SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Under Section 240.14a-12
AXP Bond Fund, Inc.
AXP California Tax-Exempt Trust
AXP Discovery Fund, Inc.
AXP Equity Select Fund, Inc.
AXP Extra Income Fund, Inc.
AXP Federal Income Fund, Inc.
AXP Global Series, Inc.
AXP Growth Series, Inc.
AXP High Yield Tax-Exempt Fund, Inc.
AXP International Fund, Inc.
AXP Investment Series, Inc.
AXP Managed Series, Inc.
AXP Market Advantage Series, Inc.
AXP Money Market Series, Inc.
AXP New Dimensions Fund, Inc.
AXP Partners Series, Inc.
AXP Partners International Series, Inc.
AXP Precious Metals Fund, Inc.
AXP Progressive Fund, Inc.
AXP Selective Fund, Inc.
AXP Special Tax-Exempt Series Trust
AXP Stock Fund, Inc.
AXP Strategy Series, Inc.
AXP Tax-Exempt Series, Inc.
AXP Tax-Free Money Fund, Inc.
AXP Utilities Income Fund, Inc.
AXP Variable Portfolio - Income Series, Inc.
AXP Variable Portfolio - Investment Series, Inc.
AXP Variable Portfolio - Managed Series, Inc.
AXP Variable Portfolio - Money Market Series, Inc.
AXP Variable Portfolio - Partners Series, Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name(s) of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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AMERICAN EXPRESS(R) FUNDS
Principal Executive Office
901 Marquette Avenue South, Suite 2810
Minneapolis, MN 55402-3268
NOTICE OF REGULAR MEETING OF SHAREHOLDERS
To be held November 13, 2002
Retail Funds
AXP(R) Bond Fund, Inc.
AXP California Tax-Exempt Trust
- AXP California Tax-Exempt Fund
AXP Discovery Fund, Inc.
AXP Equity Select Fund, Inc.
AXP Extra Income Fund, Inc.
AXP Federal Income Fund, Inc.
- AXP Federal Income Fund
- AXP U.S. Government Mortgage Fund
AXP Global Series, Inc.
- AXP Emerging Markets Fund
- AXP Global Balanced Fund
- AXP Global Bond Fund
- AXP Global Growth Fund
- AXP Global Technology Fund
AXP Growth Series, Inc.
- AXP Growth Fund
- AXP Large Cap Equity Fund
- AXP Large Cap Value Fund
- AXP Research Opportunities Fund
AXP High Yield Tax-Exempt Fund, Inc.
AXP International Fund, Inc.
- AXP European Equity Fund
- AXP International Fund
AXP Investment Series, Inc.
- AXP Diversified Equity Income Fund
- AXP Mid Cap Value Fund
- AXP Mutual
AXP Managed Series, Inc.
- AXP Managed Allocation Fund
AXP Market Advantage Series, Inc.
- AXP Blue Chip Advantage Fund
- AXP International Equity Index Fund
- AXP Mid Cap Index Fund
- AXP S&P 500 Index Fund
- AXP Small Company Index Fund
AXP Money Market Series, Inc.
- AXP Cash Management Fund
AXP New Dimensions Fund(R), Inc.
- AXP Growth Dimensions Fund
- AXP New Dimensions Fund
AXP Partners Series, Inc.
- AXP Partners Fundamental Value Fund
- AXP Partners Select Value Fund
- AXP Partners Small Cap Core Fund
- AXP Partners Small Cap Value Fund
- AXP Partners Value Fund
AXP Partners International Series, Inc.
- AXP Partners International Aggressive Growth Fund
- AXP Partners International Select Value Fund
AXP Precious Metals Fund, Inc.
AXP Progressive Fund, Inc.
AXP Selective Fund, Inc.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 1
NOTICE OF REGULAR MEETING OF SHAREHOLDERS (CONTINUED)
Retail Funds (continued)
AXP Special Tax-Exempt Series Trust
- AXP Insured Tax-Exempt Fund
- AXP Massachusetts Tax-Exempt Fund
- AXP Michigan Tax-Exempt Fund
- AXP Minnesota Tax-Exempt Fund
- AXP New York Tax-Exempt Fund
- AXP Ohio Tax-Exempt Fund
AXP Stock Fund, Inc.
AXP Strategy Series, Inc.
- AXP Equity Value Fund
- AXP Focused Growth Fund
- AXP Partners Small Cap Growth Fund
- AXP Small Cap Advantage Fund
- AXP Strategy Aggressive Fund
AXP Tax-Exempt Series, Inc.
- AXP Intermediate Tax-Exempt Fund
- AXP Tax-Exempt Bond Fund
AXP Tax-Free Money Fund, Inc.
AXP Utilities Income Fund, Inc.
- AXP Utilities Fund
Variable Portfolio Funds
AXP Variable Portfolio - Income Series, Inc.
- AXP Variable Portfolio - Bond Fund
- AXP Variable Portfolio - Extra Income Fund
- AXP Variable Portfolio - Federal Income Fund
- AXP Variable Portfolio - Global Bond Fund
AXP Variable Portfolio - Investment Series, Inc.
- AXP Variable Portfolio - Blue Chip Advantage Fund
- AXP Variable Portfolio - Capital Resource Fund
- AXP Variable Portfolio - Emerging Markets Fund
- AXP Variable Portfolio - Equity Select Fund
- AXP Variable Portfolio - Growth Fund
- AXP Variable Portfolio - International Fund
- AXP Variable Portfolio - New Dimensions Fund(R)
- AXP Variable Portfolio - S&P 500 Index Fund
- AXP Variable Portfolio - Small Cap Advantage Fund
- AXP Variable Portfolio - Stock Fund
- AXP Variable Portfolio - Strategy Aggressive Fund
AXP Variable Portfolio - Managed Series, Inc.
- AXP Variable Portfolio - Diversified Equity Income Fund
- AXP Variable Portfolio - Managed Fund
AXP Variable Portfolio - Money Market Series, Inc.
- AXP Variable Portfolio - Cash Management Fund
AXP Variable Portfolio - Partners Series, Inc.
- AXP Variable Portfolio - Partners Small Cap Value Fund
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2 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Your fund will hold a shareholders' meeting at 11:00 a.m. on November 13, 2002,
at The Marquette Hotel, 701 Marquette Avenue, Minneapolis, MN in the Red River
Room on the third floor. This will be a joint meeting of the funds listed above.
The purpose of the meeting is to consider the issues described in the following
pages. You are entitled to vote at the meeting if you were a shareholder on
September 14, 2002. Please read the proxy statement and vote immediately by
mail, telephone or internet, even if you plan to attend the meeting. Just follow
the instructions on the enclosed proxy card. It is important that you vote. The
Board recommends that you vote FOR each proposal.
By Order of the Board of Directors/Trustees
Leslie L. Ogg, Secretary
September 14, 2002
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 3
PROXY STATEMENT
This is a combined proxy statement for all of the funds listed on the first
page. There are five sections to this proxy statement:
Section Page
A -- Overview 5
B -- Fund Proposals 8
C -- Proxy Voting and Shareholder Meeting Information 37
D -- Fund Information 40
E -- Board Member Information 86
Please be sure to read the proxy statement before you vote. Enclosed is a proxy
voting card listing the proposals for each of the funds you own. It is important
that you vote for each fund. If you have questions, please call your advisor or
call client services toll free at (866) 208-5310. This proxy statement was first
mailed to shareholders the week of September 15, 2002.
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PLEASE VOTE IMMEDIATELY.
Your prompt response will save your fund the cost of additional mailings.
Your vote is important no matter how many shares you own.
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4 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
SECTION A -- OVERVIEW
The Boards of Directors/Trustees (the "Board") of the American Express Funds are
asking you to vote on the following proposals. The proposals are described in
detail in Section B.
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PROPOSAL FUNDS AFFECTED
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1. Elect Board members All Funds
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2. Amend the Articles of
Incorporation/ Declaration of Trust to:
A. Allow one vote/dollar instead of one vote/share A. All Funds
B. Change the name of the corporation B. Bond, Discovery, Equity Select, European Equity, Extra
Income, Federal Income, Growth Dimensions, High Yield
Tax-Exempt, International, New Dimensions, Precious
Metals, Progressive, Selective, Stock, Tax-Free Money,
U.S. Government Mortgage, Utilities
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3. Approve a policy authorizing Blue Chip Advantage, Diversified Equity Income, Emerging
American Express Financial Corporation ("AEFC"), subject to Markets, Equity Select, Equity Value, European Equity,
Board approval, to retain and replace subadvisers, or to Focused Growth, Global Balanced, Global Growth, Global
modify subadvisory agreements, without shareholder approval Technology, Growth, Growth Dimensions, International,
Managed Allocation, Mid Cap Index, Mutual, New Dimensions,
Precious Metals, Research Opportunities, S&P 500 Index,
Small Cap Advantage, Small Company Index, Stock, Strategy
Aggressive, Utilities and all Variable Portfolio Funds
except VP-Partners Small Cap Value
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 5
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PROPOSAL FUNDS AFFECTED
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4. Approve changes to the Investment Management Services
Agreement:
A. Add a performance incentive adjustment ("PIA") A. Global Technology, VP-Capital Resource, VP-International,
VP-Managed, VP-New Dimensions, VP-Strategy Aggressive
B. Modify the PIA calculation B. Blue Chip Advantage, Discovery, Diversified Equity
Income, Emerging Markets, Equity Select, Equity Value,
European Equity, Focused Growth, Global Balanced,
Global Growth, Growth, Growth Dimensions,
International, Large Cap Equity, Large Cap Value,
Managed Allocation, Mid Cap Value, Mutual, New
Dimensions, Partners Fundamental Value, Partners
International Aggressive Growth, Partners International
Select Value, Partners Select Value, Partners Small Cap
Core, Partners Small Cap Growth, Partners Small Cap
Value, Partners Value, Precious Metals, Progressive,
Research Opportunities, Small Cap Advantage, Stock,
Strategy Aggressive, Utilities, VP-Blue Chip Advantage,
VP-Diversified Equity Income, VP-Emerging Markets,
VP-Equity Select, VP-Growth, VP-Partners Small Cap
Value, VP-Small Cap Advantage, VP-Stock
C. Eliminate the PIA C. Small Company Index
D. Change the investment manager from IDS Life Insurance D. All Variable Portfolio Funds
Company ("IDS Life") to AEFC
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6 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
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PROPOSAL FUNDS AFFECTED
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5. Change the fund's classification from diversified to Global Technology
non-diversified
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6. Add a Plan and Agreement of Distribution Cash Management (Class A and Class B), Tax-Free Money
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7. Approve a Plan of Liquidation International Equity Index
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8. Transact other business All Funds
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 7
SECTION B -- FUND PROPOSALS
PROPOSAL 1: ELECTION OF BOARD MEMBERS
(Applies to: All Funds)
Nominees for the Board. Nominees are listed below. Each person is a nominee for
each of the 78 American Express Funds. Each nominee was elected a member of the
Board at the last shareholders' meeting except for Mr. Carroll, Mr. DeSimone,
Ms. Fraser, Mr. Hall, Dr. Lewis, Mr. Quasha, Mr. Roszell, Dr. Taunton-Rigby and
Mr. Truscott.
Each Board member is elected to serve until the next regular shareholders'
meeting or until he or she reaches mandatory retirement. Under the current Board
policy, a member must retire at the end of the first Board meeting after his or
her 72nd birthday or after 15 years from the date of his or her first Board
meeting. This policy does not apply to Mr. Hutter or Ms. Jones who must retire
after his or her 75th birthday or to Mr. Hall who must retire after August 2016.
All nominees have agreed to serve. If an unforeseen event prevents a nominee
from serving, your votes will be cast for the election of a substitute selected
by the Board. Information on each nominee follows. Election requires a vote by a
majority of the fund's shares voted at the meeting.
Independent Nominees
- -------------------------------------- ------------------ --------------------- ---------------------------- -----------------------
Name, Position held Principal Other directorships Committee memberships
address, with fund and occupation during
age length of service past five years
- -------------------------------------- ------------------ --------------------- ---------------------------- -----------------------
Arne H. Carlson Board member Chair, Board Joint Audit,
901 S. Marquette Ave. since 1999 Services Contracts, Executive,
Minneapolis, MN 55402 Corporation Investment Review,
Age 67 (provides Board Effectiveness
administrative
services to
boards). Former
Governor of
Minnesota
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8 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Independent Nominees (continued)
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Name, Position held Principal Other directorships Committee memberships
address, with fund and occupation during
age length of service past five years
- -------------------------------------- ------------------ --------------------- ---------------------------- -----------------------
Philip J. Carroll, Jr. Retired Chairman Boise Cascade Corporation
901 S. Marquette Ave. and CEO, Fluor (forest products),
Minneapolis, MN 55402 Corporation Scottish Power PLC, Vulcan
Age 64 (engineering and Materials Company, Inc.
construction) since (construction
1998. Former materials/chemicals)
President and CEO,
Shell Oil Company
- -------------------------------------- ------------------ --------------------- ---------------------------- -----------------------
Livio D. DeSimone Board member Retired Chair of Cargill, Incorporated Joint Audit, Contracts
30 Seventh Street East since 2001 the Board and Chief (commodity merchants and
Suite 3050 Executive Officer, processors), Target
St. Paul, MN 55101-4901 Minnesota Mining Corporation (department
Age 65 and Manufacturing stores), General Mills,
(3M) Inc. (consumer foods),
Vulcan Materials Company
(construction
materials/chemicals),
Milliken & Company
(textiles and chemicals),
and Nexia Biotechnologies,
Inc.
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Ira D. Hall Texaco, Inc. Board member Private investor; Imagistics International, Contracts,
2000 Westchester Avenue since 2001 formerly with Inc. (office equipment), Investment Review
White Plains, NY 10650 Texaco Inc., Reynolds & Reynolds
Age 57 Treasurer, Company (information
1999-2001 and services), TECO Energy,
General Manager, Inc. (energy holding
Alliance Management company), The Williams
Operations, Companies, Inc. (energy
1998-1999. Prior to distribution company)
that, Director,
International
Operations IBM Corp.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 9
Independent Nominees (continued)
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Name, Position held Principal Other directorships Committee memberships
address, with fund and occupation during
age length of service past five years
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Heinz F. Hutter Board member Retired President Board Effectiveness,
P.O. Box 2187 since 1994 and Chief Operating Executive,
Minneapolis, MN 55402 Officer, Cargill, Investment Review
Age 72 Incorporated
(commodity
merchants and
processors)
- -------------------------------------- ------------------ --------------------- ---------------------------- -----------------------
Anne P. Jones Board member Attorney and Motorola, Inc. Joint Audit, Board
5716 Bent Branch Rd since 1985 Consultant (electronics) Effectiveness,
Bethesda, MD 20816 Executive
Age 67
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Stephen R. Lewis, Jr.* Board member Retired President Contracts, Investment
901 S. Marquette Ave. since 2002 and Professor of Review
Minneapolis, MN 55402 Economics, Carleton
Age 63 College
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Alan G. Quasha Board member President, Quadrant Compagnie Financiere Joint Audit,
720 Fifth Avenue since 2002 Management, Inc. Richemont AG (luxury goods) Investment Review
New York, NY 10019 (management of
Age 52 private equities)
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Alan K. Simpson Board member Former three-term Biogen, Inc. Joint Audit, Contracts
1201 Sunshine Ave. since 1997 United States (biopharmaceuticals)
Cody, WY 82414 Senator for Wyoming
Age 70
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10 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Independent Nominees (continued)
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Name, Position held Principal Other directorships Committee
address, with fund and occupation during memberships
age length of service past five years
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Alison Taunton-Rigby President, Forester Synaptic Pharmaceuticals
8 Farrar Road Biotech since 2000. Corporation
Lincoln, MA 01773 Former President
Age 58 and CEO, Aquila
Biopharmaceuticals,
Inc.
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* Interested person of Partners International Aggressive Growth by reason of
being a securityholder of FleetBoston Financial Corporation, parent company
of Liberty Wanger Asset Management, L.P., one of the fund's subadvisers.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 11
Nominees Affiliated with AEFC*
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Name, Position held Principal Other directorships Committee
address, with fund and occupation during memberships
age length of service past five years
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Barbara H. Fraser Executive Vice
1546 AXP Financial Center President-- AEFA
Minneapolis, MN 55474 Products and
Age 52 Corporate Marketing
of AEFC since 2002.
President -
Travelers Check
Group, American
Express Company,
2001-2002.
Management
Consultant,
Reuters, 2000-2001.
Managing Director
- International
Investments,
Citibank Global,
1999-2000. Chairman
and CEO, Citicorp
Investment Services
and Citigroup
Insurance Group,
U.S., 1998-1999.
Head of Marketing
and Strategic
Planning -
Investment Products
and Distribution,
Citibank Global,
1995-1998
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12 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Nominees Affiliated with AEFC* (continued)
- -------------------------------------- ------------------ --------------------- ---------------------------- ------------------
Name, Position held Principal Other directorships Committee
address, with fund and occupation during memberships
age, length of service past five years
- -------------------------------------- ------------------ --------------------- ---------------------------- ------------------
Stephen W. Roszell Vice President Senior Vice
50238 AXP Financial Center since 2002 President -
Minneapolis, MN 55474 Institutional Group
Age 53 of AEFC
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William F. Truscott Board member Senior Vice
53600 AXP Financial Center N since 2001, Vice President - Chief
Minneapolis, M55474 President since Investment Officer
Age 41 2002 of AEFC since 2001.
Former Chief
Investment Officer
and Managing
Director, Zurich
Scudder Investments
- -------------------------------------- ------------------ --------------------- ---------------------------- ------------------
* Interested person by reason of being an officer, director, securityholder
and/or employee of AEFC.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 13
Board Committees. The Board has several committees that facilitate the work of
the Board. The Executive Committee has authority to act for the full Board
between meetings. The Joint Audit Committee meets with the independent public
accountant, internal auditors and corporate officers to review financial
statements, reports and compliance matters. This Committee reports significant
issues to the Board and makes recommendations to the independent Board members
regarding the selection of the independent public accountant. The Contracts
Committee receives and analyzes reports covering the level and quality of
services provided under contracts with the fund and advises the Board regarding
actions taken on these contracts during the annual review process. The
Investment Review Committee considers investment management policies and
strategies; investment performance; risk management techniques; and securities
trading practices and reports areas of concern to the Board. The Board
Effectiveness Committee recommends to the Board the size, structure and
composition for the Board; the compensation to be paid to members of the Board;
and a process for evaluating the Board's performance. The committee also reviews
candidates for Board membership including candidates recommended by
shareholders. To be considered, recommendations must include a curriculum vita
and be mailed to the Chairman of the Board, American Express Funds, 901
Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268.
During the year ended June 30, 2002, the Board met six times, Joint Audit four
times, Contracts three times, Executive one time, Investment Review four times
and Board Effectiveness four times. Average attendance at Board meetings was 93%
and no nominee attended less than 75% of the meetings.
Board Member Compensation. The following table shows the total compensation
received by each Board member from all of the American Express Funds. The funds
do not pay retirement benefits to Board members. Information on compensation
paid to Board members by individual funds is shown in Section E.
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14 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Board Member Compensation from all American Express Funds* (for the year ended
June 30, 2002)
Aggregate Compensation from all
Nominee American Express Funds
DeSimone $118,025
Hall 129,625
Hutter 138,525
Jones 146,475
Lewis 56,350
Quasha 34,750
Simpson 117,775
* Mr. Carlson is paid $275,000 a year by Board Services Corporation and is
not paid compensation by the funds. Ms. Fraser and Messrs. Roszell and
Truscott are paid by AEFC.
The dollar range of equity securities beneficially owned by each Board member is
shown in Section E.
Fund Officers. In addition to Mr. Roszell and Mr. Truscott, the fund's other
officers are:
Leslie L. Ogg, 64. Vice President and General Counsel since 1978. President
of Board Services Corporation.
Jeffrey P. Fox, 47. Treasurer since 2002. Vice President - Investment
Accounting of AEFC since 2002. Vice President - Finance of American Express
Company, 2000-2002. Vice President - Corporate Controller of AEFC,
1996-2000.
Officers serve at the pleasure of the Board. Officers are paid by AEFC or Board
Services Corporation. During the last fiscal year, no officer earned more than
$60,000 from any fund.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 15
PROPOSAL 2: APPROVE OR REJECT AN AMENDMENT TO THE ARTICLES OF
INCORPORATION/DECLARATION OF TRUST
(Applies to: All Funds)
Every fund is subject to comprehensive federal laws and regulations. In
addition, every fund is also subject to state law. AXP California Tax-Exempt
Trust and AXP Special Tax-Exempt Series Trust are Massachusetts business trusts
and the funds that are part of those trusts are subject to Massachusetts law.
Each of the other funds is part of a Minnesota corporation and is subject to
Minnesota law.
Under Massachusetts law, a business trust generally operates under an
organizational document called a declaration of trust. Under Minnesota law, a
corporation generally operates under an organizational document called the
articles of incorporation. The declaration of trust or articles of incorporation
("organizational document") sets forth various provisions relating to the
authority of the fund to conduct business and the governance of the fund.
The Board has approved, and recommends that shareholders approve, a proposal to
amend the fund's organizational document (the "Amendment"). The fund's
investments and investment policies will not change by virtue of the adoption of
the Amendment.
A. Dollar Based Voting
(Applies to All Funds)
The Amendment would provide voting rights based on a shareholder's total dollar
interest in the fund ("dollar-based voting"), rather than on a number of shares
owned, for all shareholder votes for the fund. As a result, voting power would
be allocated in proportion to the value of each shareholder's investment.
Dollar-based voting is important when a fund is part of a corporation or trust
(an "entity") that has more than one series or when a fund has more than one
class of shares. Shareholders of each class vote separately on matters
concerning only that class. Shareholders of a fund vote separately on matters
concerning only that fund. Shareholders vote on an entity-wide basis on matters
that affect the entity as a whole, such as electing the Board or amending the
organizational document. Currently, under the organizational document, each
share is entitled to one vote, regardless of the relative value of the shares of
each fund in the entity.
The original intent of the one-share, one-vote provision was to provide
equitable voting rights to all shareholders. In the case where an entity has
several series or funds, voting rights may have become disproportionate since
the net asset value ("NAV") per share of the separate funds generally diverge
over time. In the case where a fund has more than one class, voting rights may
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16 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
have become disproportionate because the NAV of the separate classes of the fund
may also diverge over time.
For example, if the fund's shares are selling for $5 per share, a $1,000
investment will purchase 200 shares of the fund. If another fund has shares that
are selling for $10 per share, that same $1,000 investment will purchase only
100 shares of that fund. The organizational document allows one vote for each
share owned. Therefore, under the organizational document, when the shareholders
of the entity vote together on an issue affecting the entity, a shareholder of
the first fund has twice the votes of a shareholder of the second fund, even
though the economic interest of each shareholder is the same. The proposed
change would match a shareholder's economic interest with the shareholder's
voting power, and conversely would prevent a shareholder who holds many shares
with a relatively low price per share from having disproportionately large
voting power.
If the change is approved, the organizational document will be amended as
follows (additions are underlined, deletions are lined through):
For funds organized under Massachusetts law, Article VII, Section 7.2 of the
Declaration of Trust will be amended to read:
(EDGAR NOTE: additions in all caps, deletions in [square brackets])
Section 7.2. NUMBER OF VOTES AND MANNER OF VOTING, PROXIES. On each matter
submitted to a vote of the Shareholders, other than the election of any
Trustee, each holder of Shares of any Series shall be entitled to ONE VOTE
FOR EACH DOLLAR OF NET ASSET VALUE (NUMBER OF SHARES OWNED TIMES NET ASSET
VALUE PER SHARE) AND EACH FRACTIONAL DOLLAR AMOUNT SHALL BE ENTITLED TO A
PROPORTIONATE FRACTIONAL VOTE. [a number of votes equal to the number of
Shares of such Series standing in his name on the books of the Trust. ] At
all elections of Trustees, each holder of Shares of any Series shall be
entitled to AS MANY VOTES AS SHALL EQUAL THE DOLLARS OF NET ASSET VALUE [as
many votes as shall equal the number of shares of such Series standing in
his name on the Books of the Trust] multiplied by the number of Trustees to
be elected and may cast all of such votes for a single Trustee or may
distribute them among the number to be voted for, or any two or more of
them. Shares may be voted in person or by proxy. A proxy with respect to
Shares held in the name of two (2) or more Persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 17
For funds organized under Minnesota law, Article III, Section 2 of the Articles
of Incorporation will be amended to read:
Section 2. At all meetings of the shareholders, each shareholder of record
entitled to vote thereat shall be entitled to one vote [(and a fractional
vote for and equal to each fractional share)] for each DOLLAR OF NET ASSET
VALUE (NUMBER OF SHARES OWNED TIMES NET ASSET VALUE PER SHARE) [share (or
fractional share)] AND EACH FRACTIONAL DOLLAR AMOUNT SHALL BE ENTITLED TO A
PROPORTIONATE FRACTIONAL VOTE [of stock standing in her or his name and
entitled to vote at such meeting.] At all elections of directors, each
shareholder shall be entitled to as many votes as shall equal the DOLLARS
OF NET ASSET VALUE [number of shares owned] multiplied by the number of
directors to be elected and may cast all of such votes for a single
director or may distribute them among the number to be voted for, or any
two or more of them.
B. Name Change
For certain funds, shown in Table 2-1, originally the corporation issued only
one series of capital stock (a single fund) and had the same name as the fund.
The corporation now may issue more than one series (more than one fund), which
could lead to confusion between the name of the corporation and the name of the
original fund. If approved by shareholders, the name of the corporation will be
changed as shown in the following table. The name of the fund will not change.
Table 2-1. Proposed Names of Corporation
Current Name of Corporation Proposed Name of Corporation
(name of underlying fund will not change)
AXP Bond Fund, Inc. AXP Fixed Income Series, Inc.
- AXP Bond Fund
AXP Discovery Fund, Inc. AXP Discovery Series, Inc.
- AXP Discovery Fund
AXP Equity Select Fund, Inc. AXP Equity Series, Inc.
- AXP Equity Select Fund
AXP Extra Income Fund, Inc. AXP High Yield Income Series, Inc.
- AXP Extra Income Fund
AXP Federal Income Fund, Inc. AXP Government Income Series, Inc.
- AXP Federal Income Fund
- AXP U.S. Government Mortgage Fund
AXP High Yield Tax-Exempt Fund, Inc. AXP High Yield Tax-Exempt Series, Inc.
- AXP High Yield Tax-Exempt Fund
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18 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table 2-1. Proposed Names of Corporation (continued)
Current Name of Corporation Proposed Name of Corporation
(name of underlying fund will not change)
AXP International Fund, Inc. AXP International Series, Inc.
- AXP European Equity Fund
- AXP International Fund
AXP New Dimensions Fund, Inc. AXP Dimensions Series, Inc.
- AXP Growth Dimensions Fund
- AXP New Dimensions Fund
AXP Precious Metals Fund, Inc. AXP Selected Series, Inc.
- AXP Precious Metals Fund
AXP Progressive Fund, Inc. AXP Progressive Series, Inc.
- AXP Progressive Fund
AXP Selective Fund, Inc. AXP Income Series, Inc.
- AXP Selective Fund
AXP Stock Fund, Inc. AXP Stock Series, Inc.
- AXP Stock Fund
AXP Tax-Free Money Fund, Inc. AXP Tax-Free Money Series, Inc.
- AXP Tax-Free Money Fund
AXP Utilities Income Fund, Inc. AXP Sector Series, Inc.
- AXP Utilities Fund
Board Recommendation and Vote Required. The Board recommends that you vote to
approve the necessary amendments to the Articles of Incorporation or Declaration
of Trust. The changes require the approval of a majority of the fund's shares
voted at the meeting. The changes will be effective when the amendments are
filed with the appropriate state office. This filing is expected to occur
shortly after the shareholder meeting. If the amendments are not approved, the
fund will continue to operate under the current organizational document.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 19
PROPOSAL 3: APPROVE OR REJECT A POLICY AUTHORIZING AEFC, WITH APPROVAL OF
THE BOARD, TO RETAIN AND REPLACE SUBADVISERS, OR MODIFY
SUBADVISORY AGREEMENTS, WITHOUT OBTAINING SHAREHOLDER APPROVAL
(Applies to: Blue Chip Advantage, Diversified Equity Income,
Emerging Markets, Equity Select, Equity Value, European Equity,
Focused Growth, Global Balanced, Global Growth, Global
Technology, Growth, Growth Dimensions, International, Managed
Allocation, Mid Cap Index, Mutual, New Dimensions, Precious
Metals, Research Opportunities, S&P 500 Index, Small Cap
Advantage, Small Company Index, Stock, Strategy Aggressive,
Utilities and all Variable Portfolio Funds except VP-Partners
Small Cap Value)
AEFC serves as the investment adviser and administrator of the fund. For certain
funds, AEFC makes the day-to-day investment decisions for the fund. For other
funds, it does not. Instead, AEFC administers the fund, establishes an
investment program for the fund and selects, compensates and evaluates the
fund's subadviser. The subadviser, in turn, makes the day-to-day investment
decisions for the fund. For each of the funds, in the future, AEFC, with the
approval of the Board, may wish to hire, add or change a subadviser to handle
the day-to-day investment decisions.
Shareholder Approval of Subadvisory Agreements. Federal securities laws
generally require that shareholders approve agreements with a fund's subadviser,
as well as with the investment manager. Shareholder action also is required if
the terms of existing agreements are materially changed or if there is a change
in control of the subadviser. In order to obtain shareholder approval, the fund
must call and conduct a shareholder meeting, prepare and distribute proxy
materials, and solicit votes from shareholders. The process is costly and
time-consuming. The Board believes that it is in shareholders' best interests if
the Board represents their interests in approving or rejecting recommendations
made by AEFC regarding subadvisers. This approach will avoid the cost and time
delay associated with holding shareholder meetings to obtain approval for the
changes.
SEC Exemptive Order. On July 16, 2002, the Securities and Exchange Commission
(the "SEC") granted the fund an order exempting it from the federal securities
law requirements to obtain shareholder approval regarding unaffiliated
subadvisers (the "SEC Order"). The SEC Order permits the fund to hire new
subadvisers, to rehire existing subadvisers that have experienced a change in
control and to modify subadvisory agreements, without the approval of
shareholders provided shareholders adopt a policy authorizing AEFC, with the
approval of the Board, to take such action.
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20 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Under the SEC Order, the fund and AEFC are subject to several conditions imposed
by the SEC to ensure that the interests of the fund's shareholders are
adequately protected. In addition, within 90 days of a change to your fund's
subadvisory arrangements, the fund will provide you with an information
statement that contains substantially the same information about the subadviser,
the subadvisory agreement and the subadvisory fee that the fund would be
required to send to you in a proxy statement.
Shareholder approval of this proposal will not result in an increase or decrease
in the total amount of investment advisory fees paid by the fund to AEFC. AEFC,
directly or through subadvisers, will continue to provide the same level of
management and administrative services to the fund as it has always provided.
The SEC Order applies to at least the following situations:
o AEFC recommends that a fund's management be diversified by adding another
subadviser
o AEFC recommends that a subadviser be removed for substandard performance
and replaced with a different subadviser
o There is a change of control of the subadviser
Comparison of Present and Proposed Selection Process for Subadvisers. Under both
the current process for approval of subadvisory agreements and under the
proposed process, any change in a subadvisory agreement requires approval by the
Board. In considering whether to appoint a subadviser, the Board will analyze
the factors it considers relevant, including:
o The nature, quality and scope of services provided by a subadviser to
investment companies comparable to the fund.
o The ability of the subadviser to provide its services to the fund, as well
as its personnel, operations, financial condition or any other factor that
would affect the provision of those services.
o The subadviser's investment performance with respect to mutual funds or
other managed accounts that are comparable.
o Other factors that the Board considers relevant to the subadviser's
performance as an investment adviser.
Under the current process for approval of subadvisory agreements, in addition to
Board approval, shareholders must approve any change in subadvisory agreements.
This shareholder approval would be eliminated under the proposed process for
approval of subadvisory agreements. While the policy would be effective
immediately, there are no current plans to add or change subadvisers.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 21
If the policy is approved, all subadvisory agreements will be for a period of
one year and will be renewable from year to year, if approved by the Board. The
agreements may be terminated without penalty by the Board, AEFC, a vote of
shareholders, or the subadviser on 60 days notice.
Board Recommendation and Vote Required. The Board recommends that shareholders
approve the policy. The change must be approved by the lesser of (a) a majority
of the fund's outstanding shares or (b) 67% of the shares voted at the meeting,
so long as more than 50% of the shares actually vote. If the change is not
approved, the fund will continue to require shareholder approval of changes in
subadvisory relationships.
PROPOSAL 4: APPROVE OR REJECT CHANGES TO THE INVESTMENT MANAGEMENT
SERVICES AGREEMENT
The fund pays fees to AEFC under an Investment Management Services Agreement
(the "Agreement") for conducting investment management services for the fund.
The services performed by AEFC include providing the personnel, equipment and
office facilities necessary for the management of the fund's investment
portfolio. Subject to the direction of the Board and consistent with the fund's
investment policies, AEFC decides what securities to buy, hold or sell. AEFC
also executes buy and sell orders and provides research and statistical data to
support investment management activities. For some of the funds, AEFC hires and
pays a subadviser to perform the day-to-day management functions, as described
in Proposal 3. Some of the retail funds are part of a master/feeder structure.
In this structure, the fund invests all of its assets in a master fund (the
"portfolio") with the same policies as the fund. For purposes of this
discussion, the portfolio is referred to as a "fund."
AEFC recommended to the Boards of the equity funds that changes be made to the
Agreement with respect to the performance incentive adjustment ("PIA") component
of the fee schedule. AEFC believes the changes will allow it to attract and
retain high quality investment management and research personnel and continue
efforts to improve investment performance for the benefit of shareholders in the
future. Specifically, AEFC recommended that:
A. A PIA be added to certain equity funds. Under a PIA the fund's performance
is compared to a Lipper index of funds with similar investment strategies.
If the fund's performance is better than the index, the fee paid to AEFC
will increase. If the fund's performance is worse than the index, the fee
paid to AEFC will decrease. The proposed calculation is shown in Table 4-2.
B. The PIA calculation currently part of the Agreement for most equity funds
be modified. Table 4-3 shows a comparison of the curent and proposed PIA.
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22 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
C. The PIA be eliminated for Small Company Index. AEFC believes that an index
fund that seeks to match the performance of an index, should be evaluated
based on its performance relative to that index, not based on its
performance relative to competitor funds. For that reason, AEFC has
recommended that the PIA be eliminated from the Agreement.
In addition, for the variable portfolio funds, IDS Life and AEFC recommended
that:
D. The Agreement be between the fund and AEFC instead of between the fund and
IDS Life.
Terms of the Current Agreement. The fee the fund pays to AEFC for its services
under the Agreement is based on the net assets of the fund and decreases as the
size of the fund increases. The complete fee schedule for your fund and other
funds managed by AEFC is found in Section D. The fund also pays its taxes,
brokerage commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration fees for
shares; office expenses; postage of confirmations except purchase confirmations;
consultant fees; compensation of Board members, officers and employees;
corporate filing fees; organizational expenses; expenses incurred in connection
with lending securities; and other expenses properly payable by the fund,
approved by the Board. Section D includes information on the date of the current
Agreement, the date it was last approved by shareholders and the reason why it
was submitted to shareholders at that time.
Proposed Agreement Compared to the Current Agreement. For Proposals 4A, 4B and
4C, the terms of the proposed Agreement are the same as the current Agreement
except for the change in the PIA described in the following paragraphs. For
Proposal 4D, the terms of the proposed Agreement would be the same as the
current Agreement after changes described in Proposal 4A and 4B except that the
agreement is between the fund and AEFC rather than between the fund and IDS
Life.
Fund Expenses. Fees and expenses the fund actually paid as well as fees and
expenses the fund would have paid if the proposed Agreement had been in effect
for the last fiscal year are shown in Section D.
Review of Agreements. Each year the Board reviews the Agreement and each of the
other agreements between the fund and AEFC or one of AEFC's affiliates by
receiving four reports prepared by AEFC. These reports cover investment
performance, transfer agent operations, distribution and AEFC's profitability
from its mutual fund operations. In addition, members of the Board, individually
and with the assistance of the Contracts Committee for the fund, consider:
o The fund's investment performance over various time periods compared to its
peer group Lipper index and a security market index that most closely
represents the investment style of the fund.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 23
o The fund's expense ratio and the expense ratios of comparable funds.
o The quality and level of services provided by AEFC or its affiliates to the
fund and its shareholders.
o The commitments made by AEFC regarding its management of the fund.
Board Conclusions. Based on its work throughout the year and detailed analysis
by the Contracts Committee of the reports provided by AEFC, the independent
Board members determined to renew the Agreement based on:
o tangible steps AEFC has taken to improve the competitive ranking and
consistency of the investment performance of the Fund, including changes in
leadership, portfolio managers, compensation structures, and the
implementation of management practices,
o continued commitment to expand the range of investment options that it
offers investors, through repositioning existing funds and creating new
funds,
o consistent effort to provide a management structure that imposes
disciplines that ensure adherence to stated management style and expected
risk characteristics,
o additional time needed to evaluate the efficacy of the new AEFC management
structure that has produced improved performance results in the short term,
o benefit of economy of scale that results from the graduated fee structure
and the reasonableness of fees in light of the fees paid by similar funds
in the industry,
o competitive total expenses that are either at or only slightly above the
median expenses of a group of comparable funds based on a report prepared
by Lipper Inc., and
o reasonable level of AEFC's profitability from its mutual fund operations.
AEFC's Proposal to Change the PIA. In addition to reviewing the current
Agreement, the Boards of the equity funds considered AEFC's proposal to change
the PIA. The Board determined to recommend the change to shareholders based on
the following:
o Performance compensation is a desirable method to reward good investment
performance.
o Lipper indexes are meaningful because they measure investment performance
against funds within the same investment category. Relative performance
within a category is significant to AEFC clients when making investment
decisions.
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24 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
o The proposed fee structure is based on AEFC's analysis showing that
consistent investment performance within a narrow range above the Lipper
index will provide good long-term competitive investment performance. The
proposed fee structure encourages and rewards investment performance within
that range and does not provide incentives to seek unsustainable results
that might increase investment risk.
At a meeting held on July 10-11, 2002, called for the purpose of considering the
proposed Agreement, the independent members first and then the Board as a whole,
by vote, cast in person, approved the terms of the proposed Agreement. If
approved, the proposed Agreement will continue from year to year after the
second year, so long as it is approved at least annually by a majority of the
Board, including a majority of the independent members. The proposed Agreement
may be terminated at any time by the Board, AEFC or the shareholders and will
terminate automatically if it is assigned.
Proposal 4A. Add a Performance Incentive Adjustment
(Applies to: Global Technology, VP-Capital Resource,
VP-International, VP-Managed, VP-New Dimensions,
VP-Strategy Aggressive)
Under the proposed Agreement, the fee will be adjusted based on the fund's
performance compared to an index of similar funds. The PIA is determined by
measuring the percentage difference over a rolling 12-month period between the
performance of one share of the fund (one Class A share for a fund with multiple
classes) and the change in a designated Lipper Index (the "Index") of funds with
similar investment objectives (the "Performance Difference"). The Performance
Difference is then used to determine the Adjustment Rate, described in Table
4-2. If the fund's performance is better than the Index, the fee paid to AEFC
will increase. If the fund's performance is worse than the Index, the fee paid
to AEFC will decrease. The following table shows the proposed Index for each
fund.
Table 4-1. Proposed Indexes
Fund Index
Global Technology Lipper Science and Technology Funds
VP - Capital Resource Lipper Large-Cap Core Funds
VP - International Lipper International Funds
VP - Managed Lipper Balanced Funds
VP - New Dimensions Lipper Large-Cap Growth Funds
VP - Strategy Aggressive Lipper Mid-Cap Growth Funds
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 25
o Adjustment Calculation. The Adjustment Rate, computed to five decimal
places, is determined in accordance with the following table:
Table 4-2. Calculation of Proposed Adjustment Rate
Performance
Difference Adjustment Rate
0.00% - 0.50% 0
0.50% - 1.00% 6 basis points times the Performance Difference over 0.50%
(maximum of 3 basis points if a 1% Performance Difference)
1.00% - 2.00% 3 basis points, plus 3 basis points times the Performance
Difference over 1.00%
(maximum 6 basis points if a 2% Performance Difference)
2.00% - 4.00% 6 basis points, plus 2 basis points times the Performance
Difference over 2.00%
(maximum 10 basis points if a 4% Performance Difference)
4.00% - 6.00% 10 basis points, plus 1 basis point times the Performance
Difference over 4.00%
(maximum 12 basis points if a 6% Performance Difference)
6.00% or more 12 basis points
For example, if the Performance Difference is 2.38%, the Adjustment Rate is
0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% Performance
Difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded
to five decimal places, the Adjustment Rate is 0.00068. The maximum
Adjustment Rate is 0.00120 per year, except that for VP-Managed the maximum
Adjustment Rate is 0.00080 per year.
The first adjustment will be made on June 1, 2003 and will cover the six-month
period beginning Dec. 1, 2002. The comparison period will increase by one month
each month until it reaches 12 months.
o Lipper Indexes. Lipper, Inc. is an unaffiliated company that collects data
from company reports, financial reporting services, periodicals and other
sources deemed to be reliable. It then analyzes the data and publishes a
number of indexes based on the performance of the largest mutual funds,
usually 30 funds, in various categories. A Lipper index is an average of
the investment performance of these funds. Categories are based on
investment objectives. Lipper indexes are published by newspapers and
periodicals throughout the country and are generally recognized by the
mutual fund industry as being an accurate and reliable source of
comparative information. If an Index ceases to be published for a period of
more than 90 days, changes in any material respect or otherwise becomes
impracticable to use for purposes of a performance incentive adjustment,
the fund will pay the advisory fee without any adjustment for performance
until the Board approves a substitute index.
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26 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Proposal 4B. Modify the PIA Calculation
(Applies to: Blue Chip Advantage, Discovery, Diversified Equity
Income, Emerging Markets, Equity Select, Equity Value, European
Equity, Focused Growth, Global Balanced, Global Growth, Growth,
Growth Dimensions, International, Large Cap Equity, Large Cap
Value, Managed Allocation, Mid Cap Value, Mutual, New Dimensions,
Partners Fundamental Value, Partners International Aggressive
Growth, Partners International Select Value, Partners Select
Value, Partners Small Cap Core, Partners Small Cap Growth,
Partners Small Cap Value, Partners Value, Precious Metals,
Progressive, Research Opportunities, Small Cap Advantage, Stock,
Strategy Aggressive, Utilities, VP-Blue Chip Advantage,
VP-Diversified Equity Income, VP-Emerging Markets, VP-Equity
Select, VP-Growth, VP-Partners Small Cap Value, VP-Small Cap
Advantage, VP-Stock)
Under the current Agreement, the fee paid to AEFC by the fund includes a PIA as
an element of the fee. AEFC has recommended that the manner of calculating the
PIA be modified to match the proposed calculation described in Proposal 4A.
The current calculation is made by measuring the percentage difference over a
rolling 12-month period between the performance of one share of the fund (one
Class A share for a fund with multiple classes) and the change in a designated
Lipper index of funds with similar investment objectives. One percentage point
is subtracted from the calculation and the result is multiplied by 0.01. For
example, if the difference between the change in the fund's net asset value and
the change in the Index for a comparison period is 2.38%, the adjustment would
be 0.000138 (0.0238 - 0.01 = 0.0138 x 0.01 = 0.000138) times the fund's average
net assets for the comparison period divided by 12.
The proposed calculation is described in Table 4-2. Table 4-3 shows the
difference between the current PIA and the proposed PIA at various levels of
Performance Difference.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 27
Table 4-3. Difference Between Current PIA and Proposed PIA
Performance Current PIA Proposed PIA
Difference (basis points) (basis points)
0.0% 0.0 0.0
0.5% 0.0 0.0
0.75% 0.0 1.5
1.0% 0.0 3.0
1.5% 0.5 4.5
2.0% 1.0 6.0
2.5% 1.5 7.0
3.0% 2.0 8.0
3.5% 2.5 9.0
4.0% 3.0 10.0
4.5% 3.5 10.5
5.0% 4.0 11.0
5.5% 4.5 11.5
6.0% 5.0 12.0
7.0% 6.0 12.0
8.0% 7.0 12.0
9.0% 8.0 12.0
10.0% 9.0 12.0
11.0% 10.0 12.0
12.0% 11.0 12.0
13.0% and higher 12.0 12.0
AEFC believes that the modified calculation will provide a better alignment
between the interests of the fund shareholders and AEFC. AEFC seeks to achieve
sustained performance above the median, which it believes will lead to a fund
with a strong competitive performance record. The proposed PIA provides
meaningful additional compensation to AEFC for investment performance that is
0.50% or better than the Lipper index. Generally a fund that is above the Lipper
index will be above the median of its peer group. The proposal not to adjust the
fee if the performance difference is above or below the index by 0.50% differs
from the current null zone which deducts 1% from performance before the PIA is
calculated. Thus, if sustained performance above the median is achieved,
shareholders will benefit from consistent strong performance and AEFC will
benefit from additional compensation. The maximum Adjustment Rate is 0.00120 per
year, except that for Global Balanced, Managed Allocation and Mutual, the
maximum Adjustment Rate
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28 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
is 0.00080 per year. If the proposed Agreement is approved by shareholders, for
a period of six months from the date of implementation of the proposed
Agreement, the PIA will be calculated based on the lesser of the amount due
under the current Agreement or the amount due under the proposed Agreement. Fees
and expenses the fund actually paid as well as fees and expenses the fund would
have paid if the proposed Agreement had been in effect for the last fiscal year
are shown in Section D.
Proposal 4C. Eliminate the PIA
(Applies to: Small Company Index)
The Agreement for the fund currently includes a PIA. The fund invests in common
stocks of small-capitalization companies that are expected to provide investment
results that correspond to the performance of the S&P SmallCap 600 Index. The
fund is an index fund and is unlike an actively managed fund, where the decision
about what stocks to purchase is made by the portfolio manager. In an actively
managed fund, the pool of possible investments is not limited to those stocks
that are part of a particular index. Generally, an actively managed fund seeks
to perform better than a benchmark index. An index fund, on the other hand,
generally purchases only securities found in its benchmark index. AEFC believes
that an index fund that seeks to match the performance of an index, should be
evaluated based on its performance relative to that index, not based on its
performance relative to competitor funds. For that reason, AEFC has recommended
that the PIA be eliminated from the Agreement.
If the proposed Agreement is approved by shareholders, for a period of six
months from the date of implementation of the proposed Agreement, the fee under
the Agreement will be calculated based on the lesser of the amount due under the
current Agreement or the amount due under the proposed Agreement. Fees and
expenses the fund actually paid as well as fees and expenses the fund would have
paid if the proposed Agreement had been in effect for the last fiscal year are
shown in Section D.
Proposal 4D. Change the Investment Manager from IDS Life to AEFC
(Applies to: all Variable Portfolio Funds)
Historically, the investment manager for the variable portfolio funds has been
IDS Life. Under an Investment Advisory Agreement between IDS Life and AEFC, AEFC
has served as investment adviser to the variable portfolio funds. IDS Life and
AEFC now recommend that AEFC assume both the role of investment manager,
currently held by IDS Life, and the role of investment adviser, currently held
by AEFC. This will combine all investment roles within one entity and one
contract. The change will not affect the management of the fund and will not
change the fees paid by the fund.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 29
Board Recommendation and Vote Required. The Board recommends that shareholders
approve the proposed Agreement. The Agreement must be approved by the lesser of
(a) a majority of the fund's outstanding shares or (b) 67% of the shares voted
at the meeting, so long as more than 50% of the shares actually vote. If the
proposed Agreement is not approved, the fund will continue to operate under the
current Agreement.
PROPOSAL 5: APPROVE OR REJECT A CHANGE IN THE FUND'S CLASSIFICATION
FROM DIVERSIFIED TO NON-DIVERSIFIED
(Applies to: Global Technology)
Currently, the fund is a diversified fund, which means that the fund may not
invest more than 5% of its total assets in the securities of any one company,
government or political subdivision, although up to 25% of the fund's total
assets may be invested without regard to the 5% limitation. In addition, the
fund may not purchase more than 10% of the outstanding voting securities of any
one issuer. There are a limited number of issuers in the technologies industry.
Because of the limited number of issuers whose securities meet the fund's
investment objective, it has become increasingly difficult to manage the fund as
it increases in size.
In order to provide the portfolio manager with more flexibility in investing the
fund's assets, AEFC has proposed that the fund's classification be changed from
diversified to non-diversified. This means the fund would not be subject to the
limitations described above, although it still would be subject to
diversification requirements under federal tax law. The fund would be able to
focus its investments in the securities of only a few companies. As a result,
the fund would have more risk than funds with broader diversification. This is
because the fund may have a higher percentage of its assets invested in the
securities of a single issuer. If that investment does not perform as well as
expected, the consequences to the fund would be more pronounced than if the fund
had limited its investment to 5% of its assets.
Recommendation and Vote Required. The Board recommends that shareholders approve
the proposed change in the fund's classification. The change must be approved by
the lesser of (a) a majority of the fund's outstanding shares or (b) 67% of the
shares voted at the meeting, so long as more than 50% of the shares actually
vote. If the change is not approved, the fund will continue to operate as a
diversified fund.
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30 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
PROPOSAL 6: APPROVE OR REJECT ADDING A PLAN AND AGREEMENT OF DISTRIBUTION
(Applies to: Cash Management (Classes A and B), Tax-Free Money)
American Express Financial Advisors Inc. ("AEFA") is the distributor for the
fund and sells fund shares primarily through personal financial advisors. Each
AEFA advisor receives compensation from the sales charges for the services he or
she provides you. The sales charges include both front-end or contingent
deferred sales charges paid by you as well as fees paid by the fund. The fees
paid by the fund are called 12b-1 fees, named for SEC Rule 12b-1 that permits a
fund to pay distribution costs.
Currently shares of all American Express Funds except Cash Management and
Tax-Free Money have a 0.25% 12b-1 fee, most of which is paid directly to your
AEFA advisor. Your AEFA advisor does not receive any compensation if you invest
or hold money in Cash Management and Tax-Free Money even though he or she has
provided services. Accordingly, AEFA recommended to the Board that a 0.10% 12b-1
fee be added to those funds. For the same reasons, AEFA recommended that Class B
shares of Cash Management adopt a 0.10% shareholder service fee. Class B shares
of Cash Management are only available to shareholders who exchange Class B
shares from other AXP funds. Class B investors do not pay a sales charge at the
time shares are purchased so AEFA must use its own money to pay for distribution
costs. For that reason, Class B shares have a 0.75% 12b-1 fee to help AEFA
recover its distribution costs.
In support of its recommendation, AEFA made the following observations:
o AEFA has begun offering several cash options and AEFA advisors should be
compensated similarly for each option.
o The fund's current pricing structure leaves it at a competitive
disadvantage to similar products that generally have distribution or
shareholder service fees.
o Growth of the fund's assets is crucial to long-term success.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 31
In light of these observations, AEFA recommended that the fund adopt a plan and
agreement of distribution or shareholder service fee (the "Distribution Plan")
as follows.
Table 6-1. Proposed Distribution Plan
(as a percent of average daily net assets)
Fund Current Distribution Plan Proposed Distribution Plan
Cash Management
- Class A None 0.10%
- Class B 0.75% 0.85%*
Tax-Free Money None 0.10%
* The 0.85% fee will be composed of the current 12b-1 fee of 0.75% and a new
shareholder service fee of 0.10%.
Under the proposed Distribution Plan, AEFA will distribute fund shares and
service shareholder accounts either directly through its financial advisors or
through broker-dealers and other financial intermediaries. Fees paid to AEFA
under the Distribution Plan may be used for distribution activities and for
shareholder service related activities. Distribution activities are primarily
intended to result in sales of fund shares and include advertising, compensation
and expenses of financial advisors or other sales and marketing personnel;
printing and mailing of prospectuses to prospective investors, and printing and
mailing of sales literature. Services provided under this Distribution Plan are
intended to help shareholders thoughtfully consider their investment goals and
monitor the progress they are making in achieving those goals. Shareholder
service-related activities include, among other things, ongoing interactions
between financial advisors and shareholders, shareholder communications and
shareholder seminars.
Class B shares convert to Class A shares in the ninth year of ownership, and
therefore Class B shareholders of Cash Management are also entitled to vote on
the proposal for Class A. For Class B shareholders, a vote in favor of this
proposal is a vote in favor of both the Class A and Class B plans.
How Will the Proposed Distribution Plan Affect Fund Expenses? Fees and expenses
the fund actually paid as well as fees and expenses the fund would have paid if
the proposed Distribution Plan had been in effect for the last fiscal year are
shown in Section D.
The Proposed Distribution Plan. Under the proposed Distribution Plan, the fund
will pay AEFA each month for distribution and shareholder servicing activities.
AEFA will pay financial advisors, broker-dealers and other financial
intermediaries who provide distribution or shareholder services to the fund's
shareholders. AEFA will provide the Board with quarterly reports specifying how
the money was spent.
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32 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
What Factors Did the Board Consider? In considering the adoption of the
Distribution Plan, the Board considered the potential costs and benefits of the
Distribution Plan, including:
o The increase in expenses.
o AEFA's statement that it needs the revenue to compensate financial
advisors, broker-dealers and other financial intermediaries for
distribution and service-related activities at competitive levels to assure
the scope and quality of services expected by shareholders.
The Board reviewed the fund's expense ratios, the level to which the expense
ratios will increase as a result of adopting the Distribution Plan, the
relationship of the fee to the overall expense ratio of the fund and how the
overall expense ratio compares to expense ratios of comparable funds with which
the fund competes. The Board concluded that there is a reasonable likelihood
that the Distribution Plan will benefit the fund and its shareholders.
If approved, the Distribution Plan will continue in effect for one year from the
date of approval, and then from year to year so long as it is approved by a
majority of the Board, including a majority of the independent members. The
Distribution Plan may be terminated at any time by the Board or the shareholders
and will terminate automatically if it is assigned. The Distribution Plan may
not be amended to materially increase the amount of the fee unless the change is
approved by the shareholders.
What Does the Board Recommend and How Many Votes are Needed? The Board
recommends that shareholders approve the proposed Distribution Plan. The
Distribution Plan must be approved by the lesser of (a) a majority of the fund's
outstanding shares or (b) 67% of the shares voted at the meeting, so long as
more than 50% of the shares actually vote. If the proposed Distribution Plan is
not approved, the fund will continue to operate under its current arrangements.
PROPOSAL 7: APPROVE OR REJECT A PLAN OF LIQUIDATION
(Applies to: International Equity Index)
Summary. The fund began operations on Oct. 25, 1999 as a separate series of AXP
Market Advantage Series, Inc. (the "Corporation"). The fund invests primarily in
the equity securities included in its benchmark index. Notwithstanding the
marketing of the fund's shares, the fund has been unable to attract sufficient
assets to operate effectively without significant expense subsidization. During
the period from commencement of operations through June 30, 2002, assets reached
a level of only $ 20.2 million. The Board therefore is recommending that
shareholders vote to approve a Plan of Liquidation to dissolve the fund.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 33
How the Plan of Liquidation Will Work. The Board has approved the Plan of
Liquidation summarized in this section.
1. Effective Date of the Plan of Liquidation and End of the Fund's Operations.
The Plan of Liquidation will become effective on the date it is approved by
shareholders. Following this approval, the fund (i) will cease to invest
its assets in accordance with its investment objective and will sell the
portfolio securities it owns in order to convert the fund's assets to cash;
and (ii) will not engage in any business activities except for the purposes
of winding up its business and affairs, preserving the value of its assets
and distributing its assets to shareholders after the payment to (or
reservation of assets for payment to) all creditors of the fund.
2. Restriction of Transfer of Shares. Following the effective date, the shares
of the fund will not be transferable.
3. Liquidating Distribution. As soon as possible after the approval of the
Plan of Liquidation, and in any event within fourteen days, the Corporation
on behalf of the fund will provide to the applicable service agent of each
shareholder of record on the effective date of the Plan of Liquidation: (i)
a liquidating cash distribution equal to the shareholder's proportionate
interest in the net assets of the fund based on the number of shares of the
class of shares of the fund held by the shareholder and recorded on the
books of the Corporation, determined immediately after the close of
business on the date of the liquidating distribution; and (ii) information
concerning the sources of the liquidating distribution.
4. Expenses. Any expenses and solicitation costs will be borne by AEFC. It is
expected that other liabilities of the fund incurred or expected to be
incurred prior to the date of the liquidating distribution will be paid by
the fund, or set aside for payment, prior to the payment of the liquidating
distribution.
5. Continued Operation of the Fund. Following the liquidating distribution
referred to in paragraph 3 above, the fund will be dissolved. The Plan of
Liquidation provides that the Board has the authority to authorize
variations from or amendments to the provisions of the Plan of Liquidation
as may be necessary or appropriate to marshal the assets of the fund and to
effect the complete liquidation of the fund.
6. Variations. The Plan of Liquidation authorizes the Board to make variations
from or amendments to the provisions of the Plan of Liquidation that it
deems necessary or appropriate to carry out its purposes.
7. Dissenters' Rights. No shareholder will be entitled to exercise any
dissenter's rights or appraisal rights with respect to the fund's
liquidation under either the Plan of Liquidation or relevant provisions of
Minnesota law.
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34 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Reasons for the Liquidation and Board Deliberations. The Board believes that
liquidation of the fund is in the best interest of shareholders for several
reasons. The Board considered the following matters, among others, in approving
the Plan of Liquidation.
o Terms and Conditions of the Plan of Liquidation. The Board considered the
terms and conditions of the Plan of Liquidation as described in previous
paragraphs.
o Fund Expenses. Since commencement of operations, AEFC has waived all or a
portion of its fees and assumed a significant portion of the expenses of
the fund. AEFC has committed to continue capping fees through Jan. 31,
2003, although the waiver can be discontinued at any time after that. AEFC
does not expect to waive fees indefinitely and, without continued fee
waivers or growth in assets, the fund's expense ratio would likely exceed
those of many other funds with similar investment objectives. This could
have an adverse impact on the fund's performance. As a result, it is
possible that the fund's asset base will decline and the fund's expense
ratio will rise even higher as fixed costs are spread over a shrinking
asset base. For the most recent fiscal year, the fund's total expenses
were:
Table 7-1. Fund Total Expenses
(as of Jan. 31, 2002)
Class D Class E
Management fees 0.50% 0.50%
12b-1 fees 0.25% 0.00%
Other expenses 0.74% 0.70%
Total annual fund operating expenses 1.49% 1.20%
Fee waiver and expense reimbursement 0.60% 0.56%
Net annual operating expenses 0.89% 0.64%
o Alternative Solutions. The Board investigated what, if any, additional
steps or alternative courses would best serve the interests of
shareholders. The Board considered whether a merger or a transfer of assets
would be possible, and if those transactions would produce desirable
results for shareholders. After reviewing current market conditions, the
relatively small size of the fund and the time required to effect a
transaction, management of the fund believes that the expense of a merger
with or transfer of assets to another mutual fund are greater than the
benefits shareholders of the fund could expect to realize from such a
transaction.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 35
o Shareholder Options. The Board noted that shareholders may continue to
exchange their shares for shares of the same class of any other American
Express fund with Class D or Class E shares prior to the date of the
liquidating distribution. The applicable redemption fee for the fund has
been waived. However, the Board also noted that shareholders who exchange
will recognize taxable gain or loss for federal income tax purposes in the
same way as if they had received a liquidating distribution.
o Tax Implications for Shareholders. Each shareholder who receives a
liquidating distribution will recognize a taxable gain or loss for federal
income tax purposes equal to any difference between the amount of the
distribution over the shareholder's tax basis in fund shares. Assuming that
the shareholder holds the shares as capital assets, the gain or loss will
be a capital gain or loss and will be a long-term or short-term capital
gain or loss depending on the shareholder's holding period for the shares.
The tax consequences discussed may affect shareholders differently
depending upon their particular tax situations unrelated to the liquidating
distribution, and accordingly, this summary is not a substitute for careful
tax planning on an individual basis. Shareholders may wish to consult their
personal tax advisers concerning their particular tax situations and the
impact of receiving the liquidating distribution as discussed above,
including any state or local tax consequences.
The Corporation anticipates that it will retain its qualification as a
regulated investment company under the Internal Revenue Code, as amended,
during the liquidation period and, therefore, will not be taxed on any of
its net income from the sale of its assets.
Board's Determination. At a meeting held on July 10-11, 2002 the Board reviewed
the expenses that had been assumed by AEFC during the life of the fund, the
efforts and expenses of AEFA to distribute shares of the fund, and the effect of
the operating expenses on the historic and anticipated returns of shareholders.
The Board considered that AEFC had not been able to collect or retain any
significant fees during the life of the fund, that there would be no prospect
that this would change in the near future, and that in the absence of
compensation over long periods, the ability of AEFC to service the needs of the
fund would be impaired.
The Board concluded that an increase in fund expenses attributable to the likely
discontinuance of the fee waiver and assumption of the expenses in the future,
especially when added to the expenses of the fund presently paid directly by the
fund, would significantly reduce the fund's returns. Moreover, the presence of
larger funds with similar objectives better able to operate on an efficient
basis and provide higher returns to shareholders, make it unlikely that the fund
could
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36 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
achieve a significant increase in asset size and achieve economies of scale. The
Board therefore concluded that it would be in the best interest of the
shareholders of the fund to liquidate the fund promptly.
Accordingly, the Board approved the liquidation of the fund and approved the
Plan of Liquidation.
Board Recommendation and Vote Required. The Board recommends that shareholders
approve the proposed Plan of Liquidation. The Plan of Liquidation must be
approved by a majority of the fund's shares voted at the meeting. If the Plan of
Liquidation is not approved, the fund will continue to exist as a series of the
Corporation and will operate in accordance with its stated objective and
policies. The Board will consider what further action should be taken.
SECTION C -- PROXY VOTING AND SHAREHOLDER MEETING INFORMATION
This section includes information about proxy voting and the shareholder
meetings.
Voting. Each share is entitled to one vote. For those of you who cannot come to
the meeting, the Board is asking permission to vote for you. The shares will be
voted as you instruct either by mail, telephone or internet. Signed proxy cards
returned without instructions will be voted in favor of all proposals.
Each corporation or trust issues one or more series of common stock. Each series
is a separate fund. On the election of Board members and the amendments to the
organizational document, you vote together with the owners of shares of all the
other funds that are part of the same corporation or trust. On the subadvisory
agreement policy, investment management agreement, change in diversification
status, and liquidation, you vote together with the owners of the other shares
in your fund. On the distribution plan, you vote together with the owners of
shares of the same class owned in your fund.
In voting for Board members, you may vote all of your shares cumulatively. This
means that you have the right to give each nominee an equal number of votes or
divide the votes among the nominees as you wish. You have as many votes as the
number of shares you own, including fractional shares, multiplied by the number
of members to be elected. If you elect to withhold authority for any individual
nominee or nominees, you may do so by marking the box labeled "For All Except,"
and by writing the number of any excepted nominee on the line provided, as is
further explained on the card itself. If you do withhold authority, the proxies
will not vote shares equivalent to the proportionate number applicable to the
names for which authority is withheld.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 37
All votes count toward a quorum, regardless of how they are voted (For, Against
or Abstain). Broker non-votes will be counted toward a quorum but not toward the
approval of any proposals. (Broker non-votes are shares for which the underlying
owner has not voted and the broker holding the shares does not have authority to
vote.) If your shares are held in an IRA account, you have the right to instruct
the IRA Custodian how to vote those shares. The IRA Custodian will vote any
shares for which it has not received voting instructions in proportionately the
same manner -- either For, Against or Abstain -- as other fund shareholders have
voted. If your investments include any of the variable portfolio funds, you have
the right to instruct IDS Life, IDS Life Insurance Company of New York ("IDS
Life of New York"), American Centurion Life Assurance Company ("ACL"), American
Enterprise Life Insurance Company ("AEL"), or American Partners Life Insurance
Company ("APL") how to vote the variable portfolio fund shares held under your
annuity contract or life insurance policy. IDS Life, IDS Life of New York, ACL,
AEL and APL will vote any fund shares for which they do not receive voting
instructions in proportionately the same manner -- either For, Against or
Abstain -- as shares for which they do receive instructions.
Master/Feeder Funds. Some funds are part of a master/feeder structure. The
feeder funds seek their investment objectives by investing their assets in
master funds with the same policies. Master funds invest in and manage the
securities. Proposals 1, 3, 4 and 5 affect certain master funds. Feeder funds,
as the sole shareholders of the master fund, will vote for or against each of
those proposals in proportion to the vote received from feeder fund
shareholders.
Revoking Your Proxy. If your plans change and you can attend the meeting, simply
inform the Secretary at the meeting that you will be voting your shares in
person. Also, if you change your mind after you vote, you may change your vote
or revoke it by mail, telephone or internet.
Joint Proxy Statement/Simultaneous Meetings. This joint proxy statement reduces
the preparation, printing and mailing costs of sending separate proxy statements
for each fund. The meetings will be held simultaneously with each proposal being
voted on separately by shareholders of a corporation or by shareholders of a
fund or by a class of shares of the fund where appropriate. If any shareholder
objects to the holding of simultaneous meetings, the shareholder may move for an
adjournment of his or her fund's meeting to a time immediately after the
simultaneous meetings so that a meeting of that fund may be held separately. If
a shareholder makes this motion, the persons named as proxies will take into
consideration the reasons for the objection in deciding whether to vote in favor
of the adjournment.
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38 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Solicitation of Proxies. The Board is asking for your vote and for you to vote
as promptly as possible. The fund will pay the expenses for the proxy material
and the postage. Supplementary solicitations may be made by mail, telephone,
electronic means or personal contact. The expenses of supplementary solicitation
will be paid by the fund and AEFC.
Shareholder Proposals. No proposals were received from shareholders. The funds
are not required to hold regular meetings of shareholders each year. However,
meetings of shareholders are held from time to time and proposals of
shareholders that are intended to be presented at future shareholder meetings
must be submitted in writing to the funds in reasonable time prior to the
solicitation of proxies for the meeting.
Other Business. The Board does not know at this time of any other business to
come before the meetings. If something does come up, the proxies will use their
best judgment to vote for you on the matter.
Adjournment. In the event that not enough votes in favor of any of the proposals
are received by the time scheduled for the meeting, the persons named as proxies
may move for one or more adjournments of the meeting for a period of not more
than 120 days in the aggregate to allow further solicitation of shareholders on
the proposals. Any adjournment requires the affirmative vote of a majority of
the shares present at the meeting. The persons named as proxies will vote in
favor of adjournment those shares they are entitled to vote that have voted in
favor of the proposals. They will vote against any adjournment those shares that
have voted against any of the proposals.
Annual Report. The latest annual report was previously mailed to you. If you
would like another copy of the annual report and any subsequent semi-annual
report, without charge, please write American Express Funds, 70100 AXP Financial
Center, Minneapolis, MN 55474 or call (800) 862-7919.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 39
SECTION D -- FUND INFORMATION
This section contains the following information about your fund and its adviser:
Table Content (all information is shown for the last fiscal year unless
noted otherwise)
D-1A Actual and pro forma expenses for Class A shares of the retail funds,
Tax-Free Money and the Variable Portfolio Funds, assuming all of the
fee changes had been in effect during the year
D-1B Actual and pro forma expenses for Class B
D-1C Actual and pro forma expenses for Class C
D-1Y Actual and pro forma expenses for Class Y
D-2 The fund's current fee schedule under its management agreement
D-3 Actual and pro forma Investment Management Services Agreement fees
D-4 Information about shareholder approval of current management agreements
D-5 Payments the fund made to AEFC and its affiliates
D-6 Brokerage commissions the fund paid to a broker-dealer affiliate
D-7 The fund's size, number of outstanding shares and 5% owners
D-8 Audit fees
The Fund's Adviser and Distributor. AEFC is the adviser or subadviser for each
of the funds. IDS Life, a wholly owned subsidiary of AEFC, is the investment
manager and distributor for each of the variable portfolio funds. AEFA, a wholly
owned subsidiary of AEFC, is the distributor for each of the retail funds. The
address for AEFC, IDS Life and AEFA is 200 AXP Financial Center, Minneapolis, MN
55474. AEFC is a wholly owned subsidiary of American Express Company, World
Financial Center, New York, NY 10285.
President, Chief Executive Officer and Board of Directors of AEFC. James M.
Cracchiolo is President and Chief Executive Officer of AEFC. The following
individuals are directors of AEFC. Except as otherwise noted, each director is
an officer of AEFC located at 200 AXP Financial Center, Minneapolis, MN 55474.
Directors: Kenneth I. Chenault (Chief Executive Officer, American Express
Company, New York, NY 10285), James M. Cracchiolo and Walter S. Berman.
President, Chief Executive Officer and Board of Directors of IDS Life. Barbara
H. Fraser is Chief Executive Officer ofIDS Life. Timothy V. Bechtold is
President of IDS Life. The following individuals are directors of IDS Life. Each
director is an officer of AEFC located at 200 AXP Financial Center, Minneapolis,
MN 55474. Directors: Gumer C. Alvero, Barbara H. Fraser, Timothy V. Bechtold,
Barry J. Murphy, Stephen W. Roszell and John T. Sweeney.
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40 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-1A. Actual and Pro Forma Fund Expenses -- Class A, Tax-Free Money and Variable Portfolio Funds
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage 0.40% 0.32% 0.25% 0.25% 0.24% 0.24% 0.89% 0.81%
Cash Management 0.30 0.30 0.00 0.10 0.29 0.29 0.59 0.69
Discovery 0.44 0.44 0.25 0.25 0.37 0.37 1.06 1.06
Diversified Equity Income 0.49 0.48 0.25 0.25 0.21 0.21 0.95 0.94
Emerging Markets 1.08 1.02 0.25 0.25 0.69 0.69 2.02 1.96
Equity Select 0.68 0.72 0.25 0.25 0.23 0.23 1.16 1.20
Equity Value 0.54 0.59 0.25 0.25 0.24 0.24 1.03 1.08
European Equity 0.78 0.74 0.25 0.25 0.50 0.50 1.53 1.49
Focused Growth** 0.53 0.53 0.25 0.25 0.62 0.62 1.40 1.40
Global Balanced 0.78 0.66 0.25 0.25 0.42 0.42 1.45 1.33
Global Growth 0.59 0.58 0.25 0.25 0.34 0.34 1.18 1.17
Global Technology 0.71 0.71 0.25 0.25 0.67 0.67 1.63 1.63
Growth 0.54 0.53 0.25 0.25 0.20 0.20 0.99 0.98
Growth Dimensions** 0.47 0.44 0.25 0.25 0.44 0.44 1.16 1.13
International 0.62 0.60 0.25 0.25 0.41 0.41 1.28 1.26
Large Cap Equity*** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 0.49 0.45 0.25 0.25 0.23 0.23 0.97 0.93
Mid Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Mutual 0.40 0.35 0.25 0.25 0.22 0.22 0.87 0.82
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 41
Table D-1A. Actual and Pro Forma Fund Expenses -- Class A, Tax-Free Money and Variable Portfolio Funds (continued)
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
New Dimensions 0.58% 0.60% 0.25% 0.25% 0.17% 0.17% 1.00% 1.02%
Partners Fundamental Value** 0.73 0.72 0.25 0.25 0.57 0.57 1.55 1.54
Partners International
Aggressive Growth** 1.00 1.00 0.25 0.25 8.09 8.09 9.34 9.34
Partners International
Select Value** 0.90 0.90 0.25 0.25 9.00 9.00 10.15 10.15
Partners Select Value** 0.78 0.79 0.25 0.25 2.03 2.03 3.06 3.07
Partners Small Cap Core** 0.97 0.94 0.25 0.25 3.83 3.83 5.05 5.02
Partners Small Cap Growth** 0.93 0.96 0.25 0.25 0.71 0.71 1.89 1.92
Partners Small Cap Value** 0.97 0.99 0.25 0.25 0.56 0.56 1.78 1.80
Partners Value** 0.74 0.76 0.25 0.25 0.68 0.68 1.67 1.69
Precious Metals 0.76 0.77 0.25 0.25 0.77 0.77 1.78 1.79
Progressive 0.53 0.50 0.25 0.25 0.30 0.30 1.08 1.05
Research Opportunities 0.60 0.53 0.25 0.25 0.31 0.31 1.16 1.09
Small Cap Advantage 0.63 0.60 0.25 0.25 0.37 0.37 1.25 1.22
Small Company Index 0.38 0.42 0.25 0.25 0.33 0.33 0.96 1.00
Stock 0.47 0.48 0.25 0.25 0.15 0.15 0.87 0.88
Strategy Aggressive 0.46 0.43 0.25 0.25 0.38 0.38 1.09 1.06
Tax-Free Money 0.36 0.36 0.00 0.10 0.23 0.23 0.59 0.69
Utilities 0.61 0.64 0.25 0.25 0.17 0.17 1.03 1.06
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42 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-1A. Actual and Pro Forma Fund Expenses -- Class A, Tax-Free Money and Variable Portfolio Funds (continued)
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Variable Portfolio Funds
VP-Blue Chip Advantage 0.54% 0.49% 0.12% 0.12% 0.12% 0.12% 0.78% 0.73%
VP-Bond 0.60 0.60 0.12 0.12 0.08 0.08 0.80 0.80
VP-Capital Resource 0.61 0.61 0.12 0.12 0.05 0.05 0.78 0.78
VP-Cash Management 0.51 0.51 0.12 0.12 0.05 0.05 0.68 0.68
VP-Diversified Equity Income 0.55 0.54 0.12 0.12 0.50 0.50 1.17 1.16
VP-Emerging Markets** 1.16 1.12 0.12 0.12 2.21 2.21 3.49 3.45
VP-Equity Select** 0.64 0.67 0.12 0.12 2.23 2.23 2.99 3.02
VP-Extra Income 0.62 0.62 0.12 0.12 0.08 0.08 0.82 0.82
VP-Federal Income 0.61 0.61 0.12 0.12 0.14 0.14 0.87 0.87
VP-Global Bond 0.84 0.84 0.12 0.12 0.11 0.11 1.07 1.07
VP-Growth 0.62 0.60 0.12 0.12 0.17 0.17 0.91 0.89
VP-International 0.83 0.83 0.12 0.12 0.09 0.09 1.04 1.04
VP-Managed 0.59 0.59 0.12 0.12 0.05 0.05 0.76 0.76
VP-New Dimensions 0.60 0.60 0.12 0.12 0.07 0.07 0.79 0.79
VP-Partners Small Cap Value 1.02 1.02 0.12 0.12 5.72 5.72 6.86 6.86
VP-S&P 500 Index** 0.29 0.29 0.12 0.12 0.90 0.90 1.31 1.31
VP-Small Cap Advantage 0.73 0.71 0.12 0.12 0.41 0.41 1.26 1.24
VP-Stock** 0.56 0.56 0.12 0.12 10.68 10.68 11.36 11.36
VP-Strategy Aggressive 0.60 0.60 0.12 0.12 0.06 0.06 0.78 0.78
* Includes expenses such as an administrative services fee, a shareholder
services fee, a transfer agency fee and other nonadvisory expenses.
** The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
*** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
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AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 43
Example: This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. Assume you invest
$10,000 and the fund earns a 5% annual return. The operating expenses remain the
same each year. The following table shows your costs under the current
arrangements and your costs if the proposed changes had been in effect:
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage $661 $653 $ 843 $ 819 $1,040 $1,000 $1,612 $1,523
Cash Management 60 70 189 221 330 385 741 862
Discovery 677 677 893 893 1,127 1,127 1,799 1,799
Diversified Equity Income 666 655 861 858 1,071 1,066 1,679 1,667
Emerging Markets 768 763 1,172 1,155 1,601 1,572 2,793 2,733
Equity Select 686 690 923 934 1,178 1,198 1,907 1,951
Equity Value 674 679 884 899 1,112 1,137 1,766 1,821
European Equity 722 718 1,031 1,019 1,362 1,342 2,298 2,557
Focused Growth* 702 702 986 986 1,291 1,291 2,156 2,156
Global Balanced 714 703 1,008 972 1,323 1,263 2,215 2,089
Global Growth 688 687 928 925 1,188 1,183 1,929 1,918
Global Technology 731 731 1,060 1,060 1,411 1,411 2,401 2,401
Growth 670 669 872 869 1,091 1,086 1,723 1,712
Growth Dimensions* 685 684 922 914 1,177 1,162 1,907 1,875
International 698 696 958 952 1,238 1,228 2,036 2,015
Large Cap Equity** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 668 664 866 855 1,081 1,061 1,701 1,656
Mid Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
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44 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Example: (continued)
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
Mutual $659 $654 $ 837 $ 822 $1,030 $1,005 $1,590 $1,534
New Dimensions 671 673 875 881 1,097 1,107 1,734 1,755
Partners Fundamental Value* 705 705 1,018 1,016 1,354 1,350 2,303 2,294
Partners International
Aggressive Growth* 743 743 2,484 2,484 N/A N/A N/A N/A
Partners International
Select Value* 733 733 2,612 2,612 N/A N/A N/A N/A
Partners Select Value* 719 719 1,328 1,330 1,961 1,965 3,656 3,664
Partners Small Cap Core* 728 728 1,713 1,707 2,696 2,686 5,150 5,130
Partners Small Cap Growth* 724 724 1,104 1,110 1,509 1,521 2,638 2,666
Partners Small Cap Value* 728 728 1,087 1,091 1,469 1,477 2,540 2,559
Partners Value* 705 705 1,042 1,046 1,403 1,411 2,417 2,436
Precious Metals 745 746 1,103 1,106 1,485 1,490 2,554 2,564
Progressive 679 676 899 890 1,137 1,122 1,821 1,788
Research Opportunities 686 680 923 902 1,178 1,142 1,907 1,832
Small Cap Advantage 695 692 949 940 1,123 1,208 2,004 1,972
Small Company Index 667 671 863 875 1,076 1,097 1,690 1,734
Stock 659 660 837 840 1,030 1,035 1,590 1,601
Strategy Aggressive 680 677 902 893 1,142 1,127 1,832 1,799
Tax-Free Money 60 70 189 221 330 385 741 862
Utilities 674 677 884 893 1,112 1,127 1,766 1,799
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 45
Example: (continued)
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Variable Portfolio Funds
VP-Blue Chip Advantage $ 80 $ 75 $ 249 $ 234 $ 434 $ 407 $ 970 $ 910
VP-Bond 82 82 256 256 445 445 994 994
VP-Capital Resource 80 80 249 249 434 434 970 970
VP-Cash Management 69 69 218 218 379 379 850 850
VP-Diversified Equity Income 119 118 372 369 645 639 1,425 1,414
VP-Emerging Markets* 178 178 910 902 1,664 1,648 3,653 3,620
VP-Equity Select* 112 112 747 753 1,407 1,419 3,179 3,205
VP-Extra Income 84 84 262 262 456 456 1,018 1,018
VP-Federal Income 89 89 278 278 483 483 1,077 1,077
VP-Global Bond 109 109 341 341 591 591 1,310 1,310
VP-Growth 93 91 290 284 505 494 1,124 1,100
VP-International 106 106 331 331 575 575 1,276 1,276
VP-Managed 78 78 243 243 423 423 946 946
VP-New Dimensions 81 81 253 253 440 440 982 982
VP-Partners Small Cap Value 153 153 1,547 1,547 2,891 2,891 6,040 6,040
VP-S&P 500 Index* 50 50 334 334 641 641 1,513 1,513
VP-Small Cap Advantage 128 126 400 394 693 682 1,528 1,505
VP-Stock* 112 112 2,329 2,329 4,281 4,281 8,202 8,202
VP-Strategy Aggressive 80 80 249 249 434 434 970 970
* The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
46 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-1B. Actual and Pro Forma Fund Expenses -- Class B
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage 0.40% 0.32% 1.00% 1.00% 0.25% 0.25% 1.65% 1.57%
Cash Management 0.30 0.30 0.75 0.85 0.29 0.29 1.34 1.44
Discovery 0.44 0.44 1.00 1.00 0.39 0.39 1.83 1.83
Diversified Equity Income 0.49 0.48 1.00 1.00 0.22 0.22 1.71 1.70
Emerging Markets 1.08 1.02 1.00 1.00 0.71 0.71 2.79 2.73
Equity Select 0.68 0.72 1.00 1.00 0.25 0.25 1.93 1.97
Equity Value 0.54 0.59 1.00 1.00 0.24 0.24 1.78 1.83
European Equity 0.78 0.74 1.00 1.00 0.52 0.52 2.30 2.26
Focused Growth** 0.53 0.53 1.00 1.00 0.63 0.63 2.16 2.16
Global Balanced 0.78 0.66 1.00 1.00 0.43 0.43 2.21 2.09
Global Growth 0.59 0.58 1.00 1.00 0.36 0.36 1.95 1.94
Global Technology 0.71 0.71 1.00 1.00 0.71 0.71 2.42 2.42
Growth 0.54 0.53 1.00 1.00 0.21 0.21 1.75 1.74
Growth Dimensions** 0.47 0.44 1.00 1.00 0.45 0.45 1.92 1.89
International 0.62 0.60 1.00 1.00 0.43 0.43 2.05 2.03
Large Cap Equity*** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 0.49 0.45 1.00 1.00 0.25 0.25 1.74 1.70
Mid Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Mutual 0.40 0.35 1.00 1.00 0.24 0.24 1.64 1.59
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 47
Table D-1B. Actual and Pro Forma Fund Expenses -- Class B (continued)
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
New Dimensions 0.58% 0.60% 1.00% 1.00% 0.18% 0.18% 1.76% 1.78%
Partners Fundamental Value** 0.73 0.72 1.00 1.00 0.58 0.58 2.31 2.30
Partners International
Aggressive Growth** 1.00 1.00 1.00 1.00 8.11 8.11 10.11 10.11
Partners International
Select Value** 0.90 0.90 1.00 1.00 9.02 9.02 10.92 10.92
Partners Select Value** 0.78 0.79 1.00 1.00 2.04 2.04 3.82 3.83
Partners Small Cap Core** 0.97 0.94 1.00 1.00 3.84 3.84 5.81 5.78
Partners Small Cap Growth** 0.93 0.96 1.00 1.00 0.72 0.72 2.65 2.68
Partners Small Cap Value** 0.97 0.99 1.00 1.00 0.57 0.57 2.54 2.56
Partners Value** 0.74 0.76 1.00 1.00 0.69 0.69 2.43 2.45
Precious Metals 0.76 0.77 1.00 1.00 0.78 0.78 2.54 2.55
Progressive 0.53 0.50 1.00 1.00 0.33 0.33 1.86 1.83
Research Opportunities 0.60 0.53 1.00 1.00 0.32 0.32 1.92 1.85
Small Cap Advantage 0.63 0.60 1.00 1.00 0.39 0.39 2.02 1.99
Small Company Index 0.38 0.42 1.00 1.00 0.34 0.34 1.72 1.76
Stock 0.47 0.48 1.00 1.00 0.17 0.17 1.64 1.65
Strategy Aggressive 0.46 0.43 1.00 1.00 0.40 0.40 1.86 1.83
Utilities 0.61 0.64 1.00 1.00 0.19 0.19 1.80 1.83
* Other expenses include an administrative services fee, a shareholder
services fee, a transfer agency fee and other nonadvisory expenses.
** The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
*** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
48 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Example: This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. Assume you invest
$10,000 and the fund earns a 5% annual return. The operating expenses remain the
same each year. The following table shows your costs under the current
arrangements and your costs if the proposed changes had been in effect:
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage $568 $560 $ 821 $ 796 $ 998 $ 956 $1,756 $1,667
Cash Management 536 547 725 756 835 888 1,410 1,524
Discovery 586 586 876 876 1,091 1,091 1,950 1,950
Diversified Equity Income 574 572 839 836 1,029 1,024 1,822 1,811
Emerging Markets 682 676 1,165 1,146 1,575 1,545 2,938 2,879
Equity Select 596 600 906 919 1,143 1,163 2,058 2,101
Equity Value 581 586 861 876 1,065 1,091 1,901 1,956
European Equity 633 629 1,019 1,007 1,331 1,311 2,447 2,405
Focused Growth* 611 611 969 969 1,253 1,253 2,298 2,298
Global Balanced 624 612 991 955 1,286 1,225 2,356 2,231
Global Growth 598 597 913 909 1,153 1,148 2,079 2,069
Global Technology 645 645 1,055 1,055 1,391 1,391 2,564 2,564
Growth 578 576 851 848 1,050 1,045 1,866 1,855
Growth Dimensions* 594 592 902 894 1,137 1,122 2,049 2,018
International 608 606 943 937 1,204 1,194 2,186 2,165
Large Cap Equity** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 577 573 848 836 1,045 1,024 1,852 1,808
Mid Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 49
Example: (continued)
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
Mutual $567 $562 $ 818 $ 802 $ 993 $ 967 $1,742 $1,687
New Dimensions 579 581 854 861 1,055 1,065 1,877 1,899
Partners Fundamental Value* 614 614 1,003 1,000 1,318 1,314 2,444 2,434
Partners International
Aggressive Growth* 655 655 2,525 2,525 N/A N/A N/A N/A
Partners International
Select Value* 645 645 2,657 2,657 N/A N/A N/A N/A
Partners Select Value* 629 629 1,324 1,326 1,937 1,941 3,791 3,799
Partners Small Cap Core* 639 639 1,723 1,717 2,687 2,676 5,278 5,258
Partners Small Cap Growth* 634 634 1,092 1,098 1,476 1,488 2,777 2,805
Partners Small Cap Value* 639 639 1,074 1,078 1,435 1,443 2,679 2,698
Partners Value* 614 614 1,027 1,031 1,368 1,376 2,558 2,576
Precious Metals 657 658 1,091 1,094 1,451 1,456 2,693 2,703
Progressive 589 586 885 876 1,107 1,091 1,980 1,948
Research Opportunities 595 588 903 882 1,138 1,102 2,050 1,975
Small Cap Advantage 605 602 934 925 1,189 1,174 2,154 2,122
Small Company Index 575 579 842 854 1,034 1,055 1,833 1,877
Stock 567 568 818 821 993 998 1,742 1,753
Strategy Aggressive 589 586 885 876 1,107 1,091 1,983 1,950
Utilities 583 586 867 876 1,076 1,091 1,918 1,950
* The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
50 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-1C. Actual and Pro Forma Fund Expenses -- Class C
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage 0.40% 0.32% 1.00% 1.00% 0.27% 0.27% 1.67% 1.59%
Cash Management 0.30 0.30 0.75 0.75 0.29 0.29 1.34 1.34
Discovery 0.44 0.44 1.00 1.00 0.39 0.39 1.83 1.83
Diversified Equity Income 0.49 0.48 1.00 1.00 0.22 0.22 1.71 1.70
Emerging Markets 1.08 1.02 1.00 1.00 0.71 0.71 2.79 2.73
Equity Select 0.68 0.72 1.00 1.00 0.29 0.29 1.97 2.01
Equity Value 0.54 0.59 1.00 1.00 0.27 0.27 1.81 1.86
European Equity 0.78 0.74 1.00 1.00 0.52 0.52 2.30 2.26
Focused Growth** 0.53 0.53 1.00 1.00 0.63 0.63 2.16 2.16
Global Balanced 0.78 0.66 1.00 1.00 0.43 0.43 2.21 2.09
Global Growth 0.59 0.58 1.00 1.00 0.36 0.36 1.95 1.94
Global Technology 0.71 0.71 1.00 1.00 0.71 0.71 2.42 2.42
Growth 0.54 0.53 1.00 1.00 0.21 0.21 1.75 1.74
Growth Dimensions** 0.47 0.44 1.00 1.00 0.45 0.45 1.92 1.89
International 0.62 0.60 1.00 1.00 0.43 0.43 2.05 2.03
Large Cap Equity*** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 0.49 0.45 1.00 1.00 0.25 0.25 1.74 1.70
Mid Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Mutual 0.40 0.35 1.00 1.00 0.24 0.24 1.64 1.59
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 51
Table D-1C. Actual and Pro Forma Fund Expenses -- Class C (continued)
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
New Dimensions 0.58% 0.60% 1.00% 1.00% 0.18% 0.18% 1.76% 1.78%
Partners Fundamental Value** 0.73 0.72 1.00 1.00 0.58 0.58 2.31 2.30
Partners International
Aggressive Growth** 1.00 1.00 1.00 1.00 8.11 8.11 10.11 10.11
Partners International
Select Value** 0.90 0.90 1.00 1.00 9.02 9.02 10.92 10.92
Partners Select Value** 0.78 0.79 1.00 1.00 2.04 2.04 3.82 3.83
Partners Small Cap Core** 0.97 0.94 1.00 1.00 3.84 3.84 5.81 5.78
Partners Small Cap Growth** 0.93 0.96 1.00 1.00 0.72 0.72 2.65 2.68
Partners Small Cap Value** 0.97 0.99 1.00 1.00 0.57 0.57 2.54 2.56
Partners Value** 0.74 0.76 1.00 1.00 0.69 0.69 2.43 2.45
Precious Metals 0.76 0.77 1.00 1.00 0.75 0.75 2.51 2.52
Progressive 0.53 0.50 1.00 1.00 0.33 0.33 1.86 1.83
Research Opportunities 0.60 0.53 1.00 1.00 0.32 0.32 1.92 1.85
Small Cap Advantage 0.63 0.60 1.00 1.00 0.41 0.41 2.04 2.01
Stock 0.47 0.48 1.00 1.00 0.17 0.17 1.64 1.65
Strategy Aggressive 0.46 0.43 1.00 1.00 0.43 0.43 1.89 1.86
Utilities 0.61 0.64 1.00 1.00 0.19 0.19 1.80 1.83
* Other expenses include an administrative services fee, a shareholder
services fee, a transfer agency fee and other nonadvisory expenses.
** The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
*** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
52 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Example: This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. Assume you invest
$10,000 and the fund earns a 5% annual return. The operating expenses remain the
same each year. The following table shows your costs under the current
arrangements and your costs if the proposed changes had been in effect:
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage $170 $162 $527 $502 $ 908 $ 867 $1,981 $1,894
Cash Management 136 136 425 425 735 735 1,618 1,618
Discovery 186 186 576 576 991 991 2,153 2,153
Diversified Equity Income 174 173 539 536 929 924 2,024 2,014
Emerging Markets 282 276 865 847 1,475 1,445 3,122 3,064
Equity Select 200 204 619 631 1,063 1,084 2,301 2,342
Equity Value 184 189 570 585 981 1,007 2,132 2,185
European Equity 233 229 719 707 1,231 1,211 2,640 2,600
Focused Growth* 211 211 669 669 1,153 1,153 2,491 2,491
Global Balanced 224 212 691 655 1,186 1,125 2,549 2,425
Global Growth 198 197 613 609 1,053 1,048 2,280 2,269
Global Technology 245 245 755 755 1,291 1,291 2,761 2,761
Growth 178 177 551 548 950 945 2,067 2,057
Growth Dimensions* 194 192 602 594 1,037 1,022 2,247 2,216
International 208 206 643 637 1,104 1,094 2,384 2,363
Large Cap Equity** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 177 173 548 536 945 924 2,057 2,014
Mid Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 53
Example: (continued)
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
Mutual $167 $162 $ 518 $ 502 $ 893 $ 867 $1,949 $1,894
New Dimensions 179 181 554 561 955 965 2,078 2,100
Partners Fundamental Value* 214 214 703 700 1,218 1,214 2,635 2,626
Partners International
Aggressive Growth* 255 255 2,225 2,225 N/A N/A N/A N/A
Partners International
Select Value* 245 245 2,357 2,357 N/A N/A N/A N/A
Partners Select Value* 229 229 1,024 1,026 1,837 1,841 3,957 3,965
Partners Small Cap Core* 239 239 1,423 1,417 2,587 2,576 5,417 5,397
Partners Small Cap Growth* 234 234 792 798 1,376 1,388 2,962 2,989
Partners Small Cap Value* 239 239 774 778 1,335 1,343 2,866 2,884
Partners Value* 214 214 727 731 1,268 1,276 2,746 2,765
Precious Metals 254 255 782 785 1,336 1,341 2,850 2,860
Progressive 189 186 585 576 1,107 991 2,185 2,153
Research Opportunities 195 188 603 582 1,038 1,002 2,248 2,174
Small Cap Advantage 207 204 640 631 1,099 1,084 2,374 2,342
Stock 167 168 518 521 893 898 1,949 1,960
Strategy Aggressive 192 189 594 585 1,022 1,007 2,216 2,185
Utilities 183 186 567 576 976 991 2,121 2,153
* The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
** The fund began operations in 2002 and has not yet had a fiscal year
end reporting period.
- --------------------------------------------------------------------------------
54 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-1Y. Actual and Pro Forma Fund Expenses -- Class Y
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage 0.40% 0.32% 0.00% 0.00% 0.32% 0.32% 0.72% 0.64%
Cash Management 0.30 0.30 0.00 0.00 0.27 0.27 0.57 0.57
Discovery 0.44 0.44 0.00 0.00 0.42 0.42 0.86 0.86
Diversified Equity Income 0.49 0.48 0.00 0.00 0.29 0.29 0.78 0.77
Emerging Markets 1.08 1.02 0.00 0.00 0.76 0.76 1.84 1.78
Equity Select 0.68 0.72 0.00 0.00 0.32 0.32 1.00 1.04
Equity Value 0.54 0.59 0.00 0.00 0.32 0.32 0.86 0.91
European Equity 0.78 0.74 0.00 0.00 0.57 0.57 1.35 1.31
Focused Growth** 0.53 0.53 0.00 0.00 0.71 0.71 1.24 1.24
Global Balanced 0.78 0.66 0.00 0.00 0.53 0.53 1.31 1.19
Global Growth 0.59 0.58 0.00 0.00 0.42 0.42 1.01 1.00
Global Technology 0.71 0.71 0.00 0.00 0.78 0.78 1.49 1.49
Growth 0.54 0.53 0.00 0.00 0.29 0.29 0.83 0.82
Growth Dimensions** 0.47 0.44 0.00 0.00 0.53 0.53 1.00 0.97
International 0.62 0.60 0.00 0.00 0.49 0.49 1.11 1.09
Large Cap Equity*** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 0.49 0.45 0.00 0.00 0.31 0.31 0.80 0.76
Mid Cap Value*** N/A N/A N/A N/A N/A N/A N/A N/A
Mutual 0.40 0.35 0.00 0.00 0.31 0.31 0.71 0.66
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 55
Table D-1Y. Actual and Pro Forma Fund Expenses -- Class Y (continued)
Total Fund
(as a % of average Management Agreement Distribution Other Expenses* Operating Expenses
daily net assets) Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
New Dimensions 0.58% 0.60% 0.00% 0.00% 0.26% 0.26% 0.84% 0.86%
Partners Fundamental Value** 0.73 0.72 0.00 0.00 0.64 0.64 1.37 1.36
Partners International
Aggressive Growth** 1.00 1.00 0.00 0.00 8.17 8.17 9.17 9.17
Partners International
Select Value** 0.90 0.90 0.00 0.00 9.08 9.08 9.98 9.98
Partners Select Value** 0.78 0.79 0.00 0.00 2.10 2.10 2.88 2.89
Partners Small Cap Core** 0.97 0.94 0.00 0.00 3.90 3.90 4.87 4.84
Partners Small Cap Growth** 0.93 0.96 0.00 0.00 0.78 0.78 1.71 1.74
Partners Small Cap Value** 0.97 0.99 0.00 0.00 0.63 0.63 1.60 1.62
Partners Value** 0.74 0.76 0.00 0.00 0.75 0.75 1.49 1.51
Precious Metals 0.76 0.77 0.00 0.00 0.82 0.82 1.58 1.59
Progressive 0.53 0.50 0.00 0.00 0.42 0.42 0.95 0.92
Research Opportunities 0.60 0.53 0.00 0.00 0.40 0.40 1.00 0.93
Small Cap Advantage 0.63 0.60 0.00 0.00 0.45 0.45 1.08 1.05
Small Company Index 0.38 0.42 0.00 0.00 0.41 0.41 0.79 0.83
Stock 0.47 0.48 0.00 0.00 0.24 0.24 0.71 0.72
Strategy Aggressive 0.46 0.43 0.00 0.00 0.45 0.45 0.91 0.88
Utilities 0.61 0.64 0.00 0.00 0.27 0.27 0.88 0.91
* Other expenses include an administrative services fee, a shareholder
services fee, a transfer agency fee and other nonadvisory expenses.
** The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
*** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
56 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Example: This example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. Assume you invest
$10,000 and the fund earns a 5% annual return. The operating expenses remain the
same each year. The following table shows your costs under the current
arrangements and your costs if the proposed changes had been in effect:
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds
Blue Chip Advantage $ 74 $ 65 $230 $205 $ 401 $ 357 $ 898 $ 802
Cash Management 58 58 183 183 319 319 717 717
Discovery 88 88 275 275 478 478 1,065 1,065
Diversified Equity Income 80 79 249 246 434 429 970 958
Emerging Markets 187 181 579 561 996 965 2,164 2,100
Equity Select 102 106 319 331 553 575 1,229 1,276
Equity Value 88 93 275 290 478 505 1,065 1,124
European Equity 137 133 428 415 740 719 1,629 1,584
Focused Growth* 118 118 386 386 674 674 1,498 1,498
Global Balanced 133 121 415 378 719 655 1,584 1,448
Global Growth 103 162 322 319 559 553 1,241 1,229
Global Technology 152 152 471 471 814 814 1,785 1,785
Growth 85 84 265 262 461 456 1,029 1,018
Growth Dimensions* 101 99 318 309 552 537 1,228 1,194
International 113 111 353 347 612 602 1,356 1,333
Large Cap Equity** N/A N/A N/A N/A N/A N/A N/A N/A
Large Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
Managed Allocation 82 78 256 243 445 423 994 946
Mid Cap Value** N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 57
Example: (continued)
1 year 3 years 5 years 10 years
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
Retail Funds (continued)
Mutual $ 73 $ 67 $ 227 $ 211 $ 396 $ 368 $ 886 $ 826
New Dimensions 86 88 268 275 467 478 1,041 1,065
Partners Fundamental Value* 119 119 414 412 732 728 1,634 1,624
Partners International
Aggressive Growth* 161 161 1,981 1,981 N/A N/A N/A N/A
Partners International
Select Value* 151 151 2,118 2,118 N/A N/A N/A N/A
Partners Select Value* 134 134 745 747 1,382 1,386 3,097 3,106
Partners Small Cap Core* 145 145 1,155 1,149 2,169 2,158 4,714 4,692
Partners Small Cap Growth* 139 139 506 512 897 910 1,996 2,026
Partners Small Cap Value* 145 145 488 492 855 864 1,890 1,910
Partners Value* 119 119 440 444 784 793 1,757 1,778
Precious Metals 161 162 499 502 861 867 1,883 1,894
Progressive 97 94 303 294 526 510 1,171 1,136
Research Opportunities 102 95 319 297 553 516 1,229 1,147
Small Cap Advantage 110 107 344 334 596 580 1,322 1,287
Small Company Index 81 85 253 265 440 461 982 1,029
Stock 73 74 227 230 396 401 886 898
Strategy Aggressive 93 90 290 281 505 488 1,124 1,089
Utilities 90 93 281 290 488 505 1,089 1,124
* The fund is subject to an expense cap and the total fund operating
expenses will be less for an agreed upon time frame. Reference Table D-2
for detailed information.
** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
58 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-2. Current Fund Management Fees
- ------------------------------------------ --------------------------------------- ------------------------
Retail Funds(1) Management Fee (annual rate;
in billions) Fee Cap(2) (if applicable)
- ------------------------------------------ --------------------------------------- ------------------------
Blue Chip Advantage First $.25-.54%; next $.25-.515%;
next $.25-.49%; next$.25-.465%;
next $1-.44%; next $1-.41%;
next $3-.38%; over $6-.35%
- ------------------------------------------ --------------------------------------- ------------------------
Discovery(3) First $.25-.64%; next $.25-.615%;
Progressive (4) next $.25-.59%; next $.25-.565%;
next $1-.54%; over $2-.515%
- ------------------------------------------ --------------------------------------- ------------------------
Diversified Equity Income(5) First $.5-.53%; next $.5-.505%;
Equity Value next $1-.48%; next $1-.455%;
Managed Allocation (5) next $3-.43%; over $6-.40%
Stock(5)
- ------------------------------------------ --------------------------------------- ------------------------
Emerging Markets(5),(6) First $.25-1.10%; next $.25-1.08%;
next $.25-1.06%; next $.25-1.04%;
next $1-1.02%; over $2-1.0%
- ------------------------------------------ --------------------------------------- ------------------------
Equity Select First $1-.60%; next $1-.575%; Growth Dimensions:
Growth(5) next $1-.55%; next $3-.525%; 1.15% until 7/31/03
Growth Dimensions next $6-.50%; next $12-.49%; Large Cap Equity and
Large Cap Equity over $24-.48% Large Cap Value:
Large Cap Value 1.25% until 7/31/03
New Dimensions(5)
- ------------------------------------------ --------------------------------------- ------------------------
European Equity(6) First $.25-.80%; next $.25-.775%;
Global Growth(5),(6) next $.25-.75%; next $.25-.725%;
International(6) next $1-.70%; over $2-.675%
Precious Metals
- ------------------------------------------ --------------------------------------- ------------------------
Focused Growth First $.25-.65%; next $.25-.625%; Focused Growth:
Research next $.50-.60%; next $1-.575%; 1.32% until 3/31/03
Opportunities(5) next $1-.55%; next $3-.525%;
over $6-.50%
- ------------------------------------------ --------------------------------------- ------------------------
Global Balanced(6) First $.25-.79%; next $.25-.765%;
next $.25-.74%; next $.25-.715%;
next $1-.69%; over $2-.665%
- ------------------------------------------ --------------------------------------- ------------------------
Global Technology(5) First $.25-.72%; next $.25-.695%;
next $.25-.67%; next $.25-.645%;
next $1-.62%; over $2-.595%
- ------------------------------------------ --------------------------------------- ------------------------
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 59
Table D-2. Current Fund Management Fees (continued)
- ------------------------------------------ --------------------------------------- ------------------------
Retail Funds(1) Management Fee (annual rate; in Fee Cap(2) (if
billions) applicable)
- ------------------------------------------ --------------------------------------- ------------------------
Mid Cap Value First $1-.70%; next $1-.675%; 1.40% until 9/30/02
next $1-.65%; next $3-.625%;
next $6-.60%; next $12-.59%;
over $24-.58%
- ------------------------------------------ --------------------------------------- ------------------------
Mutual(5) First $1-.53%; next $1-.505%;
next $1-.48%; next $3-.455%;
over $6-.43%
- ------------------------------------------ --------------------------------------- ------------------------
Partners First $.5-.73%; next $.5-.705%; 1.35% until 5/31/03
Fundamental Value(7) next $1-.68%; next $1-.655%;
Partners Value(8) next $3-.63%; over $6-.60%
- ------------------------------------------ --------------------------------------- ------------------------
Partners International First $.25-1%; next $.25-.975%; 1.75% until 10/31/02
Aggressive Growth(9) next $.25-.95%; next $.25-.925%;
next $1-.90%; over $2-.875%
- ------------------------------------------ --------------------------------------- ------------------------
Partners International First $.25-.90%; next $.25-.875%; 1.65% until 10/31/02
Select Value(10) next $.25-.85%; next $.25-.825%;
next $1-.80%; over $2-.775%
- ------------------------------------------ --------------------------------------- ------------------------
Partners Select Value(4) First $.5-.78%; next $.5-.755%; 1.5% until 5/31/03
next $1-.73%; next $1-.705%;
next $3-.68%; over $6-.65%
- ------------------------------------------ --------------------------------------- ------------------------
Partners First $.25-.97%; next $.25-.945%; Partners
Small Cap Core(3) next $.25-.92%; next $.25-.895%; Small Cap Core and
Partners over $1-.87% Partners
Small Cap Value(11) Small Cap Value:
1.6% until 5/31/03
- ------------------------------------------ --------------------------------------- ------------------------
Partners Small First $.25-.92%; next $.25-.895%; 1.55% until 3/31/03
Cap Growth(12) next $.25-.87%; next $.25-.845%;
next $1-.82%; over $2-.795%
- ------------------------------------------ --------------------------------------- ------------------------
Small Cap Advantage(13) First $.25-.74%; next $.25-.715%;
next $.25-.69%; next $.25-.665%;
next $1-.64%; over $2-.615%
- ------------------------------------------ --------------------------------------- ------------------------
Small Company Index First $.25-.38%; next $.25-.37%;
next $.25-.36%; next $.25-.35%;
over $1-.34%
- ------------------------------------------ --------------------------------------- ------------------------
Strategy Aggressive First $1-.60%; next $1-.575%;
next $1-.55%; next $3-.525%;
over $6-.50%
- ------------------------------------------ --------------------------------------- ------------------------
- --------------------------------------------------------------------------------
60 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-2. Current Fund Management Fees (continued)
- ------------------------------------------ --------------------------------------- ------------------------
Retail Funds(1) Management Fee (annual rate; in Fee Cap(2) (if
billions) applicable)
- ------------------------------------------ --------------------------------------- ------------------------
Utilities First $.5-.61%; next $.5-.585%;
next $1-.56%; next $1-.535%;
next $3-.51%; over $6-.48%
- ------------------------------------------ --------------------------------------- ------------------------
(1) Except for Global Technology, each fund has a performance incentive
adjustment based on its performance compared to a Lipper index of
comparable funds over a rolling 12-month period.
(2) For Class A shares, total fees and expenses in excess of this percent will
be waived. Fee caps for Classes B, C and Y vary slightly based on the
expenses of those classes.
(3) The fund has subadvisory agreements with Pilgrim Baxter & Associates, Ltd.
and Wellington Management Company, LLP.
(4) The fund has a subadvisory agreement with Gabelli Asset Management Company.
(5) The fund is part of a master/feeder structure. Management fees are paid by
the portfolio on behalf of the fund.
(6) The fund has a subadvisory agreement with American Express Asset Management
International Inc.
(7) The fund has a subadvisory agreement with Davis Advisors.
(8) The fund has a subadvisory agreement with Lord, Abbett & Co.
(9) The fund has subadvisory agreements with American Century Investment
Management, Inc. and Liberty Wanger Asset Management, L.P.
(10) The fund has a subadvisory agreement with Alliance Capital Management L.P.
(11) The fund has subadvisory agreements with Third Avenue Management LLC, Royce
& Associates, Inc. and National City Investment Management Company.
(12) The fund has subadvisory agreements with INVESCO Funds Group Inc., RS
Investment Management, L.P. and Neuberger Berman Management Inc.
(13) The fund has a subadvisory agreement with Kenwood Capital Management LLC.
Table D-2. Current Fund Management Fees (continued)
- ------------------------------------------ --------------------------------------- ------------------------
Variable Portfolio Funds Management Fee (annual rate; in Fee Cap(1) (if
billions) applicable)
- ------------------------------------------ --------------------------------------- ------------------------
VP-Blue Chip Advantage First $.5-.56%; next $.5-.545%; VP-Stock: 1.10%
VP-Diversified Equity next $1-.53%; next $1-.515%; until 4/30/03
Income next $3-.50%; over $6-.47%
VP-Stock
- ------------------------------------------ --------------------------------------- ------------------------
VP-Bond First $1-.61%; next $1-.595%;
VP-Federal Income next $1-.58%; next $3-.565%;
next $3-.55%; over $9-.535%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Capital Resource First $1-.63%; next $1-.615%;
VP-Growth next $1-.60%; next $3-.585%;
VP-New Dimensions over $6-.57%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Cash Management First $1-.51%; next $.5-.493%;
next $.5-.475%; next $.5-.458%;
over $2.5-.44%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Emerging Markets(2) First $.25-1.17%; next $.25-1.155%; 1.75% until 4/30/03
next $.25-1.14%; next $.25 -1.125%;
next $1-1.11%; over $2-1.095%
- ------------------------------------------ --------------------------------------- ------------------------
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 61
Table D-2. Current Fund Management Fees (continued)
- ------------------------------------------ --------------------------------------- ------------------------
Variable Portfolio Funds Management Fee (annual rate; in Fee Cap(1) (if
billions) applicable)
- ------------------------------------------ --------------------------------------- ------------------------
VP-Equity Select First $.25-.65%; next $.25-.635%; 1.10% until 4/30/03
next $.25-.62%; next $.25-.605%;
next $1-.59%; next $1-.575%;
over $3-.56%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Extra Income First $1-.62%; next $1-.605%;
next $1-.59%; next $3-.575%;
next $3-.56%; over $9-.545%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Global Bond First $.25-.84%; next $.25-.825%;
next $.25-.81%; next $.25-.795%;
over $1-.78%
- ------------------------------------------ --------------------------------------- ------------------------
VP-International(2) First $.25-.87%; next $.25-.855%;
next $.25-.84%; next $.25-.825%;
next $1-.81%; over $2-.795%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Managed First $.5-.63%; next $.5-.615%;
next $1-.60%; next $1-.585%;
next $3-.57%; over $6-.55%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Partners First $.25-1.02%; next $.25-1.00%;
Small Cap Value(3) next $.25-.98%; next $.25-.96%;
next $1-.94%; over $2-.92%
- ------------------------------------------ --------------------------------------- ------------------------
VP-S&P 500 Index First $1-.29%; next $1-.28%; .495% until 4/30/03
next $3-.27%; over $5-.26%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Small Cap Advantage(4) First $.25-.79%; next $.25-.77%;
next $.25-.75%; next $.25-.73%;
next $1-.71%; over $2-.65%
- ------------------------------------------ --------------------------------------- ------------------------
VP-Strategy Aggressive First $.25-.65%; next $.25-.635%;
next $.25-.62%; next $.25-.605%;
next $1-.59%; over $2-.575%
- ------------------------------------------ --------------------------------------- ------------------------
(1) Total fees and expenses in excess of this percent will be waived.
(2) The fund has a subadvisory agreement with American Express Asset Management
International Inc.
(3) The fund has subadvisory agreements with Third Avenue Management LLC, Royce
& Associates, Inc. and National City Investment Management Company.
(4) The fund has a subadvisory agreement with Kenwood Capital Management LLC.
- --------------------------------------------------------------------------------
62 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-3.
Actual and Pro Forma Investment Management Services Agreement Fees
Fund Actual Fee Pro Forma Fee % Change
Retail Funds
Blue Chip Advantage $ 13,295,269 $ 10,519,357 (21%)
Discovery 1,657,144 1,641,903 (1)
Diversified Equity Income 10,388,708 10,150,467 (2)
Emerging Markets 3,038,817 2,870,655 (6)
Equity Select 11,264,762 11,952,474 6
Equity Value 10,337,896 11,337,535 10
European Equity 1,749,863 1,665,840 (5)
Focused Growth 463,382 460,228 (1)
Global Balanced 1,247,975 1,050,268 (16)
Global Growth 8,625,128 8,528,881 (1)
Global Technology 2,346,933 2,346,933 0
Growth 46,332,234 45,901,875 (1)
Growth Dimensions 1,354,637 1,281,363 (5)
International 6,238,651 6,051,762 (3)
Large Cap Equity* N/A N/A N/A
Large Cap Value* N/A N/A N/A
Managed Allocation 8,045,640 7,315,052 (9)
Mid Cap Value* N/A N/A N/A
Mutual 12,630,281 11,014,126 (13)
New Dimensions 156,837,446 162,659,468 4
Partners Fundamental Value 861,709 852,654 (1)
Partners International
Aggressive Growth 11,981 11,981 0
Partners International Select Value 9,434 9,434 0
Partners Select Value 51,468 52,411 2
Partners Small Cap Core 28,743 27,894 (3)
Partners Small Cap Growth 1,074,990 1,113,257 4
Partners Small Cap Value 2,111,899 2,160,137 2
Partners Value 778,039 799,049 3
Precious Metals 309,868 314,325 1
Progressive 1,337,549 1,252,850 (6)
Research Opportunities 4,445,123 3,937,124 (11)
Small Cap Advantage 3,737,351 3,585,372 (4)
Small Company Index 4,135,567 4,556,651 10
Stock 19,192,649 19,651,969 2
Strategy Aggressive 7,962,141 7,358,197 (8)
Utilities 15,139,721 15,806,461 4
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 63
Table D-3
Actual and Pro Forma Investment Management Services Agreement Fees (cont.)
Fund Actual Fee Pro Forma Fee % Change
Variable Portfolio Funds
VP-Blue Chip Advantage $ 432,774 $ 395,926 (9%)
VP-Bond 9,066,435 9,066,435 0
VP-Capital Resource 26,165,265 26,165,265 0
VP-Cash Management 4,588,071 4,588,071 0
VP-Diversified Equity Income 226,096 221,970 (2)
VP-Emerging Markets 63,655 61,433 (3)
VP-Equity Select 14,536 15,315 5
VP-Extra Income 3,654,071 3,654,071 0
VP-Federal Income 380,941 380,941 0
VP-Global Bond 1,528,297 1,528,297 0
VP-Growth 1,231,521 1,192,995 (3)
VP-International 14,728,134 14,728,134 0
VP-Managed 26,202,635 26,202,635 0
VP-New Dimensions 27,613,749 27,613,749 0
VP-Partners Small Cap Value 2,014 2,014 0
VP-S&P 500 Index 109,395 109,395 0
VP-Small Cap Advantage 289,538 282,717 (2)
VP-Stock 540 540 0
VP-Strategy Aggressive 16,018,758 16,018,758 0
* The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
64 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-4. Dates Relating to Approval of Current Management Agreements
- ---------------------------- ---------------- ----------------- ----------------
Fund Date Last Date Entered Reason
Approved by Into Submitted to
Shareholders Shareholders
- ---------------------------- ---------------- ----------------- ----------------
Retail Funds
- ---------------------------- ---------------- ----------------- ----------------
Discovery, Growth, 9/9/94 3/20/95 *
International, Managed
Allocation, Mutual,
New Dimensions,
Precious Metals,
Progressive, Stock
- ---------------------------- ---------------- ----------------- ----------------
Small Cap Advantage 4/18/99 4/18/99 Initial approval
- ---------------------------- ---------------- ----------------- ----------------
Blue Chip Advantage, 6/16/99 7/1/99 **
Diversified Equity Income,
Emerging Markets,
Equity Select, Equity
Value,
Global Balanced,
Global Growth,
Research Opportunities,
Small Company Index,
Strategy Aggressive,
Utilities
- ---------------------------- ---------------- ----------------- ----------------
Global Technology 7/1/99 7/1/99 Initial approval
- ---------------------------- ---------------- ----------------- ----------------
European Equity, 3/9/00 3/9/00 Initial approval
Focused Growth,
Growth Dimensions
- ---------------------------- ---------------- ----------------- ----------------
Partners Small Cap Growth 11/9/00 11/9/00 Initial approval
- ---------------------------- ---------------- ----------------- ----------------
Partners Fundamental 5/10/01 5/10/01 Initial approval
Value, Partners
International
Aggressive Growth,
Partners International
Select Value,
Partners Small Cap Value,
Partners Value
- ---------------------------- ---------------- ----------------- ----------------
Large Cap Equity, 1/10/02 1/10/02 Initial approval
Mid Cap Value,
Partners Select Value,
Partners Small Cap Core
- ---------------------------- ---------------- ----------------- ----------------
Large Cap Value 4/11/02 4/11/02 Initial approval
- ---------------------------- ---------------- ----------------- ----------------
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 65
Table D-4. Dates Relating to Approval of Current Management Agreements (cont.)
- ---------------------------- ---------------- ----------------- ----------------
Fund Date Last Date Entered Reason
Approved by Into Submitted to
Shareholders Shareholders
- ---------------------------- ---------------- ----------------- ----------------
Variable Portfolio Funds
- ---------------------------- ---------------- ----------------- ----------------
VP-Bond, 9/9/94 3/20/95 *
VP-Capital Resource,
VP-Cash Management,
VP-International,
VP-Managed,
VP-Strategy Aggressive
- ---------------------------- ---------------- ----------------- ----------------
VP-Extra Income, 4/11/96 4/11/96 Initial approval
VP-Global Bond,
VP-New Dimensions
- ---------------------------- ---------------- ----------------- ----------------
VP-Blue Chip Advantage, 9/13/99 9/13/99 Initial approval
VP-Diversified Equity
Income,
VP-Federal Income,
VP-Growth,
VP-Small Cap Advantage
- ---------------------------- ---------------- ----------------- ----------------
VP-Emerging Markets, 5/1/00 5/1/00 Initial approval
VP-S&P 500 Index
- ---------------------------- ---------------- ----------------- ----------------
VP-Equity Select 4/11/01 4/11/01 Initial approval
- ---------------------------- ---------------- ----------------- ----------------
VP-Partners Small Cap 5/9/01 5/9/01 Initial approval
Value,
VP-Stock
- ---------------------------- ---------------- ----------------- ----------------
* Shareholders approved (1) basing the fee solely on the assets of the fund,
not on the assets of all of the American Express Funds and (2) eliminating
provisions regarding administration and accounting services. The fund and
AEFC then entered into a separate Administrative Services Agreement.
** Shareholders approved a change in the management fee involving an increase
in the fee, the addition of breakpoints and/or the addition of a
performance incentive adjustment.
- --------------------------------------------------------------------------------
66 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-5. Fund Payments to AEFC and Its Affiliates*
Fund Admin Plan Service TA Custody
Retail Funds
Blue Chip Advantage $ 839,722 $16,627,617 $ 304,770 $ 6,210,943 $ 217,720
Discovery 223,384 1,360,017 3,935 862,691 89,788
Diversified Equity Income 719,533 9,423,250 21,145 3,195,016 132,395
Emerging Markets 278,576 1,423,491 89 1,115,949 307,916
Equity Select 822,210 6,053,929 81,837 2,338,505 141,154
Equity Value 680,433 11,095,728 2,510 3,468,272 98,626
European Equity 136,777 1,094,908 55 614,473 136,483
Focused Growth 53,298 446,170 20 342,945 11,342
Global Balanced 98,158 890,146 1,788 361,902 80,005
Global Growth 710,917 6,843,748 14,782 3,509,859 254,289
Global Technology 194,084 1,607,956 85 1,464,738 73,489
Growth 3,193,208 33,358,014 1,259,734 11,049,320 563,372
Growth Dimensions 85,654 1,428,268 47 619,982 70,140
International 541,114 4,492,578 84,402 2,880,564 323,622
Large Cap Equity** N/A N/A N/A N/A N/A
Large Cap Value** N/A N/A N/A N/A N/A
Managed Allocation 571,810 5,432,910 20,425 2,313,883 270,466
Mid Cap Value** N/A N/A N/A N/A N/A
Mutual 1,091,114 8,458,912 705,705 4,703,810 251,341
New Dimensions 7,911,702 96,991,703 5,501,233 31,406,714 1,490,795
Partners Fundamental Value 71,365 649,317 11 281,986 58,829
Partners International
Aggressive Growth 959 3,436 -- 987 9,570
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 67
Table D-5. Fund Payments to AEFC and Its Affiliates* (continued)
Fund Admin Plan Service TA Custody
Retail Funds (continued)
Partners International
Select Value $ 838 $ 3,838 $ 1 $ 1,948 $ 9,570
Partners Select Value 3,959 35,827 2 21,172 13,860
Partners Small Cap Core 2,371 13,644 4 8,345 24,954
Partners Small Cap Growth 92,972 552,582 23 323,427 176,447
Partners Small Cap Value 171,697 1,148,413 82 610,630 66,103
Partners Value 63,396 577,320 10 234,444 153,315
Precious Metals 24,611 163,925 9 149,255 29,454
Progressive 157,294 933,519 3 489,277 37,895
Research Opportunities 412,205 4,016,790 315 1,478,718 78,465
Small Cap Advantage 341,955 3,034,591 145 1,456,171 76,216
Small Company Index 730,484 5,824,337 7,960 2,240,968 147,836
Stock 1,156,491 10,914,974 843,430 4,113,941 251,882
Strategy Aggressive 858,122 9,374,449 4,045 5,079,727 185,968
Utilities 804,152 12,095,597 1,414 2,822,848 158,225
Variable Portfolio Funds
VP-Blue Chip Advantage 33,432 99,620 N/A N/A 23,061
VP-Bond 848,035 1,873,229 N/A N/A 95,885
VP-Capital Resource 1,875,677 5,398,734 N/A N/A 323,925
VP-Cash Management 281,249 1,124,716 N/A N/A 85,059
VP-Diversified Equity Income 15,460 51,207 N/A N/A 150,326
VP-Emerging Markets 5,471 6,839 N/A N/A 57,962
VP-Equity Select 1,342 2,795 N/A N/A 27,970
- --------------------------------------------------------------------------------
68 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-5. Fund Payments to AEFC and Its Affiliates* (continued)
Fund Admin Plan Service TA Custody
Variable Portfolio Funds (continued)
VP-Extra Income $ 312,497 $ 736,708 N/A N/A $ 50,135
VP-Federal Income 32,461 78,061 N/A N/A 20,896
VP-Global Bond 112,061 227,425 N/A N/A 40,542
VP-Growth 102,800 249,203 N/A N/A 187,494
VP-International 859,062 2,216,073 N/A N/A 449,183
VP-Managed 1,309,591 5,532,568 N/A N/A 304,550
VP-New Dimensions 1,967,593 5,708,239 N/A N/A 283,557
VP-Partners Small Cap Value 158 247 N/A N/A 1,700
VP-S&P 500 Index 31,399 47,153 N/A N/A 265,820
VP-Small Cap Advantage 22,991 49,728 N/A N/A 106,376
VP-Stock 39 120 N/A N/A 1,800
VP-Strategy Aggressive 1,192,060 3,341,490 N/A N/A 283,424
* The Administrative Services Agreement ("Admin") is between the fund and
AEFC. The Plan and Agreement of Distribution ("Plan") and Shareholder
Service Agreement ("Service") are between the fund and AEFA. The Transfer
Agency ("TA") Agreement is between the fund and American Express Client
Service Corporation. The Custodian Agreement ("Custody") is between the
fund and American Express Trust Company. Services under these agreements
will continue to be provided after the Agreement is approved. The Variable
Portolio Funds do not have separate Service or TA Agreements.
** The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 69
Table D-6. Brokerage Commissions Paid to Affiliates
Amount of % of All
Fund Broker/Dealer Commissions Commissions
Retail Funds
Blue Chip Advantage AEIS(1) $ 23,611 0.34%
Discovery AEIS(1) 11,649 1.30
Diversified Equity Income AEIS(1) 20,283 0.30
Emerging Markets N/A N/A N/A
Equity Select AEIS(1) 85,611 8.42
Equity Value AEIS(1) 1,701 0.05
European Equity N/A N/A N/A
Focused Growth N/A N/A N/A
Global Balanced N/A N/A N/A
Global Growth N/A N/A N/A
Global Technology AEIS(1) 77,423 10.25
Growth AEIS(1) 147,507 3.02
Growth Dimensions AEIS(1) 18,750 3.44
International N/A N/A N/A
Large Cap Equity(2) N/A N/A N/A
Large Cap Value(2) N/A N/A N/A
Managed Allocation AEIS(1) 78,453 1.94
Mid Cap Value(2) N/A N/A N/A
Mutual AEIS(1) 243,507 4.97
New Dimensions AEIS(1) 1,480,185 9.93
Partners Fundamental Value N/A N/A N/A
Partners International
Aggressive Growth N/A N/A N/A
Partners International
Select Value N/A N/A N/A
Partners Select Value Gabelli & Co.(3) 73,135 98.17
Partners Small Cap Core N/A N/A N/A
Partners Small Cap Growth N/A N/A N/A
Partners Small Cap Value M.J. Whitman, Inc.(4) 262,142 84.03
Partners Value N/A N/A N/A
Precious Metals AEIS(1) 14,448 1.30
Progressive AEIS(1) 28,767 7.77
Research Opportunities AEIS(1) 40,815 1.66
Small Cap Advantage AEIS(1) 3,567 0.16
Small Company Index N/A N/A N/A
Stock AEIS(1) 548,179 7.91
Strategy Aggressive AEIS(1) 47,232 0.69
Utilities AEIS(1) 71,428 1.20
- --------------------------------------------------------------------------------
70 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-6. Brokerage Commissions Paid to Affiliates (continued)
Amount of % of All
Fund Broker/Dealer Commissions Commissions
Variable Portfolio Funds
VP-Blue Chip Advantage N/A N/A N/A
VP-Bond N/A N/A N/A
VP-Capital Resource AEIS(1) $603,162 10.79%
VP-Cash Management N/A N/A N/A
VP-Diversified Equity Income N/A N/A N/A
VP-Emerging Markets N/A N/A N/A
VP-Equity Select N/A N/A N/A
VP-Extra Income N/A N/A N/A
VP-Federal Income N/A N/A N/A
VP-Global Bond N/A N/A N/A
VP-Growth AEIS(1) 441 0.33
VP-International N/A N/A N/A
VP-Managed AEIS(1) 186,633 4.96
VP-New Dimensions AEIS(1) 29,262 1.13
VP-Partners Small Cap Value N/A N/A N/A
VP-S&P 500 Index N/A N/A N/A
VP-Small Cap Advantage N/A N/A N/A
VP-Stock N/A N/A N/A
VP-Strategy Aggressive AEIS(1) 146,170 2.71
(1) American Enterprise Investment Services Inc. is a wholly owned subsidiary
of AEFC. These transactions were executed at rates determined to be
reasonable and fair as compared to the rates another broker would charge.
(2) The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
(3) Gabelli & Co. is an affiliate of the fund's subadviser.
(4) M.J. Whitman, Inc. is an affiliate of the fund's subadviser.
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 71
Table D-7. Fund Size and 5% Owners
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds
Blue Chip Advantage:
Class A $1,197,999,655 171,054,822 None
Class B 818,670,275 119,871,357 None
Class C 4,858,996 713,413 None
Class Y 200,620,018 28,581,298 None
Bond:
Class A 2,351,799,678 499,101,849 None
Class B 1,051,698,684 223,165,131 None
Class C 22,094,177 4,683,166 None
Class Y 292,655,321 62,094,715 None
California Tax-Exempt:
Class A 233,535,249 44,613,090 None
Class B 27,291,593 5,215,616 None
Class C 3,479,415 663,882 (1)
Cash Management:
Class A 5,689,467,033 5,689,284,268 None
Class B 309,943,754 310,104,215 None
Class C 2,721,165 2,721,289 (2)
Class Y 201,836,061 201,925,057 None
Discovery:
Class A 156,929,088 27,581,942 None
Class B 26,711,113 5,063,200 None
Class C 20,047 3,807 (3)
Class Y 1,038,259 180,716 None
Diversified Equity Income:
Class A 1,624,873,043 203,991,203 None
Class B 698,383,881 87,880,229 None
Class C 13,835,581 1,741,182 None
Class Y 30,633,009 3,843,885 None
- --------------------------------------------------------------------------------
72 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Emerging Markets:
Class A $ 154,856,192 35,363,017 None
Class B 79,158,581 18,841,732 None
Class C 320,172 76,067 (4)
Class Y 1,799,485 408,407 None
Equity Select:
Class A 1,208,445,344 116,958,845 None
Class B 325,288,235 33,441,064 None
Class C 6,608,707 679,378 None
Class Y 116,388,767 11,187,817 None
Equity Value:
Class A 931,399,647 113,695,370 None
Class B 638,004,873 77,800,731 None
Class C 3,944,897 484,028 None
Class Y 2,763,596 336,934 None
European Equity:
Class A 130,923,996 38,499,424 None
Class B 61,386,612 18,306,037 None
Class C 2,364,489 705,684 None
Class Y 42,824 12,572 None
Extra Income:
Class A 1,538,791,362 626,598,140 None
Class B 682,920,691 278,226,122 None
Class C 19,605,617 8,030,683 None
Class Y 775,881 315,613 None
Federal Income:
Class A 1,220,338,132 250,876,238 None
Class B 1,159,262,989 238,343,351 None
Class C 30,996,724 6,372,173 None
Class Y 191,357,299 39,341,113 None
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 73
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Focused Growth:
Class A $ 41,528,017 23,597,032 None
Class B 22,013,548 12,667,241 None
Class C 1,453,170 838,260 None
Class Y 15,458 8,748 None
Global Balanced:
Class A 65,877,761 14,939,911 None
Class B 44,023,957 10,135,253 None
Class C 740,467 171,042 (5)
Class Y 3,380,204 762,557 None
Global Bond:
Class A 341,236,316 58,285,077 None
Class B 143,285,683 24,455,391 None
Class C 1,962,942 335,635 (6)
Class Y 68,201 11,636 None
Global Growth:
Class A 537,012,166 119,805,637 None
Class B 235,593,795 54,643,476 None
Class C 1,147,400 266,936 None
Class Y 9,360,535 2,079,519 None
Global Technology:
Class A 103,007,090 84,444,967 None
Class B 49,674,216 45,495,958 None
Class C 3,368,552 3,084,478 None
Class Y 57,271 47,073 None
Growth:
Class A 2,478,023,641 110,205,921 None
Class B 971,051,420 45,933,147 None
Class C 8,083,023 382,290 None
Class Y 630,364,224 27,729,054 None
- --------------------------------------------------------------------------------
74 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Growth Dimensions:
Class A $ 159,253,684 72,745,777 None
Class B 78,863,921 36,579,456 None
Class C 4,853,295 2,250,647 None
Class Y 26,990 12,296 None
High Yield Tax-Exempt:
Class A 4,529,831,875 1,025,537,530 None
Class B 345,916,025 78,337,385 None
Class C 22,444,075 5,079,853 None
Class Y 1,992 450 None
Insured Tax-Exempt:
Class A 396,862,618 71,630,027 None
Class B 65,110,910 11,751,800 None
Class C 5,857,956 1,055,602 (7)
Class Y 1,452 263 None
Intermediate Tax-Exempt:
Class A 64,665,104 12,251,074 None
Class B 15,747,142 2,983,759 None
Class C 3,574,583 677,724 (8)
Class Y 1,273 243 None
International:
Class A 382,924,813 63,316,776 None
Class B 154,335,355 25,948,564 None
Class C 1,243,959 210,203 (9)
Class Y 82,028,936 13,523,183 None
International Equity Index:
Class D 8,328,424 2,255,470 (10)
Class E 11,869,993 3,221,113 (11)
Large Cap Equity:
Class A 10,036,226 2,293,737 None
Class B 4,407,286 1,010,177 None
Class C 159,466 36,492 (12)
Class Y 28,342 6,471 None
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 75
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Large Cap Value:
Class A $ 2,096,130 426,122 None
Class B 39,405 8,011 (13)
Class C 9,837 2,000 (14)
Class Y 9,838 2,000 None
Managed Allocation:
Class A 1,039,918,060 132,904,838 None
Class B 142,491,691 18,340,066 None
Class C 1,245,035 160,248 None
Class Y 8,013,717 1,024,214 None
Massachusetts Tax-Exempt:
Class A 66,064,388 12,295,169 None
Class B 24,090,858 4,483,711 None
Class C 2,251,695 418,975 (15)
Michigan Tax-Exempt:
Class A 69,995,877 13,136,620 None
Class B 8,236,860 1,545,661 None
Class C 1,412,273 265,016 (16)
Mid Cap Index:
Class D 15,267,016 2,745,197 (17)
Class E 14,952,145 2,681,735 (18)
Mid Cap Value:
Class A 49,863,889 9,971,989 None
Class B 28,574,512 5,731,617 None
Class C 1,257,500 252,084 None
Class Y 28,105 5,615 None
Minnesota Tax-Exempt
Class A 374,526,702 72,060,911 None
Class B 64,344,285 12,378,473 None
Class C 4,891,395 940,739 (19)
- --------------------------------------------------------------------------------
76 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Mutual:
Class A $ 1,340,654,681 159,546,734 None
Class B 191,168,415 22,902,411 None
Class C 1,111,645 132,982 None
Class Y 382,681,406 45,548,035 None
New Dimensions:
Class A 10,857,921,433 506,115,486 None
Class B 4,211,791,119 205,691,905 None
Class C 46,778,106 2,286,740 None
Class Y 3,506,181,474 162,698,292 None
New York Tax-Exempt:
Class A 92,407,788 17,914,912 (20)
Class B 18,221,052 3,532,642 None
Class C 1,274,622 247,124 (21)
Ohio Tax-Exempt:
Class A 69,429,655 12,989,135 None
Class B 11,811,168 2,209,981 None
Class C 1,271,370 237,807 (22)
Partners Fundamental Value:
Class A 150,660,872 36,421,108 None
Class B 103,019,829 25,067,669 None
Class C 5,161,235 1,251,227 None
Class Y 14,505 3,503 None
Partners International
Aggressive Growth:
Class A 72,853,708 13,311,247 None
Class B 22,854,095 4,197,752 None
Class C 1,120,872 205,935 (23)
Class Y 25,446 4,643 None
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 77
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Partners International Select Value:
Class A $138,821,160 24,641,422 None
Class B 62,270,241 11,106,924 None
Class C 2,617,090 467,056 None
Class Y 37,429 6,634 None
Partners Select Value:
Class A 47,569,374 10,066,789 None
Class B 32,579,675 6,907,141 None
Class C 1,942,688 411,888 (24)
Class Y 9,455 2,000 None
Partners Small Cap Core:
Class A 16,450,931 3,645,030 None
Class B 8,292,290 1,840,459 None
Class C 690,276 153,363 (25)
Class Y 16,004 3,545 None
Partners Small Cap Growth:
Class A 146,702,444 39,864,451 None
Class B 72,140,998 19,809,547 None
Class C 5,485,245 1,506,381 None
Class Y 55,375 15,037 None
Partners Small Cap Value:
Class A 393,890,164 71,411,460 None
Class B 237,943,352 43,463,246 None
Class C 11,910,231 2,170,402 None
Class Y 256,631 46,482 None
Partners Value:
Class A 150,290,967 35,039,689 None
Class B 103,908,600 24,362,786 None
Class C 6,705,717 1,568,134 None
Class Y 11,715 2,728 None
- --------------------------------------------------------------------------------
78 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Precious Metals:
Class A $ 47,038,761 5,737,787 None
Class B 140,924,398 1,890,751 None
Class C 207,821 26,390 (26)
Class Y 41,688 5,063 None
Progressive:
Class A 14,997,233 25,714,521 None
Class B 24,769,588 4,672,795 None
Class C 87,013 16,501 (27)
Class Y 1,756 318 None
Research Opportunities:
Class A 214,319,274 50,717,577 None
Class B 139,402,624 34,806,392 None
Class C 301,771 75,279 (28)
Class Y 222,221 52,148 None
S&P 500 Index:
Class D 40,797,696 10,640,901 None
Class E 195,310,752 50,777,313 None
Selective:
Class A 1,025,396,845 119,257,397 None
Class B 342,188,791 39,798,974 None
Class C 9,675,812 1,125,548 None
Class Y 182,325,606 21,205,127 None
Small Cap Advantage:
Class A 378,002,770 74,827,144 None
Class B 201,137,568 40,801,452 None
Class C 5,144,106 1,043,303 None
Class Y 149,663 29,465 None
Small Company Index:
Class A 736,507,667 117,497,908 None
Class B 481,545,401 81,000,761 None
Class Y 11,122,217 1,758,852 None
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 79
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Retail Funds (continued)
Stock:
Class A $1,992,131,691 116,402,257 None
Class B 275,149,364 16,227,081 None
Class C 2,421,249 143,189 None
Class Y 600,418,512 35,084,431 None
Strategy Aggressive:
Class A 696,881,850 71,817,494 None
Class B 407,586,319 46,216,413 None
Class C 3,002,956 340,431 None
Class Y 1,662,342 168,779 None
Tax-Exempt Bond:
Class A 837,401,772 205,967,486 None
Class B 58,560,503 14,401,136 None
Class C 5,235,591 1,287,593 None
Class Y 1,980 487 None
Tax-Free Money 196,029,973 196,037,728 None
U.S. Government Mortgage:
Class A 71,760,220 14,131,764 None
Class B 43,026,414 8,470,009 None
Class C 6,298,959 1,239,770 (29)
Class Y 11,679 2,300 None
Utilities:
Class A 1,085,639,985 164,841,673 None
Class B 531,370,505 81,216,388 None
Class C 12,217,990 1,866,785 None
Class Y 1,463,598 221,986 None
Variable Portfolio Funds
VP-Blue Chip Advantage 72,663,450 10,201,331 (30)
VP-Bond 1,730,572,501 167,767,969 (30)
VP-Capital Resource 2,497,370,320 144,947,054 (30)
VP-Cash Management 1,058,408,243 1,058,788,319 (30)
VP-Diversified Equity
Income 276,147,539 29,478,938 (30)
VP-Emerging Markets 9,831,673 1,309,110 (30)
- --------------------------------------------------------------------------------
80 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-7. Fund Size and 5% Owners (continued)
(as of June 30, 2002)
Fund Net Assets Outstanding Shares 5% Owners
Variable Portfolio Funds (continued)
VP-Equity Select $ 67,625,080 7,251,638 (30)
VP-Extra Income 587,098,561 102,856,021 (30)
VP-Federal Income 204,621,578 19,614,114 (30)
VP-Global Bond 213,295,358 21,379,957 (30)
VP-Growth 157,731,851 29,603,829 (30)
VP-International 1,049,938,729 132,651,668 (30)
VP-Managed 3,060,946,948 234,766,320 (30)
VP-New Dimensions 3,409,602,064 245,235,106 (30)
VP-Partners Small
Cap Value 60,561,423 5,466,411 (30)
VP-S&P 500 Index 99,888,011 14,812,448 (30)
VP-Small Cap Advantage 66,818,043 6,549,688 (30)
VP-Stock 4,473,258 523,398 (30)
VP-Strategy Aggressive 1,197,713,169 186,574,684 (30)
(1) Miriam Thias Carr Trust, Sacramento CA, owns 35,354 shares (6.37%). Tommy
E. and Sally J. Sims 1991 Fam Trust, Salinas CA, owns 34,386 shares
(6.20%). Dorothy M. Mendel Rev Trust, Richmond CA, owns 32,899 shares
(5.93%). Jessica R. Rothenberg and Michael E. Dodson, San Francisco CA, own
29,062 shares (5.24%).
(2) John W. Slagle, Irvine CA, owns 204,426 shares (8.71%). Joan A. Vesco Rev
Trust, Sierra Vista AZ, owns 147,514 shares (6.29%).
(3) Antonia B. Palazzolo, Rocky Hill CT, owns 791 shares (27.26%). Hal C.
Beckley, Branford CT, owns 695 shares (23.94%). Thai Duc Bui, Redwood City
CA, owns 644 shares (22.19%).
(4) Raymond T. Snapp, Bedford IN, owns 11,553 shares (19.55%). Sandra L.
Kubena, San Antonio TX, owns 4,556 shares (7.71%). Mark Carrol Nelson,
Vacaville CA, owns 4,073 shares (6.89%). Frank Paul Sincaglia, Chagrin
Falls OH, owns 3,070 shares (5.19%).
(5) Phillip L. Jones, Hanford CA, owns 8,830 shares (6.08%). Michael R.
McCormick and Carla Z. McCormick, Louisville KY, own 8,117 shares (5.59%).
(6) Patricia Rose Reynolds, Plymouth MN, owns 9,781 shares (6.17%).
(7) Mary M. Stephens Irrev Trust, Calhoun GA, owns 66,061 shares (6.62%).
(8) Frank A. Maggio and Dianne K. Maggio, C/O Texaco Italiana Pouch, White
Plains NY, own 37,351 shares (7.66%). Mary M. Stephens Irrev Trust, Calhoun
GA, owns 29,488 shares (6.05%).
(9) Roger J. Thompson and Sylvia Ann Thompson, Boise ID, own 15,999 shares
(8.92%). Sandra L. Kubena, San Antonio TX, owns 13,462 shares (7.51%).
David T. Rouleau and Joann E. Rouleau, Cloquet MN, own 10,235 shares
(5.71%).
(10) AEFC, Minneapolis MN, owns 1,226,935 shares (54.40%).
(11) AEFC, Minneapolis MN, owns 2,869,362 shares (89.08%).
(12) Bonnie P. Foslien and Leroy D. Foslien, Minneapolis MN, own 6,845 shares
(28.07%). Daniel F. Pagano, Yonkers NY, owns 2,189 shares (8.98%). Eric T.
Fiedler and Laurie Fiedler, Lakeville MN, own 2,037 shares (8.35%). Derrick
M. Cone, Phoenix AZ, owns 1,264 shares (5.18%).
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 81
(13) Richard J. Schmaltz and Lois M. Schmaltz, Penn Yan NY, own 2,559 shares
(24.05%). Lawrence A. Minor, Beavercreek OR, owns 1,698 shares (15.96%).
Donavon Lee Krey, Waite Park MN, owns 1,598 shares (15.02%). Julia G.
Haggerty, Seattle WA, owns 1,154 shares (10.84%). Dorothy A. Snyder,
Lebanon OR, owns 676 shares (6.36%).
(14) Judith S. Chapman Trust, Santa Monica CA, owns 384 shares (16.10%).
(15) Rivelo C. Campagna and Joyce M. Campagna, Lunenburg MA, own 94,298 shares
(25.68%). Paul J. Cormier, Leominster MA, owns 63,549 shares (17.31%).
Glenlevit Trust, Leominster MA, owns 59,184 shares (16.12%). Linda Di Nardo
and Alphonse A. Di Nardo, Leominster MA, own 24,398 shares (6.65%). Carole
J. Bigney, Boston MA, owns 18,867 shares (5.14%).
(16) Marian A. Beaver Trust, Riga MI, owns 14,426 shares (12.38%). Jean M.
Abramson, Laurium MI, owns 10,433 shares (8.95%). Ray W. and Gertrude E.
Butler Rev Liv Trust, Clarkston MI, owns 10,148 shares (8.71%). Alan
Pawlow, Grosse Pointe MI, owns 8,556 shares (7.34%). Ronald P. White and
Susan L. White, Grand Rapids MI, own 8,398 shares (7.20%). Michael Wayne
Miller and Sheryl Ann Miller, Mattawan MI, own 7,026 shares (6.03%).
(17) AEFC, Minneapolis MN, owns 679,093 shares (24.74%).
(18) AEFC, Minneapolis MN, owns 1,588,274 shares (59.23%).
(19) Jane Nelson and James P. Nelson, Duluth MN, own 49,143 shares (5.91%).
(20) Frank L. Skillern Jr., New York NY, owns 958,990 shares (5.37%).
(21) Bruce C. Bernhard, Fairport NY, owns 16,576 shares (7.73%). Bernadette M.
Johannes, C/O Denise W. Jose AIF, Keuka Park NY, owns 11,679 shares
(5.44%).
(22) Sears Family Rev Liv Trust, Parma OH, owns 78,377 shares (34.12%). Gary N.
Nebinger and Maureen L. Nebinger, Dublin OH, own 19,820 shares (8.63%).
Richard Joseph Shenal Jr, Twinsburg OH, owns 14,375 shares (6.26%). Bunny
Kay Cowan Clark and Thomas J. Clark, Powell OH, own 12,714 shares (5.53%).
(23) Jeffrey D. Cooper, Tampa FL, owns 4,965 shares (5.01%).
(24) Victor O. Lawson, C/O Terry or C. Lawson POA, Portage MI, owns 17,760
shares (8.55%).
(25) Jeffrey D. Cooper, Tampa FL, owns 5,706 shares (7.73%). Gary L. Kaiser,
West Chicago IL, owns 4,873 shares (6.60%). Mary Jo Langhorne, Iowa City
IA, owns 3,859 shares (5.23%).
(26) Richard L. Venable and Susan Angela Venable, Argyle TX, own 4,815 shares
(27.05%). Greg Leroy Anderson, Gainsville GA, owns 3,317 shares (18.63%).
Richard C. Anderson Jr., Reading MA, owns 1,765 shares (9.92%). Mildred L.
Thiem, Eastpointe MI, owns 1,684 shares (9.46%). David Alan Briden and
Laurine Briden, W Des Moines IA, own 1,208 shares (6.78%).
(27) Willis P. Beverly Jr., Birmingham AL, owns 2,273 shares (14.76%). Dianna L.
Padovini and Joseph A. Padovini Jr., Morgantown WV, own 2,122 shares
(13.78%). Gerald W. Rowe and Linda P. Rowe, Ulster PA, own 1,894 shares
(12.30%). Vicki Jean Haun Trust, Ventura CA, owns 1,210 shares (7.85%). Kay
Eleanor Slade, Birmingham AL, owns 1,085 shares (7.05%). Guy Ciaccio and
Joan M. Ciaccio, Gloversville NY, own 795 shares (5.16%).
(28) Shirley Ann Balliett, San Diego CA, owns 9,422 shares (12.48%). Kelly
Family Trust, El Cajon CA, owns 7,655 shares (10.14%). James R. Glenn and
Marcia E. Glenn, Crete NE, own 4,929 shares (6.53%). Michael C. Farah Trust
and Katrina L. Farah Trust, Bloomfield MI, own 4,836 shares (6.41%).
(29) Husted Ranches In, Jackson MT, owns 82,828 shares (8.75%).
(30) 100% of the fund's assets are owned by the separate accounts of IDS Life,
IDS Life of New York, ACL, AEL and APL.
- --------------------------------------------------------------------------------
82 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
The Fund's Independent Public Accountant. The Investment Company Act of 1940
(the "1940 Act") provides that every registered investment company must be
audited at least once each year by independent public accountants selected by a
majority of the independent Board members. The fund's Board has selected KPMG
LLP to be the fund's independent public accountant for the current fiscal year.
KPMG LLP, in accordance with Independence Standards Board Standard No. 1 ("ISB
No. 1"), has confirmed to the Board's Joint Audit Committee that they are
independent accountants with respect to the fund.
The independent accountants examine annual financial statements for the fund and
provide other requested non-audit and tax-related services to the fund. The
Board's Joint Audit Committee does not consider other non-audit services
provided by KPMG LLP to be incompatible with maintaining the independence of
KPMG LLP in its audits of the fund, taking into account representations from
KPMG LLP, in accordance with ISB No. 1, regarding its independence from the fund
and its related entities.
Representatives of KPMG LLP are expected to be present at the meeting. They will
be given the opportunity to make a statement to shareholders and are expected to
be available to respond to any questions that may be raised at the meeting.
Fund-Related Fees
o Audit Fees. During the year ended June 30, 2002, the fee paid to KPMG LLP for
professional services rendered for the audits of the annual financial statements
for the fund was as follows:
Table D-8. Audit Fees
Fund Audit Fees
Retail Funds
Blue Chip Advantage $25,000
Bond 42,000
California Tax-Exempt 17,500
Cash Management 36,000
Discovery 26,250
Diversified Equity Income 34,000
Emerging Markets 24,750
Equity Select 28,000
Equity Value 23,750
European Equity 14,250
Extra Income 48,000
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 83
Table D-8. Audit Fees (continued)
Fund Audit Fees
Retail Funds (continued)
Federal Income $47,250
Focused Growth 14,000
Global Balanced 18,250
Global Bond 32,750
Global Growth 32,750
Global Technology 21,250
Growth 38,000
Growth Dimensions 14,250
High Yield Tax-Exempt 50,000
Insured Tax-Exempt 19,000
Intermediate Tax-Exempt 15,500
International 39,000
International Equity Index 15,500
Large Cap Equity* N/A
Large Cap Value* N/A
Managed Allocation 42,250
Massachusetts Tax-Exempt 16,000
Michigan Tax-Exempt 16,000
Mid Cap Index 13,750
Mid Cap Value* N/A
Minnesota Tax-Exempt 19,000
Mutual 43,250
New Dimensions 46,000
New York Tax-Exempt 17,500
Ohio Tax-Exempt 16,000
Partners Fundamental Value 13,750
Partners International Aggressive Growth 14,000
Partners International Select Value 14,000
Partners Select Value 13,750
Partners Small Cap Core 13,750
Partners Small Cap Growth 14,000
Partners Small Cap Value 13,750
Partners Value 13,750
Precious Metals 20,250
Progressive 26,000
- --------------------------------------------------------------------------------
84 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table D-8. Audit Fees (continued)
Fund Audit Fees
Retail Funds (continued)
Research Opportunities $24,000
S&P 500 Index 13,750
Selective 43,250
Small Cap Advantage 16,250
Small Company Index 21,500
Stock 43,250
Strategy Aggressive 23,500
Tax-Exempt Bond 36,750
Tax-Free Money 22,000
U.S. Government Mortgage 14,500
Utilities 28,000
Variable Portfolio Funds
VP-Blue Chip Advantage 14,000
VP-Bond 24,250
VP-Capital Resource 23,500
VP-Cash Management 18,250
VP-Diversified Equity Income 14,000
VP-Emerging Markets 14,500
VP-Equity Select 13,750
VP-Extra Income 19,750
VP-Federal Income 14,500
VP-Global Bond 17,750
VP-Growth 14,250
VP-International 21,250
VP-Managed 22,000
VP-New Dimensions 23,250
VP-Partners Small Cap Value 9,000
VP-S&P 500 Index 14,000
VP-Small Cap Advantage 14,000
VP-Stock 8,000
VP-Strategy Aggressive 18,500
* The fund began operations in 2002 and has not yet had a fiscal year end
reporting period.
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 85
o All Other Fees. During the year ended June 30, 2002, KPMG LLP was paid
$193,150 for tax-related services rendered to the funds and $46,000 for
other procedures requested by the Board or required by the 1940 Act.
AEFC Related Fees
o Audit Fees. For the year ended June 30, 2002, KPMG LLP was paid $15,000 by
AEFC for additional professional services rendered in connection with the
audit of the funds' financial statements.
o Financial Information Systems Design and Implementation Fees. For the year
ended June 30, 2002, no financial information systems design and
implementation fees were paid to KPMG LLP by the American Express Funds,
American Express Company, AEFC or affiliates.
o All Other Fees. For the year ended June 30, 2002, KPMG LLP was paid
$112,200 for non-audit services related to consulting, attestation services
for transfer agent review and tax-related services rendered to AEFC and
$115,989 for non-audit services related to consulting and tax-related
services rendered to American Express Company or affiliates.
SECTION E -- BOARD MEMBER INFORMATION
This section contains the following information:
o Table E-1 shows the compensation paid to Board members by each fund in its
last fiscal year
o Table E-2 shows the total number of shares of all the funds owned by the
Board members and the number of shares owned in each individual fund.
Table E-1. Board Member Compensation(1)
DeSimone Hall Hutter Jones Lewis(2) Quasha(2) Simpson
Retail Funds
Blue Chip Advantage $2,450 $2,700 $2,915 $3,015 $ 233 $-- $2,550
Bond 1,550 2,133 2,490 2,440 -- -- 2,325
California Tax-Exempt 900 1,050 1,165 1,265 400 275 900
Cash Management 2,125 2,875 3,475 3,475 -- -- 3,425
Discovery 583 967 1,033 1,033 -- -- 983
Diversified Equity
Income(4) 1,825 2,675 2,880 2,780 -- -- 2,350
Emerging Markets(4) 1,183 2,217 2,547 2,447 -- -- 1,717
Equity Select 1,433 1,800 1,965 2,015 -- -- 1,600
Equity Value 1,675 1,975 2,140 2,140 350 -- 1,775
European Equity 633 1,150 1,315 1,265 -- -- 900
Extra Income(4) 2,733 3,133 3,513 3,463 1,083 533 2,733
Federal Income(4) 2,558 2,958 3,288 3,288 1,058 533 2,558
Focused Growth 800 1,100 1,265 1,265 125 -- 900
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86 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table E-1. Board Member Compensation(1) (continued)
DeSimone Hall Hutter Jones Lewis(2) Quasha(2) Simpson
Retail Funds (continued)
Global Balanced $ 633 $ 1,150 $ 1,315 $ 1,265 $ -- $ -- $ 900
Global Bond(4) 1,267 2,300 2,630 2,530 -- -- 1,800
Global Growth(4) 1,700 2,833 3,163 3,063 -- -- 2,333
Global Technology(4) 1,233 2,250 2,580 2,480 -- -- 1,750
Growth(4) 3,283 4,683 5,700 5,700 -- -- 5,600
Growth Dimensions 583 950 958 858 -- -- 808
High Yield
Tax-Exempt(4) 3,442 4,208 4,538 4,638 -- -- 3,808
Insured Tax-Exempt 1,000 1,150 1,265 1,365 450 300 1,000
Intermediate Tax-Exempt 792 1,100 1,265 1,315 -- -- 900
International 983 1,583 1,748 1,698 -- -- 1,333
International Equity
Index 800 1,050 1,265 1,365 108 -- 900
Large Cap Equity(3) -- -- -- -- -- -- --
Large Cap Value(3) -- -- -- -- -- -- --
Managed Allocation(4) 1,675 2,508 2,755 2,605 -- -- 2,175
Massachusetts
Tax-Exempt 900 1,050 1,165 1,265 400 275 900
Michigan Tax-Exempt 900 1,050 1,165 1,265 400 275 900
Mid Cap Index 283 433 633 583 108 -- 383
Mid Cap Value(3) -- -- -- -- -- -- --
Minnesota Tax-Exempt 1,000 1,150 1,265 1,365 450 300 1,000
Mutual(4) 2,225 3,208 3,480 3,380 -- -- 2,950
New Dimensions(4) 8,125 10,892 13,925 13,925 -- -- 13,825
New York Tax-Exempt 900 1,050 1,165 1,265 400 275 900
Ohio Tax-Exempt 900 1,050 1,165 1,265 400 275 900
Partners Fundamental
Value 392 392 392 392 292 167 342
Partners International
Aggressive Growth(3) -- -- -- -- -- -- --
Partners International
Select Value(3) -- -- -- -- -- -- --
Partners Select
Value(3) -- -- -- -- -- -- --
Partners Small
Cap Core(3) -- -- -- -- -- -- --
Partners Small
Cap Growth 800 1,100 1,265 1,265 125 -- 900
Partners Small Cap
Value 392 392 392 392 292 167 342
Partners Value 392 392 392 392 292 167 342
Precious Metals 800 1,100 1,265 1,265 125 -- 900
Progressive 625 992 1,065 1,015 -- -- 800
Research
Opportunities(4) 1,175 1,925 2,000 2,000 -- -- 1,900
S&P 500 Index 800 1,050 1,265 1,365 108 -- 900
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 87
Table E-1. Board Member Compensation(1) (continued)
DeSimone Hall Hutter Jones Lewis(2) Quasha(2) Simpson
Retail Funds (continued)
Selective(4) $2,175 $2,575 $2,905 $2,905 $875 $450 $2,175
Small Cap Advantage 925 1,225 1,390 1,390 175 -- 1,025
Small Company Index 1,183 1,433 1,648 1,748 142 -- 1,283
Stock(4) 2,600 3,633 3,930 3,830 -- -- 3,400
Strategy Aggressive 1,675 1,975 2,140 2,140 300 -- 1,775
Tax-Exempt Bond 1,042 1,367 1,532 1,582 -- -- 1,167
Tax-Free Money 800 1,050 1,215 1,315 -- -- 900
U.S. Government Mortgage 217 167 167 217 167 167 217
Utilities 1,950 2,100 2,215 2,315 875 500 1,950
Variable Portfolio Funds
VP-Blue Chip Advantage 567 933 1,015 1,015 -- -- 900
VP-Bond 917 1,367 1,582 1,532 -- -- 1,417
VP-Capital Resource 1,858 2,592 3,040 3,040 -- -- 2,925
VP-Cash Management 758 1,158 1,273 1,273 -- -- 1,158
VP-Diversified Equity
Income 567 1,200 1,332 1,032 -- -- 967
VP-Emerging Markets(3) -- -- -- -- -- -- --
VP-Equity Select(3) -- -- -- -- -- -- --
VP-Extra Income 650 1,033 1,132 1,132 -- -- 1,017
VP-Federal Income 567 933 1,015 1,015 -- -- 900
VP-Global Bond 567 933 1,015 1,015 -- -- 900
VP-Growth 567 933 1,015 1,015 -- -- 900
VP-International 1,058 1,558 1,782 1,782 -- -- 1,667
VP-Managed 1,858 2,558 3,023 2,973 -- -- 2,858
VP-New Dimensions 1,900 2,600 3,007 3,007 -- -- 2,892
VP-Partners
Small Cap Value(3) -- -- -- -- -- -- --
VP-S&P 500 Index 567 667 682 782 -- -- 617
VP-Small Cap Advantage 567 1,200 1,332 1,032 -- -- 967
VP-Stock(3) -- -- -- -- -- -- --
VP-Strategy Aggressive 1,317 1,900 2,190 2,190 -- -- 2,075
(1) Mr. Carlson is paid $275,000 a year by Board Services Corporation and is
not paid compensation by the funds. Ms. Fraser and Messrs. Roszell and
Truscott are paid by AEFC.
(2) Mr. Lewis and Mr. Quasha have been Board members for less than a year.
(3) No compensation is paid to Board members until the fund reaches $20 million
in assets.
(4) The fund is part of a master/feeder structure. The amount shown includes
compensation from both the feeder fund and its related master portfolio.
- --------------------------------------------------------------------------------
88 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Table E-2. Board Member Holdings
Dollar range of equity securities beneficially owned on June 30, 2002
Aggregate dollar
range of equity
securities of all
American Express
Funds overseen by
Dollar range of equity securities in the fund Board Member
Board Member Fund Range Range
Carlson Blue Chip Advantage $1-$10,000
New Dimensions $50,001-$100,000
Partners Select Value $1-$10,000
VP - Diversified Equity Income $10,001- $50,000
VP - Extra Income $1-$10,000
VP - Managed $10,001- $50,000 Over $100,000
DeSimone Extra Income Over $100,000
High Yield Tax-Exempt Over $100,000
Partners Small Cap Value $50,001 -$100,000
Small Cap Advantage $50,001 -$100,000 Over $100,000
Hall Cash Management Over $100,000 Over $100,000
Hutter Cash Management $1-$10,000
Growth Over $100,000
Growth Dimensions $50,001-$100,000
New Dimensions Over $100,000 Over $100,000
Jones Blue Chip Advantage $10,001-$50,000
Bond $50,001-$100,000
Cash Management $10,001-$50,000
Emerging Markets $10,001-$50,000
Extra Income Over $100,000
Federal Income Over $100,000
Global Bond $50,001-$100,000
Growth $10,001-$50,000
New Dimensions Over $100,000
Small Cap Advantage $10,001-$50,000
Small Company Index $10,001-$50,000
Tax-Exempt Bond $10,001-$50,000 Over $100,000
Lewis Diversified Equity Income $50,001-$100,000
Equity Select $10,001-$50,000 $50,001-$100,000
Quasha None None
Simpson Bond $10,001-$50,000
Extra Income $10,001-$50,000
New Dimensions $10,001-$50,000
Utilities $10,001-$50,000 Over $100,000
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 89
Table E-2. Board Member Holdings (continued)
Dollar range of equity securities beneficially owned on June 30, 2002
Aggregate dollar
range of equity
securities of all
American Express
Funds overseen by
Dollar range of equity securities in the fund Board Member
Board Member Fund Range Range
Truscott Bond $1-$10,000
Emerging Markets $1-$10,000
Equity Select $50,001-$100,000
Extra Income $50,001-$100,000
Growth $50,001-$100,000
International $10,001-$50,000
Large Cap Equity $10,001-$50,000
Mid Cap Value $10,001-$50,000
Mutual $50,001-$100,000
Research Opportunities $1-$10,000 Over $100,000
- --------------------------------------------------------------------------------
90 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Exhibit A
ADDITIONAL INFORMATION FOR SHAREHOLDERS OF PARTNERS SMALL CAP VALUE AND
VP-PARTNERS SMALL CAP VALUE REGARDING NEW SUBADVISORY AGREEMENTS
Pursuant to an exemptive order granted by the SEC on July 16, 2002, the fund may
enter into and materially amend subadvisory agreements without shareholder
approval. The exemptive order permits AEFC, subject to board approval, to select
the subadviser best suited to achieve the fund's investment objective. For
example, the fund may exercise this authority in order to hire an additional
subadviser, to replace a subadviser or if there is a change in control of a
subadviser.
A. Subadvisory Agreement with Third Avenue. On May 23, 2002, EQSF Advisers, Inc.
("Third Avenue"), one of the fund's current Subadvisers, announced that it had
reached an agreement with Affiliated Managers Group, Inc. ("AMG") for AMG to
acquire a majority equity interest in Third Avenue. Upon completion of the
transaction, Third Avenue's business will remain unchanged. The firm's senior
principals have entered into long-term employment agreements.
Under the 1940 Act, completion of the transaction will result in the automatic
termination of the current subadvisory agreement between Third Avenue and AEFC
on behalf of the funds (the "Current Subadvisory Agreement"). The Board of the
fund has approved a new subadvisory contract with Third Avenue to take effect on
the completion of the transaction. The new Subadvisory Agreement is
substantially identical to the Current Subadvisory Agreement. The services
provided to the fund by Third Avenue after the transaction are expected to be
substantially similar to the services currently provided to the fund by Third
Avenue.
There will be no change in the fee paid by the fund. AEFC will continue to pay
Third Avenue at a rate of 0.50% of average daily net assets gradually reducing
to 0.40%.
Third Avenue is located at 767 Third Avenue, Fifth Floor, New York, NY. The
following table provides information on the principal executive officers and
directors of Third Avenue. AMG, a Delaware corporation with a principal place of
business at 600 Hale Street, Prides Crossing, MA 01965, is an asset management
holding company that holds equity interests in investment management firms.
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 91
Name Title and Principal Occupation
Martin J. Whitman Chairman, CEO
David M. Barse President, COO
Michael T. Carney Treasurer, CFO
W. James Hall General Counsel, Secretary
Richard V. Barry Co-Controller
Julie A. Smith Co-Controller
Other Funds with Similar Investment Objectives Managed by Third Avenue
Assets (in millions)
Name as of June 30, 2002 Management Fee*
Third Avenue Small-Cap Value Fund $463 0.90%
* Annual rate based on average daily net assets.
B. Subadvisory Agreement with National City Investment Management Company. As a
result of very strong sales in the fund, AEFC recommended to the Board that an
additional subadviser be hired. The criteria for choosing a subadviser were
incremental performance and reduced risk through diversification of investment
style. Based on the recommendation of AEFC, the Board appointed National City
Investment Management Company ("National City") as an additional subadviser to
the fund. National City will make investment decisions for a portion of the
fund's assets allocated to it by AEFC. National City is a highly focused,
multi-style registered investment adviser, focused on the investment and service
requirements of institutional clients, including corporate, public,
Taft-Hartley, foundation, endowment and mutual funds. As of June 30, 2002,
National City had approximately $29 billion in assets under management. AEFC
will pay National City at a rate of 0.50% of average daily net assets gradually
reducing to 0.40%.
National City, with principal offices at 1900 East Ninth Street, Cleveland, OH,
44114, is a wholly owned subsidiary of National City Corporation, a publicly
traded financial holding company. The following table provides information on
the principal executive officers and directors of National City.
Name Title and Principal Occupation
Paul G. Clark Director and Chairman
Donald L. Ross Director/President/Managing Director/
Chief Investment Officer
Kathleen T. Barr Director/Managing Director
Sandra I. Kiely Managing Director/Chief Administrative Officer
Timothy F. McDonough Managing Director, Client Services
Daniel G. Bandi Managing Director, Equities
- --------------------------------------------------------------------------------
92 AMERICAN EXPRESS FUNDS -- PROXY STATEMENT
Other Funds with Similar Investment Objectives Managed by National City
Assets (in millions)
Name as of June 30, 2002 Management Fee*
Armada Small Cap Value Fund $977 1.00%
* Annual rate based on average daily net assets.
In evaluating the recommendation to hire a subadviser for the fund, the Board
considered, among other factors:
o The favorable history, reputation, qualification and background of the
subadviser, as well as the qualifications of its personnel and its
financial condition.
o The expertise that the subadviser offers in providing portfolio management
services to other similar portfolios and the performance history of those
portfolios.
o The subadviser's proposed investment strategy for the fund.
o The fund's long- and short-term investment performance relative to
comparable mutual funds and unmanaged indexes.
o The investment management fee will not change.
o The terms of the subadvisory agreement are consistent with the language of
the registration statement of the fund and the Investment Management
Services Agreement between the fund and AEFC.
At a meeting held on July 10-11, 2002, called for the purpose of considering the
proposals, the Board determined that it would be in the best interests of the
fund and its shareholders to retain Third Avenue and National City as
subadvisers for the fund. By vote cast in person, the independent members first
and then the Board as a whole unanimously approved the Subadvisers and approved
the subadvisory agreements between AEFC and each Subadviser.
There will be no change in the fees paid by the fund. The fees paid by the fund
to AEFC will remain the same. AEFC, not the fund, will pay the Subadvisers.
- --------------------------------------------------------------------------------
AMERICAN EXPRESS FUNDS -- PROXY STATEMENT 93
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American
Express
Funds
Non-M
S-6420 A (9/02)
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American
Express
Funds
Proxy Statement Summary
September 14, 2002
Here's a brief overview of some of the changes being recommended for your
American Express mutual fund or variable annuity fund. We encourage you to read
the full text of the enclosed proxy statement.
Q: Why am I being asked to vote?
Funds are required to get shareholders' votes for certain kinds of changes, like
the ones included in this proxy statement. You have a right to vote on these
changes either by mailing your proxy card, calling a toll-free number or
responding by internet.
Q: What am I being asked to vote on?
At all regular meetings, shareholders elect Board members. In addition,
shareholders at this meeting will vote on other proposals. These include:
|X| Changing voting procedures from a share-based to a dollar-based system,
|X| Authorizing American Express Financial Corporation (the funds' investment
adviser), subject to Board approval, to retain and replace subadvisers, or
to modify subadvisory agreements, without shareholder approval,
|X| Changing the method of calculating the Performance Incentive Adjustment
(PIA) to the investment management fee (the PIA rewards the fund's
investment adviser for performance above a Lipper index and reduces its
compensation for performance that is below the index),
|X| Changing the classification of AXP Global Technology Fund from diversified
to non-diversified,
|X| Adding a 0.10% distribution plan to AXP Cash Management Fund (Class A and B
shares) and AXP Tax-Free Money Fund, and
|X| Approving a plan of liquidation for AXP International Equity Index Fund.
Again, we encourage you to read the full text of the proxy statement to obtain a
more detailed understanding of these issues.
Q: Is my vote important?
Absolutely! While the Board has reviewed these changes and recommends you
approve them, you have the right to voice your opinion. And your Fund pays for
most of the cost of holding a shareholder meeting. Until the Fund is sure that a
quorum has been reached (in most cases, 50% of existing shares), it will
continue to contact shareholders asking them to vote. These efforts cost your
Fund money - so please, vote immediately.
Q: What do Board members do?
Board members represent the interests of the shareholders and oversee the
management of the Fund.
Q: How does the Board recommend that I vote?
After careful consideration, the Board recommends that you vote FOR each
proposal.
Q: How do I vote?
You can vote in one of four ways:
1. By mail with the enclosed proxy card
2. By telephone
3. By Web site
4. In person at the meeting
Please refer to the enclosed voting instruction card for the telephone number
and internet address. If you own more than one Fund, it is important that you
vote for each Fund.
Q: Whom should I call if I have questions?
If you have questions about any of the issues described in the proxy statement
or about voting procedures, please call your financial advisor or call client
services toll free at (866) 208-5310.
American PROXY
Express(R)
Funds
AMERICAN EXPRESS FUNDS
Principal Executive Office
901 Marquette Avenue South, Suite 2810
Minneapolis, MN 55402-3268
NOTICE OF REGULAR MEETING OF SHAREHOLDERS
To be held November 13, 2002
Your fund(s) will hold a regular shareholders' meeting at 11:00 a.m. on November
13, 2002, at The Marquette Hotel, 701 Marguette Avenue, Minneapolis, MN in the
Red River Room on the third floor. This will be a joint meeting of the funds
listed below. You are entitled to vote at the meeting if you were a shareholder
on September 14, 2002. Please read the proxy statement. The Board recommends
that you vote FOR each proposal. Please vote immediately by mail, telephone or
internet, even if you plan to attend the meeting. Just follow the instructions
on this proxy card.
VOTE VIA THE INTERNET: americanexpress.com/proxyvoting
VOTE VIA THE TELEPHONE: 1-866-837-1891
CONTROL NUMBER: 999 9999 999
Note: Please sign this proxy exactly as your name
or names appears on this card. Joint owners
should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which
they sign, and where more than one name appears,
a majority must sign. If a corporation, this
signature should be that of an authorized officer
who should state his or her title.
------------------------------------------------
Signature
------------------------------------------------
Signature of joint owner, if any
------------------------------------------------
Date 12606_AEP
FUND FUND FUND
Fund Name Drop-In 1 2652.8576 Fund Name Drop-In 2 1026.8572 Fund Name Drop-In 3 1026.8572
Fund Name Drop-In 4 57858.6497 Fund Name Drop-In 5 3365.9812 Fund Name Drop-In 6 3365.9812
Fund Name Drop-In 7 103.0851 Fund Name Drop-In 8 9658.0602 Fund Name Drop-In 9 9658.0602
Fund Name Drop-In 10 7023.0960 Fund Name Drop-In 11 85269.9172 Fund Name Drop-In 12 85269.9172
Please vote by filling in the appropriate box below. If you do not mark one or
more proposals, your Proxy will be voted FOR each such proposal.
PLEASE MARK VOTES AS IN THIS EXAMPLE: [X]
[X] To vote FOR all Funds on all Proposals mark this box. (No other vote is
necessary.)
1. To elect Board members.
FOR WITHHOLD FOR ALL
01 Arne H. Carlson 02 Philip J. Carroll, Jr. 03 Livio D. DeSimone ALL ALL EXCEPT*
04 Barbara H Fraser 05 Ira D. Hall 06 Heinz F. Hutter
07 Anne P. Jones 08 Stephen R. Lewis, Jr. 09 Alan G. Quasha [ ] [ ] [ ]
10 Stephen W. Roszell 11 Alan K. Simpson 12 Alison Taunton-Rigby
13 William F. Truscott
If you do not wish your shares to be voted "FOR" a particular nominee, mark the
"FOR ALL EXCEPT" box and write the nominee's number and the fund name on the
line provided below:
________________________________________________________________________________
2. Amend the Articles of Incorporation/Declaration of Trust:
2(a). To allow one vote/dollar instead of one vote/share.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ] Fund Name Drop-In 2 [ ] [ ] [ ] Fund Name Drop-In 3 [ ] [ ] [ ]
Fund Name Drop-In 4 [ ] [ ] [ ] Fund Name Drop-In 5 [ ] [ ] [ ] Fund Name Drop-In 6 [ ] [ ] [ ]
Fund Name Drop-In 7 [ ] [ ] [ ] Fund Name Drop-In 8 [ ] [ ] [ ] Fund Name Drop-In 9 [ ] [ ] [ ]
Fund Name Drop-In 10 [ ] [ ] [ ] Fund Name Drop-In 11 [ ] [ ] [ ] Fund Name Drop-In 12 [ ] [ ] [ ]
2(b). To change the name of the corporation.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ] Fund Name Drop-In 2 [ ] [ ] [ ] Fund Name Drop-In 3 [ ] [ ] [ ]
Fund Name Drop-In 4 [ ] [ ] [ ] Fund Name Drop-In 5 [ ] [ ] [ ] Fund Name Drop-In 6 [ ] [ ] [ ]
Fund Name Drop-In 7 [ ] [ ] [ ] Fund Name Drop-In 8 [ ] [ ] [ ] Fund Name Drop-In 9 [ ] [ ] [ ]
Fund Name Drop-In 10 [ ] [ ] [ ] Fund Name Drop-In 11 [ ] [ ] [ ] Fund Name Drop-In 12 [ ] [ ] [ ]
3. Approve a policy authorizing American Express Financial Corporation,
subject to Board approval, to retain and replace subadvisers, or to
modify subadvisory agreements, without shareholder approval.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ] Fund Name Drop-In 2 [ ] [ ] [ ] Fund Name Drop-In 3 [ ] [ ] [ ]
Fund Name Drop-In 4 [ ] [ ] [ ] Fund Name Drop-In 5 [ ] [ ] [ ] Fund Name Drop-In 6 [ ] [ ] [ ]
Fund Name Drop-In 7 [ ] [ ] [ ] Fund Name Drop-In 8 [ ] [ ] [ ] Fund Name Drop-In 9 [ ] [ ] [ ]
Fund Name Drop-In 10 [ ] [ ] [ ] Fund Name Drop-In 11 [ ] [ ] [ ] Fund Name Drop-In 12 [ ] [ ] [ ]
4. Approve changes to the Investment Management Services Agreement:
4(a). Add a performance incentive adjustment.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ] Fund Name Drop-In 2 [ ] [ ] [ ] Fund Name Drop-In 3 [ ] [ ] [ ]
Fund Name Drop-In 4 [ ] [ ] [ ] Fund Name Drop-In 5 [ ] [ ] [ ] Fund Name Drop-In 6 [ ] [ ] [ ]
4(b). Modify the performance incentive adjustment calculation.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ] Fund Name Drop-In 2 [ ] [ ] [ ] Fund Name Drop-In 3 [ ] [ ] [ ]
Fund Name Drop-In 4 [ ] [ ] [ ] Fund Name Drop-In 5 [ ] [ ] [ ] Fund Name Drop-In 6 [ ] [ ] [ ]
Fund Name Drop-In 7 [ ] [ ] [ ] Fund Name Drop-In 8 [ ] [ ] [ ] Fund Name Drop-In 9 [ ] [ ] [ ]
Fund Name Drop-In 10 [ ] [ ] [ ] Fund Name Drop-In 11 [ ] [ ] [ ] Fund Name Drop-In 12 [ ] [ ] [ ]
4(c). Eliminate the performance incentive adjustment.
FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ]
4(d). Change the investment manager from IDS Life Insurance Company to American
Express Financial Corporation.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ] Fund Name Drop-In 2 [ ] [ ] [ ] Fund Name Drop-In 3 [ ] [ ] [ ]
Fund Name Drop-In 4 [ ] [ ] [ ] Fund Name Drop-In 5 [ ] [ ] [ ] Fund Name Drop-In 6 [ ] [ ] [ ]
Fund Name Drop-In 7 [ ] [ ] [ ] Fund Name Drop-In 8 [ ] [ ] [ ] Fund Name Drop-In 9 [ ] [ ] [ ]
5. Change the fund's classification from diversified to non-diversified.
FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ]
6. Add a Plan and Agreement of Distribution.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ] Fund Name Drop-In 2 [ ] [ ] [ ] Fund Name Drop-In 3 [ ] [ ] [ ]
7. Approve a Plan of Liquidation.
FOR AGAINST ABSTAIN
Fund Name Drop-In 1 [ ] [ ] [ ]
EVERY SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD TODAY!
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AMERICAN
EXPRESS
IMPORTANT NOTICE
Your vote is important. Please select one of the following voting methods:
o Vote by Mail. Sign, date and vote the enclosed proxy card(s) and return in
the postage paid envelope.
o Vote by Internet. Log onto americanexpress.com/proxyvoting, enter the
14-digit control number on your proxy card and follow the instructions.
o Vote by Touch-tone phone. Call 1- 866-837-1891, enter your 14-digit control
number and follow the instructions. This option accepts shareholder voting
of all holdings together on all proposals for the control number entered.
If you want to vote on each proposal separately, please vote either by mail
or by internet. Thank you.
(logo)
AMERICAN
EXPRESS
IMPORTANT NOTICE
Your vote is important. Please select one of the following voting methods:
o Vote by Mail. Sign, date and vote the enclosed proxy card(s) and return in
the postage paid envelope.
o Vote by Internet. Log onto americanexpress.com/proxyvoting, enter the
14-digit control number on your proxy card and follow the instructions.
o Vote by Touch-tone phone. Call 1- 866-837-1891, enter your 14-digit control
number and follow the instructions. This option accepts shareholder voting
of all holdings together on all proposals for the control number entered.
If you want to vote on each proposal separately, please vote either by mail
or by internet. Thank you.