-----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, IjDzCJq2XCVdHL0mf5XsSfvBjLj0LjMb1CWi4KOjtd/408OKnOAkmyCz48PYgVEO aQ75bkDXmj7kPSPVjRLzFQ== 0000820027-05-000557.txt : 20050630 0000820027-05-000557.hdr.sgml : 20050630 20050630101825 ACCESSION NUMBER: 0000820027-05-000557 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050430 FILED AS OF DATE: 20050630 DATE AS OF CHANGE: 20050630 EFFECTIVENESS DATE: 20050630 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: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05696 FILM NUMBER: 05926962 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 N-CSRS 1 global-ncsr.txt AXP GLOBAL SERIES, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5696 ------------ AXP GLOBAL SERIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 50606 AXP Financial Center, Minneapolis, Minnesota 55474 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (612) 330-9283 ----------------- Date of fiscal year end: 10/31 -------------- Date of reporting period: 4/30 -------------- AXP(R) Global Bond Fund Semiannual Report for the Period Ended April 30, 2005 AXP Global Bond Fund seeks to provide shareholders with high total return through income and growth of capital. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 6 Investments in Securities 10 Financial Statements (Portfolio) 20 Notes to Financial Statements (Portfolio) 23 Financial Statements (Fund) 28 Notes to Financial Statements (Fund) 31 Fund Expenses Example 40 Approval of Investment Management Services Agreement 42 Proxy Voting 43 CORPORATE REORGANIZATION On Feb. 1, 2005, American Express Company, the parent company of the Fund's investment manager, American Express Financial Corporation (AEFC), announced plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders of American Express Company. The transaction, expected to be completed in the third quarter of 2005, is subject to certain regulatory and other approvals, as well as final approval by the board of directors of American Express Company. Upon completion of the transaction AEFC will be a publicly traded company separate from American Express Company. The current agreements between the Fund and AEFC and its affiliates will remain in place. No changes in operations or personnel, including the portfolio manager or managers of the Fund, are anticipated. [Dalbar logo] American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Fund Snapshot AT APRIL 30, 2005 PORTFOLIO MANAGER Portfolio manager Since Years in industry Nic Pifer, CFA* 5/00 14 * The Fund is managed by a team of portfolio managers led by Nic Pifer. FUND OBJECTIVE For investors seeking high total return through income and growth of capital. Inception dates by class A: 3/20/89 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95 Ticker symbols by class A: IGBFX B: IGLOX C: AGBCX I: AGBIX Y: -- Total net assets $587.5 million Number of holdings 255 Average weighted life* 6.4 years Effective duration** 4.6 years Weighted average bond rating AA+ * Average weighted life is the average number of years that each dollar of unpaid principal due on a security remains outstanding. ** Effective duration measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out of 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. DURATION SHORT INT. LONG X X HIGH MEDIUM QUALITY LOW COUNTRY COMPOSITION Percentage of portfolio assets (pie chart) United States 31.3% Germany 11.4% Japan 8.6% Spain 7.8% France 6.7% Italy 5.2% United Kingdom 4.1% Greece 4.0% Canada 2.2% Finland 2.2% Austria 1.1% Australia 1.8% Poland 1.1% Netherlands 1.1% New Zealand 1.1% Norway 1.1% Supra-National 1.0% Other* 8.2% * Includes Brazil, Denmark, Luxembourg, Malaysia, Mexico, South Africa, South Korea, Sweden and cash & short-term securities. CREDIT QUALITY SUMMARY Percentage of bond portfolio assets AAA bonds 66.0% AA bonds 20.1 A bonds 9.5 BBB bonds 2.9 Non-investment grade bonds 1.5 Individual security ratings are based on information from Standard & Poor's Corp. and Moody's Investors Service. If a rating is unavailable, the rating is determined through an internal analysis, if appropriate. There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Performance Summary (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2005 +2.92% +3.41% +3.28% +2.92% = AXP Global Bond Fund Class A (excluding sales charge) +3.41% = Lehman Brothers Global Aggregate Index(1) (unmanaged) +3.28% = Lipper Global Income Funds Index(2) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919 or visiting www.americanexpress.com/funds. (1) 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. (2) 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. 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 because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. SEC YIELDS At March 31, 2005 by class A: 2.25% B: 1.59% C: 1.58% I: 2.83% Y: 2.54% At April 30, 2005 by class A: 2.08% B: 1.44% C: 1.43% I: 2.65% Y: 2.37% The Securities and Exchange Commission (SEC) yield is calculated by dividing anticipated net investment income during a 31-day period by the public offering price (POP) per share on the last day of the period, and converting the results to yearly figures. See Average Annual Total Returns on page 5 for additional performance information. - -------------------------------------------------------------------------------- 4 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Performance Summary
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class I Class Y (Inception dates) (3/20/89) (3/20/95) (6/26/00) (3/4/04) (3/20/95) After After NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) at April 30, 2005 6 months* +2.92% -1.97% +2.52% -1.44% +2.66% +1.67% +3.30% +3.00% 1 year +10.57% +5.31% +9.70% +5.70% +9.89% +9.89% +11.24% +10.90% 3 years +11.52% +9.72% +10.70% +9.88% +10.72% +10.72% N/A +11.83% 5 years +8.57% +7.52% +7.75% +7.60% N/A N/A N/A +8.79% 10 years +6.21% +5.69% +5.40% +5.40% N/A N/A N/A +6.22% Since inception +8.06% +7.73% +5.99% +5.99% +7.68% +7.68% +8.22% +6.81% at March 31, 2005 6 months* +4.71% -0.26% +4.31% +0.31% +4.31% +3.31% +5.11% +4.79% 1 year +5.47% +0.46% +4.79% +0.79% +4.80% +4.80% +6.11% +5.79% 3 years +11.87% +10.07% +11.01% +10.20% +10.99% +10.99% N/A +12.13% 5 years +7.66% +6.61% +6.86% +6.70% N/A N/A N/A +7.88% 10 years +6.40% +5.89% +5.61% +5.61% N/A N/A N/A +6.42% Since inception +8.03% +7.71% +5.95% +5.95% +7.59% +7.59% +7.86% +6.76%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 4.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to eligible investors only, currently limited to AXP Portfolio Builder Series funds, six affiliated funds-of-funds. (6) Sales charge is not applicable to these shares. Shares available to institutional investors only. * Not annualized. - -------------------------------------------------------------------------------- 5 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did AXP Global Bond Fund perform for the first half of the fiscal year? A: AXP Global Bond Fund's Class A shares gained 2.92% (excluding sales charge) for the six months ended April 30, 2005. This lagged the Fund's benchmark, the Lehman Brothers Global Aggregate Index (Lehman Global Index), which posted a total return of 3.41%. The Fund also underperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which posted a 3.28% total return over the same period. Q: What factors most significantly affected performance? A: The Fund tracked the Lehman Global Index closely through the first four months of the semiannual period, but lagged thereafter, largely due to unfavorable movements in currencies. The Fund held a larger position in the euro and a smaller position in the Japanese yen throughout the period. This positioning hurt the Fund's relative performance in April when the yen appreciated sharply vs. the euro on market speculation of an imminent revaluation of the Chinese currency. The U.S. dollar weakened approximately 1.5% vs. the euro, 4.1% vs. the British pound and 1.2% vs. the yen. The U.S. dollar strengthened 2.9% vs. the Canadian dollar over the six months. On balance, then, the U.S. dollar's movements against the major currencies provided a boost to the Fund's returns in absolute terms because as the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. We maintained the Fund's duration, a principal measure of interest rate risk, approximately half a year shorter than that of the Lehman Global Index throughout the semiannual period. This stance was based on our view that the U.S. economy in particular was growing at an above-trend pace and, thus, that the Federal Reserve's Federal Open Market Committee (FOMC) was likely to continue raising the targeted federal funds rate to more historically normal levels. Our view on U.S. monetary policy proved correct, with the FOMC raising the targeted federal funds rate by 100 basis points (1%) during the period, but U.S. yields never rose as much as we expected. In fact, they declined over the period at the very long end of the yield curve. Yields in other major bond markets generally declined over the semiannual period, reflecting lackluster economic growth in the Eurozone and Japan in particular. The Fund was positioned appropriately for the decline in European yields, but not for the decline in Japanese yields. - -------------------------------------------------------------------------------- 6 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> The U.S. dollar's movements against the major currencies provided a boost to the Fund's returns in absolute (end callout quote) The Fund's positioning on sector exposures had a fairly neutral impact on relative results over the period. Credit sectors performed well early in the period as the difference in yields over government bonds declined to historically low levels, but suffered later in the period following General Motors' negative earnings news. Q: What changes did you make to the Fund and how is it currently positioned? A: We decreased the Fund's exposure to the euro toward the end of 2004, while maintaining a significant position in the currency, and we increased the Fund's exposure to the U.S. dollar, while maintaining a moderate position. As the U.S. dollar weakened substantially during these months, the scale of decline led us to believe that it may have become oversold against some of the other major currencies, including the euro, despite the ever-burgeoning U.S. current account deficit. We viewed this as an opportunity to reallocate a small portion of the portfolio's net assets. Indeed the timing of this strategy proved prudent, as the euro subsequently corrected lower to attractive levels and the U.S. dollar strengthened during the first calendar quarter of 2005. We then added back some exposure to the euro and somewhat reduced the Fund's position in the U.S. dollar. Within sectors, we reduced the Fund's exposure to corporate bonds overall, both investment grade and high-yield. We also sought to upgrade the quality of those corporate bonds that remained in the portfolio, especially in Europe where differences in quality became so compressed that we were able to trade into higher quality securities without giving up much yield in the Fund. Elsewhere, we slightly increased the Fund's exposure to mortgage-backed securities, bringing the position closer to the Lehman Global Index. We maintained the Fund's modest exposure to emerging markets, as we felt that valuations remained too expensive. We made no other significant changes to the portfolio during the period. We maintained the Fund's duration - -------------------------------------------------------------------------------- 7 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> As for the Fund's currency positioning, we believe the view ahead for the U.S. dollar is less certain than it has been in recent years. (end callout quote) shorter than that of the Lehman Global Index. From a country perspective, we favored European bonds over U.S. and Japanese bonds. Q: How do you intend to manage the Fund in the coming months? A: We intend to maintain a somewhat defensive position in the Fund with respect to interest rate risk exposure. Specifically, we expect to keep the Fund's duration shorter than that of the Lehman Global Index given our view regarding the pace of U.S. economic growth and the tightening path of the Federal Reserve Board. However, if U.S. yields do rise to the higher levels we expect, or if the European bond market simply becomes too expensive, then we may take the opportunity to shift a percentage of asset allocation from European bonds to U.S. fixed income securities. One of the key questions now is whether recent concerns over a global economic soft patch are truly justified or whether Europe, for example, can pull out of its sluggish growth rut. Given recent economic news from the Eurozone, it currently appears that the European Central Bank may wait before beginning to raise interest rates until the end of 2005. We believe the Bank of Japan is still approximately a year away from changing its interest rates from their current 0% level. As for the Fund's currency positioning, we believe the view ahead for the U.S. dollar is less certain than it has been in recent years. We expect the U.S. dollar to remain generally weak in the period ahead, but believe that rising U.S. short-term rates and the dollar's current low valuation should begin to put something of a floor under the U.S. currency. The tug-of-war between the U.S. dollar's structural negatives (e.g., a large U.S. current account deficit) on the one hand, and its cyclical positives (e.g., better relative economic growth and rising short-term rates) and valuation on the other is more evenly balanced than it was in 2004. We still expect currency markets to remain volatile, however, providing opportunities to make tactical adjustments to our positions as market conditions permit. From a country perspective, we continue to favor - -------------------------------------------------------------------------------- 8 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Questions & Answers European bonds over U.S. or Japanese bonds. Within sectors, we intend to maintain modest positions in investment grade corporate bonds and emerging market bonds and a fairly neutral position in structured assets for the near term. As always, we constantly re-evaluate the Fund's duration, sector, country, yield curve and currency positioning in an effort to seek an attractive trade-off between risk and potential return. Our sector teams remain focused on careful individual security selection as we seek opportunities to capitalize on attractively valued bonds. - -------------------------------------------------------------------------------- 9 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Investments in Securities World Income Portfolio April 30, 2005 (Unaudited) (Percentages represent value of investments compared to net assets) Bonds (93.9%)(c) Issuer Coupon Principal Value(a) rate amount Australia (1.8%) Burns Philp Capital Property (U.S. Dollar) Sr Sub Nts 02-15-11 10.75% $100,000 $110,500 Commonwealth Bank of Australia (European Monetary Unit) 11-12-09 3.38 570,000 748,001 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 8,000,000 6,647,941 Queensland Treasury (Australian Dollar) 06-14-05 6.50 3,000,000 2,344,471 Telstra (U.S. Dollar) 04-01-12 6.38 500,000 551,898 Total 10,402,811 Austria (1.1%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 4,500,000 6,475,981 Brazil (0.2%) Federal Republic of Brazil (U.S. Dollar) 04-15-14 8.00 1,129,378 1,123,505 Canada (2.2%) Canada Housing Trust #1 (Canadian Dollar) 06-15-06 5.53 3,220,000 2,634,150 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 380,000(d) 311,880 Cascades (U.S. Dollar) Sr Nts 02-15-13 7.25 55,000 54,175 Corus Entertainment (U.S. Dollar) Sr Sub Nts 03-01-12 8.75 40,000 42,400 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Canada (cont.) Domtar (U.S. Dollar) 12-01-13 5.38% $920,000 $838,433 Norampac (U.S. Dollar) Sr Nts 06-01-13 6.75 100,000 99,000 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,400,000 5,700,482 Province of Ontario (Canadian Dollar) 03-08-06 5.90 3,300,000 2,691,830 Shaw Communications (U.S. Dollar) Sr Nts 04-06-11 7.25 185,000 196,100 Sun Media (U.S. Dollar) 02-15-13 7.63 200,000 204,000 Utilicorp Canada Finance (U.S. Dollar) 06-15-11 7.75 140,000 140,000 Videotron Ltee (U.S. Dollar) 01-15-14 6.88 95,000 93,575 Total 13,006,025 Denmark (0.8%) Realkredit Danmark (Danish Krone) 01-01-08 4.00 25,200,000 4,521,625 Finland (2.2%) Republic of Finland (European Monetary Unit) 07-04-07 5.00 9,400,000 12,781,430 France (6.6%) Dexia Municipal Agency (European Monetary Unit) 09-03-07 7.45 510,000 682,987 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount France (cont.) France Telecom (U.S. Dollar) 03-01-06 7.45% $700,000(e) $720,256 Govt of France (European Monetary Unit) 04-25-12 5.00 9,375,000 13,489,819 04-25-13 4.00 9,460,000 12,814,251 10-25-16 5.00 7,580,000 11,095,399 Total 38,802,712 Germany (11.2%) Allgemeine Hypothekenbank Rheinboden (European Monetary Unit) 09-02-09 5.00 2,030,000(d) 2,837,568 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 301,000,000 2,958,209 Bundesrepublik Deutschland (European Monetary Unit) 07-04-13 3.75 13,240,000 17,651,669 07-04-27 6.50 7,470,000 13,270,563 07-04-28 4.75 1,970,000 2,846,082 07-04-34 4.75 4,640,000 6,774,849 Bundesschatzanweisungen (European Monetary Unit) 12-16-05 2.75 7,570,000 9,777,546 DEPFA Deutsche Pfandbriefbank (European Monetary Unit) 01-15-10 5.50 2,200,000 3,157,155 Deutsche Bank (European Monetary Unit) 07-28-09 4.25 500,000 681,238 Kabel Deutschland (U.S. Dollar) 07-01-14 10.63 40,000(d) 42,200 Landesbank Berlin Girozentrale (European Monetary Unit) 04-30-07 5.00 2,130,000 2,877,444 Rheinische Hypothekenbank (European Monetary Unit) 07-05-10 5.75 2,200,000 3,206,919 Total 66,081,442 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Greece (3.9%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75% 7,600,000 $9,831,804 04-19-07 4.65 4,780,000 6,426,906 10-22-22 5.90 4,200,000 6,664,898 Total 22,923,608 Italy (5.1%) Buoni Poliennali Del Tesoro (European Monetary Unit) 03-01-07 4.50 8,800,000 11,777,621 10-15-07 5.00 8,700,000 11,902,227 11-01-26 7.25 3,486,283 6,561,640 Total 30,241,488 Japan (8.5%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 650,000,000 6,451,633 Govt of Japan (Japanese Yen) 12-21-09 1.70 2,606,000,000 26,348,887 03-22-10 1.70 320,000,000 3,238,816 06-20-12 1.40 700,000,000 6,952,835 12-20-12 1.00 396,000,000 3,807,481 12-20-14 1.30 247,000,000 2,373,009 12-20-34 2.40 61,000,000 597,863 Total 49,770,524 Luxembourg (0.5%) Telecom Italia Capital (U.S. Dollar) 09-30-34 6.00 2,690,000(d) 2,664,504 Malaysia (0.3%) Petronas Capital (U.S. Dollar) 05-22-12 7.00 1,500,000(d) 1,685,537 Mexico (0.6%) Govt of Mexico (Mexican Peso) 12-24-09 9.00 16,000,000 1,381,729 Pemex Project Funding Master Trust (U.S. Dollar) 12-15-14 7.38 765,000 831,938 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mexico (cont.) United Mexican States (Japanese Yen) 06-06-06 6.75% 62,000,000 $632,699 (U.S. Dollar) 09-27-34 6.75 727,000 724,092 Total 3,570,458 Netherlands (1.0%) Bank Nederlandse Gemeenten (British Pound) 08-06-07 7.38 1,100,000 2,211,177 Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 2,680,000 3,851,334 Total 6,062,511 New Zealand (1.1%) Govt of New Zealand (New Zealand Dollar) 11-15-06 8.00 8,800,000 6,596,961 Norway (1.1%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 36,800,000 6,633,014 Poland (1.1%) Republic of Poland (Polish Zloty) 02-12-06 8.50 11,600,000 3,560,586 11-24-09 6.00 9,000,000 2,751,450 Total 6,312,036 South Africa (0.3%) Republic of South Africa (South African Rand) 08-31-10 13.00 9,837,500 1,970,071 South Korea (0.1%) Korea Development Bank (Japanese Yen) 06-25-08 0.98 70,000,000 677,411 Spain (7.7%) Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 2,500,000 3,289,323 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Spain (cont.) Govt of Spain (European Monetary Unit) 10-31-07 4.25% 8,950,000 $12,055,268 07-30-09 5.15 12,000,000 16,958,576 01-31-10 4.00 9,400,000 12,758,207 Total 45,061,374 Supra-National (1.0%) European Investment Bank (British Pound) 12-07-11 5.50 3,000,000 5,947,930 Sweden (0.6%) Govt of Sweden (Swedish Krona) 04-20-06 3.50 19,000,000 2,699,423 08-15-07 8.00 4,800,000 757,180 Total 3,456,603 United Kingdom (4.1%) BT Group (U.S. Dollar) 12-15-10 8.38 700,000 821,219 Greater Beijing First Expressways (U.S. Dollar) Sr Nts 06-15-07 9.50 8,750,000(b,l,h) -- HBOS Treasury Services (European Monetary Unit) 02-12-09 3.50 2,000,000 2,637,616 United Kingdom Treasury (British Pound) 03-07-12 5.00 5,910,000 11,591,064 09-07-14 5.00 4,455,000 8,803,696 Total 23,853,595 United States (30.8%) Aesop Funding II LLC (U.S. Dollar) Series 2002-1A Cl A1 (AMBAC) 10-20-06 3.85 500,000(d,n) 500,725 Airgas (U.S. Dollar) 10-01-11 9.13 195,000 210,600 Allied Waste North America (U.S. Dollar) 04-15-11 6.38 25,000 22,750 (U.S. Dollar) Series B 04-01-08 8.88 50,000 51,375 (U.S. Dollar) Sr Nts 03-15-15 7.25 30,000(d) 27,300 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) AmeriCredit Automobile Receivables Trust (U.S. Dollar) Series 2004-DF Cl A3 (FSA) 07-06-09 2.98% $800,000(n) $783,125 ANR Pipeline (U.S. Dollar) 03-15-10 8.88 45,000 48,814 ARG Funding (U.S. Dollar) Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29 1,250,000(d,n) 1,242,041 ASIF Global Financing XIX (U.S. Dollar) 01-17-13 4.90 5,300,000(d) 5,280,284 Ball (U.S. Dollar) 12-15-12 6.88 115,000 118,450 Banc of America Commercial Mtge (U.S. Dollar) Series 2004-5 Cl A4 11-10-41 4.94 750,000(f) 755,760 Series 2005-1 Cl A4 11-10-42 4.88 750,000(f) 766,188 BCP Crystal US Holdings (U.S. Dollar) Sr Sub Nts 06-15-14 9.63 26,000 28,665 Bear Stearns Commercial Mtge Securities (U.S. Dollar) Series 2003-T10 Cl A1 03-13-40 4.00 626,376(f) 612,458 Series 2004-PWR6 Cl A6 11-11-41 4.83 1,075,000(f) 1,072,775 Series 2004-T16 Cl A3 02-13-46 4.03 600,000(f) 590,846 Boyd Gaming (U.S. Dollar) Sr Sub Nts 12-15-12 7.75 35,000 36,750 04-15-14 6.75 40,000 39,400 Caesars Entertainment (U.S. Dollar) Sr Nts 04-15-13 7.00 575,000 622,437 California State Teachers' Retirement System Trust (U.S. Dollar) Series 2002-C6 Cl A3 11-20-14 4.46 478,040(d,f) 478,720 Cardinal Health (U.S. Dollar) 06-15-15 4.00 1,700,000 1,547,296 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Chesapeake Energy (U.S. Dollar) Sr Nts 06-15-14 7.50% $30,000 $31,425 08-15-14 7.00 65,000 66,625 01-15-16 6.88 20,000 19,900 Citigroup (European Monetary Unit) Sr Nts 05-21-10 3.88 2,600,000 3,479,043 Colorado Interstate Gas (U.S. Dollar) Sr Nts 03-15-15 5.95 10,000(d) 9,650 Comcast (U.S. Dollar) 03-15-11 5.50 2,150,000 2,226,519 Comcast Cable Communications Holdings (U.S. Dollar) 03-15-13 8.38 106,000 128,685 Commercial Mtge Pass-Through Ctfs (U.S. Dollar) Series 2004-LB3A Cl A3 07-10-37 5.09 1,100,000(f) 1,126,244 Series 2004-LB3A Cl A4 07-10-37 5.23 550,000(f) 567,085 Community Health Systems (U.S. Dollar) Sr Sub Nts 12-15-12 6.50 40,000 39,200 Compass Minerals Group (U.S. Dollar) 08-15-11 10.00 100,000 109,000 Cott Beverages (U.S. Dollar) 12-15-11 8.00 100,000 105,000 Countrywide Alternative Loan Trust (U.S. Dollar) Series 2005-6CB Cl 1A1 04-25-35 7.50 1,451,260 1,527,802 CS First Boston Mtge Securities (U.S. Dollar) Series 2004-C1 Cl A2 01-15-37 3.52 250,000(f) 243,630 CSC Holdings (U.S. Dollar) Sr Nts 12-15-07 7.88 150,000 153,375 DaimlerChrysler NA Holding (European Monetary Unit) 01-16-07 5.63 670,000 898,664 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) DaVita (U.S. Dollar) Sr Nts 03-15-13 6.63% $40,000(d) $39,600 Del Monte (U.S. Dollar) Sr Sub Nts 12-15-12 8.63 30,000 31,950 Dex Media West LLC/Finance (U.S. Dollar) Sr Nts Series B 08-15-10 8.50 55,000 58,988 Echostar DBS (U.S. Dollar) 10-01-14 6.63 65,000(d) 63,050 (U.S. Dollar) Sr Nts 10-01-08 5.75 60,000 59,025 El Paso Natural Gas (U.S. Dollar) Sr Nts Series A 08-01-10 7.63 185,000 193,292 Emmis Operating (U.S. Dollar) 05-15-12 6.88 70,000 69,125 Encore Acquisition (U.S. Dollar) Sr Sub Nts 04-15-14 6.25 80,000 77,200 ERAC USA Finance (U.S. Dollar) 05-01-15 5.60 1,700,000(d) 1,720,647 Federal Home Loan Mtge Corp (European Monetary Unit) 02-15-07 4.63 3,730,000 4,990,392 (U.S. Dollar) 01-15-12 5.75 6,435,000 6,931,351 09-01-17 6.50 511,609(f) 532,856 10-01-18 5.00 910,547(f) 919,051 04-01-33 6.00 2,203,742(f) 2,286,028 08-01-33 6.50 342,928(f) 356,489 11-01-33 5.00 1,475,017(f) 1,465,290 Collateralized Mtge Obligation (U.S. Dollar) 04-15-15 4.50 3,000,000(f) 3,014,700 Federal Natl Mtge Assn (U.S. Dollar) 01-01-09 5.74 1,189,591(f) 1,241,735 11-01-10 4.47 365,190(f) 364,895 02-01-13 4.87 1,336,115(f) 1,353,371 09-01-13 5.28 874,632(f) 908,607 03-01-17 5.50 1,137,857(f) 1,167,847 03-01-17 6.00 300,151(f) 311,201 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Federal Natl Mtge Assn (cont.) (U.S. Dollar) 04-01-17 6.50% $1,138,525(f) $1,191,337 06-01-17 6.00 822,233(f) 852,505 07-01-17 6.00 429,774(f) 446,607 08-01-18 4.50 2,031,076(f) 2,014,652 11-01-18 5.50 1,944,399(f) 1,993,399 12-01-18 5.00 3,999,077(f) 4,033,848 07-01-23 5.00 1,203,489(f) 1,202,392 12-01-31 6.50 429,562(f) 450,445 05-01-32 7.00 1,340,987(f) 1,416,880 05-01-32 7.50 720,543(f) 771,362 06-01-32 7.00 639,546(f) 679,333 08-01-32 6.50 3,762,413(f) 3,930,360 09-01-32 6.50 411,678(f) 430,042 11-01-32 7.50 1,026,344(f) 1,098,731 03-01-33 5.50 2,327,790(f) 2,355,227 03-01-33 6.00 2,784,831(f) 2,862,680 04-01-33 6.00 1,503,927(f) 1,557,653 05-01-33 6.00 702,345(f) 726,881 06-01-33 5.50 3,896,286(f) 3,947,943 09-01-33 5.50 673,113(f) 680,347 11-01-33 6.50 810,904(f) 845,800 Ford Motor (U.S. Dollar) 10-01-28 6.63 485,000 370,598 GE Capital Commercial Mtge (U.S. Dollar) Series 2001-3 Cl A1 06-10-38 5.56 1,605,461(f) 1,656,869 General Electric Capital (European Monetary Unit) 06-20-07 5.13 500,000 678,351 (New Zealand Dollar) 02-04-10 6.63 3,530,000 2,574,212 Genworth Financial (Japanese Yen) 06-20-11 1.60 130,000,000 1,260,242 Georgia Gulf (U.S. Dollar) Sr Nts 12-15-13 7.13 55,000 56,375 Georgia-Pacific (U.S. Dollar) Sr Nts 07-15-08 7.38 140,000 146,300 GMAC (U.S. Dollar) 03-02-11 7.25 1,300,000 1,168,050 09-15-11 6.88 810,000 709,656 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) GMAC Commercial Mtge Securities (U.S. Dollar) Series 2004-C3 Cl A4 12-10-41 4.55% $1,050,000(f) $1,042,729 Series 2004-C3 Cl A5 12-10-41 4.86 1,100,000(f) 1,098,680 Govt Natl Mtge Assn (U.S. Dollar) 10-15-33 5.50 1,579,596(f) 1,608,857 Collateralized Mtge Obligation Interest Only (U.S. Dollar) 01-20-32 0.00 2,015,063(f,i) 236,836 Grant Prideco Escrow (U.S. Dollar) 12-15-09 9.00 100,000 109,000 Greenwich Capital Commercial Funding (U.S. Dollar) Series 2004-GG1 Cl A4 06-10-36 4.76 1,100,000(f) 1,110,123 Series 2005-GG3 Cl A1 08-10-42 3.92 727,480(f) 723,646 Hilton Hotels (U.S. Dollar) 12-01-12 7.63 200,000 229,666 Honda Auto Receivables Owner Trust (U.S. Dollar) Series 2005-1 Cl A3 10-21-08 3.53 700,000 695,562 ING Security Life Institutional Funding (U.S. Dollar) 01-15-10 4.25 1,440,000(d) 1,430,752 Intl Paper (European Monetary Unit) 08-11-06 5.38 505,000 672,285 INVISTA (U.S. Dollar) 05-01-12 9.25 50,000(d) 53,500 IPALCO Enterprises (U.S. Dollar) 11-14-08 8.38 250,000 268,750 Joy Global (U.S. Dollar) Series B 03-15-12 8.75 60,000 66,150 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) JPMorgan Chase Commercial Mtge Securities (U.S. Dollar) Series 2004-CBX Cl A5 01-12-37 4.65% $900,000(f) $896,630 Series 2005-CB11 Cl A3 08-12-37 5.20 1,000,000(f) 1,029,067 KB Home (U.S. Dollar) 01-15-15 5.88 155,000 152,093 Key Energy Services (U.S. Dollar) Series C 03-01-08 8.38 130,000 134,550 L-3 Communications (U.S. Dollar) 06-15-12 7.63 250,000 262,500 Lamar Media (U.S. Dollar) 01-01-13 7.25 155,000 159,650 LB-UBS Commercial Mtge Trust (U.S. Dollar) Series 2002-C8 Cl A3 11-15-27 4.83 1,000,000(f) 1,009,590 Series 2004-C2 Cl A3 03-15-29 3.97 750,000(f) 720,120 Series 2004-C4 Cl A3 06-15-29 5.16 700,000(e,f) 720,962 Series 2004-C6 Cl A4 08-15-29 4.58 275,000(f) 274,822 Series 2004-C7 Cl A2 10-15-29 3.99 1,000,000(f) 980,660 Series 2004-C8 Cl A2 12-15-29 4.20 1,300,000(f) 1,287,013 Series 2004-C8 Cl A6 12-15-29 4.80 1,500,000(f) 1,496,468 Series 2005-C1 Cl A4 02-15-30 4.74 1,100,000(f) 1,096,491 Long Beach Auto Receivables Trust (U.S. Dollar) Series 2004-C Cl A3 (FSA) 09-15-09 3.40 750,000(n) 743,850 MacDermid (U.S. Dollar) 07-15-11 9.13 35,000 37,538 Meritage Homes (U.S. Dollar) Sr Nts 03-15-15 6.25 35,000(d) 32,200 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Metropolitan Life Global Funding (U.S. Dollar) Sr Nts 05-05-10 4.50% $780,000(d,g) $781,170 Metris Master Trust (U.S. Dollar) Series 2004-2 Cl M 10-20-10 3.24 450,000(e) 450,275 MGM MIRAGE (U.S. Dollar) 10-01-09 6.00 45,000 44,438 Sr Nts 02-27-14 5.88 50,000 46,875 Mohegan Tribal Gaming Authority (U.S. Dollar) Sr Nts 02-15-13 6.13 45,000(d) 44,325 (U.S. Dollar) Sr Sub Nts 04-01-12 8.00 75,000 79,688 Moog (U.S. Dollar) Sr Sub Nts 01-15-15 6.25 15,000 14,850 Morgan Stanley Capital I (U.S. Dollar) Series 2004-HQ4 Cl A5 04-14-40 4.59 750,000(f) 746,100 Morgan Stanley Group (European Monetary Unit) 03-16-06 5.25 2,400,000 3,165,106 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 8.38 340,000 367,200 Nextel Communications (U.S. Dollar) Sr Nts 10-31-13 6.88 185,000 194,713 Nissan Auto Receivables Owner Trust (U.S. Dollar) Series 2003-A Cl A4 07-15-08 2.61 500,000 492,903 Series 2005-A Cl A3 10-15-08 3.54 1,100,000 1,091,992 Nissan Motor Acceptance (U.S. Dollar) 03-08-10 4.63 55,000(d) 54,589 Norcraft Companies LP/Finance (U.S. Dollar) Sr Sub Nts 11-01-11 9.00 40,000 40,000 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Northwest Pipeline (U.S. Dollar) 03-01-10 8.13% $10,000 $10,763 NorthWestern Energy (U.S. Dollar) 11-01-14 5.88 15,000(d) 15,242 Overseas Private Investment (U.S. Dollar) U.S. Govt Guaranty Series 1996A 09-15-08 6.99 2,916,666 3,055,237 Owens-Illinois Glass Container (U.S. Dollar) 05-15-11 7.75 100,000 105,500 Peabody Energy (U.S. Dollar) Series B 03-15-13 6.88 175,000 181,125 Plains Exploration & Production (U.S. Dollar) Sr Nts 06-15-14 7.13 60,000 62,400 Potomac Edison (U.S. Dollar) 1st Mtge 11-15-14 5.35 105,000(d) 103,950 Pricoa Global Funding I (U.S. Dollar) 01-15-10 4.20 6,940,000(d) 6,838,191 Pride Intl (U.S. Dollar) Sr Nts 07-15-14 7.38 30,000 31,500 Qwest (U.S. Dollar) 03-15-12 9.13 85,000(d) 90,100 Schuler Homes (U.S. Dollar) 07-15-09 9.38 85,000 88,963 Silgan Holdings (U.S. Dollar) Sr Sub Nts 11-15-13 6.75 100,000 99,500 Southern Star Central (U.S. Dollar) 08-01-10 8.50 50,000 53,500 Sprint Capital (U.S. Dollar) 11-15-28 6.88 1,500,000 1,672,623 Starwood Hotels & Resorts (U.S. Dollar) 11-15-15 7.38 140,000 150,150 Station Casinos (U.S. Dollar) Sr Nts 04-01-12 6.00 100,000 99,250 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL 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 $144,900 Texas Genco LLC/Financing (U.S. Dollar) Sr Nts 12-15-14 6.88 37,000(d) 36,260 Toyota Motor Credit (Japanese Yen) 06-09-08 0.75 297,000,000 2,878,207 Transcontinental Gas Pipe Line (U.S. Dollar) Series B 08-15-11 7.00 175,000 184,188 Triad Hospitals (U.S. Dollar) Sr Nts 05-15-12 7.00 140,000 143,500 U.S. Treasury (U.S. Dollar) 11-30-06 2.88 1,160,000 1,147,765 01-31-07 3.13 1,015,000 1,006,595 04-15-10 4.00 770,000 773,549 02-15-15 4.00 9,130,000(j) 8,981,994 08-15-23 6.25 6,875,000(m) 8,262,354 02-15-26 6.00 4,100,000(m) 4,851,292 United Auto Group (U.S. Dollar) 03-15-12 9.63 35,000 36,400 Verizon Pennsylvania (U.S. Dollar) Series A 11-15-11 5.65 7,400,000(m) 7,682,754 Wachovia Bank Commercial Mtge Trust (U.S. Dollar) Series 2003-C8 Cl A2 11-15-35 3.89 1,250,000(f) 1,231,108 Series 2005-C16 Cl A3 10-15-41 4.62 1,250,000(f) 1,245,841 Washington Mutual Bank FA (U.S. Dollar) Sub Nts 08-15-14 5.65 1,590,000 1,652,980 WCI Communities (U.S. Dollar) 03-15-15 6.63 50,000(d) 45,500 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Wells Fargo Bank NA (U.S. Dollar) Sub Nts 02-01-11 6.45% $2,855,000 $3,122,565 William Carter (U.S. Dollar) Series B 08-15-11 10.88 35,000 38,500 World Omni Auto Receivables Trust (U.S. Dollar) Series 2005-A Cl A3 06-12-09 3.54 1,500,000 1,490,745 Total 181,470,453 Total bonds (Cost: $509,854,797) $552,093,609 Short-term securities (4.8%)(k) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies (2.4%) Federal Home Loan Mtge Corp Disc Nt 06-13-05 2.79% $5,000,000 $4,982,601 Federal Natl Mtge Assn Disc Nts 05-11-05 2.60 3,000,000 2,997,405 06-13-05 2.79 5,900,000 5,879,470 Total 13,859,476 Commercial paper (2.4%) General Electric Capital 05-02-05 2.95 9,100,000 9,097,763 Morgan Stanley & Co 05-11-05 2.86 5,000,000 4,995,233 Total 14,092,996 Total short-term securities (Cost: $27,953,547) $27,952,472 Total investments in securities (Cost: $537,808,344)(o) $580,046,081 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2005, the value of these securities amounted to $26,429,485 or 4.5% of net assets. (e) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on April 30, 2005. (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 April 30, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $777,754. (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 April 30, 2005. (j) At April 30, 2005, 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 0.7% of net assets. See Note 4 to the financial statements. 4.1% 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). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at April 30, 2005, is as follows: Security Acquisition Cost dates Greater Beijing First Expressways (U.S. Dollar) 9.50% Sr Nts 2007 6-12-97 thru 9-16-98 $118,924 (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 Note, June 2005, 5-year $ 2,600,000 U.S. Treasury Note, June 2005, 10-year 14,800,000 - -------------------------------------------------------------------------------- 18 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Notes to investments in securities (continued) (n) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- American Municipal Bond Association Corporation FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation (o) At April 30, 2005, the cost of securities for federal income tax purposes was approximately $537,808,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $44,310,000 Unrealized depreciation (2,072,000) ---------- Net unrealized appreciation $42,238,000 ----------- 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 GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities World Income Portfolio April 30, 2005 (Unaudited) Assets Investments in securities, at value (Note 1)* (identified cost $537,808,344) $580,046,081 Foreign currency holdings (identified cost $4,812,616) (Note 1) 4,774,561 Dividends and accrued interest receivable 8,251,780 Receivable for investment securities sold 1,101,076 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 527,159 ------- Total assets 594,700,657 ----------- Liabilities Disbursements in excess of cash on demand deposit 64,118 Payable for investment securities purchased 2,862,831 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 7,049 Payable upon return of securities loaned (Note 4) 4,040,000 Accrued investment management services fee 12,110 Other accrued expenses 57,508 ------ Total liabilities 7,043,616 --------- Net assets $587,657,041 ============ *Including securities on loan, at value (Note 4) $ 3,935,120 ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statement of operations World Income Portfolio Six months ended April 30, 2005 (Unaudited) Investment income Income: Interest $10,987,848 Fee income from securities lending (Note 4) 13,311 Less foreign taxes withheld (3,647) ------ Total income 10,997,512 ---------- Expenses (Note 2): Investment management services fee 2,164,406 Compensation of board members 5,806 Custodian fees 91,000 Audit fees 13,500 Other 11,478 ------ Total expenses 2,286,190 Earnings credits on cash balances (Note 2) (598) ---- Total net expenses 2,285,592 --------- Investment income (loss) -- net 8,711,920 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 10,948,550 Foreign currency transactions 1,762,049 Futures contracts 75,380 ------ Net realized gain (loss) on investments 12,785,979 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,312,036) ---------- Net gain (loss) on investments and foreign currencies 9,473,943 --------- Net increase (decrease) in net assets resulting from operations $18,185,863 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets World Income Portfolio April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 8,711,920 $ 17,621,605 Net realized gain (loss) on investments 12,785,979 16,438,227 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,312,036) 24,402,177 ---------- ---------- Net increase (decrease) in net assets resulting from operations 18,185,863 58,462,009 ---------- ---------- Proceeds from contributions 22,530,047 20,341,237 Fair value of withdrawals (12,709,302) (62,192,959) ----------- ----------- Net contributions (withdrawals) from partners 9,820,745 (41,851,722) --------- ----------- Total increase (decrease) in net assets 28,006,608 16,610,287 Net assets at beginning of period 559,650,433 543,040,146 ----------- ----------- Net assets at end of period $587,657,041 $559,650,433 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Notes to Financial Statements World Income Portfolio (Unaudited as to April 30, 2005) 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. 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. - -------------------------------------------------------------------------------- 23 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Illiquid securities At April 30, 2005, 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 April 30, 2005 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 April 30, 2005, the Portfolio has entered into outstanding when-issued securities of $777,754. 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. 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. - -------------------------------------------------------------------------------- 24 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT 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 April 30, 2005, foreign currency holdings consisted of multiple denominations, primarily European monetary units. 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. - -------------------------------------------------------------------------------- 25 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL 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 six months ended April 30, 2005, the Portfolio's custodian fees were reduced by $598 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 $241,066,016 and $232,646,059, respectively, for the six months ended April 30, 2005. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES At April 30, 2005, securities valued at $3,935,120 were on loan to brokers. For collateral, the Portfolio received $4,040,000 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 $13,311 for the six months ended April 30, 2005. 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. - -------------------------------------------------------------------------------- 26 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT 5. FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2005, 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:
Currency to Currency to Unrealized Unrealized Exchange date be delivered be received appreciation depreciation May 9, 2005 5,180,000 6,659,253 $ -- $7,049 European Monetary Unit U.S. Dollar May 13, 2005 13,570,111 1,471,000,000 472,264 -- U.S. Dollar Japanese Yen May 17, 2005 11,410,000 14,742,291 54,895 -- European Monetary Unit U.S. Dollar -------- ------ Total $527,159 $7,049 -------- ------
6. INTEREST RATE FUTURES CONTRACTS At April 30, 2005, investments in securities included securities valued at $513,488 that were pledged as collateral to cover initial margin deposits on 174 open sale contracts. The notional market value of the open sale contracts at April 30, 2005 was $19,310,220 with a net unrealized loss of $244,478. See "Summary of significant accounting policies" and "Notes to investments in securities." 7. FINANCIAL HIGHLIGHTS The table below shows certain important financial information for evaluating the Portfolio's results.
Ratios/supplemental data Fiscal period ended Oct. 31, 2005(e) 2004 2003 2002 2001 Ratio of expenses to average daily net assets(a) .79%(b) .79% .80% .79% .78% Ratio of net investment income (loss) to average daily net assets 3.03%(b) 3.20% 3.29% 3.66% 5.27% Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24% Total return(c) 3.26%(d) 11.21% 13.99% 6.89% 11.29%
Notes to financial highlights (a) Expense ratio is based on total expenses of the Portfolio before reduction of earnings credits on cash balances. The ratio does not include feeder fund expenses. (b) Adjusted to an annual basis. (c) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. (d) Not annualized. (e) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 27 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP Global Bond Fund April 30, 2005 (Unaudited) Assets Investment in Portfolio (Note 1) $587,505,416 Capital shares receivable 219,707 ------- Total assets 587,725,123 ----------- Liabilities Capital shares payable 151,469 Accrued distribution fee 6,726 Accrued transfer agency fee 2,443 Accrued administrative services fee 907 Other accrued expenses 50,665 ------ Total liabilities 212,210 ------- Net assets applicable to outstanding capital stock $587,512,913 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 844,958 Additional paid-in capital 543,487,306 Excess of distributions over net investment income (944,294) Accumulated net realized gain (loss) (Note 5) 1,632,190 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 42,492,753 ---------- Total -- representing net assets applicable to outstanding capital stock $587,512,913 ============ Net assets applicable to outstanding shares: Class A $385,318,909 Class B $144,754,511 Class C $ 4,597,464 Class I $ 52,777,760 Class Y $ 64,269 Net asset value per share of outstanding capital stock: Class A shares 55,426,436 $ 6.95 Class B shares 20,821,091 $ 6.95 Class C shares 663,794 $ 6.93 Class I shares 7,575,277 $ 6.97 Class Y shares 9,223 $ 6.97 ----- ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 28 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statement of operations AXP Global Bond Fund Six months ended April 30, 2005 (Unaudited) Investment income Income: Interest $10,985,150 Fee income from securities lending 13,308 Less foreign taxes withheld (3,646) ------ Total income 10,994,812 ---------- Expenses (Note 2): Expenses allocated from Portfolio 2,284,994 Distribution fee Class A 488,589 Class B 724,280 Class C 23,593 Transfer agency fee 516,248 Incremental transfer agency fee Class A 38,359 Class B 25,049 Class C 929 Service fee -- Class Y 32 Administrative services fees and expenses 161,929 Compensation of board members 5,148 Printing and postage 86,331 Registration fees 31,420 Audit fees 4,500 Other 9,606 ----- Total expenses 4,401,007 Earnings credits on cash balances (Note 2) (5,846) ------ Total net expenses 4,395,161 --------- Investment income (loss) -- net 6,599,651 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 10,947,650 Foreign currency transactions 1,759,696 Futures contracts 75,380 ------ Net realized gain (loss) on investments 12,782,726 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,311,274) ---------- Net gain (loss) on investments and foreign currencies 9,471,452 --------- Net increase (decrease) in net assets resulting from operations $16,071,103 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 29 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets AXP Global Bond Fund April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 6,599,651 $ 13,433,467 Net realized gain (loss) on investments 12,782,726 16,434,312 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,311,274) 24,395,700 ---------- ---------- Net increase (decrease) in net assets resulting from operations 16,071,103 54,263,479 ---------- ---------- Distributions to shareholders from: Net investment income Class A (15,166,554) (13,588,587) Class B (5,065,561) (4,397,000) Class C (162,875) (141,492) Class I (1,291,138) (208,980) Class Y (2,812) (2,872) ------ ------ Total distributions (21,688,940) (18,338,931) ----------- ----------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 42,723,922 90,482,357 Class B shares 21,489,529 34,513,320 Class C shares 660,587 1,609,678 Class I shares 29,031,812 22,849,823 Class Y shares 15,933 13,380 Reinvestment of distributions at net asset value Class A shares 14,092,995 12,568,801 Class B shares 4,726,617 4,090,856 Class C shares 143,387 124,689 Class I shares 1,290,716 208,773 Class Y shares 2,812 2,872 Payments for redemptions Class A shares (56,447,283) (119,978,418) Class B shares (Note 2) (21,863,958) (63,787,048) Class C shares (Note 2) (880,504) (2,223,406) Class I shares (1,198,772) (97,951) Class Y shares (32,119) (7,940) ------- ------ Increase (decrease) in net assets from capital share transactions 33,755,674 (19,630,214) ---------- ----------- Total increase (decrease) in net assets 28,137,837 16,294,334 Net assets at beginning of period 559,375,076 543,080,742 ----------- ----------- Net assets at end of period $587,512,913 $ 559,375,076 ============ ============= Undistributed (excess of distributions over) net investment income $ (944,294) $ 14,144,995 ------------ -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Notes to Financial Statements AXP Global Bond Fund (Unaudited as to April 30, 2005) 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 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. 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 April 30, 2005, AEFC and the AXP Portfolio Builder Series funds owned 100% of Class I shares, which represents 8.98% of the Fund's net assets. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees 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 April 30, 2005 was 99.97%. 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 - -------------------------------------------------------------------------------- 31 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT 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 net asset value. 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. Dividends to shareholders Dividends from net investment income, declared and paid each calendar quarter, when available, are reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. - -------------------------------------------------------------------------------- 32 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL 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 0.04% 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. 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 pursuant to Rule 12b-1, 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 $391,271 for Class A, $64,725 for Class B and $355 for Class C for the six months ended April 30, 2005. During the six months ended April 30, 2005, the Fund's transfer agency fees were reduced by $5,846 as a result of earnings credits from overnight cash balances. - -------------------------------------------------------------------------------- 33 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2005 Class A Class B Class C Class I Class Y Sold 6,072,921 3,053,510 94,368 4,144,768 2,236 Issued for reinvested distributions 2,011,617 673,746 20,525 184,366 400 Redeemed (8,036,130) (3,115,741) (125,650) (168,371) (4,562) ---------- ---------- -------- -------- ------ Net increase (decrease) 48,408 611,515 (10,757) 4,160,763 (1,926) ------ ------- ------- --------- ------ 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. 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 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. The Fund had no borrowings outstanding during the six months ended April 30, 2005. 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. - -------------------------------------------------------------------------------- 34 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $7.02 $6.57 $6.00 $5.81 $5.39 ----- ----- ----- ----- ----- Income from investment operations: Net investment income (loss) .09 .17 .18 .19 .27 Net gains (losses) (both realized and unrealized) .12 .52 .60 .17 .30 ----- ----- ----- ----- ----- Total from investment operations .21 .69 .78 .36 .57 ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.28) (.24) (.21) (.17) (.15) ----- ----- ----- ----- ----- Net asset value, end of period $6.95 $7.02 $6.57 $6.00 $5.81 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $385 $389 $380 $348 $355 Ratio of expenses to average daily net assets(b) 1.36%(c) 1.34% 1.36% 1.34% 1.32% Ratio of net investment income (loss) to average daily net assets 2.46%(c) 2.66% 2.73% 3.12% 4.75% Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24% Total return(d) 2.92%(e) 10.70% 13.25% 6.24% 10.83%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 35 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $7.02 $6.57 $5.99 $5.79 $5.38 ----- ----- ----- ----- ----- Income from investment operations: Net investment income (loss) .06 .14 .12 .13 .21 Net gains (losses) (both realized and unrealized) .12 .50 .62 .19 .31 ----- ----- ----- ----- ----- Total from investment operations .18 .64 .74 .32 .52 ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.25) (.19) (.16) (.12) (.11) ----- ----- ----- ----- ----- Net asset value, end of period $6.95 $7.02 $6.57 $5.99 $5.79 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $145 $142 $158 $152 $145 Ratio of expenses to average daily net assets(b) 2.12%(c) 2.10% 2.12% 2.10% 2.09% Ratio of net investment income (loss) to average daily net assets 1.70%(c) 1.90% 1.97% 2.36% 3.99% Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24% Total return(d) 2.52%(e) 9.83% 12.39% 5.59% 9.73%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 36 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $6.99 $6.55 $5.98 $5.79 $5.38 ----- ----- ----- ----- ----- Income from investment operations: Net investment income (loss) .06 .14 .13 .14 .21 Net gains (losses) (both realized and unrealized) .13 .49 .60 .18 .31 ----- ----- ----- ----- ----- Total from investment operations .19 .63 .73 .32 .52 ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.25) (.19) (.16) (.13) (.11) ----- ----- ----- ----- ----- Net asset value, end of period $6.93 $6.99 $6.55 $5.98 $5.79 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $5 $5 $5 $3 $1 Ratio of expenses to average daily net assets(b) 2.13%(c) 2.09% 2.14% 2.10% 2.09% Ratio of net investment income (loss) to average daily net assets 1.69%(c) 1.91% 1.89% 2.29% 3.84% Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24% Total return(d) 2.66%(e) 9.72% 12.41% 5.51% 9.84%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 37 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class I Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(g) 2004(b) Net asset value, beginning of period $7.03 $6.77 ----- ----- Income from investment operations: Net investment income (loss) .10 .16 Net gains (losses) (both realized and unrealized) .13 .24 ----- ----- Total from investment operations .23 .40 ----- ----- Less distributions: Dividends from net investment income (.29) (.14) ----- ----- Net asset value, end of period $6.97 $7.03 ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $53 $24 Ratio of expenses to average daily net assets(c) .91%(d) .89%(d) Ratio of net investment income (loss) to average daily net assets 2.94%(d) 3.07%(d) Portfolio turnover rate (excluding short-term securities) 43% 92% Total return(e) 3.30%(f) 6.06%(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. (g) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 38 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $7.04 $6.59 $6.01 $5.80 $5.40 ----- ----- ----- ----- ----- Income from investment operations: Net investment income (loss) .09 .18 .19 .20 .29 Net gains (losses) (both realized and unrealized) .12 .52 .61 .19 .27 ----- ----- ----- ----- ----- Total from investment operations .21 .70 .80 .39 .56 ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.28) (.25) (.22) (.18) (.16) ----- ----- ----- ----- ----- Net asset value, end of period $6.97 $7.04 $6.59 $6.01 $5.80 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(b) 1.18%(c) 1.17% 1.18% 1.17% 1.16% Ratio of net investment income (loss) to average daily net assets 2.63%(c) 2.83% 2.69% 3.29% 4.90% Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24% Total return(d) 3.00%(e) 10.86% 13.54% 6.72% 10.71%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 39 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Fund Expenses Example (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2005. Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 40 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses Annualized account value account value paid during expense Nov. 1, 2004 April 30, 2005 the period(a) ratio Class A Actual(b) $1,000 $1,029.20 $ 6.88 1.36% Hypothetical (5% return before expenses) $1,000 $1,018.15 $ 6.84 1.36% Class B Actual(b) $1,000 $1,025.20 $10.70 2.12% Hypothetical (5% return before expenses) $1,000 $1,014.36 $10.65 2.12% Class C Actual(b) $1,000 $1,026.60 $10.76 2.13% Hypothetical (5% return before expenses) $1,000 $1,014.31 $10.70 2.13% Class I Actual(b) $1,000 $1,033.00 $ 4.61 .91% Hypothetical (5% return before expenses) $1,000 $1,020.39 $ 4.58 .91% Class Y Actual(b) $1,000 $1,030.00 $ 5.97 1.18% Hypothetical (5% return before expenses) $1,000 $1,019.05 $ 5.94 1.18%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2005: +2.92% for Class A, +2.52% for Class B, +2.66% for Class C, +3.30% for Class I and +3.00% for Class Y. - -------------------------------------------------------------------------------- 41 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT Approval of Investment Management Services Agreement American Express Financial Corporation (AEFC), a wholly-owned subsidiary of American Express Company, serves as the investment manager to the Fund. Under an Investment Management Services Agreement (the Agreement), AEFC provides investment advice and other services to the Fund. Throughout the year, the Funds' Board of Directors and the Board's Investment Review Committee monitor these services. Each year the Board determines whether to continue the Agreement by evaluating the quality and level of service received and the costs associated with those services. AEFC prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations to assist the Board in making this determination. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the Agreement. On February 1, 2005, American Express Company announced its intention to pursue a spin-off of AEFC by distributing shares of the common stock of AEFC to shareholders of American Express Company. At a meeting held in person on April 14, 2005, the Board, including a majority of the independent members, approved the continuation of the Agreement for an interim period, not to exceed one year, ending on the later of (i) the effective date of the spin-off or (ii) the approval by the Fund's shareholders of a new investment management services agreement with AEFC (the Interim Period). The spin-off will not result in an "assignment" of the Agreement under the Investment Company Act of 1940 and, therefore, will not cause the termination of the Agreement according to its terms. In connection with the spin-off AEFC has proposed that going forward, services under the Agreement be provided by an affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel advised the Board that it would be prudent, in connection with the spin-off, to consider a new agreement with RiverSource and to seek shareholder approval of that agreement as soon as practical thereafter. Investment performance is a major factor in the evaluation process, and the Board reviewed the Fund's performance over a range of different periods by comparing its performance to relevant Lipper and broader market indices. The Board considered that over time the Fund's investment performance should be above the median for a peer group of funds with similar investment goals and noted that the Fund's investment performance in 2004 exceeded the median. The Board noted that, in addition to portfolio management and investment research, AEFC provides portfolio trading, daily net asset value calculation, management of cash flow, product development, administration of its compliance and legal departments, access to distribution, accounting and recordkeeping, and reporting to the Board and shareholders. To evaluate these services, the Board referred to surveys and benchmarks established by commercial providers, trade associations and AEFC's internal processes. The Board concluded that the services provided were consistent with services provided by investment managers to comparable mutual funds. - -------------------------------------------------------------------------------- 42 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT The Board also evaluated the price paid for the services provided by AEFC, noting the existence of a pricing philosophy, established by the Board and AEFC, that seeks to maintain total Fund expenses within a range of the median expenses charged to comparable funds sold through financial advisors. The Board considered detailed information set forth in an annual report on fees and expenses, including, among other things, data showing a comparison of the Fund's expenses with median expenses paid by funds in its comparison group and data showing the Fund's contribution to AEFC's profitability. The Board determined that while the Fund's expenses are relatively high for its comparison group, the Fund's strong performance justified higher expenses and a fee waiver will be added to reduce expenses the Fund will pay during the Interim Period. The Board considered the economies of scale that might be realized by AEFC as the Fund grew and took note of the extent to which Fund shareholders also might benefit from such growth. The Board considered that the Agreement provided for lower fees as assets increase at pre-established breakpoints and concluded that the Agreement satisfactorily provided for sharing these economies of scale. The Board took into account the Contract Committee's discussion comparing the fees AEFC charges to the Fund with those it charges to institutional clients, noting that the relatively higher fees paid by the Fund were principally attributable to the additional services required to manage a regulated mutual fund, like the Fund, and the operation of a large mutual fund family. The Board also considered the profitability realized by AEFC and its affiliates from its relationship with the Fund. The Board took into account the services acquired by AEFC through the use of commission dollars paid by the Fund on portfolio transactions. The Board concluded that AEFC's overall costs and profitability were appropriate, although profitability may be too low on an ongoing basis. The Board noted that the fees paid by the Fund should permit AEFC to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. Based on the foregoing, the Board concluded that the fees paid to AEFC under the Agreement were fair and reasonable and determined to approve renewal of the Agreement for the Interim Period. Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website americanexpress.com/funds; or by searching the website of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available at http://www.sec.gov. - -------------------------------------------------------------------------------- 43 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Global Technology Fund Semiannual Report for the Period Ended April 30, 2005 AXP Global Technology Fund seeks to provide shareholders with long-term capital growth. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 6 Investments in Securities 11 Financial Statements (Portfolio) 13 Notes to Financial Statements (Portfolio) 16 Financial Statements (Fund) 20 Notes to Financial Statements (Fund) 23 Fund Expenses Example 32 Approval of Investment Management Services Agreement 34 Proxy Voting 35 CORPORATE REORGANIZATION On Feb. 1, 2005, American Express Company, the parent company of the Fund's investment manager, American Express Financial Corporation (AEFC), announced plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders of American Express Company. The transaction, expected to be completed in the third quarter of 2005, is subject to certain regulatory and other approvals, as well as final approval by the board of directors of American Express Company. Upon completion of the transaction AEFC will be a publicly traded company separate from American Express Company. The current agreements between the Fund and AEFC and its affiliates will remain in place. No changes in operations or personnel, including the portfolio manager or managers of the Fund, are anticipated. (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Fund Snapshot AT APRIL 30, 2005 PORTFOLIO MANAGER Portfolio manager Since Years in industry Nina Hughes 6/02 6 FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates by class A: 11/13/96 B: 11/13/96 C: 6/26/00 I: 7/15/04 Y: 11/13/96 Ticker symbols by class A: AXIAX B: INVBX C: AXICX I: -- Y: -- Total net assets $172.5 million Number of holdings 69 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL SECTOR COMPOSITION Percentage of portfolio assets (pie chart) Electronics 31.0% Computer software & services 24.9% Computer hardware 15.8% Telecom equipment & services 10.9% Media 5.7% Short-term securities* 5.5% Utilities -- telephone 2.9% Leisure time & entertainment 1.4% Retail -- general 1.1% Cable 0.8% * Of the 5.5%,1.4% is due to security lending activity and 4.1% is the Portfolio's cash equivalent position. TOP TEN HOLDINGS Percentage of portfolio assets Dell (Computer hardware) 5.6% Cisco Systems (Computer hardware) 4.9 Intel (Electronics) 3.8 Samsung Electronics (Electronics) 3.7 Texas Instruments (Electronics) 3.4 Yahoo! (Media) 3.2 Broadcom Cl A (Electronics) 3.2 Nokia ADR (Telecom equipment & services) 3.1 EMC (Computer hardware) 3.1 Corning (Telecom equipment & services) 2.9 For further detail about these holdings, please refer to the section entitled "Investments in Securities." There are special risk considerations associated with international investing related to market currency, economic, political and other factors. This Fund is subject to greater volatility than a more broadly invested fund because it is invested in a specific sector. Stock prices of established companies that pay dividends may be less volatile than the stock market as a whole. Stocks of small- and medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Some of these companies also may have fewer financial resources. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Performance Summary (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2005 -4.37% -5.56% -3.52% - -4.37% = AXP Global Technology Fund Class A (excluding sales charge) - -5.56% = GSTI(R) Composite Index(1) (unmanaged) - -3.52% = Lipper Science and Technology Funds Index(2) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919 or visiting www.americanexpress.com/funds. (1) The 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. (2) 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. 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 because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 4 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Performance Summary
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class I Class Y (Inception dates) (11/13/96) (11/13/96) (6/26/00) (7/15/04) (11/13/96) After After NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) at April 30, 2005 6 months* -4.37% -9.89% -4.38% -8.20% -4.35% -5.30% -3.83% -3.83% 1 year +1.16% -4.68% +0.00% -4.00% +0.65% +0.65% N/A +1.73% 3 years +5.51% +3.44% +4.78% +3.86% +5.01% +5.01% N/A +5.95% 5 years -20.21% -21.15% -20.86% -21.02% N/A N/A N/A -20.06% Since inception +2.66% +1.95% +1.85% +1.85% -21.74% -21.74% +3.53%* +2.73% at March 31, 2005 6 months* +8.33% +2.13% +7.43% +3.43% +7.43% +6.43% +8.28% +7.69% 1 year -3.19% -8.77% -4.22% -8.05% -4.79% -4.79% N/A -3.70% 3 years +2.30% +0.29% +1.51% +0.53% +1.51% +1.51% N/A +2.50% 5 years -21.77% -22.69% -22.43% -22.47% N/A N/A N/A -21.77% Since inception +3.17% +2.45% +2.34% +2.34% -21.55% -21.55% +7.65%* +3.17%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to eligible investors only, currently limited to AXP Portfolio Builder Series funds, six affiliated funds-of-funds. (6) Sales charge is not applicable to these shares. Shares available to institutional investors only. * Not annualized. - -------------------------------------------------------------------------------- 5 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, portfolio manager Nina Hughes discusses the Fund's results and positioning for the semiannual period. Q: How did AXP Global Technology Fund perform for the six months ended April 30, 2005? A: AXP Global Technology Fund's Class A shares fell 4.37% (excluding sales charge) for the six months ended April 30, 2005. This outpaced the Fund's benchmark, the unmanaged Goldman Sachs Technology Index(R) Composite Index (GSTI(R) Composite Index), which decreased 5.56%. However, the Fund underperformed the Lipper Science and Technology Funds Index, representing the Fund's peer group, which fell 3.52% over the same period. Q: What factors most significantly affected performance during the semiannual period? A: The technology sector was one of the key beneficiaries of the equity market rally during the fourth calendar quarter of 2004, but the sector faced several macroeconomic and market headwinds in the first four months of 2005 that resulted in negative absolute returns across the board for the semiannual period. First, technology stocks historically do not do well in a period of rising gold and oil prices, as concerns about the effects of record-setting commodity prices on consumer spending come to the forefront and tend to make investors more risk averse. Second, the combination of weaker-than-expected consumer spending during the December 2004 holiday season and a somewhat slower-than-anticipated pickup in corporate spending led to negative earnings guidance by several of the leading technology companies, especially in the semiconductor industry. Third, the lunar new year celebrated in Asia came later than usual in 2005, thus diminishing the seasonal uptick in demand ordinarily experienced in the fourth calendar quarter. Indeed, the sector's weak semiannual results had little to do with fundamental data from individual technology companies. On a relative basis, the Fund's stock selection in the hardware and semiconductor industries detracted from performance. These industries also performed poorly on an absolute basis. However, stock selection in the software and Internet industries boosted the Fund's relative results, especially in the Internet area, which underperformed the GSTI(R) Composite Index on an absolute basis. - -------------------------------------------------------------------------------- 6 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> During the period, we reduced the Fund's exposure to software and computer services companies, primarily because we saw more compelling valuations elsewhere. (end callout quote) The Fund's biggest individual stock contributor to performance for the semiannual period on both an absolute and relative basis was mid-capitalization software company Macromedia. Macromedia provides web publishing, multimedia solutions and web conferencing for enterprises and individual consumers. The company benefited during the period from enthusiastic anticipation about its new product cycle, including FlashPlayer for cell phones, from effective execution of its new product launches and from steady maintenance of its existing product line. During the period, Macromedia was acquired by Adobe Software at a premium. We reduced the Fund's sizable position in Macromedia by about half, as its share price appreciated upon the news of the acquisition. Still, we maintain the holding, as we believe the price on Adobe shares has become compelling as its share price declined after it announced the acquisition. Another strong performer for the Fund on an absolute and relative basis was large-capitalization company Corning, which among other products, is one of the world's leading glass substrate makers. Sirius Satellite Radio was also a strong performer for the Fund on an absolute and relative basis during the semiannual period. This mid-capitalization stock saw its share price rise on positive subscriber growth and a new chief executive officer who brought in several popular on-air radio personalities, including Howard Stern and Martha Stewart. Given the publicity this company received during the period, we felt the stock got ahead of itself, and we sold the Fund's position in Sirius at a profit. Of course, there were disappointments as well. Small-capitalization semiconductor equipment company Credence Systems fell along with the semiconductor - -------------------------------------------------------------------------------- 7 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Questions & Answers industry as a whole. Small-cap companies were hit particularly hard, as investors who stayed within the industry fled for quality. We continued to hold shares of Credence Systems, as we believe the company is better positioned for the next cycle than it had been previously. Also, we believe Credence Systems' currently distressed valuation, strong technology and gain in market share with customers such as Intel make it an attractive acquisition candidate. Another holding that detracted from the Fund's absolute and relative results was Gateway, the mid-capitalization hardware manufacturer in the personal computer area. We had purchased Gateway based on its restructuring plans and its plans to gain market share, which would potentially offer strong top-line and bottom-line growth. However, the company did not execute its plans well. The company also struggled against macroeconomic worries about consumer spending. We sold the Fund's position in Gateway during the period. This proved to be a prudent move, as the stock declined further after our sale date. Large-capitalization software security firm Symantec also detracted from the Fund's semiannual performance. We bought Symantec during the period at an attractive valuation following the stock's decline upon the news of its acquisition by VERITAS. However, its share price subsequently fell further as the merger had yet to be finalized at the end of the period, compounded by a news release about a potentially competing antivirus product being issued by Microsoft. We continue to hold this stock, as we believe Symantec will rebound from what we believe is temporary headline risk rather than any change in the company's strong fundamentals. Q: What changes did you make to the Fund and how is it currently positioned? A: During the period, we reduced the Fund's exposure to software and computer services companies, primarily because we saw more compelling valuations elsewhere. Indeed, we believe we found several stock specific opportunities and attractive valuations in semiconductors and computer hardware and added to the Fund's positions in both of these industries toward the end of the period. - -------------------------------------------------------------------------------- 8 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Questions & Answers We thought the negative attitude toward these areas was overdone and that semiconductors and hardware companies should benefit in the coming months from slow but steady growth in the economy. Furthermore in the particularly hard-hit semiconductor area, inventory levels that were an issue last year generally appear to be resolving themselves, and the group has the potential to benefit from pricing stability and new technology initiatives, such as high definition TVs, multimedia and wireless components. We also added to the Fund's holdings in the wireless area within the telecommunications service sector, primarily through an increased position in Nokia. Within the Internet industry, we made some changes. We eliminated the Fund's position in eBay, taking profits. We also added to an existing position in Yahoo and established a position in Google upon positive news flow from these larger companies. Overall, we added to the Fund's exposure to large-capitalization stocks at the expense of small- and mid-capitalization stocks. We believe larger-cap technology stocks generally have more compelling valuations currently and may well outperform going forward should the risk-averse sentiment seen in March and April 2005 become even more pronounced in the months ahead as anticipated. Throughout the semiannual period, we sought growth stocks with reasonable valuations using traditional fundamental analysis. As of April 30, 2005, the Fund held significant positions in semiconductors, computer hardware and telecommunications services and equipment relative to the GSTI(R) Composite Index and more modest positions in computer software and computer services. The Fund held relatively neutral positions to the GSTI(R) Composite Index in the Internet and networking industries. Our flexibility to move between the technology subsectors and avoid others completely if conditions warrant can provide a potential competitive advantage over our peers. - -------------------------------------------------------------------------------- 9 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Questions & Answers Q: How do you intend to manage the Fund in the coming months? A: We believe the technology sector could rebound somewhat in the months ahead from the headwinds it faced for much of the semiannual period. While there are still macroeconomic concerns in play, such as persistently high oil prices and rising interest rates, we believe the U.S. economy should continue to grow steadily even if at a slower pace than in 2004. Indeed, preliminary estimates put first quarter 2005 gross domestic product at an annualized rate of 3.1%. Although slower than the annualized rate of 3.8% in the fourth quarter of 2004, it remains a healthy picture overall. Also, we now believe we are reaching compelling valuations in technology stocks. We have not seen such attractive valuations for a long time, with several large-cap technology stocks currently trading at a discount to the S&P 500 Index.* Another positive is that technology companies are generally lean from cost-cutting measures undertaken. Thus, when conditions do improve, we should see significant earnings leverage. Finally, investor sentiment has not been this negative nor has the appetite for risk been this low for a while. Therefore, we believe that by the end of the year, if not before, the market may get to a point where there will be opportunities to become a bit more aggressive and take on a bit more risk. In this environment, we believe effective stock picking based on value and growth potential will continue to be key. We remain focused on seeking those individual technology companies with the best fundamental prospects at the most reasonable prices. * Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or fees. - -------------------------------------------------------------------------------- 10 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Investments in Securities World Technologies Portfolio April 30, 2005 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (95.7%) Issuer Shares Value(a) Cable (0.8%) Comcast Cl A 41,900(b) $1,345,409 Computer hardware (16.0%) Cisco Systems 491,000(b) 8,484,480 Dell 280,522(b) 9,770,581 EMC 414,175(b) 5,433,976 Hewlett-Packard 86,400 1,768,608 Sun Microsystems 617,500(b) 2,241,525 Total 27,699,170 Computer software & services (25.1%) Accenture Cl A 97,877(b,c) 2,123,931 Affiliated Computer Services Cl A 42,800(b) 2,040,276 Blue Coat Systems 8,450(b) 121,680 Business Objects ADR 23,028(b,c,d) 594,353 Cognizant Technology Solutions Cl A 70,885(b) 2,977,879 Electronic Arts 26,265(b) 1,402,288 Google Cl A 11,950(b) 2,629,000 i2 Technologies 112,800(b) 885,480 Juniper Networks 143,375(b) 3,238,841 Macromedia 93,100(b) 3,687,690 MatrixOne 285,100(b) 1,217,377 Mercury Interactive 30,850(b) 1,275,031 Microsoft 113,700 2,876,610 Ness Technologies 169,700(b,c) 1,815,790 Open Solutions 64,100(b) 1,198,670 OPNET Technologies 100,000(b) 779,000 Oracle 272,300(b) 3,147,788 Paychex 93,500 2,861,100 Satyam Computer Services ADR 46,200(c,d) 990,990 Symantec 175,400(b) 3,294,012 Telvent GIT 60,000(b,c) 525,000 TIBCO Software 298,850(b) 2,133,789 VERITAS Software 78,200(b) 1,610,138 Total 43,426,713 Common stocks (continued) Issuer Shares Value(a) Electronics (31.4%) Amkor Technology 208,200(b) $672,486 Analog Devices 89,900 3,066,489 ASML Holding 116,500(b,c) 1,688,085 Broadcom Cl A 185,800(b) 5,557,278 Credence Systems 419,000(b) 2,635,510 Cypress Semiconductor 204,100(b) 2,447,159 Flextronics Intl 61,400(b,c) 684,610 Freescale Semiconductor Cl A 94,468(b) 1,768,441 Genesis Microchip 191,200(b) 2,736,072 Intel 286,000 6,726,719 Marvell Technology Group 70,700(b,c) 2,367,036 Maxim Integrated Products 91,200 3,410,880 MEMC Electronic Materials 11,900(b) 139,587 Microchip Technology 51,450 1,465,296 Samsung Electronics 14,150(c) 6,472,283 Semtech 96,500(b) 1,629,885 Spatialight 205,225(b,d) 927,617 Taiwan Semiconductor Mfg ADR 214,800(c) 1,849,428 Texas Instruments 237,000 5,915,520 Xilinx 73,700 1,985,478 Total 54,145,859 Leisure time & entertainment (1.5%) Gemstar-TV Guide Intl 672,000(b) 2,587,200 Media (5.8%) iVillage 405,350(b) 2,655,043 XM Satellite Radio Holdings Cl A 59,100(b) 1,639,434 Yahoo! 164,000(b) 5,659,640 Total 9,954,117 Retail -- general (1.1%) Circuit City Stores 117,550 1,857,290 Telecom equipment & services (11.1%) Corning 365,900(b) 5,031,125 Harmonic 6,800(b) 37,468 JDS Uniphase 588,000(b) 870,240 Motorola 160,500 2,462,070 Nokia ADR 341,300(c) 5,453,974 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Telecom equipment & services (cont.) Qwest Communications Intl 251,100(b) $858,762 Vodafone Group ADR 167,500(c) 4,378,450 Total 19,092,089 Utilities -- telephone (2.9%) MCI 49,600 1,315,888 Sprint 168,850 3,758,601 Total 5,074,489 Total common stocks (Cost: $169,517,428) $165,182,336 Other (--%) Issuer Shares Value(a) UBI Soft Entertainment Warrants 5,712(b) $25,577 Total other (Cost: $19,674) $25,577 Short-term securities (5.5%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies (4.2%) Federal Home Loan Bank Disc Nt 05-18-05 2.81% $1,800,000 $1,797,330 Federal Home Loan Mtge Corp Disc Nts 06-13-05 2.79 3,000,000 2,989,562 06-15-05 2.70 1,400,000 1,395,082 Federal Natl Mtge Assn Disc Nt 06-06-05 2.74 1,100,000 1,096,825 Total 7,278,799 Commercial paper (1.3%) Falcon Asset Securitization 05-02-05 2.96 2,300,000 2,299,433 Total short-term securities (Cost: $9,578,216) $9,578,232 Total investments in securities (Cost: $179,115,318)(f) $174,786,145 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 April 30, 2005, the value of foreign securities represented 16.8% of net assets. (d) At April 30, 2005, 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 1.4% of net assets. See Note 4 to the financial statements. 4.1% of net assets is the Portfolio's cash equivalent position. (f) At April 30, 2005, the cost of securities for federal income tax purposes was approximately $179,115,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 12,215,000 Unrealized depreciation (16,544,000) ----------- Net unrealized depreciation $ (4,329,000) ------------ 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. - -------------------------------------------------------------------------------- 12 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Financial Statements Statement of assets and liabilities World Technologies Portfolio April 30, 2005 (Unaudited) Assets Investments in securities, at value (Note 1)* (identified cost $179,115,318) $174,786,145 Cash in bank on demand deposit 121,995 Dividends and accrued interest receivable 38,377 Receivable for investment securities sold 5,804,706 --------- Total assets 180,751,223 ----------- Liabilities Payable for investment securities purchased 5,614,536 Payable upon return of securities loaned (Note 4) 2,428,000 Accrued investment management services fee 3,392 Other accrued expenses 29,372 ------ Total liabilities 8,075,300 --------- Net assets $172,675,923 ============ * Including securities on loan, at value (Note 4) $ 2,285,432 ------------ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statement of operations World Technologies Portfolio Six months ended April 30, 2005 (Unaudited) Investment income Income: Dividends $ 686,169 Interest 42,797 Fee income from securities lending (Note 4) 74,399 Less foreign taxes withheld (35,431) ------- Total income 767,934 ------- Expenses (Note 2): Investment management services fee 839,343 Compensation of board members 5,148 Custodian fees 22,545 Audit fees 12,000 Other 3,600 ----- Total expenses 882,636 Earnings credits on cash balances (Note 2) (1,667) ------ Total net expenses 880,969 ------- Investment income (loss) -- net (113,035) -------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 13,022,201 Foreign currency transactions 12,410 ------ Net realized gain (loss) on investments 13,034,611 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (18,821,726) ----------- Net gain (loss) on investments and foreign currencies (5,787,115) ---------- Net increase (decrease) in net assets resulting from operations $ (5,900,150) ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets World Technologies Portfolio April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ (113,035) $ (1,343,295) Net realized gain (loss) on investments 13,034,611 14,444,467 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (18,821,726) 53,902 ----------- ------ Net increase (decrease) in net assets resulting from operations (5,900,150) 13,155,074 ---------- ---------- Proceeds from contributions 440,013 8,830,768 Fair value of withdrawals (31,766,190) (26,055,794) ----------- ----------- Net contributions (withdrawals) from partners (31,326,177) (17,225,026) ----------- ----------- Total increase (decrease) in net assets (37,226,327) (4,069,952) Net assets at beginning of period 209,902,250 213,972,202 ----------- ----------- Net assets at end of period $172,675,923 $209,902,250 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Notes to Financial Statements World Technologies Portfolio (Unaudited as to April 30, 2005) 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. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. - -------------------------------------------------------------------------------- 16 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. - -------------------------------------------------------------------------------- 17 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. 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 0.72% 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. 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 increased the fee by $113,203 for the six months ended April 30, 2005. 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. - -------------------------------------------------------------------------------- 18 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. During the six months ended April 30, 2005, the Portfolio's custodian fees were reduced by $1,667 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 $83,453,486 and $115,351,766, respectively, for the six months ended April 30, 2005. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES At April 30, 2005, securities valued at $2,285,432 were on loan to brokers. For collateral, the Portfolio received $2,428,000 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 $74,399 for the six months ended April 30, 2005. 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, 2005(e) 2004 2003 2002 2001 Ratio of expenses to average daily net assets(a) .87%(b) .87% .84% .77% .75% Ratio of net investment income (loss) to average daily net assets (.11%)(b) (.61%) (.37%) (.51%) (.11%) Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233% Total return(c) (3.82%)(d) 6.91% 68.97% (34.78%) (69.21%)
(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) Adjusted to an annual basis. (c) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. (d) Not annualized. (e) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 19 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP Global Technology Fund April 30, 2005 (Unaudited) Assets Investment in Portfolio (Note 1) $ 172,646,145 Capital shares receivable 1,468 ----- Total assets 172,647,613 ----------- Liabilities Capital shares payable 91,860 Accrued distribution fee 2,248 Accrued service fee 1 Accrued transfer agency fee 1,959 Accrued administrative services fee 282 Other accrued expenses 53,300 ------ Total liabilities 149,650 ------- Net assets applicable to outstanding capital stock $ 172,497,963 ============= Represented by Capital stock -- $.01 par value (Note 1) $ 1,027,507 Additional paid-in capital 575,842,426 Net operating loss (1,240,835) Accumulated net realized gain (loss) (Note 5) (398,802,823) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,328,312) ---------- Total -- representing net assets applicable to outstanding capital stock $ 172,497,963 ============= Net assets applicable to outstanding shares: Class A $ 119,579,176 Class B $ 49,304,621 Class C $ 3,332,507 Class I $ 10,375 Class Y $ 271,284 Net asset value per share of outstanding capital stock: Class A shares 68,250,423 $ 1.75 Class B shares 32,171,398 $ 1.53 Class C shares 2,168,709 $ 1.54 Class I shares 5,882 $ 1.76 Class Y shares 154,298 $ 1.76 ------- -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statement of operations AXP Global Technology Fund Six months ended April 30, 2005 (Unaudited) Investment income Income: Dividends $ 686,062 Interest 42,791 Fee income from securities lending 74,386 Less foreign taxes withheld (35,425) ------- Total income 767,814 ------- Expenses (Note 2): Expenses allocated from Portfolio 880,834 Distribution fee Class A 174,852 Class B 286,935 Class C 19,069 Transfer agency fee 411,740 Incremental transfer agency fee Class A 30,983 Class B 22,575 Class C 1,161 Service fee -- Class Y 199 Administrative services fees and expenses 62,406 Compensation of board members 4,756 Printing and postage 73,095 Registration fees 35,475 Audit fees 4,000 Other 3,627 ----- Total expenses 2,011,707 Earnings credits on cash balances (Note 2) (3,058) ------ Total net expenses 2,008,649 --------- Investment income (loss) -- net (1,240,835) ---------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 13,020,391 Foreign currency transactions 12,408 ------ Net realized gain (loss) on investments 13,032,799 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (18,818,790) ----------- Net gain (loss) on investments and foreign currencies (5,785,991) ---------- Net increase (decrease) in net assets resulting from operations $ (7,026,826) ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets AXP Global Technology Fund April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ (1,240,835) $ (3,788,715) Net realized gain (loss) on investments 13,032,799 14,442,457 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (18,818,790) 53,737 ----------- ------ Net increase (decrease) in net assets resulting from operations (7,026,826) 10,707,479 ---------- ---------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 6,810,002 32,538,914 Class B shares 2,433,785 8,831,756 Class C shares 221,721 1,113,196 Class I shares -- 10,000 Class Y shares 95,759 361,012 Payments for redemptions Class A shares (28,630,285) (39,802,082) Class B shares (Note 2) (10,271,598) (16,473,859) Class C shares (Note 2) (693,992) (1,305,583) Class I shares -- -- Class Y shares (226,877) (191,700) -------- -------- Increase (decrease) in net assets from capital share transactions (30,261,485) (14,918,346) ----------- ----------- Total increase (decrease) in net assets (37,288,311) (4,210,867) Net assets at beginning of period 209,786,274 213,997,141 ----------- ----------- Net assets at end of period $172,497,963 $209,786,274 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Notes to Financial Statements AXP Global Technology Fund (Unaudited as to April 30, 2005) 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 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. 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 April 30, 2005, 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, transfer agency fees 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 April 30, 2005 was 99.98%. Valuation of securities held by the Portfolio is discussed in Note 1 of the Portfolio's "Notes to financial statements" (included elsewhere in this report). - -------------------------------------------------------------------------------- 23 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL 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 net asset value. 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. - -------------------------------------------------------------------------------- 24 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. 2. EXPENSES AND SALES CHARGES In addition to the expenses allocated from the Portfolio, the Fund accrues its own expenses as follows: The Fund has an agreement with AEFC to provide administrative services. Under an Administrative Services Agreement, the Fund pays AEFC a fee for administration and accounting services at a percentage of the Fund's average daily net assets 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 pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. - -------------------------------------------------------------------------------- 25 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $136,920 for Class A, $52,817 for Class B and $293 for Class C for the six months ended April 30, 2005. AEFC and its affiliates have agreed to waive certain fees and expenses until Oct 31, 2005. Under this agreement, net expenses will not exceed 1.82% 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 six months ended April 30, 2005, the Fund's transfer agency fees were reduced by $3,058 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2005 Class A Class B Class C Class I Class Y Sold 3,636,676 1,480,914 135,134 -- 51,410 Issued for reinvested distributions -- -- -- -- -- Redeemed (15,339,131) (6,300,221) (423,984) -- (122,545) ----------- ---------- -------- ----- -------- Net increase (decrease) (11,702,455) (4,819,307) (288,850) -- (71,135) ----------- ---------- -------- ----- ------- 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. 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 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. The Fund had no borrowings outstanding during the six months ended April 30, 2005. - -------------------------------------------------------------------------------- 26 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL 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, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $1.83 $1.72 $1.03 $1.60 $ 5.26 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) (.01) (.03) (.02) (.03) (.02) Net gains (losses) (both realized and unrealized) (.07) .14 .71 (.54) (3.64) ----- ----- ----- ----- ------ Total from investment operations (.08) .11 .69 (.57) (3.66) ----- ----- ----- ----- ------ Net asset value, end of period $1.75 $1.83 $1.72 $1.03 $ 1.60 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $120 $146 $145 $81 $146 Ratio of expenses to average daily net assets(b) 1.76%(c) 1.74% 1.94% 1.91% 1.63% Ratio of net investment income (loss) to average daily net assets (.99%)(c) (1.48%) (1.47%) (1.65%) (.99%) Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233% Total return(d) (4.37%)(e) 6.40% 66.99% (35.62%) (69.58%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 27 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $1.60 $1.53 $.92 $1.44 $ 4.77 ----- ----- ---- ----- ------ Income from investment operations: Net investment income (loss) (.02) (.04) (.03) (.04) (.04) Net gains (losses) (both realized and unrealized) (.05) .11 .64 (.48) (3.29) ----- ----- ---- ----- ------ Total from investment operations (.07) .07 .61 (.52) (3.33) ----- ----- ---- ----- ------ Net asset value, end of period $1.53 $1.60 $1.53 $.92 $ 1.44 ----- ----- ---- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $49 $59 $64 $38 $67 Ratio of expenses to average daily net assets(b) 2.54%(c) 2.52% 2.75% 2.71% 2.42% Ratio of net investment income (loss) to average daily net assets (1.78%)(c) (2.26%) (2.27%) (2.45%) (1.78%) Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233% Total return(d) (4.38%)(e) 4.58% 66.30% (36.11%) (69.81%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 28 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $1.61 $1.53 $.92 $1.44 $ 4.77 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) (.02) (.04) (.03) (.04) (.04) Net gains (losses) (both realized and unrealized) (.05) .12 .64 (.48) (3.29) ----- ----- ----- ----- ------ Total from investment operations (.07) .08 .61 (.52) (3.33) ----- ----- ----- ----- ------ Net asset value, end of period $1.54 $1.61 $1.53 $.92 $ 1.44 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $3 $4 $4 $2 $4 Ratio of expenses to average daily net assets(b) 2.52%(c) 2.49% 2.72% 2.69% 2.42% Ratio of net investment income (loss) to average daily net assets (1.76%)(c) (2.23%) (2.26%) (2.39%) (1.84%) Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233% Total return(d) (4.35%)(e) 5.23% 66.30% (36.11%) (69.81%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 29 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class I Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(g) 2004(b) Net asset value, beginning of period $1.83 $1.70 ----- ----- Income from investment operations: Net investment income (loss) (.01) (.02) Net gains (losses) (both realized and unrealized) (.06) .15 ----- ----- Total from investment operations (.07) .13 ----- ----- Net asset value, end of period $1.76 $1.83 ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $-- $-- Ratio of expenses to average daily net assets(c) 1.09%(d) 1.03%(d) Ratio of net investment income (loss) to average daily net assets (.22%)(d) (.73%)(d) Portfolio turnover rate (excluding short-term securities) 43% 349% Total return(e) (3.83%)(f) 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. (g) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 30 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $1.83 $1.72 $1.03 $1.60 $ 5.25 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) (.01) (.02) (.02) (.03) (.02) Net gains (losses) (both realized and unrealized) (.06) .13 .71 (.54) (3.63) ----- ----- ----- ----- ------ Total from investment operations (.07) .11 .69 (.57) (3.65) ----- ----- ----- ----- ------ Net asset value, end of period $1.76 $1.83 $1.72 $1.03 $ 1.60 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $-- $-- $-- $-- $-- Ratio of expenses to average daily net assets(b) 1.57%(c) 1.55% 1.69% 1.72% 1.49% Ratio of net investment income (loss) to average daily net assets (.83%)(c) (1.28%) (1.25%) (1.61%) (.89%) Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233% Total return(d) (3.83%)(e) 6.40% 66.99% (35.63%) (69.52%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 31 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Fund Expenses Example (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2005. Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 32 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses account value account value paid during Annualized Nov. 1, 2004 April 30, 2005 the period(a) expense ratio Class A Actual(b) $1,000 $956.30 $8.58 1.76% Hypothetical (5% return before expenses) $1,000 $1,016.16 $8.85 1.76% Class B Actual(b) $1,000 $956.20 $12.39 2.54% Hypothetical (5% return before expenses) $1,000 $1,012.27 $12.74 2.54% Class C Actual(b) $1,000 $956.50 $12.29 2.52% Hypothetical (5% return before expenses) $1,000 $1,012.37 $12.64 2.52% Class I Actual(b) $1,000 $961.70 $5.33 1.09% Hypothetical (5% return before expenses) $1,000 $1,019.50 $5.49 1.09% Class Y Actual(b) $1,000 $961.70 $7.68 1.57% Hypothetical (5% return before expenses) $1,000 $1,017.10 $7.90 1.57%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2005: -4.37% for Class A, -4.38% for Class B, -4.35% for Class C, -3.83% for Class I and -3.83% for Class Y. - -------------------------------------------------------------------------------- 33 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT Approval of Investment Management Services Agreement American Express Financial Corporation (AEFC), a wholly-owned subsidiary of American Express Company, serves as the investment manager to the Fund. Under an Investment Management Services Agreement (the Agreement), AEFC provides investment advice and other services to the Fund. Throughout the year, the Funds' Board of Directors and the Board's Investment Review Committee monitor these services. Each year the Board determines whether to continue the Agreement by evaluating the quality and level of service received and the costs associated with those services. AEFC prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations to assist the Board in making this determination. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the Agreement. On February 1, 2005, American Express Company announced its intention to pursue a spin-off of AEFC by distributing shares of the common stock of AEFC to shareholders of American Express Company. At a meeting held in person on April 14, 2005, the Board, including a majority of the independent members, approved the continuation of the Agreement for an interim period, not to exceed one year, ending on the later of (i) the effective date of the spin-off or (ii) the approval by the Fund's shareholders of a new investment management services agreement with AEFC (the Interim Period). The spin-off will not result in an "assignment" of the Agreement under the Investment Company Act of 1940 and, therefore, will not cause the termination of the Agreement according to its terms. In connection with the spin-off AEFC has proposed that going forward, services under the Agreement be provided by an affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel advised the Board that it would be prudent, in connection with the spin-off, to consider a new agreement with RiverSource and to seek shareholder approval of that agreement as soon as practical thereafter. Investment performance is a major factor in the evaluation process, and the Board reviewed the Fund's performance over a range of different periods by comparing its performance to relevant Lipper and broader market indices. The Board considered that over time the Fund's investment performance should be above the median for a peer group of funds with similar investment goals and noted that the Fund's investment performance in 2004 exceeded the median. The Board noted that, in addition to portfolio management and investment research, AEFC provides portfolio trading, daily net asset value calculation, management of cash flow, product development, administration of its compliance and legal departments, access to distribution, accounting and recordkeeping, and reporting to the Board and shareholders. To evaluate these services, the Board referred to surveys and benchmarks established by commercial providers, trade associations and AEFC's internal processes. The Board concluded that the services provided were consistent with services provided by investment managers to comparable mutual funds. - -------------------------------------------------------------------------------- 34 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT The Board also evaluated the price paid for the services provided by AEFC, noting the existence of a pricing philosophy, established by the Board and AEFC, that seeks to maintain total Fund expenses within a range of the median expenses charged to comparable funds sold through financial advisors. The Board considered detailed information set forth in an annual report on fees and expenses, including, among other things, data showing a comparison of the Fund's expenses with median expenses paid by funds in its comparison group and data showing the Fund's contribution to AEFC's profitability. The Board determined that the total expense ratio of the Fund is below the median of its comparison group. The Board considered the economies of scale that might be realized by AEFC as the Fund grew and took note of the extent to which Fund shareholders also might benefit from such growth. The Board considered that the Agreement provided for lower fees as assets increase at pre-established breakpoints and concluded that the Agreement satisfactorily provided for sharing these economies of scale. The Board took into account the Contract Committee's discussion comparing the fees AEFC charges to the Fund with those it charges to institutional clients, noting that the relatively higher fees paid by the Fund were principally attributable to the additional services required to manage a regulated mutual fund, like the Fund, and the operation of a large mutual fund family. The Board also considered the profitability realized by AEFC and its affiliates from its relationship with the Fund. The Board took into account the services acquired by AEFC through the use of commission dollars paid by the Fund on portfolio transactions. The Board concluded that AEFC's overall costs and profitability were appropriate, although profitability may be too low on an ongoing basis. The Board noted that the fees paid by the Fund should permit AEFC to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. Based on the foregoing, the Board concluded that the fees paid to AEFC under the Agreement were fair and reasonable and determined to approve renewal of the Agreement for the Interim Period. Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website americanexpress.com/funds; or by searching the website of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available at http://www.sec.gov. - -------------------------------------------------------------------------------- 35 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Threadneedle Emerging Markets Fund Semiannual Report for the Period Ended April 30, 2005 AXP Threadneedle Emerging Markets Fund seeks to provide shareholders with long-term capital growth. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 6 Investments in Securities 10 Financial Statements (Portfolio) 14 Notes to Financial Statements (Portfolio) 17 Financial Statements (Fund) 21 Notes to Financial Statements (Fund) 24 Fund Expenses Example 33 Approval of Investment Management Services Agreement 35 Proxy Voting 37 CORPORATE REORGANIZATION On Feb. 1, 2005, American Express Company, the parent company of the Fund's investment manager, American Express Financial Corporation (AEFC), announced plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders of American Express Company. The transaction, expected to be completed in the third quarter of 2005, is subject to certain regulatory and other approvals, as well as final approval by the board of directors of American Express Company. Upon completion of the transaction AEFC will be a publicly traded company separate from American Express Company. The current agreements between the Fund and AEFC and its affiliates will remain in place. No changes in operations or personnel, including the portfolio manager or managers of the Fund, are anticipated. The current subadvisory agreement will remain in place. (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Fund Snapshot AT APRIL 30, 2005 PORTFOLIO MANAGERS Portfolio managers* Since Years in industry Julian Thompson 1/00 11 Jules Mort 10/03 7 * The Fund is managed by a team led by Julian Thompson and Jules Mort. FUND OBJECTIVE For investors seeking long-term growth of capital. Inception dates by class A: 11/13/96 B: 11/13/96 C: 6/26/00 I: 3/4/04 Y: 11/13/96 Ticker symbols by class A: IDEAX B: IEMBX C: -- I: -- Y: -- Total net assets $358.5 million Number of holdings 77 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL COUNTRY COMPOSITION Percentage of portfolio assets (pie chart) Taiwan 13.0% South Korea 12.8% South Africa 11.4% Mexico 10.1% Brazil 9.7% Russia 6.1% India 5.5% Israel 5.5% Thailand 3.8% China 3.2% Hong Kong 3.2% Cash & short-term securities 2.9% Hungary 2.8% Indonesia 2.8% Peru 1.2% Malaysia 1.1% Netherlands 1.1% Czechoslovakia Federated Republic 1.0% Other* 2.8% * Includes Argentina, Egypt, Philippine Islands, Poland and Turkey. TOP TEN HOLDINGS Percentage of portfolio assets Samsung Electronics (South Korea) 5.6% Petroleo Brasileiro ADR (Brazil) 3.5 Cia Vale do Rio Doce ADR (Brazil) 3.4 Taiwan Semiconductor Mfg (Taiwan) 3.4 Mobile Telesystems ADR (Russia) 2.9 POSCO (South Korea) 2.5 LUKOIL ADR (Russia) 2.3 Chinatrust Financial Holding (Taiwan) 2.2 America Movil ADR Series L (Mexico) 2.0 Teva Pharmaceutical Inds ADR (Israel) 2.0 For further detail about these holdings, please refer to the section entitled "Investments in Securities." There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Stocks of small- and medium-sized companies may be subject to more abrupt or erratic price movement than stocks of larger companies. Some of these companies also may have fewer financial resources, Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Performance Summary (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2005 +12.61% +13.63% +12.52% +12.61% = AXP Threadneedle Emerging Markets Fund Class A (excluding sales charge) +13.63% = MSCI Emerging Markets Index(1) (unmanaged) +12.52% = Lipper Emerging Markets Funds Index(2) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919 or visiting www.americanexpress.com/funds. (1) The Morgan Stanley Capital International (MSCI) Emerging Markets Index, an unmanaged market capitalization-weighted index, is compiled from a composite of securities markets of 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Emerging Markets Funds Index includes the 30 largest emerging markets funds tracked by Lipper Inc. The index's returns include net reinvested dividends. 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 because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 4 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Performance Summary
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class I Class Y (Inception dates) (11/13/96) (11/13/96) (6/26/00) (3/4/04) (11/13/96) After After NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6) at April 30, 2005 6 months* +12.61% +6.12% +12.10% +8.10% +11.94% +10.94% +12.67% +12.56% 1 year +19.67% +12.79% +18.89% +14.89% +18.88% +18.88% +20.23% +19.92% 3 years +14.78% +12.54% +13.94% +13.17% +14.00% +14.00% N/A +15.07% 5 years +3.43% +2.21% +2.65% +2.47% N/A N/A N/A +3.72% Since inception +4.66% +3.93% +3.86% +3.86% +3.70% +3.70% +8.22% +4.86% at March 31, 2005 6 months* +18.93% +12.09% +18.37% 14.37% +18.56% +17.56% +19.11% +19.00% 1 year +11.76% +5.33% +10.88% +6.88% +11.07% +11.07% +12.36% +12.07% 3 years +15.45% +13.20% +14.51% +13.74% +14.65% +14.65% N/A +15.66% 5 years +1.82% +0.62% +1.03% +0.84% N/A N/A N/A +2.07% Since inception +5.01% +4.27% +4.20% +4.20% +4.28% +4.28% +11.30% +5.20%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to eligible investors only, currently limited to AXP Portfolio Builder Series funds, six affiliated funds-of-funds. (6) Sales charge is not applicable to these shares. Shares available to institutional investors only. * Not annualized. - -------------------------------------------------------------------------------- 5 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, portfolio managers Julian Thompson and Jules Mort discuss the Fund's results and positioning for the semiannual period. Q: How did AXP Threadneedle Emerging Markets Fund perform for the six months ended April 30, 2005? A: AXP Threadneedle Emerging Markets Fund rose 12.61% (Class A shares excluding sales charge) for the six months ended April 30, 2005. This was less than the Fund's benchmark, the MSCI Emerging Markets Index, which advanced 13.63% for the period. The Fund's peer group, as represented by the Lipper Emerging Markets Funds Index, was up 12.52% for the same time frame. Q: How did market conditions and country positioning affect performance? A: Fund performance during the six-month period was helped by a large exposure in Brazil. However, detracting from performance was the Fund's underweight position in Korea, which was by far the largest weighting within the Fund's benchmark, the MSCI Emerging Markets Index. The Fund also started the period with low exposure to the industrials sector, which was one of the strongest performing sectors. However, good stock selection offset much of the impact of negative sector and country allocation. A large holding in Sampoerna, an Indonesian cigarette manufacturer that has been bought out by U.S.-based Altria, was a particularly strong performer. A holding in Orascom Telecom in Egypt also contributed significantly to performance, as it rose more than 50% during the first few months of the year. The stock was sold during the period when it reached our price target. After a strong start, emerging markets as an asset class gave up most of the gains seen in January and February as expectations for U.S. interest rates turned more hawkish and risk appetite began to wane. Strength in the U.S. dollar, a direct consequence of the change in rate expectations, further undermined sentiment toward emerging markets and led to some unwinding of the "carry trade" that has fueled the recent boom in domestic bond markets. Dollar weakness and low U.S. interest rates have encouraged a "carry trade" in which investors borrow in dollars to buy high-yielding emerging market domestic debt. As U.S. interest rates rise, this carry trade is reversed, providing support for the dollar and removing some liquidity from emerging capital markets. Generally speaking, a weaker dollar is very beneficial for emerging economies because it tends to support emerging market currencies, which in turn creates low inflation, leading to falling interest rates and rising consumption. A weak dollar also tends to inflate commodity - -------------------------------------------------------------------------------- 6 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> We have also continued to build positions in consumer-related stocks such as retailers and mobile telecom providers in light of strong long-term demand. (end callout quote) prices. As emerging economies are net commodity exporters, a weak dollar has been very beneficial for trade balances and industrial confidence in emerging economies. The sell-off in emerging markets during March was felt most acutely in Latin America and the higher risk markets of Eastern Europe and the Middle East. Asia proved relatively resilient, not surprisingly given the high savings ratios and lower debt levels generally displayed by countries in that region. However, the higher risk areas performed better earlier in the year. Turkey, for instance, fell more than 10% during March alone, while Hungary and Poland also recorded double-digit declines. Among the best performing stocks was Israeli agrichemical company Makhteshim-Agan, which continued to gain market share from its global peers thanks to the more flexible contracts it offers. Hong Kong-listed retailers Giordano and Esprit benefited from strong Asian demand. In addition, South African bank ABSA was a strong performer when the proposed takeover bid from U.K.-based Barclays was confirmed during April. Positions in Brazilian iron ore producer CVRD and Korean steel company POSCO detracted from performance against a backdrop of economic growth concerns. Q: What changes did you make to the Fund and how is it currently positioned? A: Our current country/regional allocation reflects our relatively cautious stance, in that we have moved to a neutral position in Latin America and have reduced the Fund's exposure to Eastern Europe, the Middle East and Africa (EMEA). We have increased our exposure to Asia, and we intend to continue to raise the Fund's Asian weighting. We have almost no exposure to Turkey given its poor funding position to issue a lot of debt on a regular basis and, therefore, will be most vulnerable to any reversal of the carry trade, in which there will be fewer buyers for the economy's debt. The largest country overweight in the Fund is Russia, which is prepaying debt rather than increasing issuance. Russia is also benefiting from the recent increase in oil prices topping more than $57 a barrel in the U.S. in April. - -------------------------------------------------------------------------------- 7 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> The structural factors driving emerging markets -- better economic governance, growing access to credit and rising investment -- remain intact and offer an excellent environment for growth in corporate profits. (end callout quote) At the sector level, the Fund had a higher-than-MSCI Emerging Markets Index weighting in financials. We remain committed to our overweight in financials as we believe that we are near the beginning of a durable credit cycle in emerging markets. Increased access to credit will continue to fuel growth in credit to gross domestic product ratios, particularly in Latin America. This will benefit Latin American banks, and we have been building up our holdings in these stocks in recent weeks at the expense of their Asian counterparts. Banks are not the only beneficiaries of burgeoning credit; we have also continued to build positions in consumer-related stocks such as retailers and mobile telecom providers in light of strong long-term demand. Meanwhile, cyclical exposure has been reduced further with sales in the mining sector and a reduction in our long-term position in Samsung following disappointing results. From a sector perspective, we have increased holdings in the energy sector with the purchase of CNOOC in China and ONGC in India. Both are exploration and production companies that should benefit from ongoing strength in oil prices as well as some regulatory reform in the case of ONGC. The Fund is now neutral in the energy sector and also in materials. The Fund's biggest overweight position is in consumer staples. Q: What is the Fund's tactical view and strategy for the months ahead? A: We are relatively cautious on the outlook for emerging markets over the next six months or so. However, we are not expecting a major pullback and we believe that any prolonged weakness would represent an excellent buying opportunity. The structural factors driving emerging markets -- better economic governance, growing access to credit and rising investment -- remain intact and offer an excellent environment for growth in corporate profits. Therefore, we believe that the current cycle in emerging markets is far from over. - -------------------------------------------------------------------------------- 8 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Questions & Answers In previous cycles the unwinding of carry trades resulted in currency devaluations and debt crises. We are not expecting the reversal of the carry trade to be disruptive in this cycle largely because emerging economies are well-funded and have been running relatively tight monetary policies. The impact on emerging economies is therefore likely to be relatively muted. Financial markets, though, are driven by the marginal dollar, and there is no doubt that conditions are likely to be less favorable for emerging capital markets as the carry trade unwinds. It is important to reiterate that the fundamentals in emerging markets remain excellent. The reforms put in place during the crisis years of 1994-1999, when the dollar was relatively strong and emerging currencies were weak, have created a very solid platform for growth during a phase of dollar weakness. Domestic banking systems are liquid and ready to lend; pent-up demand is high and investment is picking up on the back of it. Moreover, emerging markets are generally self-funding, suggesting that this cycle will prove to be relatively durable, unlike the cycle of 1993-1995, which was predominantly funded through short-term external capital and resulted in a wave of devaluations and debt crises once global interest rates began to rise. Also, central banks are now much more transparent and are setting inflation targets with fully flexible exchange rates, eliminating the risks associated with fixed exchange rates. In fact, both Mexico and Brazil have recently been well ahead of the U.S. Federal Reserve in raising rates, suggesting that domestic rates in these two economies are more likely to fall than rise over the next year or so. Nevertheless, we also recognize that short-term capital inflows to emerging economies have been unusually high over the last year couple of years. For that reason, we are relatively cautious on the asset class for the next six months or so. However, we do not anticipate any major reversal for emerging market economies, and we believe that the structural factors driving the performance of the asset class over the last couple of years remain intact. - -------------------------------------------------------------------------------- 9 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Investments in Securities Emerging Markets Portfolio April 30, 2005 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (92.5%)(c) Issuer Shares Value(a) Argentina (0.5%) Home building IRSA Inversiones y Representaciones GDR 157,774(b) $1,776,535 Brazil (6.8%) Energy (3.5%) Petroleo Brasileiro ADR 339,432 12,474,126 Metals (3.3%) Cia Vale do Rio Doce ADR 508,934 11,807,269 China (3.2%) Energy (1.2%) CNOOC 7,815,000 4,204,458 Insurance (1.0%) China Life Insurance Cl H 5,416,000(b) 3,609,285 Telecom equipment & services (1.0%) China Telecom Cl H 10,434,000 3,551,786 Czechoslovakia Federated Republic (1.0%) Health care products Zentiva 93,739(b) 3,463,777 Egypt (0.7%) Telecom equipment & services Orascom Telecom 62,809(b,d) 2,575,169 Hong Kong (3.1%) Retail -- general Esprit Holdings 587,000 4,373,009 Giordano Intl 7,400,000 5,142,142 Sa Sa Intl Holdings 3,814,000 1,748,816 Total 11,263,967 Common stocks (continued) Issuer Shares Value(a) Hungary (2.7%) Banks and savings & loans (1.4%) OTP Bank 166,480 $5,117,720 Health care products (1.3%) Gedeon Richter 39,014 4,742,665 India (5.4%) Banks and savings & loans (1.6%) ICICI Bank ADR 158,546 2,866,512 State Bank of India GDR 71,812 2,574,460 Total 5,440,972 Beverages & tobacco (1.0%) ITC 108,721 3,584,938 Building materials & construction (0.4%) Grasim Inds GDR 58,470(d) 1,558,226 Computer software & services (1.5%) Infosys Technologies 123,772 5,364,796 Energy (0.9%) Oil & Natural Gas 182,236 3,392,480 Indonesia (2.7%) Banks and savings & loans (1.0%) Bank Rakyat Indonesia 13,086,500 3,668,268 Beverages & tobacco (1.7%) HM Sampoerna 5,514,000 6,022,296 Israel (5.4%) Chemicals (1.3%) Makhteshin-Agan Inds 764,927 4,796,377 Computer software & services (1.5%) Check Point Software Technologies 262,909(b) 5,507,943 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Israel (cont.) Electronics (0.5%) Lipman Electronic Engineering 60,243 $1,752,469 Health care products (2.0%) Teva Pharmaceutical Inds ADR 230,320 7,195,197 Malaysia (1.1%) Leisure time & entertainment Resorts World 1,582,800 3,982,391 Mexico (9.9%) Beverages & tobacco (1.9%) Grupo Modelo Series C 2,360,700 6,729,293 Cellular telecommunications (1.9%) America Movil ADR Series L 143,920 7,145,628 Home building (0.1%) Urbi Desarrollos Urbanos 98,700(b) 468,469 Media (1.0%) Grupo Televisa ADR 65,751 3,693,891 Metals (0.7%) Hylsamex Cl B 707,800 2,353,889 Multi-industry (1.1%) Grupo Financiero Banorte Cl O 620,962 4,012,750 Real estate (1.3%) Consorcio ARA 1,477,400(b) 4,568,369 Retail -- general (1.9%) Wal-Mart de Mexico Series V 1,810,012 6,715,578 Netherlands (1.1%) Beverages & tobacco Efes Breweries Intl GDR 119,769(b,d) 3,772,724 Peru (1.2%) Precious metals Compania de Minas Buenaventura ADR 197,125 4,208,619 Philippine Islands (0.8%) Utilities -- telephone Philippine Long Distance Telephone 106,960 2,755,496 Common stocks (continued) Issuer Shares Value(a) Poland (0.8%) Media TVN 205,106(b) $2,710,761 Russia (6.0%) Energy (2.2%) LUKOIL ADR 58,843 7,973,227 Precious metals (1.0%) Mining and Metallurgical Co Norilsk Nickel ADR 64,231 3,564,821 Utilities -- telephone (2.8%) Mobile Telesystems ADR 301,493 10,130,164 South Africa (11.2%) Banks and savings & loans (2.2%) ABSA Group 343,582 4,404,896 Standard Bank Group 367,450 3,667,254 Total 8,072,150 Energy equipment & services (2.0%) Sasol 304,114 7,120,354 Multi-industry (1.0%) Barloworld 235,371 3,570,449 Precious metals (1.4%) AngloGold Ashanti 151,669 4,852,792 Retail -- general (2.1%) JD Group 380,848 3,920,656 Massmart Holdings 491,118 3,550,044 Total 7,470,700 Telecom equipment & services (2.5%) MTN Group 654,424 4,654,644 Telkom 251,546 4,392,156 Total 9,046,800 South Korea (12.6%) Automotive & related (1.0%) Hyundai Motor 66,801 3,636,143 Hyundai Motor GDR 1(d) 27 Total 3,636,170 Banks and savings & loans (1.0%) Kookmin Bank 81,310 3,451,870 Electronics (5.4%) Samsung Electronics 42,749 19,553,612 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) South Korea (cont.) Engineering & construction (1.1%) Hyundai Development 189,910 $3,796,298 Metals (2.5%) POSCO 48,420 8,820,928 Retail -- general (1.6%) Shinsegae 18,076 5,801,319 Taiwan (12.8%) Banks and savings & loans (3.7%) Chinatrust Financial Holding 6,717,234 7,715,900 E.Sun Financial Holding 3,006,000 2,464,197 Taishin Financial Holdings 3,543,360 3,181,928 Total 13,362,025 Computer hardware (2.1%) Asustek Computer 1,274,800 3,411,257 Hon Hai Precision Industry 839,000 3,985,362 Total 7,396,619 Electronics (4.4%) Acer 2,302,172 3,772,890 Taiwan Semiconductor Mfg 7,272,774 12,097,240 Total 15,870,130 Insurance (1.7%) Cathay Financial Holding 3,414,000 6,193,021 Textiles & apparel (0.8%) Far Eastern Textile 4,416,000 3,009,115 Thailand (3.7%) Banks and savings & loans (2.1%) Bangkok Bank 1,600,100 4,342,090 Kasikornbank 2,356,000 3,320,434 Total 7,662,524 Energy equipment & services (0.8%) PTT Public 529,000 2,709,287 Utilities -- telephone (0.8%) Advanced Info Service 1,208,700 2,913,501 Common stocks (continued) Issuer Shares Value(a) Turkey (--%) Beverages & tobacco Anadolu Efes Biracilik ve Malt Sanayil 1 $13 Total common stocks (Cost: $298,136,380) $331,966,466 Preferred stocks (2.7%)(c) Issuer Shares Value(a) Brazil Banco Bradesco 177,486 $5,461,594 Banco Itau Holding Financeira 25,080 4,306,857 Total preferred stocks (Cost: $7,820,214) $9,768,451 Short-term securities (2.8%) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies (2.2%) Federal Home Loan Mtge Corp Disc Nts 05-10-05 2.68% $2,600,000 $2,597,875 06-15-05 2.70 1,800,000 1,793,677 Federal Natl Mtge Assn Disc Nt 05-02-05 2.70 3,600,000 3,599,190 Total 7,990,742 Commercial paper (0.6%) General Electric Capital 05-02-05 2.95 2,200,000 2,199,459 Total short-term securities (Cost: $10,190,591) $10,190,201 Total investments in securities (Cost: $316,147,185)(e) $351,925,118 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (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 April 30, 2005, the value of these securities amounted to $7,906,146 or 2.2% of net assets. (e) At April 30, 2005, the cost of securities for federal income tax purposes was approximately $316,147,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $41,390,000 Unrealized depreciation (5,612,000) ---------- Net unrealized appreciation $35,778,000 ----------- 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 THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities Emerging Markets Portfolio April 30, 2005 (Unaudited) Assets Investments in securities, at value (Note 1) (identified cost $316,147,185) $351,925,118 Foreign currency holdings (identified cost $5,093,677) (Note 1) 5,104,344 Dividends and accrued interest receivable 487,701 Receivable for investment securities sold 17,403,307 ---------- Total assets 374,920,470 ----------- Liabilities Disbursements in excess of cash on demand deposit 114,136 Payable for investment securities purchased 15,786,503 Accrued investment management services fee 10,667 Other accrued expenses 73,376 ------ Total liabilities 15,984,682 ---------- Net assets $358,935,788 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statement of operations Emerging Markets Portfolio Six months ended April 30, 2005 (Unaudited) Investment income Income: Dividends $ 3,785,376 Interest 124,100 Less foreign taxes withheld (352,881) -------- Total income 3,556,595 --------- Expenses (Note 2): Investment management services fee 1,763,506 Compensation of board members 5,273 Custodian fees 153,700 Audit fees 12,000 Other 4,058 ----- Total expenses 1,938,537 Earnings credits on cash balances (Note 2) (1,584) ------ Total net expenses 1,936,953 --------- Investment income (loss) -- net 1,619,642 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 37,450,091 Foreign currency transactions (296,472) -------- Net realized gain (loss) on investments 37,153,619 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (692,936) -------- Net gain (loss) on investments and foreign currencies 36,460,683 ---------- Net increase (decrease) in net assets resulting from operations $38,080,325 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets Emerging Markets Portfolio April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 1,619,642 $ 3,059,315 Net realized gain (loss) on investments 37,153,619 48,079,058 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (692,936) (9,980,094) -------- ---------- Net increase (decrease) in net assets resulting from operations 38,080,325 41,158,279 ---------- ---------- Proceeds from contributions 32,744,658 22,729,634 Fair value of withdrawals (8,189,295) (13,403,405) ---------- ----------- Net contributions (withdrawals) from partners 24,555,363 9,326,229 ---------- --------- Total increase (decrease) in net assets 62,635,688 50,484,508 Net assets at beginning of period 296,300,100 245,815,592 ----------- ----------- Net assets at end of period $358,935,788 $296,300,100 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Notes to Financial Statements Emerging Markets Portfolio (Unaudited as to April 30, 2005) 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. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. - -------------------------------------------------------------------------------- 17 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2005, foreign currency holdings consisted of multiple denominations, primarily Taiwan dollars and Hong Kong dollars. 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. - -------------------------------------------------------------------------------- 18 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT 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 $139,792 for the six months ended April 30, 2005. 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. - -------------------------------------------------------------------------------- 19 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT AEFC has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the portfolio. During the six months ended April 30, 2005, the Portfolio's custodian fees were reduced by $1,584 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 $225,976,242 and $197,632,871, respectively, for the six months ended April 30, 2005. Realized gains and losses are determined on an identified cost basis. 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, 2005(e) 2004 2003 2002 2001 Ratio of expenses to average daily net assets(a) 1.11%(b) 1.14% 1.20% 1.23% 1.20% Ratio of net investment income (loss) to average daily net assets .93%(b) 1.12% 1.20% .63% .79% Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193% Total return(c) 12.82%(d) 17.03% 37.59% 9.39% (22.59%)
(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) Adjusted to an annual basis. (c) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. (d) Not annualized. (e) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 20 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Financial Statements Statement of assets and liabilities AXP Threadneedle Emerging Markets Fund April 30, 2005 (Unaudited) Assets Investment in Portfolio (Note 1) $358,812,487 Capital shares receivable 157,723 ------- Total assets 358,970,210 ----------- Liabilities Capital shares payable 174,910 Accrued distribution fee 3,915 Accrued service fee 50 Accrued transfer agency fee 1,857 Accrued administrative services fee 945 Other accrued expenses 249,126 ------- Total liabilities 430,803 ------- Net assets applicable to outstanding capital stock $358,539,407 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 516,041 Additional paid-in capital 360,663,848 Excess of distributions over net investment income (47,526) Accumulated net realized gain (loss) (Note 5) (38,417,124) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 35,824,168 ---------- Total -- representing net assets applicable to outstanding capital stock $358,539,407 ============ Net assets applicable to outstanding shares: Class A $231,997,270 Class B $ 84,250,805 Class C $ 2,120,450 Class I $ 21,802,031 Class Y $ 18,368,851 Net asset value per share of outstanding capital stock: Class A shares 33,001,004 $ 7.03 Class B shares 12,636,975 $ 6.67 Class C shares 317,261 $ 6.68 Class I shares 3,065,256 $ 7.11 Class Y shares 2,583,650 $ 7.11 --------- ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statement of operations AXP Threadneedle Emerging Markets Fund Six months ended April 30, 2005 (Unaudited) Investment income Income: Dividends $ 3,784,046 Interest 124,049 Less foreign taxes withheld (352,757) -------- Total income 3,555,338 --------- Expenses (Note 2): Expenses allocated from Portfolio 1,936,271 Distribution fee Class A 278,419 Class B 414,639 Class C 8,291 Transfer agency fee 357,160 Incremental transfer agency fee Class A 28,293 Class B 18,165 Class C 380 Service fee -- Class Y 9,393 Administrative services fees and expenses 167,376 Compensation of board members 5,148 Printing and postage 71,050 Registration fees 23,980 Audit fees 4,000 Other 8,071 ----- Total expenses 3,330,636 Earnings credits on cash balances (Note 2) (3,259) ------ Total net expenses 3,327,377 --------- Investment income (loss) -- net 227,961 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 37,436,159 Foreign currency transactions (296,402) -------- Net realized gain (loss) on investments 37,139,757 ---------- Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (692,602) -------- Net gain (loss) on investments and foreign currencies 36,447,155 ---------- Net increase (decrease) in net assets resulting from operations $36,675,116 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets AXP Threadneedle Emerging Markets Fund April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 227,961 $ 620,795 Net realized gain (loss) on investments 37,139,757 48,060,876 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (692,602) (9,976,656) -------- ---------- Net increase (decrease) in net assets resulting from operations 36,675,116 38,705,015 ---------- ---------- Distributions to shareholders from: Net investment income Class A (923,045) (1,739,711) Class B -- (347,165) Class C (588) (2,977) Class I (128,053) -- Class Y (98,442) (233,251) ------- -------- Total distributions (1,150,128) (2,323,104) ---------- ---------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 43,824,165 51,336,374 Class B shares 12,550,255 13,065,540 Class C shares 967,202 710,046 Class I shares 13,943,312 12,072,940 Class Y shares 1,844,141 3,109,037 Reinvestment of distributions at net asset value Class A shares 913,340 1,721,050 Class B shares -- 343,304 Class C shares 561 2,764 Class I shares 127,968 -- Class Y shares 98,442 233,251 Payments for redemptions Class A shares (26,055,043) (41,601,391) Class B shares (Note 2) (10,357,267) (21,634,907) Class C shares (Note 2) (189,362) (205,777) Class I shares (6,552,981) (2,074) Class Y shares (3,788,192) (5,555,746) ---------- ---------- Increase (decrease) in net assets from capital share transactions 27,326,541 13,594,411 ---------- ---------- Total increase (decrease) in net assets 62,851,529 49,976,322 Net assets at beginning of period 295,687,878 245,711,556 ----------- ----------- Net assets at end of period $358,539,407 $295,687,878 ============ ============ Undistributed (excess of distributions over) net investment income $ (47,526) $ 874,641 ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Notes to Financial Statements AXP Threadneedle Emerging Markets Fund (Unaudited as to April 30, 2005) 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 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. 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 April 30, 2005, AEFC and the AXP Portfolio Builder Series funds owned 100% of Class I shares, which represents 6.08% of the Fund's net assets. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees 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 April 30, 2005 was 99.97%. 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 - -------------------------------------------------------------------------------- 24 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT 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 net asset value. 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. 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. - -------------------------------------------------------------------------------- 25 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL 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. AEFC has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the portfolio. 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 pursuant to Rule 12b-1, 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. - -------------------------------------------------------------------------------- 26 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Sales charges received by the Distributor for distributing Fund shares were $437,716 for Class A, $31,629 for Class B and $238 for Class C for the six months ended April 30, 2005. 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 six months ended April 30, 2005, the Fund's transfer agency fees were reduced by $3,259 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2005 Class A Class B Class C Class I Class Y Sold 6,191,435 1,866,457 142,710 1,950,867 254,591 Issued for reinvested distributions 132,753 -- 85 18,413 14,164 Redeemed (3,682,786) (1,545,662) (28,605) (903,439) (523,613) ---------- ---------- ------- -------- -------- Net increase (decrease) 2,641,402 320,795 114,190 1,065,841 (254,858) --------- ------- ------- --------- -------- 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. 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 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. The Fund had no borrowings outstanding during the six months ended April 30, 2005. 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. - -------------------------------------------------------------------------------- 27 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $6.27 $5.46 $4.00 $3.69 $ 4.81 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) -- .03 .02 (.01) -- Net gains (losses) (both realized and unrealized) .79 .84 1.44 .32 (1.12) ----- ----- ----- ----- ------ Total from investment operations .79 .87 1.46 .31 (1.12) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income (.03) (.06) -- -- -- ----- ----- ----- ----- ------ Net asset value, end of period $7.03 $6.27 $5.46 $4.00 $ 3.69 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $232 $191 $155 $132 $143 Ratio of expenses to average daily net assets(b) 1.77%(c) 1.83% 2.02% 2.05% 2.02% Ratio of net investment income (loss) to average daily net assets .28%(c) .41% .39% (.19%) (.02%) Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193% Total return(d) 12.61%(e) 16.09% 36.50% 8.40% (23.28%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 28 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.95 $5.19 $3.83 $3.56 $ 4.67 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) (.01) (.02) (.02) (.04) (.04) Net gains (losses) (both realized and unrealized) .73 .81 1.38 .31 (1.07) ----- ----- ----- ----- ------ Total from investment operations .72 .79 1.36 .27 (1.11) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income -- (.03) -- -- -- ----- ----- ----- ----- ------ Net asset value, end of period $6.67 $5.95 $5.19 $3.83 $ 3.56 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $84 $73 $72 $65 $73 Ratio of expenses to average daily net assets(b) 2.54%(c) 2.59% 2.80% 2.83% 2.79% Ratio of net investment income (loss) to average daily net assets (.49%)(c) (.32%) (.39%) (.95%) (.80%) Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193% Total return(d) 12.10%(e) 15.18% 35.51% 7.58% (23.77%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 29 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.97 $5.20 $3.84 $3.56 $ 4.68 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) (.01) (.01) (.02) (.03) (.04) Net gains (losses) (both realized and unrealized) .72 .81 1.38 .31 (1.08) ----- ----- ----- ----- ------ Total from investment operations .71 .80 1.36 .28 (1.12) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income -- (.03) -- -- -- ----- ----- ----- ----- ------ Net asset value, end of period $6.68 $5.97 $5.20 $3.84 $ 3.56 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $2 $1 $1 $1 $-- Ratio of expenses to average daily net assets(b) 2.54%(c) 2.60% 2.80% 2.85% 2.79% Ratio of net investment income (loss) to average daily net assets (.45%)(c) (.34%) (.41%) (1.13%) (.63%) Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193% Total return(d) 11.94%(e) 15.37% 35.42% 7.87% (23.93%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 30 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class I Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(g) 2004(b) Net asset value, beginning of period $6.36 $6.54 ----- ----- Income from investment operations: Net investment income (loss) .01 .01 Net gains (losses) (both realized and unrealized) .79 (.19) ----- ----- Total from investment operations .80 (.18) ----- ----- Less distributions: Dividends from net investment income (.05) -- ----- ----- Net asset value, end of period $7.11 $6.36 ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $22 $13 Ratio of expenses to average daily net assets(c) 1.28%(d) 1.35%(d) Ratio of net investment income (loss) to average daily net assets .78%(d) .79%(d) Portfolio turnover rate (excluding short-term securities) 59% 128% Total return(e) 12.67%(f) (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. (g) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 31 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $6.35 $5.52 $4.04 $3.72 $ 4.83 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) -- .04 .03 -- .01 Net gains (losses) (both realized and unrealized) .80 .86 1.45 .32 (1.12) ----- ----- ----- ----- ------ Total from investment operations .80 .90 1.48 .32 (1.11) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income (.04) (.07) -- -- -- ----- ----- ----- ----- ------ Net asset value, end of period $7.11 $6.35 $5.52 $4.04 $ 3.72 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $18 $18 $18 $-- $-- Ratio of expenses to average daily net assets(b) 1.59%(c) 1.65% 1.87% 1.59% 1.84% Ratio of net investment income (loss) to average daily net assets .45%(c) .61% .54% .19% .21% Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193% Total return(d) 12.56%(e) 16.50% 36.63% 8.60% (22.98%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 32 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Fund Expenses Example (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2005. Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 33 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses account value account value paid during Annualized Nov. 1, 2004 April 30, 2005 the period(a) expense ratio Class A Actual(b) $1,000 $1,126.10 $9.38 1.77% Hypothetical (5% return before expenses) $1,000 $1,016.11 $8.90 1.77% Class B Actual(b) $1,000 $1,121.00 $13.43 2.54% Hypothetical (5% return before expenses) $1,000 $1,012.27 $12.74 2.54% Class C Actual(b) $1,000 $1,119.40 $13.42 2.54% Hypothetical (5% return before expenses) $1,000 $1,012.27 $12.74 2.54% Class I Actual(b) $1,000 $1,126.70 $6.79 1.28% Hypothetical (5% return before expenses) $1,000 $1,018.55 $6.44 1.28% Class Y Actual(b) $1,000 $1,125.60 $8.43 1.59% Hypothetical (5% return before expenses) $1,000 $1,017.00 $8.00 1.59%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2005: +12.61% for Class A, +12.10% for Class B, +11.94% for Class C, +12.67% for Class I and +12.56% for Class Y. - -------------------------------------------------------------------------------- 34 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Approval of Investment Management Services Agreement American Express Financial Corporation (AEFC), a wholly-owned subsidiary of American Express Company, serves as the investment manager to the Fund. Under an Investment Management Services Agreement (the Agreement), AEFC provides investment advice and other services to the Fund. Throughout the year, the Funds' Board of Directors and the Board's Investment Review Committee monitor these services. Each year the Board determines whether to continue the Agreement by evaluating the quality and level of service received and the costs associated with those services. AEFC prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations to assist the Board in making this determination. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the Agreement. On February 1, 2005, American Express Company announced its intention to pursue a spin-off of AEFC by distributing shares of the common stock of AEFC to shareholders of American Express Company. At a meeting held in person on April 14, 2005, the Board, including a majority of the independent members, approved the continuation of the Agreement for an interim period, not to exceed one year, ending on the later of (i) the effective date of the spin-off or (ii) the approval by the Fund's shareholders of a new investment management services agreement with AEFC (the Interim Period). The spin-off will not result in an "assignment" of the Agreement under the Investment Company Act of 1940 and, therefore, will not cause the termination of the Agreement according to its terms. In connection with the spin-off AEFC has proposed that going forward, services under the Agreement be provided by an affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel advised the Board that it would be prudent, in connection with the spin-off, to consider a new agreement with RiverSource and to seek shareholder approval of that agreement as soon as practical thereafter. Investment performance is a major factor in the evaluation process, and the Board reviewed the Fund's performance over a range of different periods by comparing its performance to relevant Lipper and broader market indices. The Board considered that over time the Fund's investment performance should be above the median for a peer group of funds with similar investment goals and noted that the Fund's investment performance in 2004 exceeded the median. The Board noted that, in addition to portfolio management and investment research, AEFC provides portfolio trading, daily net asset value calculation, management of cash flow, product development, administration of its compliance and legal departments, access to distribution, accounting and recordkeeping, and reporting to the Board and shareholders. To evaluate these services, the Board referred to surveys and benchmarks established by commercial providers, trade associations and AEFC's internal processes. The Board concluded that the services provided were consistent with services provided by investment managers to comparable mutual funds. - -------------------------------------------------------------------------------- 35 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT The Board also evaluated the price paid for the services provided by AEFC, noting the existence of a pricing philosophy, established by the Board and AEFC, that seeks to maintain total Fund expenses within a range of the median expenses charged to comparable funds sold through financial advisors. The Board considered detailed information set forth in an annual report on fees and expenses, including, among other things, data showing a comparison of the Fund's expenses with median expenses paid by funds in its comparison group and data showing the Fund's contribution to AEFC's profitability. The Board determined that the total expense ratio of the Fund is below the median of its comparison group. The Board considered the economies of scale that might be realized by AEFC as the Fund grew and took note of the extent to which Fund shareholders also might benefit from such growth. The Board considered that the Agreement provided for lower fees as assets increase at pre-established breakpoints and concluded that the Agreement satisfactorily provided for sharing these economies of scale. The Board took into account the Contract Committee's discussion comparing the fees AEFC charges to the Fund with those it charges to institutional clients, noting that the relatively higher fees paid by the Fund were principally attributable to the additional services required to manage a regulated mutual fund, like the Fund, and the operation of a large mutual fund family. The Board also considered the profitability realized by AEFC and its affiliates from its relationship with the Fund. The Board took into account the services acquired by AEFC through the use of commission dollars paid by the Fund on portfolio transactions. The Board concluded that AEFC's overall costs and profitability were appropriate, although profitability may be too low on an ongoing basis. The Board noted that the fees paid by the Fund should permit AEFC to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. Based on the foregoing, the Board concluded that the fees paid to AEFC under the Agreement were fair and reasonable and determined to approve renewal of the Agreement for the Interim Period. - -------------------------------------------------------------------------------- 36 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website americanexpress.com/funds; or by searching the website of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available at http://www.sec.gov. - -------------------------------------------------------------------------------- 37 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Threadneedle Global Balanced Fund Semiannual Report for the Period Ended April 30, 2005 AXP Threadneedle Global Balanced Fund seeks to provide shareholders with a balance of growth of capital and current income. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 6 Investments in Securities 12 Financial Statements 19 Notes to Financial Statements 22 Fund Expenses Example 32 Approval of Investment Management Services Agreement 34 Proxy Voting 35 CORPORATE REORGANIZATION On Feb. 1, 2005, American Express Company, the parent company of the Fund's investment manager, American Express Financial Corporation (AEFC), announced plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders of American Express Company. The transaction, expected to be completed in the third quarter of 2005, is subject to certain regulatory and other approvals, as well as final approval by the board of directors of American Express Company. Upon completion of the transaction AEFC will be a publicly traded company separate from American Express Company. The current agreements between the Fund and AEFC and its affiliates will remain in place. No changes in operations or personnel, including the portfolio manager or managers of the Fund, are anticipated. The current subadvisory agreement will remain in place. (logo) Dalbar American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Fund Snapshot AT APRIL 30, 2005 PORTFOLIO MANAGERS Portfolio managers Since Years in industry Equity Alex Lyle* 10/03 24 Stephen Thornber* 10/03 17 Fixed Income Nic Pifer, CFA** 2/03 14 * This portion of the Fund is managed by a team led by Alex Lyle and Stephen Thornber in London. ** This portion of the Fund is managed by a team led by Nic Pifer in Minneapolis. FUND OBJECTIVE For investors seeking a balance of growth of capital and current income. Inception dates by class A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96 Ticker symbols by class A: IDGAX B: IGBBX C: -- Y: AGBYX Total net assets $116.1 million Number of holdings 172 STYLE MATRIX Equities Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL STYLE MATRIX (continued) Bonds Shading within the style matrix indicates areas in which the Fund generally invests. DURATION SHORT INT. LONG X HIGH X MEDIUM QUALITY LOW TOP TEN HOLDINGS Percentage of portfolio assets Hellenic Republic (Greece) 2.75% 2006 2.3% Citigroup (United States) 1.6 Microsoft (United States) 1.6 Govt of Belgium (Belgium) 8.00% 2012 1.5 Johnson & Johnson (United States) 1.5 Oesterreichische Kontrollbank (Austria) 1.80% 2010 1.4 Hellenic Republic (Greece) 3.50% 2008 1.3 Govt of Netherlands (Netherlands) 5.00% 2012 1.3 Govt of Japan (Japan) 1.70% 2009 1.2 Sanofi-Aventis (France) 1.2 For further detail about these holdings, please refer to the section entitled "Investments in Securities." Stocks of small- and medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Some of these companies also may have fewer financial resources. There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Performance Summary (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2005 +6.23% +6.34% +4.20% +5.05% +6.23% = AXP Threadneedle Global Balanced Fund Class A (excluding sales charge) +6.34% = MSCI All Country World Index(1) (unmanaged) +4.20% = Citigroup World Government Bond Index(2) (unmanaged) +5.05% = Lipper Global Flexible Funds Index(3) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919 or visiting www.americanexpress.com/funds. (1) The Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index of equity securities, is designed to measure equity market performance in the global developed and emerging markets. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Citigroup World Government Bond Index, an unmanaged market capitalization weighted benchmark, tracks the performance of the 17 government bond markets around the world. It is widely recognized by investors as a measurement index for portfolios of government bond securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (3) The Lipper Global Flexible Funds Index includes the 10 largest global flexible (balanced) funds tracked by Lipper Inc. The index's returns include net reinvested dividends. 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 because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 4 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Performance Summary
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class Y (Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) at April 30, 2005 6 months* +6.23% +0.13% +5.96% +1.96% +6.06% +5.06% +6.44% 1 year +13.30% +6.79% +12.52% +8.52% +12.42% +12.42% +13.46% 3 years +8.00% +5.89% +7.20% +6.32% +7.17% +7.17% +8.17% 5 years -1.10% -2.27% -1.83% -2.01% N/A N/A -0.90% Since inception +4.24% +3.51% +3.46% +3.46% -1.94% -1.94% +4.45% at March 31, 2005 6 months* +10.53% +4.17% +10.34% +6.34% +10.04% +9.04% +10.74% 1 year +10.94% +4.57% +10.12% +6.12% +10.04% +10.04% +10.91% 3 years +7.98% +5.86% +7.18% +6.30% +7.09% +7.09% +8.08% 5 years -1.61% -2.77% -2.37% -2.54% N/A N/A -1.44% Since inception +4.44% +3.70% +3.66% +3.66% -1.74% -1.74% +4.63%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. * Not annualized. - -------------------------------------------------------------------------------- 5 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Q: How did AXP Threadneedle Global Balanced Fund perform for the first half of the fiscal year? A: AXP Threadneedle Global Balanced Fund's Class A shares gained 6.23% (excluding sales charge) for the six months ended April 30, 2005. This slightly underperformed the all-equity MSCI All Country World Index, the Fund's benchmark index, which advanced 6.34% for the period. The Fund outperformed the Citigroup World Government Bond Index (Citigroup World Index), the Fund's benchmark index for the fixed income portion of the fund, which returned 4.20% for the semiannual period. The Lipper Global Flexible Funds Index, representing the Fund's peer group, rose 5.05%. Q: What was the asset allocation? A: At April 30, 2005, the Fund was composed of 64.7% global equities, 31.9% global bonds and 3.4% cash. The equity allocation was split between U.S. stock (38.9%) and foreign stock (61.1%). Within the bond allocation, the largest position was foreign government obligations. Q: What factors most significantly affected equity performance? A: Within the equity portion of the Fund, individual stock selection proved most effective during the semiannual period. Country selection was rather neutral to the Fund's six-month performance, as the negative effect of the Fund's significant exposure to Japan was offset by the positive effect of its sizable positions in Asia and Latin America. Sector allocation modestly detracted from the Fund's semiannual performance. Stock Selection On an individual security basis, U.S. refinery firm Valero Energy was one of the strongest performers for the Fund during the semiannual period. Valero benefited not only from big gains among energy stocks broadly but also from sharply rising refining profit margins in a favorable supply/demand environment. COUNTRY COMPOSITION Percentage of portfolio assets at April 30, 2005 [pie chart] United States 29.8% Japan 10.3% Germany 7.9% Greece 7.0% United Kingdom 6.6% France 5.3% Italy 4.2% Switzerland 3.6% Hong Kong 3.2% Canada 2.6% South Korea 2.4% Netherlands 2.0% Belgium 1.5% Austria 1.4% Other* 11.4% * Includes Australia, Bermuda, Brazil, Denmark, Finland, India, Ireland, Israel, Luxembourg, Mexico, Norway, Poland, Russia, Singapore, South Africa, Spain, Supra-National, Sweden, Taiwan and cash & short-term securities. - -------------------------------------------------------------------------------- 6 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> From an equity sector perspective, the Fund benefited most from its significant exposure to energy, materials and healthcare. (end callout quote) -- Steve Thornber Also in the energy sector, EOG Resources performed well, as this U.S. oil and gas exploration and production company saw its stock price pushed higher along with record-setting crude oil prices. EOG also benefited from its attractive acreage position in the oil-rich Barnett Shale area in Texas. In other areas, Hong Kong retailer Esprit was an outstanding contributor. Esprit has benefited from strong branding, innovative management and an attractive business model based on rapid stock turnover of its frequently refreshed fashion offerings. Nobel Biocare a Swiss company was another strong performer, as it continued to gain market share and raise profit margins in the fast-growing dental implants market. Of course, there were disappointments as well, as the equity market continued to punish companies that did not meet earnings expectations. For example, both U.S. motorcycle manufacturing legend Harley-Davidson and industrial automation provider Rockwell Automation detracted from relative results, as each announced scaled back earnings results and gave downbeat statements about future trading. Fund performance was also hurt by its holdings in U.S. broker-dealer Ameritrade and Bermuda-based information technology consultancy firm Accenture. ASSET ALLOCATION & SECTOR COMPOSITION Percentage of portfolio assets at April 30, 2005 [pie chart] Stocks 64.7% Financials 14.5% Consumer discretionary 8.5% Information technology 8.1% Health care 6.9% Industrials 6.5% Energy 6.4% Consumer staples 6.3% Materials 3.1% Telecommunications 2.7% Utilities 1.3% Telecommunication services 0.4% Bonds 31.9% Foreign government bonds 28.1% U.S. government obligations & agencies 3.3% Corporate bonds 0.5% Cash equivalents Short-term securities* 3.4% * Of the 3.4%, 0.3% is due to security lending activity and 3.1% is the Fund's cash equivalent position. - -------------------------------------------------------------------------------- 7 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> The tug-of-war continues between structural negatives, such as the U.S. current account deficit, and cyclical positives, including attractive valuation of the dollar and higher interest rates in the U.S. than in most industrialized nations. (end callout quote) -- Nic Pifer Sector Positioning From an equity sector perspective, the Fund benefited most from its significant exposure to energy, materials and healthcare. Energy and materials continued to reflect the strong commodity price cycle, driven by demand growth, particularly from China. Within energy, Fund exposure to the oil price sensitive U.S. exploration and production companies benefited performance most. Healthcare companies continued to deliver superior earnings growth. Within healthcare, the Fund's focus on healthcare equipment and biotechnology companies rather than on pharmaceutical companies was well rewarded. Healthcare equipment and biotechnology companies posted strong earnings growth within growing markets, while pharmaceuticals were hit by pricing concerns, patent challenges and lackluster growth prospects. Detracting from the Fund's relative results was significant exposure to the poorly-performing consumer discretionary and telecommunications sectors and a more moderate exposure to the stronger-performing utilities sector. Consumer discretionary stocks, especially automotive stocks, were hurt by concerns about economic growth and rising interest rates and their potential effect on consumer confidence. Energy-related utilities performed well, reflecting the ripple effect of the energy sector and rising commodity prices. Q: What factors most significantly affected fixed-income performance? Duration Management We maintained the Fund's duration, a principal measure of interest rate risk, approximately six months less than, or "shorter," than that of the Citigroup World Index throughout the semiannual period. This stance was based on our view that the U.S. economy in particular was growing at an above-trend pace and thus that the Federal Reserve Board (the Fed) was likely to continue raising the targeted federal funds rate well into 2005 until it is back to more historically normal levels. While our view proved sound, global bond yields generally - -------------------------------------------------------------------------------- 8 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Questions & Answers declined over the six months, benefiting from lackluster international economic data, contained inflation, a shift in investor sentiment toward risk aversion and a weaker U.S. dollar. On a trade-weighted basis, the U.S. dollar declined 0.54% over the six months ended April 30, 2005. As the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. With bond yields falling, our duration management detracted somewhat from the Fund's relative results. Currency Positioning Currency positioning and yield curve positioning together had a relatively neutral effect on the Fund's six-month performance. For the semiannual period, the U.S. dollar weakened approximately 0.6% versus the euro, 3.8% versus the British pound and 1.0% versus the Japanese yen. The U.S. dollar strengthened 3.3% versus the Canadian dollar over the six months. The Fund's significant exposure to the euro and several other European currencies thus contributed positively to its relative returns as did its modest exposure to the U.S. dollar. However, the Fund's meaningful exposure to the "dollar-bloc" currencies of Canada, Australia and New Zealand and its more moderate exposure to the Japanese yen detracted. Country Allocation On the positive side, effective country allocation contributed most to the Fund's relative performance. The Fund held only limited positions in Japanese bonds and U.S. bonds and more substantial exposure to core European bonds. This strategy worked well, as the European government bond market significantly outperformed both the Japanese government bond market and U.S. Treasury market for the period in local currency terms. Q: What changes did you make to the Fund? A: Within the equity portion of the Fund, our strategy was to generally reduce the Fund's risk profile during the semiannual period, given widespread concern over slowing global economic growth and heightened inflation pressures. Thus, within country allocation, we decreased the Fund's exposure to Latin America. Following a period of outperformance, we believed the risk/reward profile for the region's equity markets, given current valuations, had become less attractive. We redeployed those assets primarily into Japan and Asia. Within sectors, we took some profits in energy and mining stocks as the period progressed. We then used those proceeds to add to the Fund's moderate positions in consumer staples and pharmaceuticals, believing that while industry conditions remain difficult for both, valuations are currently factoring in all the negatives. - -------------------------------------------------------------------------------- 9 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Questions & Answers Within the fixed income portion of the Fund, we decreased exposure to the euro toward the end of 2004, while still maintaining a significant position in the currency, and we increased the Fund's exposure to the U.S. dollar, while still maintaining a moderate position in this currency. As the U.S. dollar weakened substantially during these months, the scale of decline led us to believe that it may have become undervalued against some of the other major currencies, including the euro, despite the ever-burgeoning U.S. current account deficit. We viewed this as an opportunity to reallocate a small portion of the portfolio's net assets. Indeed the timing of this strategy proved prudent, as the euro subsequently lowered to attractive levels and the U.S. dollar strengthened during the first calendar quarter of 2005. We then added back some exposure to the euro and somewhat reduced the Fund's position in the U.S. dollar. We also decreased the portfolio's exposure to the Canadian dollar, shifting to a neutral position as the currency strengthened. We made no other significant changes to the fixed income portfolio during the period. We maintained the Fund's duration shorter than that of the Citigroup World Index. From a country perspective, we continued to favor European bonds over U.S. and Japanese bonds. Q: How do you intend to manage the Fund in the coming months? A: Overall, we maintain a generally positive outlook for the financial markets, although we believe that global economic growth will slow in 2005 relative to the year prior. We intend to keep the Fund's significant exposure to equities in the coming months. Corporate earnings reports have been generally positive, and cash flow has been strong. Merger and acquisition activity picked up during the first calendar quarter of 2005, which, should it continue as anticipated, also bodes well for the equity market. Given this view, we intend to maintain the Fund's significant equity exposure to the U.K., Europe, Asia and Japan. Japan's equity market has not yet rebounded, although we believe it will. We are particularly positive on Japanese domestically-oriented stocks, such as regional banks, as home-based demand appears to be on the rise. We intend to maintain the Fund's more modest exposure to Latin America for the near term, as we believe valuations in this region have become stretched of late. Also based on valuation analyses, we intend to maintain the Fund's moderate exposure to U.S. equities, though we believe we can continue to find attractive stocks in this market on a select, opportunistic basis. We also intend to - -------------------------------------------------------------------------------- 10 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Questions & Answers stay with the Fund's more growth-oriented stock bias, seeking attractively valued companies with strong franchises that have the capacity to deliver sustainable growth. Within the fixed income portion of the Fund, we intend to maintain a somewhat defensive position with respect to interest rate risk exposure. Specifically, we expect to keep the Fund's duration shorter than that of the Citigroup World Index given our view regarding the pace of the U.S. economic growth and the tightening path of the Fed. Indeed, should U.S. interest rates reach a certain level or should the European bond market become too expensive, then we may take the opportunity to shift a percentage of asset allocation from European government bonds to U.S. Treasuries. One of the key questions now is whether recent concerns over a global economic soft patch are truly justified or whether Europe, for example, can pull out of its sluggish growth rut. Given recent economic news from the Eurozone, it currently appears that the European Central Bank may wait until the end of 2005 before beginning to raise interest rates. We believe the Bank of Japan is still approximately a year away from changing its interest rates from their current 0% level. As for currency positioning, we believe the view ahead for the U.S. dollar remains uncertain. Following an extended period of decline, the U.S. dollar strengthened in the early months of 2005 as the markets began to focus on cyclical positives. However, the tug-of-war continues between structural negatives, such as the U.S. current account deficit, and cyclical positives, including attractive valuation of the dollar and higher interest rates in the U.S. than in most industrialized nations. Thus our currency strategy is to seek to make tactical allocation adjustments as market conditions warrant. From a country perspective, we continue to favor European bonds. As always, we remain focused on careful security selection, as we continue to seek opportunities to capitalize on attractively valued bonds. - -------------------------------------------------------------------------------- 11 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Investments in Securities AXP Threadneedle Global Balanced Fund April 30, 2005 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (62.6%)(c) Issuer Shares Value(a) Bermuda (0.6%) Insurance PartnerRe 11,848 $690,501 Brazil (0.7%) Energy (0.3%) Petroleo Brasileiro ADR 9,164 384,247 Metals (0.4%) Cia Vale do Rio Doce ADR 17,326 401,963 Canada (1.0%) Banks and savings & loans (0.4%) TSX Group 8,638 425,686 Energy (0.6%) EnCana 12,219 782,226 Finland (0.2%) Energy Neste Oil 11,279(b) 251,940 France (3.5%) Aerospace & defense (0.4%) Thales 11,724 475,842 Automotive & related (0.5%) Renault 6,755 566,126 Energy (1.1%) Total 5,740 1,276,301 Machinery (0.4%) Schneider Electric 6,472 466,434 Multi-industry (1.1%) Sanofi-Aventis 15,000 1,328,188 Common stocks (continued) Issuer Shares Value(a) Germany (2.3%) Banks and savings & loans (0.6%) Hypo Real Estate Holding1 6,715(b) $692,618 Computer software & services (0.4%) SAP 2,644 417,135 Health care products (0.5%) Schering 8,341 549,093 Utilities -- electric (0.8%) RWE 16,472 983,455 Greece (0.4%) Building materials & construction TITAN Cement 15,280 485,030 Hong Kong (3.1%) Financial services (0.3%) Hang Lung Properties 232,000 356,693 Real estate (1.5%) Henderson Land Development 112,000 521,495 New World Development 1,090,600 1,173,156 Total 1,694,651 Retail -- general (1.3%) Esprit Holdings 154,500 1,150,989 Lifestyle Intl Holdings 238,000 373,305 Total 1,524,294 India (0.7%) Banks and savings & loans State Bank of India GDR 22,000 788,700 Ireland (0.7%) Banks and savings & loans Anglo Irish Bank 67,678 778,728 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Israel (0.9%) Computer software & services Check Point Software Technologies 48,006(b) $1,005,726 Italy (0.7%) Energy Eni 34,561 868,984 Japan (7.8%) Automotive & related (0.7%) Honda Motor 9,300 447,612 Toyota Motor 10,400 377,405 Total 825,017 Banks and savings & loans (1.5%) Bank of Kyoto 66,000 556,951 Chiba Bank 53,000 326,014 Mitsubishi Tokyo Financial Group 83 717,451 UFJ Holdings 47(b) 247,044 Total 1,847,460 Broker dealers (0.8%) Matsui Securities 64,200(g) 871,028 Building materials & construction (0.5%) Nishimatsu Construction 101,000 377,766 Okumura 29,000 179,756 Total 557,522 Electronics (0.5%) eAccess 347 266,481 Keyence 1,500 330,967 Total 597,448 Energy (0.5%) Nippon Oil 78,000 550,462 Engineering & construction (0.3%) Daiwa House Industry 32,000 358,885 Home building (0.5%) Daito Trust Construction 13,400 535,191 Machinery (1.3%) Amada 114,000 704,552 Komatsu 107,000 753,483 Total 1,458,035 Multi-industry (0.6%) Canon 13,300 691,845 Common stocks (continued) Issuer Shares Value(a) Japan (cont.) Real estate (0.3%) Mitsui Fudosan 28,000 $312,505 Textiles & apparel (0.3%) ONWARD Kashiyama 31,000 398,114 Luxembourg (0.5%) Metals Arcelor 26,529 537,808 Mexico (0.3%) Cellular telecommunications America Movil ADR Series L 7,000 347,550 Netherlands (0.7%) Food Royal Numico 19,130(b) 791,380 Russia (0.4%) Utilities -- telephone Mobile Telesystems ADR 15,041 505,378 Singapore (0.5%) Real estate City Developments 126,000 531,590 South Africa (0.3%) Retail -- general Massmart Holdings 48,259 348,840 South Korea (2.3%) Chemicals (0.4%) Hanwha Chemical 36,790 436,759 Electronics (0.9%) Samsung Electronics 2,465 1,127,505 Engineering & construction (0.5%) Hyundai Development 29,550 590,704 Metals (0.5%) POSCO 3,117 567,840 Spain (0.3%) Computer software & services Indra Sistemas 21,480 371,712 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Sweden (0.3%) Telecom equipment & services Telefonaktiebolaget LM Ericsson Cl B 127,557 $377,570 Switzerland (3.5%) Banks and savings & loans (1.0%) UBS 14,452 1,155,670 Food (0.7%) Nestle 3,045 801,348 Health care products (1.8%) Actelion 2,908(b) 310,216 Nobel Biocare Holding 4,234 906,582 Roche Holding 7,051 853,112 Total 2,069,910 Taiwan (0.4%) Electronics Taiwan Semiconductor Mfg 258,337 429,707 United Kingdom (4.9%) Aerospace & defense (--%) Rolls-Royce Group Cl B 4,857,600 9,496 Cellular telecommunications (1.2%) O2 140,395(b) 313,934 Vodafone Group 413,569 1,080,851 Total 1,394,785 Energy (0.5%) BP 55,084 561,313 Financial services (0.6%) 3i Group 53,623 656,064 Food (0.8%) Cadbury Schweppes 88,237 887,158 Industrial services (0.4%) BOC Group 24,282 451,571 Media (0.3%) Reuters Group 49,845 367,488 Metals (0.4%) BHP Billiton 39,435 482,703 Retail -- grocery (0.7%) Tesco 141,316 834,264 Common stocks (continued) Issuer Shares Value(a) United States (25.6%) Banks and savings & loans (0.4%) Bank of America 10,284 $463,191 Beverages & tobacco (1.4%) Altria Group 12,943 841,166 PepsiCo 15,032 836,380 Total 1,677,546 Broker dealers (1.0%) Ameritrade Holding 16,100(b) 168,728 Bear Stearns Companies 4,662 441,305 Lehman Brothers Holdings 5,824 534,177 Total 1,144,210 Cellular telecommunications (1.1%) American Tower Cl A 44,585(b) 768,199 SpectraSite 9,058(b) 508,426 Total 1,276,625 Computer hardware (0.8%) Dell 25,164(b) 876,462 Computer software & services (2.9%) Adobe Systems 11,027 655,776 Autodesk 15,739 500,972 Google Cl A 2,635(b) 579,700 Microsoft 70,015 1,771,380 Total 3,507,828 Electronics (0.5%) Intel 22,250 523,320 Energy (2.2%) EOG Resources 13,747 653,670 Exxon Mobil 7,889 449,910 Forest Oil 10,871(b) 418,860 Massey Energy 9,508 343,334 Valero Energy 10,033 687,560 Total 2,553,334 Finance companies (1.6%) Citigroup 38,896 1,826,556 Financial services (0.6%) Goldman Sachs Group 3,737 399,075 Intl Securities Exchange 1,089(b) 28,662 Investors Financial Services 7,000 293,650 Total 721,387 Food (0.2%) WM Wrigley Jr 4,117 284,608 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Furniture & appliances (0.6%) Mohawk Inds 5,020(b) $390,606 Tempur-Pedic Intl 17,950(b) 342,666 Total 733,272 Health care products (3.4%) Abbott Laboratories 11,404 560,621 Amgen 8,711(b) 507,067 Johnson & Johnson 24,030 1,649,178 Laboratory Corp of America Holdings 8,398(b) 415,701 Pfizer 9,549 259,446 St. Jude Medical 16,460(b) 642,434 Total 4,034,447 Health care services (1.0%) DaVita 13,085(b) 527,326 WellPoint 4,967(b) 634,534 Total 1,161,860 Household products (0.4%) Procter & Gamble 8,091 438,128 Industrial transportation (0.3%) Norfolk Southern 10,517 330,234 Insurance (1.2%) American Intl Group 15,766 801,701 Genworth Financial Cl A 22,104 617,807 Total 1,419,508 Leisure time & entertainment (0.8%) Carnival Unit 15,253 745,567 Harley-Davidson 4,223 198,565 Total 944,132 Media (0.7%) Dex Media 23,404 512,548 Lamar Advertising Cl A 7,200(b) 269,136 Total 781,684 Multi-industry (1.1%) General Electric 33,915 1,227,723 Retail -- drugstores (1.2%) CVS 11,038 569,340 Walgreen 19,575 842,900 Total 1,412,240 Common stocks (continued) Issuer Shares Value(a) United States (cont.) Retail -- general (1.7%) Dillard's Cl A 18,980 $441,665 Home Depot 30,652 1,084,161 Staples 20,471 390,372 Total 1,916,198 Utilities -- electric (0.5%) Duke Energy 18,874 550,932 Total common stocks (Cost: $63,104,326) $72,639,611 Preferred stock & other (0.6%)(c) Issuer Shares Value(a) Germany Porsche 983 $634,032 Singapore City Development Warrants 12,600(b) 33,399 Total preferred stock & other (Cost: $473,100) $667,431 Bonds (31.1%)(c) Issuer Coupon Principal Value(a) rate amount Australia (0.4%) New South Wales Treasury (Australian Dollar) 03-01-08 8.00% 500,000 $415,496 Austria (1.4%) Oesterreichische Kontrollbank (Japanese Yen) 03-22-10 1.80 160,000,000 1,628,304 Belgium (1.5%) Govt of Belgium (European Monetary Unit) 12-24-12 8.00 1,000,000 1,702,097 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Canada (1.5%) Govt of Canada (Canadian Dollar) 09-01-08 4.25% 1,600,000 $1,307,127 Province of British Columbia (Canadian Dollar) 12-01-06 5.25 500,000 411,092 Total 1,718,219 Denmark (0.3%) Realkredit Danmark (Danish Krone) 01-01-08 4.00 1,720,000 308,619 France (1.7%) French Treasury Note (European Monetary Unit) 07-12-08 3.00 300,000 392,370 Govt of France (European Monetary Unit) 04-25-13 4.00 500,000 677,286 10-25-14 4.00 630,000 850,397 Total 1,920,053 Germany (4.8%) Allgemeine Hypothekenbank Rheinboden (European Monetary Unit) 09-02-09 5.00 850,000(d) 1,188,144 Bundesrepublik Deutschland (European Monetary Unit) 01-05-06 6.00 700,000 923,703 07-04-08 4.75 725,000 996,154 07-04-09 4.50 85,000 117,162 07-04-10 5.25 250,000 358,793 06-20-16 6.00 434,598 688,169 07-04-27 6.50 400,000 710,606 Rheinische Hypothekenbank (European Monetary Unit) 09-24-08 4.25 550,000 744,775 Total 5,727,506 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Greece (6.4%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75% 2,000,000 $2,587,318 06-21-07 3.25 500,000 655,581 04-18-08 3.50 1,150,000 1,520,345 04-20-09 3.50 800,000 1,059,335 05-20-13 4.60 400,000 555,787 10-22-22 5.90 700,000 1,110,816 Total 7,489,182 Italy (3.4%) Buoni Poliennali Del Tesoro (European Monetary Unit) 11-01-09 4.25 400,000 547,046 08-01-11 5.25 200,000 288,706 08-01-13 4.25 600,000 819,790 08-01-14 4.25 720,000 982,692 11-01-29 5.25 600,000 904,403 08-01-34 5.00 250,000 366,531 Total 3,909,168 Japan (2.3%) Govt of Japan (Japanese Yen) 12-21-09 1.70 137,000,000 1,385,187 06-20-13 0.50 134,000,000 1,229,616 Total 2,614,803 Netherlands (1.2%) Govt of Netherlands (European Monetary Unit) 07-15-12 5.00 1,000,000 1,437,065 Norway (0.3%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 2,100,000 378,514 Poland (0.2%) Republic of Poland (Polish Zloty) 03-24-10 5.75 655,000 197,746 Supra-National (0.5%) Intl Bank Reconstruction & Development (Japanese Yen) 02-18-08 2.00 55,000,000 553,670 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Bonds (continued) Issuer Coupon Principal Value(a) rate amount Sweden (0.3%) Govt of Sweden (Swedish Krona) 08-15-07 8.00% 2,250,000 $354,928 United Kingdom (1.5%) 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 9.00 410,000 970,437 09-27-13 8.00 340,000 804,670 Total 1,775,107 United States (3.4%) ConocoPhillips (U.S. Dollar) 03-15-28 7.13 200,000 215,813 Federal Natl Mtge Assn (U.S. Dollar) 09-15-09 6.63 1,000,000 1,096,006 05-15-11 6.00 370,000 401,424 U.S. Treasury (U.S. Dollar) 02-15-07 2.25 500,000 488,281 02-15-09 3.00 500,000 485,705 08-15-14 4.25 568,000 570,396 02-15-23 7.13 200,000 261,109 02-15-26 6.00 369,000 436,616 Total 3,955,350 Total bonds (Cost: $33,158,236) $36,085,827 Short-term securities (3.3%)(h) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies Federal Home Loan Bank Disc Nt 05-11-05 2.75% $3,100,000 $3,097,164 Federal Natl Mtge Assn Disc Nt 06-13-05 2.79 700,000 697,564 Total short-term securities (Cost: $3,794,953) $3,794,728 Total investments in securities (Cost: $100,530,615)(i) $113,187,597 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2005, the value of these securities amounted to $1,188,144 or 1.0% 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). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at April 30, 2005, is as follows: Security Acquisition Cost date Greater Beijing First Expressways (U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 $51,391 (g) At April 30, 2005, security was partially or fully on loan. See Note 5 to the financial statements. (h) Cash collateral received from security lending activity is invested in short-term securities and represents 0.2% of net assets. See Note 5 to the financial statements. 3.1% of net assets is the Fund's cash equivalent position. (i) At April 30, 2005, the cost of securities for federal income tax purposes was approximately $100,531,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $14,138,000 Unrealized depreciation (1,481,000) ---------- Net unrealized appreciation $12,657,000 ----------- 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. - -------------------------------------------------------------------------------- 18 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Threadneedle Global Balanced Fund April 30, 2005 (Unaudited) Assets Investments in securities, at value (Note 1)* (identified cost $100,530,615) $113,187,597 Cash in bank on demand deposit 158,276 Foreign currency holdings (identified cost $819,085) (Note 1) 823,030 Capital shares receivable 26,096 Dividends and accrued interest receivable 788,236 Receivable for investment securities sold 1,477,177 Unrealized appreciation on foreign currency contracts held, at value (Note 6) 25,427 ------ Total assets 116,485,839 ----------- Liabilities Capital shares payable 42,020 Payable for investment securities purchased 12,645 Unrealized depreciation on foreign currency contracts held, at value (Note 6) 1,034 Payable upon return of securities loaned (Note 5) 284,000 Accrued investment management services fee 2,496 Accrued distribution fee 1,278 Accrued service fee 62 Accrued transfer agency fee 677 Accrued administrative services fee 190 Other accrued expenses 43,766 ------ Total liabilities 388,168 ------- Net assets applicable to outstanding capital stock $116,097,671 ============ Represented by Capital stock -- $.01 par value (Note 1) $ 212,692 Additional paid-in capital 140,514,544 Undistributed net investment income 266,204 Accumulated net realized gain (loss) (Note 8) (37,592,085) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 6) 12,696,316 ---------- Total -- representing net assets applicable to outstanding capital stock $116,097,671 ============ Net assets applicable to outstanding shares: Class A $ 61,991,506 Class B $ 30,203,198 Class C $ 1,271,570 Class Y $ 22,631,397 Net asset value per share of outstanding capital stock: Class A shares 11,303,626 $ 5.48 Class B shares 5,626,140 $ 5.37 Class C shares 237,852 $ 5.35 Class Y shares 4,101,540 $ 5.52 --------- ------------ * Including securities on loan, at value (Note 5) $ 271,340 ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Statement of operations AXP Threadneedle Global Balanced Fund Six months ended April 30, 2005 (Unaudited) Investment income Income: Dividends $ 839,047 Interest 673,447 Fee income from securities lending (Note 5) 956 Less foreign taxes withheld (58,124) ------- Total income 1,455,326 --------- Expenses (Note 2): Investment management services fee 471,137 Distribution fee Class A 76,488 Class B 155,157 Class C 5,915 Transfer agency fee 128,692 Incremental transfer agency fee Class A 6,989 Class B 5,876 Class C 183 Service fee -- Class Y 9,034 Administrative services fees and expenses 31,971 Compensation of board members 5,148 Custodian fees 14,760 Printing and postage 18,995 Registration fees 20,340 Audit fees 10,375 Other 4,261 ----- Total expenses 965,321 Earnings credits on cash balances (Note 2) (5,769) ------ Total net expenses 959,552 ------- Investment income (loss) -- net 495,774 ------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 5,864,710 Foreign currency transactions 12,857 ------ Net realized gain (loss) on investments 5,877,567 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (223,322) -------- Net gain (loss) on investments and foreign currencies 5,654,245 --------- Net increase (decrease) in net assets resulting from operations $6,150,019 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets AXP Threadneedle Global Balanced Fund April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 495,774 $ 579,391 Net realized gain (loss) on investments 5,877,567 5,362,031 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (223,322) 4,301,031 -------- --------- Net increase (decrease) in net assets resulting from operations 6,150,019 10,242,453 --------- ---------- Distributions to shareholders from: Net investment income Class A (1,064,644) (304,857) Class B (503,755) -- Class C (19,981) -- Class Y (286,576) (81,770) -------- ------- Total distributions (1,874,956) (386,627) ---------- -------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 9,989,919 12,342,103 Class B shares 3,293,426 4,322,699 Class C shares 624,317 237,249 Class Y shares 9,943,742 8,838,422 Reinvestment of distributions at net asset value Class A shares 1,023,956 293,636 Class B shares 488,217 -- Class C shares 19,503 -- Class Y shares 286,551 81,761 Payments for redemptions Class A shares (8,335,859) (14,335,235) Class B shares (Note 2) (4,794,857) (10,299,121) Class C shares (Note 2) (193,503) (164,780) Class Y shares (567,209) (3,905,336) -------- ---------- Increase (decrease) in net assets from capital share transactions 11,778,203 (2,588,602) ---------- ---------- Total increase (decrease) in net assets 16,053,266 7,267,224 Net assets at beginning of period 100,044,405 92,777,181 ----------- ---------- Net assets at end of period $116,097,671 $100,044,405 ============ ============ Undistributed net investment income $ 266,204 $ 1,645,386 ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Notes to Financial Statements AXP Threadneedle Global Balanced Fund (Unaudited as to April 30, 2005) 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 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, transfer agency fees 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 - -------------------------------------------------------------------------------- 22 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT 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. 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. Illiquid Securities At April 30, 2005, 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 April 30, 2005 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. 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. - -------------------------------------------------------------------------------- 23 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL 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. At April 30, 2005, foreign currency holdings consisted of multiple denominations, primarily British pounds. 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 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. 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. 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. - -------------------------------------------------------------------------------- 24 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL 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. 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 increased the fee by $30,822 for the six months ended April 30, 2005. AEFC has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly owned subsidiary of AEFC, to subadvise the assets of the Fund. 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. - -------------------------------------------------------------------------------- 25 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT In addition, AECSC is entitled to charge an annual closed account fee of $5 per inactive account, charged on a pro rata basis from the date the account becomes inactive until the date the account is purged from the transfer agent system generally within one year. However, the closed account fee is currently not effective. The Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, 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 $82,241 for Class A, $14,032 for Class B and $258 for Class C for the six months ended April 30, 2005. During the six months ended April 30, 2005, the Fund's custodian and transfer agency fees were reduced by $5,769 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to American Express Trust Company, an affiliate of AEFC. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $46,129,389 and $38,821,485, respectively, for the six months ended April 30, 2005. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2005 Class A Class B Class C Class Y Sold 1,806,212 606,749 116,446 1,783,049 Issued for reinvested distributions 185,836 90,243 3,625 51,724 Redeemed (1,507,559) (884,210) (35,879) (101,760) ---------- -------- ------- -------- Net increase (decrease) 484,489 (187,218) 84,192 1,733,013 ------- -------- ------ --------- 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 -------- ---------- ------ -------
- -------------------------------------------------------------------------------- 26 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT 5. LENDING OF PORTFOLIO SECURITIES At April 30, 2005, securities valued at $271,340 were on loan to brokers. For collateral, the Fund received $284,000 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 $956 for the six months ended April 30, 2005. 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. 6. FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2005, the Fund has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized be delivered be received appreciation depreciation May 9, 2005 760,000 977,033 $ -- $1,034 European Monetary Unit U.S. Dollar May 17, 2005 2,460,000 3,178,443 11,835 -- European Monetary Unit U.S. Dollar May 18, 2005 1,325,000 1,066,828 13,592 -- Canadian Dollar U.S. Dollar ------- ------ Total $25,427 $1,034 ------- ------
7. 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 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. The Fund had no borrowings outstanding during the six months ended April 30, 2005. 8. 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. - -------------------------------------------------------------------------------- 27 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT 9. 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, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.25 $4.73 $4.08 $4.53 $ 6.27 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .03 .04 .05 .07 .07 Net gains (losses) (both realized and unrealized) .30 .51 .64 (.50) (1.27) ----- ----- ----- ----- ------ Total from investment operations .33 .55 .69 (.43) (1.20) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income (.10) (.03) (.04) (.02) (.03) Distributions from realized gains -- -- -- -- (.51) ----- ----- ----- ----- ------ Total distributions (.10) (.03) (.04) (.02) (.54) ----- ----- ----- ----- ------ Net asset value, end of period $5.48 $5.25 $4.73 $4.08 $ 4.53 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $62 $57 $53 $54 $80 Ratio of expenses to average daily net assets(b) 1.54%(c) 1.49% 1.60% 1.48% 1.45% Ratio of net investment income (loss) to average daily net assets 1.09%(c) .83% 1.03% 1.38% 1.18% Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173% Total return(d) 6.23%(e) 11.62% 16.91% (9.48%) (20.63%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 28 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.15 $4.65 $4.01 $4.47 $ 6.21 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .01 .01 -- .04 .01 Net gains (losses) (both realized and unrealized) .30 .49 .64 (.49) (1.24) ----- ----- ----- ----- ------ Total from investment operations .31 .50 .64 (.45) (1.23) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income (.09) -- -- (.01) -- Distributions from realized gains -- -- -- -- (.51) ----- ----- ----- ----- ------ Total distributions (.09) -- -- (.01) (.51) ----- ----- ----- ----- ------ Net asset value, end of period $5.37 $5.15 $4.65 $4.01 $ 4.47 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $30 $30 $33 $36 $53 Ratio of expenses to average daily net assets(b) 2.30%(c) 2.25% 2.37% 2.25% 2.21% Ratio of net investment income (loss) to average daily net assets .32%(c) .08% .27% .61% .42% Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173% Total return(d) 5.96%(e) 10.75% 15.96% (10.19%) (21.21%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 29 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.13 $4.64 $3.99 $4.46 $ 6.21 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .01 .01 -- .03 .02 Net gains (losses) (both realized and unrealized) .30 .48 .65 (.49) (1.24) ----- ----- ----- ----- ------ Total from investment operations .31 .49 .65 (.46) (1.22) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income (.09) -- -- (.01) (.02) Distributions from realized gains -- -- -- -- (.51) ----- ----- ----- ----- ------ Total distributions (.09) -- -- (.01) (.53) ----- ----- ----- ----- ------ Net asset value, end of period $5.35 $5.13 $4.64 $3.99 $ 4.46 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $1 $1 $1 Ratio of expenses to average daily net assets(b) 2.29%(c) 2.24% 2.36% 2.24% 2.21% Ratio of net investment income (loss) to average daily net assets .29%(c) .08% .26% .60% .41% Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173% Total return(d) 6.06%(e) 10.56% 16.29% (10.34%) (21.17%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 30 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.28 $4.76 $4.10 $4.56 $ 6.30 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .04 .05 .07 .07 .08 Net gains (losses) (both realized and unrealized) .30 .51 .64 (.50) (1.28) ----- ----- ----- ----- ------ Total from investment operations .34 .56 .71 (.43) (1.20) ----- ----- ----- ----- ------ Less distributions: Dividends from net investment income (.10) (.04) (.05) (.03) (.03) Distributions from realized gains -- -- -- -- (.51) ----- ----- ----- ----- ------ Total distributions (.10) (.04) (.05) (.03) (.54) ----- ----- ----- ----- ------ Net asset value, end of period $5.52 $5.28 $4.76 $4.10 $ 4.56 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $23 $13 $7 $4 $2 Ratio of expenses to average daily net assets(b) 1.36%(c) 1.32% 1.43% 1.30% 1.31% Ratio of net investment income (loss) to average daily net assets 1.24%(c) 1.00% 1.21% 1.52% 1.35% Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173% Total return(d) 6.44%(e) 11.74% 17.32% (9.55%) (20.40%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 31 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Fund Expenses Example (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2005. Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 32 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses account value account value paid during Annualized Nov. 1, 2004 April 30, 2005 the period(a) expense ratio Class A Actual(b) $1,000 $1,062.30 $7.92 1.54% Hypothetical (5% return before expenses) $1,000 $1,017.25 $7.75 1.54% Class B Actual(b) $1,000 $1,059.60 $11.81 2.30% Hypothetical (5% return before expenses) $1,000 $1,013.46 $11.55 2.30% Class C Actual(b) $1,000 $1,060.60 $11.76 2.29% Hypothetical (5% return before expenses) $1,000 $1,013.51 $11.50 2.29% Class Y Actual(b) $1,000 $1,064.40 $7.00 1.36% Hypothetical (5% return before expenses) $1,000 $1,018.15 $6.84 1.36%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2005: +6.23% for Class A, +5.96% for Class B, +6.06% for Class C and +6.44% for Class Y. - -------------------------------------------------------------------------------- 33 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT Approval of Investment Management Services Agreement American Express Financial Corporation (AEFC), a wholly-owned subsidiary of American Express Company, serves as the investment manager to the Fund. Under an Investment Management Services Agreement (the Agreement), AEFC provides investment advice and other services to the Fund. Throughout the year, the Funds' Board of Directors and the Board's Investment Review Committee monitor these services. Each year the Board determines whether to continue the Agreement by evaluating the quality and level of service received and the costs associated with those services. AEFC prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations to assist the Board in making this determination. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the Agreement. On February 1, 2005, American Express Company announced its intention to pursue a spin-off of AEFC by distributing shares of the common stock of AEFC to shareholders of American Express Company. At a meeting held in person on April 14, 2005, the Board, including a majority of the independent members, approved the continuation of the Agreement for an interim period, not to exceed one year, ending on the later of (i) the effective date of the spin-off or (ii) the approval by the Fund's shareholders of a new investment management services agreement with AEFC (the Interim Period). The spin-off will not result in an "assignment" of the Agreement under the Investment Company Act of 1940 and, therefore, will not cause the termination of the Agreement according to its terms. In connection with the spin-off AEFC has proposed that going forward, services under the Agreement be provided by an affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel advised the Board that it would be prudent, in connection with the spin-off, to consider a new agreement with RiverSource and to seek shareholder approval of that agreement as soon as practical thereafter. Investment performance is a major factor in the evaluation process, and the Board reviewed the Fund's performance over a range of different periods by comparing its performance to relevant Lipper and broader market indices. The Board considered that over time the Fund's investment performance should be above the median for a peer group of funds with similar investment goals and noted that the Fund's investment performance in 2004 exceeded the median. The Board noted that, in addition to portfolio management and investment research, AEFC provides portfolio trading, daily net asset value calculation, management of cash flow, product development, administration of its compliance and legal departments, access to distribution, accounting and recordkeeping, and reporting to the Board and shareholders. To evaluate these services, the Board referred to surveys and benchmarks established by commercial providers, trade associations and AEFC's internal processes. The Board concluded that the services provided were consistent with services provided by investment managers to comparable mutual funds. - -------------------------------------------------------------------------------- 34 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT The Board also evaluated the price paid for the services provided by AEFC, noting the existence of a pricing philosophy, established by the Board and AEFC, that seeks to maintain total Fund expenses within a range of the median expenses charged to comparable funds sold through financial advisors. The Board considered detailed information set forth in an annual report on fees and expenses, including, among other things, data showing a comparison of the Fund's expenses with median expenses paid by funds in its comparison group and data showing the Fund's contribution to AEFC's profitability. The Board determined that the total expense ratio of the Fund is below the median of its comparison group. The Board considered the economies of scale that might be realized by AEFC as the Fund grew and took note of the extent to which Fund shareholders also might benefit from such growth. The Board considered that the Agreement provided for lower fees as assets increase at pre-established breakpoints and concluded that the Agreement satisfactorily provided for sharing these economies of scale. The Board took into account the Contract Committee's discussion comparing the fees AEFC charges to the Fund with those it charges to institutional clients, noting that the relatively higher fees paid by the Fund were principally attributable to the additional services required to manage a regulated mutual fund, like the Fund, and the operation of a large mutual fund family. The Board also considered the profitability realized by AEFC and its affiliates from its relationship with the Fund. The Board took into account the services acquired by AEFC through the use of commission dollars paid by the Fund on portfolio transactions. The Board concluded that AEFC's overall costs and profitability were appropriate, although profitability may be too low on an ongoing basis. The Board noted that the fees paid by the Fund should permit AEFC to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. Based on the foregoing, the Board concluded that the fees paid to AEFC under the Agreement were fair and reasonable and determined to approve renewal of the Agreement for the Interim Period. Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website americanexpress.com/funds; or by searching the website of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available at http://www.sec.gov. - -------------------------------------------------------------------------------- 35 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. AXP(R) Threadneedle Global Equity Fund Semiannual Report for the Period Ended April 30, 2005 AXP Threadneedle Global Equity Fund seeks to provide shareholders with long-term capital growth. (logo) (logo) American AMERICAN Express(R) EXPRESS Funds (R) Table of Contents Fund Snapshot 3 Performance Summary 4 Questions & Answers with Portfolio Management 6 Investments in Securities 9 Financial Statements (Portfolio) 13 Notes to Financial Statements (Portfolio) 16 Financial Statements (Fund) 20 Notes to Financial Statements (Fund) 23 Fund Expenses Example 31 Approval of Investment Management Services Agreement 33 Proxy Voting 34 CORPORATE REORGANIZATION On Feb. 1, 2005, American Express Company, the parent company of the Fund's investment manager, American Express Financial Corporation (AEFC), announced plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders of American Express Company. The transaction, expected to be completed in the third quarter of 2005, is subject to certain regulatory and other approvals, as well as final approval by the board of directors of American Express Company. Upon completion of the transaction AEFC will be a publicly traded company separate from American Express Company. The current agreements between the Fund and AEFC and its affiliates will remain in place. No changes in operations or personnel, including the portfolio manager or managers of the Fund, are anticipated. The current subadvisory agreement will remain in place. [Dalbar logo] American Express(R) Funds' reports to shareholders have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Fund Snapshot AT APRIL 30, 2005 PORTFOLIO MANAGERS Portfolio managers* Since Years in industry Dominic Rossi 10/03 18 Steve Thornber 10/03 17 * The Fund is managed by a team led by Dominic Rossi and Steve Thornber. FUND OBJECTIVE For investors seeking long-term capital growth. Inception dates by class A: 5/29/90 B: 3/20/95 C: 6/26/00 Y: 3/20/95 Ticker symbols by class A: IGLGX B: IDGBX C: -- Y: IDGYX Total net assets $486.3 million Number of holdings 112 STYLE MATRIX Shading within the style matrix indicates areas in which the Fund generally invests. STYLE VALUE BLEND GROWTH X LARGE X MEDIUM SIZE X SMALL COUNTRY COMPOSITION Percentage of portfolio assets (pie chart) United States 37.2% Japan 17.8% Hong Kong 6.5% France 5.6% United Kingdom 5.0% South Korea 4.6% Switzerland 3.9% Germany 3.7% Italy 2.0% Israel 1.6% Brazil 1.4% Canada 1.4% Greece 1.0% Netherlands 1.0% Sweden 1.0% Other* 6.3% * Includes Bermuda, India, Ireland, Luxembourg, Mexico, Russia, South Africa, Taiwan and cash & short-term securities. TOP TEN HOLDINGS Percentage of portfolio assets Citigroup (United States) 3.2% Microsoft (United States) 3.1 Samsung Electronics (South Korea) 2.5 Total (France) 2.2 UBS (Switzerland) 2.2 Home Depot (United States) 2.2 Johnson & Johnson (United States) 2.0 Eni (Italy) 2.0 New World Development (Hong Kong) 1.9 Sanofi-Aventis (France) 1.8 For further detail about these holdings, please refer to the section entitled "Investments in Securities." Stocks of small- or medium-sized companies may be subject to more abrupt or erratic price movements than stocks of larger companies. Some of these companies also may have fewer financial resources. There are special risk considerations associated with international investing related to market, currency, economic, political and other factors. Fund holdings are subject to change. - -------------------------------------------------------------------------------- 3 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Performance Summary (bar chart) PERFORMANCE COMPARISON For the six-month period ended April 30, 2005 +7.05% +6.34% +6.06% +7.05% = AXP Threadneedle Global Equity Fund Class A (excluding sales charge) +6.34% = MSCI All Country World Index(1) (unmanaged) +6.06% = Lipper Global Funds Index(2) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919 or visiting www.americanexpress.com/funds. (1) Morgan Stanley Capital International (MSCI) All Country World Index, an unmanaged index, is compiled from a composite of securities markets of 47 countries, including Canada, the United States and 26 emerging market countries. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper Global Funds Index includes the 30 largest global funds tracked by Lipper Inc. The index's returns include net reinvested dividends. 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 because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 4 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Performance Summary
AVERAGE ANNUAL TOTAL RETURNS Class A Class B Class C Class Y (Inception dates) (5/29/90) (3/20/95) (6/26/00) (3/20/95) NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) at April 30, 2005 6 months* +7.05% +0.89% +6.78% +2.78% +6.84% +5.84% +7.36% 1 year +13.66% +7.13% +12.80% +8.80% +12.64% +12.64% +13.93% 3 years +4.73% +2.68% +3.95% +3.01% +3.90% +3.90% +4.96% 5 years -7.35% -8.45% -8.06% -8.21% N/A N/A -7.15% 10 years +3.72% +3.11% +2.93% +2.93% N/A N/A +3.90% Since inception +4.52% +4.10% +3.63% +3.63% -8.19% -8.19% +4.61% at March 31, 2005 6 months* +12.81% +6.32% +12.18% +8.18% +12.28% +11.28% +12.67% 1 year +13.04% +6.54% +11.95% +7.95% +12.04% +12.04% +13.12% 3 years +4.25% +2.21% +3.40% +2.46% +3.43% +3.43% +4.42% 5 years -8.02% -9.10% -8.75% -8.90% N/A N/A -7.86% 10 years +4.47% +3.85% +3.66% +3.66% N/A N/A +4.63% Since inception +4.73% +4.32% +3.93% +3.93% -7.81% -7.81% +4.90%
(1) Excluding sales charge. (2) Returns at public offering price (POP) reflect a sales charge of 5.75%. (3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as follows: first year 5%; second and third year 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. (4) 1% CDSC applies to redemptions made within the first year of purchase. (5) Sales charge is not applicable to these shares. Shares available to institutional investors only. * Not annualized. - -------------------------------------------------------------------------------- 5 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Questions & Answers WITH PORTFOLIO MANAGEMENT Below, portfolio managers Dominic Rossi and Stephen Thornber discuss the Fund's results and positioning for the semiannual period. Q: How did AXP Threadneedle Global Equity Fund perform for the six months ended April 30, 2005? A: AXP Threadneedle Global Equity Fund rose 7.05% (Class A shares excluding sales charge) for the six months ended April 30, 2005. The Fund outperformed its benchmark, the MSCI All Country World Index, which advanced 6.34% for the period. The Fund's peer group, as represented by the Lipper Global Funds Index, was up 6.06% for the same time frame. Q: How did market conditions and country positioning affect performance? A: Stock selection was positive during the semiannual period, and we were pleased to see the breadth of performance in stock selection coming from all around the world and in a variety of sectors. One of the strongest performing stocks in the Fund was Valero Energy, a U.S.-based refining company. The company's stock jumped approximately 60% during the first few months of the year. A cyclical upswing in refining and marketing margins around the world propelled the stock forward. Two companies the Fund has held for a long time and continues to own reported strong year-end results in the first quarter of the calendar year. Espirit, the Hong Kong retailer, and Nobel Biocare, the European based orthodontic company, are genuine growth companies and have performed extremely well over the years. Finally, the Fund was helped by a recovery in the pharmaceuticals sector, which rose as investors sought out the sector's defensive growth characteristics. We had been maintaining a low exposure to the sector. In the health care sector, the Fund's holding in St. Jude Medical benefited from a solid earnings report as well as the sector's surge. In addition, the Fund's large exposure to Citigroup and Hong Kong real estate developer New World Development added significant value to performance. Some stocks that performed poorly during the period include Ameritrade, a U.S.-based online broker, and Check Point Software Technologies, an Internet software company based in Israel that has been very volatile. We have owned Check Point for more than a year now, and we continue to feel positive about the company and think it will deliver. In terms of sector allocation, we saw poor performance in consumer discretionary as well as in media stocks overall. The other weak areas were materials and information technology where the Fund's large exposure ended - -------------------------------------------------------------------------------- 6 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> We continue to be positive on Japan, and we raised our weighting during the period making it the Fund's largest overweight. (end callout quote) up hurting performance a bit even though actual stock selection was good. In our country selection, we lost some ground over the period because we had less exposure in the U.S. market and more exposure in places like Japan and Latin America when the U.S. dollar, in particular, had a strong period. These positions were somewhat mitigated by the Fund's large exposure in Hong Kong, which bucked the global trend of equity market weakness during the period. Q: What changes did you make to the Fund and how is it currently positioned? A: We made some significant changes on a country basis during the period. We continue to be positive on Japan, and we raised our weighting during the period making it the Fund's largest overweight. Japanese equities strike us as attractively valued given our expectation of a gradual economic recovery, ongoing productivity gains and a growing trend toward merger and acquisition activity. Unfortunately, our large exposure hasn't worked so far, but we are confident that it will, and even with the overweight, the Fund has continued to perform quite well. At the start of the semiannual period, we reduced our position in Latin America after we started getting nervous about the rising interest rates in the U.S. and the subsequent effect on Latin America, which still relies on capital flow to some degree. We sold many of our holdings in Latin America and used the money toward our holdings in Japan. During the period, we also put more money into Korea, particularly in some of the cyclicals there that have worked well. We also added to Europe somewhat. However, our U.S. weightings are almost at our minimum exposure. We are confident in our position to remain underweight in the U.S. because we feel valuations there are less compelling given the backdrop of rising interest rates and slowing economic growth. In terms of sectors, we became a little more defensive as the period progressed. The Fund's large exposure in materials and energy proved mildly negative, so we reduced our positions in both sectors. The materials sector is neutral to the weighting in the Fund's benchmark, the MSCI All Country World Index. Energy - -------------------------------------------------------------------------------- 7 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Questions & Answers (begin callout quote)> Portfolio activity during April saw us reducing risk in light of the more cautious tone in the markets. (end callout quote) remains slightly overweight relative to the benchmark index, and we are not tempted to reduce energy further given our view that oil prices are likely to remain well supported over the medium term. In addition, we have a low exposure in the industrials and consumer staples sectors, and we reduced our position in financials early in the quarter and maintain a low exposure there. Specifically, portfolio activity during April saw us reducing risk in light of the more cautious tone in the markets. The large-cap bias of the Fund was enhanced and positions were bolstered in defensive areas such as tobacco and pharmaceuticals. At the same time, we reduced cyclical exposure. It is clear that economic momentum is waning, and, with this in mind, we are likely to reduce the cyclical content of the portfolio going forward. Q: What is the Fund's tactical view and strategy for the months ahead? A: We believe that in many markets, specifically the U.K. and the United States, the earnings cycle is near a peak in terms of margins and in terms of capital. We are likely to experience just as many profit warnings as profit surprises. We think it will be a difficult year for equities in that respect and given the fact that interest rates are clearly on the rise. Rising interest rates are not good for equities in developed markets. Rising rates will also impact emerging markets, which is why we brought down the weightings there. Our large exposure to Japan has not performed as well as we expected, however in our view, earnings growth and return on capital in Japan are still rising and have significant expansion potential. We think in the medium term there will likely be an increase in profitability in Asia and a decrease in profitability in the Western Hemisphere. Given the fact that there is growth in Japan and growth in China, we continue to have a large exposure to cyclicals because we know those markets, in the end, will be supported by earnings growth. - -------------------------------------------------------------------------------- 8 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Investments in Securities World Growth Portfolio April 30, 2005 (Unaudited) (Percentages represent value of investments compared to net assets) Common stocks (97.7%)(c) Issuer Shares Value(a) Bermuda (0.5%) Insurance PartnerRe 39,402 $2,296,349 Brazil (1.4%) Energy (0.5%) Petroleo Brasileiro ADR 59,394 2,490,390 Metals (0.9%) Cia Vale do Rio Doce ADR 192,905 4,475,396 Canada (1.4%) Energy EnCana 67,020 4,290,430 Suncor Energy 67,359 2,482,853 Total 6,773,283 France (5.6%) Aerospace & defense (0.5%) Thales 54,036 2,193,163 Automotive & related (0.4%) Renault 22,556 1,890,383 Energy (2.2%) Total 49,137 10,925,727 Machinery (0.7%) Schneider Electric 49,686 3,580,849 Multi-industry (1.8%) Sanofi-Aventis 100,000 8,854,593 Germany (2.9%) Banks and savings & loans (0.9%) Hypo Real Estate Holding 110,000(b) 4,558,057 Computer software & services (0.4%) SAP 13,803 2,177,655 Health care products (0.3%) Schering 18,475 1,216,221 Common stocks (continued) Issuer Shares Value(a) Germany (cont.) Utilities -- electric (1.3%) RWE 100,000 $5,970,464 Greece (1.0%) Building materials & construction TITAN Cement 153,130 4,860,773 Hong Kong (6.6%) Financial services (0.9%) Sun Hung Kai Properties441,000 4,223,329 Real estate (3.0%) Henderson Land Development 1,146,000 5,336,008 New World Development 8,740,600 9,402,242 Total 14,738,250 Retail -- general (2.7%) Esprit Holdings 723,500 5,389,902 Giordano Intl 5,812,000 4,038,667 Lifestyle Intl Holdings 2,247,500 3,525,227 Total 12,953,796 India (0.5%) Banks and savings & loans State Bank of India GDR 73,294 2,627,590 Ireland (0.2%) Banks and savings & loans Anglo Irish Bank 101,205 1,164,503 Israel (1.6%) Computer software & services Check Point Software Technologies 381,723(b) 7,997,096 Italy (2.0%) Energy Eni 386,944 9,729,128 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 9 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Japan (18.0%) Automotive & related (1.0%) Honda Motor 48,300 $2,324,695 Toyota Motor 64,900 2,355,154 Total 4,679,849 Banks and savings & loans (2.6%) Bank of Kyoto 511,000(d) 4,312,153 Chiba Bank 618,000 3,801,443 Mitsubishi Tokyo Financial Group 489 4,226,908 Total 12,340,504 Broker dealers (1.2%) Matsui Securities 438,000(d) 5,942,525 Building materials & construction (0.8%) Nishimatsu Construction 690,000 2,580,778 Okumura 172,000 1,066,142 Total 3,646,920 Electronics (1.6%) eAccess 3,899 2,994,267 Keyence 20,900 4,611,476 Total 7,605,743 Energy (1.1%) Nippon Oil 749,000 5,285,844 Engineering & construction (1.0%) Daiwa House Industry 454,000 5,091,675 Financial services (0.8%) Aiful 45,750 3,404,311 Kobayashi Yoko 22,100 404,554 Total 3,808,865 Home building (1.1%) Daito Trust Construction 137,300 5,483,710 Machinery (2.4%) Amada 882,000 5,451,011 Komatsu 876,000 6,168,693 Total 11,619,704 Metals (0.8%) Nisshin Steel 1,488,000 3,827,028 Multi-industry (1.0%) Canon 97,100 5,050,985 Real estate (1.8%) GOLDCREST 66,230 3,669,525 Mitsui Fudosan 446,000 4,977,757 Total 8,647,282 Common stocks (continued) Issuer Shares Value(a) Japan (cont.) Textiles & apparel (0.8%) ONWARD Kashiyama 308,000 $3,955,451 Luxembourg (0.9%) Metals Arcelor 225,071 4,562,739 Mexico (0.4%) Cellular telecommunications America Movil ADR Series L35,481 1,761,632 Netherlands (1.0%) Food Royal Numico 116,037(b) 4,800,281 Russia (0.7%) Utilities -- telephone Mobile Telesystems ADR 98,892 3,322,771 South Africa (0.7%) Retail -- general Massmart Holdings 485,061 3,506,261 South Korea (4.6%) Chemicals (0.5%) Hanwha Chemical 200,000 2,374,336 Electronics (2.5%) Samsung Electronics 26,451 12,098,823 Engineering & construction (0.9%) Hyundai Development 212,240 4,242,674 Metals (0.7%) POSCO 19,831 3,612,719 Sweden (1.0%) Telecom equipment & services Telefonaktiebolaget LM Ericsson Cl B 1,650,539 4,885,608 Switzerland (3.9%) Banks and savings & loans (2.2%) UBS 135,866 10,864,677 Food (0.5%) Nestle 9,228 2,428,518 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) Switzerland (cont.) Health care products (1.2%) Nobel Biocare Holding 27,121 $5,807,130 Taiwan (0.5%) Financial services Hung Poo Real Estate Development 3,778,000 2,488,097 United Kingdom (5.0%) Aerospace & defense (--%) Rolls-Royce Group Cl B 19,880,400 38,862 Cellular telecommunications (0.8%) Vodafone Group 1,545,044 4,037,930 Energy (1.0%) BP 491,338 5,006,793 Financial services (0.5%) 3i Group 191,538 2,343,421 Food (1.0%) Cadbury Schweppes 470,444 4,729,967 Metals (0.4%) BHP Billiton 170,185 2,083,144 Retail -- grocery (1.3%) Tesco 1,061,938 6,269,190 United States (37.3%) Beverages & tobacco (1.7%) Altria Group 89,015 5,785,084 PepsiCo 46,676 2,597,053 Total 8,382,137 Broker dealers (2.3%) Ameritrade Holding 357,950(b) 3,751,316 Bear Stearns Companies 37,617 3,560,825 Lehman Brothers Holdings 43,587 3,997,800 Total 11,309,941 Cellular telecommunications (1.7%) American Tower Cl A 270,785(b) 4,665,626 SpectraSite 65,934(b) 3,700,875 Total 8,366,501 Computer hardware (1.1%) Dell 154,490(b) 5,380,887 Common stocks (continued) Issuer Shares Value(a) United States (cont.) Computer software & services (5.8%) Adobe Systems 66,727 $3,968,255 Autodesk 123,199 3,921,424 Google Cl A 19,767(b) 4,348,740 Microsoft 602,769 15,250,055 Total 27,488,474 Energy (2.4%) Anadarko Petroleum 32,142 2,347,652 Burlington Resources 49,305 2,396,716 Forest Oil 74,787(b) 2,881,543 Massey Energy 38,448 1,388,357 Valero Energy 42,181 2,890,664 Total 11,904,932 Energy equipment & services (0.4%) ENSCO Intl 66,219 2,158,739 Finance companies (3.2%) Citigroup 333,327 15,653,036 Financial services (1.0%) Goldman Sachs Group 31,760 3,391,651 Intl Securities Exchange 48,503(b) 1,276,599 Total 4,668,250 Furniture & appliances (0.7%) Tempur-Pedic Intl 187,841(b) 3,585,885 Health care products (6.5%) Abbott Laboratories 79,986 3,932,111 Amgen 30,274(b) 1,762,250 Johnson & Johnson 142,325 9,767,764 Laboratory Corp of America Holdings 64,205(b) 3,178,148 Myogen 161,959(b) 1,052,734 St. Jude Medical 193,443(b) 7,550,079 Zimmer Holdings 44,678(b) 3,637,683 Total 30,880,769 Health care services (2.0%) DaVita 71,672(b) 2,888,382 WellPoint 52,054(b) 6,649,898 Total 9,538,280 Insurance (1.5%) American Intl Group 97,213 4,943,281 Genworth Financial Cl A 91,060 2,545,127 Total 7,488,408 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Common stocks (continued) Issuer Shares Value(a) United States (cont.) Media (1.2%) Dex Media 205,824 $4,507,545 Lamar Advertising Cl A 31,970(b) 1,195,039 Total 5,702,584 Retail -- drugstores (1.6%) CVS 56,862 2,932,942 Walgreen 118,127 5,086,549 Total 8,019,491 Retail -- general (4.2%) Dillard's Cl A 150,629 3,505,137 Home Depot 302,863 10,712,264 Staples 185,069 3,529,256 TJX Companies 118,204 2,677,321 Total 20,423,978 Total common stocks (Cost: $437,277,648) $474,900,945 Preferred stock (0.9%)(c) Issuer Shares Value(a) Germany Porsche 6,537 $4,216,345 Total preferred stock (Cost: $3,369,108) $4,216,345 Short-term securities (1.7%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. government agencies Federal Home Loan Mtge Corp Disc Nt 06-13-05 2.79% $3,500,000 $3,487,821 Federal Natl Mtge Assn Disc Nt 06-02-05 2.77 5,000,000 4,986,967 Total short-term securities (Cost: $8,475,116) $8,474,788 Total investments in securities (Cost: $449,121,872)(f) $487,592,078 Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At April 30, 2005, 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 1.0% of net assets. See Note 4 to the financial statements. 0.7% of net assets is the Portfolio's cash equivalent position. (f) At April 30, 2005, the cost of securities for federal income tax purposes was approximately $449,122,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 50,018,000 Unrealized depreciation (11,548,000) ----------- Net unrealized appreciation $ 38,470,000 ------------ 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. - -------------------------------------------------------------------------------- 12 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities World Growth Portfolio April 30, 2005 (Unaudited) Assets Investments in securities, at value (Note 1)* (identified cost $449,121,872) $487,592,078 Foreign currency holdings (identified cost $885,178) (Note 1) 896,012 Dividends and accrued interest receivable 1,848,363 Receivable for investment securities sold 9,808,805 --------- Total assets 500,145,258 ----------- Liabilities Disbursements in excess of cash on demand deposit 299,578 Payable for investment securities purchased 8,845,192 Payable upon return of securities loaned (Note 4) 4,661,750 Accrued investment management services fee 10,389 Other accrued expenses 52,937 ------ Total liabilities 13,869,846 ---------- Net assets $486,275,412 ============ *Including securities on loan, at value (Note 4) $ 4,498,615 ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statement of operations World Growth Portfolio Six months ended April 30, 2005 (Unaudited) Investment income Income: Dividends $ 6,178,149 Interest 45,123 Fee income from securities lending (Note 4) 69,893 Less foreign taxes withheld (446,123) -------- Total income 5,847,042 --------- Expenses (Note 2): Investment management services fee 2,108,740 Compensation of board members 5,540 Custodian fees 85,043 Audit fees 14,250 Other 8,749 ----- Total expenses 2,222,322 Earnings credits on cash balances (Note 2) (2,235) ------ Total net expenses 2,220,087 --------- Investment income (loss) -- net 3,626,955 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 35,869,533 Foreign currency transactions 20,427 ------ Net realized gain (loss) on investments 35,889,960 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,671,642) ---------- Net gain (loss) on investments and foreign currencies 32,218,318 ---------- Net increase (decrease) in net assets resulting from operations $35,845,273 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets World Growth Portfolio April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations Investment income (loss) -- net $ 3,626,955 $ 3,837,875 Net realized gain (loss) on investments 35,889,960 42,451,978 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,671,642) 11,388,618 ---------- ---------- Net increase (decrease) in net assets resulting from operations 35,845,273 57,678,471 ---------- ---------- Proceeds from contributions 1,753,211 954,259 Fair value of withdrawals (25,226,046) (98,738,060) ----------- ----------- Net contributions (withdrawals) from partners (23,472,835) (97,783,801) ----------- ----------- Total increase (decrease) in net assets 12,372,438 (40,105,330) Net assets at beginning of period 473,902,974 514,008,304 ----------- ----------- Net assets at end of period $486,275,412 $473,902,974 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Notes to Financial Statements World Growth Portfolio (Unaudited as to April 30, 2005) 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. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Portfolio may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Portfolio also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. - -------------------------------------------------------------------------------- 16 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT The risk in writing a call option is that the Portfolio gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Portfolio pays a premium whether or not the option is exercised. The Portfolio also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Portfolio will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Portfolio may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Portfolio also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Portfolio recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2005, foreign currency holdings consisted of multiple denominations. The Portfolio may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Portfolio is subject to the credit risk that the other party will not complete its contract obligations. - -------------------------------------------------------------------------------- 17 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT 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 increased the fee by $142,143 for the six months ended April 30, 2005. Under the agreement, the Trust also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees, audit and certain legal fees, fidelity bond premiums, registration fees for units, office expenses, consultants' fees, compensation of trustees, corporate filing fees, expenses incurred in connection with lending securities of the Portfolio and any other expenses properly payable by the Trust or Portfolio and approved by the board. Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the underlying Fund or other American Express mutual funds. The Portfolio's liability for these amounts is adjusted for market value changes and remains in the Portfolio until distributed in accordance with the Plan. AEFC has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the portfolio. - -------------------------------------------------------------------------------- 18 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT During the six months ended April 30, 2005, the Portfolio's custodian fees were reduced by $2,235 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 $242,293,296 and $259,183,958, respectively, for the six months ended April 30, 2005. Realized gains and losses are determined on an identified cost basis. 4. LENDING OF PORTFOLIO SECURITIES At April 30, 2005, securities valued at $4,498,615 were on loan to brokers. For collateral, the Portfolio received $4,661,750 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 $69,893 for the six months ended April 30, 2005. 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, 2005(e) 2004 2003 2002 2001 Ratio of expenses to average daily net assets(a) .89%(b) .71% .74% .72% .62% Ratio of net investment income (loss) to average daily net assets 1.45%(b) .78% 1.01% .67% .95% Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218% Total return(c) 7.55%(d) 12.26% 18.91% (15.58%) (34.42%)
(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) Adjusted to an annual basis. (c) Total return is based on a calculated Portfolio net asset value and does not reflect payment of a sales charge. (d) Not annualized. (e) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 19 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Financial Statements
Statement of assets and liabilities AXP Threadneedle Global Equity Fund April 30, 2005 (Unaudited) Assets Investment in Portfolio (Note 1) $ 486,206,057 Capital shares receivable 324,379 ------- Total assets 486,530,436 ----------- Liabilities Capital shares payable 146,381 Accrued distribution fee 5,435 Accrued service fee 15 Accrued transfer agency fee 3,015 Accrued administrative services fee 759 Other accrued expenses 69,775 ------ Total liabilities 225,380 ------- Net assets applicable to outstanding capital stock $ 486,305,056 ============== Represented by Capital stock -- $.01 par value (Note 1) $ 896,425 Additional paid-in capital 1,043,861,769 Excess of distributions over net investment income (920,537) Accumulated net realized gain (loss) (Note 5) (596,111,982) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 38,579,381 ---------- Total -- representing net assets applicable to outstanding capital stock $ 486,305,056 ============== Net assets applicable to outstanding shares: Class A $ 373,408,556 Class B $ 105,716,072 Class C $ 1,546,614 Class Y $ 5,633,814 Net asset value per share of outstanding capital stock: Class A shares 67,995,260 $ 5.49 Class B shares 20,330,269 $ 5.20 Class C shares 299,213 $ 5.17 Class Y shares 1,017,767 $ 5.54 --------- --------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statement of operations AXP Threadneedle Global Equity Fund Six months ended April 30, 2005 (Unaudited) Investment income Income: Dividends $ 6,177,288 Interest 45,111 Fee income from securities lending 69,883 Less foreign taxes withheld (446,060) -------- Total income 5,846,222 --------- Expenses (Note 2): Expenses allocated from Portfolio 2,219,779 Distribution fee Class A 479,144 Class B 547,381 Class C 6,710 Transfer agency fee 664,036 Incremental transfer agency fee Class A 55,051 Class B 29,600 Class C 328 Service fee -- Class Y 2,628 Administrative services fees and expenses 142,583 Compensation of board members 5,148 Printing and postage 86,500 Registration fees 28,380 Audit fees 4,750 Other 9,416 ----- Total expenses 4,281,434 Earnings credits on cash balances (Note 2) (7,531) ------ Total net expenses 4,273,903 --------- Investment income (loss) -- net 1,572,319 --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions 35,864,858 Foreign currency transactions 20,433 ------ Net realized gain (loss) on investments 35,885,291 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,671,329) ---------- Net gain (loss) on investments and foreign currencies 32,213,962 ---------- Net increase (decrease) in net assets resulting from operations $33,786,281 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets AXP Threadneedle Global Equity Fund April 30, 2005 Oct. 31, 2004 Six months ended Year ended (Unaudited) Operations and distributions Investment income (loss) -- net $ 1,572,319 $ (598,332) Net realized gain (loss) on investments 35,885,291 42,447,414 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (3,671,329) 11,386,564 ---------- ---------- Net increase (decrease) in net assets resulting from operations 33,786,281 53,235,646 ---------- ---------- Distributions to shareholders from: Net investment income Class A (2,338,418) (95,223) Class C (2,880) -- Class Y (38,051) (2,413) ------- ------ Total distributions (2,379,349) (97,636) ---------- ------- Capital share transactions (Note 3) Proceeds from sales Class A shares (Note 2) 34,349,738 46,610,187 Class B shares 11,201,461 7,409,628 Class C shares 715,736 260,184 Class Y shares 1,253,716 1,305,145 Reinvestment of distributions at net asset value Class A shares 2,297,172 93,330 Class C shares 2,823 -- Class Y shares 38,052 2,413 Payments for redemptions Class A shares (51,695,083) (88,638,536) Class B shares (Note 2) (16,311,721) (57,159,405) Class C shares (Note 2) (193,029) (378,214) Class Y shares (427,278) (2,804,270) -------- ---------- Increase (decrease) in net assets from capital share transactions (18,768,413) (93,299,538) ----------- ----------- Total increase (decrease) in net assets 12,638,519 (40,161,528) Net assets at beginning of period 473,666,537 513,828,065 ----------- ----------- Net assets at end of period $486,305,056 $473,666,537 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Notes to Financial Statements AXP Threadneedle Global Equity Fund (Unaudited as to April 30, 2005) 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, transfer agency fees 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 April 30, 2005 was 99.99%. 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 - -------------------------------------------------------------------------------- 23 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT 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. 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. Dividends to shareholders An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. - -------------------------------------------------------------------------------- 24 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL 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. AEFC has a Subadvisory Agreement with Threadneedle International Limited, an indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the portfolio. 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 pursuant to Rule 12b-1, 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 $315,026 for Class A, $42,902 for Class B and $346 for Class C for the six months ended April 30, 2005. - -------------------------------------------------------------------------------- 25 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT During the six months ended April 30, 2005, the Fund's transfer agency fees were reduced by $7,531 as a result of earnings credits from overnight cash balances. 3. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
Six months ended April 30, 2005 Class A Class B Class C Class Y Sold 6,158,949 2,115,046 137,753 224,835 Issued for reinvested distributions 417,667 -- 544 6,869 Redeemed (9,286,741) (3,085,135) (36,595) (76,086) ---------- ---------- ------- ------- Net increase (decrease) (2,710,125) (970,089) 101,702 155,618 ---------- -------- ------- ------- 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) ---------- ----------- ------- --------
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 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. The Fund had no borrowings outstanding during the six months ended April 30, 2005. 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. - -------------------------------------------------------------------------------- 26 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT 6. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
Class A Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.16 $4.62 $3.92 $4.69 $ 8.74 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .03 -- .01 -- .02 Net gains (losses) (both realized and unrealized) .33 .54 .69 (.77) (2.71) ----- ----- ----- ----- ------ Total from investment operations .36 .54 .70 (.77) (2.69) ----- ----- ----- ----- ------ Less distributions: Dividends from and in excess of net investment income (.03) -- -- -- (.02) Distributions from realized gains -- -- -- -- (1.34) ----- ----- ----- ----- ------ Total distributions (.03) -- -- -- (1.36) ----- ----- ----- ----- ------ Net asset value, end of period $5.49 $5.16 $4.62 $3.92 $ 4.69 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $373 $364 $366 $406 $714 Ratio of expenses to average daily net assets(b) 1.54%(c) 1.41% 1.50% 1.39% 1.18% Ratio of net investment income (loss) to average daily net assets .80%(c) .07% .26% .01% .39% Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218% Total return(d) 7.05%(e) 11.72% 17.86% (16.42%) (34.83%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 27 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Class B Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $4.87 $4.40 $3.76 $4.53 $ 8.53 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) -- (.03) (.03) (.04) (.02) Net gains (losses) (both realized and unrealized) .33 .50 .67 (.73) (2.64) ----- ----- ----- ----- ------ Total from investment operations .33 .47 .64 (.77) (2.66) ----- ----- ----- ----- ------ Less distributions: Distributions from realized gains -- -- -- -- (1.34) ----- ----- ----- ----- ------ Net asset value, end of period $5.20 $4.87 $4.40 $3.76 $ 4.53 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $106 $104 $142 $173 $309 Ratio of expenses to average daily net assets(b) 2.32%(c) 2.18% 2.27% 2.16% 1.95% Ratio of net investment income (loss) to average daily net assets .02%(c) (.66%) (.52%) (.77%) (.38%) Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218% Total return(d) 6.78%(e) 10.68% 17.02% (17.00%) (35.38%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 28 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Class C Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $4.85 $4.38 $3.75 $4.52 $ 8.54 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) -- (.02) (.03) (.04) (.02) Net gains (losses) (both realized and unrealized) .33 .49 .66 (.73) (2.64) ----- ----- ----- ----- ------ Total from investment operations .33 .47 .63 (.77) (2.66) ----- ----- ----- ----- ------ Less distributions: Dividends from and in excess of net investment income (.01) -- -- -- (.02) Distributions from realized gains -- -- -- -- (1.34) ----- ----- ----- ----- ------ Total distributions (.01) -- -- -- (1.36) ----- ----- ----- ----- ------ Net asset value, end of period $5.17 $4.85 $4.38 $3.75 $ 4.52 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $2 $1 $1 $1 $1 Ratio of expenses to average daily net assets(b) 2.32%(c) 2.19% 2.29% 2.19% 1.95% Ratio of net investment income (loss) to average daily net assets .01%(c) (.69%) (.52%) (.78%) (.42%) Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218% Total return(d) 6.84%(e) 10.73% 16.80% (17.04%) (35.37%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 29 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Class Y Per share income and capital changes(a) Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001 Net asset value, beginning of period $5.20 $4.65 $3.94 $4.70 $ 8.76 ----- ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .04 .01 .02 .01 .04 Net gains (losses) (both realized and unrealized) .34 .54 .69 (.77) (2.73) ----- ----- ----- ----- ------ Total from investment operations .38 .55 .71 (.76) (2.69) ----- ----- ----- ----- ------ Less distributions: Dividends from and in excess of net investment income (.04) -- -- -- (.03) Distributions from realized gains -- -- -- -- (1.34) ----- ----- ----- ----- ------ Total distributions (.04) -- -- -- (1.37) ----- ----- ----- ----- ------ Net asset value, end of period $5.54 $5.20 $4.65 $3.94 $ 4.70 ----- ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $6 $4 $5 $8 $12 Ratio of expenses to average daily net assets(b) 1.37%(c) 1.23% 1.30% 1.21% 1.01% Ratio of net investment income (loss) to average daily net assets .96%(c) .25% .43% .18% .55% Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218% Total return(d) 7.36%(e) 11.88% 18.02% (16.17%) (34.78%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) Total return does not reflect payment of a sales charge. (e) Not annualized. (f) Six months ended April 30, 2005 (Unaudited). - -------------------------------------------------------------------------------- 30 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Fund Expenses Example (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 2005. Actual Expenses The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 31 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses Annualized account value account value paid during expense Nov. 1, 2004 April 30, 2005 the period(a) ratio Class A Actual(b) $1,000 $1,070.50 $7.95 1.54% Hypothetical (5% return before expenses) $1,000 $1,017.25 $7.75 1.54% Class B Actual(b) $1,000 $1,067.80 $11.96 2.32% Hypothetical (5% return before expenses) $1,000 $1,013.36 $11.65 2.32% Class C Actual(b) $1,000 $1,068.40 $11.96 2.32% Hypothetical (5% return before expenses) $1,000 $1,013.36 $11.65 2.32% Class Y Actual(b) $1,000 $1,073.60 $7.08 1.37% Hypothetical (5% return before expenses) $1,000 $1,018.10 $6.89 1.37%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2005: +7.05% for Class A, +6.78% for Class B, +6.84% for Class C and +7.36% for Class Y. - -------------------------------------------------------------------------------- 32 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT Approval of Investment Management Services Agreement American Express Financial Corporation (AEFC), a wholly-owned subsidiary of American Express Company, serves as the investment manager to the Fund. Under an Investment Management Services Agreement (the Agreement), AEFC provides investment advice and other services to the Fund. Throughout the year, the Funds' Board of Directors and the Board's Investment Review Committee monitor these services. Each year the Board determines whether to continue the Agreement by evaluating the quality and level of service received and the costs associated with those services. AEFC prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations to assist the Board in making this determination. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the Agreement. On February 1, 2005, American Express Company announced its intention to pursue a spin-off of AEFC by distributing shares of the common stock of AEFC to shareholders of American Express Company. At a meeting held in person on April 14, 2005, the Board, including a majority of the independent members, approved the continuation of the Agreement for an interim period, not to exceed one year, ending on the later of (i) the effective date of the spin-off or (ii) the approval by the Fund's shareholders of a new investment management services agreement with AEFC (the Interim Period). The spin-off will not result in an "assignment" of the Agreement under the Investment Company Act of 1940 and, therefore, will not cause the termination of the Agreement according to its terms. In connection with the spin-off AEFC has proposed that going forward, services under the Agreement be provided by an affiliate, RiverSource Investments, LLC (RiverSource). Independent counsel advised the Board that it would be prudent, in connection with the spin-off, to consider a new agreement with RiverSource and to seek shareholder approval of that agreement as soon as practical thereafter. Investment performance is a major factor in the evaluation process, and the Board reviewed the Fund's performance over a range of different periods by comparing its performance to relevant Lipper and broader market indices. The Board considered that over time the Fund's investment performance should be above the median for a peer group of funds with similar investment goals and noted that the Fund's investment performance in 2004 exceeded the median. The Board noted that, in addition to portfolio management and investment research, AEFC provides portfolio trading, daily net asset value calculation, management of cash flow, product development, administration of its compliance and legal departments, access to distribution, accounting and recordkeeping, and reporting to the Board and shareholders. To evaluate these services, the Board referred to surveys and benchmarks established by commercial providers, trade associations and AEFC's internal processes. The Board concluded that the services provided were consistent with services provided by investment managers to comparable mutual funds. - -------------------------------------------------------------------------------- 33 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT The Board also evaluated the price paid for the services provided by AEFC, noting the existence of a pricing philosophy, established by the Board and AEFC, that seeks to maintain total Fund expenses within a range of the median expenses charged to comparable funds sold through financial advisors. The Board considered detailed information set forth in an annual report on fees and expenses, including, among other things, data showing a comparison of the Fund's expenses with median expenses paid by funds in its comparison group and data showing the Fund's contribution to AEFC's profitability. The Board determined that while the Fund's expenses are somewhat higher than the median for its comparison group, the Fund's strong performance justified the level of expenses. The Board considered the economies of scale that might be realized by AEFC as the Fund grew and took note of the extent to which Fund shareholders also might benefit from such growth. The Board considered that the Agreement provided for lower fees as assets increase at pre-established breakpoints and concluded that the Agreement satisfactorily provided for sharing these economies of scale. The Board took into account the Contract Committee's discussion comparing the fees AEFC charges to the Fund with those it charges to institutional clients, noting that the relatively higher fees paid by the Fund were principally attributable to the additional services required to manage a regulated mutual fund, like the Fund, and the operation of a large mutual fund family. The Board also considered the profitability realized by AEFC and its affiliates from its relationship with the Fund. The Board took into account the services acquired by AEFC through the use of commission dollars paid by the Fund on portfolio transactions. The Board concluded that AEFC's overall costs and profitability were appropriate, although profitability may be too low on an ongoing basis. The Board noted that the fees paid by the Fund should permit AEFC to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. Based on the foregoing, the Board concluded that the fees paid to AEFC under the Agreement were fair and reasonable and determined to approve renewal of the Agreement for the Interim Period. Proxy Voting The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling (800) 862-7919; by looking at the website americanexpress.com/funds; or by searching the website of the Securities and Exchange Commission http://www.sec.gov. You may view the Fund's voting record for all portfolio companies whose shareholders meetings were completed the previous quarter on americanexpress.com/funds or obtain a copy by calling the Fund's administrator, Board Services Corporation, collect at (612) 330-9283. In addition, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available at http://www.sec.gov. - -------------------------------------------------------------------------------- 34 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT (logo) AMERICAN EXPRESS (R) American Express Funds 70100 AXP Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer. Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) AXP GLOBAL SERIES, INC. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date June 30, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date June 30, 2005 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date June 30, 2005 EX-99.CERT 2 ex99-cert.txt CERTIFICATION PURSUANT TO 270.30A-2 OF THE INVESTMENT COMPANY ACT OF 1940 Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Paula Meyer, certify that: 1. I have reviewed this report on Form N-CSR of AXP Global Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 22, 2005 /s/ Paula R. Meyer -------------------------------- Name: Paula R. Meyer Title: President and Chief Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey Fox, certify that: 1. I have reviewed this report on Form N-CSR of AXP Global Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 22, 2005 /s/ Jeffrey P. Fox -------------------------------- Name: Jeffrey P. Fox Title: Treasurer and Chief Financial Officer EX-99.906 CERT 3 ex99-906cert.txt CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION AXP Global Series, Inc. (the Registrant) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that 1. This report on Form N-CSR of the Registrant (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: June 22, 2005 /s/ Paula R. Meyer ------------- ------------------ Paula R. Meyer President and Chief Executive Officer Date: June 22, 2005 /s/ Jeffrey P. Fox ------------- ------------------ Jeffrey P. Fox Treasurer and Chief Financial Officer A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----