UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4075
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AXP INTERNATIONAL SERIES, INC.
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(Exact name of registrant as specified in charter)
200 AXP Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
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Date of fiscal year end: 10/31
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Date of reporting period: 4/30
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Item 1. Reports to Shareholders.
AXP(R)
European
Equity
Fund
Semiannual Report
for the Period Ended
April 30, 2003
AXP European Equity Fund seeks to provide shareholders with capital
appreciation.
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(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
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Table of Contents
Fund Snapshot 3
Questions & Answers
with Portfolio Management 4
Investments in Securities 7
Financial Statements 10
Notes to Financial Statements 13
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2 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Fund Snapshot
AS OF APRIL 30, 2003
PORTFOLIO MANAGERS
Portfolio manager Richard Falle
Since 2/02
Years in industry 9
Portfolio manager Mark Burgess
Since 2/02
Years in industry 17
Portfolio manager Claire Barnes
Since 9/00
Years in industry 7
FUND OBJECTIVE
For investors seeking capital appreciation.
Inception dates
A: 6/26/00 B: 6/26/00 C: 6/26/00 Y: 6/26/00
Ticker symbols
A: AXEAX B: AEEBX C: -- Y: --
Total net assets $128.7 million
Number of holdings approximately 50
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
United Kingdom 42.3%
Switzerland 15.0%
France 9.2%
Spain 6.8%
United States 5.2%
Netherlands 4.3%
Finland 3.8%
Germany 3.6%
Italy 2.9%
Sweden 2.9%
Luxembourg 1.9%
Portugal 1.6%
Ireland 0.5%
TOP TEN HOLDINGS
Percentage of portfolio assets
GlaxoSmithKline (United Kingdom) 6.6%
BP (United Kingdom) 5.8
Novartis (Switzerland) 4.9
Royal Bank of Scotland Group (United Kingdom) 4.6
TotalFinaElf (France) 4.5
Vodafone Group (United Kingdom) 4.3
HSBC Holdings (United Kingdom) 3.6
BNP Paribas (France) 3.4
UBS (Switzerland) 3.3
Nestle (Switzerland) 3.2
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
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3 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Q: How did AXP European Equity Fund perform for the first half of fiscal year
2003?
A: AXP European Equity Fund's Class A shares rose 0.91%, excluding sales
charge, for the six-month period ended April 30, 2003. We were disappointed
in the results, as the Fund underperformed its index, the MSCI Europe
Index, and its peer group, as represented by the Lipper European Funds
Index, which gained 4.40% and 3.17%, respectively.
Q: What factors most affected performance?
A: Until April, the Fund performed relatively in line with its peer group and
index. The final month of the period, however, brought a dramatic market
rally as the war in Iraq ended quickly. The market's most beaten-up stocks
were among the month's top performers. The Fund did not own any stocks of
these companies, which generally had high debt levels and weak business
models. In March, the Fund was positioned defensively in anticipation of
the conflict in Iraq. Once the cost and length of the war became clearer,
markets rallied. Because of the Fund's defensive positioning, we missed
some of this rally. An aggressive selloff in the U.K. market in December
and January, led by financials, also hurt performance during the period.
Two of the Fund's larger holdings, Aegon and ING, were hurt further because
more than
(bar graph)
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2003
5% (bar 2)
+4.40%
4% (bar 3)
+3.17%
3%
2%
1% (bar 1)
+0.91%
0%
(bar 1) AXP European Equity Fund Class A (excluding sales charge)
(bar 2) MSCI Europe Index (unmanaged)(1)
(bar 3) Lipper European Funds Index(2)
(1) The Morgan Stanley Capital International (MSCI) Europe Index is an
unmanaged index for European portfolios. It is compiled by MSCI in Geneva
from a capitalization market of various European Countries. Income is
included. The MSCI Europe Index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or other
fees.
(2) The Lipper European Funds Index, published by Lipper Inc., includes the 30
largest funds that are generally similar to the Fund, although some funds
in the index may have somewhat different investment policies or objectives
Past performance is no guarantee of future results. The 5.75% sales charge
applicable to Class A shares of the Fund is not reflected in the bar chart; if
reflected, returns would be lower than those shown. The performance of Class B,
Class C and Class Y may vary from that shown above because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
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4 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote) > An increase in the Fund's consumer cyclical holdings and
decrease in financials, particularly among U.K. insurers that are battling
solvency concerns, were among the period's changes. (end callout quote)
half of their earnings were in dollars, which declined against the euro
during the period. On the plus side, stock selection in the consumer
discretionary sector boosted performance.
Q: What changes did you make to the portfolio?
A: An increase in the Fund's consumer cyclical holdings and decrease in
financials, particularly among U.K. insurers that are battling solvency
concerns, were among the period's changes. The Fund continues a slight
overweight in energy and pharmaceuticals, and had a significant underweight
in Germany, where fears persist over a potential Japan-like deflationary
environment.
During the first quarter, the Fund added Tesco, a U.K. food retailer, and
Reed Elsevier, a media
AVERAGE ANNUAL TOTAL RETURNS
as of April 30, 2003
Class A Class B Class C Class Y
(Inception dates) (6/26/00) (6/26/00) (6/26/00) (6/26/00)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
6 months* +0.91% -4.91% +0.72% -3.28% +0.41% -0.59% +0.80% +0.80%
1 year -18.41% -23.11% -18.84% -22.09% -19.09% -19.90% -18.21% -18.21%
Since inception -17.39% -19.09% -17.98% -18.84% -18.06% -18.06% -17.30% -17.30%
* Not annualized.
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than the original cost. The performance shown for each class of
shares will vary due to differences in sales charges and fees. Short term
performance may be higher or lower than the figures shown. Visit
americanexpress.com for current information.
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5 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Questions & Answers
company. Peugeot, the French automobile manufacturer, was also added to the
portfolio, while Accor and Signet were sold during the period and we
reduced our position in BSkyB. We also reduced our exposure to the
financial sector, mainly by trimming some insurance stocks.
Q: What is your outlook for the coming months?
A: The shape and scale of an economic recovery is still uncertain, although
improved corporate earnings are a positive. As balance sheets improve, we
will look to take part in the recovery by focusing on areas that would be
first to benefit, such as industrials. Improved cash flow and balance
sheets may also bode well for telecom companies, a sector in which we
increased the Fund's weighting. Although we believe that there will be a
global economic recovery, we have a negative view of Germany. Several of
Germany's banks face financial problems. Taxation policy and
cross-ownership of stock among leading German companies also remain issues.
The Fund, which typically holds between 35 and 50 stocks, will continue its
targeted, concentrated approach to providing value for shareholders. We
will maintain our bottom-up approach to finding stocks that show positive
cash flow, top line growth, solid management and a leadership position
within their industries.
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6 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Investments in Securities
AXP European Equity Fund
April 30, 2003 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (93.4%)(c)
Issuer Shares Value(a)
Finland (3.8%)
Communications equipment & services (2.7%)
Nokia 199,855 $3,381,260
Paper & packaging (1.1%)
Stora Enso 135,714 1,475,190
France (9.0%)
Automotive & related (1.2%)
PSA Peugeot Citroen 33,733 1,578,875
Banks and savings & loans (3.3%)
BNP Paribas 91,570 4,298,202
Energy (4.5%)
TotalFinaElf 43,850 5,750,052
Germany (3.5%)
Automotive & related (1.1%)
DaimlerChrysler 42,174 1,360,213
Communications equipment & services (1.7%)
Deutsche Telekom 171,392 2,291,457
Financial services (0.7%)
Deutsche Boerse 19,400 909,317
Ireland (0.5%)
Building materials & construction (0.2%)
CRH 17,303 265,708
Financial services (0.3%)
Irish Life & Permanent 30,073 349,039
Italy (2.9%)
Energy
Eni 260,964 3,719,083
Luxembourg (1.8%)
Metals
Arcelor 209,894(b) 2,375,212
Netherlands (4.2%)
Food (2.7%)
Unilever 54,695 3,445,688
Insurance (1.5%)
ING Groep 122,164 1,983,675
Portugal (1.6%)
Utilities -- telephone
Portugal Telecom 288,746 2,065,563
Spain (6.7%)
Banks and savings & loans (2.4%)
Banco Santander Central Hispano 399,099 3,135,578
Beverages & tobacco (2.3%)
Altadis 115,955 2,989,275
Utilities -- electric (2.0%)
Endesa 180,754 2,563,881
Sweden (2.8%)
Furniture & appliances (1.5%)
Electrolux Cl B 103,333 1,939,144
Industrial equipment & services (1.3%)
Atlas Copco Cl A 69,810 1,694,107
Switzerland (14.8%)
Banks and savings & loans (3.2%)
UBS 86,977 4,126,646
Building materials & construction (0.8%)
Holcim Cl B 5,482 1,028,658
Chemicals (0.5%)
Syngenta 12,171 628,157
Food (3.2%)
Nestle 19,924 4,061,775
See accompanying notes to investments in securities.
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7 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Switzerland (cont.)
Health care (4.9%)
Novartis 158,963 $6,270,383
Insurance (2.2%)
Swiss Reinsurance 43,532 2,843,719
United Kingdom (41.8%)
Airlines (0.3%)
easyJet 117,360(b) 354,509
Banks and savings & loans (4.6%)
Royal Bank of Scotland Group 224,280 5,882,258
Communications equipment & services (1.1%)
mm02 1,754,719(b) 1,563,498
Computer software & services (1.1%)
Sage Group 653,281 1,448,698
Energy (5.7%)
BP 1,150,472 7,290,615
Financial services (3.5%)
HSBC Holdings 413,360 4,528,777
Food (0.9%)
Compass Group 259,024 1,192,278
Health care (8.8%)
GlaxoSmithKline 414,969 8,316,837
Smith & Nephew 444,042 2,961,184
Total 11,278,021
Household products (1.6%)
Reckitt Benckiser 114,793 2,024,570
Leisure time & entertainment (1.8%)
Carnival 91,477 2,283,684
Media (3.4%)
British Sky Broadcasting Group 227,237(b) 2,355,233
Reed Elsevier 261,055 2,081,985
Total 4,437,218
Multi-industry conglomerates (0.8%)
Unilever 108,930 1,070,699
Retail (2.9%)
Marks & Spencer Group 470,353 2,191,329
Tesco 467,260 1,478,661
Total 3,669,990
Utilities -- gas (1.0%)
Centrica 468,116 1,243,827
Utilities -- telephone (4.2%)
Vodafone Group 2,733,146 5,394,792
Total common stocks
(Cost: $120,081,338) $120,193,291
Short-term securities (5.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (4.7%)
Federal Home Loan Bank Disc Nts
05-02-03 1.23% $100,000 $99,993
05-09-03 1.12 500,000 499,860
06-25-03 1.19 1,700,000 1,697,083
Federal Home Loan Mtge Corp Disc Nts
05-22-03 1.22 300,000 299,792
06-19-03 1.20 500,000 499,221
Federal Natl Mtge Assn Disc Nt
07-09-03 1.18 3,000,000 2,993,331
Total 6,089,280
Commercial paper (0.4%)
Gannett
05-09-03 1.22 500,000(d) 499,848
Total short-term securities
(Cost: $6,588,857) $6,589,128
Total investments in securities
(Cost: $126,670,195)(e) $126,782,419
See accompanying notes to investments in securities.
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8 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid
under guidelines established by the board.
(e) At April 30, 2003, the cost of securities for federal income tax purposes
was approximately $126,670,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 6,669,000
Unrealized depreciation (6,557,000)
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Net unrealized appreciation $ 112,000
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9 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP European Equity Fund
April 30, 2003 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $126,670,195) $ 126,782,419
Cash in bank on demand deposit 809,822
Capital shares receivable 300
Dividends and accrued interest receivable 1,081,333
Receivable for investment securities sold 524,430
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 3,733
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Total assets 129,202,037
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Liabilities
Capital shares payable 28,405
Payable for investment securities purchased 327,176
Accrued investment management services fee 2,803
Accrued distribution fee 1,741
Accrued transfer agency fee 1,298
Accrued administrative services fee 210
Other accrued expenses 115,250
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Total liabilities 476,883
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Net assets applicable to outstanding capital stock $ 128,725,154
=============
Represented by
Capital stock -- $.01 par value (Note 1) $ 456,459
Additional paid-in capital 248,406,213
Undistributed net investment income 492,034
Accumulated net realized gain (loss) (Note 7) (120,828,968)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 5) 199,416
-------
Total -- representing net assets applicable to outstanding capital stock $ 128,725,154
=============
Net assets applicable to outstanding shares: Class A $ 86,369,752
Class B $ 40,608,374
Class C $ 1,719,370
Class Y $ 27,658
Net asset value per share of outstanding capital stock: Class A shares 30,508,230 $ 2.83
Class B shares 14,512,546 $ 2.80
Class C shares 615,352 $ 2.79
Class Y shares 9,765 $ 2.83
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See accompanying notes to financial statements.
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10 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Statement of operations
AXP European Equity Fund
Six months ended April 30, 2003 (Unaudited)
Investment income
Income:
Dividends $ 2,028,463
Interest 33,449
Fee income from securities lending -- net (Note 3) 7,707
Less foreign taxes withheld (326,742)
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Total income 1,742,877
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Expenses (Note 2):
Investment management services fee 505,796
Distribution fee
Class A 112,095
Class B 206,692
Class C 8,945
Transfer agency fee 243,524
Incremental transfer agency fee
Class A 18,205
Class B 14,871
Class C 655
Service fee -- Class Y 16
Administrative services fees and expenses 39,985
Compensation of board members 4,867
Custodian fees 37,153
Printing and postage 35,055
Registration fees 6,071
Audit fees 8,500
Other 9,427
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Total expenses 1,251,857
Earnings credits on cash balances (Note 2) (1,191)
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Total net expenses 1,250,666
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Investment income (loss) -- net 492,211
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Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (15,888,700)
Foreign currency transactions (27,705)
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Net realized gain (loss) on investments (15,916,405)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 15,887,130
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Net gain (loss) on investments and foreign currencies (29,275)
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Net increase (decrease) in net assets resulting from operations $ 462,936
============
See accompanying notes to financial statements.
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11 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Statements of changes in net assets
AXP European Equity Fund
April 30, 2003 Oct. 31, 2002
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 492,211 $ 819,624
Net realized gain (loss) on investments (15,916,405) (13,730,288)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 15,887,130 (11,562,389)
---------- -----------
Net increase (decrease) in net assets resulting from operations 462,936 (24,473,053)
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Distributions to shareholders from:
Net investment income
Class A (841,659) (103,467)
Class B (2) --
Class C (964) --
Class Y (400) (50)
---- ---
Total distributions (843,025) (103,517)
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Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 38,420,191 94,306,318
Class B shares 3,094,307 10,154,685
Class C shares 1,493,962 3,976,104
Class Y shares -- 9,999
Reinvestment of distributions at net asset value
Class A shares 833,539 102,095
Class B shares 2 --
Class C shares 949 --
Class Y shares 381 48
Payments for redemptions
Class A shares (52,629,586) (122,736,823)
Class B shares (Note 2) (7,506,849) (22,153,752)
Class C shares (Note 2) (1,745,884) (3,983,193)
Class Y shares (7,688) (11,238)
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Increase (decrease) in net assets from capital share transactions (18,046,676) (40,335,757)
----------- -----------
Total increase (decrease) in net assets (18,426,765) (64,912,327)
Net assets at beginning of period 147,151,919 212,064,246
----------- -----------
Net assets at end of period $128,725,154 $ 147,151,919
============ =============
Undistributed net investment income $ 492,034 $ 842,848
------------ -------------
See accompanying notes to financial statements.
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12 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Notes to Financial Statements
AXP European Equity Fund
(Unaudited as to April 30, 2003)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP International Series, Inc. and is registered under
the Investment Company Act of 1940 (as amended) as a non-diversified open-end
management investment company. AXP International Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the board. The Fund invests primarily in equity
securities of European companies that offer growth potential.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year
of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. If trading or events occurring in
other markets after the close of the principal market in which foreign
securities are traded, and before the close of business of the Fund, are
expected to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into account.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
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13 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Funds
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
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14 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium and discount using the effective
interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. Under an Investment
Management Services Agreement, AEFC determines which securities will be
purchased, held or sold. The management fee is a percentage of the Fund's
average daily net assets in reducing percentages from 0.80% to 0.675% annually.
The fee may be adjusted upward or downward by a performance incentive adjustment
based on a comparison of the performance of Class A shares of the Fund to the
Lipper European Funds Index. Prior to Dec. 1, 2002, the maximum adjustment was
0.12% of the Fund's average daily net assets after deducting 1% from the
performance difference. If the performance difference was less than 1%, the
adjustment was zero. On Nov. 13, 2002, shareholders approved modification of the
performance incentive adjustment calculation by adjusting the performance
difference intervals, while retaining the previous maximum adjustment and
reducing the amount of the performance difference for which no adjustment is
made to 0.50%. The effect of the modifications began Dec. 1, 2002. The
adjustment decreased the fee by $25,547 for the six months ended April 30, 2003.
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15 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Under an Administrative Service Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.06% to 0.035% annually. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
AEFC has a Subadvisory Agreement with American Express Asset Management
International, Inc., a wholly-owned subsidiary of AEFC.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The incremental
transfer agency fee is the amount charged to the specific classes for the
additional expense above the fee for Class Y. The Fund pays AECSC an annual fee
per shareholder account for this service as follows:
o Class A $19.00
o Class B $20.00
o Class C $19.50
o Class Y $17.00
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$90,512 for Class A, $29,884 for Class B and $120 for Class C for the six months
ended April 30, 2003.
During the six months ended April 30, 2003, the Fund's custodian and transfer
agency fees were reduced by $1,191 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $50,555,305 and $67,568,921, respectively, for the six
months ended April 30, 2003. Realized gains and losses are determined on an
identified cost basis.
Income from securities lending amounted to $7,707 for the six months ended April
30, 2003. The risks to the Fund of securities lending are that the borrower may
not provide additional collateral when required or return the securities when
due.
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16 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 2003
Class A Class B Class C Class Y
Sold 14,055,186 1,135,019 583,898 --
Issued for reinvested distributions 303,105 1 349 138
Redeemed (19,210,250) (2,796,562) (670,826) (2,945)
----------- ---------- -------- ------
Net increase (decrease) (4,851,959) (1,661,542) (86,579) (2,807)
---------- ---------- ------- ------
Year ended Oct. 31, 2002
Class A Class B Class C Class Y
Sold 29,625,924 3,116,116 1,309,942 2,997
Issued for reinvested distributions 29,859 -- -- 14
Redeemed (37,961,247) (6,967,812) (1,299,820) (3,221)
----------- ---------- ---------- ------
Net increase (decrease) (8,305,464) (3,851,696) 10,122 (210)
---------- ---------- ------ ----
5. FORWARD FOREIGN CURRENCY CONTRACTS
As of April 30, 2003, the Fund has forward foreign currency exchange contracts
that obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
May 2, 2003 323,452 293,168 $3,723 $--
U.S. Dollar European Monetary Unit
May 6, 2003 198,839 317,805 10 --
British Pound U.S. Dollar
------ ---
Total $3,733 $--
------ ---
6. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
Deutsche Bank, whereby the Fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The Fund must
maintain asset coverage for borrowings of at least 300%. The agreement, which
enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the LIBOR plus 0.50%, the
IBOR plus 0.50% or the higher of the Federal Funds Rate plus 0.25% and the Prime
Lending Rate. Borrowings are payable within 60 days after such loan is executed.
The Fund also pays a commitment fee equal to its pro rata share of the amount of
the credit facility at a rate of 0.09% per annum. The Fund had no borrowings
outstanding during the six months ended April 30, 2003.
7. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund has a capital loss carry-over of
$103,364,582 as of Oct. 31, 2002, that will expire in 2009 and 2010 if not
offset by capital gains. It is unlikely the board will authorize a distribution
of any net realized capital gains until the available capital loss carry-over
has been offset or expires.
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17 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
8. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(k) 2002 2001 2000(b)
Net asset value, beginning of period $2.83 $3.30 $ 4.90 $4.95
Income from investment operations:
Net investment income (loss) .01 .03 .02 --
Net gains (losses) (both realized and unrealized) .01 (.50) (1.59) (.05)
Total from investment operations .02 (.47) (1.57) (.05)
Less distributions:
Dividends from net investment income (.02) -- -- --
Distributions from realized gains -- -- (.03) --
Total distributions (.02) -- (.03) --
Net asset value, end of period $2.83 $2.83 $ 3.30 $4.90
Ratios/supplemental data
Net assets, end of period (in millions) $86 $100 $144 $76
Ratio of expenses to average daily net assets(c) 1.63%(h) 1.54% 1.37%(d) 1.34%(d),(h)
Ratio of net investment income (loss) to average daily net assets .99%(h) .68% .69% 1.05%(h)
Portfolio turnover rate (excluding short-term securities) 39% 110% 297% 52%
Total return(i) .91%(j) (14.18%) (32.23%) (1.01%)(j)
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(k) 2002 2001 2000(b)
Net asset value, beginning of period $2.78 $3.27 $ 4.89 $4.95
Income from investment operations:
Net investment income (loss) .01 -- -- --
Net gains (losses) (both realized and unrealized) .01 (.49) (1.59) (.06)
Total from investment operations .02 (.49) (1.59) (.06)
Less distributions:
Distributions from realized gains -- -- (.03) --
Net asset value, end of period $2.80 $2.78 $ 3.27 $4.89
Ratios/supplemental data
Net assets, end of period (in millions) $41 $45 $66 $40
Ratio of expenses to average daily net assets(c) 2.41%(h) 2.31% 2.14%(e) 2.12%(e),(h)
Ratio of net investment income (loss) to average daily net assets .22%(h) (.08%) (.07%) .05%(h)
Portfolio turnover rate (excluding short-term securities) 39% 110% 297% 52%
Total return(i) .72%(j) (14.98%) (32.71%) (1.21%)(j)
See accompanying notes to financial highlights.
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18 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(k) 2002 2001 2000(b)
Net asset value, beginning of period $2.78 $3.27 $ 4.88 $4.95
Income from investment operations:
Net gains (losses) (both realized and unrealized) .01 (.49) (1.58) (.07)
Less distributions:
Distributions from realized gains -- -- (.03) --
Net asset value, end of period $2.79 $2.78 $ 3.27 $4.88
Ratios/supplemental data
Net assets, end of period (in millions) $2 $2 $2 $1
Ratio of expenses to average daily net assets(c) 2.41%(h) 2.32% 2.14%(f) 2.12%(f),(h)
Ratio of net investment income (loss) to average daily net assets .25%(h) (.10%) (.08%) .15%(h)
Portfolio turnover rate (excluding short-term securities) 39% 110% 297% 52%
Total return(i) .41%(j) (14.98%) (32.57%) (1.41%)(j)
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(k) 2002 2001 2000(b)
Net asset value, beginning of period $2.84 $3.31 $ 4.89 $4.95
Income from investment operations:
Net investment income (loss) .02 .03 .03 --
Net gains (losses) (both realized and unrealized) -- (.50) (1.58) (.06)
Total from investment operations .02 (.47) (1.55) (.06)
Less distributions:
Dividends from net investment income (.03) -- -- --
Distributions from realized gains -- -- (.03) --
Total distributions (.03) -- (.03) --
Net asset value, end of period $2.83 $2.84 $ 3.31 $4.89
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $--
Ratio of expenses to average daily net assets(c) 1.44%(h) 1.35% 1.19%(g) 1.18%(g),(h)
Ratio of net investment income (loss) to average daily net assets 1.14%(h) .76% .84% 1.29%(h)
Portfolio turnover rate (excluding short-term securities) 39% 110% 297% 52%
Total return(i) .80%(j) (14.10%) (31.89%) (1.21%)(j)
See accompanying notes to financial highlights.
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19 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
Notes to financial highlights
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 26, 2000 (when shares became publicly available)
to Oct. 31, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class A would have been 1.53% and 2.21%
for the periods ended Oct. 31, 2001 and 2000, respectively.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class B would have been 2.30% and 2.98%
for the periods ended Oct. 31, 2001 and 2000, respectively.
(f) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class C would have been 2.30% and 2.99%
for the periods ended Oct. 31, 2001 and 2000, respectively.
(g) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratios of expenses for Class Y would have been 1.35% and 2.09%
for the periods ended Oct. 31, 2001 and 2000, respectively.
(h) Adjusted to an annual basis.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
(k) Six months ended April 30, 2003 (Unaudited).
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20 -- AXP EUROPEAN EQUITY FUND -- 2003 SEMIANNUAL REPORT
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
- --------------------------------------------------------------------------------
(logo)
AMERICAN
EXPRESS(R)
- --------------------------------------------------------------------------------
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AXP(R)
International
Fund
Semiannual Report
for the Period Ended
April 30, 2003
AXP International Fund seeks to provide shareholders with long-term capital
growth.
- --------------------------------------------------------------------------------
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
- --------------------------------------------------------------------------------
Table of Contents
Fund Snapshot 3
Questions & Answers with Portfolio Management 4
Investments in Securities 8
Financial Statements 12
Notes to Financial Statements 15
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2 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Fund Snapshot
AS OF APRIL 30, 2003
PORTFOLIO MANAGERS
Portfolio manager Mark Burgess
Since 2/02
Years in industry 17
Portfolio manager Richard Falle
Since 9/02
Years in industry 9
FUND OBJECTIVE
For investors seeking long-term capital growth.
Inception dates
A: 11/15/84 B: 3/20/95 C: 6/26/00 Y: 3/20/95
Ticker symbols
A: INIFX B: IWWGX C: -- Y: IDIYX
Total net assets $410.2 million
Number of holdings approximately 100
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
COUNTRY COMPOSITION
(pie chart)
Percentage of portfolio assets
United Kingdom 30.3%
Japan 19.0%
Switzerland 11.0%
France 6.6%
Spain 5.0%
United States 4.7%
Netherlands 3.0%
Australia 2.7%
Germany 2.7%
Finland 2.6%
Italy 2.0%
Sweden 2.0%
Hong Kong 1.9%
Luxembourg 1.2%
Singapore 1.2%
Taiwan 1.2%
Mexico 1.1%
Portugal 1.1%
Other 0.7%
TOP TEN HOLDINGS
Percentage of portfolio assets
GlaxoSmithKline (United Kingdom) 4.5%
BP (United Kingdom) 4.0
Royal Bank of Scotland Group (United Kingdom) 3.9
Novartis (Switzerland) 3.8
TotalFinaElf (France) 3.3
Vodafone Group (United Kingdom) 3.0
HSBC Holdings (United Kingdom) 2.9
UBS (Switzerland) 2.5
BNP Paribas (France) 2.4
Nestle (Switzerland) 2.2
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
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3 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Q: How did AXP International Fund perform for the first half of fiscal year
2003?
A: AXP International Fund's Class A shares fell 2.02% (excluding sales charge)
for the six-month period ended April 30, 2003. In a period marked by the
conflict in Iraq, as well as continued global economic uncertainty, the
Fund underperformed its benchmark and peers. The Morgan Stanley Capital
International EAFE Index rose 2.04% and the Lipper International Funds
Index, representing the Fund's peer group, rose 1.61%.
Q: What factors affected the Fund's performance?
A: International stocks, in general, lagged the U.S. stock market over this
period, despite the favorable impact of the weakening U.S. dollar. The
Fund's underperformance resulted primarily from holdings in Europe and
Japan, our two largest regional allocations.
European stocks were volatile during the past six-months. In the fourth
quarter of 2002, we saw a rebound in cyclical companies. Although the
portfolio was positioned to benefit from this market shift, we did not
capture as much of the gains as some of our competitors. Then, in early
2003, we witnessed a near-panic sell-off of insurance and financial
companies and most U.K. equities. The initial price weakness was magnified
when some pension investment
(bar graph)
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2003
2.50% (bar 2)
+2.04% (bar 3)
1.25% +1.61%
0.00%
- -1.25% (bar 1)
-2.02%
- -2.50%
(bar 1) AXP International Fund Class A (excluding sales charge)
(bar 2) MSCI EAFE Index (unmanaged)(1)
(bar 3) Lipper International Funds Index(2)
(1) Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index,
is compiled from a composite of securities markets of Europe, Australia and
the Far East. The index is widely recognized by investors in foreign markets
as the measurement index for portfolios of non-North American securities.
The index reflects reinvestment of all distributions and changes in market
prices, but excludes brokerage commissions or other fees.
(2) The Lipper International Funds Index, published by Lipper Inc., includes the
30 largest funds that are generally similar to the Fund, although some funds
in the index may have somewhat different investment policies or objectives.
Past performance is no guarantee of future results. The 5.75% sales charge
applicable to Class A shares of the Fund is not reflected in the bar chart; if
reflected, returns would be lower than those shown. The performance of Class B,
Class C and Class Y may vary from that shown above because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
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4 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote) > Following recent volatility, we think the
international markets could be in the process of building a base for better
performance. (end callout quote)
portfolios and other institutional investors were obliged to sell into the
decline to avoid insolvency.
Within the European market, we had maintained our position in insurance
companies because we saw good value. The Fund was negatively affected by
the January to March sell-off and this hurt overall returns for the
six-month period. In addition, several industrial stocks including
Invensys, which announced a profit warning in February, hurt the portfolio.
We subsequently sold Invensys.
Strong stock selection in Japan benefited the portfolio early in the
six-month period. However, the portfolio's Japanese holdings suffered in
the later months, primarily due to an unusual technical situation in the
Japanese market. Recently enacted
AVERAGE ANNUAL TOTAL RETURNS
as of April 30, 2003
Class A Class B Class C Class Y
(Inception dates) (11/15/84) (3/20/95) (6/26/00) (3/20/95)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
6 months* -2.02% -7.65% -2.46% -6.36% -2.27% -3.25% -2.03% -2.03%
1 year -21.46% -25.97% -21.97% -25.09% -21.91% -22.69% -21.40% -21.40%
5 years -10.20% -11.25% -10.88% -11.01% N/A N/A -10.06% -10.06%
10 years -0.08% -0.67% N/A N/A N/A N/A N/A N/A
Since inception N/A N/A -1.95% -1.95% -23.63% -23.63% -1.05% -1.05%
* Not annualized.
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than the original cost. The performance shown for each class of
shares will vary due to differences in sales charges and fees. Short term
performance may be higher or lower than the figures shown. Visit
americanexpress.com for current information.
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5 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Questions & Answers
legislation requires Japanese pension managers to turn assets over to
government fund managers. Pension funds must liquidate their holdings
before transferring the assets, which has put tremendous selling pressure
on large-cap stocks, causing them to underperform smaller companies.
Because our strategy in Japan focused on medium to large-cap stocks, this
underperformance was detrimental to the portfolio. Recently, we
restructured our Japan investment team with a view toward broadening our
Japanese exposure to include more small-cap holdings.
Q: What changes were made to the portfolio?
A: We made adjustments intended to strengthen the portfolio's performance,
increasing our focus on sector and security selection. Our modified process
is to set overall global themes, select sectors that look attractive to us
and strive to choose the most promising stocks within those sectors. Once
stocks are identified, we look at the portfolio as a whole to evaluate
implications for country and currency exposure, as well as how individual
holdings are likely to behave in aggregate.
We also made tactical changes to the Fund's positioning by reducing our
allocation to the materials sector, particularly mining companies that had
reached our price targets following strong performance. We significantly
increased our holdings in telecommunications companies early in the period
which subsequently performed well. We reduced these stocks late in the
period as they reached our price targets.
The portfolio was overweight in energy prior to the start of combat in
Iraq. Since then a number of Fund holdings approached the price targets we
had set, so we gradually trimmed our energy allocation by selling into the
energy rally. We increased our consumer staples position during the
volatile first four months of 2003, but have now lowered that defensive
allocation because we believe much of the potential bad news about the
economy has already been priced into the stock market. We added companies
in the industrials sector that we believe could benefit from European
growth.
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6 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Questions & Answers
Q: How does the portfolio reflect your outlook on currency trends?
A: We typically hedge currency only when we anticipate significant shifts.
We may hedge back to the U.S. dollar if we think it will strengthen, but
our current expectations are for a weaker dollar. Our exposure to all
other currencies is determined by our stock positions. We are always
mindful of how currency trends may affect the competitiveness of
individual companies. For example, European companies are now facing
greater competitive threat from the U.S. given the weaker dollar and from
Asian countries whose currencies are pegged to the dollar. We are looking
to avoid companies vulnerable to that risk.
Q: What is your outlook for the international markets and the Fund?
A: We are generally optimistic about international equity performance.
Following recent volatility, we think the international markets could be
in the process of building a base for better performance.
We've seen continued cost cutting and restructuring, particularly among
European and Japanese companies. Equity valuations appear attractive to us
-- the dividend yield on U.K. equities surpassed the yield on long-term
U.K. government bonds this past spring. We believe European interest rates
could be lowered further by year-end. In addition, the weakening U.S.
dollar makes it more attractive for U.S. investors to own non-domestic
assets. We believe all of these suggest a favorable backdrop for better
performance in the international equity markets.
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7 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Investments in Securities
AXP International Fund
April 30, 2003 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (94.7%)(c)
Issuer Shares Value(a)
Australia (2.7%)
Banks and savings & loans (1.9%)
Australia &
New Zealand Banking Group 671,900 $7,838,728
Retail (0.8%)
Woolworths 382,328 3,090,016
Finland (2.6%)
Communications equipment & services (1.8%)
Nokia 441,053 7,461,985
Paper & packaging (0.8%)
Stora Enso 307,288 3,340,172
France (6.5%)
Automotive & related (0.9%)
PSA Peugeot Citroen 76,232 3,568,043
Banks and savings & loans (2.3%)
BNP Paribas 204,564 9,602,025
Energy (3.3%)
TotalFinaElf 103,899 13,624,281
Germany (2.7%)
Automotive & related (0.8%)
DaimlerChrysler 95,796 3,089,652
Communications equipment & services (1.4%)
Deutsche Telekom 434,618 5,810,706
Financial services (0.5%)
Deutsche Boerse 43,860 2,055,807
Hong Kong (1.8%)
Energy (1.0%)
CNOOC 2,990,500 3,930,302
Financial services (0.4%)
Cheung Kong 327,000 1,807,105
Utilities -- gas (0.4%)
Hong Kong and China Gas 1,559,000 1,839,045
Ireland (0.1%)
Building materials & construction
CRH 38,653 593,562
Italy (2.0%)
Energy
Eni 579,739 8,262,049
Japan (18.9%)
Automotive & related (1.5%)
Nissan Motor 300,000 2,301,694
Toyota Motor 170,000 3,848,734
Total 6,150,428
Banks and savings & loans (1.1%)
Mitsubishi Tokyo Financial Group 634 2,147,711
Mitsui Fudosan 440,000 2,368,606
Total 4,516,317
Chemicals (0.6%)
Shin-Etsu Chemical 84,600 2,532,467
Communications equipment & services (1.0%)
NTT DoCoMo 2,016 4,158,444
Computers & office equipment (1.1%)
Canon 114,000 4,607,412
Electronics (2.4%)
Hitachi 321,000 1,071,256
Hitachi Maxell 62,500 955,895
Keyence 17,490 2,811,364
Rohm 20,000 2,061,043
Sharp 70,000 733,691
Tokyo Electron 57,200 2,143,921
Total 9,777,170
Financial services (0.8%)
Nomura Holdings 260,000 2,574,711
Sumitomo Trust & Banking 256,000 725,541
Total 3,300,252
Furniture & appliances (0.7%)
Matsushita Electric Industrial 360,000 2,867,684
See accompanying notes to investments in securities.
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8 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Japan (cont.)
Health care (0.9%)
Chugai Pharmaceutical 339,700 $3,560,498
Health care services (0.7%)
Yamanouchi Pharmaceutical 120,900 3,051,392
Household products (0.8%)
Kao 175,000 3,191,556
Industrial equipment & services (0.7%)
Amada 246,000 579,624
SMC 28,800 2,168,573
Total 2,748,197
Insurance (0.6%)
Millea Holdings 400 2,596,009
Media (0.3%)
Dentsu 226 672,732
Sony 23,300 566,577
Total 1,239,309
Multi-industry conglomerates (0.8%)
Mitsubishi 300,000 1,783,499
Sumitomo Chemical 600,000 1,625,021
Total 3,408,520
Paper & packaging (0.7%)
Nippon Unipac Holding 900 2,890,324
Retail (0.6%)
Seven-Eleven Japan 99,000 2,357,538
Textiles & apparel (0.6%)
Asahi Glass 480,000 2,555,761
Transportation (1.6%)
East Japan Railway 1,065 4,822,237
Yamato Transport 158,000 1,767,332
Total 6,589,569
Utilities -- electric (0.9%)
Tokyo Electric Power 175,100 3,553,094
Utilities -- telephone (0.5%)
Nippon Telegraph & Telephone 542 1,899,681
Luxembourg (1.2%)
Metals
Arcelor 448,322(b) 5,073,321
Mexico (1.1%)
Financial services
Grupo Financiero
BBVA Bancomer Cl B 5,152,886(b) 4,475,981
Netherlands (3.0%)
Food (1.9%)
Unilever 122,148 7,695,107
Insurance (1.1%)
ING Groep 275,497 4,473,467
Portugal (1.1%)
Utilities -- telephone
Portugal Telecom 644,842 4,612,918
Singapore (1.2%)
Banks and savings & loans (0.4%)
United Overseas Bank 290,000 1,698,581
Transportation (0.8%)
Keppel 1,240,000 3,114,665
South Korea (0.6%)
Communications equipment & services
SK Telecom 17,330 2,410,510
Spain (4.9%)
Banks and savings & loans (1.7%)
Banco Santander Central Hispano 866,609 6,808,638
Beverages & tobacco (1.6%)
Altadis 257,598 6,640,776
Utilities -- electric (1.6%)
Endesa 472,531 6,702,553
Sweden (2.0%)
Furniture & appliances (1.1%)
Electrolux Cl B 228,934 4,296,168
Industrial equipment & services (0.9%)
Atlas Copco Cl A 157,760 3,828,424
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
9 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Switzerland (10.9%)
Banks and savings & loans (2.4%)
UBS 211,699 $10,044,113
Building materials & construction (0.6%)
Holcim Cl B 12,494 2,344,410
Chemicals (0.3%)
Syngenta 27,750 1,432,205
Food (2.2%)
Nestle 44,262 9,023,404
Health care (3.9%)
Novartis 392,379 15,477,605
Insurance (1.5%)
Swiss Reinsurance 96,069 6,275,686
Taiwan (1.2%)
Banks and savings & loans (0.6%)
Chinatrust Financial Holding 3,185,000(b) 2,485,141
Electronics (0.6%)
Taiwan Semiconductor Mfg 1,807,000(b) 2,477,757
United Kingdom (30.2%)
Airlines (0.2%)
easyJet 263,850(b) 797,010
Banks and savings & loans (4.6%)
Lloyds TSB Group 478,677 3,148,164
Royal Bank of Scotland Group 603,097 15,817,604
Total 18,965,768
Communications equipment & services (0.8%)
mm02 3,888,072(b) 3,464,369
Energy (4.0%)
BP 2,562,210 16,236,892
Financial services (2.8%)
HSBC Holdings 1,061,829 11,633,408
Food (0.6%)
Compass Group 575,430 2,648,683
Health care (6.0%)
GlaxoSmithKline 908,883 18,215,893
Smith & Nephew 986,451 6,578,348
Total 24,794,241
Household products (1.2%)
Reckitt Benckiser 287,865 5,076,988
Leisure time & entertainment (1.2%)
Carnival 198,808 4,963,171
Media (2.4%)
British Sky Broadcasting Group 502,799(b) 5,211,339
Reed Elsevier 579,940 4,625,179
Total 9,836,518
Multi-industry conglomerates (0.6%)
Unilever 241,991 2,378,588
Retail (2.0%)
Marks & Spencer Group 1,042,414 4,856,504
Tesco 1,043,843 3,303,280
Total 8,159,784
Utilities -- gas (0.7%)
Centrica 1,039,933 2,763,197
Utilities -- telephone (2.9%)
Vodafone Group 6,103,812 12,047,947
Total common stocks
(Cost: $407,650,925) 388,623,094
Short-term securities (4.7%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (2.2%)
Federal Home Loan Mtge Corp Disc Nts
06-19-03 1.20% $4,700,000 $4,692,676
07-17-03 1.19 700,000 698,263
Federal Natl Mtge Assn Disc Nt
06-04-03 1.16 3,800,000 3,795,995
Total 9,186,934
Commercial paper (2.5%)
General Electric Capital
05-01-03 1.37 10,100,000 10,099,616
Total short-term securities
(Cost: $19,286,380) $19,286,550
Total investments in securities
(Cost: $426,937,305)(d) $407,909,644
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) At April 30, 2003, the cost of securities for federal income tax purposes
was approximately $426,937,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 18,002,000
Unrealized depreciation (37,029,000)
-----------
Net unrealized depreciation $(19,027,000)
------------
- --------------------------------------------------------------------------------
11 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP International Fund
April 30, 2003 (Unaudited)
Assets
Investments in securities, at value (Note 1)*
(identified cost $426,937,305) $ 407,909,644
Foreign currency holdings (identified cost $1,536,988) (Note 1) 1,532,813
Capital shares receivable 25,107
Dividends and accrued interest receivable 2,905,697
Receivable for investment securities sold 2,637,652
Unrealized appreciation on foreign currency contracts held, at value (Note 6) 594
---
Total assets 415,011,507
-----------
Liabilities
Disbursements in excess of cash on demand deposit 73,763
Capital shares payable 44,959
Payable for investment securities purchased 235,134
Unrealized depreciation on foreign currency contracts held, at value (Note 6) 375
Payable upon return of securities loaned (Note 5) 4,275,000
Accrued investment management services fee 8,738
Accrued distribution fee 3,923
Accrued service fee 207
Accrued transfer agency fee 5,539
Accrued administrative services fee 642
Other accrued expenses 132,750
-------
Total liabilities 4,781,030
---------
Net assets applicable to outstanding capital stock $ 410,230,477
=============
Represented by
Capital stock -- $.01 par value (Note 1) $ 848,121
Additional paid-in capital 949,754,862
Undistributed net investment income 1,106,812
Accumulated net realized gain (loss) (Note 8) (522,546,848)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 6) (18,932,470)
-----------
Total -- representing net assets applicable to outstanding capital stock $ 410,230,477
=============
Net assets applicable to outstanding shares: Class A $ 249,892,858
Class B $ 81,918,419
Class C $ 726,914
Class Y $ 77,692,286
Net asset value per share of outstanding capital stock: Class A shares 51,481,782 $ 4.85
Class B shares 17,206,445 $ 4.76
Class C shares 153,465 $ 4.74
Class Y shares 15,970,443 $ 4.86
---------- -------------
*Including securities on loan, at value (Note 5) $ 4,222,125
-------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Statement of operations
AXP International Fund
Six months ended April 30, 2003 (Unaudited)
Investment income
Income:
Dividends $ 5,536,840
Interest 60,135
Fee income from securities lending -- net (Note 5) 60,980
Less foreign taxes withheld (798,143)
--------
Total income 4,859,812
---------
Expenses (Note 2):
Investment management services fee 1,403,814
Distribution fee
Class A 327,662
Class B 432,069
Class C 4,045
Transfer agency fee 1,108,186
Incremental transfer agency fee
Class A 61,229
Class B 35,530
Class C 300
Service fee -- Class Y 34,011
Administrative services fees and expenses 124,534
Compensation of board members 5,700
Custodian fees 78,538
Printing and postage 74,091
Registration fees 35,649
Audit fees 20,000
Other 10,898
------
Total expenses 3,756,256
Earnings credits on cash balances (Note 2) (3,228)
------
Total net expenses 3,753,028
---------
Investment income (loss) -- net 1,106,784
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (57,232,574)
Foreign currency transactions (76,675)
-------
Net realized gain (loss) on investments (57,309,249)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 47,239,391
----------
Net gain (loss) on investments and foreign currencies (10,069,858)
-----------
Net increase (decrease) in net assets resulting from operations $ (8,963,074)
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Statements of changes in net assets
AXP International Fund
April 30, 2003 Oct. 31, 2002
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 1,106,784 $ 1,478,729
Net realized gain (loss) on investments (57,309,249) (54,321,962)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 47,239,391 (30,378,514)
---------- -----------
Net increase (decrease) in net assets resulting from operations (8,963,074) (83,221,747)
---------- -----------
Distributions to shareholders from:
Net investment income
Class A (1,097,780) (5,656,216)
Class B -- (288,769)
Class C -- (10,936)
Class Y (397,835) (1,101,121)
-------- ----------
Total distributions (1,495,615) (7,057,042)
---------- ----------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 45,875,975 284,033,503
Class B shares 4,795,323 18,373,065
Class C shares 2,126,057 1,526,218
Class Y shares 145,639,082 203,270,792
Reinvestment of distributions at net asset value
Class A shares 1,074,296 5,522,769
Class B shares -- 284,602
Class C shares -- 10,820
Class Y shares 305,027 1,016,173
Payments for redemptions
Class A shares (81,963,707) (401,259,872)
Class B shares (Note 2) (16,450,089) (90,155,847)
Class C shares (Note 2) (2,290,579) (1,676,707)
Class Y shares (136,092,531) (195,013,558)
------------ ------------
Increase (decrease) in net assets from capital share transactions (36,981,146) (174,068,042)
----------- ------------
Total increase (decrease) in net assets (47,439,835) (264,346,831)
Net assets at beginning of period 457,670,312 722,017,143
----------- -----------
Net assets at end of period $ 410,230,477 $ 457,670,312
============= =============
Undistributed net investment income $ 1,106,812 $ 1,495,643
------------- -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Notes to Financial Statements
AXP International Fund
(Unaudited as to April 30, 2003)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP International Series, Inc. and is registered under
the Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP International Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the board. The Fund invests primarily in equity
securities of foreign issuers that offer strong growth potential.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year
of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. If trading or events occurring in
other markets after the close of the principal market in which foreign
securities are traded, and before the close of business of the Fund, are
expected to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into account.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
15 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. As of April 30, 2003, foreign currency holdings consisted of
multiple denominations.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting
- --------------------------------------------------------------------------------
16 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
unrealized appreciation or depreciation are determined using foreign currency
exchange rates from an independent pricing service. The Fund is subject to the
credit risk that the other party will not complete its contract obligations.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium and discount using the effective
interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. Under an Investment
Management Services Agreement, AEFC determines which securities will be
purchased, held or sold. The management fee is a percentage of the Fund's
average daily net assets in reducing percentages from 0.8% to 0.675% annually.
The fee may be adjusted upward or downward by a performance incentive adjustment
based on a comparison of the performance of Class A shares of the Fund to the
Lipper International Funds Index. Prior to Dec. 1, 2002, the maximum adjustment
was 0.12% of the Fund's average daily net assets after deducting 1% from the
performance difference. If the performance difference was less than 1%, the
adjustment was zero. On Nov. 13, 2002, shareholders approved modification of the
performance incentive adjustment calculation by adjusting the performance
difference intervals, while retaining the previous maximum adjustment and
reducing the amount of the performance difference for which no adjustment is
made to 0.50%. The effect of the modifications began Dec. 1, 2002. The
adjustment decreased the fee by $244,504 for the six months ended April 30,
2003.
- --------------------------------------------------------------------------------
17 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Under an Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.06% to 0.035% annually. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
AEFC has a Subadvisory Agreement with American Express Asset Management
International Inc., a wholly-owned subsidiary of AEFC.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The incremental
transfer agency fee is the amount charged to the specific classes for the
additional expense above the fee for Class Y. The Fund pays AECSC an annual fee
per shareholder account for this service as follows:
o Class A $19.00
o Class B $20.00
o Class C $19.50
o Class Y $17.00
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$109,419 for Class A, $34,837 for Class B and $70 for Class C for the six months
ended April 30, 2003.
During the six months ended April 30, 2003, the Fund's custodian and transfer
agency fees were reduced by $3,228 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $184,392,923 and $215,131,707 respectively, for the six
months ended April 30, 2003. Realized gains and losses are determined on an
identified cost basis.
- --------------------------------------------------------------------------------
18 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 2003
Class A Class B Class C Class Y
Sold 9,571,441 1,018,292 449,505 30,539,200
Issued for reinvested distributions 221,962 -- -- 62,892
Redeemed (17,066,619) (3,506,825) (481,909) (28,366,702)
----------- ---------- -------- -----------
Net increase (decrease) (7,273,216) (2,488,533) (32,404) 2,235,390
---------- ---------- ------- ---------
Year ended Oct. 31, 2002
Class A Class B Class C Class Y
Sold 49,379,910 3,267,510 278,052 36,651,824
Issued for reinvested distributions 917,365 47,832 1,828 168,241
Redeemed (69,070,028) (15,830,239) (304,605) (34,914,727)
----------- ----------- -------- -----------
Net increase (decrease) (18,772,753) (12,514,897) (24,725) 1,905,338
----------- ----------- ------- ---------
5. LENDING OF PORTFOLIO SECURITIES
As of April 30, 2003, securities valued at $4,222,125 were on loan to brokers.
For collateral, the Fund received $4,275,000 in cash. Income from securities
lending amounted to $60,980 for the six months ended April 30, 2003. The risks
to the Fund of securities lending are that the borrower may not provide
additional collateral when required or return the securities when due.
6. FORWARD FOREIGN CURRENCY CONTRACTS
As of April 30, 2003, the Fund has forward foreign currency exchange contracts
that obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
May 1, 2003 3,295,818 27,411 $ -- $224
Japanese Yen U.S. Dollar
May 2, 2003 60,100 7,235 756 572 --
U.S. Dollar Japanese Yen
May 5, 2003 1,865,534 1,166,891 -- 94
Australian Dollar U.S. Dollar
May 6, 2003 447,065 714,544 22 --
British Pound U.S. Dollar
May 6, 2003 18,139,967 152,047 -- 57
Japanese Yen U.S. Dollar
---- ----
Total $594 $375
---- ----
- --------------------------------------------------------------------------------
19 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
7. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
Deutsche Bank, whereby the Fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The Fund must
maintain asset coverage for borrowings of at least 300%. The agreement, which
enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the LIBOR plus 0.50%, the
IBOR plus 0.50% or the higher of the Federal Funds Rate plus 0.25% and the Prime
Lending Rate. Borrowings are payable within 60 days after such loan is executed.
The Fund also pays a commitment fee equal to its pro rata share of the amount of
the credit facility at a rate of 0.09% per annum. The Fund had no borrowings
outstanding during the six months ended April 30, 2003.
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund has capital loss carry-over of
$459,835,190 as of Oct. 31, 2002, that will expire in 2009 and 2010 if not
offset by capital gains. It is unlikely the board will authorize a distribution
of any net realized capital gains until the available capital loss carry-over
has been offset or expires.
- --------------------------------------------------------------------------------
20 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
9. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(g) 2002 2001 2000 1999
Net asset value, beginning of period $4.97 $5.96 $11.17 $13.45 $10.70
Income from investment operations:
Net investment income (loss) .01 .03 .01 .02 .03
Net gains (losses) (both realized and unrealized) (.11) (.94) (3.46) .04 2.91
Total from investment operations (.10) (.91) (3.45) .06 2.94
Less distributions:
Dividends from net investment income (.02) (.08) -- (.14) (.06)
Distributions from realized gains -- -- (1.76) (2.20) (.13)
Total distributions (.02) (.08) (1.76) (2.34) (.19)
Net asset value, end of period $4.85 $4.97 $ 5.96 $11.17 $13.45
Ratios/supplemental data
Net assets, end of period (in millions) $250 $292 $462 $882 $901
Ratio of expenses to average daily net assets(c) 1.67%(d) 1.54% 1.28% 1.27% 1.30%
Ratio of net investment income (loss) to average daily net assets .64%(d) .39% .07% .14% .27%
Portfolio turnover rate (excluding short-term securities) 45% 103% 303% 133% 100%
Total return(e) (2.02%)(f) (15.55%) (35.71%) (2.79%) 27.81%
See accompanying notes to financial highlights.
- --------------------------------------------------------------------------------
21 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(g) 2002 2001 2000 1999
Net asset value, beginning of period $4.88 $5.83 $11.04 $13.32 $10.62
Income from investment operations:
Net investment income (loss) .03 (.02) (.07) (.08) (.04)
Net gains (losses) (both realized and unrealized) (.15) (.92) (3.38) .04 2.87
Total from investment operations (.12) (.94) (3.45) (.04) 2.83
Less distributions:
Dividends from net investment income -- (.01) -- (.04) --
Distributions from realized gains -- -- (1.76) (2.20) (.13)
Total distributions -- (.01) (1.76) (2.24) (.13)
Net asset value, end of period $4.76 $4.88 $ 5.83 $11.04 $13.32
Ratios/supplemental data
Net assets, end of period (in millions) $82 $96 $188 $403 $417
Ratio of expenses to average daily net assets(c) 2.45%(d) 2.31% 2.05% 2.03% 2.07%
Ratio of net investment income (loss) to average daily net assets (.14%)(d) (.34%) (.70%) (.62%) (.49%)
Portfolio turnover rate (excluding short-term securities) 45% 103% 303% 133% 100%
Total return(e) (2.46%)(f) (16.16%) (36.19%) (3.51%) 26.85%
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(g) 2002 2001 2000(b)
Net asset value, beginning of period $4.85 $5.84 $11.05 $12.43
Income from investment operations:
Net investment income (loss) .02 (.02) (.07) (.04)
Net gains (losses) (both realized and unrealized) (.13) (.92) (3.38) (1.34)
Total from investment operations (.11) (.94) (3.45) (1.38)
Less distributions:
Dividends from net investment income -- (.05) -- --
Distributions from realized gains -- -- (1.76) --
Total distributions -- (.05) (1.76) --
Net asset value, end of period $4.74 $4.85 $ 5.84 $11.05
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $--
Ratio of expenses to average daily net assets(c) 2.45%(d) 2.31% 2.05% 2.03%(d)
Ratio of net investment income (loss) to average daily net assets (.15%)(d) (.35%) (.64%) (.83%)(d)
Portfolio turnover rate (excluding short-term securities) 45% 103% 303% 133%
Total return(e) (2.27%)(f) (16.27%) (36.15%) (11.10%)(f)
See accompanying notes to financial highlights.
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22 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2003(g) 2002 2001 2000 1999
Net asset value, beginning of period $4.99 $5.99 $11.19 $13.46 $10.70
Income from investment operations:
Net investment income (loss) .01 .04 .02 .04 .05
Net gains (losses) (both realized and unrealized) (.11) (.95) (3.46) .05 2.91
Total from investment operations (.10) (.91) (3.44) .09 2.96
Less distributions:
Dividends from net investment income (.03) (.09) -- (.16) (.07)
Distributions from realized gains -- -- (1.76) (2.20) (.13)
Total distributions (.03) (.09) (1.76) (2.36) (.20)
Net asset value, end of period $4.86 $4.99 $ 5.99 $11.19 $13.46
Ratios/supplemental data
Net assets, end of period (in millions) $78 $69 $71 $114 $100
Ratio of expenses to average daily net assets(c) 1.48%(d) 1.37% 1.11% 1.10% 1.18%
Ratio of net investment income (loss) to average daily net assets .96%(d) .61% .25% .33% .41%
Portfolio turnover rate (excluding short-term securities) 45% 103% 303% 133% 100%
Total return(e) (2.03%)(f) (15.43%) (35.52%) (2.57%) 27.91%
Notes to the financial highlights
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2003 (Unaudited).
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23 -- AXP INTERNATIONAL FUND -- 2003 SEMIANNUAL REPORT
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(logo)
AMERICAN
EXPRESS(R)
- --------------------------------------------------------------------------------
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
Item 2. Code of Ethics. Not applicable pursuant to SEC Release No. IC-25914
(January 27, 2003).
Item 3. Audit Committee Financial Expert. Not applicable pursuant to SEC
Release No. IC-25914 (January 27, 2003).
Item 4. Principal Accountant Fees and Services. Not applicable pursuant to
SEC Release No. IC-25915 (January 28, 2003).
Items 5-6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) The registrant's Principal Executive Officer and Principal
Financial Officer have evaluated the registrant's disclosure
controls and procedures within 90 days of this filing and have
concluded that the registrant's disclosure controls and
procedures by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) At the date of filing this Form N-CSR, the registrant's Principal
Executive Officer and Principal Financial Officer are aware of no
significant changes in the registrant's internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10. Exhibits.
(a) Not applicable pursuant to SEC Release No. IC-25914 (January 27,
2003).
(b) Separate certification for the Registrant's principal executive
officer and principal financial officer, as required by Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are attached as EX.99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) AXP International Series, Inc.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date June __, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date July 1, 2003
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date July 1, 2003