UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5696
------------
AXP GLOBAL SERIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
50606 AXP Financial Center, Minneapolis, Minnesota 55474
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
-----------------
Date of fiscal year end: 10/31
--------------
Date of reporting period: 10/31
--------------
AXP(R)
Global Bond
Fund
Annual Report
for the Period Ended
Oct. 31, 2004
AXP Global Bond Fund seeks to provide shareholders with high total return
through income and growth of capital.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers with Portfolio Management 5
The Fund's Long-term Performance 10
Investments in Securities 12
Financial Statements (Portfolio) 22
Notes to Financial Statements (Portfolio) 25
Report of Independent Registered
Public Accounting Firm (Portfolio) 30
Financial Statements (Fund) 31
Notes to Financial Statements (Fund) 34
Report of Independent Registered
Public Accounting Firm (Fund) 44
Federal Income Tax Information 45
Fund Expenses Example 47
Board Members and Officers 49
Proxy Voting 51
(logo) Dalbar)
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Fund Snapshot AT OCT. 31, 2004
PORTFOLIO MANAGER
Portfolio manager Since Years in industry
Nic Pifer, CFA* 5/00 14
* The Fund is managed by a team of portfolio managers led by Nic Pifer.
FUND OBJECTIVE
For investors seeking high total return through income and growth of capital.
Inception dates by class
A: 3/20/89 B: 3/20/95 C: 6/26/00 Y: 3/20/95
Ticker symbols by class
A: IGBFX B: IGLOX C: AGBCX Y: --
Total net assets $559.4 million
Number of holdings 261
Average weighted life* 6.2 years
Effective duration** 4.4 years
Weighted average bond rating AA
* Average weighted life is the average number of years that each dollar of
unpaid principal due on a security remains outstanding.
** Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the levels
of interest rates from two years out of 30 years). Positive duration means
that as rates rise, the price decreases, and negative duration means that
as rates rise, the price increases.
STYLE MATRIX
DURATION
SHORT INT LONG
X X HIGH
MEDIUM QUALITY
LOW
Shading within the style matrix indicates areas in which the Fund generally
invests.
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
United States 36.1%
Germany 11.2%
Italy 8.6%
Spain 7.9%
Japan 5.2%
Greece 4.0%
United Kingdom 3.5%
Netherlands 3.1%
Supra-National 2.8%
Canada 2.4%
Finland 2.3%
Austria 2.1%
France 2.0%
Norway 1.8%
Australia 1.7%
New Zealand 1.5%
Poland 1.1%
Other* 2.7%
* Includes Brazil, Denmark, Luxembourg, Malaysia, Mexico, South Korea and
Sweden.
CREDIT QUALITY SUMMARY
Percentage of portfolio assets
AAA bonds 54.6%
AA bonds 24.6
A bonds 9.5
BBB bonds 3.9
Non-investment grade bonds 2.7
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating is
determined through an internal analysis, if appropriate.
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the year ended Oct. 31, 2004
(bar 1) (bar 2) (bar 3)
+10.70% +9.68% +8.93%
(bar 1) AXP Global Bond Fund Class A (excluding sales charge)
(bar 2) Lehman Brothers Global Aggregate Index (unmanaged)
(bar 3) Lipper Global Income Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. You should consider the investment objectives,
risks, and charges and expenses of the Fund carefully before investing.
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart; if reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (3/20/89) (3/20/95) (6/26/00) (3/20/95)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
as of Oct. 31, 2004
1 year +10.70% +5.43% +9.83% +5.83% +9.72% +9.72% +10.86% +10.86%
3 years +10.02% +8.25% +9.23% +8.39% +9.18% +9.18% +10.34% +10.34%
5 years +6.96% +5.92% +6.15% +5.99% N/A N/A +7.18% +7.18%
10 years +6.66% +6.15% N/A N/A N/A N/A N/A N/A
Since inception +8.10% +7.76% +5.99% +5.99% +7.94% +7.94% +6.80% +6.80%
as of Sept. 30, 2004
1 year +6.73% +1.65% +6.04% +2.04% +6.09% +6.09% +7.06% +7.06%
3 years +9.62% +7.85% +8.81% +7.96% +8.83% +8.83% +9.87% +9.87%
5 years +6.37% +5.34% +5.58% +5.42% N/A N/A +6.60% +6.60%
10 years +6.44% +5.93% N/A N/A N/A N/A N/A N/A
Since inception +7.96% +7.62% +5.76% +5.76% +7.44% +7.44% +6.55% +6.55%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- --------------------------------------------------------------------------------
4 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager Nic Pifer discusses the Fund's positioning and results
for fiscal year 2004.
Q: How did AXP Global Bond Fund perform for the 12 months ended Oct. 31, 2004?
A: AXP Global Bond Fund's Class A shares gained 10.70% (excluding sales charge)
for the 12 months ended Oct. 31, 2004. This outpaced the Fund's benchmark,
the Lehman Brothers Global Aggregate Index (Lehman Index), which posted a
total return of 9.68%. The Fund also outperformed the Lipper Global Income
Funds Index, representing the Fund's peer group, which posted an 8.93% total
return over the same period.
Q: What factors most significantly affected performance?
A: Strong annual performance of the Fund in absolute terms reflected positive
returns on the Fund's underlying bond holdings and currency gains from a
weaker U.S. dollar. With the exception of Japan, intermediate- and
longer-maturity bond yields declined in most of the major government bond
markets during the annual period. These yield moves produced moderate total
returns in local currency terms, i.e., before the impact of currency
fluctuations are taken into account. Additionally, on a trade-weighted
basis, the U.S. dollar declined 6.7% during the 12 months ended Oct. 31,
2004 (see chart on page 7). A falling dollar increases the value of the
Fund's foreign currency denominated securities when expressed in U.S. dollar
terms, and so the currency gains from a weaker U.S. dollar amplified returns
on the Fund's international holdings, producing a strong overall return for
the period.
The Fund's good performance relative to its Lehman Index reflected a number
of factors, including country allocation, currency positioning, yield curve
positioning, and sector weightings. The Fund held a only a small position in
Japanese bonds throughout the period, AXP Global Bond Fund
SEC YIELDS
Class A Class B Class C Class Y Class I
As of Sept. 30, 2004 2.24% 1.59% 1.58% 2.51% 2.79%
As of Oct. 29, 2004 2.13% 1.49% 1.48% 2.40% 2.72%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public offering
price (POP) per share on the last day of the period, and converting the results
to yearly figures. See Average Annual Total Returns on page 4 for additional
performance information.
- --------------------------------------------------------------------------------
5 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> Strong annual performance of the Fund in absolute terms
was due primarily to currency gains from a weaker U.S. dollar.(end callout
quote)
(begin callout quote)> We intend to maintain a somewhat defensive
position in the Fund with respect to interest rate risk exposure. (end
callout quote)
a strategy that worked well as the Japanese market underperformed other
major bond markets by a wide margin. Currency positioning also benefited the
Fund. Throughout the period, the Fund ran overweight positions in the Euro,
several other European currencies, and the currencies of Canada, Australia,
and New Zealand (the so-called "dollar bloc" currencies). These currencies
outperformed the Japanese yen.
Additionally, we had positioned the Fund in anticipation of flatter yield
curve in the United States, on the view that short-term bond yields would
rise faster than long-term yields as the Federal Open Market Committee
(FOMC) of the U.S. Federal Reserve started to tighten monetary policy. In
contrast, we had positioned for a steeper yield curve in Japan. Both
strategies proved successful, especially our U.S. yield curve position.
Finally, the Fund held a modest weighting in high yield corporate bonds
(about 2-3% of the portfolio) throughout the period. These securities, which
are not in the Fund's Lehman Index, outperformed investment grade bonds over
the course of the fiscal year. This allocation to high yield debt helped
offset our positioning in investment grade corporate bonds and structured
securities, which proved to be too conservative.
- --------------------------------------------------------------------------------
6 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Questions & Answers
(line chart)
The Rise of the Euro and the Decline of the Dollar
Oct. 31, 2001 to Oct. 31, 2004
Exchange Rate (Dollar to Euro)
10/01 $0.90
11/01 $0.90
12/01 $0.89
1/02 $0.86
2/02 $0.87
3/02 $0.87
4/02 $0.90
5/02 $0.93
6/02 $0.99
7/02 $0.98
8/02 $0.98
9/02 $0.99
10/02 $0.99
11/02 $0.99
12/02 $1.05
1/03 $1.08
2/03 $1.08
3/03 $1.09
4/03 $1.12
5/03 $1.18
6/03 $1.15
7/03 $1.12
8/03 $1.10
9/03 $1.17
10/03 $1.16
11/03 $1.20
12/03 $1.26
1/04 $1.25
2/04 $1.25
3/04 $1.23
4/04 $1.20
5/04 $1.22
6/04 $1.22
7/04 $1.20
8/04 $1.22
9/04 $1.24
10/04 $1.28
Source: Bloomberg
This chart shows how much the euro has risen in value against the U.S. dollar
over the past three years. As of Oct. 31, 2004, it took $1.28 to buy a euro
compared to $0.90 three years ago, a 43% increase. That means it is more
expensive to travel to Europe, but this trend has helped augment returns for
U.S. investors who own bonds denominated in euros.
Q: What changes did you make to the Fund and how is it currently positioned?
A: We made a number of changes during the 12 months. These included:
o Shortening Duration. As the annual period began, the Fund had a fairly
neutral-to-the-Lehman Index duration given our view that global interest
rates were likely to remain range-bound through early 2004. Then, in
March 2004, global bond yields moved significantly lower, as a string of
weaker-than-expected U.S. economic data releases caused investors to
question the pace of the global economic recovery. We believed these
fears were misplaced. We used the opportunity to significantly shorten
the Fund's duration in March and continued to do so through April. We
adjusted this duration position over the subsequent months -- lengthening
duration modestly after rates peaked in May and then shortening again in
- --------------------------------------------------------------------------------
7 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Questions & Answers
mid to late summer after yields renewed their decline. The Fund ended the
annual period with a duration lower than its Index.
o Decreasing Exposure to the U.S. Dollar. The Fund began the period with a
greater-than-Lehman Index exposure to European currencies and to the
three "dollar-bloc" currencies, a lower-than-Lehman Index exposure to the
Japanese yen, and a very modestly less-than-Lehman Index position in the
U.S. dollar. We expected the U.S. dollar to continue its decline compared
to other currencies. Thus, we viewed the U.S. dollar's rebound in April
and May 2004 as an opportunity to move to a more significantly lower
position in the U.S. currency and to reallocate the exposure primarily to
the euro but also to the "dollar bloc" currencies.
o Adjusting Sector Allocations. During the first half of the period, we
increased the Fund's exposure to investment grade corporate bonds and
U.S. mortgage-backed securities. We also decreased the portfolio's
exposure to emerging market debt to approximately 1% of invested assets
based on concerns that valuations in the sector had become unattractive.
During the second half of the fiscal year, we reduced the Fund's
allocation to corporate bonds and U.S. mortgage-backed securities,
essentially selling into strength as these sectors outperformed
government bonds. We also trimmed the Fund's emerging market debt
position even further. We added modestly to the Fund's allocation to
high-yield corporate bonds, as we believed this sector should benefit
rather directly from acceleration in U.S. economic growth.
These changes resulted in a 92% portfolio turnover rate for the annual
period, but we believe the changes better positioned the Fund for current
and anticipated economic and market conditions.
Q: How do you intend to manage the Fund in the coming months?
A: We intend to maintain a somewhat defensive position in the Fund with respect
to interest rate risk exposure. Specifically, we expect to keep the Fund's
duration shorter than that of its benchmark given our view that the U.S.
economy in particular is growing at an above-trend pace and thus that the
Fed is likely to continue raising the targeted federal funds rate into 2005
until it is back to more historically neutral levels.
- --------------------------------------------------------------------------------
8 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Questions & Answers
We also expect the Bank of Canada, which just started its tightening
monetary cycle in September 2004, to continue raising interest rates for
some time. On the other hand, the monetary tightening cycles of the Bank of
England, the Reserve Bank of Australia, and the Reserve Bank of New Zealand
may soon be coming to an end. These central banks had started their
tightening cycles well ahead of the Fed and had never lowered interest rates
as significantly as the United States. Economic news from the Eurozone has
surprised on the weak side, and so the European Central Bank may wait before
beginning to raise interest rates until mid-2005, and we believe the Bank of
Japan is still more than a year away from changing its interest rates from
their current 0% level.
Overall, the strength of the global economy in the coming months remains
uncertain given both the mix of central bank actions and persistently high
oil prices. We expect global bond yields to move higher, but not
dramatically so. From a country perspective, we continue to favor European
bonds.
Our sector positioning remains fairly cautious as well. The extra income
potential of corporate bonds and U.S. mortgage-backed securities appears
narrow relative to historical norms, making valuations in these sectors
unattractive currently. Thus, we intend to maintain the Fund's
less-than-index positions in both sectors for the near term.
As for currency exposure, we expect the U.S. dollar to decline further due
to the burgeoning U.S. current account deficit. We intend to maintain the
Fund's less-than-benchmark position in the U.S. dollar in the coming months,
and thus a weaker U.S. dollar should benefit the Fund. At the same time,
however, we do not expect the Fund to experience the same sort of a boost
from currency moves that it has seen since 2002, simply because the dollar
is no longer as overvalued as it was in early 2002. Should the U.S. dollar
indeed weaken in line with our expectation, then we may reassess the
risk/reward profile of the Fund's U.S. dollar position.
As always, we constantly re-evaluate the Fund's duration, sector, country,
yield curve, and currency positioning in an effort to seek an attractive
trade-off between risk and potential return. Our sector teams remain focused
on careful individual security selection, as we continue to seek
opportunities to capitalize on attractively valued bonds.
- --------------------------------------------------------------------------------
9 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Global Bond Fund Class A shares (from 11/1/94 to 10/31/04) as
compared to the performance of two widely cited performance indices, the Lehman
Brothers Global Aggregate Index and the Lipper Global Income Funds Index. In
comparing the Fund's Class A shares to these indices, you should take into
account the fact that the Fund's performance reflects the maximum sales charge
of 4.75%, while such charges are not reflected in the performance of the
indices. Returns for the Fund include the reinvestment of any distribution paid
during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions and
redemptions. Current performance may be lower or higher than the performance
information shown. You may obtain performance information current to the most
recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. Also see "Past Performance" in the Fund's current
prospectus. You should consider the investment objectives, risks, and charges
and expenses of the Fund carefully before investing.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
Oct. 31, 2004 $0.24 $-- $-- $0.24
Oct. 31, 2003 0.21 -- -- 0.21
Oct. 31, 2002 0.17 -- -- 0.17
Oct. 31, 2001 0.15 -- -- 0.15
Oct. 31, 2000 0.19 -- -- 0.19
- --------------------------------------------------------------------------------
10 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
(line chart)
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP GLOBAL BOND FUND
AXP Global Bond Fund Class A
(includes sales charge) $ 9,525 $10,818 $11,788 $12,367 $13,017 $12,972 $12,302 $13,635 $14,485 $16,405 $18,160
Lehman Brothers Global
Aggregate Index(1) $10,000 $11,595 $12,380 $13,004 $14,600 $14,176 $13,774 $15,129 $16,353 $18,348 $20,124
Lipper Global Income Funds
Index(2) $10,000 $11,141 $12,451 $13,138 $13,724 $13,638 $13,506 $14,870 $15,598 $17,659 $19,236
`94 `95 `96 `97 `98 `99 `00 `01 `02 `03 `04
COMPARATIVE RESULTS
Results as of Oct. 31, 2004 Since
1 year 3 years 5 years 10 years inception(3)
AXP Global Bond Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,543 $12,685 $13,332 $18,160 $32,127
Average annual total return +5.43% +8.25% +5.92% +6.15% +7.76%
Lehman Brothers Global Aggregate Index(1)
Cumulative value of $10,000 $10,968 $13,303 $14,197 $20,124 N/A
Average annual total return +9.68% +9.98% +7.26% +7.25% N/A
Lipper Global Income Funds Index(2)
Cumulative value of $10,000 $10,893 $12,936 $14,104 $19,236 $29,598
Average annual total return +8.93% +8.96% +7.12% +6.76% +7.21%
Results for other share classes can be found on page 4.
(1) The Lehman Brothers Global Aggregate Index, an unmanaged market
capitalization weighted benchmark, tracks the performance of investment
grade fixed income securities denominated in 13 currencies. The index
reflects the reinvestment of all income and changes in market prices, but
excludes brokerage commissions or other fees.
(2) The Lipper Global Income Funds Index includes the 30 largest global income
funds tracked by Lipper Inc. The index's returns include net reinvested
dividends.
(3) Fund data is from March 20, 1989. The Lehman Brothers Global Aggregate
Index began operations on Jan. 1, 1990. Lipper Index data is from April 1,
1989.
- --------------------------------------------------------------------------------
11 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Investments in Securities
World Income Portfolio
Oct. 31, 2004
(Percentages represent value of investments compared to net assets)
Bonds (95.7%)(c)
Issuer Coupon Principal Value(a)
rate amount
Australia (1.7%)
Burns Philp Capital Property
(U.S. Dollar) Sr Sub Nts
02-15-11 10.75% $270,000 $302,400
New South Wales Treasury
(Australian Dollar)
03-01-08 8.00 8,000,000 6,459,998
Queensland Treasury
(Australian Dollar)
06-14-05 6.50 3,000,000 2,262,396
Telstra
(U.S. Dollar)
04-01-12 6.38 500,000 554,218
Total 9,579,012
Austria (2.2%)
Republic of Austria
(European Monetary Unit)
01-15-10 5.50 8,500,000 12,038,224
Brazil (0.2%)
Federal Republic of Brazil
(U.S. Dollar)
04-15-14 8.00 1,192,122 1,184,254
Canada (2.4%)
Ainsworth Lumber
(U.S. Dollar) Sr Nts
10-01-12 7.25 115,000(d) 116,438
Canada Housing Trust
(Canadian Dollar)
06-15-06 5.53 3,220,000 2,742,301
Canadian Pacific Railway
(Canadian Dollar)
06-15-10 4.90 380,000(d) 314,889
CanWest Media
(U.S. Dollar) Series B
04-15-13 7.63 250,000 271,875
Cascades
(U.S. Dollar) Sr Nts
02-15-13 7.25 125,000 135,000
Corus Entertainment
(U.S. Dollar) Sr Sub Nts
03-01-12 8.75 165,000 183,975
Norampac
(U.S. Dollar) Sr Nts
06-01-13 6.75 260,000 274,300
Province of British Columbia
(Canadian Dollar)
08-23-10 6.38 6,400,000 5,820,169
Province of Ontario
(Canadian Dollar)
03-08-06 5.90 3,300,000 2,809,213
Rogers Cable
(U.S. Dollar)
06-15-13 6.25 70,000 69,825
Russel Metals
(U.S. Dollar) Sr Nts
03-01-14 6.38 140,000 140,000
Shaw Communications
(U.S. Dollar) Sr Nts
04-06-11 7.25 200,000 220,000
Sun Media
(U.S. Dollar)
02-15-13 7.63 200,000 217,000
Videotron Ltee
(U.S. Dollar)
01-15-14 6.88 125,000 131,250
Total 13,446,235
Denmark (0.6%)
Realkredit Danmark
(Danish Krone) Series 10D
01-01-06 4.00 17,800,000 3,116,785
Finland (2.3%)
Republic of Finland
(European Monetary Unit)
07-04-07 5.00 9,400,000 12,742,889
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
France (2.0%)
Compagnie de Financement Foncier
(European Monetary Unit)
02-02-06 2.75% 2,000,000 $2,571,477
France Telecom
(U.S. Dollar)
03-01-06 8.20 700,000 744,690
Govt of France
(European Monetary Unit)
04-25-12 5.00 5,700,000 7,939,333
Total 11,255,500
Germany (11.3%)
Allgemeine HypothekenBank Rheinboden
(European Monetary Unit) Series 501
09-02-09 5.00 1,860,000(d) 2,560,603
Bayerische Landesbank
(Japanese Yen) Sr Nts
04-22-13 1.40 301,000,000 2,842,551
Bundesrepublik Deutschland
(European Monetary Unit)
07-04-10 5.25 2,750,000 3,857,039
07-04-13 3.75 9,600,000 12,227,386
07-04-27 6.50 7,470,000 12,226,549
Bundesschatzanweisungen
(European Monetary Unit)
12-16-05 2.75 15,310,000 19,689,751
DePfa Deutsche Pfandbriefbank
(European Monetary Unit)
Series G6
01-15-10 5.50 2,200,000 3,105,875
Deutsche Bank
(European Monetary Unit)
07-28-09 4.25 500,000 664,983
Rheinische Hypothekenbank
(European Monetary Unit)
07-05-10 5.75 2,200,000 3,146,427
Westfaelische HypotheKenbank
(European Monetary Unit)
04-24-06 4.75 2,300,000 3,040,364
Total 63,361,528
Greece (4.0%)
Hellenic Republic
(European Monetary Unit)
06-21-06 2.75 7,600,000 9,763,445
04-19-07 4.65 4,780,000 6,410,876
10-22-22 5.90 4,200,000 6,252,679
Total 22,427,000
Italy (8.6%)
Buoni Poliennali Del Tesoro
(European Monetary Unit)
03-01-07 4.50 8,800,000 11,751,958
10-15-07 5.00 8,700,000 11,840,229
02-01-13 4.75 9,300,000 12,724,866
11-01-26 7.25 3,486,283 6,085,661
Republic of Italy
(Japanese Yen)
03-27-08 3.80 500,000,000 5,263,192
Telecom Italia
(European Monetary Unit)
02-01-07 5.63 500,000 676,690
Total 48,342,596
Japan (5.3%)
Development Bank of Japan
(Japanese Yen)
06-20-12 1.40 650,000,000 6,246,052
Govt of Japan
(Japanese Yen)
03-20-09 0.70 390,000,000 3,712,260
12-21-09 1.70 970,000,000 9,652,830
03-22-10 1.70 320,000,000 3,184,647
06-20-12 1.40 700,000,000 6,744,601
Total 29,540,390
Luxembourg (0.6%)
BCP Caylux Holdings Luxembourg
(U.S. Dollar) Sr Sub Nts
06-15-14 9.63 55,000(d) 61,600
Michelin Finance Luxembourg
(European Monetary Unit)
04-16-09 6.13 500,000 705,512
Telecom Italia Capital
(U.S. Dollar)
09-30-34 6.00 2,555,000(d) 2,511,266
Total 3,278,378
Malaysia (0.3%)
Petronas Capital
(U.S. Dollar)
05-22-12 7.00 1,500,000(d) 1,729,628
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
13 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Mexico (0.5%)
United Mexican States
(Japanese Yen)
06-06-06 6.75% 62,000,000 $644,104
(U.S. Dollar)
03-03-15 6.63 1,550,000 1,661,600
Total 2,305,704
Netherlands (3.1%)
Bank Nederlandse Gemeenten
(British Pound)
08-06-07 7.38 1,100,000 2,145,153
Deutsche Telekom Intl Finance
(European Monetary Unit)
05-29-07 7.50 500,000 709,311
Govt of Netherlands
(European Monetary Unit)
07-15-12 5.00 8,700,000 12,115,915
ING Bank
(European Monetary Unit) Sr Nts
01-29-09 4.25 600,000 797,822
RWE Finance
(European Monetary Unit)
10-26-07 5.50 500,000 685,731
Vodafone Finance
(European Monetary Unit)
05-27-09 4.75 740,000 999,751
Total 17,453,683
New Zealand (1.5%)
Govt of New Zealand
(New Zealand Dollar)
11-15-06 8.00 8,800,000 6,247,454
11-15-11 6.00 3,530,000 2,413,471
Total 8,660,925
Norway (1.8%)
Eksportfinans
(Japanese Yen)
06-21-10 1.80 340,000,000 3,384,809
Govt of Norway
(Norwegian Krone)
05-16-11 6.00 36,800,000 6,527,976
Total 9,912,785
Poland (1.1%)
Republic of Poland
(Polish Zloty)
02-12-06 8.50 11,600,000 3,484,349
11-24-09 6.00 9,000,000 2,540,531
Total 6,024,880
South Korea (0.1%)
Korea Development Bank
(Japanese Yen) Series 21RG
06-25-08 0.98 70,000,000 662,580
Spain (7.9%)
Caja de Ahorros y Monte de Piedad de Madrid
(European Monetary Unit)
03-25-11 3.50 2,500,000 3,181,957
Govt of Spain
(European Monetary Unit)
10-31-07 4.25 8,950,000 11,945,748
07-30-09 5.15 12,000,000 16,713,018
01-31-10 4.00 9,400,000 12,472,134
Total 44,312,857
Supra-National (2.9%)
European Investment Bank
(British Pound)
12-07-11 5.50 3,000,000 5,670,123
Inter-American Development Bank
(Japanese Yen)
07-08-09 1.90 1,035,000,000 10,379,275
Total 16,049,398
Sweden (0.5%)
Govt of Sweden
(Swedish Krona)
04-20-06 3.50 19,000,000 2,720,081
United Kingdom (3.5%)
BT Group
(U.S. Dollar)
12-15-10 8.38 700,000 849,421
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-07 9.50 8,750,000(b,h,l) --
United Kingdom Treasury
(British Pound)
03-07-12 5.00 5,910,000 11,045,450
09-07-14 5.00 4,210,000 7,895,326
Total 19,790,197
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (31.4%)
Aesop Funding II LLC
(U.S. Dollar) Series 2002-1A Cl A1
10-20-06 3.85% $500,000(d) $505,289
Airgas
(U.S. Dollar)
10-01-11 9.13 195,000 219,375
Allied Waste North America
(U.S. Dollar) Series B
04-01-08 8.88 100,000 106,000
AmeriCredit Automobile Receivables Trust
(U.S. Dollar) Series 2004-DF Cl A3
07-06-09 2.98 800,000(g) 799,878
ASIF Global Financing XIX
(U.S. Dollar)
01-17-13 4.90 6,855,000(d) 7,001,697
AT&T Wireless Services
(U.S. Dollar) Sr Nts
03-01-11 7.88 500,000 595,653
Ball
(U.S. Dollar)
12-15-12 6.88 335,000 362,637
Bank of America
(U.S. Dollar) Sr Nts
02-01-07 5.25 1,000,000 1,047,924
Sub Nts
(U.S. Dollar)
08-15-13 4.75 800,000 804,549
Bear Stearns Commercial Mtge Securities
(U.S. Dollar)
Series 2003-T10 Cl A1
03-13-40 4.00 646,223(f) 647,586
Series 2004-PWR5 Cl A5
07-11-42 4.98 1,000,000(f) 1,018,890
Series 2004-T16 Cl A3
02-13-46 4.03 600,000(f,g) 602,344
Boise Cascade LLC
(U.S. Dollar) Sr Sub Nts
10-15-14 7.13 120,000(d) 125,257
Boyd Gaming
(U.S. Dollar) Sr Sub Nts
12-15-12 7.75 35,000 38,588
04-15-14 6.75 75,000 78,656
Caesars Entertainment
(U.S. Dollar) Sr Sub Nts
05-15-11 8.13 235,000 274,656
Cardinal Health
(U.S. Dollar)
06-15-15 4.00 1,700,000 1,501,928
Case New Holland
(U.S. Dollar) Sr Nts
06-01-09 6.00 40,000(d) 40,000
Chesapeake Energy
(U.S. Dollar) Sr Nts
06-15-14 7.50 75,000 83,438
08-15-14 7.00 65,000 70,525
01-15-16 6.88 20,000 21,400
Choctaw Resort Development Enterprise
(U.S. Dollar) Sr Nts
04-01-09 9.25 150,000 160,875
Citigroup
(European Monetary Unit) Sr Nts
05-21-10 3.88 2,600,000 3,380,448
Comcast
(U.S. Dollar)
03-15-11 5.50 2,150,000 2,267,368
Comcast Cable Communication Holdings
(U.S. Dollar)
03-15-13 8.38 106,000 130,052
Compass Minerals Group
(U.S. Dollar)
08-15-11 10.00 200,000 224,000
Cott Beverages
(U.S. Dollar)
12-15-11 8.00 300,000 327,750
CS First Boston Mtge Securities
(U.S. Dollar) Series 2004-C1 Cl A2
01-15-37 3.52 250,000(f) 248,320
CSC Holdings
(U.S. Dollar) Sr Nts
12-15-07 7.88 150,000 161,625
DaimlerChrysler NA Holding
(European Monetary Unit)
01-16-07 5.63 670,000 904,088
(U.S. Dollar)
11-15-13 6.50 400,000 436,400
Del Monte
(U.S. Dollar) Series B
05-15-11 9.25 200,000 221,000
Dex Media West LLC/Finance
(U.S. Dollar) Sr Nts Series B
08-15-10 8.50 55,000 62,700
DIRECTV Holdings LLC/Finance
(U.S. Dollar) Sr Nts
03-15-13 8.38 150,000 171,562
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
15 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Dobson Cellular Systems
(U.S. Dollar)
11-01-11 6.96% $30,000(d,e,g) $30,825
11-01-11 8.38 30,000(d,g) 30,938
Domino's Pizza
(U.S. Dollar) Sr Sub Nts
07-01-11 8.25 125,000 136,875
DPL
(U.S. Dollar) Sr Nts
09-01-11 6.88 150,000 163,500
DR Horton
(U.S. Dollar) Sr Nts
05-01-13 6.88 150,000 162,375
09-15-14 5.63 350,000 346,938
DRS Technologies
(U.S. Dollar) Sr Sub Nts
11-01-13 6.88 80,000 84,000
Earle M Jorgensen
(U.S. Dollar)
06-01-12 9.75 50,000 55,500
Echostar DBS
(U.S. Dollar)
10-01-14 6.63 125,000(d) 127,813
(U.S. Dollar) Sr Nts
10-01-08 5.75 60,000 61,350
El Paso Natural Gas
(U.S. Dollar) Sr Nts Series A
08-01-10 7.63 160,000 173,000
Emmis Operating
(U.S. Dollar) Sr Sub Nts
05-15-12 6.88 70,000 73,500
Encore Acquisition
(U.S. Dollar) Sr Sub Nts
04-15-14 6.25 540,000 553,499
Federal Home Loan Mtge Corp
(European Monetary Unit)
01-15-06 5.25 1,800,000 2,379,991
(U.S. Dollar)
01-15-12 5.75 7,475,000 8,224,533
09-01-17 6.50 576,687(f) 611,086
05-01-18 5.50 1,137,976(f) 1,179,540
10-01-18 5.00 979,439(f) 1,002,717
04-01-33 6.00 2,379,113(f) 2,477,720
08-01-33 6.50 405,458(f) 426,404
11-01-33 5.00 1,529,533(f) 1,531,538
Collateralized Mtge Obligation
(U.S. Dollar)
11-15-28 4.50 1,044,714(f) 1,065,973
Federal Natl Mtge Assn
(U.S. Dollar)
01-01-09 5.74 1,200,129(f) 1,283,934
01-01-13 4.92 518,089(f) 538,555
02-01-13 4.87 1,346,069(f) 1,390,549
10-01-13 5.11 395,120(f) 412,304
12-01-13 4.98 4,949,571(f) 5,124,895
03-01-17 5.50 1,245,622(f) 1,295,445
03-01-17 6.00 365,079(f) 383,350
04-01-17 6.50 1,269,311(f) 1,353,990
06-01-17 6.00 897,710(f) 942,636
07-01-17 6.00 508,657(f) 536,312
08-01-18 4.50 2,197,838(f) 2,210,629
11-01-18 5.50 2,180,194(f) 2,262,701
12-01-18 5.00 4,327,409(f) 4,432,161
07-01-23 5.00 1,278,882(f) 1,292,787
12-01-31 6.50 483,455(f) 511,647
05-01-32 7.00 1,543,195(f) 1,639,410
05-01-32 7.50 865,365(f) 927,025
06-01-32 7.00 727,970(f) 775,957
07-01-32 6.50 451,694(f) 475,744
08-01-32 6.50 2,425,287(f) 2,555,754
09-01-32 6.50 559,104(f) 590,845
11-01-32 7.50 1,299,444(f) 1,392,035
03-01-33 5.50 2,518,101(f) 2,572,434
03-01-33 6.00 3,092,087(f) 3,211,035
04-01-33 6.00 1,645,372(f) 1,712,497
05-01-33 6.00 807,338(f) 839,526
06-01-33 5.50 4,173,695(f) 4,269,007
09-01-33 5.50 2,634,429(f) 2,687,599
11-01-33 6.50 2,959,632(f) 3,119,899
Ford Motor
(U.S. Dollar)
10-01-28 6.63 485,000 437,608
GE Financial Assurance Holdings
(Japanese Yen)
06-20-11 1.60 130,000,000 1,220,645
General Electric Capital
(European Monetary Unit)
06-20-07 5.13 500,000 676,726
Georgia Gulf
(U.S. Dollar) Sr Nts
12-15-13 7.13 55,000 59,263
Georgia-Pacific
(U.S. Dollar)
02-01-10 8.88 185,000 217,838
(U.S. Dollar) Sr Nts
07-15-08 7.38 300,000 329,999
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
16 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
GMAC
(U.S. Dollar)
03-02-11 7.25% $1,300,000 $1,379,261
Goldman Sachs Group
(U.S. Dollar)
05-15-09 6.65 500,000 557,710
Govt Natl Mtge Assn
(U.S. Dollar)
10-15-33 5.50 1,765,401(f) 1,809,953
Collateralized Mtge Obligation
Interest Only
(U.S. Dollar)
01-20-32 0.00 2,740,864(f,i) 319,730
Grant Prideco Escrow
(U.S. Dollar)
12-15-09 9.00 250,000 280,625
Graphic Packaging Intl
(U.S. Dollar) Sr Nts
08-15-11 8.50 35,000 39,463
Greenwich Capital Commerical Funding
(U.S. Dollar) Series 2004-GG1 Cl A4
06-10-36 4.76 1,100,000(f) 1,136,032
GS Mtge Securities
(U.S. Dollar) Series 2004-GG2 Cl A6
08-10-38 5.40 740,000(f) 777,511
Hilton Hotels
(U.S. Dollar)
12-01-12 7.63 200,000 236,000
Host Marriott LP
(U.S. Dollar) Sr Nts
08-15-12 7.00 55,000(d) 59,400
IASIS Healthcare LLC/Capital
(U.S. Dollar) Sr Sub Nts
06-15-14 8.75 25,000(d) 26,875
Innophos
(U.S. Dollar) Sr Sub Nts
08-15-14 8.88 50,000(d) 53,875
Intl Paper
(European Monetary Unit)
08-11-06 5.38 505,000 672,633
IPALCO Enterprises
(U.S. Dollar)
11-14-08 8.38 250,000 279,375
Jefferson Smurfit
(U.S. Dollar)
10-01-12 8.25 85,000 94,350
Joy Global
(U.S. Dollar) Series B
03-15-12 8.75 60,000 67,800
JPMorgan Chase & Co
(U.S. Dollar) Sub Nts
02-01-11 6.75 1,590,000 1,793,898
Key Energy Services
(U.S. Dollar) Series C
03-01-08 8.38 130,000 137,150
(U.S. Dollar) Sr Nts
05-01-13 6.38 70,000 72,188
Kraft Foods
(U.S. Dollar)
10-01-08 4.00 1,100,000 1,111,209
L-3 Communications
(U.S. Dollar)
06-15-12 7.63 250,000 275,000
La Quinta Properties
(U.S. Dollar) Sr Nts
08-15-12 7.00 25,000(d) 26,844
Lamar Media
(U.S. Dollar)
01-01-13 7.25 50,000 54,250
LB-UBS Commercial Mtge Trust
(U.S. Dollar)
Series 2004-C6 Cl A2
08-15-29 4.19 1,250,000(f) 1,265,124
Series 2004-C7 Cl A2
10-15-29 3.99 1,000,000(f,g) 1,004,609
Lubrizol
(U.S. Dollar) Sr Nts
10-01-09 4.63 270,000 272,645
10-01-14 5.50 270,000 272,240
MacDermid
(U.S. Dollar)
07-15-11 9.13 35,000 39,113
Manitowoc
(U.S. Dollar)
11-01-13 7.13 200,000 214,500
Meritage Homes
(U.S. Dollar)
06-01-11 9.75 145,000 161,675
Metropolitan Edison
(U.S. Dollar)
03-15-13 4.95 1,010,000 1,012,067
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
17 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
MGM Mirage
(U.S. Dollar)
10-01-09 6.00% $45,000 $46,406
(U.S. Dollar) Sr Nts
02-27-14 5.88 50,000 49,250
Metris Master Trust
(U.S. Dollar) Series 2004-2 Cl M
10-20-10 2.44 450,000(e,g) 450,000
Mohegan Tribal Gaming Authority
(U.S. Dollar) Sr Sub Nts
04-01-12 8.00 150,000 165,750
08-15-14 7.13 25,000(d) 26,688
Morgan Stanley Capital I
(U.S. Dollar) Series 2004-HQ4 Cl A5
04-14-40 4.59 1,000,000(f) 1,016,380
Morgan Stanley Group
(European Monetary Unit)
03-16-06 5.25 2,400,000 3,181,144
NeighborCare
(U.S. Dollar) Sr Sub Nts
11-15-13 6.88 25,000 26,125
Newfield Exploration
(U.S. Dollar) Sr Sub Nts
08-15-12 8.38 340,000 388,025
09-01-14 6.63 80,000(d) 85,800
Nextel Communications
(U.S. Dollar) Sr Nts
10-31-13 6.88 185,000 201,419
Nissan Auto Receivables Owner Trust
(U.S. Dollar) Series 2003-A Cl A4
07-15-08 2.61 500,000 498,172
Norcraft LP/Finance
(U.S. Dollar) Sr Sub Nts
11-01-11 9.00 80,000 86,400
Northwest Pipeline
(U.S. Dollar)
03-01-10 8.13 10,000 11,213
Northwestern
(U.S. Dollar)
11-01-14 5.88 15,000(d,g) 15,469
Offshore Logistics
(U.S. Dollar)
06-15-13 6.13 140,000 144,900
Overseas Private Investment
(U.S. Dollar) U.S. Govt Guaranty Series 1996A
09-15-08 6.99 3,333,333 3,614,233
Owens-Illinois Glass Container
(U.S. Dollar)
05-15-11 7.75 115,000 125,063
Pacific Energy Partners LP/Finance
(U.S. Dollar) Sr Nts
06-15-14 7.13 60,000(d) 64,500
PanAmSat
(U.S. Dollar)
08-15-14 9.00 40,000(d) 42,200
Peabody Energy
(U.S. Dollar) Series B
03-15-13 6.88 295,000 323,763
Pemex Project Funding Master Trust
(U.S. Dollar)
12-15-14 7.38 450,000 498,600
Plains Exploration & Production
(U.S. Dollar) Sr Nts
06-15-14 7.13 125,000 138,750
Pride Intl
(U.S. Dollar) Sr Nts
07-15-14 7.38 30,000(d) 33,750
Prudential Financial
(U.S. Dollar)
09-20-14 5.10 1,650,000 1,654,402
Qwest
(U.S. Dollar)
03-15-12 9.13 325,000(d) 366,438
Schuler Homes
(U.S. Dollar)
07-15-09 9.38 85,000 92,225
Silgan Holdings
(U.S. Dollar) Sr Sub Nts
11-15-13 6.75 125,000 128,750
Southern Star Central
(U.S. Dollar)
08-01-10 8.50 100,000 110,500
Speedway Motorsports
(U.S. Dollar) Sr Sub Nts
06-01-13 6.75 70,000 73,500
Sprint Capital
(U.S. Dollar)
11-15-28 6.88 1,500,000 1,610,887
Station Casinos
(U.S. Dollar) Sr Nts
04-01-12 6.00 100,000 104,500
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
18 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Susquehanna Media
(U.S. Dollar) Sr Sub Nts
04-15-13 7.38% $140,000 $148,050
Time Warner
(U.S. Dollar)
05-15-29 6.63 1,635,000 1,740,199
Toyota Motor Credit
(Japanese Yen)
06-09-08 0.75 297,000,000 2,841,407
Transcontinental Gas Pipe Line
(U.S. Dollar) Series B
08-15-11 7.00 175,000 194,688
Triad Hospitals
(U.S. Dollar) Sr Nts
05-15-12 7.00 140,000 149,800
TRW Automotive
(U.S. Dollar) Sr Nts
02-15-13 9.38 70,000 80,500
U.S. Treasury (U.S. Dollar)
09-15-09 3.38 11,110,000(j) 11,156,007
08-15-14 4.25 2,425,000 2,467,816
08-15-23 6.25 7,585,000(m) 8,959,781
02-15-26 6.00 3,700,000(m) 4,270,466
02-15-31 5.38 660,000 716,848
United Auto Group
(U.S. Dollar)
03-15-12 9.63 25,000 27,813
US Bank NA Minnesota
(U.S. Dollar)
08-01-11 6.38 1,150,000 1,289,320
Valmont Inds
(U.S. Dollar)
05-01-14 6.88 140,000(d) 144,550
Verizon Pennsylvania
(U.S. Dollar) Series A
11-15-11 5.65 3,660,000(m) 3,896,985
Wachovia
(U.S. Dollar)
08-15-08 3.50 400,000 400,236
Wachovia Bank Commercial Mtge Trust
(U.S. Dollar) Series 2003-C8 Cl A2
11-15-35 3.89 1,250,000(f) 1,255,751
Wachovia Bank NA
(U.S. Dollar) Sub Nts
11-01-14 4.80 450,000 449,631
Washington Mutual Bank FA
(U.S. Dollar) Sub Nts
06-15-11 6.88 950,000 1,079,994
08-15-14 5.65 1,375,000 1,435,431
Wells Fargo Bank NA
(U.S. Dollar) Sub Nts
02-01-11 6.45 2,380,000 2,681,028
William Carter
(U.S. Dollar) Series B
08-15-11 10.88 150,000 168,000
Williams Companies
(U.S. Dollar)
03-15-12 8.13 170,000 199,749
Total 175,857,171
Total bonds
(Cost: $490,583,757) $535,792,680
Short-term securities (4.9%)(k)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies (2.7%)
Federal Natl Mtge Assn Disc Nts
12-01-04 1.73% $5,000,000 $4,992,069
12-13-04 1.85 5,000,000 4,988,444
12-29-04 1.74 5,000,000 4,985,260
Total 14,965,773
Commercial paper (2.2%)
Pacific Life Insurance
11-01-04 1.85 7,300,000 7,298,874
Ranger Funding Company LLC
12-09-04 1.92 5,000,000 4,989,067
Total 12,287,941
Total short-term securities
(Cost: $27,252,911) $27,253,714
Total investments in securities
(Cost: $517,836,668)(n) $563,046,394
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
19 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Oct. 31,
2004, the value of these securities amounted to $16,102,632 or 2.9% of net
assets.
(e) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Oct. 31,
2004.
(f) Mortgage-backed securities represent direct or indirect participations in,
or are secured by and payable from, mortgage loans secured by real
property, and include single- and multi-class pass-through securities and
collateralized mortgage obligations. These securities may be issued or
guaranteed by U.S. government agencies or instrumentalities, or by private
issuers, generally originators and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment
bankers and special purpose entities. The maturity dates shown represent
the original maturity of the underlying obligation. Actual maturity may
vary based upon prepayment activity on these obligations. Unless otherwise
noted, the coupon rates presented are fixed rates.
(g) At Oct. 31, 2004, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$2,935,844.
(h) Negligible market value.
(i) Interest only represents securities that entitle holders to receive only
interest payments on the underlying mortgages. The yield to maturity of an
interest only is extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of principal repayments
may have an adverse (positive) effect on yield to maturity. The principal
amount shown is the notional amount of the underlying mortgages. Interest
rate disclosed represents yield based upon the estimated timing and amount
of future cash flows at Oct. 31, 2004.
(j) At Oct. 31, 2004 security was partially or fully on loan. See Note 4 to the
financial statements.
(k) Cash collateral received from security lending activity is invested in
short-term securities and represents 1.5% of net assets. See Note 4 to the
financial statements. 3.4% of net assets is the Portfolio's cash equivalent
position.
(l) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at Oct. 31, 2004, is as follows:
Security Acquisition Cost
dates
Greater Beijing First Expressways 6-12-97 to 9-16-98 $118,924
(U.S. Dollar) 9.50% Sr Nts 2007
(m) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 6 to the financial statements):
Type of security Notional amount
Sale contracts
U.S. Treasury Notes, Dec. 2004, 5-year $ 2,100,000
U.S. Treasury Notes, Dec. 2004, 10-year 18,700,000
(n) At Oct. 31, 2004, the cost of securities for federal income tax purposes
was $517,850,150 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $45,610,275
Unrealized depreciation (414,031)
--------
Net unrealized appreciation $45,196,244
-----------
- --------------------------------------------------------------------------------
20 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
21 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
World Income Portfolio
Oct. 31, 2004
Assets
Investments in securities, at value (Note 1)*
(identified cost $517,836,668) $563,046,394
Foreign currency holdings (identified cost $28) (Note 1) 30
Dividends and accrued interest receivable 8,056,797
Receivable for investment securities sold 2,219,678
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 573,777
-------
Total assets 573,896,676
-----------
Liabilities
Disbursements in excess of cash on demand deposit 24,664
Payable for investment securities purchased 5,980,166
Payable upon return of securities loaned (Note 4) 8,170,000
Accrued investment management services fee 11,483
Other accrued expenses 59,930
------
Total liabilities 14,246,243
----------
Net assets $559,650,433
============
* Including securities on loan, at value (Note 4) $ 8,033,120
------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statement of operations
World Income Portfolio
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 721
Interest 21,939,247
Fee income from securities lending (Note 4) 64,314
Less foreign taxes withheld (4,128)
------
Total income 22,000,154
----------
Expenses (Note 2):
Investment management services fee 4,143,714
Compensation of board members 9,273
Custodian fees 178,550
Audit fees 27,000
Other 20,427
------
Total expenses 4,378,964
Earnings credits on cash balances (Note 2) (415)
----
Total net expenses 4,378,549
---------
Investment income (loss) -- net 17,621,605
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 17,615,533
Foreign currency transactions (964,510)
Futures contracts (266,951)
Options contracts written (Note 7) 54,155
------
Net realized gain (loss) on investments 16,438,227
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 24,402,177
----------
Net gain (loss) on investments and foreign currencies 40,840,404
----------
Net increase (decrease) in net assets resulting from operations $58,462,009
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statements of changes in net assets
World Income Portfolio
Year ended Oct. 31, 2004 2003
Operations
Investment income (loss) -- net $ 17,621,605 $ 17,801,878
Net realized gain (loss) on investments 16,438,227 18,001,647
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 24,402,177 33,085,822
---------- ----------
Net increase (decrease) in net assets resulting from operations 58,462,009 68,889,347
---------- ----------
Proceeds from contributions 20,341,237 39,684,999
Fair value of withdrawals (62,192,959) (68,855,691)
----------- -----------
Net contributions (withdrawals) from partners (41,851,722) (29,170,692)
----------- -----------
Total increase (decrease) in net assets 16,610,287 39,718,655
Net assets at beginning of year 543,040,146 503,321,491
----------- -----------
Net assets at end of year $559,650,433 $543,040,146
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Notes to Financial Statements
World Income Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Income Portfolio (the Portfolio) is a series of World Trust (the Trust)
and is registered under the Investment Company Act of 1940 (as amended) as a
non-diversified, open-end management investment company. The Portfolio invests
primarily in debt obligations of U.S. and foreign issuers. The Declaration of
Trust permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value (NAV). Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
25 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2004, foreign currency holdings consisted
primarily of Australian Dollars.
- --------------------------------------------------------------------------------
26 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Illiquid securities
At Oct. 31, 2004, investments in securities included issues that are illiquid
which the Portfolio currently limits to 10% of net assets, at market value, at
the time of purchase. The aggregate value of such securities at Oct. 31, 2004
was $0. These securities are valued at fair value according to methods selected
in good faith by the board. According to board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above. Assets are liquid if they can be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the asset is valued by the Portfolio.
Securities purchased on a forward-commitment basis
Delivery and payment for securities that have been purchased by the Portfolio on
a forward-commitment basis, including when-issued securities and other
forward-commitments, can take place one month or more after the transaction
date. During this period, such securities are subject to market fluctuations,
and they may affect the Portfolio's net assets the same as owned securities. The
Portfolio designates cash or liquid securities at least equal to the amount of
its forward-commitments. At Oct. 31, 2004, the Portfolio has entered into
outstanding when-issued securities of $2,935,844.
The Portfolio also enters into transactions to sell purchase commitments to
third parties at current market values and concurrently acquires other purchase
commitments for similar securities at later dates. As an inducement for the
Portfolio to "roll over" its purchase commitments, the Portfolio receives
negotiated amounts in the form of reductions of the purchase price of the
commitment.
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
- --------------------------------------------------------------------------------
27 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
0.77% to 0.67% annually as the Portfolio's assets increase.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their compensation. Deferred amounts are treated as though equivalent
dollar amounts had been invested in shares of the underlying Fund or other
American Express mutual funds. The Portfolio's liability for these amounts is
adjusted for market value changes and remains in the Portfolio until distributed
in accordance with the Plan.
During the year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced
by $415 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $526,825,956 and $542,178,896, respectively, for the
year ended Oct. 31, 2004. Realized gains and losses are determined on an
identified cost basis.
4. LENDING OF PORTFOLIO SECURITIES
At Oct. 31, 2004, securities valued at $8,033,120 were on loan to brokers. For
collateral, the Portfolio received $8,170,000 in cash. Cash collateral received
is invested in short-term securities, which are included in the short-term
section of the "Investments in securities." Income from securities lending
amounted to $64,314 for the year ended Oct. 31, 2004. The risks to the Portfolio
of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
- --------------------------------------------------------------------------------
28 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
5. FORWARD FOREIGN CURRENCY CONTRACTS
At Oct. 31, 2004, the Portfolio has forward foreign currency exchange contracts
that obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
Nov. 10, 2004 2,811,900 3,900,000 $105,446 $--
U.S. Dollar Australian Dollar
Nov. 15, 2004 12,864,964 1,410,000,000 468,331 --
U.S. Dollar Japanese Yen
-------- ---
Total $573,777 $--
-------- ---
6. INTEREST RATE FUTURES CONTRACTS
At Oct. 31, 2004, investments in securities included securities valued at
$519,548 that were pledged as collateral to cover initial margin deposits on 208
open sale contracts. The notional market value of the open sale contracts at
Oct. 31, 2004 was $23,575,063 with a net unrealized loss of $284,160. See
"Summary of significant accounting policies" and "Notes to investments in
securities."
7. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as follows:
Year ended Oct. 31, 2004
Puts Calls
Contracts Premiums Contracts Premiums
Balance Oct. 31, 2003 59 $ 54,155 59 $ 113,155
Exercised -- -- (59) (113,155)
Expired (59) (54,155) -- --
--- -------- --- ---------
Balance Oct. 31, 2004 -- $ -- -- $ --
--- -------- --- ---------
8. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Ratio of expenses to average daily net assets(a) .79% .80% .79% .78% .78%
Ratio of net investment income (loss) to average daily net assets 3.20% 3.29% 3.66% 5.27% 5.98%
Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48%
Total return(b) 11.21% 13.99% 6.89% 11.29% (4.29%)
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Total return is based on a calculated Portfolio NAV and does not reflect
payment of a sales charge.
- --------------------------------------------------------------------------------
29 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD OF TRUSTEES AND UNITHOLDERS
WORLD TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of World Income Portfolio (a series
of World Trust) as of October 31, 2004, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period ended October 31, 2004, and the financial
highlights for each of the years in the five-year period ended October 31, 2004.
These financial statements and the financial highlights are the responsibility
of portfolio management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers or by other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of World
Income Portfolio as of October 31, 2004, and the results of its operations,
changes in its net assets and the financial highlights for each of the periods
stated in the first paragraph above, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
30 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Global Bond Fund
Oct. 31, 2004
Assets
Investment in Portfolio (Note 1) $559,503,575
Capital shares receivable 175,033
-------
Total assets 559,678,608
-----------
Liabilities
Capital shares payable 224,413
Accrued distribution fee 6,636
Accrued transfer agency fee 2,645
Accrued administrative services fee 864
Other accrued expenses 68,974
------
Total liabilities 303,532
-------
Net assets applicable to outstanding capital stock $559,375,076
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 796,878
Additional paid-in capital 509,779,712
Undistributed net investment income 14,144,995
Accumulated net realized gain (loss) (Note 5) (11,150,536)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 45,804,027
----------
Total -- representing net assets applicable to outstanding capital stock $559,375,076
============
Net assets applicable to outstanding shares: Class A $388,702,892
Class B $141,856,065
Class C $ 4,716,721
Class I $ 24,020,955
Class Y $ 78,443
Net asset value per share of outstanding capital stock: Class A shares 55,378,028 $ 7.02
Class B shares 20,209,576 $ 7.02
Class C shares 674,551 $ 6.99
Class I shares 3,414,514 $ 7.03
Class Y shares 11,149 $ 7.04
------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statement of operations
AXP Global Bond Fund
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 721
Interest 21,934,535
Fee income from securities lending 64,297
Less foreign taxes withheld (4,127)
------
Total income 21,995,426
----------
Expenses (Note 2):
Expenses allocated from Portfolio 4,377,451
Distribution fee
Class A 952,565
Class B 1,560,487
Class C 50,444
Transfer agency fee 990,258
Incremental transfer agency fee
Class A 72,785
Class B 49,525
Class C 1,287
Service fee -- Class Y 75
Administrative services fees and expenses 314,640
Compensation of board members 8,432
Printing and postage 115,000
Registration fees 52,454
Audit fees 9,000
Other 13,067
------
Total expenses 8,567,470
Earnings credits on cash balances (Note 2) (5,511)
------
Total net expenses 8,561,959
---------
Investment income (loss) -- net 13,433,467
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 17,611,292
Foreign currency transactions (964,257)
Futures contracts (266,865)
Options contracts written 54,142
------
Net realized gain (loss) on investments 16,434,312
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 24,395,700
----------
Net gain (loss) on investments and foreign currencies 40,830,012
----------
Net increase (decrease) in net assets resulting from operations $54,263,479
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Statements of changes in net assets
AXP Global Bond Fund
Year ended Oct. 31, 2004 2003
Operations and distributions
Investment income (loss) -- net $ 13,433,467 $ 13,500,260
Net realized gain (loss) on investments 16,434,312 17,996,432
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 24,395,700 33,079,008
---------- ----------
Net increase (decrease) in net assets resulting from operations 54,263,479 64,575,700
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (13,588,587) (12,438,109)
Class B (4,397,000) (3,958,002)
Class C (141,492) (103,214)
Class I (208,980) --
Class Y (2,872) (1,009)
------ ------
Total distributions (18,338,931) (16,500,334)
----------- -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 90,482,357 118,383,281
Class B shares 34,513,320 50,004,285
Class C shares 1,609,678 3,603,615
Class I shares 22,849,823 --
Class Y shares 13,380 41,942
Reinvestment of distributions at net asset value
Class A shares 12,568,801 11,408,319
Class B shares 4,090,856 3,683,453
Class C shares 124,689 93,681
Class I shares 208,773 --
Class Y shares 2,872 985
Payments for redemptions
Class A shares (119,978,418) (130,390,225)
Class B shares (Note 2) (63,787,048) (63,154,212)
Class C shares (Note 2) (2,223,406) (1,678,853)
Class I shares (97,951) --
Class Y shares (7,940) (55,411)
------ -------
Increase (decrease) in net assets from capital share transactions (19,630,214) (8,059,140)
----------- ----------
Total increase (decrease) in net assets 16,294,334 40,016,226
Net assets at beginning of year 543,080,742 503,064,516
----------- -----------
Net assets at end of year $ 559,375,076 $ 543,080,742
============= =============
Undistributed net investment income $ 14,144,995 $ 5,836,050
------------- -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Notes to Financial Statements
AXP Global Bond Fund
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a non-diversified open-end
management investment company. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
Effective March 4, 2004, the Fund offers an additional class of shares, Class I,
exclusively to certain institutional investors. Class I shares have no sales
charges and are made available through a separate prospectus supplement provided
to investors eligible to purchase the shares. At Oct. 31, 2004, AEFC and the AXP
Portfolio Builder Series funds owned 100% of Class I shares, which represents
4.29% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
Investment in World Income Portfolio
The Fund invests all of its assets in the World Income Portfolio (the
Portfolio), a series of World Trust, an open-end investment company that has the
same objectives as the Fund. The Portfolio invests primarily in debt obligations
of U.S. and foreign issuers.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at Oct. 31, 2004 was 99.97%.
- --------------------------------------------------------------------------------
34 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the principal market in which such securities are normally traded. Pursuant
to procedures adopted by the Board of Trustees of the portfolios, AEFC utilizes
Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair NAV. Short-term securities maturing in more than 60
days from the valuation date are valued at the market price or approximate
market value based on current interest rates; those maturing in 60 days or less
are valued at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
- --------------------------------------------------------------------------------
35 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by
$13,214,409 and accumulated net realized gain has been decreased by $13,214,409.
The tax character of distributions paid for the years indicated is as follows:
Year ended Oct. 31, 2004 2003
Class A
Distributions paid from:
Ordinary income $13,588,587 $12,438,109
Long-term capital gain -- --
Class B
Distributions paid from:
Ordinary income 4,397,000 3,958,002
Long-term capital gain -- --
Class C
Distributions paid from:
Ordinary income 141,492 103,214
Long-term capital gain -- --
Class I*
Ordinary income 208,980 N/A
Long-term capital gain -- N/A
Class Y
Distributions paid from:
Ordinary income 2,872 1,009
Long-term capital gain -- --
* Inception date was March 4, 2004.
At Oct. 31, 2004, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income $ 16,119,649
Accumulated long-term gain (loss) $(11,113,313)
Unrealized appreciation (depreciation) $ 43,792,150
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
that declines from 0.06% to 0.04% annually as the Fund's assets increase. A
minor portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
- --------------------------------------------------------------------------------
36 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $20.50
o Class B $21.50
o Class C $21.00
o Class Y $18.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$828,307 for Class A, $125,976 for Class B and $2,297 for Class C for the year
ended Oct. 31, 2004.
During the year ended Oct. 31, 2004, the Fund's transfer agency fees were
reduced by $5,511 as a result of earnings credits from overnight cash balances.
- --------------------------------------------------------------------------------
37 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004
Class A Class B Class C Class I* Class Y
Sold 13,443,824 5,113,276 239,474 3,398,078 2,007
Issued for reinvested distributions 1,868,388 607,744 18,597 31,012 426
Redeemed (17,795,771) (9,514,367) (331,347) (14,576) (1,156)
----------- ---------- -------- ------- ------
Net increase (decrease) (2,483,559) (3,793,347) (73,276) 3,414,514 1,277
---------- ---------- ------- --------- -----
* Inception date was March 4, 2004.
Year ended Oct. 31, 2003
Class A Class B Class C Class I Class Y
Sold 18,346,322 7,797,131 562,338 N/A 6,300
Issued for reinvested distributions 1,795,377 578,536 14,712 N/A 154
Redeemed (20,340,957) (9,764,130) (260,976) N/A (9,193)
----------- ---------- -------- ------- ------
Net increase (decrease) (199,258) (1,388,463) 316,074 N/A (2,739)
-------- ---------- ------- ------- ------
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. The Fund must maintain asset coverage
for borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended Oct. 31, 2004.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$11,113,313 at Oct. 31, 2004, that if not offset by capital gains will expire in
2010. It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
38 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $6.57 $6.00 $5.81 $5.39 $5.87
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .17 .18 .19 .27 .34
Net gains (losses) (both realized and unrealized) .52 .60 .17 .30 (.63)
----- ----- ----- ----- -----
Total from investment operations .69 .78 .36 .57 (.29)
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.24) (.21) (.17) (.15) (.19)
----- ----- ----- ----- -----
Net asset value, end of period $7.02 $6.57 $6.00 $5.81 $5.39
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $389 $380 $348 $355 $389
Ratio of expenses to average daily net assets(b) 1.34% 1.36% 1.34% 1.32% 1.30%
Ratio of net investment income (loss) to average daily net assets 2.66% 2.73% 3.12% 4.75% 5.49%
Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48%
Total return(c) 10.70% 13.25% 6.24% 10.83% (5.16%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
39 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $6.57 $5.99 $5.79 $5.38 $5.87
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .14 .12 .13 .21 .29
Net gains (losses) (both realized and unrealized) .50 .62 .19 .31 (.62)
----- ----- ----- ----- -----
Total from investment operations .64 .74 .32 .52 (.33)
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.19) (.16) (.12) (.11) (.16)
----- ----- ----- ----- -----
Net asset value, end of period $7.02 $6.57 $5.99 $5.79 $5.38
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $142 $158 $152 $145 $155
Ratio of expenses to average daily net assets(b) 2.10% 2.12% 2.10% 2.09% 2.07%
Ratio of net investment income (loss) to average daily net assets 1.90% 1.97% 2.36% 3.99% 4.73%
Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48%
Total return(c) 9.83% 12.39% 5.59% 9.73% (5.77%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
40 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000(b)
Net asset value, beginning of period $6.55 $5.98 $5.79 $5.38 $5.52
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .14 .13 .14 .21 .10
Net gains (losses) (both realized and unrealized) .49 .60 .18 .31 (.24)
----- ----- ----- ----- -----
Total from investment operations .63 .73 .32 .52 (.14)
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.19) (.16) (.13) (.11) --
----- ----- ----- ----- -----
Net asset value, end of period $6.99 $6.55 $5.98 $5.79 $5.38
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $5 $5 $3 $1 $--
Ratio of expenses to average daily net assets(c) 2.09% 2.14% 2.10% 2.09% 2.07%(d)
Ratio of net investment income (loss) to average daily net assets 1.91% 1.89% 2.29% 3.84% 4.80%(d)
Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48%
Total return(e) 9.72% 12.41% 5.51% 9.84% (2.49%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
41 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004(b)
Net asset value, beginning of period $6.77
-----
Income from investment operations:
Net investment income (loss) .16
Net gains (losses) (both realized and unrealized) .24
-----
Total from investment operations .40
-----
Less distributions:
Dividends from net investment income (.14)
-----
Net asset value, end of period $7.03
-----
Ratios/supplemental data
Net assets, end of period (in millions) $24
Ratio of expenses to average daily net assets(c) .89%(d)
Ratio of net investment income (loss) to average daily net assets 3.07%(d)
Portfolio turnover rate (excluding short-term securities) 92%
Total return(e) 6.06%(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004 (Unaudited).
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
42 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $6.59 $6.01 $5.80 $5.40 $5.87
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .18 .19 .20 .29 .35
Net gains (losses) (both realized and unrealized) .52 .61 .19 .27 (.62)
----- ----- ----- ----- -----
Total from investment operations .70 .80 .39 .56 (.27)
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.25) (.22) (.18) (.16) (.20)
----- ----- ----- ----- -----
Net asset value, end of period $7.04 $6.59 $6.01 $5.80 $5.40
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $-- $--
Ratio of expenses to average daily net assets(b) 1.17% 1.18% 1.17% 1.16% 1.14%
Ratio of net investment income (loss) to average daily net assets 2.83% 2.69% 3.29% 4.90% 5.75%
Portfolio turnover rate (excluding short-term securities) 92% 117% 51% 24% 48%
Total return(c) 10.86% 13.54% 6.72% 10.71% (4.88%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
43 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GLOBAL SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP
Global Bond Fund (a series of AXP Global Series, Inc.) as of October 31, 2004,
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period ended October
31, 2004, and the financial highlights for each of the years in the five-year
period ended October 31, 2004. These financial statements and the financial
highlights are the responsibility of fund management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Global Bond Fund as of October 31, 2004, and the results of its operations,
changes in its net assets and the financial highlights for each of the periods
stated in the first paragraph above, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
44 --- AXP GLOBAL BOND FUND --- 2004 ANNUAL REPORT
Federal Income Tax Information
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Global Bond Fund
Fiscal year ended Oct. 31, 2004
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 0.00%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 19, 2003 $0.11803
March 23, 2004 0.04405
June 23, 2004 0.03880
Sept. 23, 2004 0.03849
Total distributions $0.23937
Class B
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 0.00%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 19, 2003 $0.10536
March 23, 2004 0.03080
June 23, 2004 0.02582
Sept. 23, 2004 0.02414
Total distributions $0.18612
Class C
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 0.00%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 19, 2003 $0.10541
March 23, 2004 0.03146
June 23, 2004 0.02558
Sept. 23, 2004 0.02476
Total distributions $0.18721
- --------------------------------------------------------------------------------
45 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Class I
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 0.00%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
March 23, 2004 $0.05003
June 23, 2004 0.04683
Sept. 23, 2004 0.04649
Total distributions $0.14335
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 0.00%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 19, 2003 $0.12121
March 23, 2004 0.04687
June 23, 2004 0.04181
Sept. 23, 2004 0.04140
Total distributions $0.25129
- --------------------------------------------------------------------------------
46 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Oct. 31, 2004.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
47 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Beginning Ending Expenses paid
account value account value during the period
May 1, 2004 Oct. 31, 2004 May 1, 2004-Oct. 31, 2004
Class A
Actual(a) $1,000 $1,074.30 $6.96(b)
Hypothetical (5% return before expenses) $1,000 $1,018.15 $6.77(b)
Class B
Actual(a) $1,000 $1,070.00 $10.86(c)
Hypothetical (5% return before expenses) $1,000 $1,014.37 $10.57(c)
Class C
Actual(a) $1,000 $1,070.40 $10.91(d)
Hypothetical (5% return before expenses) $1,000 $1,014.32 $10.62(d)
Class I
Actual(a) $1,000 $1,076.80 $4.60(e)
Hypothetical (5% return before expenses) $1,000 $1,020.44 $4.47(e)
Class Y
Actual(a) $1,000 $1,076.70 $6.09(f)
Hypothetical (5% return before expenses) $1,000 $1,019.00 $5.92(f)
(a) Based on the actual return for the six months ended Oct. 31, 2004: +7.43%
for Class A, +7.00% for Class B, +7.04% for Class C, +7.68% for Class Y and
+7.67% for Class Y.
(b) Expenses are equal to the Fund's Class A annualized expense ratio of 1.35%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(c) Expenses are equal to the Fund's Class B annualized expense ratio of 2.11%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(d) Expenses are equal to the Fund's Class C annualized expense ratio of 2.12%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(e) Expenses are equal to the Fund's Class I annualized expense ratio of 0.89%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(f) Expenses are equal to the Fund's Class Y annualized expense ratio of 1.18%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
- --------------------------------------------------------------------------------
48 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. Each member oversees 14
Master Trust portfolios and 89 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the board.
Independent Board Members
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards). Former Governor of
Age 70 Minnesota
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc.
Minneapolis, MN 55402 construction) since 1998 (construction materials/chemicals)
Age 67
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated (commodity
30 Seventh Street East since 2001 Chief Executive Officer, merchants and processors), General
Suite 3050 Minnesota Mining and Mills, Inc. (consumer foods),
St. Paul, MN 55101-4901 Manufacturing (3M) Vulcan Materials Company
Age 70 (construction materials/
chemicals), Milliken & Company
(textiles and chemicals), and
Nexia Biotechnologies, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics BostonFed Bancorp, Inc. (holding
901 S. Marquette Ave. since 2004 and Management, Bentley College company) and its subsidiary Boston
Minneapolis, MN 55402 since 2002; former Dean, McCallum Federal Savings Bank
Age 53 Graduate School of Business,
Bentley College from 1999 to 2002
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 69
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Stephen R. Lewis, Jr.* Board member Retired President and Professor Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 of Economics, Carleton College (manufactures irrigation systems)
Minneapolis, MN 55402
Age 65
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund by
reason of being a security holder of Bank of America Corporation, parent
company of Columbia Wanger Asset Management, L.P., one of the fund's
subadvisers.
- --------------------------------------------------------------------------------
49 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Management, Inc. (private real (transportation, distribution and
Minneapolis, MN 55402 estate and asset management logistics consultants)
Age 52 company) since 1999
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alan K. Simpson Board member Former three-term United States
1201 Sunshine Ave. since 1997 Senator for Wyoming
Cody, WY 82414
Age 73
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alison Taunton-Rigby Board member Founder and Chief Executive Hybridon Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Officer, RiboNovix, Inc. since
Minneapolis, MN 55402 2004; President, Forester Biotech
Age 60 since 2000; prior to that,
President and CEO, Aquila
Biopharmaceuticals, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Board Member Affiliated with AEFC**
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
William F. Truscott Board member Senior Vice President - Chief
53600 AXP Financial Center since 2001, Investment Officer of AEFC since
Minneapolis, MN 55474 Vice President 2001. Former Chief Investment
Age 44 since 2002 Officer and Managing Director,
Zurich Scudder Investments
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
** Interested person by reason of being an officer, director and/or employee of
AEFC.
- --------------------------------------------------------------------------------
50 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Jeffrey P. Fox Treasurer since Vice President - Investment
105 AXP Financial Center 2002 Accounting, AEFC, since 2002;
Minneapolis, MN 55474 Vice President - Finance,
Age 49 American Express Company,
2000-2002; Vice President -
Corporate Controller, AEFC,
1996-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Paula R. Meyer President since Senior Vice President and General
596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC,
Minneapolis, MN 55474 since 2002; Vice President and
Age 50 Managing Director - American
Express Funds, AEFC, 2000-2002;
Vice President, AEFC, 1998-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Leslie L. Ogg Vice President, President of Board Services
901 S. Marquette Ave. General Counsel, Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
51 -- AXP GLOBAL BOND FUND -- 2004 ANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AXP(R)
Global
Technology
Fund
Annual Report
for the Period Ended
Oct. 31, 2004
AXP Global Technology Fund seeks to provide shareholders with long-term capital
growth.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 10
Investments in Securities 12
Financial Statements (Portfolio) 14
Notes to Financial Statements (Portfolio) 17
Report of Independent Registered
Public Accounting Firm (Portfolio) 22
Financial Statements (Fund) 23
Notes to Financial Statements (Fund) 26
Report of Independent Registered
Public Accounting Firm (Fund) 36
Fund Expenses Example 37
Board Members and Officers 39
Proxy Voting 41
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Fund Snapshot
AT OCT. 31, 2004
PORTFOLIO MANAGER
Portfolio manager Since Years in industry
Nina Hughes 6/02 6
FUND OBJECTIVE
For investors seeking long-term capital growth.
Inception dates by class
A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96
Ticker symbols by class
A: AXIAX B: INVBX C: AXICX Y: --
Total net assets $209.8 million
Number of holdings 62
STYLE MATRIX
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
Shading within the style matrix indicates areas in which the Fund generally
invests.
SECTOR COMPOSITION
Percentage of portfolio assets
(pie chart)
Computer software & services 30.9%
Electronics 22.6%
Computer hardware 13.7%
Media 10.8%
Telecom equipment & services 6.5%
Short-term securities* 5.1%
Utilities - telephone 3.6%
Cellular telecommunications 3.0%
Leisure time & entertainment 2.3%
Retail - general 1.5%
* 2.6% of portfolio assets is due to security lending activity. 2.5% of
portfolio assets is the Portfolio's cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
Yahoo! (Media) 5.5%
Dell (Computer hardware) 5.3
EMC (Computer hardware) 3.4
Cisco Systems (Computer hardware) 3.4
Juniper Networks (Computer software & services) 3.2
Samsung Electronics (Electronics) 3.1
Macromedia (Computer software & services) 3.0
Citrix Systems (Computer software & services) 3.0
Texas Instruments (Electronics) 2.7
TIBCO Software (Computer software & services) 2.6
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market currency, economic, political and other factors. This Fund is
subject to greater volatility than a more broadly invested fund because it is
invested in a specific sector.
Stock prices of established companies that pay dividends may be less volatile
than the stock market as a whole. Stocks of medium-sized companies may be
subject to more abrupt or erratic price movements than stocks of larger
companies.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the year ended Oct. 31, 2004
(bar 1) (bar 2) (bar 3)
+6.40% -2.28% -3.08%
(bar 1) AXP Global Technology Fund Class A (excluding sales charge)
(bar 2) Goldman Sachs Technology Index(R) Composite Index (unmanaged)
(bar 3) Lipper Science and Technology Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. You should consider the investment objectives,
risks, and charges and expenses of the Fund carefully before investing.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart; if reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
as of Oct. 31, 2004
1 year +6.40% +0.27% +4.58% +0.58% +5.23% +5.23% +6.40% +6.40%
3 years +4.58% +2.53% +3.57% +2.63% +3.79% +3.79% +4.58% +4.58%
5 years -10.34% -11.39% -11.13% -11.18% N/A N/A -10.34% -10.34%
Since inception +3.41% +2.65% +2.55% +2.55% -23.12% -23.12% +3.41% +3.41%
as of Sept. 30, 2004
1 year +8.39% +2.13% +7.25% +3.25% +7.25% +7.25% +9.03% +9.03%
3 years +5.52% +3.46% +4.69% +3.77% +4.69% +4.69% +5.73% +5.73%
5 years -9.51% -10.57% -10.19% -10.24% N/A N/A -9.40% -9.40%
Since inception +2.33% +1.57% +1.56% +1.56% -25.02% -25.02% +2.41% +2.41%
(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.
- --------------------------------------------------------------------------------
4 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager Nina Hughes discusses the Fund's positioning and
results for fiscal year 2004. On Sept. 17, 2004, Telis Bersekas, a member of
the Fund's portfolio management team, left the firm.
Q: How did AXP Global Technology Fund perform for the 12 months ended Oct.
31, 2004?
A: AXP Global Technology Fund's Class A shares gained 6.40% (excluding sales
charge) for the 12 months ended Oct. 31, 2004. This significantly outpaced
the Fund's benchmark, the unmanaged Goldman Sachs Technology Index(R)
Composite Index (GSTI(R) Composite Index), which fell 2.28%. The Fund also
outperformed the Lipper Science and Technology Funds Index, representing the
Fund's peer group, which dropped 3.08% during the same period.
Q: What factors most significantly affected performance?
A: Despite a period of turmoil within the technology sector, the Fund performed
well. The technology sector overall lagged the broader equity market during
a fiscal year burdened by slower-than-anticipated economic growth, higher
oil prices, cautious capital spending, new accounting and corporate
management regulations, a large build-up of inventories and pricing
pressures. Several leading technology companies, including Intel and Cisco
Systems, reduced corporate earnings estimates.
We attribute the Fund's strong relative returns primarily to effective stock
selection and industry allocation. The Fund also benefited from its
multi-cap approach. The flexibility to invest in large-cap, mid-cap and
small-cap stocks within the technology sector enabled us to seek the most
attractive individual investment regardless of market capitalization. For
example, during the spring and summer, when the technology sector faced
trouble within the semiconductor and computer software industries, we
shifted the portfolio's emphasis to higher quality, large-cap companies.
Toward the end of the fiscal year, as early signs of seasonal demand and
product pricing stability became evident, we reallocated a percentage of
assets to mid-cap and small-cap stocks. Throughout, we stayed true to our
discipline of seeking companies with attractive risk/reward profiles.
From a sector perspective, the Fund benefited most from its
greater-than-GSTI(R) Composite Index position in Internet companies and its
lower-than-GSTI(R) Composite Index exposure to the semiconductor industry.
- --------------------------------------------------------------------------------
5 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> We attribute the Fund's strong relative returns
primarily to effective stock selection and industry allocation. (end callout
quote)
The Fund's biggest contributor to performance for the annual period was
Yahoo!, the web portal company, one of the portfolio's largest positions.
Yahoo! maintained a reasonable valuation even as its stock price rose over
the period based on strong gains in its online guide to Internet navigation
and commerce. We added to the Fund's position in this stock when its share
price temporarily sold off during the third calendar quarter.
Another strong performer for the Fund was mid-cap company Trimble
Navigation, which makes electronic measuring instruments based on the global
positioning system used primarily in agriculture and construction. Trimble's
share price rose as the company surpassed market expectations in terms of
both production capabilities and earnings. We sold the Fund's position in
Trimble during the fiscal year, taking a profit.
Gateway, a personal computer maker, was a third winner for the Fund during
the annual period as it successfully cut expenses and took advantage of new
distribution opportunities, such as Best Buy. Gateway saw its earnings per
share grow, and it continued to trade at a reasonable valuation.
The Fund had disappointments as well. Detracting from the Fund's performance
during the annual period was Agere Systems, a semiconductor company that
recently underwent significant corporate restructuring. NEC, a major
customer, delayed shipment of wireless handsets supplied by Agere, thus
affecting Agere's quarterly earnings. When Agere did not cut its expenses as
much as we thought it should, we sold the Fund's position in this stock.
Another stock that did not perform well during the period was Quest
Software, which provides application and information availability software.
Amid legal problems and sales delays, we sold this stock as well.
- --------------------------------------------------------------------------------
6 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Questions & Answers
Secure Computing, a provider of network security solutions such as firewalls
and web filters, was another poor performer for the Fund. The stock price of
this small-cap company was hurt after it was unable to close some of its
government deals during the third quarter. We decided to sell the Fund's
position in Secure Computing because the stock price had a solid run, and we
no longer felt it was attractive from a risk/reward standpoint.
Changes to Top Ten Holdings
Oct. 31, 2004 compared to Oct. 31, 2003
Company Change in positioning
Yahoo! New to Top Ten
Dell Increased
EMC New to Top Ten
Cisco Systems Decreased
Juniper Networks New to Top Ten
Samsung Electronics New to Top Ten
Macromedia New to Top Ten
Citrix Systems New to Top Ten
Texas Instruments New to Top Ten
TIBCO Software New to Top Ten
No longer among the Fund's Top Ten Holdings but still in the portfolio at Oct.
31, 2004 were Intel, Microsoft, Nokia ADR and Oracle. Hewlett Packard, Trimble
Navigation, NTL and Ascential Software were eliminated from the portfolio. For
more information on the Top Ten Holdings, see this report's Fund Snapshot page
or americanexpress.com/funds.
Q: What changes did you make to the Fund and how is it currently positioned?
A: In the last months of calendar year 2003, we maintained an aggressive
stance. This posture enabled the Fund to take advantage of the strong
performance of many technology stocks during the fourth quarter, as
information technology demand strengthened toward the end of many
businesses' fiscal years. In the first months of 2004, we gradually shifted
to a more conservative stance since technology sector share prices had
already moved sharply higher. We moved to a more defensive posture by
further diversifying the Fund into well-established, large-cap industry
leaders.
During the second half of the fiscal year, we shifted industry allocations
and capitalization emphasis based on changing issues in the various
sub-sectors. For example, we reduced the Fund's exposure to semiconductor
stocks early in the third calendar quarter and then later in the quarter
began to add to this industry, as we believed the negative sentiment
surrounding the semiconductor industry was excessive. We found some
attractively priced semiconductor stocks. Toward the end of the fiscal year,
we reduced the Fund's exposure to personal computers and computer services
stocks.
- --------------------------------------------------------------------------------
7 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> Our flexibility to move between the technology
sub-sectors and avoid others completely if conditions warrant can provide a
potential competitive advantage over our peers. (end callout quote)
While this repositioning resulted in a portfolio turnover rate of 349% for
the annual period, it also helped Fund performance relative to both its peer
group and its benchmark index. During the second half of the fiscal year, we
sought to hold stocks with attractive risk/reward profiles for longer
periods of time in response to market conditions. This is a strategy we
intend to pursue, which may lead to lower portfolio turnover rates.
Throughout the fiscal year, we sought growth stocks with reasonable
valuations using traditional fundamental analysis. From an industry
perspective, the Fund held greater-than-GSTI(R) Composite Index positions in
Internet and computer software, neutral positions in semiconductors,
telecommunications services and equipment, networking and computer services,
and lower positions in computer hardware. Our flexibility to move between
the technology sub-sectors and avoid others completely if conditions warrant
can provide a potential competitive advantage over our peers.
Q: How do you intend to manage the Fund in the coming months?
A: We believe technology sector could be less volatile in the months ahead
than it was for much of 2004. There is data suggesting that:
o The level of unsold goods in both the wireless telecommunications and
semiconductor industries is declining
o Cost cutting measures are taking effect within many technology
companies and
o Manufacturing levels are down, which may help avoid future inventory
build-ups.
We also expect a modest seasonal uptick in demand for the fourth quarter,
especially in the personal computer and wireless areas, as back-to-school
spending comes to an end, holiday spending is on the rise and enterprise
spending increases as companies complete their budget cycles. Together,
these factors bode well for the technology sector ahead.
- --------------------------------------------------------------------------------
8 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Questions & Answers
We also intend to look for indicators that the global economy is continuing
to improve, keeping a particularly close watch on developments in Asia and
on business and consumer spending trends. A major concern is that
historically high oil prices will remain a potentially dampening pressure on
consumer demand. Another is that even with the decline in technology sector
prices in 2004, some equity valuations have not yet dropped to attractive
levels. Thus, we believe that effective stock picking based on value and
growth potential will be increasingly important. We are focused on seeking
those individual technology companies with the best fundamental prospects at
the most reasonable prices.
- --------------------------------------------------------------------------------
9 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Global Technology Fund Class A shares (from 12/1/96 to
10/31/04) as compared to the performance of two widely cited performance
indices, the Goldman Sachs Technology Index(R) Composite Index (GSTI(R)
Composite Index) and the Lipper Science and Technology Funds Index. In comparing
the Fund's Class A shares to these indices, you should take into account the
fact that the Fund's performance reflects the maximum sales charge of 5.75%,
while such charges are not reflected in the performance of the indices. Returns
for the Fund include the reinvestment of any distribution paid during each
period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions and
redemptions. Current performance may be lower or higher than the performance
information shown. You may obtain performance information current to the most
recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. Also see "Past Performance" in the Fund's current
prospectus. You should consider the investment objectives, risks, and charges
and expenses of the Fund carefully before investing.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
Oct. 31, 2004 $-- $ -- $ -- $ --
Oct. 31, 2003 -- -- -- --
Oct. 31, 2002 -- -- -- --
Oct. 31, 2001 -- -- -- --
Oct. 31, 2000 -- 11.14 1.91 13.05*
* 90% of the distribution relates to a return of capital.
- --------------------------------------------------------------------------------
10 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
(line chart)
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP GLOBAL TECHNOLOGY FUND
AXP Global Technology Fund
(includes sales charge) $ 9,425 $ 9,932 $10,198 $21,245 $35,390 $10,766 $ 6,931 $11,574 $12,315
Goldman Sachs Technology
Index(R) Composite Index(1) $10,000 $12,358 $15,565 $27,861 $33,687 $14,752 $10,092 $15,091 $14,747
Lipper Science and Technology
Funds Index(2) $10,000 $11,218 $12,057 $23,440 $31,637 $13,177 $ 8,829 $13,191 $12,784
12/1/96 10/97 10/98 10/99 10/00 10/01 10/02 10/03 10/04
COMPARATIVE RESULTS
Results as of Oct. 31, 2004 Since
1 year 3 years 5 years inception(3)
AXP Global Technology Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,027 $10,778 $5,463 $12,315
Average annual total return +0.27% +2.53% -11.39% +2.65%
Goldman Sachs Technology Index(R) Composite Index(1)
Cumulative value of $10,000 $9,772 $9,979 $5,292 $14,747
Average annual total return -2.28% -0.07% -11.95% +5.02%
Lipper Science and Technology Funds Index(2)
Cumulative value of $10,000 $9,692 $9,703 $5,454 $12,784
Average annual total return -3.08% -1.00% -11.42% +3.15%
Results for other share classes can be found on page 4.
(1) GSTI(R) Composite Index, an unmanaged index published by Goldman Sachs, is
a market capitalization-weighted index of over 200 stocks designed to
measure the performance of companies in the technology sector.
(2) The Lipper Science and Technology Funds Index includes the 30 largest
science and technology funds tracked by Lipper Inc. The index's returns
include net reinvested dividends.
(3) Fund data is from Nov. 13, 1996. GSTI(R) Composite Index and Lipper Index
data is from Dec. 1, 1996.
- --------------------------------------------------------------------------------
11 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Investments in Securities
World Technologies Portfolio
Oct. 31, 2004
(Percentages represent value of investments compared to net assets)
Common stocks (96.7%)
Issuer Shares Value(a)
Cellular telecommunications (3.0%)
Nextel Communications Cl A 29,500(b) $781,455
Vodafone Group ADR 167,500(c) 4,319,825
Western Wireless Cl A 43,400(b) 1,264,676
Total 6,365,956
Computer hardware (14.0%)
Cisco Systems 378,400(b) 7,269,064
Dell 321,300(b) 11,264,778
EMC 565,000(b) 7,271,550
Gateway 598,400(b) 3,500,640
Total 29,306,032
Computer software & services (31.4%)
Affiliated Computer Services Cl A 71,600(b) 3,905,780
BEA Systems 254,500(b) 2,066,540
Blue Coat Systems 167,000(b) 2,907,470
Business Objects ADR 123,500(b,c,d) 3,151,720
Citrix Systems 262,600(b) 6,336,538
Cognizant Technology
Solutions Cl A 59,900(b) 2,036,600
i2 Technologies 2,820,000(b) 1,974,000
Informatica 697,000(b) 5,443,570
Juniper Networks 261,000(b) 6,945,210
Lexar Media 258,500(b) 1,747,460
Macromedia 234,500(b) 6,364,330
McDATA Cl A 165,700(b) 1,040,596
Microsoft 73,300 2,051,667
Ness Technologies 153,600(b,c) 2,030,592
OPNET Technologies 100,000(b) 764,500
Oracle 169,100(b) 2,140,806
Paychex 125,000 4,099,250
Telvent GIT 60,000(b,c,d) 553,800
TIBCO Software 581,000(b) 5,647,320
VERITAS Software 218,000(b) 4,769,840
Total 65,977,589
Electronics (23.0%)
Amkor Technology 583,800(b) 2,907,324
Analog Devices 133,700 5,382,762
ASML Holding 150,500(b,c) 2,144,625
Broadcom Cl A 132,000(b) 3,570,600
Cypress Semiconductor 270,500(b) 2,848,365
Genesis Microchip 191,200(b) 2,709,304
Intel 241,000 5,364,660
Marvell Technology Group 70,700(b,c) 2,019,899
Micron Technology 158,000(b) 1,924,440
Open Solutions 40,000(b) 1,126,600
Samsung Electronics 16,900(c) 6,638,557
Semtech 96,500(b) 2,014,920
Spatialight 268,925(b,d) 1,750,702
Taiwan Semiconductor Mfg ADR 282,000(c) 2,134,740
Texas Instruments 237,000 5,794,651
Total 48,332,149
Leisure time & entertainment (2.3%)
Gemstar-TV Guide Intl 856,500(b) 4,924,875
Media (11.0%)
eBay 38,300(b) 3,738,463
iVillage 550,000(b) 2,818,750
Sirius Satellite Radio 491,000(b,d) 1,914,900
XM Satellite Radio Holdings Cl A 90,500(b) 2,924,960
Yahoo! 322,500(b) 11,671,275
Total 23,068,348
Retail -- general (1.6%)
Best Buy 55,500 3,286,710
Telecom equipment & services (6.6%)
CIENA 982,000(b) 2,425,540
Corning 381,500(b) 4,368,175
JDS Uniphase 588,000(b) 1,863,960
Nokia ADR 342,300(c) 5,278,266
Total 13,935,941
Utilities -- telephone (3.7%)
AT&T 221,400 3,788,154
Verizon Communications 100,000 3,910,000
Total 7,698,154
Total common stocks
(Cost: $188,394,291) $202,895,754
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Other (--%)
Issuer Shares Value(a)
UBI Soft Entertainment
Warrants 5,712)(b) $9,867
Total other
(Cost: $19,674) $9,867
Short-term securities (5.2%)(e)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies (4.6%)
Federal Home Loan Mtge Corp Disc Nt
01-04-05 1.86% $1,800,000 $1,793,792
Federal Natl Mtge Assn Disc Nts
12-01-04 1.73 500,000 499,207
12-09-04 1.85 1,600,000 1,596,629
12-14-04 1.83 1,900,000 1,895,558
01-05-05 1.86 3,800,000 3,786,688
Total 9,571,874
Commercial paper (0.6%)
CXC LLC
11-01-04 1.86 1,300,000 1,299,799
Total short-term securities
(Cost: $10,870,776) $10,871,673
Total investments in securities
(Cost: $199,284,741)(f) $213,777,294
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At Oct. 31, 2004, the
value of foreign securities represented 13.5% of net assets.
(d) At Oct. 31, 2004, security was partially or fully on loan. See Note 4 to
the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 2.6% of net assets. See Note 4 to the
financial statements. 2.6% of net assets is the Portfolio's cash equivalent
position.
(f) At Oct. 31, 2004, the cost of securities for federal income tax purposes
was $203,826,464 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $17,118,597
Unrealized depreciation (7,167,767)
----------
Net unrealized appreciation $ 9,950,830
-----------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
13 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
World Technologies Portfolio
Oct. 31, 2004
Assets
Investments in securities, at value (Note 1)*
(identified cost $199,284,741) $213,777,294
Cash in bank on demand deposit 61,278
Dividends and accrued interest receivable 67,300
Receivable for investment securities sold 5,707,691
---------
Total assets 219,613,563
-----------
Liabilities
Payable for investment securities purchased 4,203,836
Payable upon return of securities loaned (Note 4) 5,466,200
Accrued investment management services fee 4,117
Other accrued expenses 37,160
------
Total liabilities 9,711,313
---------
Net assets $209,902,250
============
* Including securities on loan, at value (Note 4) $ 5,043,866
------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statement of operations
World Technologies Portfolio
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 477,658
Interest 72,520
Fee income from securities lending (Note 4) 70,311
Less foreign taxes withheld (52,232)
-------
Total income 568,257
-------
Expenses (Note 2):
Investment management services fee 1,812,789
Compensation of board members 8,432
Custodian fees 56,947
Audit fees 24,000
Other 9,778
-----
Total expenses 1,911,946
Earnings credits on cash balances (Note 2) (394)
----
Total net expenses 1,911,552
---------
Investment income (loss) -- net (1,343,295)
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 14,442,726
Foreign currency transactions 1,741
-----
Net realized gain (loss) on investments 14,444,467
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 53,902
------
Net gain (loss) on investments and foreign currencies 14,498,369
----------
Net increase (decrease) in net assets resulting from operations $13,155,074
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets
World Technologies Portfolio
Year ended Oct. 31, 2004 2003
Operations
Investment income (loss) -- net $ (1,343,295) $ (571,018)
Net realized gain (loss) on investments 14,444,467 64,893,772
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 53,902 18,832,116
------ ----------
Net increase (decrease) in net assets resulting from operations 13,155,074 83,154,870
---------- ----------
Proceeds from contributions 8,830,768 22,782,493
Fair value of withdrawals (26,055,794) (12,875,419)
----------- -----------
Net contributions (withdrawals) from partners (17,225,026) 9,907,074
----------- ---------
Total increase (decrease) in net assets (4,069,952) 93,061,944
Net assets at beginning of year 213,972,202 120,910,258
----------- -----------
Net assets at end of year $209,902,250 $213,972,202
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Notes to Financial Statements
World Technologies Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Technologies Portfolio (the Portfolio) is a series of World Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a non-diversified, open-end management investment company. The Portfolio
invests in equity securities of companies in the information technology industry
throughout the world. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value (NAV). Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
17 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
- --------------------------------------------------------------------------------
18 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
- --------------------------------------------------------------------------------
19 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. In certain
circumstances, the Board may approve a change in the index. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
0.72% to 0.595% annually as the Portfolio's assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment based on a
comparison of the performance of Class A shares of the AXP Global Technology
Fund to the Lipper Science and Technology Funds Index. The maximum adjustment is
0.12% per year. If the performance difference is less than 0.50%, the adjustment
will be zero. The adjustment increased the fee by $234,130 for the year ended
Oct. 31, 2004.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their annual compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the underlying Fund or
other American Express mutual funds. The Portfolio's liability for these amounts
is adjusted for market value changes and remains in the Portfolio until
distributed in accordance with the Plan.
During the year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced
by $394 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $744,408,128 and $760,179,507, respectively, for the
year ended Oct. 31, 2004. Realized gains and losses are determined on an
identified cost basis.
Brokerage clearing fees paid to brokers affiliated with AEFC were $97,718 for
the year ended Oct. 31, 2004.
- --------------------------------------------------------------------------------
20 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
4. LENDING OF PORTFOLIO SECURITIES
At Oct. 31, 2004, securities valued at $5,043,866 were on loan to brokers. For
collateral, the Portfolio received $5,466,200 in cash. Cash collateral received
is invested in short-term securities, which are included in the short-term
section of the "Investments in securities." Income from securities lending
amounted to $70,311 for the year ended Oct. 31, 2004. The risks to the Portfolio
of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
5. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Ratio of expenses to average daily net assets(a) .87% .84% .77% .75% .74%
Ratio of net investment income (loss) to average daily net assets (.61%) (.37%) (.51%) (.11%) .10%
Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116%
Total return(b) 6.91% 68.97% (34.78%) (69.21%) 66.70%
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Total return is based on a calculated Portfolio NAV and does not reflect
payment of a sales charge.
- --------------------------------------------------------------------------------
21 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD OF TRUSTEES AND UNITHOLDERS
WORLD TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of World Technologies Portfolio (a
series of World Trust) as of October 31, 2004, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period ended October 31, 2004 and the
financial highlights for each of the years in the five-year period ended October
31, 2004. These financial statements and the financial highlights are the
responsibility of portfolio management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers or by other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of World
Technologies Portfolio as of October 31, 2004, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
22 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Global Technology Fund
Oct. 31, 2004
Assets
Investment in Portfolio (Note 1) $ 209,871,332
Capital shares receivable 12,192
------
Total assets 209,883,524
-----------
Liabilities
Capital shares payable 33,608
Accrued distribution fee 2,718
Accrued service fee 1
Accrued transfer agency fee 2,453
Accrued administrative services fee 343
Other accrued expenses 58,127
------
Total liabilities 97,250
------
Net assets applicable to outstanding capital stock $ 209,786,274
=============
Represented by
Capital stock -- $.01 par value (Note 1) $ 1,196,325
Additional paid-in capital 605,935,093
Accumulated net realized gain (loss) (Note 5) (411,835,622)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 14,490,478
----------
Total -- representing net assets applicable to outstanding capital stock $ 209,786,274
=============
Net assets applicable to outstanding shares: Class A $ 146,065,605
Class B $ 59,344,328
Class C $ 3,952,783
Class I $ 10,781
Class Y $ 412,777
Net asset value per share of outstanding capital stock: Class A shares 79,952,878 $ 1.83
Class B shares 36,990,705 $ 1.60
Class C shares 2,457,559 $ 1.61
Class I shares 5,882 $ 1.83
Class Y shares 225,433 $ 1.83
------- -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statement of operations
AXP Global Technology Fund
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 477,593
Interest 72,510
Fee income from securities lending 70,301
Less foreign taxes withheld (52,225)
-------
Total income 568,179
-------
Expenses (Note 2):
Expenses allocated from Portfolio 1,911,292
Distribution fee
Class A 375,071
Class B 644,615
Class C 42,622
Transfer agency fee 922,371
Incremental transfer agency fee
Class A 68,804
Class B 52,205
Class C 1,989
Service fee -- Class Y 361
Administrative services fees and expenses 131,702
Compensation of board members 7,715
Printing and postage 132,897
Registration fees 54,656
Audit fees 8,000
Other 5,067
-----
Total expenses 4,359,367
Earnings credits on cash balances (Note 2) (2,473)
------
Total net expenses 4,356,894
---------
Investment income (loss) -- net (3,788,715)
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 14,440,716
Foreign currency transactions 1,741
-----
Net realized gain (loss) on investments 14,442,457
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 53,737
------
Net gain (loss) on investments and foreign currencies 14,496,194
----------
Net increase (decrease) in net assets resulting from operations $10,707,479
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets
AXP Global Technology Fund
Year ended Oct. 31, 2004 2003
Operations
Investment income (loss) -- net $ (3,788,715) $ (2,685,295)
Net realized gain (loss) on investments 14,442,457 64,884,382
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 53,737 18,829,617
------ ----------
Net increase (decrease) in net assets resulting from operations 10,707,479 81,028,704
---------- ----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 32,538,914 40,338,279
Class B shares 8,831,756 11,875,873
Class C shares 1,113,196 1,324,959
Class I shares 10,000 --
Class Y shares 361,012 138,070
Payments for redemptions
Class A shares (39,802,082) (30,612,393)
Class B shares (Note 2) (16,473,859) (10,091,766)
Class C shares (Note 2) (1,305,583) (704,810)
Class Y shares (191,700) (29,506)
-------- -------
Increase (decrease) in net assets from capital share transactions (14,918,346) 12,238,706
----------- ----------
Total increase (decrease) in net assets (4,210,867) 93,267,410
Net assets at beginning of year 213,997,141 120,729,731
----------- -----------
Net assets at end of year $209,786,274 $213,997,141
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Notes to Financial Statements
AXP Global Technology Fund
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AXP Global Technology Fund (a series of AXP Global Series, Inc.) is registered
under the Investment Company Act of 1940 (as amended) as a non-diversified,
open-end management investment company. AXP Global Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
Effective July 15, 2004, the Fund offers an additional class of shares, Class I,
exclusively to certain institutional investors. Class I shares have no sales
charge and are made available through a separate prospectus supplement provided
to investors eligible to purchase the shares. At Oct. 31, 2004, AEFC owned 100%
of Class I shares, which represents 0.01% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
Investment in World Technologies Portfolio
The Fund invests all of its assets in World Technologies Portfolio (the
Portfolio), a series of World Trust (the Trust), an open-end investment company
that has the same objectives as the Fund. The Portfolio invests in equity
securities of companies in the information technology industry throughout the
world.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at Oct. 31, 2004 was 99.99%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolio's "Notes to financial statements" (included elsewhere in this report).
- --------------------------------------------------------------------------------
26 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the principal market in which such securities are normally traded. Pursuant
to procedures adopted by the Board of Trustees of the portfolios, AEFC utilizes
Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair NAV. Short-term securities maturing in more than 60
days from the valuation date are valued at the market price or approximate
market value based on current interest rates; those maturing in 60 days or less
are values at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
- --------------------------------------------------------------------------------
27 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by
$3,640,017 and accumulated net realized loss has been decreased by $187,307
resulting in a net reclassification adjustment to decrease paid-in capital by
$3,827,324.
The tax character of distributions paid for the years indicated is as follows:
Year ended Oct. 31, 2004 2003
Class A
Distributions paid from:
Ordinary income $-- $--
Long-term capital gain -- --
Class B
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class C
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class I*
Distributions paid from:
Ordinary income -- N/A
Long-term capital gain -- N/A
Class Y
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
* Inception date was July 15, 2004.
At Oct. 31, 2004, the components of distributable earnings on a tax basis were
as follows:
Undistributed ordinary income $ --
Accumulated long-term gain (loss) $(407,294,569)
Unrealized appreciation (depreciation) $ 9,949,425
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
- --------------------------------------------------------------------------------
28 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net that
declines from 0.06% to 0.035% annually as the Fund's assets increase. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$492,415 for Class A, $96,966 for Class B and $2,363 for Class C for the year
ended Oct. 31, 2004.
- --------------------------------------------------------------------------------
29 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Under an agreement which was effective until May 31, 2004, net expenses would
not exceed 1.99% for Class A, 2.75% for Class B, 2.75% for Class C and 1.82% for
Class Y of the Fund's average daily net assets. Beginning June 1, 2004, AEFC and
it affiliates have agreed to waive certain fees and expenses until Oct. 31,
2005. Under this agreement, net expenses will not exceed 1.82% for Class A,
2.59% for Class B, 2.59% for Class C, 1.13% for Class I and 1.63% for Class Y of
the Fund's average daily net assets.
During the year ended Oct. 31, 2004, the Fund's transfer agency fees were
reduced by $2,473 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004
Class A Class B Class C Class I* Class Y
Sold 18,015,801 5,496,488 686,163 5,882 199,393
Issued for reinvested distributions -- -- -- -- --
Redeemed (22,398,814) (10,688,097) (844,370) -- (106,886)
----------- ----------- -------- ----- --------
Net increase (decrease) (4,383,013) (5,191,609) (158,207) 5,882 92,507
---------- ---------- -------- ----- ------
* Inception date was July 15, 2004.
Year ended Oct. 31, 2003
Class A Class B Class C Class I Class Y
Sold 29,664,616 9,892,297 1,093,757 N/A 97,979
Issued for reinvested distributions -- -- -- N/A --
Redeemed (23,738,698) (8,875,386) (608,977) N/A (21,555)
----------- ---------- -------- ----- -------
Net increase (decrease) 5,925,918 1,016,911 484,780 N/A 76,424
--------- --------- ------- ----- ------
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. The Fund must maintain asset coverage
for borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to the agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended Oct. 31, 2004.
- --------------------------------------------------------------------------------
30 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes the Fund had a capital loss carry-over of
$407,294,569 at Oct. 31, 2004, that if not offset by capital gains will expire
as follows:
2009 2010
$325,995,342 $81,299,227
It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $1.72 $1.03 $1.60 $ 5.26 $ 11.27
----- ----- ----- ------ -------
Income from investment operations:
Net investment income (loss) (.03) (.02) (.03) (.02) (.01)
Net gains (losses) (both realized and unrealized) .14 .71 (.54) (3.64) 7.05
----- ----- ----- ------ -------
Total from investment operations .11 .69 (.57) (3.66) 7.04
----- ----- ----- ------ -------
Less distributions:
Distributions from realized gains -- -- -- -- (1.29)
Tax return of capital -- -- -- -- (11.76)(b)
----- ----- ----- ------ -------
Total distributions -- -- -- -- (13.05)
----- ----- ----- ------ -------
Net asset value, end of period $1.83 $1.72 $1.03 $ 1.60 $ 5.26
----- ----- ----- ------ -------
Ratios/supplemental data
Net assets, end of period (in thousands) $146,066 $145,382 $80,831 $146,139 $319,164
Ratio of expenses to average daily net assets(c) 1.74% 1.94% 1.91% 1.63% 1.24%(d)
Ratio of net investment income (loss) to average daily net assets (1.48%) (1.47%) (1.65%) (.99%) (.38%)
Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116%
Total return(e) 6.40% 66.99% (35.62%) (69.58%) 66.58%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) A distibution payable to a single corporate shareholder.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class A would have been 1.45% for the
period ended Oct. 31, 2000.
(e) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
31 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $1.53 $ .92 $1.44 $ 4.77 $ 11.02
----- ----- ----- ------ -------
Income from investment operations:
Net investment income (loss) (.04) (.03) (.04) (.04) (.04)
Net gains (losses) (both realized and unrealized) .11 .64 (.48) (3.29) 6.84
----- ----- ----- ------ -------
Total from investment operations .07 .61 (.52) (3.33) 6.80
----- ----- ----- ------ -------
Less distributions:
Distributions from realized gains -- -- -- -- (1.29)
Tax return of capital -- -- -- -- (11.76)(b)
----- ----- ----- ------ -------
Total distributions -- -- -- -- (13.05)
----- ----- ----- ------ -------
Net asset value, end of period $1.60 $1.53 $ .92 $ 1.44 $ 4.77
----- ----- ----- ------ -------
Ratios/supplemental data
Net assets, end of period (in thousands) $59,344 $64,387 $37,877 $67,425 $138,545
Ratio of expenses to average daily net assets(c) 2.52% 2.75% 2.71% 2.42% 2.01%(d)
Ratio of net investment income (loss) to average daily net assets (2.26%) (2.27%) (2.45%) (1.78%) (1.16%)
Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116%
Total return(e) 4.58% 66.30% (36.11%) (69.81%) 65.25%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) A distibution payable to a single corporate shareholder.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class B would have been 2.26% for the
period ended Oct. 31, 2000.
(e) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
32 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000(b)
Net asset value, beginning of period $1.53 $ .92 $1.44 $ 4.77 $5.05
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) (.04) (.03) (.04) (.04) (.01)
Net gains (losses) (both realized and unrealized) .12 .64 (.48) (3.29) (.27)
----- ----- ----- ------ -----
Total from investment operations .08 .61 (.52) (3.33) (.28)
----- ----- ----- ------ -----
Net asset value, end of period $1.61 $1.53 $ .92 $ 1.44 $4.77
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in thousands) $3,953 $4,000 $1,964 $4,069 $3,298
Ratio of expenses to average daily net assets(c) 2.49% 2.72% 2.69% 2.42% 2.01%(d),(e)
Ratio of net investment income (loss) to average daily net assets (2.23%) (2.26%) (2.39%) (1.84%) (1.17%)(d)
Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116%
Total return(f) 5.23% 66.30% (36.11%) (69.81%) (5.54%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class C would have been 2.26% for the
period ended Oct. 31, 2000.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- --------------------------------------------------------------------------------
33 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004(b)
Net asset value, beginning of period $1.70
-----
Income from investment operations:
Net investment income (loss) (.02)
Net gains (losses) (both realized and unrealized) .15
-----
Total from investment operations .13
-----
Net asset value, end of period $1.83
-----
Ratios/supplemental data
Net assets, end of period (in thousands) $11
Ratio of expenses to average daily net assets(c) 1.03%(d)
Ratio of net investment income (loss) to average daily net assets (.73%)(d)
Portfolio turnover rate (excluding short-term securities) 349%
Total return(e) 7.65%(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was July 15, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
34 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $1.72 $1.03 $1.60 $ 5.25 $ 11.27
----- ----- ----- ------ -------
Income from investment operations:
Net investment income (loss) (.02) (.02) (.03) (.02) --
Net gains (losses) (both realized and unrealized) .13 .71 (.54) (3.63) 7.03
----- ----- ----- ------ -------
Total from investment operations .11 .69 (.57) (3.65) 7.03
----- ----- ----- ------ -------
Less distributions:
Distributions from realized gains -- -- -- -- (1.29)
Tax return of capital -- -- -- -- (11.76)(b)
----- ----- ----- ------ -------
Total distributions -- -- -- -- (13.05)
----- ----- ----- ------ -------
Net asset value, end of period $1.83 $1.72 $1.03 $ 1.60 $ 5.25
----- ----- ----- ------ -------
Ratios/supplemental data
Net assets, end of period (in thousands) $413 $229 $58 $57 $88
Ratio of expenses to average daily net assets(c) 1.55% 1.69% 1.72% 1.49% .94%(d)
Ratio of net investment income (loss) to average daily net assets (1.28%) (1.25%) (1.61%) (.89%) (.80%)
Portfolio turnover rate (excluding short-term securities) 349% 546% 391% 233% 116%
Total return(e) 6.40% 66.99% (35.63%) (69.52%) 66.27%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) A distibution payable to a single corporate shareholder.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) AEFC waived/reimbursed the Fund for certain expenses. Had AEFC not done so,
the annual ratio of expenses for Class Y would have been 1.19% for the
period ended Oct. 31, 2000.
(e) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
35 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GLOBAL SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP
Global Technology Fund (a series of AXP Global Series, Inc.) as of October 31,
2004, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended October 31, 2004, and the financial highlights for each of the years in
the five-year period ended October 31, 2004. These financial statements and the
financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Global Technology Fund as of October 31, 2004, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
36 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Oct. 31, 2004.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
37 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Beginning Ending Expenses paid
account value account value during the period
May 1, 2004 Oct. 31, 2004 May 1, 2004-Oct. 31, 2004
Class A
Actual(a) $1,000 $1,057.80 $9.06(b)
Hypothetical (5% return before expenses) $1,000 $1,016.06 $8.87(b)
Class B
Actual(a) $1,000 $1,045.80 $12.97(c)
Hypothetical (5% return before expenses) $1,000 $1,012.18 $12.76(c)
Class C
Actual(a) $1,000 $1,052.30 $12.91(d)
Hypothetical (5% return before expenses) $1,000 $1,012.28 $12.66(d)
Class I
Actual(a) $1,000 N/A N/A
Hypothetical (5% return before expenses) $1,000 N/A N/A
Class Y
Actual(a) $1,000 $1,057.80 $7.98(f)
Hypothetical (5% return before expenses) $1,000 $1,017.11 $7.82(f)
(a) Based on the actual return for the six months ended Oct. 31, 2004: +5.78%
for Class A, +4.58% for Class B, +5.23% for Class C and +5.78% for Class Y.
(b) Expenses are equal to the Fund's Class A annualized expense ratio of 1.77%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(c) Expenses are equal to the Fund's Class B annualized expense ratio of 2.55%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(d) Expenses are equal to the Fund's Class C annualized expense ratio of 2.53%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(e) The values and expenses paid are not presented because Class I does not
have a full six months of history. The inception date for Class I was July
15, 2004.
(f) Expenses are equal to the Fund's Class Y annualized expense ratio of 1.56%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
- --------------------------------------------------------------------------------
38 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. Each member oversees 14
Master Trust portfolios and 89 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the board.
Independent Board Members
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards). Former Governor of
Age 70 Minnesota
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc.
Minneapolis, MN 55402 construction) since 1998 (construction materials/chemicals)
Age 67
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated (commodity
30 Seventh Street East since 2001 Chief Executive Officer, merchants and processors), General
Suite 3050 Minnesota Mining and Mills, Inc. (consumer foods),
St. Paul, MN 55101-4901 Manufacturing (3M) Vulcan Materials Company
Age 70 (construction materials/
chemicals), Milliken & Company
(textiles and chemicals), and
Nexia Biotechnologies, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics BostonFed Bancorp, Inc. (holding
901 S. Marquette Ave. since 2004 and Management, Bentley College company) and its subsidiary Boston
Minneapolis, MN 55402 since 2002; former Dean, McCallum Federal Savings Bank
Age 53 Graduate School of Business,
Bentley College from 1999 to 2002
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 69
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Stephen R. Lewis, Jr.* Board member Retired President and Professor Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 of Economics, Carleton College (manufactures irrigation systems)
Minneapolis, MN 55402
Age 65
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund by
reason of being a security holder of Bank of America Corporation, parent
company of Columbia Wanger Asset Management, L.P., one of the fund's
subadvisers.
- --------------------------------------------------------------------------------
39 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Management, Inc. (private real (transportation, distribution and
Minneapolis, MN 55402 estate and asset management logistics consultants)
Age 52 company) since 1999
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alan K. Simpson Board member Former three-term United States
1201 Sunshine Ave. since 1997 Senator for Wyoming
Cody, WY 82414
Age 73
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alison Taunton-Rigby Board member Founder and Chief Executive Hybridon Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Officer, RiboNovix, Inc. since
Minneapolis, MN 55402 2004; President, Forester Biotech
Age 60 since 2000; prior to that,
President and CEO, Aquila
Biopharmaceuticals, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Board Member Affiliated with AEFC**
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
William F. Truscott Board member Senior Vice President - Chief
53600 AXP Financial Center since 2001, Investment Officer of AEFC since
Minneapolis, MN 55474 Vice President 2001. Former Chief Investment
Age 44 since 2002 Officer and Managing Director,
Zurich Scudder Investments
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
** Interested person by reason of being an officer, director and/or employee of
AEFC.
- --------------------------------------------------------------------------------
40 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Jeffrey P. Fox Treasurer since Vice President - Investment
105 AXP Financial Center 2002 Accounting, AEFC, since 2002;
Minneapolis, MN 55474 Vice President - Finance,
Age 49 American Express Company,
2000-2002; Vice President -
Corporate Controller, AEFC,
1996-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Paula R. Meyer President since Senior Vice President and General
596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC,
Minneapolis, MN 55474 since 2002; Vice President and
Age 50 Managing Director - American
Express Funds, AEFC, 2000-2002;
Vice President, AEFC, 1998-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Leslie L. Ogg Vice President, President of Board Services
901 S. Marquette Ave. General Counsel, Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
41 -- AXP GLOBAL TECHNOLOGY FUND -- 2004 ANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
AXP(R) Threadneedle
Global Balanced
Fund
Annual Report
for the Period Ended
Oct. 31, 2004
AXP Threadneedle Global Balanced Fund seeks to provide shareholders with a
balance of growth of capital and current income.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 12
Investments in Securities 14
Financial Statements 20
Notes to Financial Statements 23
Report of Independent Registered
Public Accounting Firm 34
Federal Income Tax Information 35
Fund Expenses Example 36
Board Members and Officers 38
Proxy Voting 40
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Fund Snapshot AT OCT. 31, 2004
PORTFOLIO MANAGERS
Portfolio managers Since Years in industry
Equity
Alex Lyle* 10/03 24
Stephen Thornber* 10/03 17
Fixed Income
Nic Pifer, CFA** 2/03 14
* The Fund is managed by a team led by Alex Lyle and Stephen Thornber in
London.
** The Fund is managed by a team led by Nic Pifer in Minneapolis.
FUND OBJECTIVE
For investors seeking a balance of growth of capital and current income.
Inception dates by class
A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96
Ticker symbols by class
A: IDGAX B: IGBBX C: -- Y: AGBYX
Total net assets $100.0 million
Number of holdings 152
STYLE MATRIX
Equities
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
Shading within the style matrix indicates areas in which the Fund generally
invests.
Bonds
DURATION
SHORT INT LONG
X HIGH
X MEDIUM QUALITY
LOW
TOP TEN HOLDINGS
Percentage of portfolio assets
Oesterreich Kontrollbank (Austria)
1.80% 2010 3.5%
Buoni Poliennali Del Tes (Italy)
4.25% 2009 3.2
Govt of France (France)
5.50% 2010 2.6
Bundesrepublik Deutschland (Germany)
5.25% 2008 1.8
Citigroup (United States) 1.7
Microsoft (United States) 1.6
Federal Natl Mtge Assn (United States)
6.00% 2011 1.5
Bundesrepublik Deutschland (Germany)
6.50% 2027 1.5
Total (France) 1.5
Home Depot (United States) 1.4
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Stocks of small- and medium-sized companies may be subject to more abrupt or
erratic price movements than stocks of larger companies. Some of these companies
also may have fewer financial resources.
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the year ended Oct. 31, 2004
(bar 1) (bar 2) (bar 3) (bar 4)
+11.62% +14.03% +10.72% +10.39%
(bar 1) AXP Threadneedle Global Balanced Fund Class A (excluding sales charge)
(bar 2) Morgan Stanley Capital International (MSCI) All Country World Free
Index (unmanaged)
(bar 3) Citigroup World Government Bond Index (unmanaged)
(bar 4) Lipper Global Flexible Funds Index
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. You should consider the investment objectives,
risks, and charges and expenses of the Fund carefully before investing.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart; if reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
as of Oct. 31, 2004
1 year +11.62% +5.19% +10.75% +6.75% +10.56% +10.56% +11.74% +11.74%
3 years +5.71% +3.64% +4.87% +3.96% +4.85% +4.85% +5.84% +5.84%
5 years -0.77% -1.94% -1.51% -1.68% N/A N/A -0.57% -0.57%
Since inception +3.72% +2.95% +2.93% +2.93% -3.47% -3.47% +3.92% +3.92%
as of Sept. 30, 2004
1 year +11.71% +5.28% +10.60% +6.60% +10.86% +10.86% +11.61% +11.61%
3 years +5.62% +3.55% +4.78% +3.86% +4.83% +4.83% +5.77% +5.77%
5 years -0.54% -1.71% -1.32% -1.49% N/A N/A -0.37% -0.37%
Since inception +3.40% +2.63% +2.60% +2.60% -4.12% -4.12% +3.58% +3.58%
(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.
- --------------------------------------------------------------------------------
4 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, AXP Threadneedle Global Balanced Fund's portfolio management team, Alex
Lyle and Stephen Thornber of Threadneedle International Limited (Threadneedle),
discuss the Fund's positioning and results for fiscal year 2004. Threadneedle,
an indirect wholly owned subsidiary of American Express Financial Corporation,
acts as the subadviser to the Fund. Alex Lyle manages asset allocation. Stephen
Thornber manages the equity portion. Nic Pifer manages the fixed-income portion.
Q: How did AXP Threadneedle Global Balanced Fund perform for the 12 months
ended Oct. 31, 2004?
A: AXP Threadneedle Global Balanced Fund's Class A shares gained 11.62%
(excluding sales charge) for the 12 months ended Oct. 31, 2004. This lagged
the Fund's benchmark, the unmanaged MSCI All Country World Free Index,
which posted a total return of 14.03%. However, the Fund outperformed the
Lipper Global Flexible Funds Index, representing the Fund's peer group,
which posted a 10.39% total return over the same period. The Citigroup
World Government Bond Index (Citigroup Index) returned 10.72% for the same
period.
Q: What factors most significantly affected equity performance?
A: A weakening U.S. dollar versus other world currencies helped performance
during the annual period overall for both the equity and fixed income
portions of the Fund. On a trade-weighted basis, the U.S. dollar declined
6.7% over the 12 months ended Oct. 31, 2004. As the value of the U.S.
dollar declines, the currency value of foreign investments typically
improves and vice versa.
Within the equity portion of the Fund, we made several changes when we took
over management in late October 2003. The Fund's underperformance of the
MSCI All Country World Free Index can be attributed primarily to this
restructuring process that took place during the first month or so of the
2004 fiscal year. However, for most of the remaining annual period, these
changes paid off, as evidenced by the Fund's outperformance of the Lipper
Global Flexible Funds Index. Overall, country selection, asset allocation,
sector allocation, and individual stock selection proved effective.
- --------------------------------------------------------------------------------
5 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Questions & Answers
Regional and Sector Positioning
Early in our restructuring process, we reduced the Fund's equity position
in the United States, added more emerging markets stocks, and added
slightly to its continental European exposure. Each of these strategies
worked well for the Fund. For the fiscal year as a whole:
o The U.S. equity market underperformed European equities and emerging
markets.
o Emerging equity markets of Latin America and Asia performed
particularly well.
o In Latin America, the Fund benefited most from its exposure to the
materials sector, including iron ore, pulp, and paper stocks.
o In Asia, the Fund benefited most from holdings in Hong Kong property
and retail stocks. During the first calendar quarter, we increased the
Fund's position in Japan, which worked well until June, but then hurt
results after that.
o Our position in the United Kingdom also detracted, as the British
pound sterling proved to be a stronger currency than anticipated.
ASSET ALLOCATION & SECTOR COMPOSITION
At Oct. 31, 2004
Percentage of portfolio assets
(pie chart)
Stocks 66.5%
Financials 13.6%
Consumer discretionary 10.2%
Industrials 9.1%
Information technology 7.3%
Health care 7.1%
Energy 5.7%
Consumer staples 4.6%
Telecommunications 3.9%
Materials 2.6%
Utilities 2.4%
Bonds 30.8%
Foreign government bonds 27.4%
U.S. government obligations & agencies 3.4%
Cash equivalents 2.7%
Short-term securities 2.7%
- --------------------------------------------------------------------------------
6 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> Overall, country selection, asset allocation, sector
allocation, and individual stock selection proved effective. (end callout quote)
-- Stephen Thornber
Our reduction of the Fund's substantial large-cap stock focus and addition
of more mid-cap stocks early in the fiscal year also benefited its relative
annual performance. As anticipated, mid-cap stocks benefited more than
large company stocks as the global economy grew.
From a sector perspective, the Fund benefited from successfully avoiding
significant exposure to information technology hardware, consumer staples,
and large-cap pharmaceuticals, each of which lagged during the fiscal year.
The Fund's positions in the strongly-performing information technology
software, energy, and materials sectors also boosted the portfolio's
relative results. So, too, did a timely reduction in the Fund's exposure to
the industrials sector during the first calendar quarter. On the other
hand, our position in the strongly-performing utilities sector detracted
from the Fund's relative performance.
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
United States 32.5%
Germany 9.0%
Japan 8.7%
United Kingdom 7.6%
Italy 7.1%
France 6.5%
Switzerland 4.0%
Austria 3.5%
Canada 3.2%
Hong Kong 2.3%
Greece 2.2%
Bermuda 2.1%
Brazil 1.9%
South Korea 1.5%
Netherlands 1.2%
Denmark 1.1%
Other* 5.6%
* Includes Australia, India, Indonesia, Ireland, Israel, Luxembourg, Mexico,
Norway, Singapore, Supra-National, Sweden and Taiwan.
Supra-National is any entity that is owned by multiple national governments,
such as the European Investment Bank (EIB) that is owned by all the member
states in the European Union. Generally speaking, supra-nationals have very high
credit ratings, especially those where the main shareholders are national
governments of highly rated, developed countries.
- --------------------------------------------------------------------------------
7 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> We had positioned the Fund in anticipation of a narowning
of the difference in interest rates between short and long-term fixed-income
securities. (end callout quote)
-- Nic Pifer
Stock Selection
Stock selection was another key contributor to performance. U.S.
information technology software company Adobe Systems and home improvement
retailer Home Depot, both among the Fund's larger holdings, each performed
well. Other strong performers during the annual period included Hong Kong
retailer Esprit; one of the few utilities in the portfolio, Duke Energy;
and Swiss manufacturer of orthodontic implants Nobel Biocare.
Of course, there were disappointments as well. These included U.S.
consulting firm Accenture, Israeli Internet security and software company
Check Point Software Technologies. We continue to believe in the
fundamental prospects of these firms and thus maintained holdings in these
stocks, even adding to the Fund's position in Accenture.
Q: What factors most significantly affected fixed-income performance?
Currency
The Fund's strong annual performance reflected effective currency
positioning, country allocation, and positioning. The Fund maintained
higher-than-Citigroup World Government Bond Index positions in the euro,
several other European currencies, and the "dollar-bloc" currencies of
Canada, Australia. Each of these currencies outperformed both the U.S.
dollar and the Japanese yen.
Within countries, the Fund held only a small position in Japanese bonds
throughout the fiscal year, a less than market weighting in U.S. bonds, and
a higher than Citigroup World Government Bond Index position in core
European bonds. This strategy worked well, as the Japanese fixed income
market underperformed other major bond markets for the annual period, and
the core European fixed income markets performed well relative to both the
United States and Japan.
- --------------------------------------------------------------------------------
8 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Questions & Answers
Interest rates
We had positioned the Fund in anticipation of a narrowing of the difference
in interest rates between short and long-term fixed-income securities (the
yield curve). We believed that short-term bond yields would rise faster than
long-term bond yields when the Federal Reserve Board (the Fed) started to
tighten monetary policy. In contrast, we had positioned for a steeper yield
curve in Japan. Both strategies proved successful overall, especially our
U.S. yield curve position, as the Fed made the first of this cycle's
interest rate hikes on June 30, 2004 and raised rates again on August 10 and
September 21.
Duration management
The Fund's duration management produced mixed results for the annual period.
During the first half of the fiscal year, the Fund's duration positioning
proved to be a positive contributor to relative results. We kept the Fund's
duration, a principal measure of interest rate risk, fairly neutral at the
start of the fiscal year, as global bond yields moved lower. We then began
moving to a shorter duration in January and February 2004, and did so even
more in March. This defensive stance detracted from the Fund's relative
returns when the global bond markets rallied from mid-June through the end
of the annual period.
Q: What changes did you make to the Fund and how is it currently positioned?
A: Beyond the restructuring changes made early in the fiscal year to the Fund's
equity component as described above, our strategy was to opportunistically
add to certain stock positions when they were down. Overall, this strategy
worked well. Toward the end of the fiscal year, we began to reduce the
Fund's exposure to emerging markets equities and to increase its equity
position in Japan. We believe that interest rates will continue to rise in
the United States, and the emerging markets tend to be more sensitive to
U.S. interest rates than the developed markets. Furthermore, after strong
performance over the past fiscal year, we feel the emerging markets now have
limited upside potential. As for Japan, we believe its economy is showing
signs of a cyclical recovery that has yet to be priced into its equity
market.
The fixed income portion of the Fund invests primarily in government bonds
and high-quality substitutes, such as agency issues and other national
issues. During the annual period, we shortened the Fund's duration.
- --------------------------------------------------------------------------------
9 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Questions & Answers
The U.S. Dollar
In both bonds and stocks, we decreased the Fund's exposure to the U.S.
dollar during the fiscal year. The Fund began the period with a strong
exposure to European currencies and to the three "dollar-bloc" currencies,
a low exposure to the Japanese yen, and a slightly lower-than-Citigroup
Index position in the U.S. dollar. We expected the U.S. dollar to continue
its decline compared to other currencies. Thus, we viewed the U.S. dollar's
rebound in April and May 2004 as an opportunity to move to an even lower
position in the U.S. currency and to reallocate the exposure primarily to
the euro but also to the "dollar bloc" currencies.
Q: How do you intend to manage the Fund in the coming months?
A: We are optimistic for the global equity markets for several reasons:
o First, with the resolution of the U.S. presidential election, a great
deal of uncertainty has been taken out of the equity markets globally.
o Second, we believe the U.S. dollar will continue its decline,
especially given the rising U.S. current account deficit. While this
is positive for the international equity markets, it also means that
we intend to maintain the Fund's lower exposure to the U.S. equity
market.
o Third, we believe global economic growth may continue at an
above-trend pace, especially in China and Japan. We believe this
should drive strong corporate earnings ahead, particularly in the
materials sector.
o Finally, equity valuations generally remain attractive, especially
outside of the U.S. We continue to look with some interest at property
stocks in Hong Kong, which have been benefiting from the dramatic
emergence of Asian consumers and an economic recovery.
We temper this generally bullish view with a concern that U.S. interest
rates may rise to the point that they impact Latin American equities. Also,
equity markets may feel some downward pressure where economic growth is
more sluggish, such as in the U.K. and continental Europe. Also, looking
ahead, we believe there will be increased sector polarization from a
valuation perspective. Thus, we believe sector selection will be a key
driver of portfolio performance in the months ahead.
While we believe that mid-cap stocks may well continue to outperform
large-cap stocks in the near term, we intend to maintain our dynamic
investing style, selecting what we believe are the best stocks regardless
of growth or value slant and regardless of market capitalization.
- --------------------------------------------------------------------------------
10 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Questions & Answers
Fixed-Income
We intend to maintain a somewhat defensive position with respect to interest
rate risk exposure. Specifically, we expect to keep the Fund's duration
short given our view that the U.S. economy in particular is growing at an
above-trend pace. In our view, the Fed is likely to continue raising the
targeted federal funds rate into 2005 until it is back to more historically
neutral levels. We also expect the Bank of Canada, which just started its
tightening monetary cycle in September 2004, to continue raising interest
rates for some time.
On the other hand, the tightening monetary cycles of the Bank of England,
the Reserve Bank of Australia, and the Reserve Bank of New Zealand may soon
be coming to an end. These central banks had started their tightening cycles
well ahead of the Fed and had never lowered interest rates as significantly
as the U.S. Economic news from the Eurozone has surprised on the weak side,
and so the European Central Bank may wait before beginning to raise interest
rates until mid-2005, and we believe the Bank of Japan is still more than a
year away from changing its interest rates from their current 0% level.
Overall, the strength of the global economy in the coming months remains
uncertain given both the mix of central bank actions and still high oil
prices. We expect global bond yields to move higher, but modestly so. Thus,
from a country perspective, we continue to favor European bonds, though we
may seek to reduce this allocation a bit in favor of bonds from the United
Kingdom, Australia, and New Zealand.
Currency
As for currency exposure, we intend to maintain the Fund's
lower-than-Citigroup World Government Bond Index position in the U.S. dollar
in the coming months, and thus a weaker U.S. dollar should benefit the Fund.
At the same time, however, we do not expect the Fund to experience the same
sort of a boost from currency moves that it has seen since 2002, simply
because the dollar is no longer as overvalued as it was in early 2002.
Should the U.S. dollar indeed weaken in line with our expectations, then we
may reassess the risk/reward profile of the Fund's U.S. dollar position. As
always, we remain focused on careful security selection, as we continue to
seek opportunities to capitalize on attractively valued bonds.
- --------------------------------------------------------------------------------
11 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Threadneedle Global Balanced Fund Class A shares (from 12/1/96
to 10/31/04) as compared to the performance of three widely cited performance
indices, MSCI All Country World Free Index, Citigroup World Government Bond
Index and the The Lipper Global Flexible Funds Index. In comparing the Fund's
Class A shares to these indices, you should take into account the fact that the
Fund's performance reflects the maximum sales charge of 5.75%, while such
charges are not reflected in the performance of the indices. Returns for the
Fund include the reinvestment of any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions and
redemptions. Current performance may be lower or higher than the performance
information shown. You may obtain performance information current to the most
recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. Also see "Past Performance" in the Fund's current
prospectus. You should consider the investment objectives, risks, and charges
and expenses of the Fund carefully before investing.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
Oct. 31, 2004 $0.03 $ -- $ -- $0.03
Oct. 31, 2003 0.04 -- -- 0.04
Oct. 31, 2002 0.02 -- -- 0.02
Oct. 31, 2001 0.03 0.22 0.29 0.54
Oct. 31, 2000 0.03 0.30 0.21 0.54
- --------------------------------------------------------------------------------
12 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
(line chart)
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP THREADNEEDLE GLOBAL BALANCED FUND
AXP Threadneedle Global Balanced Fund
(includes sales charge) $ 9,425 $10,188 $11,310 $13,103 $13,446 $10,672 $ 9,660 $11,294 $12,606
MSCI All Country World Free Index(1) $10,000 $11,018 $12,454 $15,694 $15,820 $11,841 $10,234 $12,818 $14,617
Citigroup World Government Bond Index(2) $10,000 $10,128 $11,399 $11,119 $10,554 $11,492 $12,544 $14,335 $15,871
Lipper Global Flexible Funds Index(3) $10,000 $11,100 $11,441 $13,557 $14,763 $12,758 $11,906 $14,369 $15,862
'96 '97 '98 '99 '00 '01 '02 '03 '04
COMPARATIVE RESULTS Since
Results as of Oct. 31, 2004 1 year 3 years 5 years inception(4)
AXP Threadneedle Global Balanced Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,519 $11,132 $9,067 $12,606
Average annual total return +5.19% +3.64% -1.94% +2.95%
MSCI All Country World Free Index(1)
Cumulative value of $10,000 $11,403 $12,343 $9,315 $14,617
Average annual total return +14.03% +7.27% -1.41% +4.91%
Citigroup World Government Bond Index(2)
Cumulative value of $10,000 $11,072 $13,810 $14,276 $15,871
Average annual total return +10.72% +11.36% +7.38% +6.01%
Lipper Global Flexible Funds Index(3)
Cumulative value of $10,000 $11,039 $12,433 $11,700 $15,862
Average annual total return +10.39% +7.53% +3.19% +6.00%
Results for other share classes can be found on page 4.
(1) MSCI All Country World Free Index, an unmanaged index of equity securities,
is compiled from a composite of securities markets of 47 countries,
including Canada, the United States, and 26 emerging market countries. The
index reflects reinvestment of all distributions and changes in market
prices, but excludes brokerage commissions or other fees.
(2) CitiGroup World Government Bond Index, an unmanaged market capitalization
weighted benchmark, tracks the performance of the 17 government bond
markets around the world. It is widely recognized by investors as a
measurement index for portfolios of government bond securities. The index
reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.
(3) The Lipper Global Flexible Funds Index includes the 10 largest global
flexible (balanced) funds tracked by Lipper Inc. The index's returns
include net reinvested dividends.
(4) Fund data is from Nov. 13, 1996. MSCI All Country World Free Index,
Citigroup World Government Bond Index and Lipper Index group data is from
Dec. 1, 1996.
- --------------------------------------------------------------------------------
13 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Investments in Securities
AXP Threadneedle Global Balanced Fund
Oct. 31, 2004
(Percentages represent value of investments compared to net assets)
Common stocks (65.1%)(c)
Issuer Shares Value(a)
Bermuda (2.0%)
Insurance (1.2%)
PartnerRe 11,848 $688,962
RenaissanceRe Holdings 12,604 590,119
Total 1,279,081
Multi-industry (0.8%)
Accenture Cl A 31,365(b) 759,347
Brazil (1.8%)
Metals (0.7%)
Cia Vale do Rio Doce ADR 39,942 726,945
Paper & packaging (0.5%)
Aracruz Celulose ADR 16,255 547,468
Utilities -- telephone (0.6%)
Brasil Telecom Participacoes ADR 18,720 573,955
Canada (1.4%)
Banks and savings & loans (0.4%)
TSX Group 8,638 362,783
Energy (0.7%)
EnCana 13,919 690,293
Metals (0.3%)
Cameco 3,953 320,615
France (2.8%)
Automotive & related (0.6%)
Renault 6,755 567,027
Energy (1.4%)
Total 6,956 1,450,847
Multi-industry (0.8%)
Sanofi-Aventis 10,801 791,941
Germany (1.6%)
Banks and savings & loans (0.7%)
Hypo Real Estate Holding 18,035(b) 676,635
Utilities -- electric (0.9%)
RWE 16,472 875,140
Hong Kong (2.3%)
Multi-industry (1.0%)
New World Development 1,090,600 952,820
Real estate (0.5%)
Henderson Land Development 112,000 519,471
Retail -- general (0.8%)
Esprit Holdings 154,500 825,768
India (0.6%)
Banks and savings & loans
State Bank of India GDR 8,855 233,949
State Bank of India GDR 13,145(d) 347,291
Total 581,240
Indonesia (0.3%)
Metals
PT Bumi Resources 3,500,000(b) 279,460
Ireland (0.8%)
Banks and savings & loans
Anglo Irish Bank 39,838 763,631
Israel (0.8%)
Computer software & services
Check Point Software Technologies 35,109(b) 794,201
Italy (1.2%)
Energy (0.8%)
Eni 37,750 859,827
Utilities -- electric (0.4%)
Enel 39,007 353,886
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Japan (8.6%)
Automotive & related (1.0%)
Honda Motor 9,300 $449,972
Toyota Motor 13,200 515,176
Total 965,148
Banks and savings & loans (1.6%)
Chiba Bank 85,000 547,014
Mitsubishi Tokyo Financial Group 91 773,957
UFJ Holdings 47(b) 218,522
Total 1,539,493
Broker dealers (0.3%)
Matsui Securities 11,900 315,999
Electronics (0.3%)
Keyence 1,500 338,499
Financial services (0.3%)
Nomura Holdings 26,000 319,410
Health care products (0.5%)
Chugai Pharmaceutical 31,700 497,278
Machinery (1.3%)
Amada 112,000 596,938
Komatsu 107,000 716,906
Total 1,313,844
Media (0.4%)
Fuji Television Network 195 440,418
Multi-industry (1.2%)
Canon 14,600(b) 721,583
Ricoh 28,000 523,909
Total 1,245,492
Real estate (0.9%)
Daito Trust Construction 13,400 567,303
Mitsui Fudosan 28,000 297,675
Total 864,978
Retail -- general (0.4%)
Seven-Eleven Japan 14,000 406,161
Textiles & apparel (0.4%)
Onward Kashiyama 31,000 404,271
Luxembourg (0.4%)
Metals
Arcelor 18,615 351,341
Mexico (0.8%)
Cellular telecommunications
America Movil ADR Series L 18,121 797,324
Netherlands (1.2%)
Aerospace & defense (0.3%)
European Aeronautic
Defence and Space 12,000 343,189
Food (0.9%)
Royal Numico 25,200(b) 851,938
Singapore (0.5%)
Real estate
City Developments 126,000 477,445
South Korea (1.5%)
Electronics (1.1%)
Samsung Electronics 2,890 1,135,233
Engineering & construction (0.4%)
Hyundai Development 29,550 396,166
Sweden (0.1%)
Telecom equipment & services
Telefonaktiebolaget LM
Ericsson Cl B 49,557(b) 144,346
Switzerland (4.0%)
Banks and savings & loans (1.0%)
UBS 14,452 1,044,562
Food (0.3%)
Nestle 1,371 325,239
Health care products (2.7%)
Actelion 6,689(b) 767,499
Nobel Biocare Holding 4,615 756,799
Roche Holding 5,292 542,496
Synthes 5,180 553,575
Total 2,620,369
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
15 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Taiwan (0.4%)
Electronics
Optimax Technology 28,364 $56,074
Taiwan Semiconductor Mfg 258,337 338,929
Total 395,003
United Kingdom (5.9%)
Aerospace & defense (0.7%)
Rolls-Royce Group 144,721 689,486
Rolls-Royce Group Cl B 4,602,127(b) 8,457
Total 697,943
Cellular telecommunications (1.4%)
Vodafone Group 516,036 1,322,907
Energy (0.4%)
BP 42,199 409,072
Food (0.5%)
Cadbury Schweppes 61,633 512,515
Health care products (0.5%)
AstraZeneca 13,282 544,794
Industrial services (0.8%)
BOC Group 46,162 743,976
Media (0.3%)
Reuters Group 49,845 339,608
Retail -- grocery (0.7%)
Tesco 129,188 681,364
Telecom equipment & services (0.6%)
mmO2 323,704(b) 626,102
United States (26.2%)
Banks and savings & loans (0.7%)
Bank of America 10,284 460,620
Investors Financial Services 7,000 269,430
Total 730,050
Beverages & tobacco (0.6%)
PepsiCo 12,851 637,153
Broker dealers (0.8%)
Ameritrade Holding 16,100(b) 209,622
Bear Stearns Companies 6,255 592,661
Total 802,283
Cellular telecommunications (1.2%)
American Tower Cl A 44,585(b) 766,416
Nextel Communications Cl A 15,800(b) 418,542
Total 1,184,958
Chemicals (0.4%)
Ecolab 11,397 385,788
Communications equipment & services (0.6%)
SpectraSite 11,050(b) 566,865
Computer hardware (0.9%)
Dell 25,164(b) 882,250
Computer software & services (2.6%)
Adobe Systems 14,200 795,626
First Data 6,864 283,346
Microsoft 55,365 1,549,666
Total 2,628,638
Electronics (0.3%)
Intel 11,750 261,555
Energy (2.2%)
ChevronTexaco 3,040 161,302
EOG Resources 8,603 572,616
Exxon Mobil 7,889 388,297
Massey Energy 11,470 308,887
Valero Energy 18,616 799,929
Total 2,231,031
Finance companies (1.7%)
Citigroup 38,896 1,725,816
Financial services (1.0%)
Goldman Sachs Group 5,495 540,599
Moody's 6,108 475,263
Total 1,015,862
Food (0.3%)
WM Wrigley Jr 4,117 269,252
Furniture & appliances (0.5%)
Mohawk Inds 5,929(b) 504,439
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
16 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
United States (cont.)
Health care products (3.1%)
Abbott Laboratories 7,249 $309,025
Amgen 18,169(b) 1,032,000
Johnson & Johnson 9,990 583,216
Laboratory Corp of America
Holdings 8,398(b) 384,628
Pfizer 9,549 276,444
St. Jude Medical 8,230(b) 630,171
Total 3,215,484
Health care services (0.2%)
WellPoint Health Networks 1,632(b) 159,381
Household products (0.6%)
Procter & Gamble 12,305 629,770
Industrial services (0.4%)
Iron Mountain 12,750(b) 421,388
Industrial transportation (0.4%)
Norfolk Southern 12,976 440,535
Insurance (0.5%)
American Intl Group 7,555 458,664
Leisure time & entertainment (1.2%)
Carnival 13,344 674,673
Harley-Davidson 8,274 476,334
Total 1,151,007
Media (1.2%)
Dex Media 23,404(b) 496,164
DIRECTV Group 21,423(b) 359,264
Lamar Advertising 7,200(b) 298,224
Total 1,153,652
Multi-industry (0.9%)
General Electric 25,478 869,309
Retail -- drugstores (0.7%)
Walgreen 19,575 702,547
Retail -- general (2.6%)
Circuit City Stores 15,963 259,399
Home Depot 33,899 1,392,570
Staples 13,647 405,862
Wal-Mart Stores 10,455 563,734
Total 2,621,565
United States (cont.)
Utilities -- electric (0.6%)
Duke Energy 22,886 $561,394
Total common stocks
(Cost: $57,823,971) $65,174,444
Preferred stock & other (0.8%)(c)
Issuer Shares Value(a)
Germany
Porsche 1,162 $741,901
Singapore
City Development
Warrants 12,600(b) 28,950
Total preferred stock & other
(Cost: $559,249) $770,851
Bonds (30.6%)(c)
Issuer Coupon Principal Value(a)
rate amount
Australia (0.2%)
New South Wales Treasury
(Australian Dollar)
03-01-08 8.00% 200,000 $161,500
Austria (3.5%)
Oesterreich Kontrollbank
(Japanese Yen)
03-22-10 1.80 347,000,000 3,460,711
Canada (1.8%)
Govt of Canada
(Canadian Dollar)
09-01-08 4.25 1,600,000 1,339,276
Province of British Columbia
(Canadian Dollar)
12-01-06 5.25 500,000 426,295
Total 1,765,571
Denmark (1.1%)
Kingdom of Denmark
(Danish Krone)
08-15-05 5.00 1,900,000 333,766
Rheinische Hypbk
(European Monetary Unit)
09-24-08 4.25 550,000 734,935
Total 1,068,701
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
17 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
France (3.6%)
French Treasury Note
(European Monetary Unit)
07-12-08 3.00% 300,000 385,270
Govt of France
(European Monetary Unit)
04-25-10 5.50 1,800,000 2,556,763
04-25-13 4.00 500,000 650,722
Total 3,592,755
Germany (6.6%)
Allgemeine HypothekenBank Rheinboden
(European Monetary Unit) Series 501
09-02-09 5.00 850,000(d) 1,170,168
Bundesrepublik Deutschland
(European Monetary Unit)
01-05-06 6.00 150,000 200,035
01-04-08 5.25 1,285,000 1,767,424
07-04-08 4.75 725,000 987,556
07-04-10 5.25 250,000 350,640
06-20-16 6.00 434,598 658,236
07-04-27 6.50 900,000 1,473,078
Total 6,607,137
Greece (2.2%)
Hellenic Republic
(European Monetary Unit)
04-18-08 3.50 650,000 847,093
04-20-09 3.50 800,000 1,038,230
05-20-13 4.60 200,000 268,062
Total 2,153,385
Italy (5.6%)
Buoni Poliennali Del Tes
(European Monetary Unit)
11-01-09 4.25 2,400,000 3,221,455
08-01-13 4.25 600,000 791,594
08-01-14 4.25 720,000 940,967
11-01-29 5.25 600,000 829,460
Total 5,783,476
Norway (0.4%)
Govt of Norway
(Norwegian Krone)
05-16-11 6.00 2,100,000 372,520
Supra-National (0.5%)
Intl Bank Reconstruction & Development
(Japanese Yen)
02-18-08 2.00 55,000,000 548,975
United Kingdom (1.7%)
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-07 9.50 170,000(b,e,f) --
United Kingdom Treasury
(British Pound)
07-12-11 9.00 410,000 937,592
09-27-13 8.00 340,000 771,373
Total 1,708,965
United States (3.4%)
ConocoPhillips
(U.S. Dollar)
03-15-28 7.13 200,000 216,933
Federal Natl Mtge Assn
(U.S. Dollar)
05-15-11 6.00 1,370,000 1,524,747
U.S. Treasury (U.S. Dollar)
01-31-06 1.88 535,000 532,137
08-15-14 4.25 868,000 883,325
02-15-26 6.00 169,000 195,056
Total 3,352,198
Total bonds
(Cost: $25,178,167) $30,575,894
Short-term securities (2.7%)
Issuer Effective Amount Value(a)
yield payable at
maturity
Commercial paper
Pacific Life Insurance
11-01-04 1.85% $700,000 $699,892
Sysco
11-01-04 1.85 2,000,000 1,999,692
Total short-term securities
(Cost: $2,699,723) $2,699,584
Total investments in securities
(Cost: $86,261,110)(g) $99,220,773
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
18 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the board.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At Oct. 31, 2004, the value of
these securities amounted to $1,517,459 or 1.5% of net assets.
(e) Negligible market value.
(f) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at Oct. 31, 2004, is as follows:
Security Acquisition Cost
dates
Greater Beijing First Expressways
(U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 thru 09-30-04 $51,391
(g) At Oct. 31, 2004, the cost of securities for federal income tax purposes
was $86,442,991 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $13,700,265
Unrealized depreciation (922,483)
--------
Net unrealized appreciation $12,777,782
-----------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
19 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Threadneedle Global Balanced Fund
Oct. 31, 2004
Assets
Investments in securities, at value (Note 1)
(identified cost $86,261,110) $ 99,220,773
Cash in bank on demand deposit 66,079
Foreign currency holdings (identified cost $589,591) (Note 1) 596,399
Capital shares receivable 53,433
Dividends and accrued interest receivable 567,686
Receivable for investment securities sold 638,011
-------
Total assets 101,142,381
-----------
Liabilities
Capital shares payable 2,216
Payable for investment securities purchased 948,766
Unrealized depreciation on foreign currency contracts held, at value (Note 5) 69,603
Accrued investment management services fee 2,153
Accrued distribution fee 1,225
Accrued service fee 34
Accrued transfer agency fee 632
Accrued administrative services fee 163
Other accrued expenses 73,184
------
Total liabilities 1,097,976
---------
Net assets applicable to outstanding capital stock $100,044,405
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 191,547
Additional paid-in capital 128,757,486
Undistributed net investment income 1,645,386
Accumulated net realized gain (loss) (Note 7) (43,469,652)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 12,919,638
----------
Total -- representing net assets applicable to outstanding capital stock $100,044,405
============
Net assets applicable to outstanding shares: Class A $ 56,802,615
Class B $ 29,946,507
Class C $ 788,884
Class Y $ 12,506,399
Net asset value per share of outstanding capital stock: Class A shares 10,819,137 $ 5.25
Class B shares 5,813,358 $ 5.15
Class C shares 153,660 $ 5.13
Class Y shares 2,368,527 $ 5.28
--------- ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Statement of operations
AXP Threadneedle Global Balanced Fund
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 948,412
Interest 1,345,359
Fee income from securities lending (Note 3) 2,001
Less foreign taxes withheld (41,972)
-------
Total income 2,253,800
---------
Expenses (Note 2):
Investment management services fee 699,824
Distribution fee
Class A 136,721
Class B 320,051
Class C 7,301
Transfer agency fee 243,934
Incremental transfer agency fee
Class A 13,742
Class B 12,733
Class C 238
Service fee -- Class Y 9,589
Administrative services fees and expenses 59,047
Compensation of board members 8,432
Custodian fees 42,380
Printing and postage 53,990
Registration fees 41,954
Audit fees 20,750
Other 7,396
-----
Total expenses 1,678,082
Earnings credits on cash balances (Note 2) (3,673)
------
Total net expenses 1,674,409
---------
Investment income (loss) -- net 579,391
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 5,746,953
Foreign currency transactions (384,922)
--------
Net realized gain (loss) on investments 5,362,031
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 4,301,031
---------
Net gain (loss) on investments and foreign currencies 9,663,062
---------
Net increase (decrease) in net assets resulting from operations $10,242,453
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets
AXP Threadneedle Global Balanced Fund
Year ended Oct. 31, 2004 2003
Operations and distributions
Investment income (loss) -- net $ 579,391 $ 687,550
Net realized gain (loss) on investments 5,362,031 (2,312,136)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 4,301,031 15,670,500
--------- ----------
Net increase (decrease) in net assets resulting from operations 10,242,453 14,045,914
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (304,857) (444,097)
Class C -- (2)
Class Y (81,770) (55,350)
------- -------
Total distributions (386,627) (499,449)
-------- --------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 12,342,103 8,267,331
Class B shares 4,322,699 3,172,163
Class C shares 237,249 163,435
Class Y shares 8,838,422 3,877,067
Reinvestment of distributions at net asset value
Class A shares 293,636 426,497
Class C shares -- 2
Class Y shares 81,761 55,338
Payments for redemptions
Class A shares (14,335,235) (17,397,690)
Class B shares (Note 2) (10,299,121) (10,981,624)
Class C shares (Note 2) (164,780) (338,285)
Class Y shares (3,905,336) (1,696,600)
---------- ----------
Increase (decrease) in net assets from capital share transactions (2,588,602) (14,452,366)
---------- -----------
Total increase (decrease) in net assets 7,267,224 (905,901)
Net assets at beginning of year 92,777,181 93,683,082
---------- ----------
Net assets at end of year $100,044,405 $ 92,777,181
============ ============
Undistributed net investment income $ 1,645,386 $ (43,245)
------------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Notes to Financial Statements
AXP Threadneedle Global Balanced Fund (formerly AXP Global Balanced Fund)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified open-end management
investment company. The Fund invests primarily in equity and debt securities of
issuers throughout the world. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Directors of the funds, American Express Financial Corporation (AEFC)
utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions
- --------------------------------------------------------------------------------
23 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
receive a fair net asset value (NAV). Short-term securities maturing in more
than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2004, foreign currency holdings consisted of
multiple denominations.
- --------------------------------------------------------------------------------
24 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation and/or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Illiquid Securities
At Oct. 31, 2004, investments in securities included issues that are illiquid
which the Fund currently limits to 10% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at Oct. 31, 2004 was
$0. These securities are valued at fair value according to methods selected in
good faith by the board. According to board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above. Assets are liquid if they can be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the asset is valued by the Fund.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by
$1,495,867 and accumulated net realized loss has been increased by $1,495,867.
- --------------------------------------------------------------------------------
25 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
The tax character of distributions paid for the years indicated is as follows:
Year ended Oct. 31, 2004 2003
Class A
Distributions paid from:
Ordinary income $304,857 $444,097
Long-term capital gain -- --
Class B
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class C
Distributions paid from:
Ordinary income -- 2
Long-term capital gain -- --
Class Y
Distributions paid from:
Ordinary income 81,770 55,350
Long-term capital gain -- --
As of Oct. 31, 2004, the components of distributable earnings on a tax basis
are as follows:
Undistributed ordinary income $ 1,719,063
Accumulated long-term gain (loss) $(43,431,051)
Unrealized appreciation (depreciation) $ 12,807,360
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
The Fund has agreements with AEFC to manage its portfolio and provide
administrative services. Under an Investment Management Services Agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 0.79%
to 0.665% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Global Flexible Funds
Index. In certain circumstances, the Board may approve a change in the index.
The maximum adjustment is 0.08% per year. If the performance difference is less
than 0.50%, the adjustment will be zero. The adjustment decreased the fee by
$66,573 for the year ended Oct. 31, 2004.
- --------------------------------------------------------------------------------
26 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly-owned subsidiary of AEFC to subadvise the assets of the Fund.
Prior to July 10, 2004, AEFC had a Subadvisory Agreement with American Express
Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC.
Under an Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets that declines from 0.06% to 0.035% annually as the Fund's
assets increase. A minor portion of additional administrative service expenses
paid by the Fund are consultants' fees and fund office expenses. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$128,853 for Class A, $21,515 for Class B and $133 for Class C for the year
ended Oct. 31, 2004.
During the year ended Oct. 31, 2004, the Fund's custodian and transfer agency
fees were reduced by $3,673 as a result of earnings credits from overnight cash
balances. The Fund also pays custodian fees to American Express Trust Company,
an affiliate of AEFC.
- --------------------------------------------------------------------------------
27 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $68,803,383 and $71,985,055, respectively, for the year
ended Oct. 31, 2004. Realized gains and losses are determined on an identified
cost basis.
Income from securities lending amounted to $2,001 for the year ended Oct. 31,
2004. The risks to the Fund of securities lending are that the borrower may not
provide additional collateral when required or return the securities when due.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004
Class A Class B Class C Class Y
Sold 2,472,726 879,364 48,206 1,747,550
Issued for reinvested distributions 58,294 -- -- 16,159
Redeemed (2,866,353) (2,107,582) (33,478) (772,959)
---------- ---------- ------- --------
Net increase (decrease) (335,333) (1,228,218) 14,728 990,750
-------- ---------- ------ -------
Year ended Oct. 31, 2003
Class A Class B Class C Class Y
Sold 1,893,751 744,690 38,196 880,736
Issued for reinvested distributions 94,345 -- -- 12,132
Redeemed (4,039,134) (2,576,965) (77,229) (382,383)
---------- ---------- ------- --------
Net increase (decrease) (2,051,038) (1,832,275) (39,033) 510,485
---------- ---------- ------- -------
5. FORWARD FOREIGN CURRENCY CONTRACTS
At Oct. 31, 2004, the Fund has a forward foreign currency exchange contract that
obligates it to deliver currency at a specified future date. The unrealized
appreciation and/or depreciation on this contract is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contract are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
Nov. 19, 2004 2,165,000 2,700,513 $-- $69,603
European Monetary Unit U.S. Dollar
- --------------------------------------------------------------------------------
28 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
6. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. The Fund must maintain asset coverage
for borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended Oct. 31, 2004.
7. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$43,431,051 at Oct. 31, 2004, that if not offset by capital gains will expire as
follows:
2009 2010 2011
$30,518,697 $10,684,989 $2,227,365
It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
29 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
8. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $4.73 $4.08 $4.53 $ 6.27 $6.61
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) .04 .05 .07 .07 .08
Net gains (losses) (both realized and unrealized) .51 .64 (.50) (1.27) .12
----- ----- ----- ------ -----
Total from investment operations .55 .69 (.43) (1.20) .20
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income (.03) (.04) (.02) (.03) (.03)
Distributions from realized gains -- -- -- (.51) (.51)
----- ----- ----- ------ -----
Total distributions (.03) (.04) (.02) (.54) (.54)
----- ----- ----- ------ -----
Net asset value, end of period $5.25 $4.73 $4.08 $ 4.53 $6.27
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $57 $53 $54 $80 $110
Ratio of expenses to average daily net assets(b) 1.49% 1.60% 1.48% 1.45% 1.31%
Ratio of net investment income (loss) to average daily net assets .83% 1.03% 1.38% 1.18% 1.26%
Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110%
Total return(c) 11.62% 16.91% (9.48%) (20.63%) 2.62%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
30 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $4.65 $4.01 $4.47 $ 6.21 $6.58
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) .01 -- .04 .01 .04
Net gains (losses) (both realized and unrealized) .49 .64 (.49) (1.24) .12
----- ----- ----- ------ -----
Total from investment operations .50 .64 (.45) (1.23) .16
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income -- -- (.01) -- (.02)
Distributions from realized gains -- -- -- (.51) (.51)
----- ----- ----- ------ -----
Total distributions -- -- (.01) (.51) (.53)
----- ----- ----- ------ -----
Net asset value, end of period $5.15 $4.65 $4.01 $ 4.47 $6.21
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $30 $33 $36 $53 $77
Ratio of expenses to average daily net assets(b) 2.25% 2.37% 2.25% 2.21% 2.07%
Ratio of net investment income (loss) to average daily net assets .08% .27% .61% .42% .51%
Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110%
Total return(c) 10.75% 15.96% (10.19%) (21.21%) 1.95%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
31 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000(b)
Net asset value, beginning of period $4.64 $3.99 $4.46 $ 6.21 $6.58
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) .01 -- .03 .02 .01
Net gains (losses) (both realized and unrealized) .48 .65 (.49) (1.24) (.38)
----- ----- ----- ------ -----
Total from investment operations .49 .65 (.46) (1.22) (.37)
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income -- -- (.01) (.02) --
Distributions from realized gains -- -- -- (.51) --
----- ----- ----- ------ -----
Total distributions -- -- (.01) (.53) --
----- ----- ----- ------ -----
Net asset value, end of period $5.13 $4.64 $3.99 $ 4.46 $6.21
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $1 $--
Ratio of expenses to average daily net assets(c) 2.24% 2.36% 2.24% 2.21% 2.07%(d)
Ratio of net investment income (loss) to average daily net assets .08% .26% .60% .41% .47%(d)
Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110%
Total return(e) 10.56% 16.29% (10.34%) (21.17%) (5.62%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
32 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $4.76 $4.10 $4.56 $ 6.30 $6.62
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) .05 .07 .07 .08 .10
Net gains (losses) (both realized and unrealized) .51 .64 (.50) (1.28) .13
----- ----- ----- ------ -----
Total from investment operations .56 .71 (.43) (1.20) .23
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income (.04) (.05) (.03) (.03) (.04)
Distributions from realized gains -- -- -- (.51) (.51)
----- ----- ----- ------ -----
Total distributions (.04) (.05) (.03) (.54) (.55)
----- ----- ----- ------ -----
Net asset value, end of period $5.28 $4.76 $4.10 $ 4.56 $6.30
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $13 $7 $4 $2 $1
Ratio of expenses to average daily net assets(b) 1.32% 1.43% 1.30% 1.31% 1.20%
Ratio of net investment income (loss) to average daily net assets 1.00% 1.21% 1.52% 1.35% 1.51%
Portfolio turnover rate (excluding short-term securities) 74% 90% 99% 173% 110%
Total return(c) 11.74% 17.32% (9.55%) (20.40%) 2.99%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
33 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GLOBAL SERIES, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of AXP Threadneedle Global Balanced
Fund (formerly AXP Global Balanced Fund) (a series of the AXP Global Series,
Inc.) as of October 31, 2004, the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period ended October 31, 2004, and the financial highlights for each of
the years in the five-year period ended October 31, 2004. These financial
statements and the financial highlights are the responsibility of fund
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers or by other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Threadneedle Global Balanced Fund as of October 31, 2004, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
34 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Federal Income Tax Information
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Threadneedle Global Balanced Fund
Fiscal year ended Oct. 31, 2004
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 37.57%
Dividends Received Deduction for corporations 15.07%
Payable date Per share
June 23, 2004 0.01059
Sept. 23, 2004 0.01763
Total distributions $0.02822
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 37.57%
Dividends Received Deduction for corporations 15.07%
Payable date Per share
June 23, 2004 0.01567
Sept. 23, 2004 0.02150
Total distributions $0.03717
- --------------------------------------------------------------------------------
35 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Oct. 31, 2004.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
36 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Beginning Ending Expenses
account value account value paid during the period
May 1, 2004 Oct. 31, 2004 May 1, 2004-Oct. 31, 2004
Class A
Actual(a) $1,000 $1,066.60 $7.76(b)
Hypothetical (5% return before expenses) $1,000 $1,017.35 $7.57(b)
Class B
Actual(a) $1,000 $1,061.90 $11.64(c)
Hypothetical (5% return before expenses) $1,000 $1,013.58 $11.36(c)
Class C
Actual(a) $1,000 $1,059.90 $11.63(d)
Hypothetical (5% return before expenses) $1,000 $1,013.58 $11.36(d)
Class Y
Actual(a) $1,000 $1,065.90 $6.88(e)
Hypothetical (5% return before expenses) $1,000 $1,018.20 $6.72(e)
(a) Based on the actual return for the six months ended Oct. 31, 2004: +6.66%
for Class A, +6.19% for Class B, +5.99% for Class C and +6.59% for Class Y.
(b) Expenses are equal to the Fund's Class A annualized expense ratio of 1.51%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(c) Expenses are equal to the Fund's Class B annualized expense ratio of 2.27%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(d) Expenses are equal to the Fund's Class C annualized expense ratio of 2.27%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(e) Expenses are equal to the Fund's Class Y annualized expense ratio of 1.34%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
- --------------------------------------------------------------------------------
37 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. Each member oversees 14
Master Trust portfolios and 89 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the board.
Independent Board Members
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards). Former Governor of
Age 70 Minnesota
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc.
Minneapolis, MN 55402 construction) since 1998 (construction materials/chemicals)
Age 67
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated (commodity
30 Seventh Street East since 2001 Chief Executive Officer, merchants and processors), General
Suite 3050 Minnesota Mining and Mills, Inc. (consumer foods),
St. Paul, MN 55101-4901 Manufacturing (3M) Vulcan Materials Company
Age 70 (construction materials/
chemicals), Milliken & Company
(textiles and chemicals), and
Nexia Biotechnologies, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics BostonFed Bancorp, Inc. (holding
901 S. Marquette Ave. since 2004 and Management, Bentley College company) and its subsidiary Boston
Minneapolis, MN 55402 since 2002; former Dean, McCallum Federal Savings Bank
Age 53 Graduate School of Business,
Bentley College from 1999 to 2002
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 69
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Stephen R. Lewis, Jr.* Board member Retired President and Professor Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 of Economics, Carleton College (manufactures irrigation systems)
Minneapolis, MN 55402
Age 65
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund by
reason of being a security holder of Bank of America Corporation, parent
company of Columbia Wanger Asset Management, L.P., one of the fund's
subadvisers.
- --------------------------------------------------------------------------------
38 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Management, Inc. (private real (transportation, distribution and
Minneapolis, MN 55402 estate and asset management logistics consultants)
Age 52 company) since 1999
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alan K. Simpson Board member Former three-term United States
1201 Sunshine Ave. since 1997 Senator for Wyoming
Cody, WY 82414
Age 73
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alison Taunton-Rigby Board member Founder and Chief Executive Hybridon Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Officer, RiboNovix, Inc. since
Minneapolis, MN 55402 2004; President, Forester Biotech
Age 60 since 2000; prior to that,
President and CEO, Aquila
Biopharmaceuticals, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Board Member Affiliated with AEFC**
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
William F. Truscott Board member Senior Vice President - Chief
53600 AXP Financial Center since 2001, Investment Officer of AEFC since
Minneapolis, MN 55474 Vice President 2001. Former Chief Investment
Age 44 since 2002 Officer and Managing Director,
Zurich Scudder Investments
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
** Interested person by reason of being an officer, director and/or employee of
AEFC.
- --------------------------------------------------------------------------------
39 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Jeffrey P. Fox Treasurer since Vice President - Investment
105 AXP Financial Center 2002 Accounting, AEFC, since 2002;
Minneapolis, MN 55474 Vice President - Finance,
Age 49 American Express Company,
2000-2002; Vice President -
Corporate Controller, AEFC,
1996-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Paula R. Meyer President since Senior Vice President and General
596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC,
Minneapolis, MN 55474 since 2002; Vice President and
Age 50 Managing Director - American
Express Funds, AEFC, 2000-2002;
Vice President, AEFC, 1998-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Leslie L. Ogg Vice President, President of Board Services
901 S. Marquette Ave. General Counsel, Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
40 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2004 ANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AXP(R) Threadneedle
Global Equity
Fund
Annual Report
for the Period Ended
Oct. 31, 2004
AXP Threadneedle Global Equity Fund seeks to provide shareholders with long-term
capital growth.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 10
Investments in Securities 12
Financial Statements (Portfolio) 16
Notes to Financial Statements (Portfolio) 19
Report of Independent Registered
Public Accounting Firm (Portfolio) 23
Financial Statements (Fund) 24
Notes to Financial Statements (Fund) 27
Report of Independent Registered
Public Accounting Firm (Fund) 36
Federal Income Tax Information 37
Fund Expenses Example 38
Board Members and Officers 40
Proxy Voting 42
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Fund Snapshot
AT OCT. 31, 2004
PORTFOLIO MANAGERS
Portfolio managers* Since Years in industry
Dominic Rossi 10/03 18
Stephen Thornber 10/03 17
* The Fund is managed by a team led by Dominic Rossi and Stephen Thornber.
FUND OBJECTIVE
For investors seeking long-term capital growth.
Inception dates by class
A: 5/29/90 B: 3/20/95 C: 6/26/00 Y: 3/20/95
Ticker symbols by class
A: IGLGX B: IDGBX C: -- Y: IDGYX
Total net assets $473.7 million
Number of holdings 97
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
United States 36.2%
Japan 13.9%
Hong Kong 5.8%
United Kingdom 5.5%
Switzerland 5.4%
France 4.5%
Brazil 3.3%
Germany 3.2%
South Korea 3.2%
Bermuda 3.0%
Italy 2.5%
Canada 2.4%
Mexico 2.3%
Netherlands 1.7%
Israel 1.4%
Peru 1.1%
Other* 4.6%
* Includes India, Indonesia, Ireland, Luxembourg, Sweden and Taiwan.
TOP TEN HOLDINGS
Percentage of portfolio assets
Citigroup (United States) 3.9%
Microsoft (United States) 3.0
Samsung Electronics (South Korea) 2.6
Total (France) 2.6
Vodafone Group (United Kingdom) 2.4
Home Depot (United States) 2.0
EnCana (Canada) 1.9
Duke Energy (United States) 1.9
Eni (Italy) 1.9
UBS (Switzerland) 1.8
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the year ended Oct. 31, 2004
(bar 1) (bar 2) (bar 3) (bar 4)
+11.72% +14.03% +12.86% +9.75%
(bar 1) AXP Threadneedle Global Equity Fund Class A (excluding sales charge)
(bar 2) Morgan Stanley Capital International (MSCI) All Country World Free
Index (unmanaged)
(bar 3) Lipper Global Funds Index
(bar 4) Lipper Global Large-Cap Core Funds Index
(see "The Fund`s Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. You should consider the investment objectives,
risks, and charges and expenses of the Fund carefully before investing.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart; if reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (5/29/90) (3/20/95) (6/26/00) (3/20/95)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
as of Oct. 31, 2004
1 year +11.72% +5.29% +10.68% +6.68% +10.73% +10.73% +11.88% +11.88%
3 years +3.24% +1.23% +2.44% +1.48% +2.38% +2.38% +3.44% +3.44%
5 years -5.56% -6.67% -6.31% -6.45% N/A N/A -5.42% -5.42%
10 years +2.08% +1.48% N/A N/A N/A N/A N/A N/A
Since inception +4.18% +3.76% +3.11% +3.11% -10.45% -10.45% +4.08% +4.08%
as of Sept. 30, 2004
1 year +14.61% +8.01% +13.88% +9.88% +13.67% +13.67% +14.98% +14.98%
3 years +3.64% +1.61% +2.89% +1.94% +2.82% +2.82% +3.91% +3.91%
5 years -4.90% -6.02% -5.60% -5.74% N/A N/A -4.71% -4.71%
10 years +1.87% +1.27% N/A N/A N/A N/A N/A N/A
Since inception +4.02% +3.59% +2.89% +2.89% -11.13% -11.13% +3.86% +3.86%
(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.
- --------------------------------------------------------------------------------
4 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Managers Dominic Rossi and Stephen Thornber of Threadneedle
International Limited (Threadneedle) discuss the Fund's positioning and results
for fiscal year 2004. Threadneedle, an indirect wholly owned subsidiary of
American Express Financial Corporation, acts as the subadviser to the Fund.
Q: How did AXP Threadneedle Global Equity Fund perform for the 12 months
ended Oct. 31, 2004?
A: AXP Threadneedle Global Equity Fund's Class A shares gained 11.72%
(excluding sales charge) for the 12 months ended Oct. 31, 2004. This was
less than the unmanaged MSCI All Country World Free Index (MSCI Index),
which posted a total return of 14.03% for the period.
The Fund underperformed the Lipper Global Funds Index, which increased
12.86% for the 12 months ended Oct. 31, 2004. Currently, American Express
Financial Corporation's (AEFC) investment management fees are increased if
the Fund outperforms this index and decreased for underperformance.
Additional details are available in the Fund's statement of additional
information.
During the period, Lipper created additional peer groups to provide
investors with global and international categories that more precisely
reflect the funds' equity investing styles. AEFC is considering whether the
Lipper Global Funds Index or the newly created Lipper Global Large-Cap Core
Funds Index is more appropriate as a peer group index for the Fund. AEFC is
expected to make a recommendation to the Fund's board in January 2005, and
AEFC will notify shareholders of any change in the Fund's Lipper peer group
index.
This past fiscal year the Fund outperformed the Lipper Global Large-Cap Core
Funds Index, which rose 9.75% for the 12 months ended Oct. 31, 2004.
Q: What factors most significantly affected performance?
A: When we assumed responsibility for the Fund in late October 2003, we made
substantial changes to the portfolio. The Fund's underperformance of the
MSCI Index and the Lipper Global Funds Index can be attributed primarily to
this restructuring process that took place during the first month or so of
the fiscal year. Stock selection and the Fund's positioning relative to both
indices were also factors contributing to our relatively weak fiscal year
results.
- --------------------------------------------------------------------------------
5 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> Country selection, asset allocation, sector allocation
and individual stock selection proved effective. (end callout quote)
Changes to Regional Positioning
Oct. 31, 2004 compared to Oct. 31, 2003
Country/Region Oct. 31, 2004 Oct. 31, 2003
United States 36.2% 49.4%
Eurozone* 20.2% 18.1%
Japan 13.9% 7.6%
Other Asia 11.2% 8.4%
Latin America and Canada 10.1% 8.0%
United Kingdom 5.5% 7.5%
Israel 1.4% none
Cash equivalents 1.5% 1.0%
* Generally, European countries that use the euro as their currency.
Regional and Sector Positioning
Early in our restructuring process, we reduced the Fund's position in the
United States, added more emerging markets stocks and added slightly to its
continental European exposure. Each of these strategies worked well for the
Fund. For the fiscal year as a whole:
o The U.S. equity market underperformed European equities and emerging
markets.
o Emerging equity markets of Latin America and Asia performed particularly
well.
o In Latin America, the Fund benefited most from its exposure to the
materials sector, including iron ore, pulp and paper stocks.
o In Asia, the Fund benefited most from holdings in Hong Kong property and
retail stocks. During the first calendar quarter, we added to our
position in Japan, which worked well until June, but then hurt results
after that.
- --------------------------------------------------------------------------------
6 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> While we believe that mid-cap stocks may well continue
to outperform large-cap stocks in the near term, we intend to maintain our
dynamic investing style. (end callout quote)
o Our position in the United Kingdom also detracted, as the British pound
sterling proved to be a stronger currency than anticipated.
Our reduction of the Fund's substantial large-cap stock focus and addition
of more mid-cap stocks early in the fiscal year also benefited its relative
annual performance. As anticipated, mid-cap stocks benefited more than large
company stocks as the global economy grew.
From a sector perspective, the Fund successfully avoided significant
exposure to information technology hardware, consumer staples and large-cap
pharmaceuticals, each of which lagged during the fiscal year.
The Fund's greater-than-MSCI Index positions in the strongly-performing
information technology software, energy and materials sectors also boosted
the portfolio's relative results. So, too, did a timely reduction in the
Fund's exposure to the industrials sector during the first calendar quarter.
On the other hand, a lower-than-MSCI Index position in the strongly
performing utilities sector detracted from the Fund's relative performance.
Stock Selection
Stock selection was another key contributor to performance. U.S. information
technology software company Adobe Systems and home improvement retailer Home
Depot, both among the Fund's larger holdings, each performed well. Other
strong performers during the annual period included Hong Kong retailer
Esprit; one of the few utilities in the portfolio, Duke Energy; and Swiss
manufacturer of orthodontic implants Nobel Biocare.
Of course, there were disappointments as well. These included U.S.
consulting firm Accenture, Israeli Internet security software company Check
Point Software Technologies and Japanese printer manufacturer Seiko Epson.
We continue to believe in the fundamental prospects of these firms and thus
maintained holdings in these stocks, even adding to the portfolio's position
in Accenture.
- --------------------------------------------------------------------------------
7 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Questions & Answers
Q: What changes did you make to the Fund and how is it currently positioned?
A: The restructuring changes made early in the fiscal year, as described above,
account for most of the Fund's 104% portfolio turnover rate for the annual
period. However, we believe the changes better positioned the Fund for
current and anticipated economic and market conditions.
Beyond these restructuring changes, our strategy was to generally maintain
the Fund's positioning for the remainder of the period and opportunistically
add to certain stock positions when they were down. Overall, this strategy
worked well. Toward the end of the fiscal year, we began to reduce the
Fund's exposure to emerging markets equities and to increase its position in
Japan.
We believe that interest rates will continue to rise in the U.S., and
emerging markets tend to be more sensitive to U.S. interest rates than the
developed markets. Furthermore, after strong performance during the past
fiscal year, we feel emerging markets now have limited upside potential. As
for Japan, we believe its economy is showing signs of a cyclical recovery
that has yet to be priced into its equity market.
At the end of the fiscal year, the Fund had greater-than-MSCI Index
positions in the equity markets of Japan, continental Europe and emerging
markets and lower-than-MSCI Index positions in the equity markets of the
U.S. and the U.K.
Changes to Top Ten Holdings
Oct. 31, 2004 compared to Oct. 31, 2003
Company Change in Positioning
Citigroup (United States) Increased
Microsoft (United States) Increased
Samsung Electronics (South Korea) Increased
Total (France) New to Top Ten
Vodafone Group (United Kingdom) New to Top Ten
Home Depot (United States) New to Top Ten
EnCana (Canada) New to Top Ten
Duke Energy (United States) New to Top Ten
Eni (Italy) New to Top Ten
UBS (Switzerland) New to Top Ten
No longer among Top Ten Holdings but still in the portfolio at Oct. 31, 2004
were Johnson & Johnson and Dell. Swiss Life Holding, HSBC, Intel, North Fork
Bancorporation and Procter & Gamble were eliminated from the portfolio. For more
information on the Top Ten Holdings, see this report's Fund Snapshot page or
americanexpress.com/funds.
- --------------------------------------------------------------------------------
8 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Questions & Answers
Q: How do you intend to manage the Fund in the coming months?
A: We are optimistic about global equity markets for several reasons:
o First, with the resolution of the U.S. presidential election, a great
deal of uncertainty has been taken out of equity markets globally.
o Second, we believe the U.S. dollar will continue its decline, especially
given the rising U.S. current account deficit. While this is positive for
the international equity markets, it also means that we intend to
maintain the Fund's lower exposure to the U.S. equity market.
o Third, we believe global economic growth may continue at an above-trend
pace, especially in China and Japan. We believe this should drive strong
corporate earnings ahead, particularly in the materials sector.
o Finally, equity valuations generally remain attractive, especially
outside of the U.S. We continue to look with some interest at property
stocks in Hong Kong, which have been benefiting from the dramatic
emergence of the Asian consumer as well as from a recovery there.
We temper this generally bullish view with a concern that U.S. interest
rates may rise to the point that they impact Latin American equities. Also,
equity markets may feel some downward pressure where economic growth is more
sluggish, such as in the U.K. and continental Europe. Also, looking ahead,
we believe there will be increased sector polarization from a valuation
perspective. Thus, we believe sector selection will be a key driver of
portfolio performance in the months ahead.
While we believe that mid-cap stocks may well continue to outperform
large-cap stocks in the near term, we intend to maintain our dynamic
investing style, selecting what we believe are the best stocks regardless of
growth or value slant and regardless of market capitalization.
- --------------------------------------------------------------------------------
9 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Threadneedle Global Equity Fund Class A shares (from 11/1/94
to 10/31/04) as compared to the performance of two widely cited performance
indices, the MSCI All Country World Free Index and the Lipper Global Funds
Index. In comparing the Fund's Class A shares to these indices, you should take
into account the fact that the Fund's performance reflects the maximum sales
charge of 5.75%, while such charges are not reflected in the performance of the
indices. Returns for the Fund include the reinvestment of any distribution paid
during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions and
redemptions. Current performance may be lower or higher than the performance
information shown. You may obtain performance information current to the most
recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. Also see "Past Performance" in the Fund's current
prospectus. You should consider the investment objectives, risks, and charges
and expenses of the Fund carefully before investing.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
Oct. 31, 2004 $ -- $ -- $ -- $ --
Oct. 31, 2003 -- -- -- --
Oct. 31, 2002 -- -- -- --
Oct. 31, 2001 0.02 0.08 1.26 1.36
Oct. 31, 2000 0.04 0.25 0.71 1.00
- --------------------------------------------------------------------------------
10 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
(line chart)
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP THREADNEEDLE GLOBAL EQUITY FUND
AXP Threadneedle Global Equity Fund
Class A (includes sales charge) $ 9,425 $ 8,766 $10,038 $10,663 $12,475 $15,418 $16,149 $10,524 $ 8,796 $10,367 $11,582
MSCI All Country World Free Index(1) $10,000 $10,792 $12,503 $14,512 $16,403 $20,671 $20,836 $15,596 $13,479 $16,883 $19,252
Lipper Global Funds Index(2) $10,000 $10,414 $11,960 $14,105 $14,917 $18,483 $20,686 $15,787 $13,696 $16,798 $18,958
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
COMPARATIVE RESULTS
Results as of Oct. 31, 2004 Since
1 year 3 years 5 years 10 years inception
AXP Threadneedle Global Equity Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,529 $10,374 $7,081 $11,582 $17,030(4)
Average annual total return +5.29% +1.23% -6.67% +1.48% +3.76%(4)
MSCI All Country World Free Index(1)
Cumulative value of $10,000 $11,403 $12,343 $9,315 $19,252 $26,959(4)
Average annual total return +14.03% +7.27% -1.41% +6.77% +7.12%(4)
Lipper Global Funds Index(2)
Cumulative value of $10,000 $11,286 $12,001 $10,253 $18,958 $28,069(4)
Average annual total return +12.86% +6.27% +0.50% +6.60% +7.42%(4)
Lipper Global Large-Cap Core Funds Index(3)
Cumulative value of $10,000 $10,975 $11,161 $9,310 N/A(5) N/A(5)
Average annual total return +9.75% +3.73% -1.42% N/A(5) N/A(5)
Results for other share classes can be found on page 4.
(1) MSCI All Country World Free Index, an unmanaged index, is compiled from a
composite of securities markets of 47 countries, including Canada, the
United States and 26 emerging market countries. The index reflects
reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
(2) The Lipper Global Funds Index includes the 30 largest global funds tracked
by Lipper Inc. The index's returns include net reinvested dividends.
(3) The Lipper Global Large-Cap Core Funds Index includes the 10 largest global
large-cap core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
(4) Fund data is from May 29, 1990. MSCI All Country World Free Index and
Lipper Index data is from June 1, 1990.
(5) The Fund began operating before most of its peers in the Lipper Global
Large-Cap Core Funds Index. Insufficient historical index data is available
to show a performance comparison for the 10 year and Since inception
periods.
- --------------------------------------------------------------------------------
11 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Investments in Securities
World Growth Portfolio
Oct. 31, 2004
(Percentages represent value of investments compared to net assets)
Common stocks (97.0%)(c)
Issuer Shares Value(a)
Bermuda (3.0%)
Insurance (1.3%)
PartnerRe 64,239 $3,735,497
RenaissanceRe Holdings 47,491 2,223,529
Total 5,959,026
Multi-industry (1.7%)
Accenture Cl A 344,849(b) 8,348,794
Brazil (3.2%)
Metals (1.1%)
Cia Vale do Rio Doce ADR 283,419 5,158,226
Paper & packaging (1.1%)
Aracruz Celulose ADR 148,554 5,003,299
Utilities -- telephone (1.0%)
Brasil Telecom Participacoes ADR 170,736 5,234,766
Canada (2.4%)
Energy
EnCana 178,793 8,866,982
Suncor Energy 67,359 2,296,942
Total 11,163,924
France (4.5%)
Automotive & related (0.5%)
Renault 31,000 2,602,195
Energy (2.7%)
Total 58,476 12,196,623
Multi-industry (1.3%)
Sanofi-Aventis 87,147 6,389,714
Germany (2.3%)
Banks and savings & loans (1.0%)
Hypo Real Estate Holding 126,241(b) 4,736,295
Utilities -- electric (1.3%)
RWE 115,000 6,109,836
Hong Kong (5.8%)
Multi-industry (1.5%)
New World Development 8,157,600 7,127,013
Real estate (2.1%)
Henderson Land Development 1,187,000 5,505,467
Sun Hung Kai Properties 489,000 4,523,531
Total 10,028,998
Retail -- general (2.2%)
Esprit Holdings 1,055,000 5,638,739
Giordano Intl 4,238,000 2,368,571
Lifestyle Intl Holdings 1,579,000 2,231,573
Total 10,238,883
India (0.9%)
Banks and savings & loans
State Bank of India ADR 60,000 1,585,200
State Bank of India ADR 105,794(d) 2,795,077
Total 4,380,277
Indonesia (0.7%)
Metals
PT Bumi Resources 44,278,500(b) 3,535,453
Ireland (0.9%)
Banks and savings & loans
Anglo Irish Bank 226,622 4,343,984
Israel (1.4%)
Computer software & services
Check Point
Software Technologies 296,405(b) 6,704,978
Italy (2.5%)
Energy (1.9%)
Eni 383,344 8,731,383
Utilities -- electric (0.6%)
Enel 331,395 3,006,537
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Japan (13.8%)
Automotive & related (1.6%)
Toyota Motor 200,000 $7,805,708
Banks and savings & loans (1.7%)
Chiba Bank 618,000 3,977,112
Mitsubishi Tokyo Financial Group 489 4,158,949
Total 8,136,061
Broker dealers (0.8%)
Matsui Securities 135,900 3,608,760
Electronics (0.8%)
Keyence 16,000 3,610,660
Engineering & construction (0.9%)
Daiwa House Industry 410,000 4,199,962
Financial services (0.5%)
Kobayashi Yoko 15,400 305,613
Nomura Holdings 174,000 2,137,592
Total 2,443,205
Machinery (2.3%)
Amada 882,000 4,700,888
Komatsu 876,000 5,869,250
Total 10,570,138
Multi-industry (2.0%)
Canon 92,900 4,591,448
Ricoh 251,000 4,696,466
Total 9,287,914
Real estate (2.0%)
Daito Trust Construction 113,800 4,817,842
Mitsui Fudosan 446,000 4,741,542
Total 9,559,384
Retail -- general (0.4%)
Seven-Eleven Japan 71,000 2,059,819
Textiles & apparel (0.8%)
Onward Kashiyama 308,000 4,016,632
Luxembourg (0.8%)
Metals
Arcelor 192,320 3,621,598
Mexico (2.3%)
Cellular telecommunications (1.5%)
America Movil ADR Series L 161,116 7,089,104
Media (0.8%)
Grupo Televisa ADR 71,782 3,948,010
Netherlands (1.6%)
Aerospace & defense (0.6%)
European Aeronautic
Defence and Space 92,000 2,631,114
Food (1.0%)
Royal Numico 152,662(b) 5,161,050
Peru (1.1%)
Precious metals
Compania de Minas
Buenaventura ADR 204,679 5,084,226
South Korea (3.2%)
Electronics (2.6%)
Samsung Electronics 31,740 12,467,918
Engineering & construction (0.6%)
Hyundai Development 212,240 2,845,422
Sweden (0.7%)
Telecom equipment & services
Telefonaktiebolaget
LM Ericsson Cl B 1,217,539(b) 3,546,364
Switzerland (5.4%)
Banks and savings & loans (1.8%)
UBS 120,291 8,694,401
Health care products (3.6%)
Actelion 67,372(b) 7,730,289
Nobel Biocare Holding 36,764 6,028,803
Synthes 27,900(b) 2,981,608
Total 16,740,700
Taiwan (0.5%)
Electronics (0.1%)
Optimax Technology 172,803 341,620
Financial services (0.4%)
Hung Poo Real
Estate Development 3,295,000 1,983,810
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
13 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
United Kingdom (5.5%)
Aerospace & defense (0.4%)
Rolls-Royce Group 392,614 $1,870,508
Rolls-Royce Group Cl B 12,485,125(b) 22,944
Total 1,893,452
Cellular telecommunications (2.4%)
Vodafone Group 4,396,906 11,271,881
Food (0.5%)
Cadbury Schweppes 300,000 2,494,680
Health care products (1.4%)
AstraZeneca 157,752 6,470,592
Retail -- grocery (0.8%)
Tesco 724,380 3,820,527
United States (34.5%)
Banks and savings & loans (0.4%)
Investors Financial Services 52,000 2,001,480
Broker dealers (1.9%)
Ameritrade Holding 403,350(b) 5,251,617
Bear Stearns Companies 37,617 3,564,211
Total 8,815,828
Cellular telecommunications (1.5%)
American Tower Cl A 401,802(b) 6,906,976
Communications equipment & services (0.7%)
SpectraSite 65,934(b) 3,382,414
Computer hardware (1.7%)
Dell 235,553(b) 8,258,488
Computer software & services (4.3%)
Adobe Systems 113,600(e) 6,365,008
Microsoft 504,083 14,109,283
Total 20,474,291
Energy (2.4%)
EOG Resources 35,000 2,329,600
Massey Energy 81,584 2,197,057
Valero Energy 162,048 6,963,203
Total 11,489,860
Finance companies (3.8%)
Citigroup 409,028 18,148,572
Financial services (1.3%)
Goldman Sachs Group 62,472 6,145,996
Furniture & appliances (0.6%)
Mohawk Inds 31,429(b) 2,673,979
Health care products (5.2%)
Amgen 123,402(b) 7,009,233
Johnson & Johnson 71,258 4,160,042
Laboratory Corp of
America Holdings 64,205(b) 2,940,589
Myogen 161,959(b) 1,404,185
Pfizer 142,382 4,121,959
St. Jude Medical 65,207(b) 4,992,900
Total 24,628,908
Insurance (0.7%)
American Intl Group 57,612 3,497,625
Leisure time & entertainment (1.3%)
Harley-Davidson 103,135 5,937,482
Media (2.8%)
Dex Media 162,796(b) 3,451,275
DIRECTV Group 356,761(b) 5,982,882
Lamar Advertising 89,200(b) 3,694,664
Total 13,128,821
Retail -- drugstores (0.8%)
Walgreen 109,179 3,918,434
Retail -- general (3.2%)
Home Depot 225,974 9,283,012
Staples 95,861 2,850,906
TJX Companies 118,204 2,834,532
Total 14,968,450
Utilities -- electric (1.9%)
Duke Energy 359,305 8,813,751
Total common stocks
(Cost: $418,298,672) $459,596,271
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Preferred stock (0.9%)(c)
Issuer Shares Value(a)
Germany
Porsche 6,537 $4,173,674
Total preferred stock
(Cost: $3,369,108) $4,173,674
Short-term securities (1.5%)(f)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies (1.1%)
Federal Home Loan Mtge Corp Disc Nt
11-16-04 1.78% $5,000,000 $4,995,562
Federal Natl Mtge Assn Disc Nt
11-01-04 1.68 400,000 399,944
Total 5,395,506
Commercial paper (0.4%)
CXC LLC
11-01-04 1.86 1,700,000 1,699,737
Total short-term securities
(Cost: $7,095,596) $7,095,243
Total investments in securities
(Cost: $428,763,376)(g) $470,865,188
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Oct. 31,
2004, the value of these securities amounted to $2,795,077 or 0.6% of net
assets.
(e) At Oct. 31, 2004, security was partially or fully on loan. See Note 4 to
the financial statements.
(f) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.1% of net assets. See Note 4 to the
financial statements. 1.4% of the net assets is the Portfolio's cash
equivalent position.
(g) At Oct. 31, 2004, the cost of securities for federal income tax purposes
was $430,468,499 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $48,925,438
Unrealized depreciation (8,528,749)
----------
Net unrealized appreciation $40,396,689
-----------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
15 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
World Growth Portfolio
Oct. 31, 2004
Assets
Investments in securities, at value (Note 1)*
(identified cost $428,763,376) $470,865,188
Cash in bank on demand deposit 3,768
Foreign currency holdings (identified cost $1,848,658) (Note 1) 1,863,553
Dividends and accrued interest receivable 501,981
Receivable for investment securities sold 4,238,243
Reclaims receivable 677,765
-------
Total assets 478,150,498
-----------
Liabilities
Payable for investment securities purchased 3,525,719
Payable upon return of securities loaned (Note 4) 661,200
Accrued investment management services fee 10,185
Other accrued expenses 50,420
------
Total liabilities 4,247,524
---------
Net assets $473,902,974
============
* Including securities on loan, at value (Note 4) 649,948
-------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statement of operations
World Growth Portfolio
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 7,833,623
Interest 54,366
Fee income from securities lending (Note 4) 124,983
Less foreign taxes withheld (667,098)
--------
Total income 7,345,874
---------
Expenses (Note 2):
Investment management services fee 3,302,062
Compensation of board members 9,148
Custodian fees 154,577
Audit fees 28,500
Other 14,495
------
Total expenses 3,508,782
Earnings credits on cash balances (Note 2) (783)
----
Total net expenses 3,507,999
---------
Investment income (loss) -- net 3,837,875
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 42,392,252
Foreign currency transactions 59,726
------
Net realized gain (loss) on investments 42,451,978
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 11,388,618
----------
Net gain (loss) on investments and foreign currencies 53,840,596
----------
Net increase (decrease) in net assets resulting from operations $57,678,471
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets
World Growth Portfolio
Year ended Oct. 31, 2004 2003
Operations
Investment income (loss) -- net $ 3,837,875 $ 5,324,642
Net realized gain (loss) on investments 42,451,978 (27,567,565)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 11,388,618 109,515,236
---------- -----------
Net increase (decrease) in net assets resulting from operations 57,678,471 87,272,313
---------- ----------
Proceeds from contributions 954,259 2,304,809
Fair value of withdrawals (98,738,060) (163,329,472)
----------- ------------
Net contributions (withdrawals) from partners (97,783,801) (161,024,663)
----------- ------------
Total increase (decrease) in net assets (40,105,330) (73,752,350)
Net assets at beginning of year 514,008,304 587,760,654
----------- -----------
Net assets at end of year $473,902,974 $ 514,008,304
============ =============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Notes to Financial Statements
World Growth Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Growth Portfolio (the Portfolio) is a series of World Trust (the Trust)
and is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Portfolio invests
primarily in equity securities of companies around the world, including
companies located in developed and emerging countries. The Declaration of Trust
permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value (NAV). Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
19 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2004, foreign currency holdings consisted of
multiple denominations, primarily European Monetary Units.
- --------------------------------------------------------------------------------
20 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
0.8% to 0.675% annually as the Portfolio's assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment based on a
comparison of the performance of Class A shares of AXP Threadneedle Global
Equity Fund to the Lipper Global Funds Index. In certain circumstances, the
Board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment decreased the fee by $570,426 for the year ended Oct. 31,
2004.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
- --------------------------------------------------------------------------------
21 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their compensation. Deferred amounts are treated as though equivalent
dollar amounts had been invested in shares of the underlying Fund or other
American Express mutual funds. The Portfolio's liability for these amounts is
adjusted for market value changes and remains in the Portfolio until distributed
in accordance with the Plan.
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly-owned subsidiary of AEFC to subadvise the assets of the Fund.
Prior to July 10, 2004, AEFC had a Subadvisory Agreement with American Express
Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC.
During the year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced
by $783 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $508,502,295 and $605,517,694, respectively, for the
year ended Oct. 31, 2004. Realized gains and losses are determined on an
identified cost basis.
4. LENDING OF PORTFOLIO SECURITIES
At Oct. 31, 2004, securities valued at $649,948 were on loan to brokers. For
collateral, the Portfolio received $661,200 in cash. Cash collateral received is
invested in short-term securities, which are included in the short-term section
of the "Investments in securities." Income from securities lending amounted to
$124,983 for the year ended Oct. 31, 2004. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
5. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Ratio of expenses to average daily net assets(a) .71% .74% .72% .62% .73%
Ratio of net investment income (loss) to average daily net assets .78% 1.01% .67% .95% .27%
Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131%
Total return(b) 12.26% 18.91% (15.58%) (34.42%) 4.95%
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Total return is based on a calculated Portfolio NAV and does not reflect
payment of a sales charge.
- --------------------------------------------------------------------------------
22 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD OF TRUSTEES AND UNITHOLDERS
WORLD TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of World Growth Portfolio (a series
of World Trust) as of October 31, 2004, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period ended October 31, 2004, and the financial
highlights for each of the years in the five-year period ended October 31, 2004.
These financial statements and the financial highlights are the responsibility
of portfolio management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers or by other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of World
Growth Portfolio as of October 31, 2004, and the results of its operations,
changes in its net assets and the financial highlights for each of the periods
stated in the first paragraph above, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
23 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Threadneedle Global Equity Fund
Oct. 31, 2004
Assets
Investment in Portfolio (Note 1) $ 473,838,481
Capital shares receivable 78,513
------
Total assets 473,916,994
-----------
Liabilities
Capital shares payable 134,991
Accrued distribution fee 5,337
Accrued service fee 12
Accrued transfer agency fee 3,445
Accrued administrative services fee 744
Other accrued expenses 105,928
-------
Total liabilities 250,457
-------
Net assets applicable to outstanding capital stock $ 473,666,537
==============
Represented by
Capital stock -- $.01 par value (Note 1) $ 930,654
Additional paid-in capital 1,062,595,953
Excess of distributions over net investment income (113,507)
Accumulated net realized gain (loss) (Note 5) (631,997,273)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 42,250,710
----------
Total -- representing net assets applicable to outstanding capital stock $ 473,666,537
==============
Net assets applicable to outstanding shares: Class A $ 364,487,949
Class B $ 103,737,319
Class C $ 958,277
Class Y $ 4,482,992
Net asset value per share of outstanding capital stock: Class A shares 70,705,385 $ 5.16
Class B shares 21,300,358 $ 4.87
Class C shares 197,511 $ 4.85
Class Y shares 862,149 $ 5.20
------- --------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statement of operations
AXP Threadneedle Global Equity Fund
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 7,832,656
Interest 54,354
Fee income from securities lending 124,983
Less foreign taxes withheld (667,015)
--------
Total income 7,344,978
---------
Expenses (Note 2):
Expenses allocated from Portfolio 3,507,565
Distribution fee
Class A 894,340
Class B 1,283,273
Class C 9,589
Transfer agency fee 1,467,489
Incremental transfer agency fee
Class A 115,363
Class B 74,953
Class C 581
Service fee -- Class Y 4,591
Administrative services fees and expenses 284,795
Compensation of board members 8,432
Printing and postage 224,315
Registration fees 52,349
Audit fees 9,500
Other 13,439
------
Total expenses 7,950,574
Earnings credits on cash balances (Note 2) (7,264)
------
Total net expenses 7,943,310
---------
Investment income (loss) -- net (598,332)
--------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 42,387,650
Foreign currency transactions 59,764
------
Net realized gain (loss) on investments 42,447,414
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 11,386,564
----------
Net gain (loss) on investments and foreign currencies 53,833,978
----------
Net increase (decrease) in net assets resulting from operations $53,235,646
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets
AXP Threadneedle Global Equity Fund
Year ended Oct. 31, 2004 2003
Operations and distributions
Investment income (loss) -- net $ (598,332) $ 183,979
Net realized gain (loss) on investments 42,447,414 (27,567,201)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 11,386,564 109,506,308
---------- -----------
Net increase (decrease) in net assets resulting from operations 53,235,646 82,123,086
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (95,223) --
Class Y (2,413) --
---------- ----------
Total distributions (97,636) --
---------- ----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 46,610,187 35,389,682
Class B shares 7,409,628 6,481,182
Class C shares 260,184 483,450
Class Y shares 1,305,145 1,478,386
Reinvestment of distributions at net asset value
Class A shares 93,330 --
Class Y shares 2,413 --
Payments for redemptions
Class A shares (88,638,536) (134,289,060)
Class B shares (Note 2) (57,159,405) (60,198,322)
Class C shares (Note 2) (378,214) (553,226)
Class Y shares (2,804,270) (4,612,498)
---------- ----------
Increase (decrease) in net assets from capital share transactions (93,299,538) (155,820,406)
----------- ------------
Total increase (decrease) in net assets (40,161,528) (73,697,320)
Net assets at beginning of year 513,828,065 587,525,385
----------- -----------
Net assets at end of year $473,666,537 $ 513,828,065
============ =============
Undistributed (excess of distributions over) net investment income $ (113,507) $ 97,478
------------ -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Notes to Financial Statements
AXP Threadneedle Global Equity Fund (formerly AXP Global Equity Fund)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
Investment in World Growth Portfolio
The Fund invests all of its assets in World Growth Portfolio (the Portfolio), a
series of World Trust (the Trust), an open-end investment company that has the
same objectives as the Fund. The Portfolio invests primarily in equity
securities of companies around the world that are positioned to meet market
needs in a changing world economy.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at Oct. 31, 2004 was 99.99%.
- --------------------------------------------------------------------------------
27 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the principal market in which such securities are normally traded. Pursuant
to procedures adopted by the Board of Trustees of the portfolios, AEFC utilizes
Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair NAV. Short-term securities maturing in more than 60
days from the valuation date are valued at the market price or approximate
market value based on current interest rates; those maturing in 60 days or less
are valued at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
- --------------------------------------------------------------------------------
28 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by $484,983
and accumulated net realized loss has been increased by $484,983.
The tax character of distributions paid for the years indicated is as follows:
Year ended Oct. 31, 2004 2003
Class A
Distributions paid from:
Ordinary income $95,223 $--
Long-term capital gain -- --
Class B
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class C
Distributions paid from:
Ordinary income -- --
Long-term capital gain -- --
Class Y
Distributions paid from:
Ordinary income 2,413 --
Long-term capital gain -- --
At Oct. 31, 2004, the components of distributable earnings on a tax basis are
as follows:
Undistributed ordinary income $ 1,024,286
Accumulated long-term gain (loss) $(631,430,152)
Unrealized appreciation (depreciation) $ 40,545,796
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
- --------------------------------------------------------------------------------
29 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
that declines from 0.06% to 0.035% annually as the Fund's assets increase. A
minor portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$360,702 for Class A, $106,382 for Class B and $114 for Class C for the year
ended Oct. 31, 2004.
During the year ended Oct. 31, 2004, the Fund's transfer agency fees were
reduced by $7,264 as a result of earnings credits from overnight cash balances.
- --------------------------------------------------------------------------------
30 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004
Class A Class B Class C Class Y
Sold 9,625,192 1,590,230 55,798 264,315
Issued for reinvested distributions 19,608 -- -- 504
Redeemed (18,107,612) (12,478,367) (81,146) (572,441)
----------- ----------- ------- --------
Net increase (decrease) (8,462,812) (10,888,137) (25,348) (307,622)
---------- ----------- ------- --------
Year ended Oct. 31, 2003
Class A Class B Class C Class Y
Sold 8,499,668 1,658,622 121,148 359,435
Issued for reinvested distributions -- -- -- --
Redeemed (33,041,539) (15,356,093) (137,322) (1,146,272)
----------- ----------- -------- ----------
Net increase (decrease) (24,541,871) (13,697,471) (16,174) (786,837)
----------- ----------- ------- --------
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. The Fund must maintain asset coverage
for borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended Oct. 31, 2004.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$631,430,152 at Oct. 31, 2004, that if not offset by capital gains will expire
as follows:
2009 2010 2011
$457,285,316 $143,634,885 $30,509,951
It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
31 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $4.62 $3.92 $4.69 $ 8.74 $ 9.18
----- ----- ----- ------ ------
Income from investment operations:
Net investment income (loss) -- .01 -- .02 (.02)
Net gains (losses) (both realized and unrealized) .54 .69 (.77) (2.71) .58
----- ----- ----- ------ ------
Total from investment operations .54 .70 (.77) (2.69) .56
----- ----- ----- ------ ------
Less distributions:
Dividends from and in excess of net investment income -- -- -- (.02) (.04)
Distributions from realized gains -- -- -- (1.34) (.96)
----- ----- ----- ------ ------
Total distributions -- -- -- (1.36) (1.00)
----- ----- ----- ------ ------
Net asset value, end of period $5.16 $4.62 $3.92 $ 4.69 $ 8.74
----- ----- ----- ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $364 $366 $406 $714 $1,356
Ratio of expenses to average daily net assets(b) 1.41% 1.50% 1.39% 1.18% 1.22%
Ratio of net investment income (loss) to average daily net assets .07% .26% .01% .39% (.21%)
Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131%
Total return(c) 11.72% 17.86% (16.42%) (34.83%) 4.74%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
32 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $4.40 $3.76 $4.53 $ 8.53 $9.01
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) (.03) (.03) (.04) (.02) (.08)
Net gains (losses) (both realized and unrealized) .50 .67 (.73) (2.64) .56
----- ----- ----- ------ -----
Total from investment operations .47 .64 (.77) (2.66) .48
----- ----- ----- ------ -----
Less distributions:
Distributions from realized gains -- -- -- (1.34) (.96)
----- ----- ----- ------ -----
Net asset value, end of period $4.87 $4.40 $3.76 $ 4.53 $8.53
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $104 $142 $173 $309 $575
Ratio of expenses to average daily net assets(b) 2.18% 2.27% 2.16% 1.95% 1.98%
Ratio of net investment income (loss) to average daily net assets (.66%) (.52%) (.77%) (.38%) (.95%)
Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131%
Total return(c) 10.68% 17.02% (17.00%) (35.38%) 3.89%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
33 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000(b)
Net asset value, beginning of period $4.38 $3.75 $4.52 $ 8.54 $ 9.57
----- ----- ----- ------ ------
Income from investment operations:
Net investment income (loss) (.02) (.03) (.04) (.02) (.01)
Net gains (losses) (both realized and unrealized) .49 .66 (.73) (2.64) (1.02)
----- ----- ----- ------ ------
Total from investment operations .47 .63 (.77) (2.66) (1.03)
----- ----- ----- ------ ------
Less distributions:
Dividends from and in excess of net investment income -- -- -- (.02) --
Distributions from realized gains -- -- -- (1.34) --
----- ----- ----- ------ ------
Total distributions -- -- -- (1.36) --
----- ----- ----- ------ ------
Net asset value, end of period $4.85 $4.38 $3.75 $ 4.52 $ 8.54
----- ----- ----- ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $1 $1
Ratio of expenses to average daily net assets(c) 2.19% 2.29% 2.19% 1.95% 1.98%(d)
Ratio of net investment income (loss) to average daily net assets (.69%) (.52%) (.78%) (.42%) (1.15%)(d)
Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131%
Total return(e) 10.73% 16.80% (17.04%) (35.37%) (10.76%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
34 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $4.65 $3.94 $4.70 $ 8.76 $ 9.20
----- ----- ----- ------ ------
Income from investment operations:
Net investment income (loss) .01 .02 .01 .04 (.01)
Net gains (losses) (both realized and unrealized) .54 .69 (.77) (2.73) .58
----- ----- ----- ------ ------
Total from investment operations .55 .71 (.76) (2.69) .57
----- ----- ----- ------ ------
Less distributions:
Dividends from and in excess of net investment income -- -- -- (.03) (.05)
Distributions from realized gains -- -- -- (1.34) (.96)
----- ----- ----- ------ ------
Total distributions -- -- -- (1.37) (1.01)
----- ----- ----- ------ ------
Net asset value, end of period $5.20 $4.65 $3.94 $ 4.70 $ 8.76
----- ----- ----- ------ ------
Ratios/supplemental data
Net assets, end of period (in millions) $4 $5 $8 $12 $20
Ratio of expenses to average daily net assets(b) 1.23% 1.30% 1.21% 1.01% 1.05%
Ratio of net investment income (loss) to average daily net assets .25% .43% .18% .55% (.06%)
Portfolio turnover rate (excluding short-term securities) 104% 132% 123% 218% 131%
Total return(c) 11.88% 18.02% (16.17%) (34.78%) 4.86%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
35 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GLOBAL SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP
Threadneedle Global Equity Fund (formerly AXP Global Equity Fund) (a series of
AXP Global Series, Inc.) as of October 31, 2004, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period ended October 31, 2004, and the
financial highlights for each of the years in the five-year period ended October
31, 2004. These financial statements and the financial highlights are the
responsibility of fund management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Threadneedle Global Equity Fund as of October 31, 2004, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
36 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Federal Income Tax Information
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Threadneedle Global Equity Fund
Fiscal year ended Oct. 31, 2004
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 100%
Dividends Received Deduction for corporations 100%
Payable date Per share
Dec. 18, 2003 $0.00124
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 100%
Dividends Received Deduction for corporations 100%
Payable date Per share
Dec. 18, 2003 $0.00214
- --------------------------------------------------------------------------------
37 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Oct. 31, 2004.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
38 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Beginning Ending Expenses paid
account value account value during the period
May 1, 2004 Oct. 31, 2004 May 1, 2004-Oct. 31, 2004
Class A
Actual(a) $1,000 $1,061.70 $7.23(b)
Hypothetical (5% return before expenses) $1,000 $1,017.85 $7.07(b)
Class B
Actual(a) $1,000 $1,056.40 $11.15(c)
Hypothetical (5% return before expenses) $1,000 $1,014.02 $10.92(c)
Class C
Actual(a) $1,000 $1,054.30 $11.19(d)
Hypothetical (5% return before expenses) $1,000 $1,013.97 $10.97(d)
Class Y
Actual(a) $1,000 $1,061.20 $6.30(e)
Hypothetical (5% return before expenses) $1,000 $1,018.75 $6.17(e)
(a) Based on the actual return for the six months ended Oct. 31, 2004: +6.17%
for Class A, +5.64% for Class B, +5.43% for Class C and +6.12% for Class Y.
(b) Expenses are equal to the Fund's Class A annualized expense ratio of 1.41%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(c) Expenses are equal to the Fund's Class B annualized expense ratio of 2.18%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(d) Expenses are equal to the Fund's Class C annualized expense ratio of 2.19%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(e) Expenses are equal to the Fund's Class Y annualized expense ratio of 1.23%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
- --------------------------------------------------------------------------------
39 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. Each member oversees 14
Master Trust portfolios and 89 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the board.
Independent Board Members
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards). Former Governor of
Age 70 Minnesota
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc.
Minneapolis, MN 55402 construction) since 1998 (construction materials/chemicals)
Age 67
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated (commodity
30 Seventh Street East since 2001 Chief Executive Officer, merchants and processors), General
Suite 3050 Minnesota Mining and Mills, Inc. (consumer foods),
St. Paul, MN 55101-4901 Manufacturing (3M) Vulcan Materials Company
Age 70 (construction materials/
chemicals), Milliken & Company
(textiles and chemicals), and
Nexia Biotechnologies, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics BostonFed Bancorp, Inc. (holding
901 S. Marquette Ave. since 2004 and Management, Bentley College company) and its subsidiary Boston
Minneapolis, MN 55402 since 2002; former Dean, McCallum Federal Savings Bank
Age 53 Graduate School of Business,
Bentley College from 1999 to 2002
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 69
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Stephen R. Lewis, Jr.* Board member Retired President and Professor Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 of Economics, Carleton College (manufactures irrigation systems)
Minneapolis, MN 55402
Age 65
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund by
reason of being a security holder of Bank of America Corporation, parent
company of Columbia Wanger Asset Management, L.P., one of the fund's
subadvisers.
- --------------------------------------------------------------------------------
40 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Management, Inc. (private real (transportation, distribution and
Minneapolis, MN 55402 estate and asset management logistics consultants)
Age 52 company) since 1999
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alan K. Simpson Board member Former three-term United States
1201 Sunshine Ave. since 1997 Senator for Wyoming
Cody, WY 82414
Age 73
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alison Taunton-Rigby Board member Founder and Chief Executive Hybridon Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Officer, RiboNovix, Inc. since
Minneapolis, MN 55402 2004; President, Forester Biotech
Age 60 since 2000; prior to that,
President and CEO, Aquila
Biopharmaceuticals, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Board Member Affiliated with AEFC**
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
William F. Truscott Board member Senior Vice President - Chief
53600 AXP Financial Center since 2001, Investment Officer of AEFC since
Minneapolis, MN 55474 Vice President 2001. Former Chief Investment
Age 44 since 2002 Officer and Managing Director,
Zurich Scudder Investments
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
** Interested person by reason of being an officer, director and/or employee of
AEFC.
- --------------------------------------------------------------------------------
41 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Jeffrey P. Fox Treasurer since Vice President - Investment
105 AXP Financial Center 2002 Accounting, AEFC, since 2002;
Minneapolis, MN 55474 Vice President - Finance,
Age 49 American Express Company,
2000-2002; Vice President -
Corporate Controller, AEFC,
1996-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Paula R. Meyer President since Senior Vice President and General
596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC,
Minneapolis, MN 55474 since 2002; Vice President and
Age 50 Managing Director - American
Express Funds, AEFC, 2000-2002;
Vice President, AEFC, 1998-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Leslie L. Ogg Vice President, President of Board Services
901 S. Marquette Ave. General Counsel, Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
42 -- AXP THREADNEEDLE GLOBAL EQUITY FUND -- 2004 ANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
AXP(R) Threadneedle
Emerging Markets
Fund
Annual Report
for the Period Ended
Oct. 31, 2004
AXP Threadneedle Emerging Markets Fund seeks to provide shareholders with
long-term capital growth.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers
with Portfolio Management 5
The Fund's Long-term Performance 10
Investments in Securities 12
Financial Statements (Portfolio) 16
Notes to Financial Statements (Portfolio) 19
Report of Independent Registered
Public Accounting Firm (Portfolio) 23
Financial Statements (Fund) 24
Notes to Financial Statements (Fund) 27
Report of Independent Registered
Public Accounting Firm (Fund) 37
Federal Income Tax Information 38
Fund Expenses Example 39
Board Members and Officers 41
Proxy Voting 43
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Fund Snapshot
AT OCT. 31, 2004
PORTFOLIO MANAGERS
Portfolio managers* Since Years in industry
Julian Thompson 1/00 11
Jules Mort 10/03 7
* The Fund is managed by a team led by Julian Thompson and Jules Mort.
FUND OBJECTIVE
For investors seeking for long-term growth of capital.
Inception dates by class
A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96
Ticker symbols by class
A: IDEAX B: IEMBX C: -- Y: --
Total net assets $295.7 million
Number of holdings 74
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
South Korea 13.3%
Brazil 12.4%
Mexico 11.1%
Taiwan 11.0%
South Africa 8.9%
Russia 6.5%
India 4.5%
Hong Kong 4.1%
Thailand 4.0%
Turkey 3.9%
Israel 3.7%
China 2.9%
United States 2.8%
Hungary 2.3%
Malaysia 1.9%
United Kingdom 1.5%
Indonesia 1.1%
Singapore 1.0%
Other* 3.1%
* Includes Estonia, Netherlands, Peru and Philippine Islands.
TOP TEN HOLDINGS
Percentage of portfolio assets
Samsung Electronics (South Korea) 4.6%
America Movil ADR Series L (Mexico) 4.1
Petroleo Brasileiro ADR (Brazil) 2.8
Chinatrust Financial Holding (Taiwan) 2.7
LUKOIL ADR (Russia) 2.6
POSCO (South Korea) 2.5
Gedeon Richter (Hungary) 2.3
Cia Vale do Rio Doce ADR (Brazil) 2.1
Hana Bank (South Korea) 2.1
Teva Pharmaceutical Inds ADR (Israel) 2.1
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the year ended Oct. 31, 2004
(bar 1) (bar 2) (bar 3)
+16.09% +19.40% +21.58%
(bar 1) AXP Threadneedle Emerging Markets Fund Class A (excluding sales charge)
(bar 2) Morgan Stanley Capital International (MSCI) Emerging Markets Index
(unmanaged)
(bar 3) Lipper Emerging Markets Funds Index
(see "The Fund`s Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. You should consider the investment objectives,
risks, and charges and expenses of the Fund carefully before investing.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart; if reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (11/13/96) (11/13/96) (6/20/00) (11/13/96)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5) POP(5)
as of Oct. 31, 2004
1 year +16.09% +9.42% +15.18% +11.18% +15.37% +15.37% +16.50% +16.50%
3 years +19.76% +17.42% +18.86% +18.15% +19.00% +19.00% +20.02% +20.02%
5 years +4.90% +3.67% +4.14% +3.97% N/A N/A +5.20% +5.20%
Since inception +3.41% +2.64% +2.63% +2.63% +1.43% +1.43% +3.62% +3.62%
as of Sept. 30, 2004
1 year +22.44% +15.41% +21.54% +17.54% +21.26% +21.26% +22.60% +22.60%
3 years +20.88% +18.52% +19.94% +19.24% +20.02% +20.02% +21.06% +21.06%
5 years +5.07% +3.83% +4.26% +4.09% N/A N/A +5.34% +5.34%
Since inception +3.04% +2.27% +2.26% +2.26% +0.69% +0.69% +3.24% +3.24%
(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.
- --------------------------------------------------------------------------------
4 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Managers Julian Thompson and Jules Mort of Threadneedle
International Limited (Threadneedle) discuss the Fund's positioning and results
for fiscal year 2004. Threadneedle, an indirect wholly owned subsidiary of
American Express Financial Corporation, acts as the subadviser to the Fund.
Q: How did AXP Threadneedle Emerging Markets Fund perform for the 12-month
period ended Oct. 31, 2004?
A: AXP Threadneedle Emerging Markets Fund rose 16.09% (Class A shares excluding
sales charge) for the 12 months ended Oct. 31, 2004. This was less than the
Fund's benchmark, the MSCI Emerging Markets Free Index, which advanced
19.40% for the period. The Fund's peer group, represented by the Lipper
Emerging Markets Funds Index, was up 21.58% for the same time frame.
Q: How did market conditions and country positioning affect performance?
A: Most of the Fund's relative underperformance came in November and December
of 2003. At the time, we were concerned about the rising value of currencies
such as the South African rand and the potential negative impact on earnings
for firms in the materials sector. We maintained a lower-than-MSCI Index
position in materials and energy stocks during the period, and this
negatively affected results.
Asia
We started the 2004 fiscal period with a strong position in Asia (about 60%
of the portfolio). In April, as Asian stock markets peaked, particularly in
the information technology sector, we reduced the Fund's allocation to Asian
countries, gradually bringing it down to 43% at fiscal year ended Oct. 31,
2004. More specifically in the spring, we became concerned that the Chinese
economy was overheating and reduced our exposure to China and other Asian
countries. A poor performer for the Fund during the period was Samsung
Electronics. We reduced the number of shares we owned.
Latin America
In fiscal year 2004, we increased the Fund's weighting in Latin America, up
from 18% the same time last year to approximately 23% for fiscal year 2004.
Highlights included:
o A pick up in the Brazilian economy, as well as strong growth in consumer
demand for credit. Banco Itau Holding Financeira in Brazil performed very
well and was one of the larger holdings in the Fund as of Oct. 31, 2004.
o A resilient Mexican economy. Mexico saw a lot of consumption growth amid
low interest rates and increased credit use by consumers.
- --------------------------------------------------------------------------------
5 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Questions & Answers
(begin callout quote)> Most of the Fund's relative underperformance came in
November and December of 2003. At the time, we were concerned about the rising
currencies such as the South African rand and the potential negative impact on
earnings for firms in the materials sector. (end callout quote)
One of our largest holdings and strongest performer in the telecom sector
was America Movil, which is a cellular telecom operator in Mexico that has
80% of the Mexican market.
o No exposure to Argentina, Colombia or Venezuela during the period because
of political and economic uncertainties in these countries.
Russia and Eastern Europe
At the beginning of the period we only had about 3% in Russia because we
were worried about the impact of Russian oil company Yukos' potential
bankruptcy on the market overall. The market ended up correcting quite a bit
and we bought back in. We continue to run with a relatively high position in
Russia. LUKOIL, one of Russia's largest oil exporters, has performed
slightly ahead of the energy sector overall, which contributed positively to
performance.
Q: How is the Fund's overall portfolio currently allocated with respect to
sectors?
A: We have consistently held a high weighting in financials as we explore
exposure to domestic growth within emerging markets. Financials picked up
near the end of the period particularly with the realization of strong
emerging currencies against the weak dollar, which means that domestic
interest rates will remain relatively low and may allow a durable credit
cycle to develop in emerging markets.
Telecommunications services was a strong performer for the portfolio during
the period. America Movil in Mexico and Mobile Telesystems in Russia have
both delivered exceptional returns over the last year on the back of strong
subscriber growth.
- --------------------------------------------------------------------------------
6 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Questions & Answers
(line chart)
The Rise of the Euro and the Decline of the Dollar
Oct. 31, 2001 to Oct. 31, 2004
Exchange Rate (Dollar to Euro)
10/01 $0.90
11/01 $0.90
12/01 $0.89
1/02 $0.86
2/02 $0.87
3/02 $0.87
4/02 $0.90
5/02 $0.93
6/02 $0.99
7/02 $0.98
8/02 $0.98
9/02 $0.99
10/02 $0.99
11/02 $0.99
12/02 $1.05
1/03 $1.08
2/03 $1.08
3/03 $1.09
4/03 $1.12
5/03 $1.18
6/03 $1.15
7/03 $1.12
8/03 $1.10
9/03 $1.17
10/03 $1.16
11/03 $1.20
12/03 $1.26
1/04 $1.25
2/04 $1.25
3/04 $1.23
4/04 $1.20
5/04 $1.22
6/04 $1.22
7/04 $1.20
8/04 $1.22
9/04 $1.24
10/04 $1.28
Source: Bloomberg
This chart shows how much the euro has risen in value against the U.S. dollar
over the past three years. As of Oct. 31, 2004, it took $1.28 to buy a euro
compared to $0.90 three years ago, a 43% increase. During the past fiscal
year, emerging markets began to price in a structurally weak U.S. dollar.
Q: What is the Fund's tactical view and strategy for the months ahead?
A: We remain positive on emerging markets as an asset class and continue to
believe that emerging markets are in the early stages of a durable economic
cycle focused on growth in domestic consumption. There have been further
signs recently, particularly in Asia, that economies in that region are
successfully making the transition from export driven growth to domestic
consumption. Likewise, in Latin America we have seen growing evidence of a
cyclical recovery in domestic demand in both Brazil and Mexico. For this
reason the Fund remains focused on domestic sectors such as financials,
telecommunications and consumer staples.
Emerging market economies appear fundamentally sound for the medium term (as
illustrated by the emerging market gross domestic product (GDP) growth rate
chart). Emerging economies
- --------------------------------------------------------------------------------
7 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Questions & Answers
are well positioned to withstand a higher cost of capital as the U.S.
continues to raise interest rates. Because leverage is much lower throughout
emerging markets economies than in previous cycles of rising interest rates,
we expect the asset class to remain relatively resilient in the face of
rising U.S. rates and expect current levels of growth to be sustained, with
the possible exception of China. The Fund is focused on companies we think
have strong growth franchises supported by good cash flow and high quality
management.
In terms of geographic exposure, the Fund remains cautious on the Chinese
market. We are skeptical of a recovery in domestic consumption in South
Korea. In Africa the Fund has minimal exposure to South African commodity
producers. However, the Fund has relatively high exposure in Russia at
around 6.5% of the Fund. We also have increased exposure in Latin America,
which is enjoying both strong commodity prices and a domestic recovery.
Mexico represents the Fund's largest position relative to the MSCI Emerging
Markets Free Index, though in absolute terms, the Latin American exposure is
approximately equally split between Mexico and Brazil.
- --------------------------------------------------------------------------------
8 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Questions & Answers
(bar chart)
Historical Economic Growth in Emerging Markets
and Threadneedle's Current Expectations
(bar 1) (bar 2) (bar 3) (bar 1) (bar 2) (bar 3) (bar 1) (bar 2) (bar 3)
+2.4% +1.1% +2.0% +5.7% +4.6% +3.7% +4.7% +3.6% +3.6%
7-year average 2004 estimate 2005 estimate
REGION
(bar 1) Asia
(bar 2) Latin American
(bar 3) Europe, Middle East and Africa
Source: Threadneedle Limited International
The chart above shows the seven year average Gross Domestic Product (GDP) growth
in different emerging market regions compared to what Threadneedle believes may
be the growth rate for calendar years 2004 and 2005. GDP is the value of goods
and services. As you can see, Threadneedle expects growth around the world to
slow in the year ahead, but still be well above its seven-year average.
- --------------------------------------------------------------------------------
9 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed $10,000
investment in AXP Threadneedle Emerging Markets Fund Class A shares (from
12/1/96 to 10/31/04) as compared to the performance of two widely cited
performance indices, the MSCI Emerging Markets Free Index and the Lipper
Emerging Markets Funds Index. In comparing the Fund's Class A shares to these
indices, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5.75%, while such charges are not reflected
in the performance of the indices. Returns for the Fund include the reinvestment
of any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions and
redemptions. Current performance may be lower or higher than the performance
information shown. You may obtain performance information current to the most
recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds. Also see "Past Performance" in the Fund's current
prospectus. You should consider the investment objectives, risks, and charges
and expenses of the Fund carefully before investing.
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for the
fiscal years shown. More information on the other classes can be found in the
Financial Highlights section of this report's Notes to Financial Statements.
Class A
Short-term Long-term
Fiscal year ended Income capital gains capital gains Total
Oct. 31, 2004 $0.06 $-- $-- $0.06
Oct. 31, 2003 -- -- -- --
Oct. 31, 2002 -- -- -- --
Oct. 31, 2001 -- -- -- --
Oct. 31, 2000 -- -- -- --
- --------------------------------------------------------------------------------
10 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
(line chart)
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN AXP THREADNEEDLE EMERGING MARKETS FUND
AXP Threadneedle Emerging Markets Fund
(includes sales charge) $ 9,425 $10,070 $6,672 $9,687 $9,339 $7,165 $7,766 $10,601 $12,307
MSCI Emerging Markets Free Index(1) $10,000 $ 9,001 $6,212 $8,984 $8,192 $6,270 $6,800 $10,114 $12,076
Lipper Emerging Markets Funds Index(2) $10,000 $ 9,402 $6,283 $8,571 $8,204 $6,382 $6,837 $10,144 $12,333
12/1/96 10/97 10/98 10/99 10/00 10/01 10/02 10/03 10/04
COMPARATIVE RESULTS
Results as of Oct. 31, 2004 Since
1 years 3 years 5 years inception(3)
AXP Threadneedle Emerging Markets Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,942 $16,189 $11,975 $12,307
Average annual total return +9.42% +17.42% +3.67% +2.64%
MSCI Emerging Markets Free Index(1)
Cumulative value of $10,000 $11,940 $19,261 $13,445 $12,076
Average annual total return +19.40% +24.42% +6.10% +2.41%
Lipper Emerging Markets Funds Index(2)
Cumulative value of $10,000 $12,158 $19,326 $14,390 $12,333
Average annual total return +21.58% +24.56% +7.55% +2.68%
Fund results for other share classes can be found on page 4.
(1) MSCI Emerging Markets Free Index, an unmanaged market
capitalization-weighted index, is compiled from a composite of securities
markets of 26 emerging market countries. The index reflects reinvestment of
all distributions and changes in market prices, but excludes brokerage
commissions or other fees.
(2) The Lipper Emerging Markets Funds Index includes the 30 largest emerging
markets funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
(3) Fund data is from Nov. 13, 1996. MSCIEmerging Markets Free Index and Lipper
Index data is from Dec. 1, 1996.
- --------------------------------------------------------------------------------
11 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Investments in Securities
Emerging Markets Portfolio
Oct. 31, 2004
(Percentages represent value of investments compared to net assets)
Common stocks (91.4%)(c)
Issuer Shares Value(a)
Brazil (10.0%)
Chemicals (0.8%)
Braskem ADR 66,150(b) $2,421,090
Energy (2.7%)
Petroleo Brasileiro ADR 244,496 7,970,570
Metals (2.0%)
Cia Vale do Rio Doce ADR 331,788 6,038,542
Paper & packaging (1.1%)
Aracruz Celulose ADR 95,957 3,231,832
Textiles & apparel (0.2%)
Grenedene 46,425(b) 564,672
Utilities -- electric (0.8%)
Cia Energetica de
Minas Gerais 100,900,000 2,330,907
Utilities -- telephone (2.4%)
Brasil Telecom Participacoes ADR 141,374 4,334,526
Tele Norte Leste
Participacoes ADR 217,725 2,847,843
Total 7,182,369
China (2.8%)
Metals (1.1%)
Yanzhou Coal Mining Cl H 2,566,000 3,379,222
Telecom equipment & services (1.0%)
China Telecom Cl H 8,800,000 2,826,565
Utilities -- electric (0.7%)
Datang Intl Power Generation 2,602,000 2,072,694
Estonia (0.8%)
Banks and savings & loans
Hansabank 242,625 2,452,658
Hong Kong (4.0%)
Financial services (1.0%)
Hong Kong Exchanges
and Clearing 1,252,000 2,847,173
Real estate (1.0%)
Sun Hung Kai Properties 326,000 3,015,688
Retail -- general (2.0%)
Esprit Holdings 580,000 3,099,971
Giordano Intl 5,082,000 2,840,273
Total 5,940,244
Hungary (2.2%)
Health care products
Gedeon Richter 56,160 6,645,903
India (4.4%)
Banks and savings & loans (1.4%)
Housing Development Finance 90,771 1,279,085
State Bank of India GDR 108,232 2,859,489
Total 4,138,574
Beverages & tobacco (1.3%)
ITC 166,009 3,978,253
Computer software & services (1.7%)
Infosys Technologies 113,851 4,782,582
Indonesia (1.1%)
Banks and savings & loans
Bank Mandiri 18,024,500 3,126,496
Israel (3.5%)
Computer software & services (1.5%)
Check Point Software
Technologies 197,926(b) 4,477,284
Health care products (2.0%)
Teva Pharmaceutical Inds ADR 227,620 5,918,120
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Malaysia (1.8%)
Banks and savings & loans (0.8%)
Malayan Banking 773,200 $2,241,159
Leisure time & entertainment (1.0%)
Resorts World 1,228,100 3,090,476
Mexico (10.6%)
Beverages & tobacco (1.9%)
Fomento Economico
Mexicano ADR 62,649 2,762,821
Grupo Modelo Series C 1,122,400 2,876,901
Total 5,639,722
Building materials & construction (0.8%)
CEMEX ADR 85,633 2,481,644
Cellular telecommunications (4.0%)
America Movil ADR Series L 268,021 11,792,924
Media (1.7%)
Grupo Televisa ADR 91,000 5,005,000
Real estate (0.9%)
Consorcio ARA 974,500(b) 2,605,931
Retail -- general (1.3%)
Wal-Mart de Mexico Series C 1,217,521 3,978,723
Netherlands Antilles (0.7%)
Beverages & tobacco
Efes Breweries Intl GDR 71,315(b,d) 1,978,991
Peru (0.8%)
Precious metals
Compania de Minas
Buenaventura ADR 90,039 2,236,569
Philippine Islands (0.7%)
Utilities -- telephone
Philippine Long Distance Telephone 86,230(b) 2,154,600
Russia (6.2%)
Energy (3.5%)
LUKOIL ADR 59,256 7,392,186
Surgutneftegax ADR 71,676 2,859,872
Total 10,252,058
Precious metals (0.7%)
JSC MMC Norilsk Nickel ADR 33,331 2,069,855
Utilities -- natural gas (0.5%)
OAO Gazprom ADR 42,990(d) 1,606,106
Utilities -- telephone (1.5%)
Mobile Telesystems ADR 30,730 4,459,538
Singapore (1.0%)
Banks and savings & loans
DBS Group Holdings 304,000 2,852,400
South Africa (8.5%)
Banks and savings & loans (3.9%)
ABSA Group 278,827 3,065,642
FirstRand 1,584,317 3,158,858
Standard Bank Group 610,267 5,387,831
Total 11,612,331
Energy equipment & services (1.0%)
Sasol 154,260 3,075,682
Insurance (1.2%)
Sanlam 2,007,100 3,550,582
Retail -- general (1.2%)
JD Group 376,395 3,520,712
Telecom equipment & services (1.2%)
Telkom 248,605 3,537,046
South Korea (12.9%)
Automotive & related (1.9%)
Hyundai Motor GDR 242,020(d) 5,743,135
Banks and savings & loans (2.0%)
Hana Bank 239,420 5,980,953
Beverages & tobacco (1.0%)
KT&G 105,350 2,918,935
Electronics (4.5%)
Samsung Electronics 33,330 13,092,492
Metals (2.5%)
POSCO 47,850 7,163,494
Retail -- general (1.0%)
Shinsegae 10,740 3,023,730
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
13 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Taiwan (10.5%)
Banks and savings & loans (4.2%)
Chinatrust Financial Holding 6,638,234 $7,575,758
E.Sun Financial Holdings 2,971,000 2,029,019
Taishin Financial Holdings 3,502,360 2,863,994
Total 12,468,771
Computer hardware (0.9%)
Asustek Computer 1,259,800 2,792,428
Electronics (2.9%)
Acer 1,834,172 2,686,566
Taiwan Semiconductor Mfg 4,483,774 5,882,561
Total 8,569,127
Insurance (1.5%)
Cathay Financial Holding 2,340,000 4,485,847
Textiles & apparel (1.0%)
Far Eastern Textile 4,364,000 2,914,998
Thailand (3.9%)
Banks and savings & loans (3.2%)
Bangkok Bank 1,793,200(b) 4,193,598
Kasikornbank 4,505,600(b) 5,158,665
Total 9,352,263
Utilities -- telephone (0.7%)
Advanced Info Service 927,700 2,113,032
Turkey (3.7%)
Banks and savings & loans (0.6%)
Akbank 402,393,539 1,810,499
Beverages & tobacco (0.9%)
Anadolu Efes Biracilik
ve Malt Sanayil 161,187,526 2,541,048
Furniture & appliances (0.5%)
Arcelik 251,090,026(b) 1,520,471
Telecom equipment & services (1.7%)
Turkcell Iletisim Hizmetleri 832,672,402 5,098,569
United Kingdom (1.4%)
Metals
BHP Billiton 416,902 4,257,411
Total common stocks
(Cost: $236,401,590) $270,930,690
Preferred stock (1.9%)(c)
Issuer Shares Value(a)
Brazil
Banco Itau Holding Financeira 47,380 $5,721,421
Total preferred stock
(Cost: $3,761,433) $5,721,421
Short-term securities (2.7%)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agency (1.7%)
Federal Natl Mtge Assn Disc Nt
12-14-04 1.83% $5,000,000 $4,988,311
Commercial paper (1.0%)
CXC LLC
11-01-04 1.86 3,100,000 3,099,520
Total short-term securities
(Cost: $8,087,992) $8,087,831
Total investments in securities
(Cost: $248,251,015)(e) $284,739,942
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Oct. 31,
2004, the value of these securities amounted to $9,328,232 or 3.1% of net
assets.
(e) At Oct. 31, 2004, the cost of securities for federal income tax purposes
was $248,647,799 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $41,993,058
Unrealized depreciation (5,900,915)
----------
Net unrealized appreciation $36,092,143
-----------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
15 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Emerging Markets Portfolio
Oct. 31, 2004
Assets
Investments in securities, at value (Note 1)
(identified cost $248,251,015) $284,739,942
Foreign currency holdings (identified cost $3,452,911) (Note 1) 3,473,781
Dividends and accrued interest receivable 93,818
Receivable for investment securities sold 9,408,724
---------
Total assets 297,716,265
-----------
Liabilities
Disbursements in excess of cash on demand deposit 47,166
Payable for investment securities purchased 1,274,562
Accrued investment management services fee 8,813
Other accrued expenses 85,624
------
Total liabilities 1,416,165
---------
Net assets $296,300,100
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statement of operations
Emerging Markets Portfolio
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 6,995,537
Interest 117,227
Fee income from securities lending (Note 3) 256
Less foreign taxes withheld (942,019)
--------
Total income 6,171,001
---------
Expenses (Note 2):
Investment management services fee 2,770,886
Compensation of board members 8,482
Custodian fees 291,850
Audit fees 24,000
Other 17,262
------
Total expenses 3,112,480
---------
Earnings credits on cash balances (Note 2) (794)
Total net expenses 3,111,686
---------
Investment income (loss) -- net 3,059,315
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 48,342,092
Foreign currency transactions (263,034)
--------
Net realized gain (loss) on investments 48,079,058
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (9,980,094)
----------
Net gain (loss) on investments and foreign currencies 38,098,964
----------
Net increase (decrease) in net assets resulting from operations $41,158,279
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets
Emerging Markets Portfolio
Year ended Oct. 30, 2004 2003
Operations
Investment income (loss) -- net $ 3,059,315 $ 2,490,540
Net realized gain (loss) on investments 48,079,058 17,305,707
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (9,980,094) 50,708,763
---------- ----------
Net increase (decrease) in net assets resulting from operations 41,158,279 70,505,010
---------- ----------
Proceeds from contributions 22,729,634 40,823,634
Fair value of withdrawals (13,403,405) (63,961,807)
----------- -----------
Net contributions (withdrawals) from partners 9,326,229 (23,138,173)
--------- -----------
Total increase (decrease) in net assets 50,484,508 47,366,837
Net assets at beginning of year 245,815,592 198,448,755
----------- -----------
Net assets at end of year $296,300,100 $245,815,592
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Notes to Financial Statements
Emerging Markets Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Emerging Markets Portfolio (the Portfolio) is a series of World Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. The Portfolio invests
primarily in equity securities of emerging markets companies. The Declaration of
Trust permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value (NAV). Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
19 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2004 foreign currency holdings consisted of
multiple denominations, primarily Taiwan Dollars.
- --------------------------------------------------------------------------------
20 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
1.10% to 1.00% annually as the Portfolio's assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment based on a
comparison of the performance of Class A shares of AXP Threadneedle Emerging
Markets Fund to the Lipper Emerging Markets Funds Index. In certain
circumstances, the Board may approve a change in the index. The maximum
adjustment is 0.12% per year. If the performance difference is less than 0.50%,
the adjustment will be zero. The adjustment decreased the fee by $232,104 for
the year ended Oct. 31, 2004.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
- --------------------------------------------------------------------------------
21 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their compensation. Deferred amounts are treated as though equivalent
dollar amounts had been invested in shares of the underlying Fund or other
American Express mutual funds. The Portfolio's liability for these amounts is
adjusted for market value changes and remains in the Portfolio until distributed
in accordance with the Plan.
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly-owned subsidiary of AEFC to subadvise the assets of the Fund.
Prior to July 10, 2004, AEFC had a Subadvisory Agreement with American Express
Asset Management International Inc. (AEAMI), a wholly-owned subsidiary of AEFC.
During the year ended Oct. 31, 2004, the Portfolio's custodian fees were reduced
by $794 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $337,446,962 and $340,663,620, respectively, for the
year ended Oct. 31, 2004. Realized gains and losses are determined on an
identified cost basis.
Income from securities lending amounted to $256 for the year ended Oct. 31,
2004. The risks to the Portfolio of securities lending are that the borrower may
not provide additional collateral when required or return the securities when
due.
4. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Ratio of expenses to average daily net assets(a) 1.14% 1.20% 1.23% 1.20% 1.17%
Ratio of net investment income (loss) to average daily net assets 1.12% 1.20% .63% .79% .28%
Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143%
Total return(b) 17.03% 37.59% 9.39% (22.59%) (2.86%)
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Total return is based on a calculated Portfolio NAV and does not reflect
payment of a sales charge.
- --------------------------------------------------------------------------------
22 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD OF TRUSTEES AND UNITHOLDERS
WORLD TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Emerging Markets Portfolio (a
series of World Trust) as of October 31, 2004, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period ended October 31, 2004, and the
financial highlights for each of the years in the five-year period ended October
31, 2004. These financial statements and the financial highlights are the
responsibility of portfolio management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers or by other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Emerging Markets Portfolio as of October 31, 2004, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
23 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Threadneedle Emerging Markets Fund
Oct. 31, 2004
Assets
Investment in Portfolio (Note 1) $296,190,895
Capital shares receivable 100,738
-------
Total assets 296,291,633
-----------
Liabilities
Capital shares payable 349,531
Accrued distribution fee 3,310
Accrued service fee 50
Accrued transfer agency fee 1,578
Accrued administrative services fee 790
Other accrued expenses 248,496
-------
Total liabilities 603,755
-------
Net assets applicable to outstanding capital stock $295,687,878
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 477,168
Additional paid-in capital 333,376,180
Undistributed net investment income 874,641
Accumulated net realized gain (loss) (Note 5) (75,556,881)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 36,516,770
----------
Total -- representing net assets applicable to outstanding capital stock $295,687,878
============
Net assets applicable to outstanding shares: Class A $190,500,049
Class B $ 73,255,622
Class C $ 1,211,363
Class I $ 12,706,944
Class Y $ 18,013,900
Net asset value per share of outstanding capital stock: Class A shares 30,359,602 $ 6.27
Class B shares 12,316,180 $ 5.95
Class C shares 203,071 $ 5.97
Class I shares 1,999,415 $ 6.36
Class Y shares 2,838,508 $ 6.35
--------- ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statement of operations
AXP Threadneedle Emerging Markets Fund
Year ended Oct. 31, 2004
Investment income
Income:
Dividends $ 6,992,937
Interest 117,225
Fee income from securities lending 256
Less foreign taxes withheld (941,669)
--------
Total income 6,168,749
---------
Expenses (Note 2):
Expenses allocated from Portfolio 3,110,528
Distribution fee
Class A 438,042
Class B 756,560
Class C 9,336
Transfer agency fee 675,065
Incremental transfer agency fee
Class A 51,799
Class B 37,265
Class C 426
Service fee -- Class Y 18,278
Administrative services fees and expenses 271,857
Compensation of board members 8,107
Printing and postage 110,340
Registration fees 49,172
Audit fees 8,000
Other 7,274
-----
Total expenses 5,552,049
Earnings credits on cash balances (Note 2) (4,095)
------
Total net expenses 5,547,954
---------
Investment income (loss) -- net 620,795
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 48,323,810
Foreign currency transactions (262,934)
--------
Net realized gain (loss) on investments 48,060,876
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (9,976,656)
----------
Net gain (loss) on investments and foreign currencies 38,084,220
----------
Net increase (decrease) in net assets resulting from operations $38,705,015
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Statements of changes in net assets
AXP Threadneedle Emerging Markets Fund
Year ended Oct. 31, 2004 2003
Operations and distributions
Investment income (loss) -- net $ 620,795 $ 320,873
Net realized gain (loss) on investments 48,060,876 17,299,589
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (9,976,656) 50,690,349
---------- ----------
Net increase (decrease) in net assets resulting from operations 38,705,015 68,310,811
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (1,739,711) --
Class B (347,165) --
Class C (2,977) --
Class Y (233,251) --
------------ ------------
Total distributions (2,323,104) --
------------ ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 51,336,374 46,522,730
Class B shares 13,065,540 4,677,343
Class C shares 710,046 1,881,668
Class I shares 12,072,940 --
Class Y shares 3,109,037 17,134,059
Reinvestment of distributions at net asset value
Class A shares 1,721,050 --
Class B shares 343,304 --
Class C shares 2,764 --
Class Y shares 233,251 --
Payments for redemptions
Class A shares (41,601,391) (66,453,449)
Class B shares (Note 2) (21,634,907) (17,438,584)
Class C shares (Note 2) (205,777) (1,963,556)
Class I shares (2,074) --
Class Y shares (5,555,746) (5,243,858)
---------- ----------
Increase (decrease) in net assets from capital share transactions 13,594,411 (20,883,647)
---------- -----------
Total increase (decrease) in net assets 49,976,322 47,427,164
Net assets at beginning of year 245,711,556 198,284,392
----------- -----------
Net assets at end of year $295,687,878 $245,711,556
============ ============
Undistributed (excess of distributions over) net investment income $ 874,641 $ (284,054)
------------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Notes to Financial Statements
AXP Threadneedle Emerging Markets Fund (formerly AXP Emerging Markets Fund)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
Effective March 4, 2004, the Fund offers an additional class of shares, Class I,
exclusively to certain institutional investors. Class I shares have no sales
charge and are made available through a separate prospectus supplement provided
to investors eligible to purchase the shares. At Oct. 31, 2004, American Express
Financial Corporation (AEFC) and the AXP Portfolio Builder Series funds owned
100% of Class I shares, which represents 4.30% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
Investment in Emerging Markets Portfolio
The Fund invests all of its assets in Emerging Markets Portfolio (the
Portfolio), a series of World Trust (the Trust), an open-end investment company
that has the same objectives as the Fund. The Portfolio invests primarily in
equity securities of emerging markets companies.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at Oct. 31, 2004 was 99.96%.
- --------------------------------------------------------------------------------
27 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the principal market in which such securities are normally traded. Pursuant
to procedures adopted by the Board of Trustees of the portfolios, AEFC utilizes
Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair NAV. Short-term securities maturing in more than 60
days from the valuation date are valued at the market price or approximate
market value based on current interest rates; those maturing in 60 days or less
are valued at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
- --------------------------------------------------------------------------------
28 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by
$2,861,004 and accumulated net realized loss has been increased by $2,861,004.
The tax character of distributions paid for the years indicated is as follows:
Year ended Oct. 31, 2004 2003
Class A
Distributions paid from:
Ordinary income $1,739,711 $--
Long-term capital gain -- --
Class B
Distributions paid from:
Ordinary income 347,165 --
Long-term capital gain -- --
Class C
Distributions paid from:
Ordinary income 2,977 --
Long-term capital gain -- --
Class I*
Distributions paid from:
Ordinary income -- N/A
Long-term capital gain -- N/A
Class Y
Distributions paid from:
Ordinary income 233,251 --
Long-term capital gain -- --
* Inception date was March 4, 2004.
At Oct. 31, 2004, the components of distributable earnings on a tax basis are
as follows:
Undistributed ordinary income $ 1,106,679
Accumulated long-term gain (loss) $(75,392,313)
Unrealized appreciation (depreciation) $ 36,120,164
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
- --------------------------------------------------------------------------------
29 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
that declines from 0.10% to 0.05% annually as the Fund's assets increase. A
minor portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$513,194 for Class A, $43,590 for Class B and $45 for Class C for the year ended
Oct. 31, 2004.
- --------------------------------------------------------------------------------
30 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
AEFC and its affiliates have agreed to waive certain fees and expenses until
Oct. 31, 2005. Under this agreement net expenses will not exceed 1.99% for Class
A, 2.75% for Class B, 2.75% for Class C, 1.47% for Class I and 1.82% for Class
Y.
During the year ended Oct. 31, 2004, the Fund's transfer agency fees were
reduced by $4,095 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended Oct. 31, 2004
Class A Class B Class C Class I* Class Y
Sold 8,624,819 2,280,081 122,428 1,999,746 521,530
Issued for reinvested distributions 308,432 64,531 518 -- 41,430
Redeemed (7,033,449) (3,919,054) (37,461) (331) (917,351)
---------- ---------- ------- --------- --------
Net increase (decrease) 1,899,802 (1,574,442) 85,485 1,999,415 (354,391)
--------- ---------- ------ --------- --------
* Inception date was March 4, 2004.
Year ended Oct. 31, 2003
Class A Class B Class C Class I Class Y
Sold 10,502,183 1,107,124 439,743 N/A 4,214,232
Issued for reinvested distributions -- -- -- N/A --
Redeemed (15,064,186) (4,225,912) (453,986) N/A (1,112,507)
----------- ---------- -------- ----- ----------
Net increase (decrease) (4,562,003) (3,118,788) (14,243) N/A 3,101,725
---------- ---------- ------- ----- ---------
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The
agreement went into effect Sept. 21, 2004. The Fund must maintain asset coverage
for borrowings of at least 300%. The agreement, which enables the Fund to
participate with other American Express mutual funds, permits borrowings up to
$500 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to either the higher of the Federal Funds Effective
Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days
after such loan is executed. The Fund also pays a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.09% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with Deutsche Bank. The Fund had no
borrowings outstanding during the year ended Oct. 31, 2004.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$75,392,313 at Oct. 31, 2004, that if not offset by capital gains will expire in
2009. It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
31 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $5.46 $4.00 $3.69 $ 4.81 $4.99
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) .03 .02 (.01) -- (.02)
Net gains (losses) (both realized and unrealized) .84 1.44 .32 (1.12) (.16)
----- ----- ----- ------ -----
Total from investment operations .87 1.46 .31 (1.12) (.18)
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income (.06) -- -- -- --
----- ----- ----- ------ -----
Net asset value, end of period $6.27 $5.46 $4.00 $ 3.69 $4.81
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $191 $155 $132 $143 $234
Ratio of expenses to average daily net assets(b) 1.83% 2.02% 2.05% 2.02% 1.83%
Ratio of net investment income (loss) to average daily net assets .41% .39% (.19%) (.02%) (.38%)
Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143%
Total return(c) 16.09% 36.50% 8.40% (23.28%) (3.60%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
32 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $5.19 $3.83 $3.56 $ 4.67 $4.88
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) (.02) (.02) (.04) (.04) (.07)
Net gains (losses) (both realized and unrealized) .81 1.38 .31 (1.07) (.14)
----- ----- ----- ------ -----
Total from investment operations .79 1.36 .27 (1.11) (.21)
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income (.03) -- -- -- --
----- ----- ----- ------ -----
Net asset value, end of period $5.95 $5.19 $3.83 $ 3.56 $4.67
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $73 $72 $65 $73 $120
Ratio of expenses to average daily net assets(b) 2.59% 2.80% 2.83% 2.79% 2.60%
Ratio of net investment income (loss) to average daily net assets (.32%) (.39%) (.95%) (.80%) (1.14%)
Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143%
Total return(c) 15.18% 35.51% 7.58% (23.77%) (4.30%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
33 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000(b)
Net asset value, beginning of period $5.20 $3.84 $3.56 $ 4.68 $5.64
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) (.01) (.02) (.03) (.04) (.01)
Net gains (losses) (both realized and unrealized) .81 1.38 .31 (1.08) (.95)
----- ----- ----- ------ -----
Total from investment operations .80 1.36 .28 (1.12) (.96)
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income (.03) -- -- -- --
----- ----- ----- ------ -----
Net asset value, end of period $5.97 $5.20 $3.84 $ 3.56 $4.68
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $-- $--
Ratio of expenses to average daily net assets(c) 2.60% 2.80% 2.85% 2.79% 2.60%(d)
Ratio of net investment income (loss) to average daily net assets (.34%) (.41%) (1.13%) (.63%) (2.06%)(d)
Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143%
Total return(e) 15.37% 35.42% 7.87% (23.93%) (17.02%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was June 26, 2000.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
34 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004(b)
Net asset value, beginning of period $6.54
-----
Income from investment operations:
Net investment income (loss) .01
Net gains (losses) (both realized and unrealized) (.19)
-----
Total from investment operations (.18)
-----
Net asset value, end of period $6.36
-----
Ratios/supplemental data
Net assets, end of period (in millions) $13
Ratio of expenses to average daily net assets(c) 1.35%(d)
Ratio of net investment income (loss) to average daily net assets .79%(d)
Portfolio turnover rate (excluding short-term securities) 128%
Total return(e) (2.75%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
35 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $5.52 $4.04 $3.72 $ 4.83 $4.99
----- ----- ----- ------ -----
Income from investment operations:
Net investment income (loss) .04 .03 -- .01 (.01)
Net gains (losses) (both realized and unrealized) .86 1.45 .32 (1.12) (.15)
----- ----- ----- ------ -----
Total from investment operations .90 1.48 .32 (1.11) (.16)
----- ----- ----- ------ -----
Less distributions:
Dividends from net investment income (.07) -- -- -- --
----- ----- ----- ------ -----
Net asset value, end of period $6.35 $5.52 $4.04 $ 3.72 $4.83
----- ----- ----- ------ -----
Ratios/supplemental data
Net assets, end of period (in millions) $18 $18 $-- $-- $--
Ratio of expenses to average daily net assets(b) 1.65% 1.87% 1.59% 1.84% 1.66%
Ratio of net investment income (loss) to average daily net assets .61% .54% .19% .21% (.29%)
Portfolio turnover rate (excluding short-term securities) 128% 174% 226% 193% 143%
Total return(c) 16.50% 36.63% 8.60% (22.98%) (3.21%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
36 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP GLOBAL SERIES, INC.
We have audited the accompanying statement of assets and liabilities of AXP
Threadneedle Emerging Markets Fund (formerly AXP Emerging Markets Fund) (a
series of AXP Global Series, Inc.) as of October 31, 2004, the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the years in the two-year period ended October 31, 2004, and the
financial highlights for each of the years in the five-year period ended October
31, 2004. These financial statements and the financial highlights are the
responsibility of fund management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AXP
Threadneedle Emerging Markets Fund as of October 31, 2004, and the results of
its operations, changes in its net assets and the financial highlights for each
of the periods stated in the first paragraph above, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
December 20, 2004
- --------------------------------------------------------------------------------
37 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Federal Income Tax Information
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Threadneedle Emerging Markets Fund
Year ended Oct. 31, 2004
Class A
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 10.85%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 18, 2003 $0.06104
Class B
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 10.85%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 18, 2003 $0.02512
Class C
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 10.85%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 18, 2003 $0.02630
Class Y
Income distributions -- taxable as dividend income:
Qualified Dividend Income for individuals 10.85%
Dividends Received Deduction for corporations 0.00%
Payable date Per share
Dec. 18, 2003 $0.07147
- --------------------------------------------------------------------------------
38 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Oct. 31, 2004.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
39 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Beginning Ending Expenses paid
account value account value during the period
May 1, 2004 Oct. 31, 2004 May 1, 2004-Oct. 31, 2004
Class A
Actual(a) $1,000 $1,062.70 $9.54(b)
Hypothetical (5% return before expenses) $1,000 $1,015.61 $9.32(b)
Class B
Actual(a) $1,000 $1,060.60 $13.47(c)
Hypothetical (5% return before expenses) $1,000 $1,011.79 $13.16(c)
Class C
Actual(a) $1,000 $1,060.40 $13.47(d)
Hypothetical (5% return before expenses) $1,000 $1,011.79 $13.16(d)
Class I
Actual(a) $1,000 $1,067.10 $6.89(e)
Hypothetical (5% return before expenses) $1,000 $1,018.20 $6.72(e)
Class Y
Actual(a) $1,000 $1,065.40 $8.63(f)
Hypothetical (5% return before expenses) $1,000 $1,016.51 $8.42(f)
(a) Based on the actual return for the six months ended Oct. 31, 2004: +6.27%
for Class A, +6.06% for Class B, +6.04% for Class C, +6.71% for Class I and
+6.54% for Class Y.
(b) Expenses are equal to the Fund's Class A annualized expense ratio of 1.86%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(c) Expenses are equal to the Fund's Class B annualized expense ratio of 2.63%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(d) Expenses are equal to the Fund's Class C annualized expense ratio of 2.63%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(e) Expenses are equal to the Fund's Class I annualized expense ratio of 1.34%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(f) Expenses are equal to the Fund's Class Y annualized expense ratio of 1.68%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
- --------------------------------------------------------------------------------
40 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.
The following is a list of the Fund's board members. Each member oversees 14
Master Trust portfolios and 89 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the board.
Independent Board Members
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards). Former Governor of
Age 70 Minnesota
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan
901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc.
Minneapolis, MN 55402 construction) since 1998 (construction materials/chemicals)
Age 67
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Livio D. DeSimone Board member Retired Chair of the Board and Cargill, Incorporated (commodity
30 Seventh Street East since 2001 Chief Executive Officer, merchants and processors), General
Suite 3050 Minnesota Mining and Mills, Inc. (consumer foods),
St. Paul, MN 55101-4901 Manufacturing (3M) Vulcan Materials Company
Age 70 (construction materials/
chemicals), Milliken & Company
(textiles and chemicals), and
Nexia Biotechnologies, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics BostonFed Bancorp, Inc. (holding
901 S. Marquette Ave. since 2004 and Management, Bentley College company) and its subsidiary Boston
Minneapolis, MN 55402 since 2002; former Dean, McCallum Federal Savings Bank
Age 53 Graduate School of Business,
Bentley College from 1999 to 2002
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 69
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Stephen R. Lewis, Jr.* Board member Retired President and Professor Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 of Economics, Carleton College (manufactures irrigation systems)
Minneapolis, MN 55402
Age 65
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
* Interested person of AXP Partners International Aggressive Growth Fund by
reason of being a security holder of Bank of America Corporation, parent
company of Columbia Wanger Asset Management, L.P., one of the fund's
subadvisers.
- --------------------------------------------------------------------------------
41 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
Independent Board Members (continued)
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution, Inc.
901 S. Marquette Ave. since 2004 Management, Inc. (private real (transportation, distribution and
Minneapolis, MN 55402 estate and asset management logistics consultants)
Age 52 company) since 1999
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alan K. Simpson Board member Former three-term United States
1201 Sunshine Ave. since 1997 Senator for Wyoming
Cody, WY 82414
Age 73
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Alison Taunton-Rigby Board member Founder and Chief Executive Hybridon Inc. (biotechnology)
901 S. Marquette Ave. since 2002 Officer, RiboNovix, Inc. since
Minneapolis, MN 55402 2004; President, Forester Biotech
Age 60 since 2000; prior to that,
President and CEO, Aquila
Biopharmaceuticals, Inc.
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Board Member Affiliated with AEFC**
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
William F. Truscott Board member Senior Vice President - Chief
53600 AXP Financial Center since 2001, Investment Officer of AEFC since
Minneapolis, MN 55474 Vice President 2001. Former Chief Investment
Age 44 since 2002 Officer and Managing Director,
Zurich Scudder Investments
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
** Interested person by reason of being an officer, director and/or employee of
AEFC.
- --------------------------------------------------------------------------------
42 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Truscott, who is vice president, the
Fund's other officers are:
Other Officers
Name, address, age Position held Principal occupation during past Other directorships
with Fund and five years
length of service
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Jeffrey P. Fox Treasurer since Vice President - Investment
105 AXP Financial Center 2002 Accounting, AEFC, since 2002;
Minneapolis, MN 55474 Vice President - Finance,
Age 49 American Express Company,
2000-2002; Vice President -
Corporate Controller, AEFC,
1996-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Paula R. Meyer President since Senior Vice President and General
596 AXP Financial Center 2002 Manager - Mutual Funds, AEFC,
Minneapolis, MN 55474 since 2002; Vice President and
Age 50 Managing Director - American
Express Funds, AEFC, 2000-2002;
Vice President, AEFC, 1998-2000
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
Leslie L. Ogg Vice President, President of Board Services
901 S. Marquette Ave. General Counsel, Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- ---------------------------------- ------------------ ----------------------------------- ------------------------------------
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling (800) 862-7919.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
43 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2004 ANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
Item 2. (a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial
officer. A copy of the code of ethics is filed as an exhibit to this
form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of ethics
adopted in 2(a).
Item 3. The Registrant's board of directors has determined that independent
directors Livio D. DeSimone and Anne P. Jones, each qualify as audit
committee financial experts.
Item 4. Principal Accountant Fees and Services
Fund - Related Fees*
(a) Audit Fees. The fees paid for the years ended Oct. 31, to KPMG LLP for
professional services rendered for the audits of the annual financial
statements for AXP Global Series, Inc. were as follows:
2004 - $51,512; 2003 - $48,645
(b) Audit - Related Fees. The fees paid for the years ended Oct. 31, to
KPMG LLP for additional professional services rendered in connection
with the registrant's security count pursuant to Rule 17f-2 and a 2003
private equity security review for AXP Global Series, Inc. were as
follows:
2004 - $354; 2003 - $9,019
(c) Tax Fees. The fees paid for the years ended Oct. 31, to KPMG LLP for
tax compliance related services for AXP Global Series, Inc. were as
follows:
2004 - $12,883; 2003 - $11,975
(d) All Other Fees. The fees paid for the years ended Oct. 31, to KPMG LLP
for additional professional services rendered for AXP Global Series,
Inc. were as follows:
2004 - None; 2003 - None
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by KPMG LLP for
the registrant and to the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
must be pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above
during 2004 and 2003 were pre-approved by the audit committee with the
exception of the 2003 tax fees.
(f) Not applicable.
(g) Non-Audit Fees. The fees paid for the years ended Oct. 31, by the
registrant for non-audit services to KPMG LLP were as follows:
2004 - None; 2003 - None
The fees paid for the years ended Oct. 31, to KPMG LLP by the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant were as follows:
2004 - $126,900; 2003 - $60,890
(h) For the fees disclosed in item (g) above, 100% and 92% of the fees for
services performed during 2004 and 2003, respectively, were
pre-approved by the audit committee. The exception was a 2003 tax
research request by the adviser on defaulted securities for $5,000. The
amounts not pre-approved are compatible with maintaining KPMG LLP's
independence.
* 2003 represents bills paid 11/1/02 - 10/31/03
2004 represents bills paid 11/1/03 - 10/31/04
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 9. Submission of matters to a vote of security holders. Not applicable.
Item 10. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing
date of this Form N-CSR, the registrant's Principal Financial
Officer and Principal Executive Officer have concluded that those
disclosure controls and procedures provide reasonable assurance
that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
Item 11. Exhibits.
(a)(1) Code of ethics as applies to the Registrant's principal
executive officer and principal financial officer, as required to be
disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH.
(a)(2) Separate certification for the Registrant's principal
executive officer and principal financial officer, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a)
under the Investment Company Act of 1940, are attached as
EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) AXP GLOBAL SERIES, INC.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date January 4, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date January 4, 2005
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date January 4, 2005