154 Verizon Communications 100,000 3,910,000 Total 7,698,154 Total common stocks (Cost: $188,394,291) $202,895,754 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Other (--%) Issuer Shares Value(a) UBI Soft Entertainment Warrants 5,712)(b) $9,867 Total other (Cost: $19,674) $9,867 Short-term securities (5.2%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies (4.6%) Federal Home Loan Mtge Corp Disc Nt 01-04-05 1.86% $1,800,000 $1,793,792 Federal Natl Mtge Assn Disc Nts 12-01-04 1.73 500,000 499,207 12-09-04 1.85 1,600,000 1,596,629 12-14-04 1.83 1,900,000 1,895,558 01-05-05 1.86 3,800,000 3,786,688 Total 9,571,874 Commercial paper (0.6%) CXC LLC 11-01-04 1.86 1,300,000 1,299,799 Total short-term securities (Cost: $10,870,776) $10,871,673 Total investments in securities (Cost: $199,284,741)(f) $213,777,294 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. At Oct. 31, 2004, the value of foreign securities represented 13.5% of net assets. (d) At Oct. 31, 2004, security was partially or fully on loan. See Note 4 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 2.6% of net assets. See Note 4 to the financial statements. 2.6% of net assets is the Portfolio's cash equivalent position. (f) At Oct. 31, 2004, the cost of securities for federal income tax purposes was $203,826,464 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $17,118,597 Unrealized depreciation (7,167,767) ---------- Net unrealized appreciation $ 9,950,830 ----------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.americanexpress.com/funds. - -------------------------------------------------------------------------------- 13 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Financial Statements Statement of assets and liabilities World Technologies Portfolio Oct. 31, 2004 Assets Investments in securities, at value (Note 1)* (identified cost $199,284,741) $213,777,294 Cash in bank on demand deposit 61,278 Dividends and accrued interest receivable 67,300 Receivable for investment securities sold 5,707,691 --------- Total assets 219,613,563 ----------- Liabilities Payable for investment securities purchased 4,203,836 Payable upon return of securities loaned (Note 4) 5,466,200 Accrued investment management services fee 4,117 Other accrued expenses 37,160 ------ Total liabilities 9,711,313 --------- Net assets $209,902,250 ============ * Including securities on loan, at value (Note 4) $ 5,043,866 ------------ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statement of operations World Technologies Portfolio Year ended Oct. 31, 2004 Investment income Income: Dividends $ 477,658 Interest 72,520 Fee income from securities lending (Note 4) 70,311 Less foreign taxes withheld (52,232) ------- Total income 568,257 ------- Expenses (Note 2): Investment management services fee 1,812,789 Compensation of board members 8,432 Custodian fees 56,947 Audit fees 24,000 Other 9,778 ----- Total expenses 1,911,946 Earnings credits on cash balances (Note 2) (394) ---- Total net expenses 1,911,552 --------- Investment income (loss) -- net (1,343,295) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 14,442,726 Foreign currency transactions 1,741 ----- Net realized gain (loss) on investments 14,444,467 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 53,902 ------ Net gain (loss) on investments and foreign currencies 14,498,369 ---------- Net increase (decrease) in net assets resulting from operations $13,155,074 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets World Technologies Portfolio Year ended Oct. 31, 2004 2003 Operations Investment income (loss) -- net $ (1,343,295) $ (571,018) Net realized gain (loss) on investments 14,444,467 64,893,772 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 53,902 18,832,116 ------ ---------- Net increase (decrease) in net assets resulting from operations 13,155,074 83,154,870 ---------- ---------- Proceeds from contributions 8,830,768 22,782,493 Fair value of withdrawals (26,055,794) (12,875,419) ----------- ----------- Net contributions (withdrawals) from partners (17,225,026) 9,907,074 ----------- --------- Total increase (decrease) in net assets (4,069,952) 93,061,944 Net assets at beginning of year 213,972,202 120,910,258 ----------- ----------- Net assets at end of year $209,902,250 $213,972,202 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Notes to Financial Statements World Technologies Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Technologies Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. The Portfolio invests in equity securities of companies in the information technology industry throughout the world. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which securities are normally traded. 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 these 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 net asset value (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. - -------------------------------------------------------------------------------- 17 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. - -------------------------------------------------------------------------------- 18 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. 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. Guarantees and indemnifications Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. 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. - -------------------------------------------------------------------------------- 19 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT 2. FEES AND EXPENSES The Trust, on behalf of the Portfolio, has an Investment Management Services Agreement with AEFC to manage its portfolio. Under this agreement, AEFC determines which securities will be purchased, held or sold. In certain circumstances, the Board may approve a change in the index. The management fee is a percentage of the Portfolio's average daily net assets that declines from 0.72% to 0.595% annually as the Portfolio's assets increase. 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 $234,130 for the year ended Oct. 31, 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 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 year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced by $394 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 $744,408,128 and $760,179,507, respectively, for the year ended Oct. 31, 2004. Realized gains and losses are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with AEFC were $97,718 for the year ended Oct. 31, 2004. - -------------------------------------------------------------------------------- 20 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT 4. LENDING OF PORTFOLIO SECURITIES At Oct. 31, 2004, securities valued at $5,043,866 were on loan to brokers. For collateral, the Portfolio received $5,466,200 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 $70,311 for the year ended Oct. 31, 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 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) .87% .84% .77% .75% .74% Ratio of net investment income (loss) to average daily net assets (.61%) (.37%) (.51%) (.11%) .10% Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(b) 6.91% 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. - -------------------------------------------------------------------------------- 21 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Technologies Portfolio (a series of World Trust) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004 and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of World Technologies Portfolio as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 22 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Global Technology Fund Oct. 31, 2004 Assets Investment in Portfolio (Note 1) $ 209,871,332 Capital shares receivable 12,192 ------ Total assets 209,883,524 ----------- Liabilities Capital shares payable 33,608 Accrued distribution fee 2,718 Accrued service fee 1 Accrued transfer agency fee 2,453 Accrued administrative services fee 343 Other accrued expenses 58,127 ------ Total liabilities 97,250 ------ Net assets applicable to outstanding capital stock $ 209,786,274 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 1,196,325 Additional paid-in capital 605,935,093 Accumulated net realized gain (loss) (Note 5) (411,835,622) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 14,490,478 ---------- Total -- representing net assets applicable to outstanding capital stock $ 209,786,274 ============= Net assets applicable to outstanding shares: Class A $ 146,065,605 Class B $ 59,344,328 Class C $ 3,952,783 Class I $ 10,781 Class Y $ 412,777 Net asset value per share of outstanding capital stock: Class A shares 79,952,878 $ 1.83 Class B shares 36,990,705 $ 1.60 Class C shares 2,457,559 $ 1.61 Class I shares 5,882 $ 1.83 Class Y shares 225,433 $ 1.83 ------- -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statement of operations AXP Global Technology Fund Year ended Oct. 31, 2004 Investment income Income: Dividends $ 477,593 Interest 72,510 Fee income from securities lending 70,301 Less foreign taxes withheld (52,225) ------- Total income 568,179 ------- Expenses (Note 2): Expenses allocated from Portfolio 1,911,292 Distribution fee Class A 375,071 Class B 644,615 Class C 42,622 Transfer agency fee 922,371 Incremental transfer agency fee Class A 68,804 Class B 52,205 Class C 1,989 Service fee -- Class Y 361 Administrative services fees and expenses 131,702 Compensation of board members 7,715 Printing and postage 132,897 Registration fees 54,656 Audit fees 8,000 Other 5,067 ----- Total expenses 4,359,367 Earnings credits on cash balances (Note 2) (2,473) ------ Total net expenses 4,356,894 --------- Investment income (loss) -- net (3,788,715) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 14,440,716 Foreign currency transactions 1,741 ----- Net realized gain (loss) on investments 14,442,457 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 53,737 ------ Net gain (loss) on investments and foreign currencies 14,496,194 ---------- Net increase (decrease) in net assets resulting from operations $10,707,479 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets AXP Global Technology Fund Year ended Oct. 31, 2004 2003 Operations Investment income (loss) -- net $ (3,788,715) $ (2,685,295) Net realized gain (loss) on investments 14,442,457 64,884,382 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 53,737 18,829,617 ------ ---------- Net increase (decrease) in net assets resulting from operations 10,707,479 81,028,704 ---------- ---------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 32,538,914 40,338,279 Class B shares 8,831,756 11,875,873 Class C shares 1,113,196 1,324,959 Class I shares 10,000 -- Class Y shares 361,012 138,070 Payments for redemptions Class A shares (39,802,082) (30,612,393) Class B shares (Note 2) (16,473,859) (10,091,766) Class C shares (Note 2) (1,305,583) (704,810) Class Y shares (191,700) (29,506) -------- ------- Increase (decrease) in net assets from capital share transactions (14,918,346) 12,238,706 ----------- ---------- Total increase (decrease) in net assets (4,210,867) 93,267,410 Net assets at beginning of year 213,997,141 120,729,731 ----------- ----------- Net assets at end of year $209,786,274 $213,997,141 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Notes to Financial Statements AXP Global Technology Fund 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AXP Global Technology Fund (a series of AXP Global Series, Inc.) is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. Effective July 15, 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. At Oct. 31, 2004, AEFC owned 100% of Class I shares, which represents 0.01% of the Fund's net assets. 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 at Oct. 31, 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). - -------------------------------------------------------------------------------- 26 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT All securities held by the Portfolio 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, AEFC utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these 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 values at amortized cost. 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. Guarantees and indemnifications Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. 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. - -------------------------------------------------------------------------------- 27 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $3,640,017 and accumulated net realized loss has been decreased by $187,307 resulting in a net reclassification adjustment to decrease paid-in capital by $3,827,324. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2004 2003 Class A Distributions paid from: Ordinary income $-- $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class I* Distributions paid from: Ordinary income -- N/A Long-term capital gain -- N/A Class Y Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- * Inception date was July 15, 2004. At Oct. 31, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income $ -- Accumulated long-term gain (loss) $(407,294,569) Unrealized appreciation (depreciation) $ 9,949,425 Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. - -------------------------------------------------------------------------------- 28 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net that declines from 0.06% to 0.035% annually as the Fund's assets increase. 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. 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 $492,415 for Class A, $96,966 for Class B and $2,363 for Class C for the year ended Oct. 31, 2004. - -------------------------------------------------------------------------------- 29 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Under an agreement which was effective until May 31, 2004, net expenses would not exceed 1.99% for Class A, 2.75% for Class B, 2.75% for Class C and 1.82% for Class Y of the Fund's average daily net assets. Beginning June 1, 2004, AEFC and it affiliates have agreed to waive certain fees and expenses until Oct. 31, 2005. Under this agreement, net expenses will not exceed 1.82% for Class A, 2.59% for Class B, 2.59% for Class C, 1.13% for Class I and 1.63% for Class Y of the Fund's average daily net assets. During the year ended Oct. 31, 2004, the Fund's transfer agency fees were reduced by $2,473 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004 Class A Class B Class C Class I* Class Y Sold 18,015,801 5,496,488 686,163 5,882 199,393 Issued for reinvested distributions -- -- -- -- -- Redeemed (22,398,814) (10,688,097) (844,370) -- (106,886) ----------- ----------- -------- ----- -------- Net increase (decrease) (4,383,013) (5,191,609) (158,207) 5,882 92,507 ---------- ---------- -------- ----- ------ * Inception date was July 15, 2004. Year ended Oct. 31, 2003 Class A Class B Class C Class I Class Y Sold 29,664,616 9,892,297 1,093,757 N/A 97,979 Issued for reinvested distributions -- -- -- N/A -- Redeemed (23,738,698) (8,875,386) (608,977) N/A (21,555) ----------- ---------- -------- ----- ------- Net increase (decrease) 5,925,918 1,016,911 484,780 N/A 76,424 --------- --------- ------- ----- ------
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by The Bank of New York, whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to the agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with Deutsche Bank. The Fund had no borrowings outstanding during the year ended Oct. 31, 2004. - -------------------------------------------------------------------------------- 30 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes the Fund had a capital loss carry-over of $407,294,569 at Oct. 31, 2004, that if not offset by capital gains will expire as follows: 2009 2010 $325,995,342 $81,299,227 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 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) (.03) (.02) (.03) (.02) (.01) Net gains (losses) (both realized and unrealized) .14 .71 (.54) (3.64) 7.05 ----- ----- ----- ------ ------- Total from investment operations .11 .69 (.57) (3.66) 7.04 ----- ----- ----- ------ ------- Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(b) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (13.05) ----- ----- ----- ------ ------- Net asset value, end of period $1.83 $1.72 $1.03 $ 1.60 $ 5.26 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in thousands) $146,066 $145,382 $80,831 $146,139 $319,164 Ratio of expenses to average daily net assets(c) 1.74% 1.94% 1.91% 1.63% 1.24%(d) Ratio of net investment income (loss) to average daily net assets (1.48%) (1.47%) (1.65%) (.99%) (.38%) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(e) 6.40% 66.99% (35.62%) (69.58%) 66.58%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) A distibution payable to a single corporate shareholder. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class A would have been 1.45% for the period ended Oct. 31, 2000. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 31 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.04) (.03) (.04) (.04) (.04) Net gains (losses) (both realized and unrealized) .11 .64 (.48) (3.29) 6.84 ----- ----- ----- ------ ------- Total from investment operations .07 .61 (.52) (3.33) 6.80 ----- ----- ----- ------ ------- Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(b) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (13.05) ----- ----- ----- ------ ------- Net asset value, end of period $1.60 $1.53 $ .92 $ 1.44 $ 4.77 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in thousands) $59,344 $64,387 $37,877 $67,425 $138,545 Ratio of expenses to average daily net assets(c) 2.52% 2.75% 2.71% 2.42% 2.01%(d) Ratio of net investment income (loss) to average daily net assets (2.26%) (2.27%) (2.45%) (1.78%) (1.16%) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(e) 4.58% 66.30% (36.11%) (69.81%) 65.25%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) A distibution payable to a single corporate shareholder. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class B would have been 2.26% for the period ended Oct. 31, 2000. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 32 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.04) (.03) (.04) (.04) (.01) Net gains (losses) (both realized and unrealized) .12 .64 (.48) (3.29) (.27) ----- ----- ----- ------ ----- Total from investment operations .08 .61 (.52) (3.33) (.28) ----- ----- ----- ------ ----- Net asset value, end of period $1.61 $1.53 $ .92 $ 1.44 $4.77 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in thousands) $3,953 $4,000 $1,964 $4,069 $3,298 Ratio of expenses to average daily net assets(c) 2.49% 2.72% 2.69% 2.42% 2.01%(d),(e) Ratio of net investment income (loss) to average daily net assets (2.23%) (2.26%) (2.39%) (1.84%) (1.17%)(d) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(f) 5.23% 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. - -------------------------------------------------------------------------------- 33 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Class I Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004(b) Net asset value, beginning of period $1.70 ----- Income from investment operations: Net investment income (loss) (.02) Net gains (losses) (both realized and unrealized) .15 ----- Total from investment operations .13 ----- Net asset value, end of period $1.83 ----- Ratios/supplemental data Net assets, end of period (in thousands) $11 Ratio of expenses to average daily net assets(c) 1.03%(d) Ratio of net investment income (loss) to average daily net assets (.73%)(d) Portfolio turnover rate (excluding short-term securities) 349% Total return(e) 7.65%(f) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was July 15, 2004. (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. - -------------------------------------------------------------------------------- 34 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.02) (.02) (.03) (.02) -- Net gains (losses) (both realized and unrealized) .13 .71 (.54) (3.63) 7.03 ----- ----- ----- ------ ------- Total from investment operations .11 .69 (.57) (3.65) 7.03 ----- ----- ----- ------ ------- Less distributions: Distributions from realized gains -- -- -- -- (1.29) Tax return of capital -- -- -- -- (11.76)(b) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (13.05) ----- ----- ----- ------ ------- Net asset value, end of period $1.83 $1.72 $1.03 $ 1.60 $ 5.25 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in thousands) $413 $229 $58 $57 $88 Ratio of expenses to average daily net assets(c) 1.55% 1.69% 1.72% 1.49% .94%(d) Ratio of net investment income (loss) to average daily net assets (1.28%) (1.25%) (1.61%) (.89%) (.80%) Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116% Total return(e) 6.40% 66.99% (35.63%) (69.52%) 66.27%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) A distibution payable to a single corporate shareholder. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses for Class Y would have been 1.19% for the period ended Oct. 31, 2000. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 35 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of AXP Global Technology Fund (a series of AXP Global Series, Inc.) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Global Technology Fund as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 36 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT Investments in Securities Emerging Markets Portfolio Oct. 31, 2004 (Percentages represent value of investments compared to net assets) Common stocks (91.4%)(c) Issuer Shares Value(a) Brazil (10.0%) Chemicals (0.8%) Braskem ADR 66,150(b) $2,421,090 Energy (2.7%) Petroleo Brasileiro ADR 244,496 7,970,570 Metals (2.0%) Cia Vale do Rio Doce ADR 331,788 6,038,542 Paper & packaging (1.1%) Aracruz Celulose ADR 95,957 3,231,832 Textiles & apparel (0.2%) Grenedene 46,425(b) 564,672 Utilities -- electric (0.8%) Cia Energetica de Minas Gerais 100,900,000 2,330,907 Utilities -- telephone (2.4%) Brasil Telecom Participacoes ADR 141,374 4,334,526 Tele Norte Leste Participacoes ADR 217,725 2,847,843 Total 7,182,369 China (2.8%) Metals (1.1%) Yanzhou Coal Mining Cl H 2,566,000 3,379,222 Telecom equipment & services (1.0%) China Telecom Cl H 8,800,000 2,826,565 Utilities -- electric (0.7%) Datang Intl Power Generation 2,602,000 2,072,694 Estonia (0.8%) Banks and savings & loans Hansabank 242,625 2,452,658 Hong Kong (4.0%) Financial services (1.0%) Hong Kong Exchanges and Clearing 1,252,000 2,847,173 Real estate (1.0%) Sun Hung Kai Properties 326,000 3,015,688 Retail -- general (2.0%) Esprit Holdings 580,000 3,099,971 Giordano Intl 5,082,000 2,840,273 Total 5,940,244 Hungary (2.2%) Health care products Gedeon Richter 56,160 6,645,903 India (4.4%) Banks and savings & loans (1.4%) Housing Development Finance 90,771 1,279,085 State Bank of India GDR 108,232 2,859,489 Total 4,138,574 Beverages & tobacco (1.3%) ITC 166,009 3,978,253 Computer software & services (1.7%) Infosys Technologies 113,851 4,782,582 Indonesia (1.1%) Banks and savings & loans Bank Mandiri 18,024,500 3,126,496 Israel (3.5%) Computer software & services (1.5%) Check Point Software Technologies 197,926(b) 4,477,284 Health care products (2.0%) Teva Pharmaceutical Inds ADR 227,620 5,918,120 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Malaysia (1.8%) Banks and savings & loans (0.8%) Malayan Banking 773,200 $2,241,159 Leisure time & entertainment (1.0%) Resorts World 1,228,100 3,090,476 Mexico (10.6%) Beverages & tobacco (1.9%) Fomento Economico Mexicano ADR 62,649 2,762,821 Grupo Modelo Series C 1,122,400 2,876,901 Total 5,639,722 Building materials & construction (0.8%) CEMEX ADR 85,633 2,481,644 Cellular telecommunications (4.0%) America Movil ADR Series L 268,021 11,792,924 Media (1.7%) Grupo Televisa ADR 91,000 5,005,000 Real estate (0.9%) Consorcio ARA 974,500(b) 2,605,931 Retail -- general (1.3%) Wal-Mart de Mexico Series C 1,217,521 3,978,723 Netherlands Antilles (0.7%) Beverages & tobacco Efes Breweries Intl GDR 71,315(b,d) 1,978,991 Peru (0.8%) Precious metals Compania de Minas Buenaventura ADR 90,039 2,236,569 Philippine Islands (0.7%) Utilities -- telephone Philippine Long Distance Telephone 86,230(b) 2,154,600 Russia (6.2%) Energy (3.5%) LUKOIL ADR 59,256 7,392,186 Surgutneftegax ADR 71,676 2,859,872 Total 10,252,058 Precious metals (0.7%) JSC MMC Norilsk Nickel ADR 33,331 2,069,855 Utilities -- natural gas (0.5%) OAO Gazprom ADR 42,990(d) 1,606,106 Utilities -- telephone (1.5%) Mobile Telesystems ADR 30,730 4,459,538 Singapore (1.0%) Banks and savings & loans DBS Group Holdings 304,000 2,852,400 South Africa (8.5%) Banks and savings & loans (3.9%) ABSA Group 278,827 3,065,642 FirstRand 1,584,317 3,158,858 Standard Bank Group 610,267 5,387,831 Total 11,612,331 Energy equipment & services (1.0%) Sasol 154,260 3,075,682 Insurance (1.2%) Sanlam 2,007,100 3,550,582 Retail -- general (1.2%) JD Group 376,395 3,520,712 Telecom equipment & services (1.2%) Telkom 248,605 3,537,046 South Korea (12.9%) Automotive & related (1.9%) Hyundai Motor GDR 242,020(d) 5,743,135 Banks and savings & loans (2.0%) Hana Bank 239,420 5,980,953 Beverages & tobacco (1.0%) KT&G 105,350 2,918,935 Electronics (4.5%) Samsung Electronics 33,330 13,092,492 Metals (2.5%) POSCO 47,850 7,163,494 Retail -- general (1.0%) Shinsegae 10,740 3,023,730 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Taiwan (10.5%) Banks and savings & loans (4.2%) Chinatrust Financial Holding 6,638,234 $7,575,758 E.Sun Financial Holdings 2,971,000 2,029,019 Taishin Financial Holdings 3,502,360 2,863,994 Total 12,468,771 Computer hardware (0.9%) Asustek Computer 1,259,800 2,792,428 Electronics (2.9%) Acer 1,834,172 2,686,566 Taiwan Semiconductor Mfg 4,483,774 5,882,561 Total 8,569,127 Insurance (1.5%) Cathay Financial Holding 2,340,000 4,485,847 Textiles & apparel (1.0%) Far Eastern Textile 4,364,000 2,914,998 Thailand (3.9%) Banks and savings & loans (3.2%) Bangkok Bank 1,793,200(b) 4,193,598 Kasikornbank 4,505,600(b) 5,158,665 Total 9,352,263 Utilities -- telephone (0.7%) Advanced Info Service 927,700 2,113,032 Turkey (3.7%) Banks and savings & loans (0.6%) Akbank 402,393,539 1,810,499 Beverages & tobacco (0.9%) Anadolu Efes Biracilik ve Malt Sanayil 161,187,526 2,541,048 Furniture & appliances (0.5%) Arcelik 251,090,026(b) 1,520,471 Telecom equipment & services (1.7%) Turkcell Iletisim Hizmetleri 832,672,402 5,098,569 United Kingdom (1.4%) Metals BHP Billiton 416,902 4,257,411 Total common stocks (Cost: $236,401,590) $270,930,690 Preferred stock (1.9%)(c) Issuer Shares Value(a) Brazil Banco Itau Holding Financeira 47,380 $5,721,421 Total preferred stock (Cost: $3,761,433) $5,721,421 Short-term securities (2.7%) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agency (1.7%) Federal Natl Mtge Assn Disc Nt 12-14-04 1.83% $5,000,000 $4,988,311 Commercial paper (1.0%) CXC LLC 11-01-04 1.86 3,100,000 3,099,520 Total short-term securities (Cost: $8,087,992) $8,087,831 Total investments in securities (Cost: $248,251,015)(e) $284,739,942 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (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 Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Oct. 31, 2004, the value of these securities amounted to $9,328,232 or 3.1% of net assets. (e) At Oct. 31, 2004, the cost of securities for federal income tax purposes was $248,647,799 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $41,993,058 Unrealized depreciation (5,900,915) ---------- Net unrealized appreciation $36,092,143 ----------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.americanexpress.com/funds. - -------------------------------------------------------------------------------- 15 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Financial Statements Statement of assets and liabilities Emerging Markets Portfolio Oct. 31, 2004 Assets Investments in securities, at value (Note 1) (identified cost $248,251,015) $284,739,942 Foreign currency holdings (identified cost $3,452,911) (Note 1) 3,473,781 Dividends and accrued interest receivable 93,818 Receivable for investment securities sold 9,408,724 --------- Total assets 297,716,265 ----------- Liabilities Disbursements in excess of cash on demand deposit 47,166 Payable for investment securities purchased 1,274,562 Accrued investment management services fee 8,813 Other accrued expenses 85,624 ------ Total liabilities 1,416,165 --------- Net assets $296,300,100 ============ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statement of operations Emerging Markets Portfolio Year ended Oct. 31, 2004 Investment income Income: Dividends $ 6,995,537 Interest 117,227 Fee income from securities lending (Note 3) 256 Less foreign taxes withheld (942,019) -------- Total income 6,171,001 --------- Expenses (Note 2): Investment management services fee 2,770,886 Compensation of board members 8,482 Custodian fees 291,850 Audit fees 24,000 Other 17,262 ------ Total expenses 3,112,480 --------- Earnings credits on cash balances (Note 2) (794) Total net expenses 3,111,686 --------- Investment income (loss) -- net 3,059,315 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 48,342,092 Foreign currency transactions (263,034) -------- Net realized gain (loss) on investments 48,079,058 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (9,980,094) ---------- Net gain (loss) on investments and foreign currencies 38,098,964 ---------- Net increase (decrease) in net assets resulting from operations $41,158,279 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets Emerging Markets Portfolio Year ended Oct. 30, 2004 2003 Operations Investment income (loss) -- net $ 3,059,315 $ 2,490,540 Net realized gain (loss) on investments 48,079,058 17,305,707 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (9,980,094) 50,708,763 ---------- ---------- Net increase (decrease) in net assets resulting from operations 41,158,279 70,505,010 ---------- ---------- Proceeds from contributions 22,729,634 40,823,634 Fair value of withdrawals (13,403,405) (63,961,807) ----------- ----------- Net contributions (withdrawals) from partners 9,326,229 (23,138,173) --------- ----------- Total increase (decrease) in net assets 50,484,508 47,366,837 Net assets at beginning of year 245,815,592 198,448,755 ----------- ----------- Net assets at end of year $296,300,100 $245,815,592 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Notes to Financial Statements Emerging Markets Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Emerging Markets Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests primarily in equity securities of emerging markets companies. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. 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 these 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 net asset value (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. - -------------------------------------------------------------------------------- 19 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2004 foreign currency holdings consisted of multiple denominations, primarily Taiwan Dollars. - -------------------------------------------------------------------------------- 20 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Guarantees and indemnifications Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. 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 that declines from 1.10% to 1.00% annually as the Portfolio's assets increase. 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 Threadneedle Emerging Markets Fund to the Lipper Emerging Markets Funds Index. In certain circumstances, the Board may approve a change in the 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 $232,104 for the year ended Oct. 31, 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. - -------------------------------------------------------------------------------- 21 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT 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 Threadneedle International Limited, an indirect wholly-owned subsidiary of AEFC to subadvise the assets of the Fund. Prior to July 10, 2004, AEFC had a Subadvisory Agreement with American Express Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC. During the year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced by $794 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 $337,446,962 and $340,663,620, respectively, for the year ended Oct. 31, 2004. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $256 for the year ended Oct. 31, 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 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) 1.14% 1.20% 1.23% 1.20% 1.17% Ratio of net investment income (loss) to average daily net assets 1.12% 1.20% .63% .79% .28% Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(b) 17.03% 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. - -------------------------------------------------------------------------------- 22 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of Emerging Markets Portfolio (a series of World Trust) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Emerging Markets Portfolio as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 23 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP Threadneedle Emerging Markets Fund Oct. 31, 2004 Assets Investment in Portfolio (Note 1) $296,190,895 Capital shares receivable 100,738 ------- Total assets 296,291,633 ----------- Liabilities Capital shares payable 349,531 Accrued distribution fee 3,310 Accrued service fee 50 Accrued transfer agency fee 1,578 Accrued administrative services fee 790 Other accrued expenses 248,496 ------- Total liabilities 603,755 ------- Net assets applicable to outstanding capital stock $295,687,878 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 477,168 Additional paid-in capital 333,376,180 Undistributed net investment income 874,641 Accumulated net realized gain (loss) (Note 5) (75,556,881) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 36,516,770 ---------- Total -- representing net assets applicable to outstanding capital stock $295,687,878 ============ Net assets applicable to outstanding shares: Class A $190,500,049 Class B $ 73,255,622 Class C $ 1,211,363 Class I $ 12,706,944 Class Y $ 18,013,900 Net asset value per share of outstanding capital stock: Class A shares 30,359,602 $ 6.27 Class B shares 12,316,180 $ 5.95 Class C shares 203,071 $ 5.97 Class I shares 1,999,415 $ 6.36 Class Y shares 2,838,508 $ 6.35 --------- ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statement of operations AXP Threadneedle Emerging Markets Fund Year ended Oct. 31, 2004 Investment income Income: Dividends $ 6,992,937 Interest 117,225 Fee income from securities lending 256 Less foreign taxes withheld (941,669) -------- Total income 6,168,749 --------- Expenses (Note 2): Expenses allocated from Portfolio 3,110,528 Distribution fee Class A 438,042 Class B 756,560 Class C 9,336 Transfer agency fee 675,065 Incremental transfer agency fee Class A 51,799 Class B 37,265 Class C 426 Service fee -- Class Y 18,278 Administrative services fees and expenses 271,857 Compensation of board members 8,107 Printing and postage 110,340 Registration fees 49,172 Audit fees 8,000 Other 7,274 ----- Total expenses 5,552,049 Earnings credits on cash balances (Note 2) (4,095) ------ Total net expenses 5,547,954 --------- Investment income (loss) -- net 620,795 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 48,323,810 Foreign currency transactions (262,934) -------- Net realized gain (loss) on investments 48,060,876 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (9,976,656) ---------- Net gain (loss) on investments and foreign currencies 38,084,220 ---------- Net increase (decrease) in net assets resulting from operations $38,705,015 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets AXP Threadneedle Emerging Markets Fund Year ended Oct. 31, 2004 2003 Operations and distributions Investment income (loss) -- net $ 620,795 $ 320,873 Net realized gain (loss) on investments 48,060,876 17,299,589 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (9,976,656) 50,690,349 ---------- ---------- Net increase (decrease) in net assets resulting from operations 38,705,015 68,310,811 ---------- ---------- Distributions to shareholders from: Net investment income Class A (1,739,711) -- Class B (347,165) -- Class C (2,977) -- Class Y (233,251) -- ------------ ------------ Total distributions (2,323,104) -- ------------ ------------ Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 51,336,374 46,522,730 Class B shares 13,065,540 4,677,343 Class C shares 710,046 1,881,668 Class I shares 12,072,940 -- Class Y shares 3,109,037 17,134,059 Reinvestment of distributions at net asset value Class A shares 1,721,050 -- Class B shares 343,304 -- Class C shares 2,764 -- Class Y shares 233,251 -- Payments for redemptions Class A shares (41,601,391) (66,453,449) Class B shares (Note 2) (21,634,907) (17,438,584) Class C shares (Note 2) (205,777) (1,963,556) Class I shares (2,074) -- Class Y shares (5,555,746) (5,243,858) ---------- ---------- Increase (decrease) in net assets from capital share transactions 13,594,411 (20,883,647) ---------- ----------- Total increase (decrease) in net assets 49,976,322 47,427,164 Net assets at beginning of year 245,711,556 198,284,392 ----------- ----------- Net assets at end of year $295,687,878 $245,711,556 ============ ============ Undistributed (excess of distributions over) net investment income $ 874,641 $ (284,054) ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Notes to Financial Statements AXP Threadneedle Emerging Markets Fund (formerly AXP Emerging Markets Fund) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. 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. At Oct. 31, 2004, American Express Financial Corporation (AEFC) and the AXP Portfolio Builder Series funds owned 100% of Class I shares, which represents 4.30% of the Fund's net assets. 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 at Oct. 31, 2004 was 99.96%. - -------------------------------------------------------------------------------- 27 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT All securities held by the Portfolio 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, AEFC utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these 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. 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. Guarantees and indemnifications Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. 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. - -------------------------------------------------------------------------------- 28 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $2,861,004 and accumulated net realized loss has been increased by $2,861,004. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2004 2003 Class A Distributions paid from: Ordinary income $1,739,711 $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income 347,165 -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income 2,977 -- Long-term capital gain -- -- Class I* Distributions paid from: Ordinary income -- N/A Long-term capital gain -- N/A Class Y Distributions paid from: Ordinary income 233,251 -- Long-term capital gain -- -- * Inception date was March 4, 2004. At Oct. 31, 2004, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 1,106,679 Accumulated long-term gain (loss) $(75,392,313) Unrealized appreciation (depreciation) $ 36,120,164 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. - -------------------------------------------------------------------------------- 29 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.10% to 0.05% annually as the Fund's assets increase. 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. 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 $513,194 for Class A, $43,590 for Class B and $45 for Class C for the year ended Oct. 31, 2004. - -------------------------------------------------------------------------------- 30 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT AEFC and its affiliates have agreed to waive certain fees and expenses until Oct. 31, 2005. 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 year ended Oct. 31, 2004, the Fund's transfer agency fees were reduced by $4,095 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004 Class A Class B Class C Class I* Class Y Sold 8,624,819 2,280,081 122,428 1,999,746 521,530 Issued for reinvested distributions 308,432 64,531 518 -- 41,430 Redeemed (7,033,449) (3,919,054) (37,461) (331) (917,351) ---------- ---------- ------- --------- -------- Net increase (decrease) 1,899,802 (1,574,442) 85,485 1,999,415 (354,391) --------- ---------- ------ --------- -------- * 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 The Bank of New York, whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with Deutsche Bank. The Fund had no borrowings outstanding during the year ended Oct. 31, 2004. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $75,392,313 at Oct. 31, 2004, that if not offset by capital gains will expire in 2009. 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. - -------------------------------------------------------------------------------- 31 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .03 .02 (.01) -- (.02) Net gains (losses) (both realized and unrealized) .84 1.44 .32 (1.12) (.16) ----- ----- ----- ------ ----- Total from investment operations .87 1.46 .31 (1.12) (.18) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.06) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $6.27 $5.46 $4.00 $ 3.69 $4.81 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $191 $155 $132 $143 $234 Ratio of expenses to average daily net assets(b) 1.83% 2.02% 2.05% 2.02% 1.83% Ratio of net investment income (loss) to average daily net assets .41% .39% (.19%) (.02%) (.38%) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(c) 16.09% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 32 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.02) (.02) (.04) (.04) (.07) Net gains (losses) (both realized and unrealized) .81 1.38 .31 (1.07) (.14) ----- ----- ----- ------ ----- Total from investment operations .79 1.36 .27 (1.11) (.21) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.03) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $5.95 $5.19 $3.83 $ 3.56 $4.67 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $73 $72 $65 $73 $120 Ratio of expenses to average daily net assets(b) 2.59% 2.80% 2.83% 2.79% 2.60% Ratio of net investment income (loss) to average daily net assets (.32%) (.39%) (.95%) (.80%) (1.14%) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(c) 15.18% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 33 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.01) (.02) (.03) (.04) (.01) Net gains (losses) (both realized and unrealized) .81 1.38 .31 (1.08) (.95) ----- ----- ----- ------ ----- Total from investment operations .80 1.36 .28 (1.12) (.96) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.03) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $5.97 $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) 2.60% 2.80% 2.85% 2.79% 2.60%(d) Ratio of net investment income (loss) to average daily net assets (.34%) (.41%) (1.13%) (.63%) (2.06%)(d) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(e) 15.37% 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. - -------------------------------------------------------------------------------- 34 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL 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) .01 Net gains (losses) (both realized and unrealized) (.19) ----- Total from investment operations (.18) ----- Net asset value, end of period $6.36 ----- Ratios/supplemental data Net assets, end of period (in millions) $13 Ratio of expenses to average daily net assets(c) 1.35%(d) Ratio of net investment income (loss) to average daily net assets .79%(d) Portfolio turnover rate (excluding short-term securities) 128% Total return(e) (2.75%)(f) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was March 4, 2004. (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. - -------------------------------------------------------------------------------- 35 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .04 .03 -- .01 (.01) Net gains (losses) (both realized and unrealized) .86 1.45 .32 (1.12) (.15) ----- ----- ----- ------ ----- Total from investment operations .90 1.48 .32 (1.11) (.16) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.07) -- -- -- -- ----- ----- ----- ------ ----- Net asset value, end of period $6.35 $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) 1.65% 1.87% 1.59% 1.84% 1.66% Ratio of net investment income (loss) to average daily net assets .61% .54% .19% .21% (.29%) Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143% Total return(c) 16.50% 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) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 36 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of AXP Threadneedle Emerging Markets Fund (formerly AXP Emerging Markets Fund) (a series of AXP Global Series, Inc.) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Threadneedle Emerging Markets Fund as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 37 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT Investments in Securities AXP Threadneedle Global Balanced Fund Oct. 31, 2004 (Percentages represent value of investments compared to net assets) Common stocks (65.1%)(c) Issuer Shares Value(a) Bermuda (2.0%) Insurance (1.2%) PartnerRe 11,848 $688,962 RenaissanceRe Holdings 12,604 590,119 Total 1,279,081 Multi-industry (0.8%) Accenture Cl A 31,365(b) 759,347 Brazil (1.8%) Metals (0.7%) Cia Vale do Rio Doce ADR 39,942 726,945 Paper & packaging (0.5%) Aracruz Celulose ADR 16,255 547,468 Utilities -- telephone (0.6%) Brasil Telecom Participacoes ADR 18,720 573,955 Canada (1.4%) Banks and savings & loans (0.4%) TSX Group 8,638 362,783 Energy (0.7%) EnCana 13,919 690,293 Metals (0.3%) Cameco 3,953 320,615 France (2.8%) Automotive & related (0.6%) Renault 6,755 567,027 Energy (1.4%) Total 6,956 1,450,847 Multi-industry (0.8%) Sanofi-Aventis 10,801 791,941 Germany (1.6%) Banks and savings & loans (0.7%) Hypo Real Estate Holding 18,035(b) 676,635 Utilities -- electric (0.9%) RWE 16,472 875,140 Hong Kong (2.3%) Multi-industry (1.0%) New World Development 1,090,600 952,820 Real estate (0.5%) Henderson Land Development 112,000 519,471 Retail -- general (0.8%) Esprit Holdings 154,500 825,768 India (0.6%) Banks and savings & loans State Bank of India GDR 8,855 233,949 State Bank of India GDR 13,145(d) 347,291 Total 581,240 Indonesia (0.3%) Metals PT Bumi Resources 3,500,000(b) 279,460 Ireland (0.8%) Banks and savings & loans Anglo Irish Bank 39,838 763,631 Israel (0.8%) Computer software & services Check Point Software Technologies 35,109(b) 794,201 Italy (1.2%) Energy (0.8%) Eni 37,750 859,827 Utilities -- electric (0.4%) Enel 39,007 353,886 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Japan (8.6%) Automotive & related (1.0%) Honda Motor 9,300 $449,972 Toyota Motor 13,200 515,176 Total 965,148 Banks and savings & loans (1.6%) Chiba Bank 85,000 547,014 Mitsubishi Tokyo Financial Group 91 773,957 UFJ Holdings 47(b) 218,522 Total 1,539,493 Broker dealers (0.3%) Matsui Securities 11,900 315,999 Electronics (0.3%) Keyence 1,500 338,499 Financial services (0.3%) Nomura Holdings 26,000 319,410 Health care products (0.5%) Chugai Pharmaceutical 31,700 497,278 Machinery (1.3%) Amada 112,000 596,938 Komatsu 107,000 716,906 Total 1,313,844 Media (0.4%) Fuji Television Network 195 440,418 Multi-industry (1.2%) Canon 14,600(b) 721,583 Ricoh 28,000 523,909 Total 1,245,492 Real estate (0.9%) Daito Trust Construction 13,400 567,303 Mitsui Fudosan 28,000 297,675 Total 864,978 Retail -- general (0.4%) Seven-Eleven Japan 14,000 406,161 Textiles & apparel (0.4%) Onward Kashiyama 31,000 404,271 Luxembourg (0.4%) Metals Arcelor 18,615 351,341 Mexico (0.8%) Cellular telecommunications America Movil ADR Series L 18,121 797,324 Netherlands (1.2%) Aerospace & defense (0.3%) European Aeronautic Defence and Space 12,000 343,189 Food (0.9%) Royal Numico 25,200(b) 851,938 Singapore (0.5%) Real estate City Developments 126,000 477,445 South Korea (1.5%) Electronics (1.1%) Samsung Electronics 2,890 1,135,233 Engineering & construction (0.4%) Hyundai Development 29,550 396,166 Sweden (0.1%) Telecom equipment & services Telefonaktiebolaget LM Ericsson Cl B 49,557(b) 144,346 Switzerland (4.0%) Banks and savings & loans (1.0%) UBS 14,452 1,044,562 Food (0.3%) Nestle 1,371 325,239 Health care products (2.7%) Actelion 6,689(b) 767,499 Nobel Biocare Holding 4,615 756,799 Roche Holding 5,292 542,496 Synthes 5,180 553,575 Total 2,620,369 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Taiwan (0.4%) Electronics Optimax Technology 28,364 $56,074 Taiwan Semiconductor Mfg 258,337 338,929 Total 395,003 United Kingdom (5.9%) Aerospace & defense (0.7%) Rolls-Royce Group 144,721 689,486 Rolls-Royce Group Cl B 4,602,127(b) 8,457 Total 697,943 Cellular telecommunications (1.4%) Vodafone Group 516,036 1,322,907 Energy (0.4%) BP 42,199 409,072 Food (0.5%) Cadbury Schweppes 61,633 512,515 Health care products (0.5%) AstraZeneca 13,282 544,794 Industrial services (0.8%) BOC Group 46,162 743,976 Media (0.3%) Reuters Group 49,845 339,608 Retail -- grocery (0.7%) Tesco 129,188 681,364 Telecom equipment & services (0.6%) mmO2 323,704(b) 626,102 United States (26.2%) Banks and savings & loans (0.7%) Bank of America 10,284 460,620 Investors Financial Services 7,000 269,430 Total 730,050 Beverages & tobacco (0.6%) PepsiCo 12,851 637,153 Broker dealers (0.8%) Ameritrade Holding 16,100(b) 209,622 Bear Stearns Companies 6,255 592,661 Total 802,283 Cellular telecommunications (1.2%) American Tower Cl A 44,585(b) 766,416 Nextel Communications Cl A 15,800(b) 418,542 Total 1,184,958 Chemicals (0.4%) Ecolab 11,397 385,788 Communications equipment & services (0.6%) SpectraSite 11,050(b) 566,865 Computer hardware (0.9%) Dell 25,164(b) 882,250 Computer software & services (2.6%) Adobe Systems 14,200 795,626 First Data 6,864 283,346 Microsoft 55,365 1,549,666 Total 2,628,638 Electronics (0.3%) Intel 11,750 261,555 Energy (2.2%) ChevronTexaco 3,040 161,302 EOG Resources 8,603 572,616 Exxon Mobil 7,889 388,297 Massey Energy 11,470 308,887 Valero Energy 18,616 799,929 Total 2,231,031 Finance companies (1.7%) Citigroup 38,896 1,725,816 Financial services (1.0%) Goldman Sachs Group 5,495 540,599 Moody's 6,108 475,263 Total 1,015,862 Food (0.3%) WM Wrigley Jr 4,117 269,252 Furniture & appliances (0.5%) Mohawk Inds 5,929(b) 504,439 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Health care products (3.1%) Abbott Laboratories 7,249 $309,025 Amgen 18,169(b) 1,032,000 Johnson & Johnson 9,990 583,216 Laboratory Corp of America Holdings 8,398(b) 384,628 Pfizer 9,549 276,444 St. Jude Medical 8,230(b) 630,171 Total 3,215,484 Health care services (0.2%) WellPoint Health Networks 1,632(b) 159,381 Household products (0.6%) Procter & Gamble 12,305 629,770 Industrial services (0.4%) Iron Mountain 12,750(b) 421,388 Industrial transportation (0.4%) Norfolk Southern 12,976 440,535 Insurance (0.5%) American Intl Group 7,555 458,664 Leisure time & entertainment (1.2%) Carnival 13,344 674,673 Harley-Davidson 8,274 476,334 Total 1,151,007 Media (1.2%) Dex Media 23,404(b) 496,164 DIRECTV Group 21,423(b) 359,264 Lamar Advertising 7,200(b) 298,224 Total 1,153,652 Multi-industry (0.9%) General Electric 25,478 869,309 Retail -- drugstores (0.7%) Walgreen 19,575 702,547 Retail -- general (2.6%) Circuit City Stores 15,963 259,399 Home Depot 33,899 1,392,570 Staples 13,647 405,862 Wal-Mart Stores 10,455 563,734 Total 2,621,565 United States (cont.) Utilities -- electric (0.6%) Duke Energy 22,886 $561,394 Total common stocks (Cost: $57,823,971) $65,174,444 Preferred stock & other (0.8%)(c) Issuer Shares Value(a) Germany Porsche 1,162 $741,901 Singapore City Development Warrants 12,600(b) 28,950 Total preferred stock & other (Cost: $559,249) $770,851 Bonds (30.6%)(c) Issuer Coupon Principal Value(a) rate amount Australia (0.2%) New South Wales Treasury (Australian Dollar) 03-01-08 8.00% 200,000 $161,500 Austria (3.5%) Oesterreich Kontrollbank (Japanese Yen) 03-22-10 1.80 347,000,000 3,460,711 Canada (1.8%) Govt of Canada (Canadian Dollar) 09-01-08 4.25 1,600,000 1,339,276 Province of British Columbia (Canadian Dollar) 12-01-06 5.25 500,000 426,295 Total 1,765,571 Denmark (1.1%) Kingdom of Denmark (Danish Krone) 08-15-05 5.00 1,900,000 333,766 Rheinische Hypbk (European Monetary Unit) 09-24-08 4.25 550,000 734,935 Total 1,068,701 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount France (3.6%) French Treasury Note (European Monetary Unit) 07-12-08 3.00% 300,000 385,270 Govt of France (European Monetary Unit) 04-25-10 5.50 1,800,000 2,556,763 04-25-13 4.00 500,000 650,722 Total 3,592,755 Germany (6.6%) Allgemeine HypothekenBank Rheinboden (European Monetary Unit) Series 501 09-02-09 5.00 850,000(d) 1,170,168 Bundesrepublik Deutschland (European Monetary Unit) 01-05-06 6.00 150,000 200,035 01-04-08 5.25 1,285,000 1,767,424 07-04-08 4.75 725,000 987,556 07-04-10 5.25 250,000 350,640 06-20-16 6.00 434,598 658,236 07-04-27 6.50 900,000 1,473,078 Total 6,607,137 Greece (2.2%) Hellenic Republic (European Monetary Unit) 04-18-08 3.50 650,000 847,093 04-20-09 3.50 800,000 1,038,230 05-20-13 4.60 200,000 268,062 Total 2,153,385 Italy (5.6%) Buoni Poliennali Del Tes (European Monetary Unit) 11-01-09 4.25 2,400,000 3,221,455 08-01-13 4.25 600,000 791,594 08-01-14 4.25 720,000 940,967 11-01-29 5.25 600,000 829,460 Total 5,783,476 Norway (0.4%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 2,100,000 372,520 Supra-National (0.5%) Intl Bank Reconstruction & Development (Japanese Yen) 02-18-08 2.00 55,000,000 548,975 United Kingdom (1.7%) Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-07 9.50 170,000(b,e,f) -- United Kingdom Treasury (British Pound) 07-12-11 9.00 410,000 937,592 09-27-13 8.00 340,000 771,373 Total 1,708,965 United States (3.4%) ConocoPhillips (U.S. Dollar) 03-15-28 7.13 200,000 216,933 Federal Natl Mtge Assn (U.S. Dollar) 05-15-11 6.00 1,370,000 1,524,747 U.S. Treasury (U.S. Dollar) 01-31-06 1.88 535,000 532,137 08-15-14 4.25 868,000 883,325 02-15-26 6.00 169,000 195,056 Total 3,352,198 Total bonds (Cost: $25,178,167) $30,575,894 Short-term securities (2.7%) Issuer Effective Amount Value(a) yield payable at maturity Commercial paper Pacific Life Insurance 11-01-04 1.85% $700,000 $699,892 Sysco 11-01-04 1.85 2,000,000 1,999,692 Total short-term securities (Cost: $2,699,723) $2,699,584 Total investments in securities (Cost: $86,261,110)(g) $99,220,773 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the board. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Oct. 31, 2004, the value of these securities amounted to $1,517,459 or 1.5% of net assets. (e) Negligible market value. (f) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Oct. 31, 2004, is as follows: Security Acquisition Cost dates Greater Beijing First Expressways (U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 thru 09-30-04 $51,391 (g) At Oct. 31, 2004, the cost of securities for federal income tax purposes was $86,442,991 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $13,700,265 Unrealized depreciation (922,483) -------- Net unrealized appreciation $12,777,782 ----------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.americanexpress.com/funds. - -------------------------------------------------------------------------------- 19 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Threadneedle Global Balanced Fund Oct. 31, 2004 Assets Investments in securities, at value (Note 1) (identified cost $86,261,110) $ 99,220,773 Cash in bank on demand deposit 66,079 Foreign currency holdings (identified cost $589,591) (Note 1) 596,399 Capital shares receivable 53,433 Dividends and accrued interest receivable 567,686 Receivable for investment securities sold 638,011 ------- Total assets 101,142,381 ----------- Liabilities Capital shares payable 2,216 Payable for investment securities purchased 948,766 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 69,603 Accrued investment management services fee 2,153 Accrued distribution fee 1,225 Accrued service fee 34 Accrued transfer agency fee 632 Accrued administrative services fee 163 Other accrued expenses 73,184 ------ Total liabilities 1,097,976 --------- Net assets applicable to outstanding capital stock $100,044,405 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 191,547 Additional paid-in capital 128,757,486 Undistributed net investment income 1,645,386 Accumulated net realized gain (loss) (Note 7) (43,469,652) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 12,919,638 ---------- Total -- representing net assets applicable to outstanding capital stock $100,044,405 ============ Net assets applicable to outstanding shares: Class A $ 56,802,615 Class B $ 29,946,507 Class C $ 788,884 Class Y $ 12,506,399 Net asset value per share of outstanding capital stock: Class A shares 10,819,137 $ 5.25 Class B shares 5,813,358 $ 5.15 Class C shares 153,660 $ 5.13 Class Y shares 2,368,527 $ 5.28 --------- ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Statement of operations AXP Threadneedle Global Balanced Fund Year ended Oct. 31, 2004 Investment income Income: Dividends $ 948,412 Interest 1,345,359 Fee income from securities lending (Note 3) 2,001 Less foreign taxes withheld (41,972) ------- Total income 2,253,800 --------- Expenses (Note 2): Investment management services fee 699,824 Distribution fee Class A 136,721 Class B 320,051 Class C 7,301 Transfer agency fee 243,934 Incremental transfer agency fee Class A 13,742 Class B 12,733 Class C 238 Service fee -- Class Y 9,589 Administrative services fees and expenses 59,047 Compensation of board members 8,432 Custodian fees 42,380 Printing and postage 53,990 Registration fees 41,954 Audit fees 20,750 Other 7,396 ----- Total expenses 1,678,082 Earnings credits on cash balances (Note 2) (3,673) ------ Total net expenses 1,674,409 --------- Investment income (loss) -- net 579,391 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 5,746,953 Foreign currency transactions (384,922) -------- Net realized gain (loss) on investments 5,362,031 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 4,301,031 --------- Net gain (loss) on investments and foreign currencies 9,663,062 --------- Net increase (decrease) in net assets resulting from operations $10,242,453 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets AXP Threadneedle Global Balanced Fund Year ended Oct. 31, 2004 2003 Operations and distributions Investment income (loss) -- net $ 579,391 $ 687,550 Net realized gain (loss) on investments 5,362,031 (2,312,136) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 4,301,031 15,670,500 --------- ---------- Net increase (decrease) in net assets resulting from operations 10,242,453 14,045,914 ---------- ---------- Distributions to shareholders from: Net investment income Class A (304,857) (444,097) Class C -- (2) Class Y (81,770) (55,350) ------- ------- Total distributions (386,627) (499,449) -------- -------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 12,342,103 8,267,331 Class B shares 4,322,699 3,172,163 Class C shares 237,249 163,435 Class Y shares 8,838,422 3,877,067 Reinvestment of distributions at net asset value Class A shares 293,636 426,497 Class C shares -- 2 Class Y shares 81,761 55,338 Payments for redemptions Class A shares (14,335,235) (17,397,690) Class B shares (Note 2) (10,299,121) (10,981,624) Class C shares (Note 2) (164,780) (338,285) Class Y shares (3,905,336) (1,696,600) ---------- ---------- Increase (decrease) in net assets from capital share transactions (2,588,602) (14,452,366) ---------- ----------- Total increase (decrease) in net assets 7,267,224 (905,901) Net assets at beginning of year 92,777,181 93,683,082 ---------- ---------- Net assets at end of year $100,044,405 $ 92,777,181 ============ ============ Undistributed net investment income $ 1,645,386 $ (43,245) ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Notes to Financial Statements AXP Threadneedle Global Balanced Fund (formerly AXP Global Balanced Fund) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified open-end management investment company. The Fund invests primarily in equity and debt securities of issuers throughout the world. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. 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 these 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 - -------------------------------------------------------------------------------- 23 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT receive a fair net asset value (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. 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. At Oct. 31, 2004, foreign currency holdings consisted of multiple denominations. - -------------------------------------------------------------------------------- 24 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation and/or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. Illiquid Securities At Oct. 31, 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 at Oct. 31, 2004 was $0. 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. Guarantees and indemnifications Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $1,495,867 and accumulated net realized loss has been increased by $1,495,867. - -------------------------------------------------------------------------------- 25 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2004 2003 Class A Distributions paid from: Ordinary income $304,857 $444,097 Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- 2 Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income 81,770 55,350 Long-term capital gain -- -- As of Oct. 31, 2004, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 1,719,063 Accumulated long-term gain (loss) $(43,431,051) Unrealized appreciation (depreciation) $ 12,807,360 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 that declines from 0.79% to 0.665% annually as the Fund's assets increase. 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. In certain circumstances, the Board may approve a change in the 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 $66,573 for the year ended Oct. 31, 2004. - -------------------------------------------------------------------------------- 26 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT AEFC has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of AEFC to subadvise the assets of the Fund. Prior to July 10, 2004, AEFC had a Subadvisory Agreement with American Express Asset Management International Inc. (AEAMI), 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 that declines from 0.06% to 0.035% annually as the Fund's assets increase. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.50 o Class B $20.50 o Class C $20.00 o Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. In addition, 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 $128,853 for Class A, $21,515 for Class B and $133 for Class C for the year ended Oct. 31, 2004. During the year ended Oct. 31, 2004, the Fund's custodian and transfer agency fees were reduced by $3,673 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. - -------------------------------------------------------------------------------- 27 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $68,803,383 and $71,985,055, respectively, for the year ended Oct. 31, 2004. Realized gains and losses are determined on an identified cost basis. Income from securities lending amounted to $2,001 for the year ended Oct. 31, 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. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004 Class A Class B Class C Class Y Sold 2,472,726 879,364 48,206 1,747,550 Issued for reinvested distributions 58,294 -- -- 16,159 Redeemed (2,866,353) (2,107,582) (33,478) (772,959) ---------- ---------- ------- -------- Net increase (decrease) (335,333) (1,228,218) 14,728 990,750 -------- ---------- ------ ------- 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 At Oct. 31, 2004, the Fund 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 Nov. 19, 2004 2,165,000 2,700,513 $-- $69,603 European Monetary Unit U.S. Dollar - -------------------------------------------------------------------------------- 28 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT 6. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by The Bank of New York, whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with Deutsche Bank. The Fund had no borrowings outstanding during the year ended Oct. 31, 2004. 7. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $43,431,051 at Oct. 31, 2004, that if not offset by capital gains will expire as follows: 2009 2010 2011 $30,518,697 $10,684,989 $2,227,365 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. - -------------------------------------------------------------------------------- 29 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT 8. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .04 .05 .07 .07 .08 Net gains (losses) (both realized and unrealized) .51 .64 (.50) (1.27) .12 ----- ----- ----- ------ ----- Total from investment operations .55 .69 (.43) (1.20) .20 ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.03) (.04) (.02) (.03) (.03) Distributions from realized gains -- -- -- (.51) (.51) ----- ----- ----- ------ ----- Total distributions (.03) (.04) (.02) (.54) (.54) ----- ----- ----- ------ ----- Net asset value, end of period $5.25 $4.73 $4.08 $ 4.53 $6.27 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $57 $53 $54 $80 $110 Ratio of expenses to average daily net assets(b) 1.49% 1.60% 1.48% 1.45% 1.31% Ratio of net investment income (loss) to average daily net assets .83% 1.03% 1.38% 1.18% 1.26% Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(c) 11.62% 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. - -------------------------------------------------------------------------------- 30 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .49 .64 (.49) (1.24) .12 ----- ----- ----- ------ ----- Total from investment operations .50 .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 $5.15 $4.65 $4.01 $ 4.47 $6.21 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $30 $33 $36 $53 $77 Ratio of expenses to average daily net assets(b) 2.25% 2.37% 2.25% 2.21% 2.07% Ratio of net investment income (loss) to average daily net assets .08% .27% .61% .42% .51% Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(c) 10.75% 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. - -------------------------------------------------------------------------------- 31 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .48 .65 (.49) (1.24) (.38) ----- ----- ----- ------ ----- Total from investment operations .49 .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 $5.13 $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) 2.24% 2.36% 2.24% 2.21% 2.07%(d) Ratio of net investment income (loss) to average daily net assets .08% .26% .60% .41% .47%(d) Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(e) 10.56% 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) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. - -------------------------------------------------------------------------------- 32 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .05 .07 .07 .08 .10 Net gains (losses) (both realized and unrealized) .51 .64 (.50) (1.28) .13 ----- ----- ----- ------ ----- Total from investment operations .56 .71 (.43) (1.20) .23 ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.04) (.05) (.03) (.03) (.04) Distributions from realized gains -- -- -- (.51) (.51) ----- ----- ----- ------ ----- Total distributions (.04) (.05) (.03) (.54) (.55) ----- ----- ----- ------ ----- Net asset value, end of period $5.28 $4.76 $4.10 $ 4.56 $6.30 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $13 $7 $4 $2 $1 Ratio of expenses to average daily net assets(b) 1.32% 1.43% 1.30% 1.31% 1.20% Ratio of net investment income (loss) to average daily net assets 1.00% 1.21% 1.52% 1.35% 1.51% Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110% Total return(c) 11.74% 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. - -------------------------------------------------------------------------------- 33 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of AXP Threadneedle Global Balanced Fund (formerly AXP Global Balanced Fund) (a series of the AXP Global Series, Inc.) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Threadneedle Global Balanced Fund as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 34 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT Investments in Securities World Growth Portfolio Oct. 31, 2004 (Percentages represent value of investments compared to net assets) Common stocks (97.0%)(c) Issuer Shares Value(a) Bermuda (3.0%) Insurance (1.3%) PartnerRe 64,239 $3,735,497 RenaissanceRe Holdings 47,491 2,223,529 Total 5,959,026 Multi-industry (1.7%) Accenture Cl A 344,849(b) 8,348,794 Brazil (3.2%) Metals (1.1%) Cia Vale do Rio Doce ADR 283,419 5,158,226 Paper & packaging (1.1%) Aracruz Celulose ADR 148,554 5,003,299 Utilities -- telephone (1.0%) Brasil Telecom Participacoes ADR 170,736 5,234,766 Canada (2.4%) Energy EnCana 178,793 8,866,982 Suncor Energy 67,359 2,296,942 Total 11,163,924 France (4.5%) Automotive & related (0.5%) Renault 31,000 2,602,195 Energy (2.7%) Total 58,476 12,196,623 Multi-industry (1.3%) Sanofi-Aventis 87,147 6,389,714 Germany (2.3%) Banks and savings & loans (1.0%) Hypo Real Estate Holding 126,241(b) 4,736,295 Utilities -- electric (1.3%) RWE 115,000 6,109,836 Hong Kong (5.8%) Multi-industry (1.5%) New World Development 8,157,600 7,127,013 Real estate (2.1%) Henderson Land Development 1,187,000 5,505,467 Sun Hung Kai Properties 489,000 4,523,531 Total 10,028,998 Retail -- general (2.2%) Esprit Holdings 1,055,000 5,638,739 Giordano Intl 4,238,000 2,368,571 Lifestyle Intl Holdings 1,579,000 2,231,573 Total 10,238,883 India (0.9%) Banks and savings & loans State Bank of India ADR 60,000 1,585,200 State Bank of India ADR 105,794(d) 2,795,077 Total 4,380,277 Indonesia (0.7%) Metals PT Bumi Resources 44,278,500(b) 3,535,453 Ireland (0.9%) Banks and savings & loans Anglo Irish Bank 226,622 4,343,984 Israel (1.4%) Computer software & services Check Point Software Technologies 296,405(b) 6,704,978 Italy (2.5%) Energy (1.9%) Eni 383,344 8,731,383 Utilities -- electric (0.6%) Enel 331,395 3,006,537 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Japan (13.8%) Automotive & related (1.6%) Toyota Motor 200,000 $7,805,708 Banks and savings & loans (1.7%) Chiba Bank 618,000 3,977,112 Mitsubishi Tokyo Financial Group 489 4,158,949 Total 8,136,061 Broker dealers (0.8%) Matsui Securities 135,900 3,608,760 Electronics (0.8%) Keyence 16,000 3,610,660 Engineering & construction (0.9%) Daiwa House Industry 410,000 4,199,962 Financial services (0.5%) Kobayashi Yoko 15,400 305,613 Nomura Holdings 174,000 2,137,592 Total 2,443,205 Machinery (2.3%) Amada 882,000 4,700,888 Komatsu 876,000 5,869,250 Total 10,570,138 Multi-industry (2.0%) Canon 92,900 4,591,448 Ricoh 251,000 4,696,466 Total 9,287,914 Real estate (2.0%) Daito Trust Construction 113,800 4,817,842 Mitsui Fudosan 446,000 4,741,542 Total 9,559,384 Retail -- general (0.4%) Seven-Eleven Japan 71,000 2,059,819 Textiles & apparel (0.8%) Onward Kashiyama 308,000 4,016,632 Luxembourg (0.8%) Metals Arcelor 192,320 3,621,598 Mexico (2.3%) Cellular telecommunications (1.5%) America Movil ADR Series L 161,116 7,089,104 Media (0.8%) Grupo Televisa ADR 71,782 3,948,010 Netherlands (1.6%) Aerospace & defense (0.6%) European Aeronautic Defence and Space 92,000 2,631,114 Food (1.0%) Royal Numico 152,662(b) 5,161,050 Peru (1.1%) Precious metals Compania de Minas Buenaventura ADR 204,679 5,084,226 South Korea (3.2%) Electronics (2.6%) Samsung Electronics 31,740 12,467,918 Engineering & construction (0.6%) Hyundai Development 212,240 2,845,422 Sweden (0.7%) Telecom equipment & services Telefonaktiebolaget LM Ericsson Cl B 1,217,539(b) 3,546,364 Switzerland (5.4%) Banks and savings & loans (1.8%) UBS 120,291 8,694,401 Health care products (3.6%) Actelion 67,372(b) 7,730,289 Nobel Biocare Holding 36,764 6,028,803 Synthes 27,900(b) 2,981,608 Total 16,740,700 Taiwan (0.5%) Electronics (0.1%) Optimax Technology 172,803 341,620 Financial services (0.4%) Hung Poo Real Estate Development 3,295,000 1,983,810 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United Kingdom (5.5%) Aerospace & defense (0.4%) Rolls-Royce Group 392,614 $1,870,508 Rolls-Royce Group Cl B 12,485,125(b) 22,944 Total 1,893,452 Cellular telecommunications (2.4%) Vodafone Group 4,396,906 11,271,881 Food (0.5%) Cadbury Schweppes 300,000 2,494,680 Health care products (1.4%) AstraZeneca 157,752 6,470,592 Retail -- grocery (0.8%) Tesco 724,380 3,820,527 United States (34.5%) Banks and savings & loans (0.4%) Investors Financial Services 52,000 2,001,480 Broker dealers (1.9%) Ameritrade Holding 403,350(b) 5,251,617 Bear Stearns Companies 37,617 3,564,211 Total 8,815,828 Cellular telecommunications (1.5%) American Tower Cl A 401,802(b) 6,906,976 Communications equipment & services (0.7%) SpectraSite 65,934(b) 3,382,414 Computer hardware (1.7%) Dell 235,553(b) 8,258,488 Computer software & services (4.3%) Adobe Systems 113,600(e) 6,365,008 Microsoft 504,083 14,109,283 Total 20,474,291 Energy (2.4%) EOG Resources 35,000 2,329,600 Massey Energy 81,584 2,197,057 Valero Energy 162,048 6,963,203 Total 11,489,860 Finance companies (3.8%) Citigroup 409,028 18,148,572 Financial services (1.3%) Goldman Sachs Group 62,472 6,145,996 Furniture & appliances (0.6%) Mohawk Inds 31,429(b) 2,673,979 Health care products (5.2%) Amgen 123,402(b) 7,009,233 Johnson & Johnson 71,258 4,160,042 Laboratory Corp of America Holdings 64,205(b) 2,940,589 Myogen 161,959(b) 1,404,185 Pfizer 142,382 4,121,959 St. Jude Medical 65,207(b) 4,992,900 Total 24,628,908 Insurance (0.7%) American Intl Group 57,612 3,497,625 Leisure time & entertainment (1.3%) Harley-Davidson 103,135 5,937,482 Media (2.8%) Dex Media 162,796(b) 3,451,275 DIRECTV Group 356,761(b) 5,982,882 Lamar Advertising 89,200(b) 3,694,664 Total 13,128,821 Retail -- drugstores (0.8%) Walgreen 109,179 3,918,434 Retail -- general (3.2%) Home Depot 225,974 9,283,012 Staples 95,861 2,850,906 TJX Companies 118,204 2,834,532 Total 14,968,450 Utilities -- electric (1.9%) Duke Energy 359,305 8,813,751 Total common stocks (Cost: $418,298,672) $459,596,271 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Preferred stock (0.9%)(c) Issuer Shares Value(a) Germany Porsche 6,537 $4,173,674 Total preferred stock (Cost: $3,369,108) $4,173,674 Short-term securities (1.5%)(f) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies (1.1%) Federal Home Loan Mtge Corp Disc Nt 11-16-04 1.78% $5,000,000 $4,995,562 Federal Natl Mtge Assn Disc Nt 11-01-04 1.68 400,000 399,944 Total 5,395,506 Commercial paper (0.4%) CXC LLC 11-01-04 1.86 1,700,000 1,699,737 Total short-term securities (Cost: $7,095,596) $7,095,243 Total investments in securities (Cost: $428,763,376)(g) $470,865,188 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 Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Oct. 31, 2004, the value of these securities amounted to $2,795,077 or 0.6% of net assets. (e) At Oct. 31, 2004, security was partially or fully on loan. See Note 4 to the financial statements. (f) Cash collateral received from security lending activity is invested in short-term securities and represents 0.1% of net assets. See Note 4 to the financial statements. 1.4% of the net assets is the Portfolio's cash equivalent position. (g) At Oct. 31, 2004, the cost of securities for federal income tax purposes was $430,468,499 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $48,925,438 Unrealized depreciation (8,528,749) ---------- Net unrealized appreciation $40,396,689 ----------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.americanexpress.com/funds. - -------------------------------------------------------------------------------- 15 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Financial Statements Statement of assets and liabilities World Growth Portfolio Oct. 31, 2004 Assets Investments in securities, at value (Note 1)* (identified cost $428,763,376) $470,865,188 Cash in bank on demand deposit 3,768 Foreign currency holdings (identified cost $1,848,658) (Note 1) 1,863,553 Dividends and accrued interest receivable 501,981 Receivable for investment securities sold 4,238,243 Reclaims receivable 677,765 ------- Total assets 478,150,498 ----------- Liabilities Payable for investment securities purchased 3,525,719 Payable upon return of securities loaned (Note 4) 661,200 Accrued investment management services fee 10,185 Other accrued expenses 50,420 ------ Total liabilities 4,247,524 --------- Net assets $473,902,974 ============ * Including securities on loan, at value (Note 4) 649,948 ------- See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statement of operations World Growth Portfolio Year ended Oct. 31, 2004 Investment income Income: Dividends $ 7,833,623 Interest 54,366 Fee income from securities lending (Note 4) 124,983 Less foreign taxes withheld (667,098) -------- Total income 7,345,874 --------- Expenses (Note 2): Investment management services fee 3,302,062 Compensation of board members 9,148 Custodian fees 154,577 Audit fees 28,500 Other 14,495 ------ Total expenses 3,508,782 Earnings credits on cash balances (Note 2) (783) ---- Total net expenses 3,507,999 --------- Investment income (loss) -- net 3,837,875 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 42,392,252 Foreign currency transactions 59,726 ------ Net realized gain (loss) on investments 42,451,978 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 11,388,618 ---------- Net gain (loss) on investments and foreign currencies 53,840,596 ---------- Net increase (decrease) in net assets resulting from operations $57,678,471 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets World Growth Portfolio Year ended Oct. 31, 2004 2003 Operations Investment income (loss) -- net $ 3,837,875 $ 5,324,642 Net realized gain (loss) on investments 42,451,978 (27,567,565) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 11,388,618 109,515,236 ---------- ----------- Net increase (decrease) in net assets resulting from operations 57,678,471 87,272,313 ---------- ---------- Proceeds from contributions 954,259 2,304,809 Fair value of withdrawals (98,738,060) (163,329,472) ----------- ------------ Net contributions (withdrawals) from partners (97,783,801) (161,024,663) ----------- ------------ Total increase (decrease) in net assets (40,105,330) (73,752,350) Net assets at beginning of year 514,008,304 587,760,654 ----------- ----------- Net assets at end of year $473,902,974 $ 514,008,304 ============ =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Notes to Financial Statements World Growth Portfolio 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES World Growth Portfolio (the Portfolio) is a series of World Trust (the Trust) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Portfolio invests primarily in equity securities of companies around the world, including companies located in developed and emerging countries. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio's significant accounting policies are summarized below: Use of estimates Preparing financial statements that conform to accounting principles generally accepted in the United States of America requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. 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 these 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 net asset value (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. - -------------------------------------------------------------------------------- 19 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Oct. 31, 2004, foreign currency holdings consisted of multiple denominations, primarily European Monetary Units. - -------------------------------------------------------------------------------- 20 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. Guarantees and indemnifications Under the Portfolio's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolio. In addition, certain of the Portfolio's contracts with its service providers contain general indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Portfolio cannot be determined and the Portfolio has no historical basis for predicting the likelihood of any such claims. 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 that declines from 0.8% to 0.675% annually as the Portfolio's assets increase. 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 Threadneedle Global Equity Fund to the Lipper Global Funds Index. In certain circumstances, the Board may approve a change in the 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 $570,426 for the year ended Oct. 31, 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. - -------------------------------------------------------------------------------- 21 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT 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 Threadneedle International Limited, an indirect wholly-owned subsidiary of AEFC to subadvise the assets of the Fund. Prior to July 10, 2004, AEFC had a Subadvisory Agreement with American Express Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC. During the year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced by $783 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 $508,502,295 and $605,517,694, respectively, for the year ended Oct. 31, 2004. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES At Oct. 31, 2004, securities valued at $649,948 were on loan to brokers. For collateral, the Portfolio received $661,200 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 $124,983 for the year ended Oct. 31, 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 2003 2002 2001 2000 Ratio of expenses to average daily net assets(a) .71% .74% .72% .62% .73% Ratio of net investment income (loss) to average daily net assets .78% 1.01% .67% .95% .27% Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(b) 12.26% 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. - -------------------------------------------------------------------------------- 22 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD OF TRUSTEES AND UNITHOLDERS WORLD TRUST We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of World Growth Portfolio (a series of World Trust) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of portfolio management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of World Growth Portfolio as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 23 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Threadneedle Global Equity Fund Oct. 31, 2004 Assets Investment in Portfolio (Note 1) $ 473,838,481 Capital shares receivable 78,513 ------ Total assets 473,916,994 ----------- Liabilities Capital shares payable 134,991 Accrued distribution fee 5,337 Accrued service fee 12 Accrued transfer agency fee 3,445 Accrued administrative services fee 744 Other accrued expenses 105,928 ------- Total liabilities 250,457 ------- Net assets applicable to outstanding capital stock $ 473,666,537 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 930,654 Additional paid-in capital 1,062,595,953 Excess of distributions over net investment income (113,507) Accumulated net realized gain (loss) (Note 5) (631,997,273) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 42,250,710 ---------- Total -- representing net assets applicable to outstanding capital stock $ 473,666,537 ============== Net assets applicable to outstanding shares: Class A $ 364,487,949 Class B $ 103,737,319 Class C $ 958,277 Class Y $ 4,482,992 Net asset value per share of outstanding capital stock: Class A shares 70,705,385 $ 5.16 Class B shares 21,300,358 $ 4.87 Class C shares 197,511 $ 4.85 Class Y shares 862,149 $ 5.20 ------- --------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statement of operations AXP Threadneedle Global Equity Fund Year ended Oct. 31, 2004 Investment income Income: Dividends $ 7,832,656 Interest 54,354 Fee income from securities lending 124,983 Less foreign taxes withheld (667,015) -------- Total income 7,344,978 --------- Expenses (Note 2): Expenses allocated from Portfolio 3,507,565 Distribution fee Class A 894,340 Class B 1,283,273 Class C 9,589 Transfer agency fee 1,467,489 Incremental transfer agency fee Class A 115,363 Class B 74,953 Class C 581 Service fee -- Class Y 4,591 Administrative services fees and expenses 284,795 Compensation of board members 8,432 Printing and postage 224,315 Registration fees 52,349 Audit fees 9,500 Other 13,439 ------ Total expenses 7,950,574 Earnings credits on cash balances (Note 2) (7,264) ------ Total net expenses 7,943,310 --------- Investment income (loss) -- net (598,332) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 42,387,650 Foreign currency transactions 59,764 ------ Net realized gain (loss) on investments 42,447,414 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 11,386,564 ---------- Net gain (loss) on investments and foreign currencies 53,833,978 ---------- Net increase (decrease) in net assets resulting from operations $53,235,646 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets AXP Threadneedle Global Equity Fund Year ended Oct. 31, 2004 2003 Operations and distributions Investment income (loss) -- net $ (598,332) $ 183,979 Net realized gain (loss) on investments 42,447,414 (27,567,201) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 11,386,564 109,506,308 ---------- ----------- Net increase (decrease) in net assets resulting from operations 53,235,646 82,123,086 ---------- ---------- Distributions to shareholders from: Net investment income Class A (95,223) -- Class Y (2,413) -- ---------- ---------- Total distributions (97,636) -- ---------- ---------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 46,610,187 35,389,682 Class B shares 7,409,628 6,481,182 Class C shares 260,184 483,450 Class Y shares 1,305,145 1,478,386 Reinvestment of distributions at net asset value Class A shares 93,330 -- Class Y shares 2,413 -- Payments for redemptions Class A shares (88,638,536) (134,289,060) Class B shares (Note 2) (57,159,405) (60,198,322) Class C shares (Note 2) (378,214) (553,226) Class Y shares (2,804,270) (4,612,498) ---------- ---------- Increase (decrease) in net assets from capital share transactions (93,299,538) (155,820,406) ----------- ------------ Total increase (decrease) in net assets (40,161,528) (73,697,320) Net assets at beginning of year 513,828,065 587,525,385 ----------- ----------- Net assets at end of year $473,666,537 $ 513,828,065 ============ ============= Undistributed (excess of distributions over) net investment income $ (113,507) $ 97,478 ------------ -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Notes to Financial Statements AXP Threadneedle Global Equity Fund (formerly AXP Global Equity Fund) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of AXP Global Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. AXP Global Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the board. The Fund offers Class A, Class B, Class C and Class Y shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar year of ownership. o Class C shares may be subject to a CDSC. o Class Y shares have no sales charge and are offered only to qualifying institutional investors. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, incremental transfer agency fee and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Investment in World Growth Portfolio The Fund invests all of its assets in World Growth Portfolio (the Portfolio), a series of World Trust (the Trust), an open-end investment company that has the same objectives as the Fund. The Portfolio invests primarily in equity securities of companies around the world that are positioned to meet market needs in a changing world economy. The Fund records daily its share of the Portfolio's income, expenses and realized and unrealized gains and losses. The financial statements of the Portfolio are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund records its investment in the Portfolio at the value that is equal to the Fund's proportionate ownership interest in the Portfolio's net assets. The percentage of the Portfolio owned by the Fund at Oct. 31, 2004 was 99.99%. - -------------------------------------------------------------------------------- 27 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT All securities held by the Portfolio 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, AEFC utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these 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. 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. Guarantees and indemnifications Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. - -------------------------------------------------------------------------------- 28 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Federal taxes The Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $484,983 and accumulated net realized loss has been increased by $484,983. The tax character of distributions paid for the years indicated is as follows: Year ended Oct. 31, 2004 2003 Class A Distributions paid from: Ordinary income $95,223 $-- Long-term capital gain -- -- Class B Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class C Distributions paid from: Ordinary income -- -- Long-term capital gain -- -- Class Y Distributions paid from: Ordinary income 2,413 -- Long-term capital gain -- -- At Oct. 31, 2004, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income $ 1,024,286 Accumulated long-term gain (loss) $(631,430,152) Unrealized appreciation (depreciation) $ 40,545,796 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. - -------------------------------------------------------------------------------- 29 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.035% annually as the Fund's assets increase. A minor portion of additional administrative service expenses paid by the Fund are consultants' fees and fund office expenses. Under this agreement, the Fund also pays taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Fund and approved by the board. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other American Express mutual funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. The Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.50 o Class B $20.50 o Class C $20.00 o Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. In addition, 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 $360,702 for Class A, $106,382 for Class B and $114 for Class C for the year ended Oct. 31, 2004. During the year ended Oct. 31, 2004, the Fund's transfer agency fees were reduced by $7,264 as a result of earnings credits from overnight cash balances. - -------------------------------------------------------------------------------- 30 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004 Class A Class B Class C Class Y Sold 9,625,192 1,590,230 55,798 264,315 Issued for reinvested distributions 19,608 -- -- 504 Redeemed (18,107,612) (12,478,367) (81,146) (572,441) ----------- ----------- ------- -------- Net increase (decrease) (8,462,812) (10,888,137) (25,348) (307,622) ---------- ----------- ------- -------- 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) ----------- ----------- ------- --------
4. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by The Bank of New York, whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. 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 higher of the Federal Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, the Fund had a revolving credit agreement that permitted borrowings up to $500 million with Deutsche Bank. The Fund had no borrowings outstanding during the year ended Oct. 31, 2004. 5. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $631,430,152 at Oct. 31, 2004, that if not offset by capital gains will expire as follows: 2009 2010 2011 $457,285,316 $143,634,885 $30,509,951 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. - -------------------------------------------------------------------------------- 31 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .54 .69 (.77) (2.71) .58 ----- ----- ----- ------ ------ Total from investment operations .54 .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 $5.16 $4.62 $3.92 $ 4.69 $ 8.74 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $364 $366 $406 $714 $1,356 Ratio of expenses to average daily net assets(b) 1.41% 1.50% 1.39% 1.18% 1.22% Ratio of net investment income (loss) to average daily net assets .07% .26% .01% .39% (.21%) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(c) 11.72% 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. - -------------------------------------------------------------------------------- 32 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.03) (.04) (.02) (.08) Net gains (losses) (both realized and unrealized) .50 .67 (.73) (2.64) .56 ----- ----- ----- ------ ----- Total from investment operations .47 .64 (.77) (2.66) .48 ----- ----- ----- ------ ----- Less distributions: Distributions from realized gains -- -- -- (1.34) (.96) ----- ----- ----- ------ ----- Net asset value, end of period $4.87 $4.40 $3.76 $ 4.53 $8.53 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $104 $142 $173 $309 $575 Ratio of expenses to average daily net assets(b) 2.18% 2.27% 2.16% 1.95% 1.98% Ratio of net investment income (loss) to average daily net assets (.66%) (.52%) (.77%) (.38%) (.95%) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(c) 10.68% 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. - -------------------------------------------------------------------------------- 33 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) (.02) (.03) (.04) (.02) (.01) Net gains (losses) (both realized and unrealized) .49 .66 (.73) (2.64) (1.02) ----- ----- ----- ------ ------ Total from investment operations .47 .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 $4.85 $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% 2.29% 2.19% 1.95% 1.98%(d) Ratio of net investment income (loss) to average daily net assets (.69%) (.52%) (.78%) (.42%) (1.15%)(d) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(e) 10.73% 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) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. - -------------------------------------------------------------------------------- 34 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2004 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) .01 .02 .01 .04 (.01) Net gains (losses) (both realized and unrealized) .54 .69 (.77) (2.73) .58 ----- ----- ----- ------ ------ Total from investment operations .55 .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 $5.20 $4.65 $3.94 $ 4.70 $ 8.76 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $4 $5 $8 $12 $20 Ratio of expenses to average daily net assets(b) 1.23% 1.30% 1.21% 1.01% 1.05% Ratio of net investment income (loss) to average daily net assets .25% .43% .18% .55% (.06%) Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131% Total return(c) 11.88% 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. - -------------------------------------------------------------------------------- 35 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD AND SHAREHOLDERS AXP GLOBAL SERIES, INC. We have audited the accompanying statement of assets and liabilities of AXP Threadneedle Global Equity Fund (formerly AXP Global Equity Fund) (a series of AXP Global Series, Inc.) as of October 31, 2004, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended October 31, 2004, and the financial highlights for each of the years in the five-year period ended October 31, 2004. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AXP Threadneedle Global Equity Fund as of October 31, 2004, and the results of its operations, changes in its net assets and the financial highlights for each of the periods stated in the first paragraph above, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Minneapolis, Minnesota December 20, 2004 - -------------------------------------------------------------------------------- 36 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT PART C. OTHER INFORMATION Item 22. Exhibits (a)(1) Articles of Incorporation, dated October 28, 1988, filed as Exhibit 1 to Registration Statement No. 33-25824, are incorporated by reference. (a)(2) Articles of Amendment, dated October 10, 1990, filed as Exhibit 1 to Registrant's Post Effective Amendment No. 9 to Registration Statement No. 33-25824, are incorporated by reference. (a)(3) Articles of Amendment, dated June 16, 1999, filed electronically as Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, are incorporated by reference. (a)(4) Articles of Amendment of AXP Global Series, Inc., dated November 14, 2002, filed electronically as Exhibit (a)(4) to Registration Statement No. 33-25824 on or about Dec. 20, 2002, are incorporated by reference. (b) By-laws, as amended January 11, 2001, filed electronically as Exhibit (b) to Registrant's Post-Effective Amendment No. 36 to Registration Statement No. 33-25824 filed on or about Dec. 20, 2001, are incorporated by reference. (c) Instruments Defining Rights of Security Holders: Not Applicable. (d)(1) AXP Threadneedle Emerging Markets Fund, AXP Global Bond Fund, AXP Threadneedle Global Equity Fund and AXP Global Technology Fund, series of the Registrant, have adopted a master/feeder operating structure. Therefore, the Investment Management Services Agreement is with corresponding master portfolio. Investment Management Services Agreement, dated Dec. 1, 2002, between World Trust, on behalf of Emerging Markets Portfolio, World Growth Portfolio, World Income Portfolio and World Technologies Portfolio, and American Express Financial Corporation, filed on or about Dec. 20, 2002 as Exhibit (d)(1) to Amendment No. 10 to Registration Statement No. 811-7399, is incorporated by reference. (d)(2) Investment Management Services Agreement between AXP Global Series, Inc., on behalf of its underlying series AXP Global Balanced Fund, and American Express Financial Corporation dated December 1, 2002 filed electronically as Exhibit (d)(6) to Registration Statement No. 33-25824 on or about Dec. 20, 2002, is incorporated by reference. (d)(3) Subadvisory Agreement, dated July 10, 2004, by and between American Express Financial Corporation and Threadneedle International Limited, filed electronically on or about Dec. 2, 2004 as Exhibit (d)(2) to AXP International Series, Inc.'s Post-Effective Amendment No. 40 to Registration Statement No. 2-92309 is incorporated by reference. (e) Distribution Agreement, dated July 8, 1999, between AXP Utilities Income Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (e) to AXP Utilities Income Fund, Inc. Post-Effective Amendment No. 22 to Registration Statement No. 33-20872 filed on or about August 27, 1999. Registrant's Distribution Agreement differs from the one incorporated by reference only by the fact that Registrant is one executing party. (f) All employees are eligible to participate in a profit sharing plan. Entry into the plan is Jan. 1 or July 1. The Registrant contributes each year an amount up to 15 percent of their annual salaries, the maximum deductible amount permitted under Section 404(a) of the Internal Revenue Code. (g)(1) Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Global Bond Fund and IDS Global Growth Fund, and American Express Trust Company, dated March 20, 1995, filed electronically as Exhibit 8(a) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(2) Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Emerging Markets Fund, IDS Global Balanced Fund and IDS Innovations Fund, and American Express Trust Company, dated November 13, 1996, filed electronically as Exhibit 8(b) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(3) Addendum to the Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Global Bond Fund and IDS Global Growth Fund, American Express Trust Company and American Express Financial Corporation, dated May 13, 1996, filed electronically as Exhibit 8(e) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(4) Addendum to the Custodian Agreement between IDS Global Series, Inc., on behalf of IDS Emerging Markets Fund and IDS Innovations Fund, American Express Trust Company and American Express Financial Corporation, dated November 13, 1996, filed electronically as Exhibit 8(d) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (g)(5) Custodian Agreement Amendment between IDS International Fund, Inc. and American Express Trust Company, dated October 9, 1997, filed electronically on or about December 23, 1997 as Exhibit 8(c) to IDS International Fund, Inc.'s Post-Effective Amendment No. 26 to Registration Statement No. 2-92309, is incorporated by reference. Registrant's Custodian Agreement Amendments differ from the one incorporated by reference only by the fact that Registrant is one executing party. (g)(6) Custodian Agreement between American Express Trust Company and The Bank of New York dated May 13, 1999, filed electronically as Exhibit (g)(3) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 33 to Registration Statement No. 2-93745, filed on or about May 28, 1999 is incorporated by reference. (g)(7) Custodian Agreement First Amendment between American Express Trust Company and The Bank of New York, dated December 1, 2000, filed electronically as Exhibit (g)(4) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002, is incorporated by reference. (g)(8) Custodian Agreement Second Amendment between American Express Trust Company and The Bank of New York, dated June 7, 2001, filed electronically as Exhibit (g)(5) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002, is incorporated by reference. (g)(9) Custodian Agreement Amendment between American Express Trust Company and The Bank of New York, dated January 31, 2002, filed electronically as Exhibit (g)(6) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002, is incorporated by reference. (g)(10) Custodian Agreement Amendment between American Express Trust Company and The Bank of New York, dated April 29, 2003, filed electronically as Exhibit (g)(8) to AXP Partners Series, Inc. Post-Effective Amendment No. 7 to Registration Statement No. 333-57852, filed on or about May 22, 2003, is incorporated by reference. (h)(1) Administrative Services Agreement between IDS Global Series, Inc., on behalf of IDS Global Bond Fund and IDS Global Growth Fund, and American Express Financial Corporation, dated March 20, 1995, filed electronically as Exhibit 9(f) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (h)(2) Administrative Services Agreement between IDS Global Series, Inc., on behalf of IDS Emerging Markets Fund, IDS Global Balanced Fund and IDS Innovations Fund, and American Express Financial Corporation, dated November 13, 1996, filed electronically as Exhibit 9(g) to Registrant's Post-Effective Amendment No. 27 to Registration Statement No. 33-25824, is incorporated by reference. (h)(3) Amendment to Administrative Services Agreement between AXP Growth Series, Inc. and American Express Financial Corporation, dated June 3, 2002, filed electronically on or about June 12, 2002 as Exhibit (h)(7) to AXP Growth Series, Inc. Post-Effective Amendment No. 71 to Registration Statement No. 2-38355, is incorporated by reference. Registrant's Amendments to Administrative Services Agreements differ from the one incorporated by reference only by the fact that Registrant is one executing party. (h)(4) Class Y Shareholder Service Agreement between IDS Precious Metals Fund, Inc. and American Express Financial Advisors Inc., dated May 9, 1997, filed electronically on or about May 27, 1997 as Exhibit 9(e) to IDS Precious Metals Fund, Inc.'s Post-Effective Amendment No. 30 to Registration Statement No. 2-93745, is incorporated by reference. Registrant's Class Y Shareholder Service Agreement, on behalf of IDS Emerging Markets Fund, IDS Global Balanced Fund, IDS Global Bond Fund and IDS Global Growth Fund, differs from the one incorporated by reference only by the fact that Registrant is one executing party. Registrant's Class Y Shareholder Service Agreement, on behalf of AXP Innovations Fund, differs from the one incorporated by reference only by the fact that Registrant is one executing party and it is dated March 15, 2000. (h)(5) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Emerging Markets Fund, and Strategist World Fund, Inc., on behalf of Strategist Emerging Markets Fund, dated March 10, 2000, filed electronically as Exhibit (h)(7) to Registrant's Post- Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(6) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Global Bond Fund, and Strategist World Fund, Inc., on behalf of Strategist World Income Fund, dated March 10, 2000, filed electronically as Exhibit (h)(8) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(7) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Global Growth Fund, and Strategist World Fund, Inc., on behalf of Strategist World Growth Fund, dated March 10, 2000, filed electronically as Exhibit (h)(9) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(8) Agreement and Plan of Reorganization between AXP Global Series, Inc., on behalf of AXP Innovations Fund, and Strategist World Fund, Inc., on behalf of Strategist World Technologies Fund, dated March 10, 2000, filed electronically as Exhibit (h)(10) to Registrant's Post-Effective Amendment No. 35 to Registration Statement No. 33-25824 filed on or about Dec. 21, 2000, is incorporated by reference. (h)(9) Amended and Restated Fee Waiver Agreement, dated Nov. 1, 2004, between American Express Financial Corporation, American Express Client Service Corporation and AXP Emerging Markets Fund, a series of AXP Global Series, Inc., is filed electronically herewith as Exhibit (h)(9). (h)(10) Amended and Restated Fee Waiver Agreement, dated Nov. 1, 2004, between American Express Financial Corporation, American Express Client Service Corporation and AXP Global Technology Fund, a series of AXP Global Series, Inc. and World Technologies Portfolio, a series of World Trust, is filed electronically herewith as Exhibit (h)(10). (h)(11) Transfer Agency Agreement between AXP Global Series, Inc., on behalf of AXP Emerging Markets Fund, AXP Global Balanced Fund, AXP Global Bond Fund, AXP Global Growth Fund and AXP Global Technology Fund, and American Express Client Service Corporation, dated May 1, 2003, filed electronically on or about Oct. 23, 2003 as Exhibit (h)(5) to Registrant's Post-Effective Amendment No. 39 to Registration Statement No. 33-25824 is incorporated by reference. (h)(12) Amended Class I Transfer Agency Agreement between the American Express Funds and American Express Client Service Corporation, dated November 13, 2003 (amended June 1, 2004), filed electronically on or about Sept. 27, 2004 as Exhibit (h)(10) to AXP Dimensions Series, Inc. Post-Effective Amendment No. 70 to Registration Statement No. 2-28529 is incorporated by reference. (h)(13) License Agreement, dated June 17, 1999, between American Express Funds and American Express Company filed electronically on or about Sept. 23, 1999 as Exhibit (h)(4) to AXP Stock Fund, Inc.'s Post-Effective Amendment No. 98 to Registration Statement No. 2-11358, is incorporated by reference. (h)(14) Addendum to Schedule A and Schedule B of the License Agreement between the American Express Funds and American Express Company, dated June 23, 2004, filed electronically on or about June 28, 2004 as Exhibit (h)(2) to AXP Variable Portfolio - Select Series, Inc. Pre-Effective Amendment No. 1 to Registration Statement No. 333-113780 is incorporated by reference. (i) Opinion and consent of counsel as to the legality of the securities being registered is filed electronically herewith. (j) Consent of Independent Registered Public Accounting Firm is filed electronically herewith. (k) Omitted Financial Statements: Not Applicable (l) Agreement made in consideration for providing initial capital between IDS Global Series, Inc. and IDS Financial Corporation, filed as Exhibit 13 to Registration Statement No. 33-25824, is incorporated by reference. (m)(1) Plan and Agreement of Distribution, dated July 1, 1999, between AXP Discovery Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (m) to AXP Discovery Fund, Inc. Post-Effective Amendment No. 36 to Registration Statement File No. 2-72174 filed on or about July 30, 1999. Registrant's Plan and Agreement of Distribution differs from the one incorporated by reference only by the fact that Registrant is one executing party. (m)(2) Plan and Agreement of Distribution for Class C shares, dated March 9, 2000, between AXP Bond Fund, Inc. and American Express Financial Advisors Inc. is incorporated by reference to Exhibit (m)(2) to AXP Bond Fund, Inc.'s Post-Effective Amendment No. 51 to Registration Statement File No. 2-51586 filed on or about June 14, 2000. Registrant's Plan and Agreement of Distribution for Class C shares differs from the one incorporated by reference only by the fact that Registrant is one executing party. (n) Amended 18f-3 Plan, dated as of May 26, 2004, filed electronically on or about July 29, 2004 as Exhibit (n) to AXP Discovery Series, Inc. Post-Effective Amendment No. 49 to Registration Statement No. 2-72174 is incorporated by reference. (o) Reserved. (p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about March 30, 2000 as Exhibit (p)(1) to AXP Market Advantage Series, Inc.'s Post-Effective Amendment No. 24 to Registration Statement No. 33-30770 is incorporated by reference. (p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's investment adviser and principal underwriter, dated January 2, 2004, filed electronically on or about January 12, 2004 as Exhibit (p)(2) to AXP Discovery Series, Inc. Post-Effective Amendment No. 47 to Registration Statement No. 2-72174 is incorporated by reference. (p)(3) Code of Ethics for AXP Threadneedle Global Balanced Fund, AXP Threadneedle Emerging Markets Fund and AXP Threadneedle Global Equity Fund Subadviser, Threadneedle International Ltd., dated Oct. 2004, adopted under Rule 17j-1 filed electronically on or about Dec. 21, 2004 as Exhibit (p)(3) to AXP International Series, Inc. Post-Effective Amendment No. 41 to Registration Statement No. 2-92309 is incorporated by reference. (q)(1) Directors'/Trustees' Power of Attorney, to sign Amendments to this Registration Statement, dated Nov. 11, 2004, is filed electronically herewith as Exhibit (q)(1). (q)(2) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated Jan. 9, 2002, filed electronically as Exhibit (q)(2) to Registrant's Post-Effective Amendment No. 37 to Registration Statement No. 33-25824 on or about October 23, 2002 is incorporated by reference. (q)(3) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated September 17, 2002, filed electronically as Exhibit (q)(3) to Registrant's Post-Effective Amendment No. 37 to Registration Statement No. 33-25824 on or about October 23, 2002 is incorporated by reference. (q)(4) Trustees' Power of Attorney, to sign Amendments to this Registration Statement, dated Nov. 11, 2004, is filed electronically herewith as Exhibit (q)(4). (q)(5) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated Jan. 9, 2002, filed electronically as Exhibit (q)(5) is incorporated by reference to AXP Global Series, Inc. Post-Effective Amendment No. 37 filed on or about October 23, 2002. (q)(6) Officers' Power of Attorney, to sign Amendments to this Registration Statement, dated September 18, 2002, filed electronically as Exhibit (q)(6) to Registrant's Post-Effective Amendment No. 37 to Registration Statement No. 33-25824 on or about October 23, 2002 is incorporated by reference. Item 23. Persons Controlled by or Under Common Control with Registrant: None. Item 24. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940.
Item 25. Business and Other Connections of Investment Adviser (American Express Financial Corporation) Directors and officers of American Express Financial Corporation who are directors and/or officers of one or more other companies: Name and Title Other company(s) Address* Title within other company(s) - ------------------------- ----------------------- ------------------------- ----------------------- Gumer C. Alvero American Centurion Life 20 Madison Ave. Extension Director and Vice President - Annuities Vice President - General Assurance Company P.O. Box 5555 Manager Annuities Albany, NY 12205-0555 American Enterprise Life Director and Executive Insurance Company Vice President - Annuities American Express Financial Vice President - General Manager Advisors Inc. Annuities American Express Insurance Director and Vice President Agency of Alabama Inc. American Express Insurance Director and Vice President Agency of Arizona Inc. American Express Insurance Director and Vice President Agency of Idaho Inc. American Express Insurance Director and Vice President Agency of Maryland Inc. American Express Insurance Director and Vice President Agency of Massachusetts Inc. American Express Insurance Director and Vice President Agency of Nevada Inc. American Express Insurance Director and Vice President Agency of New Mexico Inc. American Express Insurance Director and Vice President Agency of Oklahoma Inc. American Express Insurance Director and Vice President Agency of Wyoming Inc. American Partners Life 1751 AXP Financial Center Director and President Insurance Company Minneapolis MN 55474 IDS Life Insurance Company Director and Executive Vice President - Annuities IDS Life Insurance Company P.O. Box 5144 Director and Vice President - Annuities of New York Albany, NY 12205 IDS Life Series Fund, Inc. Director and Chairman of the Board IDS Life Variable Annuity Manager and Chairman of the Board Funds A & B Ward D. Armstrong American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Retirement Services and Asset Retirement Services Management Group and Asset Management Group American Express Asset Director and President Management Group Inc. American Express Trust Director and Chairman of Company the Board Kenwood Capital Management LLC Manager Northwinds Marketing Manager Group LLC John M. Baker American Express Financial Vice President - Chief Client Vice President - Plan Sponsor Advisors Inc. Service Officer Services American Express Asset Vice President Management Group Inc. American Express Trust Director and Senior Vice President Company Dudley Barksdale American Express Financial Vice President - Service Vice President - Service Advisors Inc. Development Development Timothy V. Bechtold American Centurion Life 20 Madison Ave. Extension Director, President and Chief Vice President - Assurance Company P.O. Box 5555 Executive Officer Insurance Products Albany, NY 12205-0555 American Enterprise Life Director Insurance Company American Express Financial Vice President - Insurance Advisors Inc. Products American Express Insurance Director, President and Chief Agency of Alabama Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Arizona Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Idaho Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Maryland Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Massachusetts Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Nevada Inc. Executive Officer American Express Insurance Director, President and Chief Agency of New Mexico Inc. Executive Officer American Express Insurance Director and President and Chief Agency of Oklahoma Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Wyoming Inc. Executive Officer American Partners Life Director and Vice President-Insurance Insurance Company Products IDS Life Insurance Company Director and President IDS Life Insurance Company P.O. Box 5144 Director, President and Chief of New York Albany, NY 12205 Executive Officer IDS Life Series Fund, Inc. Director, President and Chief Executive Officer IDS Life Variable Annuity Manager, President and Chief Funds A & B Executive Officer IDS REO 1, LLC President IDS REO 2, LLC President Arthur H. Berman American Enterprise Life Director, Vice President - Finance Senior Vice President and Insurance Company Chief Financial Officer American Express Senior Vice President Financial Advisors Inc. American Express Director Trust Company American Partners Life Director and Vice President - Finance Insurance Company IDS Life Insurance Director, Executive Vice Company President - Finance Walter S. Berman Advisory Capital Partners LLC Treasurer Director, Senior Vice President and Treasurer Advisory Capital Strategies Treasurer Group Inc. Advisory Convertible Arbitrage LLC Treasurer Advisory Quantitative Treasurer Equity (General Partner) LLC Advisory Select LLC Treasurer American Centurion Life Vice President and Treasurer Assurance Company American Enterprise Life Vice President and Treasurer Insurance Company American Enterprise REO 1, LLC Treasurer American Express Asset Management Treasurer Group, Inc. American Express Asset Management Treasurer International, Inc. American Express Director and Treasurer Certificate Company American Express Client Treasurer Service Corporation American Express Corporation Treasurer American Express Financial Director and Senior Vice President Advisors Inc. American Express Financial Vice President and Treasurer Advisors Japan Inc. American Express Insurance Treasurer Agency of Alabama Inc. American Express Insurance Treasurer Agency of Arizona Inc. American Express Insurance Treasurer Agency of Idaho Inc. American Express Insurance Treasurer Agency of Maryland Inc. American Express Insurance Treasurer Agency of Massachusetts Inc. American Express Insurance Treasurer Agency of Nevada Inc. American Express Insurance Treasurer Agency of New Mexico Inc. American Express Insurance Treasurer Agency of Oklahoma Inc. American Express Insurance Treasurer Agency of Wyoming Inc. American Express Property Treasurer Casualty Insurance Agency American Express Property Treasurer Casualty Insurance Agency of Kentucky, Inc. American Express Property Treasurer Casualty Insurance Agency of Maryland, Inc. American Express Property Treasurer Casualty Insurance Agency of Pennsylvania, Inc. American Partners Life Vice President and Treasurer Insurance Company AMEX Assurance Company Treasurer Boston Equity General Treasurer Partner LLC IDS Cable Corporation Treasurer IDS Cable II Corporation Treasurer IDS Capital Holdings Inc. Treasurer IDS Life Insurance Company Vice President and Treasurer IDS Life Insurance Company Vice President and Treasurer of New York IDS Management Corporation Treasurer IDS Partnership Services Treasurer Corporation IDS Property Casualty Treasurer Insurance Company IDS Realty Corporation Treasurer IDS REO 1, LLC Treasurer IDS REO 2, LLC Treasurer Investors Syndicate Vice President and Treasurer Development Corp. Kenwood Capital Treasurer Management LLC Threadneedle Asset Management Director Holdings LTD Robert C. Bloomer American Express Vice President - Technologies III Vice President - Financial Advisors Inc. Technologies III Leslie H. Bodell American Express Vice President - Technologies I Vice President - Financial Advisors Inc. Technologies I Kenneth I. Chenault Director Kenneth J. Ciak AMEX Assurance Company Director, President and Chief Vice President and General Executive Officer Manager - IDS Property Casualty American Express Financial Vice President and General Advisors Inc. Manager - IDS Property Casualty American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Kentucky Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Maryland Inc. American Express Property Director, President and Chief Casualty Insurance Agency Executive Officer of Pennsylvania Inc. IDS Property Casualty 1 WEG Blvd. Director, President and Chief Insurance Company DePere, WI 54115 Executive Officer Paul A. Connolly American Express Financial Vice President - RL HR/US Retail Vice President - Retail Advisors Inc. Distribution Services James M. Cracchiolo American Express Financial Director, Chairman of the Board, Director, Chairman of Advisors Inc. President and Chief Executive Officer the Board, President and Chief Executive Officer Threadneedle Asset Chairman of the Board Management Holdings LTD Colleen Curran American Express Financial Vice President and Vice President and Assistant Advisors Inc. Assistant General Counsel General Counsel Luz Maria Davis American Express Financial Vice President - Employee Vice President - Employee Advisors Inc. Communications Communications Paul James Dolan American Express Financial Vice President - CAO Product Sales Vice President - Advisors Inc. CAO Product Sales William V. Elliott American Express Financial Vice President - Financial Vice President - Financial Advisors Inc. Planning and Advice Planning and Advice Benjamin R. Field American Express Vice President - Finance Education & Vice President - Finance Financial Advisors Inc. Planning Services Education & Planning Services Gordon M. Fines American Express Asset Senior Vice President - Vice President - Financial Management Group Inc. Growth Spectrum Education & Planning Services American Express Financial Vice President - Senior Advisors Inc. Portfolio Manager I Giunero Floro American Express Vice President - Creative Services Vice President - Creative Financial Advisors Inc. Services Terrence J. Flynn American Express Vice President - Brokerage Clearing Vice President - Brokerage Financial Advisors Inc. Operations Clearing Operations American Enterprise Senior Vice President Investment Services Inc. American Express Client Director and Senior Vice President - Service Corporation Clearing Operations Jeffery P. Fox American Express Vice President - Investment Accounting Vice President - Financial Advisors Inc. Investment Accounting IDS Life Series, Inc. Chief Financial Officer IDS Life Variable Annuity Chief Financial Officer Funds A & B Peter A. Gallus Advisory Capital Strategies Director Vice President - Investment Group Inc. Administration American Express Financial Vice President - CAO - AEFA Advisors Inc. Investment Management American Express Asset Assistant Treasurer Management Group, Inc. American Express Asset Assistant Treasurer Management International, Inc. Kenwood Capital Management LLC Manager IDS Capital Holdings Inc. Vice President and Controller Steven Guida American Enterprise Vice President Vice President - New Investment Services Inc. Business and Service American Express Client Director Service Corporation American Express Financial Vice President - New Advisors Inc. Business and Service American Express Insurance Vice President Agency of Massachusetts Inc. Teresa A. Hanratty American Express Financial Senior Vice Senior Vice President - Advisors Inc. President - Field Management Field Management Lorraine R. Hart AMEX Assurance Company Vice President - Vice President - Fixed Income Investments Investment Administration Officer American Centurion Life 20 Madison Ave. Extension Vice President - Investments Assurance Company P.O. Box 5555 Albany, NY 12205-0555 American Enterprise Life 829 AXP Financial Center Vice President - Investments Insurance Company Minneapolis, MN 55474 American Enterprise 829 AXP Financial Center Vice President REO 1, LLC Minneapolis, MN 55474 American Express Vice President - Investments Certificate Company American Express Director, President and Chief Corporation Executive Officer American Express International Vice President - Investments Deposit Company American Express Financial Vice President - Fixed Income Advisors Inc. Investment Administration Officer American Partners Life 1751 AXP Financial Center Vice President - Investments Insurance Company Minneapolis, MN 55474 IDS Life Insurance Company Vice President - Investments IDS Life Insurance Company P.O. Box 5144 Vice President - Investments of New York Albany, NY 12205 IDS Life Series Fund, Inc. Vice President - Investments IDS Life Variable Annuity Vice President - Investments Funds A and B IDS Property Casualty 1 WEG Blvd. Vice President - Investments Insurance Company DePere, WI 54115 IDS REO 1, LLC Vice President IDS REO 2, LLC Vice President Investors Syndicate Director and Vice Development Corp. President - Investments Janis K. Heaney American Express Financial Vice President - Incentive Vice President - Incentive Advisors Inc. Management Management Brian M. Heath American Express Financial Senior Vice President - U.S. Senior Vice President - Advisors Inc. Advisor Group U.S. Advisor Group Henry Heitman Vice President - Brokerage Product Development Carol A. Holton American Centurion Life 20 Madison Ave. Extension Director, Vice President - Third Vice President - Third Party Assurance Company Albany, NY 12205-0555 Party Distribution Distribution American Enterprise Life 829 AXP Financial Center Director and President Insurance Company Minneapolis, MN 55474 American Enterprise 829 AXP Financial Center President REO 1, LLC Minneapolis, MN 55474 American Express Financial Vice President - Third Advisors Inc. Party Distribution IDS Life Insurance Company 20 Madison Ave. Extension Director and Vice President - of New York P.O. Box 5555 Third Party Distribution Albany, NY 12205-0555 Nancy R. Hughes Assistant Vice President Debra A. Hutchinson American Express Financial Vice President - Technologies I Vice President - Advisors Inc. Technologies I James M. Jensen American Express Financial Vice President - Compensation Vice President - Advice and Advisors Inc. and Licensing Services Retail Distribution Group, Product, Compensation and American Express Insurance Director, Vice President Field Administration Agency of Alabama Inc. American Express Insurance Director, Vice President Agency of Arizona Inc. American Express Insurance Director, Vice President Agency of Idaho Inc. American Express Insurance Director, Vice President Agency of Maryland Inc. American Express Insurance Director, Vice President Agency of Massachusetts Inc. American Express Insurance Director, Vice President Agency of Nevada Inc. American Express Insurance Director, Vice President Agency of New Mexico Inc. American Express Insurance Director, Vice President Agency of Oklahoma Inc. American Express Insurance Director, Vice President Agency of Wyoming Inc. Amy K. Johnson Vice President - Operations and Compliance Nancy E. Jones American Express Financial Vice President - Advisor Vice President - Advisor Advisors Inc. Marketing Marketing William A. Jones American Express Vice President - Technologies III Vice President - Financial Advisors Inc. Technologies III John C. Junek American Express Financial Senior Vice President and Senior Vice President Advisors Inc. General Counsel and General Counsel Ora J. Kaine American Express Financial Vice President - Retail Vice President - Retail Advisors Inc. Distribution Services Distribution Services Michelle M. Keeley AMEX Assurance Company Vice President-Investments Senior Vice President - Fixed Income American Centurion Life Vice President-Investments Assurance Company American Enterprise Life Vice President-Investments Insurance Company American Express Director and Senior Vice President - Asset Management Fixed Income Group, Inc. American Express Director Asset Management Group International Inc. American Express Vice President-Investments Certificate Company American Express Financial Senior Vice President-Fixed Income Advisors Inc. American Partners Life Vice President-Investments Insurance Company IDS Life Insurance Company Vice President-Investments IDS Life Insurance Company Vice President-Investments of New York IDS Life Series Fund Inc. Vice President-Investments IDS Life Variable Annuity Vice President-Investments Funds A and B Claire Kolmodin American Express Financial Vice President - Strategic Vice President - Strategic Advisors Inc. Initiatives Initiatives Christopher J. Kopka Advisory Capital Partners LLC Money Laundering Money Laundering Prevention Officer Prevention Officer Advisory Capital Strategies Money Laundering Group Inc. Prevention Officer Advisory Convertible Arbitrage LLC Money Laundering Prevention Officer Advisory Quantitative Money Laundering Equity (General Partner) LLC Prevention Officer Advisory Select LLC Money Laundering Prevention Officer American Enterprise Money Laundering Investment Services, Inc. Prevention Officer American Enterprise Life Money Laundering Insurance Company Prevention Officer American Express Asset Management Money Laundering Group, Inc. Prevention Officer American Express Asset Management Money Laundering International, Inc. Prevention Officer American Express Money Laundering Certificate Company Prevention Officer American Express Client Money Laundering Service Corporation Prevention Officer American Express Corporation Money Laundering Prevention Officer American Express Financial Money Laundering Advisors Inc. Prevention Officer American Express Financial Money Laundering Advisors Japan Inc. Prevention Officer American Express Insurance Money Laundering Agency of Alabama Inc. Prevention Officer American Express Insurance Money Laundering Agency of Arizona Inc. Prevention Officer American Express Insurance Money Laundering Agency of Idaho Inc. Prevention Officer American Express Insurance Money Laundering Agency of Maryland Inc. Prevention Officer American Express Insurance Money Laundering Agency of Massachusetts Inc. Prevention Officer American Express Insurance Money Laundering Agency of Nevada Inc. Prevention Officer American Express Insurance Money Laundering Agency of New Mexico Inc. Prevention Officer American Express Insurance Money Laundering Agency of Oklahoma Inc. Prevention Officer American Express Insurance Money Laundering Agency of Texas Inc. Prevention Officer American Express Insurance Money Laundering Agency of Wyoming Inc. Prevention Officer American Express Property Money Laundering Casualty Insurance Agency Prevention Officer American Express Property Money Laundering Casualty Insurance Agency Prevention Officer of Kentucky, Inc. American Express Property Money Laundering Casualty Insurance Agency Prevention Officer of Maryland, Inc. American Express Property Money Laundering Casualty Insurance Agency Prevention Officer of Mississippi, Inc. American Express Property Money Laundering Casualty Insurance Agency Prevention Officer of Pennsylvania, Inc. American Express Trust Company Money Laundering Prevention Officer American Partners Life Money Laundering Insurance Company Prevention Officer AMEX Assurance Company Money Laundering Prevention Officer Boston Equity General Money Laundering Partner LLC Prevention Officer IDS Cable Corporation Money Laundering Prevention Officer IDS Cable II Corporation Money Laundering Prevention Officer IDS Capital Holdings Inc. Money Laundering Prevention Officer IDS Insurance Agency of Utah Inc. Money Laundering Prevention Officer IDS Life Insurance Company Money Laundering Prevention Officer IDS Life Series Fund, Inc. Money Laundering Prevention Officer IDS Life Variable Annuity Money Laundering Funds A & B Prevention Officer IDS Management Corporation Money Laundering Prevention Officer IDS Partnership Services Money Laundering Corporation Prevention Officer IDS Property Casualty Money Laundering Insurance Company Prevention Officer IDS Realty Corporation Money Laundering Prevention Officer Investors Syndicate Money Laundering Development Corporation Prevention Officer Lori J. Larson American Express Financial Vice President - Advisor Vice President - Advisor Advisors Inc. Field Force Growth Active & Field Force Growth Active & Retention Retention Daniel E. Laufenberg American Express Financial Vice President and Chief Vice President and Chief Advisors Inc. U.S. Economist U.S. Economist Jane W. Lee American Express Financial Vice President and General Vice President and General Advisors Inc. Manager Platinum Active Manager Platinum Financial Financial Services Services Catherine M. Libbe American Express Vice President - Marketing & Product Vice President - Financial Advisors Inc. Retirement Services Marketing & Product Retirement Services Diane D. Lyngstad American Express Financial Vice President - Comp Vice President - Comp Advisors Inc. and Licensing Services and Licensing Services American Express Client Director, Vice President and Chief Service Corporation Financial Officer Thomas A. Mahowald American Express Financial Vice President - Equity Research Vice President - Equity Advisors Inc. Research Timothy J. Masek American Express Financial Vice President - Fixed Income Research Vice President - Fixed Advisors Inc. Income Research Mark T. McGannon American Express Financial Vice President and Vice President and Advisors Inc. General Manager - Products Sales General Manager - Products Sales Brian J. McGrane American Express Vice President - Lead Financial Vice President - Financial Advisors Inc. Officer Finance Lead Financial Officer Finance Advisory Capital Partners LLC Vice President and Chief Financial Officer Advisory Capital Vice President and Chief Financial Strategies Group Inc. Officer Advisory Convertible Vice President and Chief Financial Arbitrage LLC Officer Advisory Quantitative Equity Vice President and Chief Financial (General Partner) LLC Officer Advisory Select LLC Vice President and Chief Financial Officer American Express Asset Vice President and Chief Financial Management Group Inc. Officer American Express Vice President and Chief Financial Certificate Company Officer Boston Equity General Vice President and Chief Financial Partner LLC Officer Sarah M. McKenzie American Express Financial Vice President - Vice President - Advisors Inc. Managed and Brokerage Products Managed and Brokerage Products Penny J. Meier American Express Vice President - Business Vice President - Business Financial Advisors Inc. Transformation/Six Sigma Transformation/Six Sigma Paula R. Meyer American Express Financial Senior Vice President and General Senior Vice President Advisors Inc. Manager - Mutual Funds and General Manager - Mutual Funds American Express Certificate Director, President Chairman of the Company Board and Chief Executive Officer American Express Director and President International Deposit Company American Express Director Trust Company Investors Syndicate Director, President and Chief Development Corp. Executive Officer Holly Morris American Express Senior Vice President - Senior Vice President - Financial Advisors Inc. Technologies Technologies Rebecca A. Nash American Express Financial Vice President - Vice President - Advisors Inc. Service Operations Service Operations AMEX Assurance Company Vice President - Insurance IDS Property Casualty Vice President - Insurance Company Insurance Roger Natarajan American Enterprise Life Director Vice President - Finance Insurance Company American Express Financial Vice President - Finance Advisors Inc. American Partners Life Director Insurance Company IDS Life Insurance Company Director Francois B. Odouard American Express Financial Vice President - Brokerage Vice President - Advisors Inc. Brokerage Michael J. O'Keefe American Express Financial Vice President - Advisory Vice President - Advisory Advisors Inc. Business Systems Business Systems Paul Pearson Vice President - SPS and External Products Kristi L. Petersen American Express Asset Vice President and Assistant Secretary Vice President - SPS and Management Group Inc. External Products American Express Financial Vice President - One Account Advisors Inc. and Cash IDS Cable Corporation Director, President and Chief Executive Officer IDS Cable II Corporation Director, President and Chief Executive Officer IDS Futures Corporation Director, President and Chief Executive Officer IDS Management Corporation Director, President and Chief Executive Officer IDS Partnership Services Director, President and Chief Executive Corporation Officer IDS Realty Corporation Director, President and Chief Executive Officer Scott R. Plummer American Centurion Life 38a-1 Chief Compliance Officer Vice President - Assurance Company Asset Management Compliance American Enterprise Life 38a-1 Chief Compliance Officer Insurance Company American Express Certificate 38a-1 Chief Compliance Officer Company American Partners 38a-1 Chief Compliance Officer Life Insurance Company IDS Life Insurance Company 38a-1 Chief Compliance Officer IDS Life Insurance Company 38a-1 Chief Compliance Officer of New York Teresa J. Rasmussen American Centurion Life Assistant General Counsel Vice President and Assistant Assurance Company General Counsel American Enterprise Life Assistant General Counsel Insurance Company American Express Corporation Vice President American Express Financial Vice President and Advisors Inc. Assistant General Counsel IDS Life Insurance Company General Counsel IDS Life Insurance Company 20 Madison Ave. Extension Assistant General Counsel of New York Albany, NY 12205-0555 American Partners General Counsel Life Insurance Company Lisa Reitsma Vice President - Finance Emerging Technologies Mark A. Riordan American Express Vice President - Finance Vice President - Finance Financial Advisors Inc. Emerging Technologies Emerging Technologies ReBecca K. Roloff American Express Financial Senior Vice President - GFS Senior Vice President - Advisors Inc. GFS Andrew C. Schell American Express Financial Vice President - Strategy Vice President - Strategy Advisors Inc. and Planning and Planning Mark E. Schwarzmann American Enterprise Life Director, Chairman of the Board and Vice President - Insurance Insurance Company Chief Executive Officer and Annuities American Express Financial Senior Vice President - Insurance Advisors Inc. and Annuities American Partners Life Director, Chairman of the Board and Insurance Company Chief Executive Officer IDS Life Insurance Company Director, Chairman of the Board and Chief Executive Officer Gary A. Scott American Express Vice President - Client Acquisition Vice President - Financial Advisors Inc. Marketing and Services Client Acquisition Marketing and Services Kim M. Sharan Senior Vice President and Chief Marketing Officer Jacqueline M. Sinjem American Express Financial Vice President - Plan Sponsor Vice President - Plan Advisors Inc. Services Sponsor Services American Express Trust Vice President Company Peter L. Slattery Advisory Select LLC President and Chief Operating Vice President - Marketing Officer Officer Development American Express Asset Senior Vice President Management Group Inc. IDS Futures Brokerage General Manager and Director Group IDS Futures Corporation Vice President and Treasurer Bridget M. Sperl American Enterprise Director, President and Chief Senior Vice President - Investment Services Inc. Executive Officer Client Service Organization American Express Client Director, Chairman of the Board; Service Corporation President and Chief Executive Officer American Express Financial Senior Vice President - Advisors Inc. Client Service Organization IDS Life Insurance Company Executive Vice President - Client Service IDS Property Casualty Director Insurance Company Lisa A. Steffes American Express Financial Vice President - Marketing Vice President - Marketing Advisors Inc. Officer Development Officer Development AMEX Assurance Company Director IDS Property Casualty 1 WEG Blvd. Director Insurance Company DePere, WI 54115 David K. Stewart American Centurion Life Vice President and Controller Vice President - Assurance Company AEFA Controller and Treasurer American Enterprise Treasurer Investment Services Inc. American Enterprise Life Vice President and Controller Insurance Company American Express Vice President - AEFA Controller Financial Advisors Inc. and Treasurer American Partners Life Vice President and Controller Insurance Company IDS Life Insurance Vice President and Controller Company IDS Life Insurance Vice President and Controller Company of New York Caroline Stockdale-Boon American Express Senior Vice President - Senior Vice President - Financial Advisors Inc. Human Resources Human Resources Jeffrey J. Stremcha American Express Financial Vice President - Technologies I Vice President - Advisors Inc. Technologies I John T. Sweeney American Enterprise Investment Chief Financial Officer Vice President - Lead Services, Inc. Financial Officer - Products Group American Express Financial Chief Financial Officer, Vice President, Advisors Inc. Lead Financial Officer - Banking, Brokerage and Managed Products AMEX Assurance Company Director IDS Cable Corporation Director IDS Cable II Corporation Director IDS Partnership Director Services Corporation IDS Property Casualty Director Insurance Company IDS Realty Corporation Director William F. "Ted" Truscott Advisory Capital Strategies Director Senior Vice President and Group Inc. Chief Investment Officer American Express Asset Director and Chairman of the Board, Management Group Inc. Chief Investment Officer American Express Asset Director Management International Inc. American Express Financial Senior Vice President and Advisors Inc. Chief Investment Officer IDS Capital Holdings Inc. Director and President Kenwood Capital Management LLC Manager Northwinds Marketing Group LLC Manager George F. Tsafaridis American Express Vice President - Quality & Service Vice President - Financial Advisors Inc. Support Quality & Service Support Ramanathan Venkataramana American Express Financial Vice President - Technologies III Vice President - Advisors Inc. Technologies III Peter S. Velardi American Express Senior Vice President - Field Management Senior Vice President - Financial Advisors Inc. Field Management Andrew O. Washburn American Express Vice President - Mutual Fund Marketing Vice President - Financial Advisors Inc. Mutual Fund Marketing Beth E. Weimer American Express Financial Vice President and Chief Vice President and Advisors Inc. Compliance Officer Chief Compliance Officer American Enterprise Chief Compliance Officer Investment Services Inc. American Express Asset Chief Compliance Officer Management Group Inc. American Express Asset Chief Compliance Officer Management International Inc. American Express Client Chief Compliance Officer Service Corporation IDS Life Insurance Company Chief Compliance Officer Jeffery A. Williams American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Cross-Sell/Strategic Cross-Sell/Strategic Management Management William J. Williams American Express Senior Vice President - Field Management Senior Vice President - Financial Advisors Inc. Field Management Dianne L. Wilson American Express Vice President - Insurance Operations Vice President - Financial Advisors Inc. Insurance Operations Amex Assurance Company Director and Senior Vice President American Express Property Vice President Casualty Insurance Agency of Kentucky Inc. American Express Property Vice President Casualty Insurance Agency of Maryland Inc. American Express Property Vice President Casualty Insurance Agency of Pennsylvania Inc. AMEX Assurance Company Director and Senior Vice President IDS Property Casualty Company Director and Senior Vice President Michael D. Wolf American Express Asset Executive Vice President Vice President and Senior Management Group Inc. Portfolio Manager American Express Financial Vice President and Equity Advisors Inc. Senior Portfolio Manager Michael R. Woodward American Express Financial Senior Vice President - Senior Vice President - Advisors Inc. Field Management Field Management American Centurion Life 20 Madison Ave. Extension Director Assurance Company Albany, NY 12205-0555 IDS Life Insurance Company P.O. Box 5144 Director of New York Albany, NY 12205 * Unless otherwise noted, address is 70100 AXP Financial Center, Minneapolis, MN 55474.
Item 26. Principal Underwriters. (a) American Express Financial Advisors acts as principal underwriter for the following investment companies: AXP California Tax-Exempt Trust; AXP Dimensions Series, Inc.; AXP Discovery Series, Inc.; AXP Equity Series, Inc.; AXP Fixed Income Series, Inc.; AXP Global Series, Inc.; AXP Government Income Series, Inc.; AXP Growth Series, Inc.; AXP High Yield Income Series, Inc.; AXP High Yield Tax-Exempt Series, Inc.; AXP Income Series, Inc.; AXP International Series, Inc.; AXP Investment Series, Inc.; AXP Managed Series, Inc.; AXP Market Advantage Series, Inc.; AXP Money Market Series, Inc.; AXP Partners Series, Inc.; AXP Partners International Series, Inc.; AXP Progressive Series, Inc.; AXP Sector Series, Inc.; AXP Selected Series, Inc.; AXP Special Tax-Exempt Series Trust; AXP Stock Series, Inc.; AXP Strategy Series, Inc.; AXP Tax-Exempt Series, Inc.; AXP Tax-Free Money Series, Inc.; Growth Trust; Growth and Income Trust; Income Trust; Tax-Free Income Trust; World Trust; American Express Certificate Company; Advisory Hedged Opportunity Fund. (b) As to each director, officer or partner of the principal underwriter: Name and Principal Position and Offices with Offices with Registrant Business Address* Underwriter Gumer C. Alvero Vice President - General None Manager Annuities Ward D. Armstrong Senior Vice President - None Retirement Services and Asset Management Group John M. Baker Vice President - Chief None Client Service Officer Dudley Barksdale Vice President - Service None Development Timothy V. Bechtold Vice President - None Insurance Products Arthur H. Berman Senior Vice President None Walter S. Berman Director and Senior Vice President None Robert C. Bloomer Vice President - Technologies III None Leslie H. Bodell Vice President - Technologies I None Rob Bohli Group Vice President - None 10375 Richmond Avenue #600 South Texas Houston, TX 77042 Walter K. Booker Group Vice President - None 61 South Paramus Road New Jersey Mack-Cali Office Center IV, 3rd Floor Paramus, NJ 07652 Bruce J. Bordelon Group Vice President - None 1333 N. California Blvd., Northern California Suite 200 Walnut Creek, CA 94596 Randy L. Boser Vice President - Mutual Fund None Business Development Kenneth J. Ciak Vice President and None IDS Property Casualty General Manager - IDS 1400 Lombardi Avenue Property Casualty Green Bay, WI 54304 Paul A. Connolly Vice President - RL HR/US Retail None James M. Cracchiolo Director, President, Chairman of None the Board and Chief Executive Officer Colleen Curran Vice President and None Assistant General Counsel Luz Maria Davis Vice President - Employee None Communications Arthur E. DeLorenzo Group Vice President - None 4 Atrium Drive, #100 Upstate New York/Vermont Albany, NY 12205 Scott M. DiGiammarino Group Vice President - None Suite 500, 8045 Leesburg Washington D.C./Baltimore Pike Vienna, VA 22182 Paul James Dolan Vice President - CAO Product Sales Kenneth Dykman Group Vice President - None 6000 28th Street South East Greater Michigan Suite 200 Grand Rapids, MI 49546 William V. Elliot Vice President - Financial None Planning and Advice Benjamin R. Field Vice President - Finanace None Education and Planning Services Gordon M. Fines Vice President - Senior None Portfolio Manager I Giunero Floro Vice President - Creative None Services Terrence J. Flynn Vice President - Brokerage None Clearing Operations Jeffrey P. Fox Vice President - Investment Treasurer Accounting Barbara H. Fraser Executive Vice President - None AEFA Products and Corporate Marketing Peter A. Gallus Vice President - CAO - AEFA None Investment Management Gary W. Gassmann Group Vice President - None 2677 Central Park Boulevard Detroit Metro Suite 350 Southfield, MN 48076 Diana T. Gossett Group Vice President - None Great Plains John C. Greiber Group Vice President - None Minnesota/Iowa Steven Guida Vice President - None New Business and Service Teresa A. Hanratty Senior Vice President - None Suites 6&7 Field Management 169 South River Road Bedford, NH 03110 Lorraine R. Hart Vice President - Fixed Income None Investments Administration Officer Janis K. Heaney Vice President - None Incentive Management Brian M. Heath Senior Vice President - None Suite 150 Advisor Group 801 E. Campbell Road Richardson, TX 75081 Jon E. Hjelm Group Vice President - None 655 Metro Place South Ohio Valley Suite 570 Dublin, OH 43017 David X. Hockenberry Group Vice President - None 830 Crescent Centre Drive Mid South Suite 490 Franklin, TN 37067-7217 Carol A. Holton Vice President - Third None Party Distribution Debra A. Hutchinson Vice President - Technologies I None Diana R. Iannarone Group Vice President - None 3030 N.W. Expressway Great Plains Suite 900 Oklahoma City, OK 73112 Theodore M. Jenkin Group Vice President - None 6000 Freedom Square Drive Steel Cities Suite 300 Cleveland, OH 44131 James M. Jensen Vice President - None Compensation and Licensing Services Jody M. Johnson Group Vice President - None Twin Cities Metro Paul R. Johnston Secretary Nancy E. Jones Vice President - Advisor None Marketing William A. Jones Vice President - Technologies III None John C. Junek Senior Vice President and None General Counsel Ora J. Kaine Vice President - None Retail Distribution Services Michelle M. Keeley Senior Vice President - None Fixed Income Raymond G. Kelly Group Vice President - None Suite 250 Northern Texas 801 East Campbell Road Richardson, TX 75081 Claire Kolmodin Vice President - Strategic None Initiatives Christopher J. Kopka Money Laundering Prevention Non Officer Mitre Kutanovski Group Vice President - None 125 South Wacker Drive Chicago Metro Suite 1550 Chicago, IL 60606 Lori J. Larson Vice President - Advisor None Field Force Growth and Retention Daniel E. Laufenberg Vice President and Chief None U.S. Economist Jane W. Lee Vice President - General None Manager Platinum Financial Services Catherine M. Libbe Vice President - Marketing None & Product Retirement Services Diane D. Lyngstad Vice President - Comp and None Licensing Services Thomas A. Mahowald Vice President - Equity Research None Timothy J. Masek Vice President - None Fixed Income Research Mark T. McGannon Vice President and General None Manager - Products Sales Brian J. McGrane Vice President and LFO None Officer - Finance Dean O. McGill Group Vice President - None 11835 W. Olympic Blvd Los Angeles Metro Suite 900 East Los Angeles, CA 90064 Sarah M. McKenzie Vice President - Managed and None Brokerage Products Penny J. Meier Vice President - Business None Transformation/Six Sigma Paula R. Meyer Senior Vice President and President General Manager - Mutual Funds Holly Morris Senior Vice President - None Technologies Rebecca Nash Vice President - Service Non Operations Roger Natarajan Vice President - Finance None Thomas V. Nicolosi Group Vice President - None Suite 220 New York Metro Area 500 Mamaroneck Ave. Harrison, NY 10528 Patrick H. O'Connell Group Vice President - None Commerce Center One Southern New England 333 East River Hartford, CT 06108-4200 Francois B. Odouard Vice President - Brokerage None Michael J. O'Keefe Vice President - None Advisory Business Systems Geoffery Oprandy Group Vice President - Southwest None 11811 N. Tatum Blvd. Suite 1030 Phoenix, AZ 85028 Kristi L. Petersen Vice President - ONE Account None and Cash John G. Poole Group Vice President - None 14755 North Outer Forty Road Gateway/Springfield Suite 500 Chesterfield, MO 63017 Larry M. Post Group Vice President - None 2 Constitution Plaza New England Charlestown, MA 02129 Teresa J. Rasmussen Vice President and None Assistant General Counsel Michael J. Rearden Group Vice President - None 1800 S. Pine Island Road, Suite 510 Southern Florida Plantation, FL 33324 Ralph D. Richardson III Group Vice President - None Suite 800 Carolinas Arboretum Plaza One 9442 Capital of Texas Hyw. N. Austin, TX 78759 Mark A. Riordan Vice President - Finance None Emerging Technologies ReBecca K. Roloff Senior Vice President - None GFS Maximillian G. Roth Group Vice President - None 1400 Lombardi Avenue Wisconsin/Upper Michigan Suite 202 Green Bay, WI 54304 Russell L. Scalfano Group Vice President - None Suite 201 Illinois/Indiana/Kentucky 101 Plaza East Blvd. Evansville, IN 47715 Andrew C. Schell Vice President - Strategy None and Planning Mark E. Schwarzmann Senior Vice President - None Insurance and Annuities Gary A. Scott Vice President - Client None Acquisition Marketing and Services Jacqueline M. Sinjem Vice President - Plan None Sponsor Services Albert L. Soule Group Vice President - None 6925 Union Park Center Western Frontier Suite 200 Midvale, UT 84047 Bridget M. Sperl Senior Vice President - None Client Service Organization Paul J. Stanislaw Group Vice President - None Suite 1100 Southern California/Hawaii Two Park Plaza Irvine, CA 92614 Lisa A. Steffes Vice President - None Marketing Officer Development David K. Stewart Vice President - AEFA Controller None and Treasurer Caroline Stockdale-Boon Senior Vice President - None Human Resources Jeffrey J. Stremcha Vice President - Technologies I None John T. Sweeney Chief Financial Officer, None Vice President, Lead Financial Officer - Banking, Brokerage and Managed Products Joe Sweeney Senior Vice President, None General Manager - U.S. Brokerage and Membership Banking Craig P. Taucher Group Vice President - None Suite 150 Georgia/North Florida 4190 Belfort Rd. Jackonville, FL 32216 Neil G. Taylor Group Vice President - None 188 106th Avenue NE Pacific Northwest Suite 640 Bellevue, WA 98004-5902 William F. "Ted" Truscott Senior Vice President and Board member and Chief Investment Officer Vice President George F. Tsafaridis Vice President - Quality & None Service Support Janet M. Vandenbark Group Vice President - None 3951 Westerre Parkway, Suite 250 Virginia Richmond, VA 23233 Ramanathan Venkataramanan Vice President - Technologies III None Peter S. Velardi Senior Vice President - None Field Management Andrew O. Washburn Vice President - None Mutual Fund Marketing Donald F. Weaver Group Vice President - None 3500 Market Street, Eastern Pennsylvania/ Suite 200 Delaware Camp Hill, PA 17011 Beth E. Weimer Vice President and None Chief Compliance Officer Phil Wentzel Vice President - Finance None Jeffrey A. Williams Senior Vice President - None Cross-Sell/Strategic Management William J. Williams Senior Vice President - None Field Management Dianne L. Wilson Vice President - Insurance None Operations Gayle W. Winfree Group Vice President - None 1 Galleria Blvd. Suite 1900 Delta States Metairie, LA 70001 Michael D. Wolf Vice President - Equity Senior None Portfolio Manager Abraham L. Wons Vice President - Investments Risk None Management Michael R. Woodward Senior Vice President - None 32 Ellicott St Field Management Suite 100 Batavia, NY 14020
* Business address is: 70100 AXP Financial Center, Minneapolis, MN 55474 unless otherwise noted. Item 26 (c). Not Applicable. Item 27. Location of Accounts and Records American Express Financial Corporation 70100 AXP Financial Center Minneapolis, MN 55474 Item 28. Management Services Not Applicable. Item 29. Undertakings Not Applicable. SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, AXP Global Series, Inc., certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement under Rule 485(b) under the Securities Act and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis, and State of Minnesota on the 21st day of December, 2004. AXP GLOBAL SERIES, INC. By /s/ Paula R. Meyer ---------------------- Paula R. Meyer, President By /s/ Jeffrey P. Fox ---------------------- Jeffrey P. Fox, Treasurer Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 21st day of December, 2004. Signature Capacity /s/ Arne H. Carlson* Chair of the Board - --------------------- Arne H. Carlson /s/ Philip J. Carroll, Jr.* Director - --------------------------- Philip J. Carroll, Jr. /s/ Livio D. DeSimone* Director - ----------------------- Livio D. DeSimone /s/ Patricia M. Flynn* Director - ------------------------ Patricia M. Flynn /s/ Anne P. Jones* Director - ------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.* Director - ----------------------------- Stephen R. Lewis, Jr. /s/ Catherine James Paglia* Director - ----------------------------- Catherine James Paglia /s/ Alan K. Simpson* Director - --------------------- Alan K. Simpson /s/ Alison Taunton-Rigby* Director - --------------------------- Alison Taunton-Rigby /s/ William F. Truscott* Director - ------------------------- William F. Truscott * Signed pursuant to Directors'/Trustees' Power of Attorney, dated Nov. 11, 2004, filed electronically herewith as Exhibit (q)(1), by: /s/ Leslie L. Ogg - ------------------ Leslie L. Ogg SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, WORLD TRUST consents to the filing of this Amendment to the Registration Statement signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis and State of Minnesota on the 21st day of December, 2004. WORLD TRUST By /s/ Paula R. Meyer ---------------------- Paula R. Meyer, President By /s/ Jeffrey P. Fox ---------------------- Jeffrey P. Fox, Treasurer Pursuant to the requirements of the Investment Company Act of 1940, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 21st day of December, 2004. Signature Capacity /s/ Arne H. Carlson** Chair of the Board - --------------------- Arne H. Carlson /s/ Philip J. Carroll, Jr.** Trustee - ----------------------------- Philip J. Carroll, Jr. /s/ Livio D. DeSimone** Trustee - ----------------------- Livio D. DeSimone /s/ Patricia M. Flynn** Trustee - ------------------------ Patricia M. Flynn /s/ Anne P. Jones** Trustee - ------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.** Trustee - ----------------------------- Stephen R. Lewis, Jr. /s/ Catherine James Paglia** Trustee - ----------------------------- Catherine James Paglia /s/ Alan K. Simpson** Trustee - --------------------- Alan K. Simpson /s/ Alison Taunton-Rigby** Trustee - --------------------------- Alison Taunton-Rigby /s/ William F. Truscott** Trustee - ------------------------- William F. Truscott ** Signed pursuant to Trustees' Power of Attorney, dated Nov. 11, 2004, filed electronically herewith as Exhibit (q)(4), by: /s/ Leslie L. Ogg - ------------------ Leslie L. Ogg CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 43 TO REGISTRATION STATEMENT NO. 33-25824 This Post-Effective Amendment contains the following papers and documents: The facing sheet. Part A. The prospectuses for: AXP Global Bond Fund. Class I prospectus supplement for AXP Global Bond Fund. AXP Global Technology Fund. Class I prospectus supplement for AXP Global Technology Fund. AXP Threadneedle Emerging Markets Fund. Class I prospectus supplement for AXP Threadneedle Emerging Markets Fund. AXP Threadneedle Global Balanced Fund. AXP Threadneedle Global Equity Fund. Part B. Statement of Additional Information for: AXP Global Bond Fund. AXP Global Technology Fund. AXP Threadneedle Emerging Markets Fund. AXP Threadneedle Global Balanced Fund. AXP Threadneedle Global Equity Fund. Financial Statements. Part C. Other information. The signatures. EX-99 2 exindex.txt EXHIBIT INDEX EXHIBIT INDEX (h)(9) Amended and Restated Fee Waiver Agreement, dated Nov. 1, 2004, between American Express Financial Corporation, American Express Client Service Corporation and AXP Emerging Markets Fund, a series of AXP Global Series, Inc. (h)(10) Amended and Restated Fee Waiver Agreement, dated Nov. 1, 2004, between American Express Financial Corporation, American Express Client Service Corporation and AXP Global Technology Fund, a series of AXP Global Series, Inc. and World Technologies Portfolio, a series of World Trust. (i) Opinion and consent of counsel as to the legality of the securities being registered. (j) Consent of Independent Registered Public Accounting Firm. (q)(1) Directors'/Trustees' Power of Attorney, to sign Amendments to this Registration Statement, dated Nov. 11, 2004. (q)(4) Trustees' Power of Attorney, to sign Amendments to this Registration Statement, dated Nov. 11, 2004. EX-99.H9 FEE WAIVER 3 h9-feewaiver.txt AMENDED AND RESTATED FEE WAIVER AGREEMENT AMENDED AND RESTATED FEE WAIVER AGREEMENT Dated November 1, 2004 American Express Financial Corporation ("AEFC") and American Express Client Service Corporation ("AECSC") agree to waive fees and reimburse certain expenses and AXP Threadneedle Emerging Markets Fund (the "Fund"), a series of AXP Global Series, Inc. and Emerging Markets Portfolio, a series of World Trust (the "Trust"), agree to accept those waivers and reimbursements, as described below: 1. Applicable Agreements. To the extent that the Fund's total expenses exceed the expense ratios set out in paragraph 2, AEFC and AECSC agree to waive fees and reimburse certain expenses under the following agreements: o Investment Management Services Agreement between the Trust and AEFC dated December 1, 2002. o Administrative Services Agreement between the Fund and AEFC dated November 13, 1996. o Transfer Agency Services Agreement between the Fund and AECSC dated May 1, 2003. AEFC also agrees to pay certain non-advisory expenses of the Fund if necessary to meet the expense ratio limits set out in paragraph 2. AEFC will determine the allocation of fee waivers and expense reimbursements among the applicable agreements. 2. Fee Caps. AEFC and AECSC agree to waive fees and reimburse certain expenses to the extent that total expenses exceed the following expense ratios: ------------------- ---------- ---------- ---------- ---------- ---------- Fund Class A Class B Class C Class I Class Y ------------------- ---------- ---------- ---------- ---------- ---------- AXP Threadneedle 1.99% 2.75% 2.75% 1.47% 1.82% Emerging Markets Fund ------------------- ---------- ---------- ---------- ---------- ---------- 3. Termination. This agreement will terminate on Oct. 31, 2005 unless extended by written agreement of the Fund and AEFC. AXP Global Series, Inc. AXP Threadneedle Emerging Markets Fund World Trust Emerging Markets Portfolio By: /s/ Leslie L. Ogg -------------------- Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By: /s/ Paula R. Meyer -------------------- Paula R. Meyer Senior Vice President and General Manager- Mutual Funds AMERICAN EXPRESS CLIENT SERVICE CORPORATION By: /s/ Bridget Sperl -------------------- Bridget Sperl Senior Vice President EX-99.H10 FEE WAIVER 4 h10-feewaiver.txt AMENDED AND RESTATED FEE WAIVER AGREEMENT AMENDED AND RESTATED FEE WAIVER AGREEMENT Dated November 1, 2004 American Express Financial Corporation ("AEFC") and American Express Client Service Corporation ("AECSC") agree to waive fees and reimburse certain expenses and AXP Global Technology Fund (the "Fund"), a series of AXP Global Series, Inc. and World Technologies Portfolio, a series of World Trust (the "Trust"), agree to accept those waivers and reimbursements, as described below: 1. Applicable Agreements. To the extent that the Fund's total expenses exceed the expense ratios set out in paragraph 2, AEFC and AECSC agree to waive fees and reimburse certain expenses under the following agreements: o Investment Management Services Agreement between the Trust and AEFC dated November 13, 1996. o Administrative Services Agreement between the Fund and AEFC dated November 13, 1996 o Transfer Agency Services Agreement between the Fund and AECSC dated May 1, 2003. AEFC also agrees to pay certain non-advisory expenses of the Fund if necessary to meet the expense ratio limits set out in paragraph 2. AEFC will determine the allocation of fee waivers and expense reimbursements among the applicable agreements. 2. Fee Caps. AEFC and AECSC agree to waive fees and reimburse certain expenses to the extent that total expenses exceed the following expense ratios: ------------------- ---------- ---------- ---------- ---------- ----------- Fund Class A Class B Class C Class I Class Y ------------------- ---------- ---------- ---------- ---------- ----------- AXP Global 1.82% 2.59% 2.59% 1.13% 1.63% Technology Fund ------------------- ---------- ---------- ---------- ---------- ----------- 3. Termination. This agreement will terminate on Oct. 31, 2005 unless extended by written agreement of the Fund and AEFC. AXP Global Series, Inc. AXP Global Technology Fund World Trust World Technologies Portfolio By: /s/ Leslie L. Ogg -------------------- Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By: /s/ Paula R. Meyer -------------------- Paula R. Meyer Senior Vice President and General Manager- Mutual Funds AMERICAN EXPRESS CLIENT SERVICE CORPORATION By: /s/ Bridget Sperl -------------------- Bridget Sperl Senior Vice President EX-99.I OPIN COUNSEL 5 i_opincon-global.txt OPINION AND CONSENT OF COUNSEL December 21, 2004 AXP Global Series, Inc. 50606 AXP Financial Center Minneapolis, MN 55474 Gentlemen: I have examined the Articles of Incorporation and the By-Laws of AXP Global Series, Inc. (the Company) and all necessary certificates, permits, minute books, documents and records of the Company, and the applicable statutes of the State of Minnesota, and it is my opinion that the shares sold in accordance with applicable federal and state securities laws will be legally issued, fully paid, and nonassessable. This opinion may be used in connection with the Post-Effective Amendment. Sincerely, /s/ Leslie L. Ogg - ------------------ Leslie L. Ogg Attorney at Law 901 S. Marquette Ave., Suite 2810 Minneapolis, MN 55402-3268 EX-99.J AUD CONSENT 6 j-audcon.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Consent of Independent Registered Public Accounting Firm - ---------------------------------------------------------------------- The board and shareholders AXP Global Series, Inc.: AXP Global Bond Fund AXP Global Technology Fund AXP Threadneedle Emerging Markets Fund AXP Threadneelde Global Balanced Fund AXP Threadneedle Global Equity Fund The board of trustees and unitholders World Trust: World Income Portfolio World Technologies Portfolio Emerging Markets Portfolio World Growth Portfolio We consent to the use of our reports included herein and to the references to our Firm under the headings "Financial Highlights" in Part A and "Independent Registered Public Accounting Firm" in Part B of the Registration Statement. /s/ KPMG LLP - ------------- KPMG LLP Minneapolis, Minnesota December 21, 2004 EX-99.Q1 PWR OF ATTY 7 q1-poa.txt DIRECTORS'/TRUSTEES' POWER OF ATTORNEY DIRECTORS/TRUSTEES POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as directors and trustees of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission: 1933 Act 1940 Act Reg. Number Reg. Number AXP Fixed Income Series, Inc. 2-51586 811-2503 AXP California Tax-Exempt Trust 33-5103 811-4646 AXP Discovery Series, Inc. 2-72174 811-3178 AXP Equity Series, Inc. 2-13188 811-772 AXP High Yield Income Series, Inc. 2-86637 811-3848 AXP Government Income Series, Inc. 2-96512 811-4260 AXP Global Series, Inc. 33-25824 811-5696 AXP Growth Series, Inc. 2-38355 811-2111 AXP High Yield Tax-Exempt Series, Inc. 2-63552 811-2901 AXP International Series, Inc. 2-92309 811-4075 AXP Investment Series, Inc. 2-11328 811-54 AXP Managed Series, Inc. 2-93801 811-4133 AXP Market Advantage Series, Inc. 33-30770 811-5897 AXP Money Market Series, Inc. 2-54516 811-2591 AXP Dimensions Series, Inc. 2-28529 811-1629 AXP Selected Series, Inc. 2-93745 811-4132 AXP Progressive Series, Inc. 2-30059 811-1714 AXP Income Series, Inc. 2-10700 811-499 AXP Special Tax-Exempt Series Trust 33-5102 811-4647 AXP Stock Series, Inc. 2-11358 811-498 AXP Strategy Series, Inc. 2-89288 811-3956 AXP Tax-Exempt Series, Inc. 2-57328 811-2686 AXP Tax-Free Money Series, Inc. 2-66868 811-3003 AXP Sector Series, Inc. 33-20872 811-5522 AXP Partners Series, Inc. 333-57852 811-10321 AXP Partners International Series, Inc. 333-64010 811-10427 AXP Variable Portfolio-Partners Series, Inc 333-61346 811-10383 AXP Variable Portfolio-Investment Series, Inc. 2-73115 811-3218 AXP Variable Portfolio-Managed Series, Inc. 2-96367 811-4252 AXP Variable Portfolio-Money Market Series, Inc. 2-72584 811-3190 AXP Variable Portfolio-Income Series, Inc. 2-73113 811-3219 AXP Variable Portfolio-Select Series, Inc. 333-113780 811-21534 hereby constitutes and appoints Arne H. Carlson, any other member of the Boards who is not an interested person of the investment manager, and Leslie L. Ogg or any one of these persons individually as her or his attorney-in-fact and agent to file and sign for her or him in her or his name, place and stead any and all further amendments to said registration statements with all exhibits and other documents thereto pursuant to said Acts and any rules and regulations thereunder and grants them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. Dated the 11th day of November, 2004. /s/ Arne H. Carlson /s/ Stephen R. Lewis, Jr. - ---------------------------- ---------------------------- Arne H. Carlson Stephen R. Lewis, Jr. /s/ Philip J. Carroll, Jr. /s/ Catherine James Paglia - ---------------------------- ---------------------------- Philip J. Carroll, Jr. Catherine James Paglia /s/ Livio D. DeSimone /s/ Alan K. Simpson - ---------------------------- ---------------------------- Livio D. DeSimone Alan K. Simpson /s/ Patricia M. Flynn /s/ Alison Taunton-Rigby - ---------------------------- ---------------------------- Patricia M. Flynn Alison Taunton-Rigby /s/ Anne P. Jones /s/ William F. Truscott - ---------------------------- ---------------------------- Anne P. Jones William F. Truscott EX-99.Q4 PWR OF ATTY 8 q4-trusteepoa.txt TRUSTEES' POWER OF ATTORNEY TRUSTEES POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as trustees of the below listed open-end, diversified investment companies that previously have filed registration statements and amendments thereto pursuant to the requirements of the Investment Company Act of 1940 with the Securities and Exchange Commission: 1940 Act Reg. Number Growth Trust 811-07395 Growth and Income Trust 811-07393 Income Trust 811-07307 Tax-Free Income Trust 811-07397 World Trust 811-07399 hereby constitutes and appoints Arne H. Carlson, any other member of the Boards who is not an interested person of the investment manager, and Leslie L. Ogg or any one of these persons individually, as her or his attorney-in-fact and agent, to sign for her or him in her or his name, place and stead any and all further amendments to said registration statements filed pursuant to said Act and any rules and regulations thereunder, and to file such amendments with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting to either of them the full power and authority to do and perform each and every act required and necessary to be done in connection therewith. Dated the 11th day of November, 2004. /s/ Arne H. Carlson /s/ Stephen R. Lewis, Jr. - ---------------------------- ---------------------------- Arne H. Carlson Stephen R. Lewis, Jr. /s/ Philip J. Carroll, Jr. /s/ Catherine James Paglia - ---------------------------- ---------------------------- Philip J. Carroll, Jr. Catherine James Paglia /s/ Livio D. DeSimone /s/ Alan K. Simpson - ---------------------------- ---------------------------- Livio D. DeSimone Alan K. Simpson /s/ Patricia M. Flynn /s/ Alison Taunton-Rigby - ---------------------------- ---------------------------- Patricia M. Flynn Alison Taunton-Rigby /s/ Anne P. Jones /s/ William F. Truscott - ---------------------------- ---------------------------- Anne P. Jones William F. Truscott -----END PRIVACY-ENHANCED MESSAGE-----