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
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AXP GLOBAL SERIES, INC.
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(Exact name of registrant as specified in charter)
50606 AXP Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
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Date of fiscal year end: 10/31
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Date of reporting period: 4/30
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AXP(R)
Global Bond
Fund
Semiannual Report
for the Period Ended
April 30, 2005
AXP Global Bond Fund seeks to provide shareholders with high total return
through income and growth of capital.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers with Portfolio Management 6
Investments in Securities 10
Financial Statements (Portfolio) 20
Notes to Financial Statements (Portfolio) 23
Financial Statements (Fund) 28
Notes to Financial Statements (Fund) 31
Fund Expenses Example 40
Approval of Investment Management Services Agreement 42
Proxy Voting 43
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated.
[Dalbar logo]
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
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2 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Fund Snapshot
AT APRIL 30, 2005
PORTFOLIO MANAGER
Portfolio manager Since Years in industry
Nic Pifer, CFA* 5/00 14
* The Fund is managed by a team of portfolio managers led by Nic Pifer.
FUND OBJECTIVE
For investors seeking high total return through income and growth of capital.
Inception dates by class
A: 3/20/89 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95
Ticker symbols by class
A: IGBFX B: IGLOX C: AGBCX I: AGBIX Y: --
Total net assets $587.5 million
Number of holdings 255
Average weighted life* 6.4 years
Effective duration** 4.6 years
Weighted average bond rating AA+
* Average weighted life is the average number of years that each dollar of
unpaid principal due on a security remains outstanding.
** Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the levels
of interest rates from two years out of 30 years). Positive duration means
that as rates rise, the price decreases, and negative duration means that
as rates rise, the price increases.
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X X HIGH
MEDIUM QUALITY
LOW
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
United States 31.3%
Germany 11.4%
Japan 8.6%
Spain 7.8%
France 6.7%
Italy 5.2%
United Kingdom 4.1%
Greece 4.0%
Canada 2.2%
Finland 2.2%
Austria 1.1%
Australia 1.8%
Poland 1.1%
Netherlands 1.1%
New Zealand 1.1%
Norway 1.1%
Supra-National 1.0%
Other* 8.2%
* Includes Brazil, Denmark, Luxembourg, Malaysia, Mexico, South Africa, South
Korea, Sweden and cash & short-term securities.
CREDIT QUALITY SUMMARY
Percentage of bond portfolio assets
AAA bonds 66.0%
AA bonds 20.1
A bonds 9.5
BBB bonds 2.9
Non-investment grade bonds 1.5
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating is
determined through an internal analysis, if appropriate.
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
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3 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2005
+2.92% +3.41% +3.28%
+2.92% = AXP Global Bond Fund Class A (excluding sales charge)
+3.41% = Lehman Brothers Global Aggregate Index(1) (unmanaged)
+3.28% = Lipper Global Income Funds Index(2)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds.
(1) The Lehman Brothers Global Aggregate Index, an unmanaged market
capitalization weighted benchmark, tracks the performance of investment
grade fixed income securities denominated in 13 currencies. The index
reflects the reinvestment of all income and changes in market prices, but
excludes brokerage commissions or other fees.
(2) The Lipper Global Income Funds Index includes the 30 largest global income
funds tracked by Lipper Inc. The index's returns include net reinvested
dividends.
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
SEC YIELDS
At March 31, 2005 by class
A: 2.25% B: 1.59% C: 1.58% I: 2.83% Y: 2.54%
At April 30, 2005 by class
A: 2.08% B: 1.44% C: 1.43% I: 2.65% Y: 2.37%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public offering
price (POP) per share on the last day of the period, and converting the results
to yearly figures. See Average Annual Total Returns on page 5 for additional
performance information.
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4 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Performance Summary
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (3/20/89) (3/20/95) (6/26/00) (3/4/04) (3/20/95)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at April 30, 2005
6 months* +2.92% -1.97% +2.52% -1.44% +2.66% +1.67% +3.30% +3.00%
1 year +10.57% +5.31% +9.70% +5.70% +9.89% +9.89% +11.24% +10.90%
3 years +11.52% +9.72% +10.70% +9.88% +10.72% +10.72% N/A +11.83%
5 years +8.57% +7.52% +7.75% +7.60% N/A N/A N/A +8.79%
10 years +6.21% +5.69% +5.40% +5.40% N/A N/A N/A +6.22%
Since inception +8.06% +7.73% +5.99% +5.99% +7.68% +7.68% +8.22% +6.81%
at March 31, 2005
6 months* +4.71% -0.26% +4.31% +0.31% +4.31% +3.31% +5.11% +4.79%
1 year +5.47% +0.46% +4.79% +0.79% +4.80% +4.80% +6.11% +5.79%
3 years +11.87% +10.07% +11.01% +10.20% +10.99% +10.99% N/A +12.13%
5 years +7.66% +6.61% +6.86% +6.70% N/A N/A N/A +7.88%
10 years +6.40% +5.89% +5.61% +5.61% N/A N/A N/A +6.42%
Since inception +8.03% +7.71% +5.95% +5.95% +7.59% +7.59% +7.86% +6.76%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
eligible investors only, currently limited to AXP Portfolio Builder Series
funds, six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
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5 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Q: How did AXP Global Bond Fund perform for the first half of the fiscal year?
A: AXP Global Bond Fund's Class A shares gained 2.92% (excluding sales charge)
for the six months ended April 30, 2005. This lagged the Fund's benchmark,
the Lehman Brothers Global Aggregate Index (Lehman Global Index), which
posted a total return of 3.41%. The Fund also underperformed the Lipper
Global Income Funds Index, representing the Fund's peer group, which posted
a 3.28% total return over the same period.
Q: What factors most significantly affected performance?
A: The Fund tracked the Lehman Global Index closely through the first four
months of the semiannual period, but lagged thereafter, largely due to
unfavorable movements in currencies. The Fund held a larger position in
the euro and a smaller position in the Japanese yen throughout the period.
This positioning hurt the Fund's relative performance in April when the
yen appreciated sharply vs. the euro on market speculation of an imminent
revaluation of the Chinese currency. The U.S. dollar weakened
approximately 1.5% vs. the euro, 4.1% vs. the British pound and 1.2% vs.
the yen. The U.S. dollar strengthened 2.9% vs. the Canadian dollar over
the six months. On balance, then, the U.S. dollar's movements against the
major currencies provided a boost to the Fund's returns in absolute terms
because as the value of the U.S. dollar decreases, the dollar value of
foreign investments typically increases and vice versa.
We maintained the Fund's duration, a principal measure of interest rate
risk, approximately half a year shorter than that of the Lehman Global Index
throughout the semiannual period. This stance was based on our view that the
U.S. economy in particular was growing at an above-trend pace and, thus,
that the Federal Reserve's Federal Open Market Committee (FOMC) was likely
to continue raising the targeted federal funds rate to more historically
normal levels. Our view on U.S. monetary policy proved correct, with the
FOMC raising the targeted federal funds rate by 100 basis points (1%) during
the period, but U.S. yields never rose as much as we expected. In fact, they
declined over the period at the very long end of the yield curve. Yields in
other major bond markets generally declined over the semiannual period,
reflecting lackluster economic growth in the Eurozone and Japan in
particular. The Fund was positioned appropriately for the decline in
European yields, but not for the decline in Japanese yields.
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6 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> The U.S. dollar's movements against the major
currencies provided a boost to the Fund's returns in absolute (end callout
quote)
The Fund's positioning on sector exposures had a fairly neutral impact on
relative results over the period. Credit sectors performed well early in the
period as the difference in yields over government bonds declined to
historically low levels, but suffered later in the period following General
Motors' negative earnings news.
Q: What changes did you make to the Fund and how is it currently positioned?
A: We decreased the Fund's exposure to the euro toward the end of 2004, while
maintaining a significant position in the currency, and we increased the
Fund's exposure to the U.S. dollar, while maintaining a moderate position.
As the U.S. dollar weakened substantially during these months, the scale of
decline led us to believe that it may have become oversold against some of
the other major currencies, including the euro, despite the ever-burgeoning
U.S. current account deficit. We viewed this as an opportunity to reallocate
a small portion of the portfolio's net assets. Indeed the timing of this
strategy proved prudent, as the euro subsequently corrected lower to
attractive levels and the U.S. dollar strengthened during the first calendar
quarter of 2005. We then added back some exposure to the euro and somewhat
reduced the Fund's position in the U.S. dollar.
Within sectors, we reduced the Fund's exposure to corporate bonds overall,
both investment grade and high-yield. We also sought to upgrade the quality
of those corporate bonds that remained in the portfolio, especially in
Europe where differences in quality became so compressed that we were able
to trade into higher quality securities without giving up much yield in the
Fund. Elsewhere, we slightly increased the Fund's exposure to
mortgage-backed securities, bringing the position closer to the Lehman
Global Index. We maintained the Fund's modest exposure to emerging markets,
as we felt that valuations remained too expensive.
We made no other significant changes to the portfolio during the period. We
maintained the Fund's duration
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7 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> As for the Fund's currency positioning, we believe the
view ahead for the U.S. dollar is less certain than it has been in recent
years. (end callout quote)
shorter than that of the Lehman Global Index. From a country perspective,
we favored European bonds over U.S. and Japanese bonds.
Q: How do you intend to manage the Fund in the coming months?
A: We intend to maintain a somewhat defensive position in the Fund with respect
to interest rate risk exposure. Specifically, we expect to keep the Fund's
duration shorter than that of the Lehman Global Index given our view
regarding the pace of U.S. economic growth and the tightening path of the
Federal Reserve Board. However, if U.S. yields do rise to the higher levels
we expect, or if the European bond market simply becomes too expensive, then
we may take the opportunity to shift a percentage of asset allocation from
European bonds to U.S. fixed income securities. One of the key questions now
is whether recent concerns over a global economic soft patch are truly
justified or whether Europe, for example, can pull out of its sluggish
growth rut. Given recent economic news from the Eurozone, it currently
appears that the European Central Bank may wait before beginning to raise
interest rates until the end of 2005. We believe the Bank of Japan is still
approximately a year away from changing its interest rates from their
current 0% level.
As for the Fund's currency positioning, we believe the view ahead for the
U.S. dollar is less certain than it has been in recent years. We expect the
U.S. dollar to remain generally weak in the period ahead, but believe that
rising U.S. short-term rates and the dollar's current low valuation should
begin to put something of a floor under the U.S. currency. The tug-of-war
between the U.S. dollar's structural negatives (e.g., a large U.S. current
account deficit) on the one hand, and its cyclical positives (e.g., better
relative economic growth and rising short-term rates) and valuation on the
other is more evenly balanced than it was in 2004. We still expect currency
markets to remain volatile, however, providing opportunities to make
tactical adjustments to our positions as market conditions permit. From a
country perspective, we continue to favor
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8 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Questions & Answers
European bonds over U.S. or Japanese bonds. Within sectors, we intend to
maintain modest positions in investment grade corporate bonds and emerging
market bonds and a fairly neutral position in structured assets for the near
term.
As always, we constantly re-evaluate the Fund's duration, sector, country,
yield curve and currency positioning in an effort to seek an attractive
trade-off between risk and potential return. Our sector teams remain focused
on careful individual security selection as we seek opportunities to
capitalize on attractively valued bonds.
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9 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Investments in Securities
World Income Portfolio
April 30, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Bonds (93.9%)(c)
Issuer Coupon Principal Value(a)
rate amount
Australia (1.8%)
Burns Philp Capital Property
(U.S. Dollar) Sr Sub Nts
02-15-11 10.75% $100,000 $110,500
Commonwealth Bank of Australia
(European Monetary Unit)
11-12-09 3.38 570,000 748,001
New South Wales Treasury
(Australian Dollar)
03-01-08 8.00 8,000,000 6,647,941
Queensland Treasury
(Australian Dollar)
06-14-05 6.50 3,000,000 2,344,471
Telstra
(U.S. Dollar)
04-01-12 6.38 500,000 551,898
Total 10,402,811
Austria (1.1%)
Republic of Austria
(European Monetary Unit)
01-15-10 5.50 4,500,000 6,475,981
Brazil (0.2%)
Federal Republic of Brazil
(U.S. Dollar)
04-15-14 8.00 1,129,378 1,123,505
Canada (2.2%)
Canada Housing Trust #1
(Canadian Dollar)
06-15-06 5.53 3,220,000 2,634,150
Canadian Pacific Railway
(Canadian Dollar)
06-15-10 4.90 380,000(d) 311,880
Cascades
(U.S. Dollar) Sr Nts
02-15-13 7.25 55,000 54,175
Corus Entertainment
(U.S. Dollar) Sr Sub Nts
03-01-12 8.75 40,000 42,400
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Canada (cont.)
Domtar
(U.S. Dollar)
12-01-13 5.38% $920,000 $838,433
Norampac
(U.S. Dollar) Sr Nts
06-01-13 6.75 100,000 99,000
Province of British Columbia
(Canadian Dollar)
08-23-10 6.38 6,400,000 5,700,482
Province of Ontario
(Canadian Dollar)
03-08-06 5.90 3,300,000 2,691,830
Shaw Communications
(U.S. Dollar) Sr Nts
04-06-11 7.25 185,000 196,100
Sun Media
(U.S. Dollar)
02-15-13 7.63 200,000 204,000
Utilicorp Canada Finance
(U.S. Dollar)
06-15-11 7.75 140,000 140,000
Videotron Ltee
(U.S. Dollar)
01-15-14 6.88 95,000 93,575
Total 13,006,025
Denmark (0.8%)
Realkredit Danmark
(Danish Krone)
01-01-08 4.00 25,200,000 4,521,625
Finland (2.2%)
Republic of Finland
(European Monetary Unit)
07-04-07 5.00 9,400,000 12,781,430
France (6.6%)
Dexia Municipal Agency
(European Monetary Unit)
09-03-07 7.45 510,000 682,987
See accompanying notes to investments in securities.
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10 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
France (cont.)
France Telecom
(U.S. Dollar)
03-01-06 7.45% $700,000(e) $720,256
Govt of France
(European Monetary Unit)
04-25-12 5.00 9,375,000 13,489,819
04-25-13 4.00 9,460,000 12,814,251
10-25-16 5.00 7,580,000 11,095,399
Total 38,802,712
Germany (11.2%)
Allgemeine Hypothekenbank Rheinboden
(European Monetary Unit)
09-02-09 5.00 2,030,000(d) 2,837,568
Bayerische Landesbank
(Japanese Yen) Sr Nts
04-22-13 1.40 301,000,000 2,958,209
Bundesrepublik Deutschland
(European Monetary Unit)
07-04-13 3.75 13,240,000 17,651,669
07-04-27 6.50 7,470,000 13,270,563
07-04-28 4.75 1,970,000 2,846,082
07-04-34 4.75 4,640,000 6,774,849
Bundesschatzanweisungen
(European Monetary Unit)
12-16-05 2.75 7,570,000 9,777,546
DEPFA Deutsche Pfandbriefbank
(European Monetary Unit)
01-15-10 5.50 2,200,000 3,157,155
Deutsche Bank
(European Monetary Unit)
07-28-09 4.25 500,000 681,238
Kabel Deutschland
(U.S. Dollar)
07-01-14 10.63 40,000(d) 42,200
Landesbank Berlin Girozentrale
(European Monetary Unit)
04-30-07 5.00 2,130,000 2,877,444
Rheinische Hypothekenbank
(European Monetary Unit)
07-05-10 5.75 2,200,000 3,206,919
Total 66,081,442
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Greece (3.9%)
Hellenic Republic
(European Monetary Unit)
06-21-06 2.75% 7,600,000 $9,831,804
04-19-07 4.65 4,780,000 6,426,906
10-22-22 5.90 4,200,000 6,664,898
Total 22,923,608
Italy (5.1%)
Buoni Poliennali Del Tesoro
(European Monetary Unit)
03-01-07 4.50 8,800,000 11,777,621
10-15-07 5.00 8,700,000 11,902,227
11-01-26 7.25 3,486,283 6,561,640
Total 30,241,488
Japan (8.5%)
Development Bank of Japan
(Japanese Yen)
06-20-12 1.40 650,000,000 6,451,633
Govt of Japan
(Japanese Yen)
12-21-09 1.70 2,606,000,000 26,348,887
03-22-10 1.70 320,000,000 3,238,816
06-20-12 1.40 700,000,000 6,952,835
12-20-12 1.00 396,000,000 3,807,481
12-20-14 1.30 247,000,000 2,373,009
12-20-34 2.40 61,000,000 597,863
Total 49,770,524
Luxembourg (0.5%)
Telecom Italia Capital
(U.S. Dollar)
09-30-34 6.00 2,690,000(d) 2,664,504
Malaysia (0.3%)
Petronas Capital
(U.S. Dollar)
05-22-12 7.00 1,500,000(d) 1,685,537
Mexico (0.6%)
Govt of Mexico
(Mexican Peso)
12-24-09 9.00 16,000,000 1,381,729
Pemex Project Funding Master Trust
(U.S. Dollar)
12-15-14 7.38 765,000 831,938
See accompanying notes to investments in securities.
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11 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Mexico (cont.)
United Mexican States
(Japanese Yen)
06-06-06 6.75% 62,000,000 $632,699
(U.S. Dollar)
09-27-34 6.75 727,000 724,092
Total 3,570,458
Netherlands (1.0%)
Bank Nederlandse Gemeenten
(British Pound)
08-06-07 7.38 1,100,000 2,211,177
Govt of Netherlands
(European Monetary Unit)
07-15-12 5.00 2,680,000 3,851,334
Total 6,062,511
New Zealand (1.1%)
Govt of New Zealand
(New Zealand Dollar)
11-15-06 8.00 8,800,000 6,596,961
Norway (1.1%)
Govt of Norway
(Norwegian Krone)
05-16-11 6.00 36,800,000 6,633,014
Poland (1.1%)
Republic of Poland
(Polish Zloty)
02-12-06 8.50 11,600,000 3,560,586
11-24-09 6.00 9,000,000 2,751,450
Total 6,312,036
South Africa (0.3%)
Republic of South Africa
(South African Rand)
08-31-10 13.00 9,837,500 1,970,071
South Korea (0.1%)
Korea Development Bank
(Japanese Yen)
06-25-08 0.98 70,000,000 677,411
Spain (7.7%)
Caja de Ahorros y Monte de Piedad de Madrid
(European Monetary Unit)
03-25-11 3.50 2,500,000 3,289,323
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Spain (cont.)
Govt of Spain
(European Monetary Unit)
10-31-07 4.25% 8,950,000 $12,055,268
07-30-09 5.15 12,000,000 16,958,576
01-31-10 4.00 9,400,000 12,758,207
Total 45,061,374
Supra-National (1.0%)
European Investment Bank
(British Pound)
12-07-11 5.50 3,000,000 5,947,930
Sweden (0.6%)
Govt of Sweden
(Swedish Krona)
04-20-06 3.50 19,000,000 2,699,423
08-15-07 8.00 4,800,000 757,180
Total 3,456,603
United Kingdom (4.1%)
BT Group
(U.S. Dollar)
12-15-10 8.38 700,000 821,219
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-07 9.50 8,750,000(b,l,h) --
HBOS Treasury Services
(European Monetary Unit)
02-12-09 3.50 2,000,000 2,637,616
United Kingdom Treasury
(British Pound)
03-07-12 5.00 5,910,000 11,591,064
09-07-14 5.00 4,455,000 8,803,696
Total 23,853,595
United States (30.8%)
Aesop Funding II LLC
(U.S. Dollar) Series 2002-1A Cl A1 (AMBAC)
10-20-06 3.85 500,000(d,n) 500,725
Airgas
(U.S. Dollar)
10-01-11 9.13 195,000 210,600
Allied Waste North America
(U.S. Dollar)
04-15-11 6.38 25,000 22,750
(U.S. Dollar) Series B
04-01-08 8.88 50,000 51,375
(U.S. Dollar) Sr Nts
03-15-15 7.25 30,000(d) 27,300
See accompanying notes to investments in securities.
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12 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
AmeriCredit Automobile Receivables Trust
(U.S. Dollar) Series 2004-DF Cl A3 (FSA)
07-06-09 2.98% $800,000(n) $783,125
ANR Pipeline
(U.S. Dollar)
03-15-10 8.88 45,000 48,814
ARG Funding
(U.S. Dollar) Series 2005-1A Cl A3 (MBIA)
04-20-10 4.29 1,250,000(d,n) 1,242,041
ASIF Global Financing XIX
(U.S. Dollar)
01-17-13 4.90 5,300,000(d) 5,280,284
Ball
(U.S. Dollar)
12-15-12 6.88 115,000 118,450
Banc of America Commercial Mtge
(U.S. Dollar)
Series 2004-5 Cl A4
11-10-41 4.94 750,000(f) 755,760
Series 2005-1 Cl A4
11-10-42 4.88 750,000(f) 766,188
BCP Crystal US Holdings
(U.S. Dollar) Sr Sub Nts
06-15-14 9.63 26,000 28,665
Bear Stearns Commercial Mtge Securities
(U.S. Dollar)
Series 2003-T10 Cl A1
03-13-40 4.00 626,376(f) 612,458
Series 2004-PWR6 Cl A6
11-11-41 4.83 1,075,000(f) 1,072,775
Series 2004-T16 Cl A3
02-13-46 4.03 600,000(f) 590,846
Boyd Gaming
(U.S. Dollar) Sr Sub Nts
12-15-12 7.75 35,000 36,750
04-15-14 6.75 40,000 39,400
Caesars Entertainment
(U.S. Dollar) Sr Nts
04-15-13 7.00 575,000 622,437
California State Teachers' Retirement System Trust
(U.S. Dollar) Series 2002-C6 Cl A3
11-20-14 4.46 478,040(d,f) 478,720
Cardinal Health
(U.S. Dollar)
06-15-15 4.00 1,700,000 1,547,296
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Chesapeake Energy
(U.S. Dollar) Sr Nts
06-15-14 7.50% $30,000 $31,425
08-15-14 7.00 65,000 66,625
01-15-16 6.88 20,000 19,900
Citigroup
(European Monetary Unit) Sr Nts
05-21-10 3.88 2,600,000 3,479,043
Colorado Interstate Gas
(U.S. Dollar) Sr Nts
03-15-15 5.95 10,000(d) 9,650
Comcast
(U.S. Dollar)
03-15-11 5.50 2,150,000 2,226,519
Comcast Cable Communications Holdings
(U.S. Dollar)
03-15-13 8.38 106,000 128,685
Commercial Mtge Pass-Through Ctfs
(U.S. Dollar)
Series 2004-LB3A Cl A3
07-10-37 5.09 1,100,000(f) 1,126,244
Series 2004-LB3A Cl A4
07-10-37 5.23 550,000(f) 567,085
Community Health Systems
(U.S. Dollar) Sr Sub Nts
12-15-12 6.50 40,000 39,200
Compass Minerals Group
(U.S. Dollar)
08-15-11 10.00 100,000 109,000
Cott Beverages
(U.S. Dollar)
12-15-11 8.00 100,000 105,000
Countrywide Alternative Loan Trust
(U.S. Dollar) Series 2005-6CB Cl 1A1
04-25-35 7.50 1,451,260 1,527,802
CS First Boston Mtge Securities
(U.S. Dollar) Series 2004-C1 Cl A2
01-15-37 3.52 250,000(f) 243,630
CSC Holdings
(U.S. Dollar) Sr Nts
12-15-07 7.88 150,000 153,375
DaimlerChrysler NA Holding
(European Monetary Unit)
01-16-07 5.63 670,000 898,664
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
13 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
DaVita
(U.S. Dollar) Sr Nts
03-15-13 6.63% $40,000(d) $39,600
Del Monte
(U.S. Dollar) Sr Sub Nts
12-15-12 8.63 30,000 31,950
Dex Media West LLC/Finance
(U.S. Dollar) Sr Nts Series B
08-15-10 8.50 55,000 58,988
Echostar DBS
(U.S. Dollar)
10-01-14 6.63 65,000(d) 63,050
(U.S. Dollar) Sr Nts
10-01-08 5.75 60,000 59,025
El Paso Natural Gas
(U.S. Dollar) Sr Nts Series A
08-01-10 7.63 185,000 193,292
Emmis Operating
(U.S. Dollar)
05-15-12 6.88 70,000 69,125
Encore Acquisition
(U.S. Dollar) Sr Sub Nts
04-15-14 6.25 80,000 77,200
ERAC USA Finance
(U.S. Dollar)
05-01-15 5.60 1,700,000(d) 1,720,647
Federal Home Loan Mtge Corp
(European Monetary Unit)
02-15-07 4.63 3,730,000 4,990,392
(U.S. Dollar)
01-15-12 5.75 6,435,000 6,931,351
09-01-17 6.50 511,609(f) 532,856
10-01-18 5.00 910,547(f) 919,051
04-01-33 6.00 2,203,742(f) 2,286,028
08-01-33 6.50 342,928(f) 356,489
11-01-33 5.00 1,475,017(f) 1,465,290
Collateralized Mtge Obligation
(U.S. Dollar)
04-15-15 4.50 3,000,000(f) 3,014,700
Federal Natl Mtge Assn
(U.S. Dollar)
01-01-09 5.74 1,189,591(f) 1,241,735
11-01-10 4.47 365,190(f) 364,895
02-01-13 4.87 1,336,115(f) 1,353,371
09-01-13 5.28 874,632(f) 908,607
03-01-17 5.50 1,137,857(f) 1,167,847
03-01-17 6.00 300,151(f) 311,201
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Federal Natl Mtge Assn (cont.)
(U.S. Dollar)
04-01-17 6.50% $1,138,525(f) $1,191,337
06-01-17 6.00 822,233(f) 852,505
07-01-17 6.00 429,774(f) 446,607
08-01-18 4.50 2,031,076(f) 2,014,652
11-01-18 5.50 1,944,399(f) 1,993,399
12-01-18 5.00 3,999,077(f) 4,033,848
07-01-23 5.00 1,203,489(f) 1,202,392
12-01-31 6.50 429,562(f) 450,445
05-01-32 7.00 1,340,987(f) 1,416,880
05-01-32 7.50 720,543(f) 771,362
06-01-32 7.00 639,546(f) 679,333
08-01-32 6.50 3,762,413(f) 3,930,360
09-01-32 6.50 411,678(f) 430,042
11-01-32 7.50 1,026,344(f) 1,098,731
03-01-33 5.50 2,327,790(f) 2,355,227
03-01-33 6.00 2,784,831(f) 2,862,680
04-01-33 6.00 1,503,927(f) 1,557,653
05-01-33 6.00 702,345(f) 726,881
06-01-33 5.50 3,896,286(f) 3,947,943
09-01-33 5.50 673,113(f) 680,347
11-01-33 6.50 810,904(f) 845,800
Ford Motor
(U.S. Dollar)
10-01-28 6.63 485,000 370,598
GE Capital Commercial Mtge
(U.S. Dollar) Series 2001-3 Cl A1
06-10-38 5.56 1,605,461(f) 1,656,869
General Electric Capital
(European Monetary Unit)
06-20-07 5.13 500,000 678,351
(New Zealand Dollar)
02-04-10 6.63 3,530,000 2,574,212
Genworth Financial
(Japanese Yen)
06-20-11 1.60 130,000,000 1,260,242
Georgia Gulf
(U.S. Dollar) Sr Nts
12-15-13 7.13 55,000 56,375
Georgia-Pacific
(U.S. Dollar) Sr Nts
07-15-08 7.38 140,000 146,300
GMAC
(U.S. Dollar)
03-02-11 7.25 1,300,000 1,168,050
09-15-11 6.88 810,000 709,656
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
GMAC Commercial Mtge Securities
(U.S. Dollar) Series 2004-C3 Cl A4
12-10-41 4.55% $1,050,000(f) $1,042,729
Series 2004-C3 Cl A5
12-10-41 4.86 1,100,000(f) 1,098,680
Govt Natl Mtge Assn
(U.S. Dollar)
10-15-33 5.50 1,579,596(f) 1,608,857
Collateralized Mtge Obligation
Interest Only
(U.S. Dollar)
01-20-32 0.00 2,015,063(f,i) 236,836
Grant Prideco Escrow
(U.S. Dollar)
12-15-09 9.00 100,000 109,000
Greenwich Capital Commercial Funding
(U.S. Dollar)
Series 2004-GG1 Cl A4
06-10-36 4.76 1,100,000(f) 1,110,123
Series 2005-GG3 Cl A1
08-10-42 3.92 727,480(f) 723,646
Hilton Hotels
(U.S. Dollar)
12-01-12 7.63 200,000 229,666
Honda Auto Receivables Owner Trust
(U.S. Dollar) Series 2005-1 Cl A3
10-21-08 3.53 700,000 695,562
ING Security Life Institutional Funding
(U.S. Dollar)
01-15-10 4.25 1,440,000(d) 1,430,752
Intl Paper
(European Monetary Unit)
08-11-06 5.38 505,000 672,285
INVISTA
(U.S. Dollar)
05-01-12 9.25 50,000(d) 53,500
IPALCO Enterprises
(U.S. Dollar)
11-14-08 8.38 250,000 268,750
Joy Global
(U.S. Dollar) Series B
03-15-12 8.75 60,000 66,150
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
JPMorgan Chase Commercial Mtge Securities
(U.S. Dollar) Series 2004-CBX Cl A5
01-12-37 4.65% $900,000(f) $896,630
Series 2005-CB11 Cl A3
08-12-37 5.20 1,000,000(f) 1,029,067
KB Home
(U.S. Dollar)
01-15-15 5.88 155,000 152,093
Key Energy Services
(U.S. Dollar) Series C
03-01-08 8.38 130,000 134,550
L-3 Communications
(U.S. Dollar)
06-15-12 7.63 250,000 262,500
Lamar Media
(U.S. Dollar)
01-01-13 7.25 155,000 159,650
LB-UBS Commercial Mtge Trust
(U.S. Dollar)
Series 2002-C8 Cl A3
11-15-27 4.83 1,000,000(f) 1,009,590
Series 2004-C2 Cl A3
03-15-29 3.97 750,000(f) 720,120
Series 2004-C4 Cl A3
06-15-29 5.16 700,000(e,f) 720,962
Series 2004-C6 Cl A4
08-15-29 4.58 275,000(f) 274,822
Series 2004-C7 Cl A2
10-15-29 3.99 1,000,000(f) 980,660
Series 2004-C8 Cl A2
12-15-29 4.20 1,300,000(f) 1,287,013
Series 2004-C8 Cl A6
12-15-29 4.80 1,500,000(f) 1,496,468
Series 2005-C1 Cl A4
02-15-30 4.74 1,100,000(f) 1,096,491
Long Beach Auto Receivables Trust
(U.S. Dollar) Series 2004-C Cl A3 (FSA)
09-15-09 3.40 750,000(n) 743,850
MacDermid
(U.S. Dollar)
07-15-11 9.13 35,000 37,538
Meritage Homes
(U.S. Dollar) Sr Nts
03-15-15 6.25 35,000(d) 32,200
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
15 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Metropolitan Life Global Funding
(U.S. Dollar) Sr Nts
05-05-10 4.50% $780,000(d,g) $781,170
Metris Master Trust
(U.S. Dollar) Series 2004-2 Cl M
10-20-10 3.24 450,000(e) 450,275
MGM MIRAGE
(U.S. Dollar)
10-01-09 6.00 45,000 44,438
Sr Nts
02-27-14 5.88 50,000 46,875
Mohegan Tribal Gaming Authority
(U.S. Dollar) Sr Nts
02-15-13 6.13 45,000(d) 44,325
(U.S. Dollar) Sr Sub Nts
04-01-12 8.00 75,000 79,688
Moog
(U.S. Dollar) Sr Sub Nts
01-15-15 6.25 15,000 14,850
Morgan Stanley Capital I
(U.S. Dollar) Series 2004-HQ4 Cl A5
04-14-40 4.59 750,000(f) 746,100
Morgan Stanley Group
(European Monetary Unit)
03-16-06 5.25 2,400,000 3,165,106
NeighborCare
(U.S. Dollar) Sr Sub Nts
11-15-13 6.88 25,000 26,125
Newfield Exploration
(U.S. Dollar) Sr Sub Nts
08-15-12 8.38 340,000 367,200
Nextel Communications
(U.S. Dollar) Sr Nts
10-31-13 6.88 185,000 194,713
Nissan Auto Receivables Owner Trust
(U.S. Dollar)
Series 2003-A Cl A4
07-15-08 2.61 500,000 492,903
Series 2005-A Cl A3
10-15-08 3.54 1,100,000 1,091,992
Nissan Motor Acceptance
(U.S. Dollar)
03-08-10 4.63 55,000(d) 54,589
Norcraft Companies LP/Finance
(U.S. Dollar) Sr Sub Nts
11-01-11 9.00 40,000 40,000
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Northwest Pipeline
(U.S. Dollar)
03-01-10 8.13% $10,000 $10,763
NorthWestern Energy
(U.S. Dollar)
11-01-14 5.88 15,000(d) 15,242
Overseas Private Investment
(U.S. Dollar) U.S. Govt Guaranty Series 1996A
09-15-08 6.99 2,916,666 3,055,237
Owens-Illinois Glass Container
(U.S. Dollar)
05-15-11 7.75 100,000 105,500
Peabody Energy
(U.S. Dollar) Series B
03-15-13 6.88 175,000 181,125
Plains Exploration & Production
(U.S. Dollar) Sr Nts
06-15-14 7.13 60,000 62,400
Potomac Edison
(U.S. Dollar) 1st Mtge
11-15-14 5.35 105,000(d) 103,950
Pricoa Global Funding I
(U.S. Dollar)
01-15-10 4.20 6,940,000(d) 6,838,191
Pride Intl
(U.S. Dollar) Sr Nts
07-15-14 7.38 30,000 31,500
Qwest
(U.S. Dollar)
03-15-12 9.13 85,000(d) 90,100
Schuler Homes
(U.S. Dollar)
07-15-09 9.38 85,000 88,963
Silgan Holdings
(U.S. Dollar) Sr Sub Nts
11-15-13 6.75 100,000 99,500
Southern Star Central
(U.S. Dollar)
08-01-10 8.50 50,000 53,500
Sprint Capital
(U.S. Dollar)
11-15-28 6.88 1,500,000 1,672,623
Starwood Hotels & Resorts
(U.S. Dollar)
11-15-15 7.38 140,000 150,150
Station Casinos
(U.S. Dollar) Sr Nts
04-01-12 6.00 100,000 99,250
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
16 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Susquehanna Media
(U.S. Dollar) Sr Sub Nts
04-15-13 7.38% $140,000 $144,900
Texas Genco LLC/Financing
(U.S. Dollar) Sr Nts
12-15-14 6.88 37,000(d) 36,260
Toyota Motor Credit
(Japanese Yen)
06-09-08 0.75 297,000,000 2,878,207
Transcontinental Gas Pipe Line
(U.S. Dollar) Series B
08-15-11 7.00 175,000 184,188
Triad Hospitals
(U.S. Dollar) Sr Nts
05-15-12 7.00 140,000 143,500
U.S. Treasury (U.S. Dollar)
11-30-06 2.88 1,160,000 1,147,765
01-31-07 3.13 1,015,000 1,006,595
04-15-10 4.00 770,000 773,549
02-15-15 4.00 9,130,000(j) 8,981,994
08-15-23 6.25 6,875,000(m) 8,262,354
02-15-26 6.00 4,100,000(m) 4,851,292
United Auto Group
(U.S. Dollar)
03-15-12 9.63 35,000 36,400
Verizon Pennsylvania
(U.S. Dollar) Series A
11-15-11 5.65 7,400,000(m) 7,682,754
Wachovia Bank Commercial Mtge Trust
(U.S. Dollar)
Series 2003-C8 Cl A2
11-15-35 3.89 1,250,000(f) 1,231,108
Series 2005-C16 Cl A3
10-15-41 4.62 1,250,000(f) 1,245,841
Washington Mutual Bank FA
(U.S. Dollar) Sub Nts
08-15-14 5.65 1,590,000 1,652,980
WCI Communities
(U.S. Dollar)
03-15-15 6.63 50,000(d) 45,500
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
United States (cont.)
Wells Fargo Bank NA
(U.S. Dollar) Sub Nts
02-01-11 6.45% $2,855,000 $3,122,565
William Carter
(U.S. Dollar) Series B
08-15-11 10.88 35,000 38,500
World Omni Auto Receivables Trust
(U.S. Dollar) Series 2005-A Cl A3
06-12-09 3.54 1,500,000 1,490,745
Total 181,470,453
Total bonds
(Cost: $509,854,797) $552,093,609
Short-term securities (4.8%)(k)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies (2.4%)
Federal Home Loan Mtge Corp Disc Nt
06-13-05 2.79% $5,000,000 $4,982,601
Federal Natl Mtge Assn Disc Nts
05-11-05 2.60 3,000,000 2,997,405
06-13-05 2.79 5,900,000 5,879,470
Total 13,859,476
Commercial paper (2.4%)
General Electric Capital
05-02-05 2.95 9,100,000 9,097,763
Morgan Stanley & Co
05-11-05 2.86 5,000,000 4,995,233
Total 14,092,996
Total short-term securities
(Cost: $27,953,547) $27,952,472
Total investments in securities
(Cost: $537,808,344)(o) $580,046,081
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
17 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Fund's Board of Directors. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
April 30, 2005, the value of these securities amounted to $26,429,485 or
4.5% of net assets.
(e) Interest rate varies either based on a predetermined schedule or to
reflect current market conditions; rate shown is the effective rate on
April 30, 2005.
(f) Mortgage-backed securities represent direct or indirect participations
in, or are secured by and payable from, mortgage loans secured by real
property, and include single- and multi-class pass-through securities
and collateralized mortgage obligations. These securities may be issued
or guaranteed by U.S. government agencies or instrumentalities, or by
private issuers, generally originators and investors in mortgage loans,
including savings associations, mortgage bankers, commercial banks,
investment bankers and special purpose entities. The maturity dates
shown represent the original maturity of the underlying obligation.
Actual maturity may vary based upon prepayment activity on these
obligations. Unless otherwise noted, the coupon rates presented are
fixed rates.
(g) At April 30, 2005, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$777,754.
(h) Negligible market value.
(i) Interest only represents securities that entitle holders to receive only
interest payments on the underlying mortgages. The yield to maturity of
an interest only is extremely sensitive to the rate of principal
payments on the underlying mortgage assets. A rapid (slow) rate of
principal repayments may have an adverse (positive) effect on yield to
maturity. The principal amount shown is the notional amount of the
underlying mortgages. Interest rate disclosed represents yield based
upon the estimated timing and amount of future cash flows at April 30,
2005.
(j) At April 30, 2005, security was partially or fully on loan. See Note 4 to
the financial statements.
(k) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.7% of net assets. See Note 4 to the
financial statements. 4.1% of net assets is the Portfolio's cash
equivalent position.
(l) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). These securities are valued at fair
value according to methods selected in good faith by the Fund's Board of
Directors. Information concerning such security holdings at April 30,
2005, is as follows:
Security Acquisition Cost
dates
Greater Beijing First Expressways
(U.S. Dollar) 9.50% Sr Nts 2007 6-12-97 thru 9-16-98 $118,924
(m) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 6 to the financial statements):
Type of security Notional amount
Sale contracts
U.S. Treasury Note, June 2005, 5-year $ 2,600,000
U.S. Treasury Note, June 2005, 10-year 14,800,000
- --------------------------------------------------------------------------------
18 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Notes to investments in securities (continued)
(n) The following abbreviations are used in the portfolio security
descriptions to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
FSA -- Financial Security Assurance
MBIA -- MBIA Insurance Corporation
(o) At April 30, 2005, the cost of securities for federal income tax purposes
was approximately $537,808,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $44,310,000
Unrealized depreciation (2,072,000)
----------
Net unrealized appreciation $42,238,000
-----------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
19 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
World Income Portfolio
April 30, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)*
(identified cost $537,808,344) $580,046,081
Foreign currency holdings (identified cost $4,812,616) (Note 1) 4,774,561
Dividends and accrued interest receivable 8,251,780
Receivable for investment securities sold 1,101,076
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 527,159
-------
Total assets 594,700,657
-----------
Liabilities
Disbursements in excess of cash on demand deposit 64,118
Payable for investment securities purchased 2,862,831
Unrealized depreciation on foreign currency contracts held, at value (Note 5) 7,049
Payable upon return of securities loaned (Note 4) 4,040,000
Accrued investment management services fee 12,110
Other accrued expenses 57,508
------
Total liabilities 7,043,616
---------
Net assets $587,657,041
============
*Including securities on loan, at value (Note 4) $ 3,935,120
------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statement of operations
World Income Portfolio
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Interest $10,987,848
Fee income from securities lending (Note 4) 13,311
Less foreign taxes withheld (3,647)
------
Total income 10,997,512
----------
Expenses (Note 2):
Investment management services fee 2,164,406
Compensation of board members 5,806
Custodian fees 91,000
Audit fees 13,500
Other 11,478
------
Total expenses 2,286,190
Earnings credits on cash balances (Note 2) (598)
----
Total net expenses 2,285,592
---------
Investment income (loss) -- net 8,711,920
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 10,948,550
Foreign currency transactions 1,762,049
Futures contracts 75,380
------
Net realized gain (loss) on investments 12,785,979
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,312,036)
----------
Net gain (loss) on investments and foreign currencies 9,473,943
---------
Net increase (decrease) in net assets resulting from operations $18,185,863
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
World Income Portfolio
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ 8,711,920 $ 17,621,605
Net realized gain (loss) on investments 12,785,979 16,438,227
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,312,036) 24,402,177
---------- ----------
Net increase (decrease) in net assets resulting from operations 18,185,863 58,462,009
---------- ----------
Proceeds from contributions 22,530,047 20,341,237
Fair value of withdrawals (12,709,302) (62,192,959)
----------- -----------
Net contributions (withdrawals) from partners 9,820,745 (41,851,722)
--------- -----------
Total increase (decrease) in net assets 28,006,608 16,610,287
Net assets at beginning of period 559,650,433 543,040,146
----------- -----------
Net assets at end of period $587,657,041 $559,650,433
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
World Income Portfolio
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Income Portfolio (the Portfolio) is a series of World Trust (the Trust)
and is registered under the Investment Company Act of 1940 (as amended) as a
non-diversified, open-end management investment company. The Portfolio invests
primarily in debt obligations of U.S. and foreign issuers. The Declaration of
Trust permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
23 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Illiquid securities
At April 30, 2005, investments in securities included issues that are illiquid
which the Portfolio currently limits to 10% of net assets, at market value, at
the time of purchase. The aggregate value of such securities at April 30, 2005
was $0. These securities are valued at fair value according to methods selected
in good faith by the board. According to board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above. Assets are liquid if they can be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the asset is valued by the Portfolio.
Securities purchased on a forward-commitment basis
Delivery and payment for securities that have been purchased by the Portfolio on
a forward-commitment basis, including when-issued securities and other
forward-commitments, can take place one month or more after the transaction
date. During this period, such securities are subject to market fluctuations,
and they may affect the Portfolio's net assets the same as owned securities. The
Portfolio designates cash or liquid securities at least equal to the amount of
its forward-commitments. At April 30, 2005, the Portfolio has entered into
outstanding when-issued securities of $777,754.
The Portfolio also enters into transactions to sell purchase commitments to
third parties at current market values and concurrently acquires other purchase
commitments for similar securities at later dates. As an inducement for the
Portfolio to "roll over" its purchase commitments, the Portfolio receives
negotiated amounts in the form of reductions of the purchase price of the
commitment.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
- --------------------------------------------------------------------------------
24 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At April 30, 2005, foreign currency holdings consisted of
multiple denominations, primarily European monetary units.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
- --------------------------------------------------------------------------------
25 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
0.77% to 0.67% annually as the Portfolio's assets increase.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their compensation. Deferred amounts are treated as though equivalent
dollar amounts had been invested in shares of the underlying Fund or other
American Express mutual funds. The Portfolio's liability for these amounts is
adjusted for market value changes and remains in the Portfolio until distributed
in accordance with the Plan.
During the six months ended April 30, 2005, the Portfolio's custodian fees were
reduced by $598 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $241,066,016 and $232,646,059, respectively, for the six
months ended April 30, 2005. Realized gains and losses are determined on an
identified cost basis.
4. LENDING OF PORTFOLIO SECURITIES
At April 30, 2005, securities valued at $3,935,120 were on loan to brokers. For
collateral, the Portfolio received $4,040,000 in cash. Cash collateral received
is invested in short-term securities, which are included in the short-term
section of the "Investments in securities." Income from securities lending
amounted to $13,311 for the six months ended April 30, 2005. The risks to the
Portfolio of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
- --------------------------------------------------------------------------------
26 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
5. FORWARD FOREIGN CURRENCY CONTRACTS
At April 30, 2005, the Portfolio has forward foreign currency exchange contracts
that obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
May 9, 2005 5,180,000 6,659,253 $ -- $7,049
European Monetary Unit U.S. Dollar
May 13, 2005 13,570,111 1,471,000,000 472,264 --
U.S. Dollar Japanese Yen
May 17, 2005 11,410,000 14,742,291 54,895 --
European Monetary Unit U.S. Dollar
-------- ------
Total $527,159 $7,049
-------- ------
6. INTEREST RATE FUTURES CONTRACTS
At April 30, 2005, investments in securities included securities valued at
$513,488 that were pledged as collateral to cover initial margin deposits on 174
open sale contracts. The notional market value of the open sale contracts at
April 30, 2005 was $19,310,220 with a net unrealized loss of $244,478. See
"Summary of significant accounting policies" and "Notes to investments in
securities."
7. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended Oct. 31, 2005(e) 2004 2003 2002 2001
Ratio of expenses to average daily net assets(a) .79%(b) .79% .80% .79% .78%
Ratio of net investment income (loss) to average daily net assets 3.03%(b) 3.20% 3.29% 3.66% 5.27%
Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24%
Total return(c) 3.26%(d) 11.21% 13.99% 6.89% 11.29%
Notes to financial highlights
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Adjusted to an annual basis.
(c) Total return is based on a calculated Portfolio net asset value and does
not reflect payment of a sales charge.
(d) Not annualized.
(e) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
27 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Global Bond Fund
April 30, 2005 (Unaudited)
Assets
Investment in Portfolio (Note 1) $587,505,416
Capital shares receivable 219,707
-------
Total assets 587,725,123
-----------
Liabilities
Capital shares payable 151,469
Accrued distribution fee 6,726
Accrued transfer agency fee 2,443
Accrued administrative services fee 907
Other accrued expenses 50,665
------
Total liabilities 212,210
-------
Net assets applicable to outstanding capital stock $587,512,913
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 844,958
Additional paid-in capital 543,487,306
Excess of distributions over net investment income (944,294)
Accumulated net realized gain (loss) (Note 5) 1,632,190
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 42,492,753
----------
Total -- representing net assets applicable to outstanding capital stock $587,512,913
============
Net assets applicable to outstanding shares: Class A $385,318,909
Class B $144,754,511
Class C $ 4,597,464
Class I $ 52,777,760
Class Y $ 64,269
Net asset value per share of outstanding capital stock: Class A shares 55,426,436 $ 6.95
Class B shares 20,821,091 $ 6.95
Class C shares 663,794 $ 6.93
Class I shares 7,575,277 $ 6.97
Class Y shares 9,223 $ 6.97
----- ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Global Bond Fund
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Interest $10,985,150
Fee income from securities lending 13,308
Less foreign taxes withheld (3,646)
------
Total income 10,994,812
----------
Expenses (Note 2):
Expenses allocated from Portfolio 2,284,994
Distribution fee
Class A 488,589
Class B 724,280
Class C 23,593
Transfer agency fee 516,248
Incremental transfer agency fee
Class A 38,359
Class B 25,049
Class C 929
Service fee -- Class Y 32
Administrative services fees and expenses 161,929
Compensation of board members 5,148
Printing and postage 86,331
Registration fees 31,420
Audit fees 4,500
Other 9,606
-----
Total expenses 4,401,007
Earnings credits on cash balances (Note 2) (5,846)
------
Total net expenses 4,395,161
---------
Investment income (loss) -- net 6,599,651
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 10,947,650
Foreign currency transactions 1,759,696
Futures contracts 75,380
------
Net realized gain (loss) on investments 12,782,726
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,311,274)
----------
Net gain (loss) on investments and foreign currencies 9,471,452
---------
Net increase (decrease) in net assets resulting from operations $16,071,103
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
29 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Global Bond Fund
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 6,599,651 $ 13,433,467
Net realized gain (loss) on investments 12,782,726 16,434,312
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,311,274) 24,395,700
---------- ----------
Net increase (decrease) in net assets resulting from operations 16,071,103 54,263,479
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (15,166,554) (13,588,587)
Class B (5,065,561) (4,397,000)
Class C (162,875) (141,492)
Class I (1,291,138) (208,980)
Class Y (2,812) (2,872)
------ ------
Total distributions (21,688,940) (18,338,931)
----------- -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 42,723,922 90,482,357
Class B shares 21,489,529 34,513,320
Class C shares 660,587 1,609,678
Class I shares 29,031,812 22,849,823
Class Y shares 15,933 13,380
Reinvestment of distributions at net asset value
Class A shares 14,092,995 12,568,801
Class B shares 4,726,617 4,090,856
Class C shares 143,387 124,689
Class I shares 1,290,716 208,773
Class Y shares 2,812 2,872
Payments for redemptions
Class A shares (56,447,283) (119,978,418)
Class B shares (Note 2) (21,863,958) (63,787,048)
Class C shares (Note 2) (880,504) (2,223,406)
Class I shares (1,198,772) (97,951)
Class Y shares (32,119) (7,940)
------- ------
Increase (decrease) in net assets from capital share transactions 33,755,674 (19,630,214)
---------- -----------
Total increase (decrease) in net assets 28,137,837 16,294,334
Net assets at beginning of period 559,375,076 543,080,742
----------- -----------
Net assets at end of period $587,512,913 $ 559,375,076
============ =============
Undistributed (excess of distributions over) net investment income $ (944,294) $ 14,144,995
------------ -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Global Bond Fund
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a non-diversified open-end
management investment company. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charges and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At April 30, 2005, AEFC and the AXP Portfolio
Builder Series funds owned 100% of Class I shares, which represents 8.98% of the
Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Investment in World Income Portfolio
The Fund invests all of its assets in the World Income Portfolio (the
Portfolio), a series of World Trust, an open-end investment company that has the
same objectives as the Fund. The Portfolio invests primarily in debt obligations
of U.S. and foreign issuers.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at April 30, 2005 was 99.97%.
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the principal market in which such securities are normally traded. Pursuant
to procedures adopted
- --------------------------------------------------------------------------------
31 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
by the Board of Trustees of the portfolios, AEFC utilizes Fair Value Pricing
(FVP). FVP determinations are made in good faith in accordance with these
procedures. If a development or event is so significant that there is a
reasonably high degree of certainty that the effect of the development or event
has actually caused the closing price to no longer reflect the actual value, the
closing prices, as determined at the close of the applicable foreign market, may
be adjusted to reflect the fair value of the affected foreign securities as of
the close of the New York Stock Exchange. Significant events include material
movements in the U.S. securities markets prior to the opening of foreign markets
on the following trading day. FVP results in an estimated price that reasonably
reflects the current market conditions in order to value the portfolio holdings
such that shareholder transactions receive a fair net asset value. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
- --------------------------------------------------------------------------------
32 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
that declines from 0.06% to 0.04% annually as the Fund's assets increase. A
minor portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $20.50
o Class B $21.50
o Class C $21.00
o Class Y $18.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$391,271 for Class A, $64,725 for Class B and $355 for Class C for the six
months ended April 30, 2005.
During the six months ended April 30, 2005, the Fund's transfer agency fees were
reduced by $5,846 as a result of earnings credits from overnight cash balances.
- --------------------------------------------------------------------------------
33 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 2005
Class A Class B Class C Class I Class Y
Sold 6,072,921 3,053,510 94,368 4,144,768 2,236
Issued for reinvested distributions 2,011,617 673,746 20,525 184,366 400
Redeemed (8,036,130) (3,115,741) (125,650) (168,371) (4,562)
---------- ---------- -------- -------- ------
Net increase (decrease) 48,408 611,515 (10,757) 4,160,763 (1,926)
------ ------- ------- --------- ------
Year ended Oct. 31, 2004
Class A Class B Class C Class I* Class Y
Sold 13,443,824 5,113,276 239,474 3,398,078 2,007
Issued for reinvested distributions 1,868,388 607,744 18,597 31,012 426
Redeemed (17,795,771) (9,514,367) (331,347) (14,576) (1,156)
----------- ---------- -------- ------- ------
Net increase (decrease) (2,483,559) (3,793,347) (73,276) 3,414,514 1,277
---------- ---------- ------- --------- -----
* Inception date was March 4, 2004.
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are
payable within 60 days after such loan is executed. The Fund also pays a
commitment fee equal to its pro rata share of the amount of the credit facility
at a rate of 0.09% per annum. The Fund had no borrowings outstanding during the
six months ended April 30, 2005.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$11,113,313 at Oct. 31, 2004, that if not offset by capital gains will expire in
2010. It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
34 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $7.02 $6.57 $6.00 $5.81 $5.39
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .09 .17 .18 .19 .27
Net gains (losses) (both realized and unrealized) .12 .52 .60 .17 .30
----- ----- ----- ----- -----
Total from investment operations .21 .69 .78 .36 .57
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.28) (.24) (.21) (.17) (.15)
----- ----- ----- ----- -----
Net asset value, end of period $6.95 $7.02 $6.57 $6.00 $5.81
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $385 $389 $380 $348 $355
Ratio of expenses to average daily net assets(b) 1.36%(c) 1.34% 1.36% 1.34% 1.32%
Ratio of net investment income (loss) to average daily net assets 2.46%(c) 2.66% 2.73% 3.12% 4.75%
Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24%
Total return(d) 2.92%(e) 10.70% 13.25% 6.24% 10.83%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
35 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $7.02 $6.57 $5.99 $5.79 $5.38
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .06 .14 .12 .13 .21
Net gains (losses) (both realized and unrealized) .12 .50 .62 .19 .31
----- ----- ----- ----- -----
Total from investment operations .18 .64 .74 .32 .52
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.25) (.19) (.16) (.12) (.11)
----- ----- ----- ----- -----
Net asset value, end of period $6.95 $7.02 $6.57 $5.99 $5.79
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $145 $142 $158 $152 $145
Ratio of expenses to average daily net assets(b) 2.12%(c) 2.10% 2.12% 2.10% 2.09%
Ratio of net investment income (loss) to average daily net assets 1.70%(c) 1.90% 1.97% 2.36% 3.99%
Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24%
Total return(d) 2.52%(e) 9.83% 12.39% 5.59% 9.73%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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36 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $6.99 $6.55 $5.98 $5.79 $5.38
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .06 .14 .13 .14 .21
Net gains (losses) (both realized and unrealized) .13 .49 .60 .18 .31
----- ----- ----- ----- -----
Total from investment operations .19 .63 .73 .32 .52
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.25) (.19) (.16) (.13) (.11)
----- ----- ----- ----- -----
Net asset value, end of period $6.93 $6.99 $6.55 $5.98 $5.79
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $5 $5 $5 $3 $1
Ratio of expenses to average daily net assets(b) 2.13%(c) 2.09% 2.14% 2.10% 2.09%
Ratio of net investment income (loss) to average daily net assets 1.69%(c) 1.91% 1.89% 2.29% 3.84%
Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24%
Total return(d) 2.66%(e) 9.72% 12.41% 5.51% 9.84%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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37 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(g) 2004(b)
Net asset value, beginning of period $7.03 $6.77
----- -----
Income from investment operations:
Net investment income (loss) .10 .16
Net gains (losses) (both realized and unrealized) .13 .24
----- -----
Total from investment operations .23 .40
----- -----
Less distributions:
Dividends from net investment income (.29) (.14)
----- -----
Net asset value, end of period $6.97 $7.03
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $53 $24
Ratio of expenses to average daily net assets(c) .91%(d) .89%(d)
Ratio of net investment income (loss) to average daily net assets 2.94%(d) 3.07%(d)
Portfolio turnover rate (excluding short-term securities) 43% 92%
Total return(e) 3.30%(f) 6.06%(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
38 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $7.04 $6.59 $6.01 $5.80 $5.40
----- ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .09 .18 .19 .20 .29
Net gains (losses) (both realized and unrealized) .12 .52 .61 .19 .27
----- ----- ----- ----- -----
Total from investment operations .21 .70 .80 .39 .56
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (.28) (.25) (.22) (.18) (.16)
----- ----- ----- ----- -----
Net asset value, end of period $6.97 $7.04 $6.59 $6.01 $5.80
----- ----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $-- $--
Ratio of expenses to average daily net assets(b) 1.18%(c) 1.17% 1.18% 1.17% 1.16%
Ratio of net investment income (loss) to average daily net assets 2.63%(c) 2.83% 2.69% 3.29% 4.90%
Portfolio turnover rate (excluding short-term securities) 43% 92% 117% 51% 24%
Total return(d) 3.00%(e) 10.86% 13.54% 6.72% 10.71%
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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39 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
40 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses Annualized
account value account value paid during expense
Nov. 1, 2004 April 30, 2005 the period(a) ratio
Class A
Actual(b) $1,000 $1,029.20 $ 6.88 1.36%
Hypothetical (5% return before expenses) $1,000 $1,018.15 $ 6.84 1.36%
Class B
Actual(b) $1,000 $1,025.20 $10.70 2.12%
Hypothetical (5% return before expenses) $1,000 $1,014.36 $10.65 2.12%
Class C
Actual(b) $1,000 $1,026.60 $10.76 2.13%
Hypothetical (5% return before expenses) $1,000 $1,014.31 $10.70 2.13%
Class I
Actual(b) $1,000 $1,033.00 $ 4.61 .91%
Hypothetical (5% return before expenses) $1,000 $1,020.39 $ 4.58 .91%
Class Y
Actual(b) $1,000 $1,030.00 $ 5.97 1.18%
Hypothetical (5% return before expenses) $1,000 $1,019.05 $ 5.94 1.18%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2005: +2.92%
for Class A, +2.52% for Class B, +2.66% for Class C, +3.30% for Class I and
+3.00% for Class Y.
- --------------------------------------------------------------------------------
41 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
Approval of Investment Management Services Agreement
American Express Financial Corporation (AEFC), a wholly-owned subsidiary of
American Express Company, serves as the investment manager to the Fund. Under an
Investment Management Services Agreement (the Agreement), AEFC provides
investment advice and other services to the Fund. Throughout the year, the
Funds' Board of Directors and the Board's Investment Review Committee monitor
these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. AEFC prepares detailed reports for the Board and its Contracts
Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with AEFC (the Interim Period). The spin-off will not result in an
"assignment" of the Agreement under the Investment Company Act of 1940 and,
therefore, will not cause the termination of the Agreement according to its
terms. In connection with the spin-off AEFC has proposed that going forward,
services under the Agreement be provided by an affiliate, RiverSource
Investments, LLC (RiverSource). Independent counsel advised the Board that it
would be prudent, in connection with the spin-off, to consider a new agreement
with RiverSource and to seek shareholder approval of that agreement as soon as
practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above the median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 exceeded the median.
The Board noted that, in addition to portfolio management and investment
research, AEFC provides portfolio trading, daily net asset value calculation,
management of cash flow, product development, administration of its compliance
and legal departments, access to distribution, accounting and recordkeeping, and
reporting to the Board and shareholders. To evaluate these services, the Board
referred to surveys and benchmarks established by commercial providers, trade
associations and AEFC's internal processes. The Board concluded that the
services provided were consistent with services provided by investment managers
to comparable mutual funds.
- --------------------------------------------------------------------------------
42 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
The Board also evaluated the price paid for the services provided by AEFC,
noting the existence of a pricing philosophy, established by the Board and AEFC,
that seeks to maintain total Fund expenses within a range of the median expenses
charged to comparable funds sold through financial advisors. The Board
considered detailed information set forth in an annual report on fees and
expenses, including, among other things, data showing a comparison of the Fund's
expenses with median expenses paid by funds in its comparison group and data
showing the Fund's contribution to AEFC's profitability. The Board determined
that while the Fund's expenses are relatively high for its comparison group, the
Fund's strong performance justified higher expenses and a fee waiver will be
added to reduce expenses the Fund will pay during the Interim Period.
The Board considered the economies of scale that might be realized by AEFC as
the Fund grew and took note of the extent to which Fund shareholders also might
benefit from such growth. The Board considered that the Agreement provided for
lower fees as assets increase at pre-established breakpoints and concluded that
the Agreement satisfactorily provided for sharing these economies of scale.
The Board took into account the Contract Committee's discussion comparing the
fees AEFC charges to the Fund with those it charges to institutional clients,
noting that the relatively higher fees paid by the Fund were principally
attributable to the additional services required to manage a regulated mutual
fund, like the Fund, and the operation of a large mutual fund family. The Board
also considered the profitability realized by AEFC and its affiliates from its
relationship with the Fund. The Board took into account the services acquired by
AEFC through the use of commission dollars paid by the Fund on portfolio
transactions. The Board concluded that AEFC's overall costs and profitability
were appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit AEFC to offer
competitive compensation to its personnel, make necessary investments in its
business and earn an appropriate profit. Based on the foregoing, the Board
concluded that the fees paid to AEFC under the Agreement were fair and
reasonable and determined to approve renewal of the Agreement for the Interim
Period.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
43 --- AXP GLOBAL BOND FUND --- 2005 SEMIANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
AXP(R)
Global
Technology
Fund
Semiannual Report
for the Period Ended
April 30, 2005
AXP Global Technology Fund seeks to provide shareholders with long-term capital
growth.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers with Portfolio Management 6
Investments in Securities 11
Financial Statements (Portfolio) 13
Notes to Financial Statements (Portfolio) 16
Financial Statements (Fund) 20
Notes to Financial Statements (Fund) 23
Fund Expenses Example 32
Approval of Investment Management Services Agreement 34
Proxy Voting 35
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated.
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Fund Snapshot
AT APRIL 30, 2005
PORTFOLIO MANAGER
Portfolio manager Since Years in industry
Nina Hughes 6/02 6
FUND OBJECTIVE
For investors seeking long-term capital growth.
Inception dates by class
A: 11/13/96 B: 11/13/96 C: 6/26/00 I: 7/15/04 Y: 11/13/96
Ticker symbols by class
A: AXIAX B: INVBX C: AXICX I: -- Y: --
Total net assets $172.5 million
Number of holdings 69
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
SECTOR COMPOSITION
Percentage of portfolio assets
(pie chart)
Electronics 31.0%
Computer software & services 24.9%
Computer hardware 15.8%
Telecom equipment & services 10.9%
Media 5.7%
Short-term securities* 5.5%
Utilities -- telephone 2.9%
Leisure time & entertainment 1.4%
Retail -- general 1.1%
Cable 0.8%
* Of the 5.5%,1.4% is due to security lending activity and 4.1% is the
Portfolio's cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
Dell (Computer hardware) 5.6%
Cisco Systems (Computer hardware) 4.9
Intel (Electronics) 3.8
Samsung Electronics (Electronics) 3.7
Texas Instruments (Electronics) 3.4
Yahoo! (Media) 3.2
Broadcom Cl A (Electronics) 3.2
Nokia ADR (Telecom equipment & services) 3.1
EMC (Computer hardware) 3.1
Corning (Telecom equipment & services) 2.9
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market currency, economic, political and other factors. This Fund is
subject to greater volatility than a more broadly invested fund because it is
invested in a specific sector.
Stock prices of established companies that pay dividends may be less volatile
than the stock market as a whole. Stocks of small- and medium-sized companies
may be subject to more abrupt or erratic price movements than stocks of larger
companies. Some of these companies also may have fewer financial resources.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2005
-4.37% -5.56% -3.52%
- -4.37% = AXP Global Technology Fund Class A (excluding sales charge)
- -5.56% = GSTI(R) Composite Index(1) (unmanaged)
- -3.52% = Lipper Science and Technology Funds Index(2)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds.
(1) The Goldman Sachs Technology Index(R) Composite Index (GSTI(R) Composite
Index), an unmanaged index published by Goldman Sachs, is a market
capitalization-weighted index of over 200 stocks designed to measure the
performance of companies in the technology sector.
(2) The Lipper Science and Technology Funds Index includes the 30 largest
science and technology funds tracked by Lipper Inc. The index's returns
include net reinvested dividends.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- --------------------------------------------------------------------------------
4 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (11/13/96) (11/13/96) (6/26/00) (7/15/04) (11/13/96)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at April 30, 2005
6 months* -4.37% -9.89% -4.38% -8.20% -4.35% -5.30% -3.83% -3.83%
1 year +1.16% -4.68% +0.00% -4.00% +0.65% +0.65% N/A +1.73%
3 years +5.51% +3.44% +4.78% +3.86% +5.01% +5.01% N/A +5.95%
5 years -20.21% -21.15% -20.86% -21.02% N/A N/A N/A -20.06%
Since inception +2.66% +1.95% +1.85% +1.85% -21.74% -21.74% +3.53%* +2.73%
at March 31, 2005
6 months* +8.33% +2.13% +7.43% +3.43% +7.43% +6.43% +8.28% +7.69%
1 year -3.19% -8.77% -4.22% -8.05% -4.79% -4.79% N/A -3.70%
3 years +2.30% +0.29% +1.51% +0.53% +1.51% +1.51% N/A +2.50%
5 years -21.77% -22.69% -22.43% -22.47% N/A N/A N/A -21.77%
Since inception +3.17% +2.45% +2.34% +2.34% -21.55% -21.55% +7.65%* +3.17%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
eligible investors only, currently limited to AXP Portfolio Builder Series
funds, six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- --------------------------------------------------------------------------------
5 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, portfolio manager Nina Hughes discusses the Fund's results and
positioning for the semiannual period.
Q: How did AXP Global Technology Fund perform for the six months ended April
30, 2005?
A: AXP Global Technology Fund's Class A shares fell 4.37% (excluding sales
charge) for the six months ended April 30, 2005. This outpaced the Fund's
benchmark, the unmanaged Goldman Sachs Technology Index(R) Composite Index
(GSTI(R) Composite Index), which decreased 5.56%. However, the Fund
underperformed the Lipper Science and Technology Funds Index, representing
the Fund's peer group, which fell 3.52% over the same period.
Q: What factors most significantly affected performance during the semiannual
period?
A: The technology sector was one of the key beneficiaries of the equity market
rally during the fourth calendar quarter of 2004, but the sector faced
several macroeconomic and market headwinds in the first four months of 2005
that resulted in negative absolute returns across the board for the
semiannual period. First, technology stocks historically do not do well in a
period of rising gold and oil prices, as concerns about the effects of
record-setting commodity prices on consumer spending come to the forefront
and tend to make investors more risk averse. Second, the combination of
weaker-than-expected consumer spending during the December 2004 holiday
season and a somewhat slower-than-anticipated pickup in corporate spending
led to negative earnings guidance by several of the leading technology
companies, especially in the semiconductor industry. Third, the lunar new
year celebrated in Asia came later than usual in 2005, thus diminishing the
seasonal uptick in demand ordinarily experienced in the fourth calendar
quarter. Indeed, the sector's weak semiannual results had little to do with
fundamental data from individual technology companies.
On a relative basis, the Fund's stock selection in the hardware and
semiconductor industries detracted from performance. These industries also
performed poorly on an absolute basis. However, stock selection in the
software and Internet industries boosted the Fund's relative results,
especially in the Internet area, which underperformed the GSTI(R) Composite
Index on an absolute basis.
- --------------------------------------------------------------------------------
6 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> During the period, we reduced the Fund's exposure to
software and computer services companies, primarily because we saw more
compelling valuations elsewhere. (end callout quote)
The Fund's biggest individual stock contributor to performance for the
semiannual period on both an absolute and relative basis was
mid-capitalization software company Macromedia. Macromedia provides web
publishing, multimedia solutions and web conferencing for enterprises and
individual consumers. The company benefited during the period from
enthusiastic anticipation about its new product cycle, including FlashPlayer
for cell phones, from effective execution of its new product launches and
from steady maintenance of its existing product line. During the period,
Macromedia was acquired by Adobe Software at a premium. We reduced the
Fund's sizable position in Macromedia by about half, as its share price
appreciated upon the news of the acquisition. Still, we maintain the
holding, as we believe the price on Adobe shares has become compelling as
its share price declined after it announced the acquisition.
Another strong performer for the Fund on an absolute and relative basis was
large-capitalization company Corning, which among other products, is one of
the world's leading glass substrate makers. Sirius Satellite Radio was also
a strong performer for the Fund on an absolute and relative basis during the
semiannual period. This mid-capitalization stock saw its share price rise on
positive subscriber growth and a new chief executive officer who brought in
several popular on-air radio personalities, including Howard Stern and
Martha Stewart. Given the publicity this company received during the period,
we felt the stock got ahead of itself, and we sold the Fund's position in
Sirius at a profit.
Of course, there were disappointments as well. Small-capitalization
semiconductor equipment company Credence Systems fell along with the
semiconductor
- --------------------------------------------------------------------------------
7 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
industry as a whole. Small-cap companies were hit particularly hard, as
investors who stayed within the industry fled for quality. We continued to
hold shares of Credence Systems, as we believe the company is better
positioned for the next cycle than it had been previously. Also, we believe
Credence Systems' currently distressed valuation, strong technology and gain
in market share with customers such as Intel make it an attractive
acquisition candidate.
Another holding that detracted from the Fund's absolute and relative results
was Gateway, the mid-capitalization hardware manufacturer in the personal
computer area. We had purchased Gateway based on its restructuring plans and
its plans to gain market share, which would potentially offer strong
top-line and bottom-line growth. However, the company did not execute its
plans well. The company also struggled against macroeconomic worries about
consumer spending. We sold the Fund's position in Gateway during the period.
This proved to be a prudent move, as the stock declined further after our
sale date.
Large-capitalization software security firm Symantec also detracted from the
Fund's semiannual performance. We bought Symantec during the period at an
attractive valuation following the stock's decline upon the news of its
acquisition by VERITAS. However, its share price subsequently fell further
as the merger had yet to be finalized at the end of the period, compounded
by a news release about a potentially competing antivirus product being
issued by Microsoft. We continue to hold this stock, as we believe Symantec
will rebound from what we believe is temporary headline risk rather than any
change in the company's strong fundamentals.
Q: What changes did you make to the Fund and how is it currently positioned?
A: During the period, we reduced the Fund's exposure to software and computer
services companies, primarily because we saw more compelling valuations
elsewhere. Indeed, we believe we found several stock specific opportunities
and attractive valuations in semiconductors and computer hardware and added
to the Fund's positions in both of these industries toward the end of the
period.
- --------------------------------------------------------------------------------
8 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
We thought the negative attitude toward these areas was overdone and that
semiconductors and hardware companies should benefit in the coming months
from slow but steady growth in the economy. Furthermore in the particularly
hard-hit semiconductor area, inventory levels that were an issue last year
generally appear to be resolving themselves, and the group has the potential
to benefit from pricing stability and new technology initiatives, such as
high definition TVs, multimedia and wireless components. We also added to
the Fund's holdings in the wireless area within the telecommunications
service sector, primarily through an increased position in Nokia.
Within the Internet industry, we made some changes. We eliminated the Fund's
position in eBay, taking profits. We also added to an existing position in
Yahoo and established a position in Google upon positive news flow from
these larger companies.
Overall, we added to the Fund's exposure to large-capitalization stocks at
the expense of small- and mid-capitalization stocks. We believe larger-cap
technology stocks generally have more compelling valuations currently and
may well outperform going forward should the risk-averse sentiment seen in
March and April 2005 become even more pronounced in the months ahead as
anticipated. Throughout the semiannual period, we sought growth stocks with
reasonable valuations using traditional fundamental analysis.
As of April 30, 2005, the Fund held significant positions in semiconductors,
computer hardware and telecommunications services and equipment relative to
the GSTI(R) Composite Index and more modest positions in computer software
and computer services. The Fund held relatively neutral positions to the
GSTI(R) Composite Index in the Internet and networking industries. Our
flexibility to move between the technology subsectors and avoid others
completely if conditions warrant can provide a potential competitive
advantage over our peers.
- --------------------------------------------------------------------------------
9 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
Q: How do you intend to manage the Fund in the coming months?
A: We believe the technology sector could rebound somewhat in the months ahead
from the headwinds it faced for much of the semiannual period. While there
are still macroeconomic concerns in play, such as persistently high oil
prices and rising interest rates, we believe the U.S. economy should
continue to grow steadily even if at a slower pace than in 2004. Indeed,
preliminary estimates put first quarter 2005 gross domestic product at an
annualized rate of 3.1%. Although slower than the annualized rate of 3.8% in
the fourth quarter of 2004, it remains a healthy picture overall. Also, we
now believe we are reaching compelling valuations in technology stocks. We
have not seen such attractive valuations for a long time, with several
large-cap technology stocks currently trading at a discount to the S&P 500
Index.* Another positive is that technology companies are generally lean
from cost-cutting measures undertaken. Thus, when conditions do improve, we
should see significant earnings leverage. Finally, investor sentiment has
not been this negative nor has the appetite for risk been this low for a
while. Therefore, we believe that by the end of the year, if not before, the
market may get to a point where there will be opportunities to become a bit
more aggressive and take on a bit more risk.
In this environment, we believe effective stock picking based on value and
growth potential will continue to be key. We remain focused on seeking those
individual technology companies with the best fundamental prospects at the
most reasonable prices.
* Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common
stocks, is frequently used as a general measure of market performance. The
index reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or fees.
- --------------------------------------------------------------------------------
10 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Investments in Securities
World Technologies Portfolio
April 30, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (95.7%)
Issuer Shares Value(a)
Cable (0.8%)
Comcast Cl A 41,900(b) $1,345,409
Computer hardware (16.0%)
Cisco Systems 491,000(b) 8,484,480
Dell 280,522(b) 9,770,581
EMC 414,175(b) 5,433,976
Hewlett-Packard 86,400 1,768,608
Sun Microsystems 617,500(b) 2,241,525
Total 27,699,170
Computer software & services (25.1%)
Accenture Cl A 97,877(b,c) 2,123,931
Affiliated Computer
Services Cl A 42,800(b) 2,040,276
Blue Coat Systems 8,450(b) 121,680
Business Objects ADR 23,028(b,c,d) 594,353
Cognizant Technology
Solutions Cl A 70,885(b) 2,977,879
Electronic Arts 26,265(b) 1,402,288
Google Cl A 11,950(b) 2,629,000
i2 Technologies 112,800(b) 885,480
Juniper Networks 143,375(b) 3,238,841
Macromedia 93,100(b) 3,687,690
MatrixOne 285,100(b) 1,217,377
Mercury Interactive 30,850(b) 1,275,031
Microsoft 113,700 2,876,610
Ness Technologies 169,700(b,c) 1,815,790
Open Solutions 64,100(b) 1,198,670
OPNET Technologies 100,000(b) 779,000
Oracle 272,300(b) 3,147,788
Paychex 93,500 2,861,100
Satyam Computer Services ADR 46,200(c,d) 990,990
Symantec 175,400(b) 3,294,012
Telvent GIT 60,000(b,c) 525,000
TIBCO Software 298,850(b) 2,133,789
VERITAS Software 78,200(b) 1,610,138
Total 43,426,713
Common stocks (continued)
Issuer Shares Value(a)
Electronics (31.4%)
Amkor Technology 208,200(b) $672,486
Analog Devices 89,900 3,066,489
ASML Holding 116,500(b,c) 1,688,085
Broadcom Cl A 185,800(b) 5,557,278
Credence Systems 419,000(b) 2,635,510
Cypress Semiconductor 204,100(b) 2,447,159
Flextronics Intl 61,400(b,c) 684,610
Freescale Semiconductor Cl A 94,468(b) 1,768,441
Genesis Microchip 191,200(b) 2,736,072
Intel 286,000 6,726,719
Marvell Technology Group 70,700(b,c) 2,367,036
Maxim Integrated Products 91,200 3,410,880
MEMC Electronic Materials 11,900(b) 139,587
Microchip Technology 51,450 1,465,296
Samsung Electronics 14,150(c) 6,472,283
Semtech 96,500(b) 1,629,885
Spatialight 205,225(b,d) 927,617
Taiwan Semiconductor Mfg ADR 214,800(c) 1,849,428
Texas Instruments 237,000 5,915,520
Xilinx 73,700 1,985,478
Total 54,145,859
Leisure time & entertainment (1.5%)
Gemstar-TV Guide Intl 672,000(b) 2,587,200
Media (5.8%)
iVillage 405,350(b) 2,655,043
XM Satellite Radio
Holdings Cl A 59,100(b) 1,639,434
Yahoo! 164,000(b) 5,659,640
Total 9,954,117
Retail -- general (1.1%)
Circuit City Stores 117,550 1,857,290
Telecom equipment & services (11.1%)
Corning 365,900(b) 5,031,125
Harmonic 6,800(b) 37,468
JDS Uniphase 588,000(b) 870,240
Motorola 160,500 2,462,070
Nokia ADR 341,300(c) 5,453,974
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Telecom equipment & services (cont.)
Qwest Communications Intl 251,100(b) $858,762
Vodafone Group ADR 167,500(c) 4,378,450
Total 19,092,089
Utilities -- telephone (2.9%)
MCI 49,600 1,315,888
Sprint 168,850 3,758,601
Total 5,074,489
Total common stocks
(Cost: $169,517,428) $165,182,336
Other (--%)
Issuer Shares Value(a)
UBI Soft Entertainment
Warrants 5,712(b) $25,577
Total other
(Cost: $19,674) $25,577
Short-term securities (5.5%)(e)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies (4.2%)
Federal Home Loan Bank Disc Nt
05-18-05 2.81% $1,800,000 $1,797,330
Federal Home Loan Mtge Corp Disc Nts
06-13-05 2.79 3,000,000 2,989,562
06-15-05 2.70 1,400,000 1,395,082
Federal Natl Mtge Assn Disc Nt
06-06-05 2.74 1,100,000 1,096,825
Total 7,278,799
Commercial paper (1.3%)
Falcon Asset Securitization
05-02-05 2.96 2,300,000 2,299,433
Total short-term securities
(Cost: $9,578,216) $9,578,232
Total investments in securities
(Cost: $179,115,318)(f) $174,786,145
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At April 30, 2005, the
value of foreign securities represented 16.8% of net assets.
(d) At April 30, 2005, security was partially or fully on loan. See Note 4 to
the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 1.4% of net assets. See Note 4 to the
financial statements. 4.1% of net assets is the Portfolio's cash
equivalent position.
(f) At April 30, 2005, the cost of securities for federal income tax purposes
was approximately $179,115,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 12,215,000
Unrealized depreciation (16,544,000)
-----------
Net unrealized depreciation $ (4,329,000)
------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
12 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
World Technologies Portfolio
April 30, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)*
(identified cost $179,115,318) $174,786,145
Cash in bank on demand deposit 121,995
Dividends and accrued interest receivable 38,377
Receivable for investment securities sold 5,804,706
---------
Total assets 180,751,223
-----------
Liabilities
Payable for investment securities purchased 5,614,536
Payable upon return of securities loaned (Note 4) 2,428,000
Accrued investment management services fee 3,392
Other accrued expenses 29,372
------
Total liabilities 8,075,300
---------
Net assets $172,675,923
============
* Including securities on loan, at value (Note 4) $ 2,285,432
------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
World Technologies Portfolio
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Dividends $ 686,169
Interest 42,797
Fee income from securities lending (Note 4) 74,399
Less foreign taxes withheld (35,431)
-------
Total income 767,934
-------
Expenses (Note 2):
Investment management services fee 839,343
Compensation of board members 5,148
Custodian fees 22,545
Audit fees 12,000
Other 3,600
-----
Total expenses 882,636
Earnings credits on cash balances (Note 2) (1,667)
------
Total net expenses 880,969
-------
Investment income (loss) -- net (113,035)
--------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 13,022,201
Foreign currency transactions 12,410
------
Net realized gain (loss) on investments 13,034,611
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (18,821,726)
-----------
Net gain (loss) on investments and foreign currencies (5,787,115)
----------
Net increase (decrease) in net assets resulting from operations $ (5,900,150)
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
World Technologies Portfolio
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ (113,035) $ (1,343,295)
Net realized gain (loss) on investments 13,034,611 14,444,467
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (18,821,726) 53,902
----------- ------
Net increase (decrease) in net assets resulting from operations (5,900,150) 13,155,074
---------- ----------
Proceeds from contributions 440,013 8,830,768
Fair value of withdrawals (31,766,190) (26,055,794)
----------- -----------
Net contributions (withdrawals) from partners (31,326,177) (17,225,026)
----------- -----------
Total increase (decrease) in net assets (37,226,327) (4,069,952)
Net assets at beginning of period 209,902,250 213,972,202
----------- -----------
Net assets at end of period $172,675,923 $209,902,250
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
World Technologies Portfolio
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Technologies Portfolio (the Portfolio) is a series of World Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a non-diversified, open-end management investment company. The Portfolio
invests in equity securities of companies in the information technology industry
throughout the world. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
16 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
- --------------------------------------------------------------------------------
17 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
0.72% to 0.595% annually as the Portfolio's assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment based on a
comparison of the performance of Class A shares of the AXP Global Technology
Fund to the Lipper Science and Technology Funds Index. In certain circumstances,
the board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment increased the fee by $113,203 for the six months ended
April 30, 2005.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
- --------------------------------------------------------------------------------
18 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their annual compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the underlying Fund or
other American Express mutual funds. The Portfolio's liability for these amounts
is adjusted for market value changes and remains in the Portfolio until
distributed in accordance with the Plan.
During the six months ended April 30, 2005, the Portfolio's custodian fees were
reduced by $1,667 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $83,453,486 and $115,351,766, respectively, for the six
months ended April 30, 2005. Realized gains and losses are determined on an
identified cost basis.
4. LENDING OF PORTFOLIO SECURITIES
At April 30, 2005, securities valued at $2,285,432 were on loan to brokers. For
collateral, the Portfolio received $2,428,000 in cash. Cash collateral received
is invested in short-term securities, which are included in the short-term
section of the "Investments in securities." Income from securities lending
amounted to $74,399 for the six months ended April 30, 2005. The risks to the
Portfolio of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
5. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data:
Fiscal period ended Oct. 31, 2005(e) 2004 2003 2002 2001
Ratio of expenses to average daily net assets(a) .87%(b) .87% .84% .77% .75%
Ratio of net investment income (loss) to average daily net assets (.11%)(b) (.61%) (.37%) (.51%) (.11%)
Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233%
Total return(c) (3.82%)(d) 6.91% 68.97% (34.78%) (69.21%)
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Adjusted to an annual basis.
(c) Total return is based on a calculated Portfolio net asset value and does
not reflect payment of a sales charge.
(d) Not annualized.
(e) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
19 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Global Technology Fund
April 30, 2005 (Unaudited)
Assets
Investment in Portfolio (Note 1) $ 172,646,145
Capital shares receivable 1,468
-----
Total assets 172,647,613
-----------
Liabilities
Capital shares payable 91,860
Accrued distribution fee 2,248
Accrued service fee 1
Accrued transfer agency fee 1,959
Accrued administrative services fee 282
Other accrued expenses 53,300
------
Total liabilities 149,650
-------
Net assets applicable to outstanding capital stock $ 172,497,963
=============
Represented by
Capital stock -- $.01 par value (Note 1) $ 1,027,507
Additional paid-in capital 575,842,426
Net operating loss (1,240,835)
Accumulated net realized gain (loss) (Note 5) (398,802,823)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (4,328,312)
----------
Total -- representing net assets applicable to outstanding capital stock $ 172,497,963
=============
Net assets applicable to outstanding shares: Class A $ 119,579,176
Class B $ 49,304,621
Class C $ 3,332,507
Class I $ 10,375
Class Y $ 271,284
Net asset value per share of outstanding capital stock: Class A shares 68,250,423 $ 1.75
Class B shares 32,171,398 $ 1.53
Class C shares 2,168,709 $ 1.54
Class I shares 5,882 $ 1.76
Class Y shares 154,298 $ 1.76
------- -------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Global Technology Fund
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Dividends $ 686,062
Interest 42,791
Fee income from securities lending 74,386
Less foreign taxes withheld (35,425)
-------
Total income 767,814
-------
Expenses (Note 2):
Expenses allocated from Portfolio 880,834
Distribution fee
Class A 174,852
Class B 286,935
Class C 19,069
Transfer agency fee 411,740
Incremental transfer agency fee
Class A 30,983
Class B 22,575
Class C 1,161
Service fee -- Class Y 199
Administrative services fees and expenses 62,406
Compensation of board members 4,756
Printing and postage 73,095
Registration fees 35,475
Audit fees 4,000
Other 3,627
-----
Total expenses 2,011,707
Earnings credits on cash balances (Note 2) (3,058)
------
Total net expenses 2,008,649
---------
Investment income (loss) -- net (1,240,835)
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 13,020,391
Foreign currency transactions 12,408
------
Net realized gain (loss) on investments 13,032,799
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (18,818,790)
-----------
Net gain (loss) on investments and foreign currencies (5,785,991)
----------
Net increase (decrease) in net assets resulting from operations $ (7,026,826)
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Global Technology Fund
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ (1,240,835) $ (3,788,715)
Net realized gain (loss) on investments 13,032,799 14,442,457
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (18,818,790) 53,737
----------- ------
Net increase (decrease) in net assets resulting from operations (7,026,826) 10,707,479
---------- ----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 6,810,002 32,538,914
Class B shares 2,433,785 8,831,756
Class C shares 221,721 1,113,196
Class I shares -- 10,000
Class Y shares 95,759 361,012
Payments for redemptions
Class A shares (28,630,285) (39,802,082)
Class B shares (Note 2) (10,271,598) (16,473,859)
Class C shares (Note 2) (693,992) (1,305,583)
Class I shares -- --
Class Y shares (226,877) (191,700)
-------- --------
Increase (decrease) in net assets from capital share transactions (30,261,485) (14,918,346)
----------- -----------
Total increase (decrease) in net assets (37,288,311) (4,210,867)
Net assets at beginning of period 209,786,274 213,997,141
----------- -----------
Net assets at end of period $172,497,963 $209,786,274
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Global Technology Fund
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AXP Global Technology Fund (a series of AXP Global Series, Inc.) is registered
under the Investment Company Act of 1940 (as amended) as a non-diversified,
open-end management investment company. AXP Global Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At April 30, 2005, AEFC owned 100% of Class I
shares, which represents 0.01% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Investment in World Technologies Portfolio
The Fund invests all of its assets in World Technologies Portfolio (the
Portfolio), a series of World Trust (the Trust), an open-end investment company
that has the same objectives as the Fund. The Portfolio invests in equity
securities of companies in the information technology industry throughout the
world.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at April 30, 2005 was 99.98%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolio's "Notes to financial statements" (included elsewhere in this report).
- --------------------------------------------------------------------------------
23 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the principal market in which such securities are normally traded. Pursuant
to procedures adopted by the Board of Trustees of the portfolios, AEFC utilizes
Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
- --------------------------------------------------------------------------------
24 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
that declines from 0.06% to 0.035% annually as the Fund's assets increase. A
minor portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
- --------------------------------------------------------------------------------
25 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$136,920 for Class A, $52,817 for Class B and $293 for Class C for the six
months ended April 30, 2005.
AEFC and its affiliates have agreed to waive certain fees and expenses until Oct
31, 2005. Under this agreement, net expenses will not exceed 1.82% for Class A,
2.59% for Class B, 2.59% for Class C, 1.13% for Class I and 1.63% for Class Y of
the Fund's average daily net assets.
During the six months ended April 30, 2005, the Fund's transfer agency fees were
reduced by $3,058 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 2005
Class A Class B Class C Class I Class Y
Sold 3,636,676 1,480,914 135,134 -- 51,410
Issued for reinvested distributions -- -- -- -- --
Redeemed (15,339,131) (6,300,221) (423,984) -- (122,545)
----------- ---------- -------- ----- --------
Net increase (decrease) (11,702,455) (4,819,307) (288,850) -- (71,135)
----------- ---------- -------- ----- -------
Year ended Oct. 31, 2004
Class A Class B Class C Class I* Class Y
Sold 18,015,801 5,496,488 686,163 5,882 199,393
Issued for reinvested distributions -- -- -- -- --
Redeemed (22,398,814) (10,688,097) (844,370) -- (106,886)
----------- ----------- -------- ----- --------
Net increase (decrease) (4,383,013) (5,191,609) (158,207) 5,882 92,507
---------- ---------- -------- ----- ------
* Inception date was July 15, 2004.
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are
payable within 60 days after such loan is executed. The Fund also pays a
commitment fee equal to its pro rata share of the amount of the credit facility
at a rate of 0.09% per annum. The Fund had no borrowings outstanding during the
six months ended April 30, 2005.
- --------------------------------------------------------------------------------
26 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes the Fund had a capital loss carry-over of
$407,294,569 at Oct. 31, 2004, that if not offset by capital gains will expire
as follows:
2009 2010
$325,995,342 $81,299,227
It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $1.83 $1.72 $1.03 $1.60 $ 5.26
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) (.01) (.03) (.02) (.03) (.02)
Net gains (losses) (both realized and unrealized) (.07) .14 .71 (.54) (3.64)
----- ----- ----- ----- ------
Total from investment operations (.08) .11 .69 (.57) (3.66)
----- ----- ----- ----- ------
Net asset value, end of period $1.75 $1.83 $1.72 $1.03 $ 1.60
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $120 $146 $145 $81 $146
Ratio of expenses to average daily net assets(b) 1.76%(c) 1.74% 1.94% 1.91% 1.63%
Ratio of net investment income (loss) to average daily net assets (.99%)(c) (1.48%) (1.47%) (1.65%) (.99%)
Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233%
Total return(d) (4.37%)(e) 6.40% 66.99% (35.62%) (69.58%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
27 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $1.60 $1.53 $.92 $1.44 $ 4.77
----- ----- ---- ----- ------
Income from investment operations:
Net investment income (loss) (.02) (.04) (.03) (.04) (.04)
Net gains (losses) (both realized and unrealized) (.05) .11 .64 (.48) (3.29)
----- ----- ---- ----- ------
Total from investment operations (.07) .07 .61 (.52) (3.33)
----- ----- ---- ----- ------
Net asset value, end of period $1.53 $1.60 $1.53 $.92 $ 1.44
----- ----- ---- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $49 $59 $64 $38 $67
Ratio of expenses to average daily net assets(b) 2.54%(c) 2.52% 2.75% 2.71% 2.42%
Ratio of net investment income (loss) to average daily net assets (1.78%)(c) (2.26%) (2.27%) (2.45%) (1.78%)
Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233%
Total return(d) (4.38%)(e) 4.58% 66.30% (36.11%) (69.81%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
28 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $1.61 $1.53 $.92 $1.44 $ 4.77
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) (.02) (.04) (.03) (.04) (.04)
Net gains (losses) (both realized and unrealized) (.05) .12 .64 (.48) (3.29)
----- ----- ----- ----- ------
Total from investment operations (.07) .08 .61 (.52) (3.33)
----- ----- ----- ----- ------
Net asset value, end of period $1.54 $1.61 $1.53 $.92 $ 1.44
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $3 $4 $4 $2 $4
Ratio of expenses to average daily net assets(b) 2.52%(c) 2.49% 2.72% 2.69% 2.42%
Ratio of net investment income (loss) to average daily net assets (1.76%)(c) (2.23%) (2.26%) (2.39%) (1.84%)
Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233%
Total return(d) (4.35%)(e) 5.23% 66.30% (36.11%) (69.81%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
29 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(g) 2004(b)
Net asset value, beginning of period $1.83 $1.70
----- -----
Income from investment operations:
Net investment income (loss) (.01) (.02)
Net gains (losses) (both realized and unrealized) (.06) .15
----- -----
Total from investment operations (.07) .13
----- -----
Net asset value, end of period $1.76 $1.83
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $-- $--
Ratio of expenses to average daily net assets(c) 1.09%(d) 1.03%(d)
Ratio of net investment income (loss) to average daily net assets (.22%)(d) (.73%)(d)
Portfolio turnover rate (excluding short-term securities) 43% 349%
Total return(e) (3.83%)(f) 7.65%(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was July 15, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
30 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $1.83 $1.72 $1.03 $1.60 $ 5.25
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) (.01) (.02) (.02) (.03) (.02)
Net gains (losses) (both realized and unrealized) (.06) .13 .71 (.54) (3.63)
----- ----- ----- ----- ------
Total from investment operations (.07) .11 .69 (.57) (3.65)
----- ----- ----- ----- ------
Net asset value, end of period $1.76 $1.83 $1.72 $1.03 $ 1.60
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $-- $-- $-- $-- $--
Ratio of expenses to average daily net assets(b) 1.57%(c) 1.55% 1.69% 1.72% 1.49%
Ratio of net investment income (loss) to average daily net assets (.83%)(c) (1.28%) (1.25%) (1.61%) (.89%)
Portfolio turnover rate (excluding short-term securities) 43% 349% 546% 391% 233%
Total return(d) (3.83%)(e) 6.40% 66.99% (35.63%) (69.52%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
31 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
32 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Nov. 1, 2004 April 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $956.30 $8.58 1.76%
Hypothetical (5% return before expenses) $1,000 $1,016.16 $8.85 1.76%
Class B
Actual(b) $1,000 $956.20 $12.39 2.54%
Hypothetical (5% return before expenses) $1,000 $1,012.27 $12.74 2.54%
Class C
Actual(b) $1,000 $956.50 $12.29 2.52%
Hypothetical (5% return before expenses) $1,000 $1,012.37 $12.64 2.52%
Class I
Actual(b) $1,000 $961.70 $5.33 1.09%
Hypothetical (5% return before expenses) $1,000 $1,019.50 $5.49 1.09%
Class Y
Actual(b) $1,000 $961.70 $7.68 1.57%
Hypothetical (5% return before expenses) $1,000 $1,017.10 $7.90 1.57%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2005: -4.37%
for Class A, -4.38% for Class B, -4.35% for Class C, -3.83% for Class I and
-3.83% for Class Y.
- --------------------------------------------------------------------------------
33 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
Approval of Investment Management Services Agreement
American Express Financial Corporation (AEFC), a wholly-owned subsidiary of
American Express Company, serves as the investment manager to the Fund. Under an
Investment Management Services Agreement (the Agreement), AEFC provides
investment advice and other services to the Fund. Throughout the year, the
Funds' Board of Directors and the Board's Investment Review Committee monitor
these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. AEFC prepares detailed reports for the Board and its Contracts
Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with AEFC (the Interim Period). The spin-off will not result in an
"assignment" of the Agreement under the Investment Company Act of 1940 and,
therefore, will not cause the termination of the Agreement according to its
terms. In connection with the spin-off AEFC has proposed that going forward,
services under the Agreement be provided by an affiliate, RiverSource
Investments, LLC (RiverSource). Independent counsel advised the Board that it
would be prudent, in connection with the spin-off, to consider a new agreement
with RiverSource and to seek shareholder approval of that agreement as soon as
practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above the median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 exceeded the median.
The Board noted that, in addition to portfolio management and investment
research, AEFC provides portfolio trading, daily net asset value calculation,
management of cash flow, product development, administration of its compliance
and legal departments, access to distribution, accounting and recordkeeping, and
reporting to the Board and shareholders. To evaluate these services, the Board
referred to surveys and benchmarks established by commercial providers, trade
associations and AEFC's internal processes. The Board concluded that the
services provided were consistent with services provided by investment managers
to comparable mutual funds.
- --------------------------------------------------------------------------------
34 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
The Board also evaluated the price paid for the services provided by AEFC,
noting the existence of a pricing philosophy, established by the Board and AEFC,
that seeks to maintain total Fund expenses within a range of the median expenses
charged to comparable funds sold through financial advisors. The Board
considered detailed information set forth in an annual report on fees and
expenses, including, among other things, data showing a comparison of the Fund's
expenses with median expenses paid by funds in its comparison group and data
showing the Fund's contribution to AEFC's profitability. The Board determined
that the total expense ratio of the Fund is below the median of its comparison
group.
The Board considered the economies of scale that might be realized by AEFC as
the Fund grew and took note of the extent to which Fund shareholders also might
benefit from such growth. The Board considered that the Agreement provided for
lower fees as assets increase at pre-established breakpoints and concluded that
the Agreement satisfactorily provided for sharing these economies of scale.
The Board took into account the Contract Committee's discussion comparing the
fees AEFC charges to the Fund with those it charges to institutional clients,
noting that the relatively higher fees paid by the Fund were principally
attributable to the additional services required to manage a regulated mutual
fund, like the Fund, and the operation of a large mutual fund family. The Board
also considered the profitability realized by AEFC and its affiliates from its
relationship with the Fund. The Board took into account the services acquired by
AEFC through the use of commission dollars paid by the Fund on portfolio
transactions. The Board concluded that AEFC's overall costs and profitability
were appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit AEFC to offer
competitive compensation to its personnel, make necessary investments in its
business and earn an appropriate profit. Based on the foregoing, the Board
concluded that the fees paid to AEFC under the Agreement were fair and
reasonable and determined to approve renewal of the Agreement for the Interim
Period.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
35 -- AXP GLOBAL TECHNOLOGY FUND -- 2005 SEMIANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AXP(R) Threadneedle
Emerging Markets
Fund
Semiannual Report
for the Period Ended
April 30, 2005
AXP Threadneedle Emerging Markets Fund seeks to provide shareholders with
long-term capital growth.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers with Portfolio Management 6
Investments in Securities 10
Financial Statements (Portfolio) 14
Notes to Financial Statements (Portfolio) 17
Financial Statements (Fund) 21
Notes to Financial Statements (Fund) 24
Fund Expenses Example 33
Approval of Investment Management Services Agreement 35
Proxy Voting 37
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated. The current subadvisory agreement will remain in place.
(logo) Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Fund Snapshot AT APRIL 30, 2005
PORTFOLIO MANAGERS
Portfolio managers* Since Years in industry
Julian Thompson 1/00 11
Jules Mort 10/03 7
* The Fund is managed by a team led by Julian Thompson and Jules Mort.
FUND OBJECTIVE
For investors seeking long-term growth of capital.
Inception dates by class
A: 11/13/96 B: 11/13/96 C: 6/26/00 I: 3/4/04 Y: 11/13/96
Ticker symbols by class
A: IDEAX B: IEMBX C: -- I: -- Y: --
Total net assets $358.5 million
Number of holdings 77
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
Taiwan 13.0%
South Korea 12.8%
South Africa 11.4%
Mexico 10.1%
Brazil 9.7%
Russia 6.1%
India 5.5%
Israel 5.5%
Thailand 3.8%
China 3.2%
Hong Kong 3.2%
Cash & short-term securities 2.9%
Hungary 2.8%
Indonesia 2.8%
Peru 1.2%
Malaysia 1.1%
Netherlands 1.1%
Czechoslovakia Federated Republic 1.0%
Other* 2.8%
* Includes Argentina, Egypt, Philippine Islands, Poland and Turkey.
TOP TEN HOLDINGS
Percentage of portfolio assets
Samsung Electronics (South Korea) 5.6%
Petroleo Brasileiro ADR (Brazil) 3.5
Cia Vale do Rio Doce ADR (Brazil) 3.4
Taiwan Semiconductor Mfg (Taiwan) 3.4
Mobile Telesystems ADR (Russia) 2.9
POSCO (South Korea) 2.5
LUKOIL ADR (Russia) 2.3
Chinatrust Financial Holding (Taiwan) 2.2
America Movil ADR Series L (Mexico) 2.0
Teva Pharmaceutical Inds ADR (Israel) 2.0
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Stocks of small- and medium-sized companies may be subject to more abrupt or
erratic price movement than stocks of larger companies. Some of these companies
also may have fewer financial resources,
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2005
+12.61% +13.63% +12.52%
+12.61% = AXP Threadneedle Emerging Markets Fund Class A (excluding sales
charge)
+13.63% = MSCI Emerging Markets Index(1) (unmanaged)
+12.52% = Lipper Emerging Markets Funds Index(2)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds.
(1) The Morgan Stanley Capital International (MSCI) Emerging Markets Index, an
unmanaged market capitalization-weighted index, is compiled from a
composite of securities markets of 26 emerging market countries. The index
reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.
(2) The Lipper Emerging Markets Funds Index includes the 30 largest emerging
markets funds tracked by Lipper Inc. The index's returns include net
reinvested dividends.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- --------------------------------------------------------------------------------
4 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class I Class Y
(Inception dates) (11/13/96) (11/13/96) (6/26/00) (3/4/04) (11/13/96)
After After
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
at April 30, 2005
6 months* +12.61% +6.12% +12.10% +8.10% +11.94% +10.94% +12.67% +12.56%
1 year +19.67% +12.79% +18.89% +14.89% +18.88% +18.88% +20.23% +19.92%
3 years +14.78% +12.54% +13.94% +13.17% +14.00% +14.00% N/A +15.07%
5 years +3.43% +2.21% +2.65% +2.47% N/A N/A N/A +3.72%
Since inception +4.66% +3.93% +3.86% +3.86% +3.70% +3.70% +8.22% +4.86%
at March 31, 2005
6 months* +18.93% +12.09% +18.37% 14.37% +18.56% +17.56% +19.11% +19.00%
1 year +11.76% +5.33% +10.88% +6.88% +11.07% +11.07% +12.36% +12.07%
3 years +15.45% +13.20% +14.51% +13.74% +14.65% +14.65% N/A +15.66%
5 years +1.82% +0.62% +1.03% +0.84% N/A N/A N/A +2.07%
Since inception +5.01% +4.27% +4.20% +4.20% +4.28% +4.28% +11.30% +5.20%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
eligible investors only, currently limited to AXP Portfolio Builder Series
funds, six affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- --------------------------------------------------------------------------------
5 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, portfolio managers Julian Thompson and Jules Mort discuss the Fund's
results and positioning for the semiannual period.
Q: How did AXP Threadneedle Emerging Markets Fund perform for the six months
ended April 30, 2005?
A: AXP Threadneedle Emerging Markets Fund rose 12.61% (Class A shares excluding
sales charge) for the six months ended April 30, 2005. This was less than
the Fund's benchmark, the MSCI Emerging Markets Index, which advanced 13.63%
for the period. The Fund's peer group, as represented by the Lipper Emerging
Markets Funds Index, was up 12.52% for the same time frame.
Q: How did market conditions and country positioning affect performance?
A: Fund performance during the six-month period was helped by a large exposure
in Brazil. However, detracting from performance was the Fund's underweight
position in Korea, which was by far the largest weighting within the Fund's
benchmark, the MSCI Emerging Markets Index. The Fund also started the period
with low exposure to the industrials sector, which was one of the strongest
performing sectors. However, good stock selection offset much of the impact
of negative sector and country allocation. A large holding in Sampoerna, an
Indonesian cigarette manufacturer that has been bought out by U.S.-based
Altria, was a particularly strong performer. A holding in Orascom Telecom in
Egypt also contributed significantly to performance, as it rose more than
50% during the first few months of the year. The stock was sold during the
period when it reached our price target.
After a strong start, emerging markets as an asset class gave up most of the
gains seen in January and February as expectations for U.S. interest rates
turned more hawkish and risk appetite began to wane. Strength in the U.S.
dollar, a direct consequence of the change in rate expectations, further
undermined sentiment toward emerging markets and led to some unwinding of
the "carry trade" that has fueled the recent boom in domestic bond markets.
Dollar weakness and low U.S. interest rates have encouraged a "carry trade"
in which investors borrow in dollars to buy high-yielding emerging market
domestic debt. As U.S. interest rates rise, this carry trade is reversed,
providing support for the dollar and removing some liquidity from emerging
capital markets. Generally speaking, a weaker dollar is very beneficial for
emerging economies because it tends to support emerging market currencies,
which in turn creates low inflation, leading to falling interest rates and
rising consumption. A weak dollar also tends to inflate commodity
- --------------------------------------------------------------------------------
6 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> We have also continued to build positions in
consumer-related stocks such as retailers and mobile telecom providers in
light of strong long-term demand. (end callout quote)
prices. As emerging economies are net commodity exporters, a weak dollar has
been very beneficial for trade balances and industrial confidence in
emerging economies.
The sell-off in emerging markets during March was felt most acutely in Latin
America and the higher risk markets of Eastern Europe and the Middle East.
Asia proved relatively resilient, not surprisingly given the high savings
ratios and lower debt levels generally displayed by countries in that
region. However, the higher risk areas performed better earlier in the year.
Turkey, for instance, fell more than 10% during March alone, while Hungary
and Poland also recorded double-digit declines.
Among the best performing stocks was Israeli agrichemical company
Makhteshim-Agan, which continued to gain market share from its global peers
thanks to the more flexible contracts it offers. Hong Kong-listed retailers
Giordano and Esprit benefited from strong Asian demand. In addition, South
African bank ABSA was a strong performer when the proposed takeover bid from
U.K.-based Barclays was confirmed during April. Positions in Brazilian iron
ore producer CVRD and Korean steel company POSCO detracted from performance
against a backdrop of economic growth concerns.
Q: What changes did you make to the Fund and how is it currently positioned?
A: Our current country/regional allocation reflects our relatively cautious
stance, in that we have moved to a neutral position in Latin America and
have reduced the Fund's exposure to Eastern Europe, the Middle East and
Africa (EMEA). We have increased our exposure to Asia, and we intend to
continue to raise the Fund's Asian weighting. We have almost no exposure to
Turkey given its poor funding position to issue a lot of debt on a regular
basis and, therefore, will be most vulnerable to any reversal of the carry
trade, in which there will be fewer buyers for the economy's debt. The
largest country overweight in the Fund is Russia, which is prepaying debt
rather than increasing issuance. Russia is also benefiting from the recent
increase in oil prices topping more than $57 a barrel in the U.S. in April.
- --------------------------------------------------------------------------------
7 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> The structural factors driving emerging markets -- better
economic governance, growing access to credit and rising investment -- remain
intact and offer an excellent environment for growth in corporate profits. (end
callout quote)
At the sector level, the Fund had a higher-than-MSCI Emerging Markets Index
weighting in financials. We remain committed to our overweight in financials
as we believe that we are near the beginning of a durable credit cycle in
emerging markets. Increased access to credit will continue to fuel growth in
credit to gross domestic product ratios, particularly in Latin America. This
will benefit Latin American banks, and we have been building up our holdings
in these stocks in recent weeks at the expense of their Asian counterparts.
Banks are not the only beneficiaries of burgeoning credit; we have also
continued to build positions in consumer-related stocks such as retailers
and mobile telecom providers in light of strong long-term demand. Meanwhile,
cyclical exposure has been reduced further with sales in the mining sector
and a reduction in our long-term position in Samsung following disappointing
results.
From a sector perspective, we have increased holdings in the energy sector
with the purchase of CNOOC in China and ONGC in India. Both are exploration
and production companies that should benefit from ongoing strength in oil
prices as well as some regulatory reform in the case of ONGC. The Fund is
now neutral in the energy sector and also in materials. The Fund's biggest
overweight position is in consumer staples.
Q: What is the Fund's tactical view and strategy for the months ahead?
A: We are relatively cautious on the outlook for emerging markets over the next
six months or so. However, we are not expecting a major pullback and we
believe that any prolonged weakness would represent an excellent buying
opportunity. The structural factors driving emerging markets -- better
economic governance, growing access to credit and rising investment --
remain intact and offer an excellent environment for growth in corporate
profits. Therefore, we believe that the current cycle in emerging markets is
far from over.
- --------------------------------------------------------------------------------
8 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
In previous cycles the unwinding of carry trades resulted in currency
devaluations and debt crises. We are not expecting the reversal of the carry
trade to be disruptive in this cycle largely because emerging economies are
well-funded and have been running relatively tight monetary policies. The
impact on emerging economies is therefore likely to be relatively muted.
Financial markets, though, are driven by the marginal dollar, and there is
no doubt that conditions are likely to be less favorable for emerging
capital markets as the carry trade unwinds.
It is important to reiterate that the fundamentals in emerging markets
remain excellent. The reforms put in place during the crisis years of
1994-1999, when the dollar was relatively strong and emerging currencies
were weak, have created a very solid platform for growth during a phase of
dollar weakness. Domestic banking systems are liquid and ready to lend;
pent-up demand is high and investment is picking up on the back of it.
Moreover, emerging markets are generally self-funding, suggesting that this
cycle will prove to be relatively durable, unlike the cycle of 1993-1995,
which was predominantly funded through short-term external capital and
resulted in a wave of devaluations and debt crises once global interest
rates began to rise. Also, central banks are now much more transparent and
are setting inflation targets with fully flexible exchange rates,
eliminating the risks associated with fixed exchange rates. In fact, both
Mexico and Brazil have recently been well ahead of the U.S. Federal Reserve
in raising rates, suggesting that domestic rates in these two economies are
more likely to fall than rise over the next year or so.
Nevertheless, we also recognize that short-term capital inflows to emerging
economies have been unusually high over the last year couple of years. For
that reason, we are relatively cautious on the asset class for the next six
months or so. However, we do not anticipate any major reversal for emerging
market economies, and we believe that the structural factors driving the
performance of the asset class over the last couple of years remain intact.
- --------------------------------------------------------------------------------
9 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Investments in Securities
Emerging Markets Portfolio
April 30, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (92.5%)(c)
Issuer Shares Value(a)
Argentina (0.5%)
Home building
IRSA Inversiones y
Representaciones GDR 157,774(b) $1,776,535
Brazil (6.8%)
Energy (3.5%)
Petroleo Brasileiro ADR 339,432 12,474,126
Metals (3.3%)
Cia Vale do Rio Doce ADR 508,934 11,807,269
China (3.2%)
Energy (1.2%)
CNOOC 7,815,000 4,204,458
Insurance (1.0%)
China Life Insurance Cl H 5,416,000(b) 3,609,285
Telecom equipment & services (1.0%)
China Telecom Cl H 10,434,000 3,551,786
Czechoslovakia Federated Republic (1.0%)
Health care products
Zentiva 93,739(b) 3,463,777
Egypt (0.7%)
Telecom equipment & services
Orascom Telecom 62,809(b,d) 2,575,169
Hong Kong (3.1%)
Retail -- general
Esprit Holdings 587,000 4,373,009
Giordano Intl 7,400,000 5,142,142
Sa Sa Intl Holdings 3,814,000 1,748,816
Total 11,263,967
Common stocks (continued)
Issuer Shares Value(a)
Hungary (2.7%)
Banks and savings & loans (1.4%)
OTP Bank 166,480 $5,117,720
Health care products (1.3%)
Gedeon Richter 39,014 4,742,665
India (5.4%)
Banks and savings & loans (1.6%)
ICICI Bank ADR 158,546 2,866,512
State Bank of India GDR 71,812 2,574,460
Total 5,440,972
Beverages & tobacco (1.0%)
ITC 108,721 3,584,938
Building materials & construction (0.4%)
Grasim Inds GDR 58,470(d) 1,558,226
Computer software & services (1.5%)
Infosys Technologies 123,772 5,364,796
Energy (0.9%)
Oil & Natural Gas 182,236 3,392,480
Indonesia (2.7%)
Banks and savings & loans (1.0%)
Bank Rakyat Indonesia 13,086,500 3,668,268
Beverages & tobacco (1.7%)
HM Sampoerna 5,514,000 6,022,296
Israel (5.4%)
Chemicals (1.3%)
Makhteshin-Agan Inds 764,927 4,796,377
Computer software & services (1.5%)
Check Point Software
Technologies 262,909(b) 5,507,943
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Israel (cont.)
Electronics (0.5%)
Lipman Electronic Engineering 60,243 $1,752,469
Health care products (2.0%)
Teva Pharmaceutical Inds ADR 230,320 7,195,197
Malaysia (1.1%)
Leisure time & entertainment
Resorts World 1,582,800 3,982,391
Mexico (9.9%)
Beverages & tobacco (1.9%)
Grupo Modelo Series C 2,360,700 6,729,293
Cellular telecommunications (1.9%)
America Movil ADR Series L 143,920 7,145,628
Home building (0.1%)
Urbi Desarrollos Urbanos 98,700(b) 468,469
Media (1.0%)
Grupo Televisa ADR 65,751 3,693,891
Metals (0.7%)
Hylsamex Cl B 707,800 2,353,889
Multi-industry (1.1%)
Grupo Financiero Banorte Cl O 620,962 4,012,750
Real estate (1.3%)
Consorcio ARA 1,477,400(b) 4,568,369
Retail -- general (1.9%)
Wal-Mart de Mexico Series V 1,810,012 6,715,578
Netherlands (1.1%)
Beverages & tobacco
Efes Breweries Intl GDR 119,769(b,d) 3,772,724
Peru (1.2%)
Precious metals
Compania de Minas
Buenaventura ADR 197,125 4,208,619
Philippine Islands (0.8%)
Utilities -- telephone
Philippine Long Distance
Telephone 106,960 2,755,496
Common stocks (continued)
Issuer Shares Value(a)
Poland (0.8%)
Media
TVN 205,106(b) $2,710,761
Russia (6.0%)
Energy (2.2%)
LUKOIL ADR 58,843 7,973,227
Precious metals (1.0%)
Mining and Metallurgical Co
Norilsk Nickel ADR 64,231 3,564,821
Utilities -- telephone (2.8%)
Mobile Telesystems ADR 301,493 10,130,164
South Africa (11.2%)
Banks and savings & loans (2.2%)
ABSA Group 343,582 4,404,896
Standard Bank Group 367,450 3,667,254
Total 8,072,150
Energy equipment & services (2.0%)
Sasol 304,114 7,120,354
Multi-industry (1.0%)
Barloworld 235,371 3,570,449
Precious metals (1.4%)
AngloGold Ashanti 151,669 4,852,792
Retail -- general (2.1%)
JD Group 380,848 3,920,656
Massmart Holdings 491,118 3,550,044
Total 7,470,700
Telecom equipment & services (2.5%)
MTN Group 654,424 4,654,644
Telkom 251,546 4,392,156
Total 9,046,800
South Korea (12.6%)
Automotive & related (1.0%)
Hyundai Motor 66,801 3,636,143
Hyundai Motor GDR 1(d) 27
Total 3,636,170
Banks and savings & loans (1.0%)
Kookmin Bank 81,310 3,451,870
Electronics (5.4%)
Samsung Electronics 42,749 19,553,612
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
South Korea (cont.)
Engineering & construction (1.1%)
Hyundai Development 189,910 $3,796,298
Metals (2.5%)
POSCO 48,420 8,820,928
Retail -- general (1.6%)
Shinsegae 18,076 5,801,319
Taiwan (12.8%)
Banks and savings & loans (3.7%)
Chinatrust Financial Holding 6,717,234 7,715,900
E.Sun Financial Holding 3,006,000 2,464,197
Taishin Financial Holdings 3,543,360 3,181,928
Total 13,362,025
Computer hardware (2.1%)
Asustek Computer 1,274,800 3,411,257
Hon Hai Precision Industry 839,000 3,985,362
Total 7,396,619
Electronics (4.4%)
Acer 2,302,172 3,772,890
Taiwan Semiconductor Mfg 7,272,774 12,097,240
Total 15,870,130
Insurance (1.7%)
Cathay Financial Holding 3,414,000 6,193,021
Textiles & apparel (0.8%)
Far Eastern Textile 4,416,000 3,009,115
Thailand (3.7%)
Banks and savings & loans (2.1%)
Bangkok Bank 1,600,100 4,342,090
Kasikornbank 2,356,000 3,320,434
Total 7,662,524
Energy equipment & services (0.8%)
PTT Public 529,000 2,709,287
Utilities -- telephone (0.8%)
Advanced Info Service 1,208,700 2,913,501
Common stocks (continued)
Issuer Shares Value(a)
Turkey (--%)
Beverages & tobacco
Anadolu Efes Biracilik
ve Malt Sanayil 1 $13
Total common stocks
(Cost: $298,136,380) $331,966,466
Preferred stocks (2.7%)(c)
Issuer Shares Value(a)
Brazil
Banco Bradesco 177,486 $5,461,594
Banco Itau Holding Financeira 25,080 4,306,857
Total preferred stocks
(Cost: $7,820,214) $9,768,451
Short-term securities (2.8%)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies (2.2%)
Federal Home Loan Mtge Corp Disc Nts
05-10-05 2.68% $2,600,000 $2,597,875
06-15-05 2.70 1,800,000 1,793,677
Federal Natl Mtge Assn Disc Nt
05-02-05 2.70 3,600,000 3,599,190
Total 7,990,742
Commercial paper (0.6%)
General Electric Capital
05-02-05 2.95 2,200,000 2,199,459
Total short-term securities
(Cost: $10,190,591) $10,190,201
Total investments in securities
(Cost: $316,147,185)(e) $351,925,118
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Fund's Board of Directors. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At April 30, 2005, the value of these securities
amounted to $7,906,146 or 2.2% of net assets.
(e) At April 30, 2005, the cost of securities for federal income tax
purposes was approximately $316,147,000 and the approximate aggregate
gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $41,390,000
Unrealized depreciation (5,612,000)
----------
Net unrealized appreciation $35,778,000
-----------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
13 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
Emerging Markets Portfolio
April 30, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $316,147,185) $351,925,118
Foreign currency holdings (identified cost $5,093,677) (Note 1) 5,104,344
Dividends and accrued interest receivable 487,701
Receivable for investment securities sold 17,403,307
----------
Total assets 374,920,470
-----------
Liabilities
Disbursements in excess of cash on demand deposit 114,136
Payable for investment securities purchased 15,786,503
Accrued investment management services fee 10,667
Other accrued expenses 73,376
------
Total liabilities 15,984,682
----------
Net assets $358,935,788
============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
Emerging Markets Portfolio
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Dividends $ 3,785,376
Interest 124,100
Less foreign taxes withheld (352,881)
--------
Total income 3,556,595
---------
Expenses (Note 2):
Investment management services fee 1,763,506
Compensation of board members 5,273
Custodian fees 153,700
Audit fees 12,000
Other 4,058
-----
Total expenses 1,938,537
Earnings credits on cash balances (Note 2) (1,584)
------
Total net expenses 1,936,953
---------
Investment income (loss) -- net 1,619,642
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 37,450,091
Foreign currency transactions (296,472)
--------
Net realized gain (loss) on investments 37,153,619
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (692,936)
--------
Net gain (loss) on investments and foreign currencies 36,460,683
----------
Net increase (decrease) in net assets resulting from operations $38,080,325
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
Emerging Markets Portfolio
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ 1,619,642 $ 3,059,315
Net realized gain (loss) on investments 37,153,619 48,079,058
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (692,936) (9,980,094)
-------- ----------
Net increase (decrease) in net assets resulting from operations 38,080,325 41,158,279
---------- ----------
Proceeds from contributions 32,744,658 22,729,634
Fair value of withdrawals (8,189,295) (13,403,405)
---------- -----------
Net contributions (withdrawals) from partners 24,555,363 9,326,229
---------- ---------
Total increase (decrease) in net assets 62,635,688 50,484,508
Net assets at beginning of period 296,300,100 245,815,592
----------- -----------
Net assets at end of period $358,935,788 $296,300,100
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
Emerging Markets Portfolio
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Emerging Markets Portfolio (the Portfolio) is a series of World Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. The Portfolio invests
primarily in equity securities of emerging markets companies. The Declaration of
Trust permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options.
- --------------------------------------------------------------------------------
17 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
The risk in writing a call option is that the Portfolio gives up the opportunity
for profit if the market price of the security increases. The risk in writing a
put option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At April 30, 2005, foreign currency holdings consisted of
multiple denominations, primarily Taiwan dollars and Hong Kong dollars.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
- --------------------------------------------------------------------------------
18 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
1.10% to 1.00% annually as the Portfolio's assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment based on a
comparison of the performance of Class A shares of AXP Threadneedle Emerging
Markets Fund to the Lipper Emerging Markets Funds Index. In certain
circumstances the board may approve a change in the index. The maximum
adjustment is 0.12% per year. If the performance difference is less than 0.50%,
the adjustment will be zero. The adjustment decreased the fee by $139,792 for
the six months ended April 30, 2005.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their compensation. Deferred amounts are treated as though equivalent
dollar amounts had been invested in shares of the underlying Fund or other
American Express mutual funds. The Portfolio's liability for these amounts is
adjusted for market value changes and remains in the Portfolio until distributed
in accordance with the Plan.
- --------------------------------------------------------------------------------
19 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the
portfolio.
During the six months ended April 30, 2005, the Portfolio's custodian fees were
reduced by $1,584 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $225,976,242 and $197,632,871, respectively, for the six
months ended April 30, 2005. Realized gains and losses are determined on an
identified cost basis.
4. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended Oct. 31, 2005(e) 2004 2003 2002 2001
Ratio of expenses to average daily net assets(a) 1.11%(b) 1.14% 1.20% 1.23% 1.20%
Ratio of net investment income (loss) to average daily net assets .93%(b) 1.12% 1.20% .63% .79%
Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193%
Total return(c) 12.82%(d) 17.03% 37.59% 9.39% (22.59%)
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Adjusted to an annual basis.
(c) Total return is based on a calculated Portfolio net asset value and does
not reflect payment of a sales charge.
(d) Not annualized.
(e) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
20 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Threadneedle Emerging Markets Fund
April 30, 2005 (Unaudited)
Assets
Investment in Portfolio (Note 1) $358,812,487
Capital shares receivable 157,723
-------
Total assets 358,970,210
-----------
Liabilities
Capital shares payable 174,910
Accrued distribution fee 3,915
Accrued service fee 50
Accrued transfer agency fee 1,857
Accrued administrative services fee 945
Other accrued expenses 249,126
-------
Total liabilities 430,803
-------
Net assets applicable to outstanding capital stock $358,539,407
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 516,041
Additional paid-in capital 360,663,848
Excess of distributions over net investment income (47,526)
Accumulated net realized gain (loss) (Note 5) (38,417,124)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 35,824,168
----------
Total -- representing net assets applicable to outstanding capital stock $358,539,407
============
Net assets applicable to outstanding shares: Class A $231,997,270
Class B $ 84,250,805
Class C $ 2,120,450
Class I $ 21,802,031
Class Y $ 18,368,851
Net asset value per share of outstanding capital stock: Class A shares 33,001,004 $ 7.03
Class B shares 12,636,975 $ 6.67
Class C shares 317,261 $ 6.68
Class I shares 3,065,256 $ 7.11
Class Y shares 2,583,650 $ 7.11
--------- ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Threadneedle Emerging Markets Fund
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Dividends $ 3,784,046
Interest 124,049
Less foreign taxes withheld (352,757)
--------
Total income 3,555,338
---------
Expenses (Note 2):
Expenses allocated from Portfolio 1,936,271
Distribution fee
Class A 278,419
Class B 414,639
Class C 8,291
Transfer agency fee 357,160
Incremental transfer agency fee
Class A 28,293
Class B 18,165
Class C 380
Service fee -- Class Y 9,393
Administrative services fees and expenses 167,376
Compensation of board members 5,148
Printing and postage 71,050
Registration fees 23,980
Audit fees 4,000
Other 8,071
-----
Total expenses 3,330,636
Earnings credits on cash balances (Note 2) (3,259)
------
Total net expenses 3,327,377
---------
Investment income (loss) -- net 227,961
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 37,436,159
Foreign currency transactions (296,402)
--------
Net realized gain (loss) on investments 37,139,757
----------
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (692,602)
--------
Net gain (loss) on investments and foreign currencies 36,447,155
----------
Net increase (decrease) in net assets resulting from operations $36,675,116
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Threadneedle Emerging Markets Fund
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 227,961 $ 620,795
Net realized gain (loss) on investments 37,139,757 48,060,876
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (692,602) (9,976,656)
-------- ----------
Net increase (decrease) in net assets resulting from operations 36,675,116 38,705,015
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (923,045) (1,739,711)
Class B -- (347,165)
Class C (588) (2,977)
Class I (128,053) --
Class Y (98,442) (233,251)
------- --------
Total distributions (1,150,128) (2,323,104)
---------- ----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 43,824,165 51,336,374
Class B shares 12,550,255 13,065,540
Class C shares 967,202 710,046
Class I shares 13,943,312 12,072,940
Class Y shares 1,844,141 3,109,037
Reinvestment of distributions at net asset value
Class A shares 913,340 1,721,050
Class B shares -- 343,304
Class C shares 561 2,764
Class I shares 127,968 --
Class Y shares 98,442 233,251
Payments for redemptions
Class A shares (26,055,043) (41,601,391)
Class B shares (Note 2) (10,357,267) (21,634,907)
Class C shares (Note 2) (189,362) (205,777)
Class I shares (6,552,981) (2,074)
Class Y shares (3,788,192) (5,555,746)
---------- ----------
Increase (decrease) in net assets from capital share transactions 27,326,541 13,594,411
---------- ----------
Total increase (decrease) in net assets 62,851,529 49,976,322
Net assets at beginning of period 295,687,878 245,711,556
----------- -----------
Net assets at end of period $358,539,407 $295,687,878
============ ============
Undistributed (excess of distributions over) net investment income $ (47,526) $ 874,641
------------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Threadneedle Emerging Markets Fund
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
o Class C shares may be subject to CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At April 30, 2005, AEFC and the AXP Portfolio
Builder Series funds owned 100% of Class I shares, which represents 6.08% of the
Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Investment in Emerging Markets Portfolio
The Fund invests all of its assets in Emerging Markets Portfolio (the
Portfolio), a series of World Trust (the Trust), an open-end investment company
that has the same objectives as the Fund. The Portfolio invests primarily in
equity securities of emerging markets companies.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at April 30, 2005 was 99.97%.
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the
- --------------------------------------------------------------------------------
24 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
principal market in which such securities are normally traded. Pursuant to
procedures adopted by the Board of Trustees of the portfolios, AEFC utilizes
Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
- --------------------------------------------------------------------------------
25 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
that declines from 0.10% to 0.05% annually as the Fund's assets increase. A
minor portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the
portfolio.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
- --------------------------------------------------------------------------------
26 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Sales charges received by the Distributor for distributing Fund shares were
$437,716 for Class A, $31,629 for Class B and $238 for Class C for the six
months ended April 30, 2005.
AEFC and its affiliates have agreed to waive certain fees and expenses until
Oct. 31, 2005. Under this agreement net expenses will not exceed 1.99% for Class
A, 2.75% for Class B, 2.75% for Class C, 1.47% for Class I and 1.82% for Class
Y.
During the six months ended April 30, 2005, the Fund's transfer agency fees were
reduced by $3,259 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 2005
Class A Class B Class C Class I Class Y
Sold 6,191,435 1,866,457 142,710 1,950,867 254,591
Issued for reinvested distributions 132,753 -- 85 18,413 14,164
Redeemed (3,682,786) (1,545,662) (28,605) (903,439) (523,613)
---------- ---------- ------- -------- --------
Net increase (decrease) 2,641,402 320,795 114,190 1,065,841 (254,858)
--------- ------- ------- --------- --------
Year ended Oct. 31, 2004
Class A Class B Class C Class I* Class Y
Sold 8,624,819 2,280,081 122,428 1,999,746 521,530
Issued for reinvested distributions 308,432 64,531 518 -- 41,430
Redeemed (7,033,449) (3,919,054) (37,461) (331) (917,351)
---------- ---------- ------- ---- --------
Net increase (decrease) 1,899,802 (1,574,442) 85,485 1,999,415 (354,391)
--------- ---------- ------ --------- --------
* Inception date was March 4, 2004.
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are
payable within 60 days after such loan is executed. The Fund also pays a
commitment fee equal to its pro rata share of the amount of the credit facility
at a rate of 0.09% per annum. The Fund had no borrowings outstanding during the
six months ended April 30, 2005.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$75,392,313 at Oct. 31, 2004, that if not offset by capital gains will expire in
2009. It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
27 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $6.27 $5.46 $4.00 $3.69 $ 4.81
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) -- .03 .02 (.01) --
Net gains (losses) (both realized and unrealized) .79 .84 1.44 .32 (1.12)
----- ----- ----- ----- ------
Total from investment operations .79 .87 1.46 .31 (1.12)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income (.03) (.06) -- -- --
----- ----- ----- ----- ------
Net asset value, end of period $7.03 $6.27 $5.46 $4.00 $ 3.69
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $232 $191 $155 $132 $143
Ratio of expenses to average daily net assets(b) 1.77%(c) 1.83% 2.02% 2.05% 2.02%
Ratio of net investment income (loss) to average daily net assets .28%(c) .41% .39% (.19%) (.02%)
Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193%
Total return(d) 12.61%(e) 16.09% 36.50% 8.40% (23.28%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
28 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.95 $5.19 $3.83 $3.56 $ 4.67
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) (.01) (.02) (.02) (.04) (.04)
Net gains (losses) (both realized and unrealized) .73 .81 1.38 .31 (1.07)
----- ----- ----- ----- ------
Total from investment operations .72 .79 1.36 .27 (1.11)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income -- (.03) -- -- --
----- ----- ----- ----- ------
Net asset value, end of period $6.67 $5.95 $5.19 $3.83 $ 3.56
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $84 $73 $72 $65 $73
Ratio of expenses to average daily net assets(b) 2.54%(c) 2.59% 2.80% 2.83% 2.79%
Ratio of net investment income (loss) to average daily net assets (.49%)(c) (.32%) (.39%) (.95%) (.80%)
Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193%
Total return(d) 12.10%(e) 15.18% 35.51% 7.58% (23.77%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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29 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.97 $5.20 $3.84 $3.56 $ 4.68
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) (.01) (.01) (.02) (.03) (.04)
Net gains (losses) (both realized and unrealized) .72 .81 1.38 .31 (1.08)
----- ----- ----- ----- ------
Total from investment operations .71 .80 1.36 .28 (1.12)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income -- (.03) -- -- --
----- ----- ----- ----- ------
Net asset value, end of period $6.68 $5.97 $5.20 $3.84 $ 3.56
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $2 $1 $1 $1 $--
Ratio of expenses to average daily net assets(b) 2.54%(c) 2.60% 2.80% 2.85% 2.79%
Ratio of net investment income (loss) to average daily net assets (.45%)(c) (.34%) (.41%) (1.13%) (.63%)
Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193%
Total return(d) 11.94%(e) 15.37% 35.42% 7.87% (23.93%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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30 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class I
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(g) 2004(b)
Net asset value, beginning of period $6.36 $6.54
----- -----
Income from investment operations:
Net investment income (loss) .01 .01
Net gains (losses) (both realized and unrealized) .79 (.19)
----- -----
Total from investment operations .80 (.18)
----- -----
Less distributions:
Dividends from net investment income (.05) --
----- -----
Net asset value, end of period $7.11 $6.36
----- -----
Ratios/supplemental data
Net assets, end of period (in millions) $22 $13
Ratio of expenses to average daily net assets(c) 1.28%(d) 1.35%(d)
Ratio of net investment income (loss) to average daily net assets .78%(d) .79%(d)
Portfolio turnover rate (excluding short-term securities) 59% 128%
Total return(e) 12.67%(f) (2.75%)(f)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date was March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2005 (Unaudited).
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31 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $6.35 $5.52 $4.04 $3.72 $ 4.83
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) -- .04 .03 -- .01
Net gains (losses) (both realized and unrealized) .80 .86 1.45 .32 (1.12)
----- ----- ----- ----- ------
Total from investment operations .80 .90 1.48 .32 (1.11)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income (.04) (.07) -- -- --
----- ----- ----- ----- ------
Net asset value, end of period $7.11 $6.35 $5.52 $4.04 $ 3.72
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $18 $18 $18 $-- $--
Ratio of expenses to average daily net assets(b) 1.59%(c) 1.65% 1.87% 1.59% 1.84%
Ratio of net investment income (loss) to average daily net assets .45%(c) .61% .54% .19% .21%
Portfolio turnover rate (excluding short-term securities) 59% 128% 174% 226% 193%
Total return(d) 12.56%(e) 16.50% 36.63% 8.60% (22.98%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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32 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
33 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Nov. 1, 2004 April 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,126.10 $9.38 1.77%
Hypothetical (5% return before expenses) $1,000 $1,016.11 $8.90 1.77%
Class B
Actual(b) $1,000 $1,121.00 $13.43 2.54%
Hypothetical (5% return before expenses) $1,000 $1,012.27 $12.74 2.54%
Class C
Actual(b) $1,000 $1,119.40 $13.42 2.54%
Hypothetical (5% return before expenses) $1,000 $1,012.27 $12.74 2.54%
Class I
Actual(b) $1,000 $1,126.70 $6.79 1.28%
Hypothetical (5% return before expenses) $1,000 $1,018.55 $6.44 1.28%
Class Y
Actual(b) $1,000 $1,125.60 $8.43 1.59%
Hypothetical (5% return before expenses) $1,000 $1,017.00 $8.00 1.59%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2005: +12.61%
for Class A, +12.10% for Class B, +11.94% for Class C, +12.67% for Class I
and +12.56% for Class Y.
- --------------------------------------------------------------------------------
34 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Approval of Investment Management Services Agreement
American Express Financial Corporation (AEFC), a wholly-owned subsidiary of
American Express Company, serves as the investment manager to the Fund. Under an
Investment Management Services Agreement (the Agreement), AEFC provides
investment advice and other services to the Fund. Throughout the year, the
Funds' Board of Directors and the Board's Investment Review Committee monitor
these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. AEFC prepares detailed reports for the Board and its Contracts
Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with AEFC (the Interim Period). The spin-off will not result in an
"assignment" of the Agreement under the Investment Company Act of 1940 and,
therefore, will not cause the termination of the Agreement according to its
terms. In connection with the spin-off AEFC has proposed that going forward,
services under the Agreement be provided by an affiliate, RiverSource
Investments, LLC (RiverSource). Independent counsel advised the Board that it
would be prudent, in connection with the spin-off, to consider a new agreement
with RiverSource and to seek shareholder approval of that agreement as soon as
practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above the median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 exceeded the median.
The Board noted that, in addition to portfolio management and investment
research, AEFC provides portfolio trading, daily net asset value calculation,
management of cash flow, product development, administration of its compliance
and legal departments, access to distribution, accounting and recordkeeping, and
reporting to the Board and shareholders. To evaluate these services, the Board
referred to surveys and benchmarks established by commercial providers, trade
associations and AEFC's internal processes. The Board concluded that the
services provided were consistent with services provided by investment managers
to comparable mutual funds.
- --------------------------------------------------------------------------------
35 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
The Board also evaluated the price paid for the services provided by AEFC,
noting the existence of a pricing philosophy, established by the Board and AEFC,
that seeks to maintain total Fund expenses within a range of the median expenses
charged to comparable funds sold through financial advisors. The Board
considered detailed information set forth in an annual report on fees and
expenses, including, among other things, data showing a comparison of the Fund's
expenses with median expenses paid by funds in its comparison group and data
showing the Fund's contribution to AEFC's profitability. The Board determined
that the total expense ratio of the Fund is below the median of its comparison
group.
The Board considered the economies of scale that might be realized by AEFC as
the Fund grew and took note of the extent to which Fund shareholders also might
benefit from such growth. The Board considered that the Agreement provided for
lower fees as assets increase at pre-established breakpoints and concluded that
the Agreement satisfactorily provided for sharing these economies of scale.
The Board took into account the Contract Committee's discussion comparing the
fees AEFC charges to the Fund with those it charges to institutional clients,
noting that the relatively higher fees paid by the Fund were principally
attributable to the additional services required to manage a regulated mutual
fund, like the Fund, and the operation of a large mutual fund family. The Board
also considered the profitability realized by AEFC and its affiliates from its
relationship with the Fund. The Board took into account the services acquired by
AEFC through the use of commission dollars paid by the Fund on portfolio
transactions. The Board concluded that AEFC's overall costs and profitability
were appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit AEFC to offer
competitive compensation to its personnel, make necessary investments in its
business and earn an appropriate profit. Based on the foregoing, the Board
concluded that the fees paid to AEFC under the Agreement were fair and
reasonable and determined to approve renewal of the Agreement for the Interim
Period.
- --------------------------------------------------------------------------------
36 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
37 -- AXP THREADNEEDLE EMERGING MARKETS FUND -- 2005 SEMIANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
AXP(R) Threadneedle
Global Balanced
Fund
Semiannual Report
for the Period Ended
April 30, 2005
AXP Threadneedle Global Balanced Fund seeks to provide shareholders with a
balance of growth of capital and current income.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers with Portfolio Management 6
Investments in Securities 12
Financial Statements 19
Notes to Financial Statements 22
Fund Expenses Example 32
Approval of Investment Management Services Agreement 34
Proxy Voting 35
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated. The current subadvisory agreement will remain in place.
(logo)
Dalbar
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Fund Snapshot AT APRIL 30, 2005
PORTFOLIO MANAGERS
Portfolio managers Since Years in industry
Equity
Alex Lyle* 10/03 24
Stephen Thornber* 10/03 17
Fixed Income
Nic Pifer, CFA** 2/03 14
* This portion of the Fund is managed by a team led by Alex Lyle and Stephen
Thornber in London.
** This portion of the Fund is managed by a team led by Nic Pifer in
Minneapolis.
FUND OBJECTIVE
For investors seeking a balance of growth of capital and current income.
Inception dates by class
A: 11/13/96 B: 11/13/96 C: 6/26/00 Y: 11/13/96
Ticker symbols by class
A: IDGAX B: IGBBX C: -- Y: AGBYX
Total net assets $116.1 million
Number of holdings 172
STYLE MATRIX
Equities
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
STYLE MATRIX (continued)
Bonds
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X HIGH
X MEDIUM QUALITY
LOW
TOP TEN HOLDINGS
Percentage of portfolio assets
Hellenic Republic (Greece)
2.75% 2006 2.3%
Citigroup (United States) 1.6
Microsoft (United States) 1.6
Govt of Belgium (Belgium)
8.00% 2012 1.5
Johnson & Johnson (United States) 1.5
Oesterreichische Kontrollbank (Austria)
1.80% 2010 1.4
Hellenic Republic (Greece)
3.50% 2008 1.3
Govt of Netherlands (Netherlands)
5.00% 2012 1.3
Govt of Japan (Japan)
1.70% 2009 1.2
Sanofi-Aventis (France) 1.2
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Stocks of small- and medium-sized companies may be subject to more abrupt or
erratic price movements than stocks of larger companies. Some of these companies
also may have fewer financial resources.
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2005
+6.23% +6.34% +4.20% +5.05%
+6.23% = AXP Threadneedle Global Balanced Fund Class A (excluding sales charge)
+6.34% = MSCI All Country World Index(1) (unmanaged)
+4.20% = Citigroup World Government Bond Index(2) (unmanaged)
+5.05% = Lipper Global Flexible Funds Index(3)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds.
(1) The Morgan Stanley Capital International (MSCI) All Country World Index, an
unmanaged index of equity securities, is designed to measure equity market
performance in the global developed and emerging markets. The index
reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.
(2) The Citigroup World Government Bond Index, an unmanaged market
capitalization weighted benchmark, tracks the performance of the 17
government bond markets around the world. It is widely recognized by
investors as a measurement index for portfolios of government bond
securities. The index reflects reinvestment of all distributions and
changes in market prices, but excludes brokerage commissions or other fees.
(3) The Lipper Global Flexible Funds Index includes the 10 largest global
flexible (balanced) funds tracked by Lipper Inc. The index's returns
include net reinvested dividends.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- --------------------------------------------------------------------------------
4 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Performance Summary
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (11/13/96) (11/13/96) (6/26/00) (11/13/96)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5)
at April 30, 2005
6 months* +6.23% +0.13% +5.96% +1.96% +6.06% +5.06% +6.44%
1 year +13.30% +6.79% +12.52% +8.52% +12.42% +12.42% +13.46%
3 years +8.00% +5.89% +7.20% +6.32% +7.17% +7.17% +8.17%
5 years -1.10% -2.27% -1.83% -2.01% N/A N/A -0.90%
Since inception +4.24% +3.51% +3.46% +3.46% -1.94% -1.94% +4.45%
at March 31, 2005
6 months* +10.53% +4.17% +10.34% +6.34% +10.04% +9.04% +10.74%
1 year +10.94% +4.57% +10.12% +6.12% +10.04% +10.04% +10.91%
3 years +7.98% +5.86% +7.18% +6.30% +7.09% +7.09% +8.08%
5 years -1.61% -2.77% -2.37% -2.54% N/A N/A -1.44%
Since inception +4.44% +3.70% +3.66% +3.66% -1.74% -1.74% +4.63%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
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5 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Q: How did AXP Threadneedle Global Balanced Fund perform for the first half
of the fiscal year?
A: AXP Threadneedle Global Balanced Fund's Class A shares gained 6.23%
(excluding sales charge) for the six months ended April 30, 2005. This
slightly underperformed the all-equity MSCI All Country World Index, the
Fund's benchmark index, which advanced 6.34% for the period. The Fund
outperformed the Citigroup World Government Bond Index (Citigroup World
Index), the Fund's benchmark index for the fixed income portion of the fund,
which returned 4.20% for the semiannual period. The Lipper Global Flexible
Funds Index, representing the Fund's peer group, rose 5.05%.
Q: What was the asset allocation?
A: At April 30, 2005, the Fund was composed of 64.7% global equities, 31.9%
global bonds and 3.4% cash. The equity allocation was split between U.S.
stock (38.9%) and foreign stock (61.1%). Within the bond allocation, the
largest position was foreign government obligations.
Q: What factors most significantly affected equity performance?
A: Within the equity portion of the Fund, individual stock selection proved
most effective during the semiannual period. Country selection was rather
neutral to the Fund's six-month performance, as the negative effect of the
Fund's significant exposure to Japan was offset by the positive effect of
its sizable positions in Asia and Latin America. Sector allocation modestly
detracted from the Fund's semiannual performance.
Stock Selection
On an individual security basis, U.S. refinery firm Valero Energy was one of
the strongest performers for the Fund during the semiannual period. Valero
benefited not only from big gains among energy stocks broadly but also from
sharply rising refining profit margins in a favorable supply/demand
environment.
COUNTRY COMPOSITION
Percentage of portfolio assets at April 30, 2005
[pie chart]
United States 29.8%
Japan 10.3%
Germany 7.9%
Greece 7.0%
United Kingdom 6.6%
France 5.3%
Italy 4.2%
Switzerland 3.6%
Hong Kong 3.2%
Canada 2.6%
South Korea 2.4%
Netherlands 2.0%
Belgium 1.5%
Austria 1.4%
Other* 11.4%
* Includes Australia, Bermuda, Brazil, Denmark, Finland, India, Ireland,
Israel, Luxembourg, Mexico, Norway, Poland, Russia, Singapore, South Africa,
Spain, Supra-National, Sweden, Taiwan and cash & short-term securities.
- --------------------------------------------------------------------------------
6 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> From an equity sector perspective, the Fund benefited
most from its significant exposure to energy, materials and healthcare. (end
callout quote)
-- Steve Thornber
Also in the energy sector, EOG Resources performed well, as this U.S. oil
and gas exploration and production company saw its stock price pushed higher
along with record-setting crude oil prices. EOG also benefited from its
attractive acreage position in the oil-rich Barnett Shale area in Texas. In
other areas, Hong Kong retailer Esprit was an outstanding contributor.
Esprit has benefited from strong branding, innovative management and an
attractive business model based on rapid stock turnover of its frequently
refreshed fashion offerings. Nobel Biocare a Swiss company was another
strong performer, as it continued to gain market share and raise profit
margins in the fast-growing dental implants market.
Of course, there were disappointments as well, as the equity market
continued to punish companies that did not meet earnings expectations. For
example, both U.S. motorcycle manufacturing legend Harley-Davidson and
industrial automation provider Rockwell Automation detracted from relative
results, as each announced scaled back earnings results and gave downbeat
statements about future trading. Fund performance was also hurt by its
holdings in U.S. broker-dealer Ameritrade and Bermuda-based information
technology consultancy firm Accenture.
ASSET ALLOCATION & SECTOR COMPOSITION
Percentage of portfolio assets at April 30, 2005
[pie chart]
Stocks 64.7%
Financials 14.5%
Consumer discretionary 8.5%
Information technology 8.1%
Health care 6.9%
Industrials 6.5%
Energy 6.4%
Consumer staples 6.3%
Materials 3.1%
Telecommunications 2.7%
Utilities 1.3%
Telecommunication services 0.4%
Bonds 31.9%
Foreign government bonds 28.1%
U.S. government obligations & agencies 3.3%
Corporate bonds 0.5%
Cash equivalents
Short-term securities* 3.4%
* Of the 3.4%, 0.3% is due to security lending activity and 3.1% is the Fund's
cash equivalent position.
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7 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> The tug-of-war continues between structural negatives,
such as the U.S. current account deficit, and cyclical positives, including
attractive valuation of the dollar and higher interest rates in the U.S. than
in most industrialized nations. (end callout quote)
-- Nic Pifer
Sector Positioning
From an equity sector perspective, the Fund benefited most from its
significant exposure to energy, materials and healthcare. Energy and
materials continued to reflect the strong commodity price cycle, driven by
demand growth, particularly from China. Within energy, Fund exposure to the
oil price sensitive U.S. exploration and production companies benefited
performance most. Healthcare companies continued to deliver superior
earnings growth. Within healthcare, the Fund's focus on healthcare equipment
and biotechnology companies rather than on pharmaceutical companies was well
rewarded. Healthcare equipment and biotechnology companies posted strong
earnings growth within growing markets, while pharmaceuticals were hit by
pricing concerns, patent challenges and lackluster growth prospects.
Detracting from the Fund's relative results was significant exposure to the
poorly-performing consumer discretionary and telecommunications sectors and
a more moderate exposure to the stronger-performing utilities sector.
Consumer discretionary stocks, especially automotive stocks, were hurt by
concerns about economic growth and rising interest rates and their potential
effect on consumer confidence. Energy-related utilities performed well,
reflecting the ripple effect of the energy sector and rising commodity
prices.
Q: What factors most significantly affected fixed-income performance?
Duration Management
We maintained the Fund's duration, a principal measure of interest rate
risk, approximately six months less than, or "shorter," than that of the
Citigroup World Index throughout the semiannual period. This stance was
based on our view that the U.S. economy in particular was growing at an
above-trend pace and thus that the Federal Reserve Board (the Fed) was
likely to continue raising the targeted federal funds rate well into 2005
until it is back to more historically normal levels. While our view proved
sound, global bond yields generally
- --------------------------------------------------------------------------------
8 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
declined over the six months, benefiting from lackluster international
economic data, contained inflation, a shift in investor sentiment toward
risk aversion and a weaker U.S. dollar. On a trade-weighted basis, the U.S.
dollar declined 0.54% over the six months ended April 30, 2005. As the value
of the U.S. dollar decreases, the dollar value of foreign investments
typically increases and vice versa. With bond yields falling, our duration
management detracted somewhat from the Fund's relative results.
Currency Positioning
Currency positioning and yield curve positioning together had a relatively
neutral effect on the Fund's six-month performance. For the semiannual
period, the U.S. dollar weakened approximately 0.6% versus the euro, 3.8%
versus the British pound and 1.0% versus the Japanese yen. The U.S. dollar
strengthened 3.3% versus the Canadian dollar over the six months. The Fund's
significant exposure to the euro and several other European currencies thus
contributed positively to its relative returns as did its modest exposure to
the U.S. dollar. However, the Fund's meaningful exposure to the
"dollar-bloc" currencies of Canada, Australia and New Zealand and its more
moderate exposure to the Japanese yen detracted.
Country Allocation
On the positive side, effective country allocation contributed most to the
Fund's relative performance. The Fund held only limited positions in
Japanese bonds and U.S. bonds and more substantial exposure to core European
bonds. This strategy worked well, as the European government bond market
significantly outperformed both the Japanese government bond market and U.S.
Treasury market for the period in local currency terms.
Q: What changes did you make to the Fund?
A: Within the equity portion of the Fund, our strategy was to generally reduce
the Fund's risk profile during the semiannual period, given widespread
concern over slowing global economic growth and heightened inflation
pressures. Thus, within country allocation, we decreased the Fund's exposure
to Latin America. Following a period of outperformance, we believed the
risk/reward profile for the region's equity markets, given current
valuations, had become less attractive. We redeployed those assets primarily
into Japan and Asia. Within sectors, we took some profits in energy and
mining stocks as the period progressed. We then used those proceeds to add
to the Fund's moderate positions in consumer staples and pharmaceuticals,
believing that while industry conditions remain difficult for both,
valuations are currently factoring in all the negatives.
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9 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
Within the fixed income portion of the Fund, we decreased exposure to the
euro toward the end of 2004, while still maintaining a significant position
in the currency, and we increased the Fund's exposure to the U.S. dollar,
while still maintaining a moderate position in this currency. As the U.S.
dollar weakened substantially during these months, the scale of decline led
us to believe that it may have become undervalued against some of the other
major currencies, including the euro, despite the ever-burgeoning U.S.
current account deficit. We viewed this as an opportunity to reallocate a
small portion of the portfolio's net assets. Indeed the timing of this
strategy proved prudent, as the euro subsequently lowered to attractive
levels and the U.S. dollar strengthened during the first calendar quarter of
2005. We then added back some exposure to the euro and somewhat reduced the
Fund's position in the U.S. dollar. We also decreased the portfolio's
exposure to the Canadian dollar, shifting to a neutral position as the
currency strengthened. We made no other significant changes to the fixed
income portfolio during the period. We maintained the Fund's duration
shorter than that of the Citigroup World Index. From a country perspective,
we continued to favor European bonds over U.S. and Japanese bonds.
Q: How do you intend to manage the Fund in the coming months?
A: Overall, we maintain a generally positive outlook for the financial markets,
although we believe that global economic growth will slow in 2005 relative
to the year prior. We intend to keep the Fund's significant exposure to
equities in the coming months. Corporate earnings reports have been
generally positive, and cash flow has been strong. Merger and acquisition
activity picked up during the first calendar quarter of 2005, which, should
it continue as anticipated, also bodes well for the equity market.
Given this view, we intend to maintain the Fund's significant equity
exposure to the U.K., Europe, Asia and Japan. Japan's equity market has not
yet rebounded, although we believe it will. We are particularly positive on
Japanese domestically-oriented stocks, such as regional banks, as home-based
demand appears to be on the rise. We intend to maintain the Fund's more
modest exposure to Latin America for the near term, as we believe valuations
in this region have become stretched of late. Also based on valuation
analyses, we intend to maintain the Fund's moderate exposure to U.S.
equities, though we believe we can continue to find attractive stocks in
this market on a select, opportunistic basis. We also intend to
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10 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Questions & Answers
stay with the Fund's more growth-oriented stock bias, seeking attractively
valued companies with strong franchises that have the capacity to deliver
sustainable growth.
Within the fixed income portion of the Fund, we intend to maintain a
somewhat defensive position with respect to interest rate risk exposure.
Specifically, we expect to keep the Fund's duration shorter than that of the
Citigroup World Index given our view regarding the pace of the U.S. economic
growth and the tightening path of the Fed. Indeed, should U.S. interest
rates reach a certain level or should the European bond market become too
expensive, then we may take the opportunity to shift a percentage of asset
allocation from European government bonds to U.S. Treasuries. One of the key
questions now is whether recent concerns over a global economic soft patch
are truly justified or whether Europe, for example, can pull out of its
sluggish growth rut. Given recent economic news from the Eurozone, it
currently appears that the European Central Bank may wait until the end of
2005 before beginning to raise interest rates. We believe the Bank of Japan
is still approximately a year away from changing its interest rates from
their current 0% level.
As for currency positioning, we believe the view ahead for the U.S. dollar
remains uncertain. Following an extended period of decline, the U.S. dollar
strengthened in the early months of 2005 as the markets began to focus on
cyclical positives. However, the tug-of-war continues between structural
negatives, such as the U.S. current account deficit, and cyclical positives,
including attractive valuation of the dollar and higher interest rates in
the U.S. than in most industrialized nations. Thus our currency strategy is
to seek to make tactical allocation adjustments as market conditions
warrant. From a country perspective, we continue to favor European bonds. As
always, we remain focused on careful security selection, as we continue to
seek opportunities to capitalize on attractively valued bonds.
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11 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Investments in Securities
AXP Threadneedle Global Balanced Fund
April 30, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (62.6%)(c)
Issuer Shares Value(a)
Bermuda (0.6%)
Insurance
PartnerRe 11,848 $690,501
Brazil (0.7%)
Energy (0.3%)
Petroleo Brasileiro ADR 9,164 384,247
Metals (0.4%)
Cia Vale do Rio Doce ADR 17,326 401,963
Canada (1.0%)
Banks and savings & loans (0.4%)
TSX Group 8,638 425,686
Energy (0.6%)
EnCana 12,219 782,226
Finland (0.2%)
Energy
Neste Oil 11,279(b) 251,940
France (3.5%)
Aerospace & defense (0.4%)
Thales 11,724 475,842
Automotive & related (0.5%)
Renault 6,755 566,126
Energy (1.1%)
Total 5,740 1,276,301
Machinery (0.4%)
Schneider Electric 6,472 466,434
Multi-industry (1.1%)
Sanofi-Aventis 15,000 1,328,188
Common stocks (continued)
Issuer Shares Value(a)
Germany (2.3%)
Banks and savings & loans (0.6%)
Hypo Real Estate Holding1 6,715(b) $692,618
Computer software & services (0.4%)
SAP 2,644 417,135
Health care products (0.5%)
Schering 8,341 549,093
Utilities -- electric (0.8%)
RWE 16,472 983,455
Greece (0.4%)
Building materials & construction
TITAN Cement 15,280 485,030
Hong Kong (3.1%)
Financial services (0.3%)
Hang Lung Properties 232,000 356,693
Real estate (1.5%)
Henderson Land Development 112,000 521,495
New World Development 1,090,600 1,173,156
Total 1,694,651
Retail -- general (1.3%)
Esprit Holdings 154,500 1,150,989
Lifestyle Intl Holdings 238,000 373,305
Total 1,524,294
India (0.7%)
Banks and savings & loans
State Bank of India GDR 22,000 788,700
Ireland (0.7%)
Banks and savings & loans
Anglo Irish Bank 67,678 778,728
See accompanying notes to investments in securities.
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12 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Israel (0.9%)
Computer software & services
Check Point Software Technologies 48,006(b) $1,005,726
Italy (0.7%)
Energy
Eni 34,561 868,984
Japan (7.8%)
Automotive & related (0.7%)
Honda Motor 9,300 447,612
Toyota Motor 10,400 377,405
Total 825,017
Banks and savings & loans (1.5%)
Bank of Kyoto 66,000 556,951
Chiba Bank 53,000 326,014
Mitsubishi Tokyo Financial Group 83 717,451
UFJ Holdings 47(b) 247,044
Total 1,847,460
Broker dealers (0.8%)
Matsui Securities 64,200(g) 871,028
Building materials & construction (0.5%)
Nishimatsu Construction 101,000 377,766
Okumura 29,000 179,756
Total 557,522
Electronics (0.5%)
eAccess 347 266,481
Keyence 1,500 330,967
Total 597,448
Energy (0.5%)
Nippon Oil 78,000 550,462
Engineering & construction (0.3%)
Daiwa House Industry 32,000 358,885
Home building (0.5%)
Daito Trust Construction 13,400 535,191
Machinery (1.3%)
Amada 114,000 704,552
Komatsu 107,000 753,483
Total 1,458,035
Multi-industry (0.6%)
Canon 13,300 691,845
Common stocks (continued)
Issuer Shares Value(a)
Japan (cont.)
Real estate (0.3%)
Mitsui Fudosan 28,000 $312,505
Textiles & apparel (0.3%)
ONWARD Kashiyama 31,000 398,114
Luxembourg (0.5%)
Metals
Arcelor 26,529 537,808
Mexico (0.3%)
Cellular telecommunications
America Movil ADR Series L 7,000 347,550
Netherlands (0.7%)
Food
Royal Numico 19,130(b) 791,380
Russia (0.4%)
Utilities -- telephone
Mobile Telesystems ADR 15,041 505,378
Singapore (0.5%)
Real estate
City Developments 126,000 531,590
South Africa (0.3%)
Retail -- general
Massmart Holdings 48,259 348,840
South Korea (2.3%)
Chemicals (0.4%)
Hanwha Chemical 36,790 436,759
Electronics (0.9%)
Samsung Electronics 2,465 1,127,505
Engineering & construction (0.5%)
Hyundai Development 29,550 590,704
Metals (0.5%)
POSCO 3,117 567,840
Spain (0.3%)
Computer software & services
Indra Sistemas 21,480 371,712
See accompanying notes to investments in securities.
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13 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Sweden (0.3%)
Telecom equipment & services
Telefonaktiebolaget LM
Ericsson Cl B 127,557 $377,570
Switzerland (3.5%)
Banks and savings & loans (1.0%)
UBS 14,452 1,155,670
Food (0.7%)
Nestle 3,045 801,348
Health care products (1.8%)
Actelion 2,908(b) 310,216
Nobel Biocare Holding 4,234 906,582
Roche Holding 7,051 853,112
Total 2,069,910
Taiwan (0.4%)
Electronics
Taiwan Semiconductor Mfg 258,337 429,707
United Kingdom (4.9%)
Aerospace & defense (--%)
Rolls-Royce Group Cl B 4,857,600 9,496
Cellular telecommunications (1.2%)
O2 140,395(b) 313,934
Vodafone Group 413,569 1,080,851
Total 1,394,785
Energy (0.5%)
BP 55,084 561,313
Financial services (0.6%)
3i Group 53,623 656,064
Food (0.8%)
Cadbury Schweppes 88,237 887,158
Industrial services (0.4%)
BOC Group 24,282 451,571
Media (0.3%)
Reuters Group 49,845 367,488
Metals (0.4%)
BHP Billiton 39,435 482,703
Retail -- grocery (0.7%)
Tesco 141,316 834,264
Common stocks (continued)
Issuer Shares Value(a)
United States (25.6%)
Banks and savings & loans (0.4%)
Bank of America 10,284 $463,191
Beverages & tobacco (1.4%)
Altria Group 12,943 841,166
PepsiCo 15,032 836,380
Total 1,677,546
Broker dealers (1.0%)
Ameritrade Holding 16,100(b) 168,728
Bear Stearns Companies 4,662 441,305
Lehman Brothers Holdings 5,824 534,177
Total 1,144,210
Cellular telecommunications (1.1%)
American Tower Cl A 44,585(b) 768,199
SpectraSite 9,058(b) 508,426
Total 1,276,625
Computer hardware (0.8%)
Dell 25,164(b) 876,462
Computer software & services (2.9%)
Adobe Systems 11,027 655,776
Autodesk 15,739 500,972
Google Cl A 2,635(b) 579,700
Microsoft 70,015 1,771,380
Total 3,507,828
Electronics (0.5%)
Intel 22,250 523,320
Energy (2.2%)
EOG Resources 13,747 653,670
Exxon Mobil 7,889 449,910
Forest Oil 10,871(b) 418,860
Massey Energy 9,508 343,334
Valero Energy 10,033 687,560
Total 2,553,334
Finance companies (1.6%)
Citigroup 38,896 1,826,556
Financial services (0.6%)
Goldman Sachs Group 3,737 399,075
Intl Securities Exchange 1,089(b) 28,662
Investors Financial Services 7,000 293,650
Total 721,387
Food (0.2%)
WM Wrigley Jr 4,117 284,608
See accompanying notes to investments in securities.
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14 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
United States (cont.)
Furniture & appliances (0.6%)
Mohawk Inds 5,020(b) $390,606
Tempur-Pedic Intl 17,950(b) 342,666
Total 733,272
Health care products (3.4%)
Abbott Laboratories 11,404 560,621
Amgen 8,711(b) 507,067
Johnson & Johnson 24,030 1,649,178
Laboratory Corp of
America Holdings 8,398(b) 415,701
Pfizer 9,549 259,446
St. Jude Medical 16,460(b) 642,434
Total 4,034,447
Health care services (1.0%)
DaVita 13,085(b) 527,326
WellPoint 4,967(b) 634,534
Total 1,161,860
Household products (0.4%)
Procter & Gamble 8,091 438,128
Industrial transportation (0.3%)
Norfolk Southern 10,517 330,234
Insurance (1.2%)
American Intl Group 15,766 801,701
Genworth Financial Cl A 22,104 617,807
Total 1,419,508
Leisure time & entertainment (0.8%)
Carnival Unit 15,253 745,567
Harley-Davidson 4,223 198,565
Total 944,132
Media (0.7%)
Dex Media 23,404 512,548
Lamar Advertising Cl A 7,200(b) 269,136
Total 781,684
Multi-industry (1.1%)
General Electric 33,915 1,227,723
Retail -- drugstores (1.2%)
CVS 11,038 569,340
Walgreen 19,575 842,900
Total 1,412,240
Common stocks (continued)
Issuer Shares Value(a)
United States (cont.)
Retail -- general (1.7%)
Dillard's Cl A 18,980 $441,665
Home Depot 30,652 1,084,161
Staples 20,471 390,372
Total 1,916,198
Utilities -- electric (0.5%)
Duke Energy 18,874 550,932
Total common stocks
(Cost: $63,104,326) $72,639,611
Preferred stock & other (0.6%)(c)
Issuer Shares Value(a)
Germany
Porsche 983 $634,032
Singapore
City Development
Warrants 12,600(b) 33,399
Total preferred stock & other
(Cost: $473,100) $667,431
Bonds (31.1%)(c)
Issuer Coupon Principal Value(a)
rate amount
Australia (0.4%)
New South Wales Treasury
(Australian Dollar)
03-01-08 8.00% 500,000 $415,496
Austria (1.4%)
Oesterreichische Kontrollbank
(Japanese Yen)
03-22-10 1.80 160,000,000 1,628,304
Belgium (1.5%)
Govt of Belgium
(European Monetary Unit)
12-24-12 8.00 1,000,000 1,702,097
See accompanying notes to investments in securities.
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15 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Canada (1.5%)
Govt of Canada
(Canadian Dollar)
09-01-08 4.25% 1,600,000 $1,307,127
Province of British Columbia
(Canadian Dollar)
12-01-06 5.25 500,000 411,092
Total 1,718,219
Denmark (0.3%)
Realkredit Danmark
(Danish Krone)
01-01-08 4.00 1,720,000 308,619
France (1.7%)
French Treasury Note
(European Monetary Unit)
07-12-08 3.00 300,000 392,370
Govt of France
(European Monetary Unit)
04-25-13 4.00 500,000 677,286
10-25-14 4.00 630,000 850,397
Total 1,920,053
Germany (4.8%)
Allgemeine Hypothekenbank Rheinboden
(European Monetary Unit)
09-02-09 5.00 850,000(d) 1,188,144
Bundesrepublik Deutschland
(European Monetary Unit)
01-05-06 6.00 700,000 923,703
07-04-08 4.75 725,000 996,154
07-04-09 4.50 85,000 117,162
07-04-10 5.25 250,000 358,793
06-20-16 6.00 434,598 688,169
07-04-27 6.50 400,000 710,606
Rheinische Hypothekenbank
(European Monetary Unit)
09-24-08 4.25 550,000 744,775
Total 5,727,506
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Greece (6.4%)
Hellenic Republic
(European Monetary Unit)
06-21-06 2.75% 2,000,000 $2,587,318
06-21-07 3.25 500,000 655,581
04-18-08 3.50 1,150,000 1,520,345
04-20-09 3.50 800,000 1,059,335
05-20-13 4.60 400,000 555,787
10-22-22 5.90 700,000 1,110,816
Total 7,489,182
Italy (3.4%)
Buoni Poliennali Del Tesoro
(European Monetary Unit)
11-01-09 4.25 400,000 547,046
08-01-11 5.25 200,000 288,706
08-01-13 4.25 600,000 819,790
08-01-14 4.25 720,000 982,692
11-01-29 5.25 600,000 904,403
08-01-34 5.00 250,000 366,531
Total 3,909,168
Japan (2.3%)
Govt of Japan
(Japanese Yen)
12-21-09 1.70 137,000,000 1,385,187
06-20-13 0.50 134,000,000 1,229,616
Total 2,614,803
Netherlands (1.2%)
Govt of Netherlands
(European Monetary Unit)
07-15-12 5.00 1,000,000 1,437,065
Norway (0.3%)
Govt of Norway
(Norwegian Krone)
05-16-11 6.00 2,100,000 378,514
Poland (0.2%)
Republic of Poland
(Polish Zloty)
03-24-10 5.75 655,000 197,746
Supra-National (0.5%)
Intl Bank Reconstruction & Development
(Japanese Yen)
02-18-08 2.00 55,000,000 553,670
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
16 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Sweden (0.3%)
Govt of Sweden
(Swedish Krona)
08-15-07 8.00% 2,250,000 $354,928
United Kingdom (1.5%)
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-07 9.50 170,000(b,e,f) --
United Kingdom Treasury
(British Pound)
07-12-11 9.00 410,000 970,437
09-27-13 8.00 340,000 804,670
Total 1,775,107
United States (3.4%)
ConocoPhillips
(U.S. Dollar)
03-15-28 7.13 200,000 215,813
Federal Natl Mtge Assn
(U.S. Dollar)
09-15-09 6.63 1,000,000 1,096,006
05-15-11 6.00 370,000 401,424
U.S. Treasury (U.S. Dollar)
02-15-07 2.25 500,000 488,281
02-15-09 3.00 500,000 485,705
08-15-14 4.25 568,000 570,396
02-15-23 7.13 200,000 261,109
02-15-26 6.00 369,000 436,616
Total 3,955,350
Total bonds
(Cost: $33,158,236) $36,085,827
Short-term securities (3.3%)(h)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies
Federal Home Loan Bank Disc Nt
05-11-05 2.75% $3,100,000 $3,097,164
Federal Natl Mtge Assn Disc Nt
06-13-05 2.79 700,000 697,564
Total short-term securities
(Cost: $3,794,953) $3,794,728
Total investments in securities
(Cost: $100,530,615)(i) $113,187,597
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
17 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Fund's Board of Directors. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
April 30, 2005, the value of these securities amounted to $1,188,144 or
1.0% of net assets.
(e) Negligible market value.
(f) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). These securities are valued at fair
value according to methods selected in good faith by the Fund's Board of
Directors. Information concerning such security holdings at April 30,
2005, is as follows:
Security Acquisition Cost
date
Greater Beijing First Expressways
(U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 $51,391
(g) At April 30, 2005, security was partially or fully on loan. See Note 5 to
the financial statements.
(h) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.2% of net assets. See Note 5 to the
financial statements. 3.1% of net assets is the Fund's cash equivalent
position.
(i) At April 30, 2005, the cost of securities for federal income tax purposes
was approximately $100,531,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $14,138,000
Unrealized depreciation (1,481,000)
----------
Net unrealized appreciation $12,657,000
-----------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
18 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Threadneedle Global Balanced Fund
April 30, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)*
(identified cost $100,530,615) $113,187,597
Cash in bank on demand deposit 158,276
Foreign currency holdings (identified cost $819,085) (Note 1) 823,030
Capital shares receivable 26,096
Dividends and accrued interest receivable 788,236
Receivable for investment securities sold 1,477,177
Unrealized appreciation on foreign currency contracts held, at value (Note 6) 25,427
------
Total assets 116,485,839
-----------
Liabilities
Capital shares payable 42,020
Payable for investment securities purchased 12,645
Unrealized depreciation on foreign currency contracts held, at value (Note 6) 1,034
Payable upon return of securities loaned (Note 5) 284,000
Accrued investment management services fee 2,496
Accrued distribution fee 1,278
Accrued service fee 62
Accrued transfer agency fee 677
Accrued administrative services fee 190
Other accrued expenses 43,766
------
Total liabilities 388,168
-------
Net assets applicable to outstanding capital stock $116,097,671
============
Represented by
Capital stock -- $.01 par value (Note 1) $ 212,692
Additional paid-in capital 140,514,544
Undistributed net investment income 266,204
Accumulated net realized gain (loss) (Note 8) (37,592,085)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 6) 12,696,316
----------
Total -- representing net assets applicable to outstanding capital stock $116,097,671
============
Net assets applicable to outstanding shares: Class A $ 61,991,506
Class B $ 30,203,198
Class C $ 1,271,570
Class Y $ 22,631,397
Net asset value per share of outstanding capital stock: Class A shares 11,303,626 $ 5.48
Class B shares 5,626,140 $ 5.37
Class C shares 237,852 $ 5.35
Class Y shares 4,101,540 $ 5.52
--------- ------------
* Including securities on loan, at value (Note 5) $ 271,340
------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Threadneedle Global Balanced Fund
Six months ended April 30, 2005
(Unaudited)
Investment income
Income:
Dividends $ 839,047
Interest 673,447
Fee income from securities lending (Note 5) 956
Less foreign taxes withheld (58,124)
-------
Total income 1,455,326
---------
Expenses (Note 2):
Investment management services fee 471,137
Distribution fee
Class A 76,488
Class B 155,157
Class C 5,915
Transfer agency fee 128,692
Incremental transfer agency fee
Class A 6,989
Class B 5,876
Class C 183
Service fee -- Class Y 9,034
Administrative services fees and expenses 31,971
Compensation of board members 5,148
Custodian fees 14,760
Printing and postage 18,995
Registration fees 20,340
Audit fees 10,375
Other 4,261
-----
Total expenses 965,321
Earnings credits on cash balances (Note 2) (5,769)
------
Total net expenses 959,552
-------
Investment income (loss) -- net 495,774
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 5,864,710
Foreign currency transactions 12,857
------
Net realized gain (loss) on investments 5,877,567
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (223,322)
--------
Net gain (loss) on investments and foreign currencies 5,654,245
---------
Net increase (decrease) in net assets resulting from operations $6,150,019
==========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Threadneedle Global Balanced Fund
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 495,774 $ 579,391
Net realized gain (loss) on investments 5,877,567 5,362,031
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (223,322) 4,301,031
-------- ---------
Net increase (decrease) in net assets resulting from operations 6,150,019 10,242,453
--------- ----------
Distributions to shareholders from:
Net investment income
Class A (1,064,644) (304,857)
Class B (503,755) --
Class C (19,981) --
Class Y (286,576) (81,770)
-------- -------
Total distributions (1,874,956) (386,627)
---------- --------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 9,989,919 12,342,103
Class B shares 3,293,426 4,322,699
Class C shares 624,317 237,249
Class Y shares 9,943,742 8,838,422
Reinvestment of distributions at net asset value
Class A shares 1,023,956 293,636
Class B shares 488,217 --
Class C shares 19,503 --
Class Y shares 286,551 81,761
Payments for redemptions
Class A shares (8,335,859) (14,335,235)
Class B shares (Note 2) (4,794,857) (10,299,121)
Class C shares (Note 2) (193,503) (164,780)
Class Y shares (567,209) (3,905,336)
-------- ----------
Increase (decrease) in net assets from capital share transactions 11,778,203 (2,588,602)
---------- ----------
Total increase (decrease) in net assets 16,053,266 7,267,224
Net assets at beginning of period 100,044,405 92,777,181
----------- ----------
Net assets at end of period $116,097,671 $100,044,405
============ ============
Undistributed net investment income $ 266,204 $ 1,645,386
------------ ------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Threadneedle Global Balanced Fund
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified open-end management
investment company. The Fund invests primarily in equity and debt securities of
issuers throughout the world. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Directors of the funds, American Express Financial Corporation (AEFC)
utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer reflect
the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the
- --------------------------------------------------------------------------------
22 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
following trading day. FVP results in an estimated price that reasonably
reflects the current market conditions in order to value the portfolio holdings
such that shareholder transactions receive a fair net asset value. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Illiquid Securities
At April 30, 2005, investments in securities included issues that are illiquid
which the Fund currently limits to 10% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at April 30, 2005 was
$0. These securities are valued at fair value according to methods selected in
good faith by the board. According to board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above. Assets are liquid if they can be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the asset is valued by the Fund.
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
- --------------------------------------------------------------------------------
23 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At April 30, 2005, foreign currency holdings consisted of
multiple denominations, primarily British pounds.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
- --------------------------------------------------------------------------------
24 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
The Fund has agreements with AEFC to manage its portfolio and provide
administrative services. Under an Investment Management Services Agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 0.79%
to 0.665% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Global Flexible Funds
Index. In certain circumstances, the board may approve a change in the index.
The maximum adjustment is 0.08% per year. If the performance difference is less
than 0.50%, the adjustment will be zero. The adjustment increased the fee by
$30,822 for the six months ended April 30, 2005.
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly owned subsidiary of AEFC, to subadvise the assets of the Fund.
Under an Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets that declines from 0.06% to 0.035% annually as the Fund's
assets increase. A minor portion of additional administrative service expenses
paid by the Fund are consultants' fees and fund office expenses. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
- --------------------------------------------------------------------------------
25 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$82,241 for Class A, $14,032 for Class B and $258 for Class C for the six months
ended April 30, 2005.
During the six months ended April 30, 2005, the Fund's custodian and transfer
agency fees were reduced by $5,769 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $46,129,389 and $38,821,485, respectively, for the six
months ended April 30, 2005. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 2005
Class A Class B Class C Class Y
Sold 1,806,212 606,749 116,446 1,783,049
Issued for reinvested distributions 185,836 90,243 3,625 51,724
Redeemed (1,507,559) (884,210) (35,879) (101,760)
---------- -------- ------- --------
Net increase (decrease) 484,489 (187,218) 84,192 1,733,013
------- -------- ------ ---------
Year ended Oct. 31, 2004
Class A Class B Class C Class Y
Sold 2,472,726 879,364 48,206 1,747,550
Issued for reinvested distributions 58,294 -- -- 16,159
Redeemed (2,866,353) (2,107,582) (33,478) (772,959)
---------- ---------- ------- --------
Net increase (decrease) (335,333) (1,228,218) 14,728 990,750
-------- ---------- ------ -------
- --------------------------------------------------------------------------------
26 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
5. LENDING OF PORTFOLIO SECURITIES
At April 30, 2005, securities valued at $271,340 were on loan to brokers. For
collateral, the Fund received $284,000 in cash. Cash collateral received is
invested in short-term securities, which are included in the short-term section
of the "Investments in securities." Income from securities lending amounted to
$956 for the six months ended April 30, 2005. The risks to the Fund of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
6. FORWARD FOREIGN CURRENCY CONTRACTS
At April 30, 2005, the Fund has forward foreign currency exchange contracts that
obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
May 9, 2005 760,000 977,033 $ -- $1,034
European Monetary Unit U.S. Dollar
May 17, 2005 2,460,000 3,178,443 11,835 --
European Monetary Unit U.S. Dollar
May 18, 2005 1,325,000 1,066,828 13,592 --
Canadian Dollar U.S. Dollar
------- ------
Total $25,427 $1,034
------- ------
7. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are
payable within 60 days after such loan is executed. The Fund also pays a
commitment fee equal to its pro rata share of the amount of the credit facility
at a rate of 0.09% per annum. The Fund had no borrowings outstanding during the
six months ended April 30, 2005.
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$43,431,051 at Oct. 31, 2004, that if not offset by capital gains will expire as
follows:
2009 2010 2011
$30,518,697 $10,684,989 $2,227,365
It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
27 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
9. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.25 $4.73 $4.08 $4.53 $ 6.27
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) .03 .04 .05 .07 .07
Net gains (losses) (both realized and unrealized) .30 .51 .64 (.50) (1.27)
----- ----- ----- ----- ------
Total from investment operations .33 .55 .69 (.43) (1.20)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income (.10) (.03) (.04) (.02) (.03)
Distributions from realized gains -- -- -- -- (.51)
----- ----- ----- ----- ------
Total distributions (.10) (.03) (.04) (.02) (.54)
----- ----- ----- ----- ------
Net asset value, end of period $5.48 $5.25 $4.73 $4.08 $ 4.53
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $62 $57 $53 $54 $80
Ratio of expenses to average daily net assets(b) 1.54%(c) 1.49% 1.60% 1.48% 1.45%
Ratio of net investment income (loss) to average daily net assets 1.09%(c) .83% 1.03% 1.38% 1.18%
Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173%
Total return(d) 6.23%(e) 11.62% 16.91% (9.48%) (20.63%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
28 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.15 $4.65 $4.01 $4.47 $ 6.21
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) .01 .01 -- .04 .01
Net gains (losses) (both realized and unrealized) .30 .49 .64 (.49) (1.24)
----- ----- ----- ----- ------
Total from investment operations .31 .50 .64 (.45) (1.23)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income (.09) -- -- (.01) --
Distributions from realized gains -- -- -- -- (.51)
----- ----- ----- ----- ------
Total distributions (.09) -- -- (.01) (.51)
----- ----- ----- ----- ------
Net asset value, end of period $5.37 $5.15 $4.65 $4.01 $ 4.47
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $30 $30 $33 $36 $53
Ratio of expenses to average daily net assets(b) 2.30%(c) 2.25% 2.37% 2.25% 2.21%
Ratio of net investment income (loss) to average daily net assets .32%(c) .08% .27% .61% .42%
Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173%
Total return(d) 5.96%(e) 10.75% 15.96% (10.19%) (21.21%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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29 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.13 $4.64 $3.99 $4.46 $ 6.21
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) .01 .01 -- .03 .02
Net gains (losses) (both realized and unrealized) .30 .48 .65 (.49) (1.24)
----- ----- ----- ----- ------
Total from investment operations .31 .49 .65 (.46) (1.22)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income (.09) -- -- (.01) (.02)
Distributions from realized gains -- -- -- -- (.51)
----- ----- ----- ----- ------
Total distributions (.09) -- -- (.01) (.53)
----- ----- ----- ----- ------
Net asset value, end of period $5.35 $5.13 $4.64 $3.99 $ 4.46
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $1 $1 $1 $1 $1
Ratio of expenses to average daily net assets(b) 2.29%(c) 2.24% 2.36% 2.24% 2.21%
Ratio of net investment income (loss) to average daily net assets .29%(c) .08% .26% .60% .41%
Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173%
Total return(d) 6.06%(e) 10.56% 16.29% (10.34%) (21.17%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
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30 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.28 $4.76 $4.10 $4.56 $ 6.30
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) .04 .05 .07 .07 .08
Net gains (losses) (both realized and unrealized) .30 .51 .64 (.50) (1.28)
----- ----- ----- ----- ------
Total from investment operations .34 .56 .71 (.43) (1.20)
----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income (.10) (.04) (.05) (.03) (.03)
Distributions from realized gains -- -- -- -- (.51)
----- ----- ----- ----- ------
Total distributions (.10) (.04) (.05) (.03) (.54)
----- ----- ----- ----- ------
Net asset value, end of period $5.52 $5.28 $4.76 $4.10 $ 4.56
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $23 $13 $7 $4 $2
Ratio of expenses to average daily net assets(b) 1.36%(c) 1.32% 1.43% 1.30% 1.31%
Ratio of net investment income (loss) to average daily net assets 1.24%(c) 1.00% 1.21% 1.52% 1.35%
Portfolio turnover rate (excluding short-term securities) 37% 74% 90% 99% 173%
Total return(d) 6.44%(e) 11.74% 17.32% (9.55%) (20.40%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
31 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
32 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses
account value account value paid during Annualized
Nov. 1, 2004 April 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,062.30 $7.92 1.54%
Hypothetical (5% return before expenses) $1,000 $1,017.25 $7.75 1.54%
Class B
Actual(b) $1,000 $1,059.60 $11.81 2.30%
Hypothetical (5% return before expenses) $1,000 $1,013.46 $11.55 2.30%
Class C
Actual(b) $1,000 $1,060.60 $11.76 2.29%
Hypothetical (5% return before expenses) $1,000 $1,013.51 $11.50 2.29%
Class Y
Actual(b) $1,000 $1,064.40 $7.00 1.36%
Hypothetical (5% return before expenses) $1,000 $1,018.15 $6.84 1.36%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2005: +6.23%
for Class A, +5.96% for Class B, +6.06% for Class C and +6.44% for Class Y.
- --------------------------------------------------------------------------------
33 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
Approval of Investment Management Services Agreement
American Express Financial Corporation (AEFC), a wholly-owned subsidiary of
American Express Company, serves as the investment manager to the Fund. Under an
Investment Management Services Agreement (the Agreement), AEFC provides
investment advice and other services to the Fund. Throughout the year, the
Funds' Board of Directors and the Board's Investment Review Committee monitor
these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. AEFC prepares detailed reports for the Board and its Contracts
Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with AEFC (the Interim Period). The spin-off will not result in an
"assignment" of the Agreement under the Investment Company Act of 1940 and,
therefore, will not cause the termination of the Agreement according to its
terms. In connection with the spin-off AEFC has proposed that going forward,
services under the Agreement be provided by an affiliate, RiverSource
Investments, LLC (RiverSource). Independent counsel advised the Board that it
would be prudent, in connection with the spin-off, to consider a new agreement
with RiverSource and to seek shareholder approval of that agreement as soon as
practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above the median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 exceeded the median.
The Board noted that, in addition to portfolio management and investment
research, AEFC provides portfolio trading, daily net asset value calculation,
management of cash flow, product development, administration of its compliance
and legal departments, access to distribution, accounting and recordkeeping, and
reporting to the Board and shareholders. To evaluate these services, the Board
referred to surveys and benchmarks established by commercial providers, trade
associations and AEFC's internal processes. The Board concluded that the
services provided were consistent with services provided by investment managers
to comparable mutual funds.
- --------------------------------------------------------------------------------
34 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
The Board also evaluated the price paid for the services provided by AEFC,
noting the existence of a pricing philosophy, established by the Board and AEFC,
that seeks to maintain total Fund expenses within a range of the median expenses
charged to comparable funds sold through financial advisors. The Board
considered detailed information set forth in an annual report on fees and
expenses, including, among other things, data showing a comparison of the Fund's
expenses with median expenses paid by funds in its comparison group and data
showing the Fund's contribution to AEFC's profitability. The Board determined
that the total expense ratio of the Fund is below the median of its comparison
group.
The Board considered the economies of scale that might be realized by AEFC as
the Fund grew and took note of the extent to which Fund shareholders also might
benefit from such growth. The Board considered that the Agreement provided for
lower fees as assets increase at pre-established breakpoints and concluded that
the Agreement satisfactorily provided for sharing these economies of scale.
The Board took into account the Contract Committee's discussion comparing the
fees AEFC charges to the Fund with those it charges to institutional clients,
noting that the relatively higher fees paid by the Fund were principally
attributable to the additional services required to manage a regulated mutual
fund, like the Fund, and the operation of a large mutual fund family. The Board
also considered the profitability realized by AEFC and its affiliates from its
relationship with the Fund. The Board took into account the services acquired by
AEFC through the use of commission dollars paid by the Fund on portfolio
transactions. The Board concluded that AEFC's overall costs and profitability
were appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit AEFC to offer
competitive compensation to its personnel, make necessary investments in its
business and earn an appropriate profit. Based on the foregoing, the Board
concluded that the fees paid to AEFC under the Agreement were fair and
reasonable and determined to approve renewal of the Agreement for the Interim
Period.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
35 -- AXP THREADNEEDLE GLOBAL BALANCED FUND -- 2005 SEMIANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
AXP(R) Threadneedle
Global Equity
Fund
Semiannual Report
for the Period Ended
April 30, 2005
AXP Threadneedle Global Equity Fund seeks to provide shareholders with long-term
capital growth.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
Fund Snapshot 3
Performance Summary 4
Questions & Answers with Portfolio Management 6
Investments in Securities 9
Financial Statements (Portfolio) 13
Notes to Financial Statements (Portfolio) 16
Financial Statements (Fund) 20
Notes to Financial Statements (Fund) 23
Fund Expenses Example 31
Approval of Investment Management Services Agreement 33
Proxy Voting 34
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of the Fund's
investment manager, American Express Financial Corporation (AEFC), announced
plans to pursue a spin-off of 100% of the common stock of AEFC to shareholders
of American Express Company. The transaction, expected to be completed in the
third quarter of 2005, is subject to certain regulatory and other approvals, as
well as final approval by the board of directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company. The current agreements between the Fund
and AEFC and its affiliates will remain in place. No changes in operations or
personnel, including the portfolio manager or managers of the Fund, are
anticipated. The current subadvisory agreement will remain in place.
[Dalbar logo]
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
- --------------------------------------------------------------------------------
2 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Fund Snapshot
AT APRIL 30, 2005
PORTFOLIO MANAGERS
Portfolio managers* Since Years in industry
Dominic Rossi 10/03 18
Steve Thornber 10/03 17
* The Fund is managed by a team led by Dominic Rossi and Steve Thornber.
FUND OBJECTIVE
For investors seeking long-term capital growth.
Inception dates by class
A: 5/29/90 B: 3/20/95 C: 6/26/00 Y: 3/20/95
Ticker symbols by class
A: IGLGX B: IDGBX C: -- Y: IDGYX
Total net assets $486.3 million
Number of holdings 112
STYLE MATRIX
Shading within the style matrix indicates areas in which the Fund generally
invests.
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
COUNTRY COMPOSITION
Percentage of portfolio assets
(pie chart)
United States 37.2%
Japan 17.8%
Hong Kong 6.5%
France 5.6%
United Kingdom 5.0%
South Korea 4.6%
Switzerland 3.9%
Germany 3.7%
Italy 2.0%
Israel 1.6%
Brazil 1.4%
Canada 1.4%
Greece 1.0%
Netherlands 1.0%
Sweden 1.0%
Other* 6.3%
* Includes Bermuda, India, Ireland, Luxembourg, Mexico, Russia, South Africa,
Taiwan and cash & short-term securities.
TOP TEN HOLDINGS
Percentage of portfolio assets
Citigroup (United States) 3.2%
Microsoft (United States) 3.1
Samsung Electronics (South Korea) 2.5
Total (France) 2.2
UBS (Switzerland) 2.2
Home Depot (United States) 2.2
Johnson & Johnson (United States) 2.0
Eni (Italy) 2.0
New World Development (Hong Kong) 1.9
Sanofi-Aventis (France) 1.8
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Stocks of small- or medium-sized companies may be subject to more abrupt or
erratic price movements than stocks of larger companies. Some of these companies
also may have fewer financial resources.
There are special risk considerations associated with international investing
related to market, currency, economic, political and other factors.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
3 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Performance Summary
(bar chart)
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2005
+7.05% +6.34% +6.06%
+7.05% = AXP Threadneedle Global Equity Fund Class A (excluding sales charge)
+6.34% = MSCI All Country World Index(1) (unmanaged)
+6.06% = Lipper Global Funds Index(2)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.americanexpress.com/funds.
(1) Morgan Stanley Capital International (MSCI) All Country World Index, an
unmanaged index, is compiled from a composite of securities markets of 47
countries, including Canada, the United States and 26 emerging market
countries. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
(2) The Lipper Global Funds Index includes the 30 largest global funds tracked
by Lipper Inc. The index's returns include net reinvested dividends.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- --------------------------------------------------------------------------------
4 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Performance Summary
AVERAGE ANNUAL TOTAL RETURNS
Class A Class B Class C Class Y
(Inception dates) (5/29/90) (3/20/95) (6/26/00) (3/20/95)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4) NAV(5)
at April 30, 2005
6 months* +7.05% +0.89% +6.78% +2.78% +6.84% +5.84% +7.36%
1 year +13.66% +7.13% +12.80% +8.80% +12.64% +12.64% +13.93%
3 years +4.73% +2.68% +3.95% +3.01% +3.90% +3.90% +4.96%
5 years -7.35% -8.45% -8.06% -8.21% N/A N/A -7.15%
10 years +3.72% +3.11% +2.93% +2.93% N/A N/A +3.90%
Since inception +4.52% +4.10% +3.63% +3.63% -8.19% -8.19% +4.61%
at March 31, 2005
6 months* +12.81% +6.32% +12.18% +8.18% +12.28% +11.28% +12.67%
1 year +13.04% +6.54% +11.95% +7.95% +12.04% +12.04% +13.12%
3 years +4.25% +2.21% +3.40% +2.46% +3.43% +3.43% +4.42%
5 years -8.02% -9.10% -8.75% -8.90% N/A N/A -7.86%
10 years +4.47% +3.85% +3.66% +3.66% N/A N/A +4.63%
Since inception +4.73% +4.32% +3.93% +3.93% -7.81% -7.81% +4.90%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
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5 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, portfolio managers Dominic Rossi and Stephen Thornber discuss the Fund's
results and positioning for the semiannual period.
Q: How did AXP Threadneedle Global Equity Fund perform for the six months ended
April 30, 2005?
A: AXP Threadneedle Global Equity Fund rose 7.05% (Class A shares excluding
sales charge) for the six months ended April 30, 2005. The Fund outperformed
its benchmark, the MSCI All Country World Index, which advanced 6.34% for
the period. The Fund's peer group, as represented by the Lipper Global Funds
Index, was up 6.06% for the same time frame.
Q: How did market conditions and country positioning affect performance?
A: Stock selection was positive during the semiannual period, and we were
pleased to see the breadth of performance in stock selection coming from all
around the world and in a variety of sectors.
One of the strongest performing stocks in the Fund was Valero Energy, a
U.S.-based refining company. The company's stock jumped approximately 60%
during the first few months of the year. A cyclical upswing in refining and
marketing margins around the world propelled the stock forward.
Two companies the Fund has held for a long time and continues to own
reported strong year-end results in the first quarter of the calendar year.
Espirit, the Hong Kong retailer, and Nobel Biocare, the European based
orthodontic company, are genuine growth companies and have performed
extremely well over the years.
Finally, the Fund was helped by a recovery in the pharmaceuticals sector,
which rose as investors sought out the sector's defensive growth
characteristics. We had been maintaining a low exposure to the sector. In
the health care sector, the Fund's holding in St. Jude Medical benefited
from a solid earnings report as well as the sector's surge. In addition, the
Fund's large exposure to Citigroup and Hong Kong real estate developer New
World Development added significant value to performance.
Some stocks that performed poorly during the period include Ameritrade, a
U.S.-based online broker, and Check Point Software Technologies, an Internet
software company based in Israel that has been very volatile. We have owned
Check Point for more than a year now, and we continue to feel positive about
the company and think it will deliver.
In terms of sector allocation, we saw poor performance in consumer
discretionary as well as in media stocks overall. The other weak areas were
materials and information technology where the Fund's large exposure ended
- --------------------------------------------------------------------------------
6 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> We continue to be positive on Japan, and we raised our
weighting during the period making it the Fund's largest overweight. (end
callout quote)
up hurting performance a bit even though actual stock selection was good.
In our country selection, we lost some ground over the period because we had
less exposure in the U.S. market and more exposure in places like Japan and
Latin America when the U.S. dollar, in particular, had a strong period.
These positions were somewhat mitigated by the Fund's large exposure in Hong
Kong, which bucked the global trend of equity market weakness during the
period.
Q: What changes did you make to the Fund and how is it currently positioned?
A: We made some significant changes on a country basis during the period. We
continue to be positive on Japan, and we raised our weighting during the
period making it the Fund's largest overweight. Japanese equities strike us
as attractively valued given our expectation of a gradual economic recovery,
ongoing productivity gains and a growing trend toward merger and acquisition
activity. Unfortunately, our large exposure hasn't worked so far, but we are
confident that it will, and even with the overweight, the Fund has continued
to perform quite well.
At the start of the semiannual period, we reduced our position in Latin
America after we started getting nervous about the rising interest rates in
the U.S. and the subsequent effect on Latin America, which still relies on
capital flow to some degree. We sold many of our holdings in Latin America
and used the money toward our holdings in Japan.
During the period, we also put more money into Korea, particularly in some
of the cyclicals there that have worked well. We also added to Europe
somewhat. However, our U.S. weightings are almost at our minimum exposure.
We are confident in our position to remain underweight in the U.S. because
we feel valuations there are less compelling given the backdrop of rising
interest rates and slowing economic growth.
In terms of sectors, we became a little more defensive as the period
progressed. The Fund's large exposure in materials and energy proved mildly
negative, so we reduced our positions in both sectors. The materials sector
is neutral to the weighting in the Fund's benchmark, the MSCI All Country
World Index. Energy
- --------------------------------------------------------------------------------
7 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Questions & Answers
(begin callout quote)> Portfolio activity during April saw us reducing risk in
light of the more cautious tone in the markets. (end callout quote)
remains slightly overweight relative to the benchmark index, and we are not
tempted to reduce energy further given our view that oil prices are likely
to remain well supported over the medium term. In addition, we have a low
exposure in the industrials and consumer staples sectors, and we reduced our
position in financials early in the quarter and maintain a low exposure
there.
Specifically, portfolio activity during April saw us reducing risk in light
of the more cautious tone in the markets. The large-cap bias of the Fund was
enhanced and positions were bolstered in defensive areas such as tobacco and
pharmaceuticals. At the same time, we reduced cyclical exposure. It is clear
that economic momentum is waning, and, with this in mind, we are likely to
reduce the cyclical content of the portfolio going forward.
Q: What is the Fund's tactical view and strategy for the months ahead?
A: We believe that in many markets, specifically the U.K. and the United
States, the earnings cycle is near a peak in terms of margins and in terms
of capital. We are likely to experience just as many profit warnings as
profit surprises. We think it will be a difficult year for equities in that
respect and given the fact that interest rates are clearly on the rise.
Rising interest rates are not good for equities in developed markets. Rising
rates will also impact emerging markets, which is why we brought down the
weightings there.
Our large exposure to Japan has not performed as well as we expected,
however in our view, earnings growth and return on capital in Japan are
still rising and have significant expansion potential. We think in the
medium term there will likely be an increase in profitability in Asia and a
decrease in profitability in the Western Hemisphere. Given the fact that
there is growth in Japan and growth in China, we continue to have a large
exposure to cyclicals because we know those markets, in the end, will be
supported by earnings growth.
- --------------------------------------------------------------------------------
8 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Investments in Securities
World Growth Portfolio
April 30, 2005 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (97.7%)(c)
Issuer Shares Value(a)
Bermuda (0.5%)
Insurance
PartnerRe 39,402 $2,296,349
Brazil (1.4%)
Energy (0.5%)
Petroleo Brasileiro ADR 59,394 2,490,390
Metals (0.9%)
Cia Vale do Rio Doce ADR 192,905 4,475,396
Canada (1.4%)
Energy
EnCana 67,020 4,290,430
Suncor Energy 67,359 2,482,853
Total 6,773,283
France (5.6%)
Aerospace & defense (0.5%)
Thales 54,036 2,193,163
Automotive & related (0.4%)
Renault 22,556 1,890,383
Energy (2.2%)
Total 49,137 10,925,727
Machinery (0.7%)
Schneider Electric 49,686 3,580,849
Multi-industry (1.8%)
Sanofi-Aventis 100,000 8,854,593
Germany (2.9%)
Banks and savings & loans (0.9%)
Hypo Real Estate Holding 110,000(b) 4,558,057
Computer software & services (0.4%)
SAP 13,803 2,177,655
Health care products (0.3%)
Schering 18,475 1,216,221
Common stocks (continued)
Issuer Shares Value(a)
Germany (cont.)
Utilities -- electric (1.3%)
RWE 100,000 $5,970,464
Greece (1.0%)
Building materials & construction
TITAN Cement 153,130 4,860,773
Hong Kong (6.6%)
Financial services (0.9%)
Sun Hung Kai Properties441,000 4,223,329
Real estate (3.0%)
Henderson Land Development 1,146,000 5,336,008
New World Development 8,740,600 9,402,242
Total 14,738,250
Retail -- general (2.7%)
Esprit Holdings 723,500 5,389,902
Giordano Intl 5,812,000 4,038,667
Lifestyle Intl Holdings 2,247,500 3,525,227
Total 12,953,796
India (0.5%)
Banks and savings & loans
State Bank of India GDR 73,294 2,627,590
Ireland (0.2%)
Banks and savings & loans
Anglo Irish Bank 101,205 1,164,503
Israel (1.6%)
Computer software & services
Check Point Software
Technologies 381,723(b) 7,997,096
Italy (2.0%)
Energy
Eni 386,944 9,729,128
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
9 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Japan (18.0%)
Automotive & related (1.0%)
Honda Motor 48,300 $2,324,695
Toyota Motor 64,900 2,355,154
Total 4,679,849
Banks and savings & loans (2.6%)
Bank of Kyoto 511,000(d) 4,312,153
Chiba Bank 618,000 3,801,443
Mitsubishi Tokyo Financial Group 489 4,226,908
Total 12,340,504
Broker dealers (1.2%)
Matsui Securities 438,000(d) 5,942,525
Building materials & construction (0.8%)
Nishimatsu Construction 690,000 2,580,778
Okumura 172,000 1,066,142
Total 3,646,920
Electronics (1.6%)
eAccess 3,899 2,994,267
Keyence 20,900 4,611,476
Total 7,605,743
Energy (1.1%)
Nippon Oil 749,000 5,285,844
Engineering & construction (1.0%)
Daiwa House Industry 454,000 5,091,675
Financial services (0.8%)
Aiful 45,750 3,404,311
Kobayashi Yoko 22,100 404,554
Total 3,808,865
Home building (1.1%)
Daito Trust Construction 137,300 5,483,710
Machinery (2.4%)
Amada 882,000 5,451,011
Komatsu 876,000 6,168,693
Total 11,619,704
Metals (0.8%)
Nisshin Steel 1,488,000 3,827,028
Multi-industry (1.0%)
Canon 97,100 5,050,985
Real estate (1.8%)
GOLDCREST 66,230 3,669,525
Mitsui Fudosan 446,000 4,977,757
Total 8,647,282
Common stocks (continued)
Issuer Shares Value(a)
Japan (cont.)
Textiles & apparel (0.8%)
ONWARD Kashiyama 308,000 $3,955,451
Luxembourg (0.9%)
Metals
Arcelor 225,071 4,562,739
Mexico (0.4%)
Cellular telecommunications
America Movil ADR Series L35,481 1,761,632
Netherlands (1.0%)
Food
Royal Numico 116,037(b) 4,800,281
Russia (0.7%)
Utilities -- telephone
Mobile Telesystems ADR 98,892 3,322,771
South Africa (0.7%)
Retail -- general
Massmart Holdings 485,061 3,506,261
South Korea (4.6%)
Chemicals (0.5%)
Hanwha Chemical 200,000 2,374,336
Electronics (2.5%)
Samsung Electronics 26,451 12,098,823
Engineering & construction (0.9%)
Hyundai Development 212,240 4,242,674
Metals (0.7%)
POSCO 19,831 3,612,719
Sweden (1.0%)
Telecom equipment & services
Telefonaktiebolaget
LM Ericsson Cl B 1,650,539 4,885,608
Switzerland (3.9%)
Banks and savings & loans (2.2%)
UBS 135,866 10,864,677
Food (0.5%)
Nestle 9,228 2,428,518
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
Switzerland (cont.)
Health care products (1.2%)
Nobel Biocare Holding 27,121 $5,807,130
Taiwan (0.5%)
Financial services
Hung Poo Real Estate
Development 3,778,000 2,488,097
United Kingdom (5.0%)
Aerospace & defense (--%)
Rolls-Royce Group Cl B 19,880,400 38,862
Cellular telecommunications (0.8%)
Vodafone Group 1,545,044 4,037,930
Energy (1.0%)
BP 491,338 5,006,793
Financial services (0.5%)
3i Group 191,538 2,343,421
Food (1.0%)
Cadbury Schweppes 470,444 4,729,967
Metals (0.4%)
BHP Billiton 170,185 2,083,144
Retail -- grocery (1.3%)
Tesco 1,061,938 6,269,190
United States (37.3%)
Beverages & tobacco (1.7%)
Altria Group 89,015 5,785,084
PepsiCo 46,676 2,597,053
Total 8,382,137
Broker dealers (2.3%)
Ameritrade Holding 357,950(b) 3,751,316
Bear Stearns Companies 37,617 3,560,825
Lehman Brothers Holdings 43,587 3,997,800
Total 11,309,941
Cellular telecommunications (1.7%)
American Tower Cl A 270,785(b) 4,665,626
SpectraSite 65,934(b) 3,700,875
Total 8,366,501
Computer hardware (1.1%)
Dell 154,490(b) 5,380,887
Common stocks (continued)
Issuer Shares Value(a)
United States (cont.)
Computer software & services (5.8%)
Adobe Systems 66,727 $3,968,255
Autodesk 123,199 3,921,424
Google Cl A 19,767(b) 4,348,740
Microsoft 602,769 15,250,055
Total 27,488,474
Energy (2.4%)
Anadarko Petroleum 32,142 2,347,652
Burlington Resources 49,305 2,396,716
Forest Oil 74,787(b) 2,881,543
Massey Energy 38,448 1,388,357
Valero Energy 42,181 2,890,664
Total 11,904,932
Energy equipment & services (0.4%)
ENSCO Intl 66,219 2,158,739
Finance companies (3.2%)
Citigroup 333,327 15,653,036
Financial services (1.0%)
Goldman Sachs Group 31,760 3,391,651
Intl Securities Exchange 48,503(b) 1,276,599
Total 4,668,250
Furniture & appliances (0.7%)
Tempur-Pedic Intl 187,841(b) 3,585,885
Health care products (6.5%)
Abbott Laboratories 79,986 3,932,111
Amgen 30,274(b) 1,762,250
Johnson & Johnson 142,325 9,767,764
Laboratory Corp of
America Holdings 64,205(b) 3,178,148
Myogen 161,959(b) 1,052,734
St. Jude Medical 193,443(b) 7,550,079
Zimmer Holdings 44,678(b) 3,637,683
Total 30,880,769
Health care services (2.0%)
DaVita 71,672(b) 2,888,382
WellPoint 52,054(b) 6,649,898
Total 9,538,280
Insurance (1.5%)
American Intl Group 97,213 4,943,281
Genworth Financial Cl A 91,060 2,545,127
Total 7,488,408
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Common stocks (continued)
Issuer Shares Value(a)
United States (cont.)
Media (1.2%)
Dex Media 205,824 $4,507,545
Lamar Advertising Cl A 31,970(b) 1,195,039
Total 5,702,584
Retail -- drugstores (1.6%)
CVS 56,862 2,932,942
Walgreen 118,127 5,086,549
Total 8,019,491
Retail -- general (4.2%)
Dillard's Cl A 150,629 3,505,137
Home Depot 302,863 10,712,264
Staples 185,069 3,529,256
TJX Companies 118,204 2,677,321
Total 20,423,978
Total common stocks
(Cost: $437,277,648) $474,900,945
Preferred stock (0.9%)(c)
Issuer Shares Value(a)
Germany
Porsche 6,537 $4,216,345
Total preferred stock
(Cost: $3,369,108) $4,216,345
Short-term securities (1.7%)(e)
Issuer Effective Amount Value(a)
yield payable at
maturity
U.S. government agencies
Federal Home Loan Mtge Corp Disc Nt
06-13-05 2.79% $3,500,000 $3,487,821
Federal Natl Mtge Assn Disc Nt
06-02-05 2.77 5,000,000 4,986,967
Total short-term securities
(Cost: $8,475,116) $8,474,788
Total investments in securities
(Cost: $449,121,872)(f) $487,592,078
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) At April 30, 2005, security was partially or fully on loan. See Note 4
to the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 1.0% of net assets. See Note 4 to
the financial statements. 0.7% of net assets is the Portfolio's cash
equivalent position.
(f) At April 30, 2005, the cost of securities for federal income tax
purposes was approximately $449,122,000 and the approximate aggregate
gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 50,018,000
Unrealized depreciation (11,548,000)
-----------
Net unrealized appreciation $ 38,470,000
------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.americanexpress.com/funds.
- --------------------------------------------------------------------------------
12 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
World Growth Portfolio
April 30, 2005 (Unaudited)
Assets
Investments in securities, at value (Note 1)*
(identified cost $449,121,872) $487,592,078
Foreign currency holdings (identified cost $885,178) (Note 1) 896,012
Dividends and accrued interest receivable 1,848,363
Receivable for investment securities sold 9,808,805
---------
Total assets 500,145,258
-----------
Liabilities
Disbursements in excess of cash on demand deposit 299,578
Payable for investment securities purchased 8,845,192
Payable upon return of securities loaned (Note 4) 4,661,750
Accrued investment management services fee 10,389
Other accrued expenses 52,937
------
Total liabilities 13,869,846
----------
Net assets $486,275,412
============
*Including securities on loan, at value (Note 4) $ 4,498,615
------------
See accompanying notes to financial statements.
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13 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statement of operations
World Growth Portfolio
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Dividends $ 6,178,149
Interest 45,123
Fee income from securities lending (Note 4) 69,893
Less foreign taxes withheld (446,123)
--------
Total income 5,847,042
---------
Expenses (Note 2):
Investment management services fee 2,108,740
Compensation of board members 5,540
Custodian fees 85,043
Audit fees 14,250
Other 8,749
-----
Total expenses 2,222,322
Earnings credits on cash balances (Note 2) (2,235)
------
Total net expenses 2,220,087
---------
Investment income (loss) -- net 3,626,955
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 35,869,533
Foreign currency transactions 20,427
------
Net realized gain (loss) on investments 35,889,960
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,671,642)
----------
Net gain (loss) on investments and foreign currencies 32,218,318
----------
Net increase (decrease) in net assets resulting from operations $35,845,273
===========
See accompanying notes to financial statements.
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14 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
World Growth Portfolio
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations
Investment income (loss) -- net $ 3,626,955 $ 3,837,875
Net realized gain (loss) on investments 35,889,960 42,451,978
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,671,642) 11,388,618
---------- ----------
Net increase (decrease) in net assets resulting from operations 35,845,273 57,678,471
---------- ----------
Proceeds from contributions 1,753,211 954,259
Fair value of withdrawals (25,226,046) (98,738,060)
----------- -----------
Net contributions (withdrawals) from partners (23,472,835) (97,783,801)
----------- -----------
Total increase (decrease) in net assets 12,372,438 (40,105,330)
Net assets at beginning of period 473,902,974 514,008,304
----------- -----------
Net assets at end of period $486,275,412 $473,902,974
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
World Growth Portfolio
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Growth Portfolio (the Portfolio) is a series of World Trust (the Trust)
and is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Portfolio invests
primarily in equity securities of companies around the world, including
companies located in developed and emerging countries. The Declaration of Trust
permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Trustees of the portfolios, American Express Financial Corporation
(AEFC) utilizes Fair Value Pricing (FVP). FVP determinations are made in good
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the effect
of the development or event has actually caused the closing price to no longer
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options.
- --------------------------------------------------------------------------------
16 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
The risk in writing a call option is that the Portfolio gives up the opportunity
for profit if the market price of the security increases. The risk in writing a
put option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At April 30, 2005, foreign currency holdings consisted of
multiple denominations.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
- --------------------------------------------------------------------------------
17 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Guarantees and indemnifications
Under the Portfolio's organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Portfolio. In addition, certain of the Portfolio's contracts with
its service providers contain general indemnification clauses. The Portfolio's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Portfolio cannot be determined and
the Portfolio has no historical basis for predicting the likelihood of any such
claims.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets that declines from
0.8% to 0.675% annually as the Portfolio's assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment based on a
comparison of the performance of Class A shares of AXP Threadneedle Global
Equity Fund to the Lipper Global Funds Index. In certain circumstances, the
board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment increased the fee by $142,143 for the six months ended
April 30, 2005.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested trustees may defer
receipt of their compensation. Deferred amounts are treated as though equivalent
dollar amounts had been invested in shares of the underlying Fund or other
American Express mutual funds. The Portfolio's liability for these amounts is
adjusted for market value changes and remains in the Portfolio until distributed
in accordance with the Plan.
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the
portfolio.
- --------------------------------------------------------------------------------
18 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
During the six months ended April 30, 2005, the Portfolio's custodian fees were
reduced by $2,235 as a result of earnings credits from overnight cash balances.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $242,293,296 and $259,183,958, respectively, for the six
months ended April 30, 2005. Realized gains and losses are determined on an
identified cost basis.
4. LENDING OF PORTFOLIO SECURITIES
At April 30, 2005, securities valued at $4,498,615 were on loan to brokers. For
collateral, the Portfolio received $4,661,750 in cash. Cash collateral received
is invested in short-term securities, which are included in the short-term
section of the "Investments in securities." Income from securities lending
amounted to $69,893 for the six months ended April 30, 2005. The risks to the
Portfolio of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
5. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Portfolio's results.
Ratios/supplemental data
Fiscal period ended Oct. 31, 2005(e) 2004 2003 2002 2001
Ratio of expenses to average daily net assets(a) .89%(b) .71% .74% .72% .62%
Ratio of net investment income (loss) to average daily net assets 1.45%(b) .78% 1.01% .67% .95%
Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218%
Total return(c) 7.55%(d) 12.26% 18.91% (15.58%) (34.42%)
(a) Expense ratio is based on total expenses of the Portfolio before reduction
of earnings credits on cash balances. The ratio does not include feeder
fund expenses.
(b) Adjusted to an annual basis.
(c) Total return is based on a calculated Portfolio net asset value and does
not reflect payment of a sales charge.
(d) Not annualized.
(e) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
19 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Financial Statements
Statement of assets and liabilities
AXP Threadneedle Global Equity Fund
April 30, 2005 (Unaudited)
Assets
Investment in Portfolio (Note 1) $ 486,206,057
Capital shares receivable 324,379
-------
Total assets 486,530,436
-----------
Liabilities
Capital shares payable 146,381
Accrued distribution fee 5,435
Accrued service fee 15
Accrued transfer agency fee 3,015
Accrued administrative services fee 759
Other accrued expenses 69,775
------
Total liabilities 225,380
-------
Net assets applicable to outstanding capital stock $ 486,305,056
==============
Represented by
Capital stock -- $.01 par value (Note 1) $ 896,425
Additional paid-in capital 1,043,861,769
Excess of distributions over net investment income (920,537)
Accumulated net realized gain (loss) (Note 5) (596,111,982)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 38,579,381
----------
Total -- representing net assets applicable to outstanding capital stock $ 486,305,056
==============
Net assets applicable to outstanding shares: Class A $ 373,408,556
Class B $ 105,716,072
Class C $ 1,546,614
Class Y $ 5,633,814
Net asset value per share of outstanding capital stock: Class A shares 67,995,260 $ 5.49
Class B shares 20,330,269 $ 5.20
Class C shares 299,213 $ 5.17
Class Y shares 1,017,767 $ 5.54
--------- --------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statement of operations
AXP Threadneedle Global Equity Fund
Six months ended April 30, 2005 (Unaudited)
Investment income
Income:
Dividends $ 6,177,288
Interest 45,111
Fee income from securities lending 69,883
Less foreign taxes withheld (446,060)
--------
Total income 5,846,222
---------
Expenses (Note 2):
Expenses allocated from Portfolio 2,219,779
Distribution fee
Class A 479,144
Class B 547,381
Class C 6,710
Transfer agency fee 664,036
Incremental transfer agency fee
Class A 55,051
Class B 29,600
Class C 328
Service fee -- Class Y 2,628
Administrative services fees and expenses 142,583
Compensation of board members 5,148
Printing and postage 86,500
Registration fees 28,380
Audit fees 4,750
Other 9,416
-----
Total expenses 4,281,434
Earnings credits on cash balances (Note 2) (7,531)
------
Total net expenses 4,273,903
---------
Investment income (loss) -- net 1,572,319
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions 35,864,858
Foreign currency transactions 20,433
------
Net realized gain (loss) on investments 35,885,291
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,671,329)
----------
Net gain (loss) on investments and foreign currencies 32,213,962
----------
Net increase (decrease) in net assets resulting from operations $33,786,281
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Statements of changes in net assets
AXP Threadneedle Global Equity Fund
April 30, 2005 Oct. 31, 2004
Six months ended Year ended
(Unaudited)
Operations and distributions
Investment income (loss) -- net $ 1,572,319 $ (598,332)
Net realized gain (loss) on investments 35,885,291 42,447,414
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (3,671,329) 11,386,564
---------- ----------
Net increase (decrease) in net assets resulting from operations 33,786,281 53,235,646
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (2,338,418) (95,223)
Class C (2,880) --
Class Y (38,051) (2,413)
------- ------
Total distributions (2,379,349) (97,636)
---------- -------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 34,349,738 46,610,187
Class B shares 11,201,461 7,409,628
Class C shares 715,736 260,184
Class Y shares 1,253,716 1,305,145
Reinvestment of distributions at net asset value
Class A shares 2,297,172 93,330
Class C shares 2,823 --
Class Y shares 38,052 2,413
Payments for redemptions
Class A shares (51,695,083) (88,638,536)
Class B shares (Note 2) (16,311,721) (57,159,405)
Class C shares (Note 2) (193,029) (378,214)
Class Y shares (427,278) (2,804,270)
-------- ----------
Increase (decrease) in net assets from capital share transactions (18,768,413) (93,299,538)
----------- -----------
Total increase (decrease) in net assets 12,638,519 (40,161,528)
Net assets at beginning of period 473,666,537 513,828,065
----------- -----------
Net assets at end of period $486,305,056 $473,666,537
============ ============
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Notes to Financial Statements
AXP Threadneedle Global Equity Fund
(Unaudited as to April 30, 2005)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Global Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Global Series, Inc. has 10 billion authorized
shares of capital stock that can be allocated among the separate series as
designated by the board.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Investment in World Growth Portfolio
The Fund invests all of its assets in World Growth Portfolio (the Portfolio), a
series of World Trust (the Trust), an open-end investment company that has the
same objectives as the Fund. The Portfolio invests primarily in equity
securities of companies around the world that are positioned to meet market
needs in a changing world economy.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at April 30, 2005 was 99.99%.
All securities held by the Portfolio are valued at the close of each business
day. Securities traded on national securities exchanges or included in national
market systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price that
reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on quotations
from the principal market in which such securities are normally traded. Pursuant
to procedures adopted by the Board of Trustees of the portfolios, AEFC utilizes
Fair Value Pricing (FVP). FVP determinations are made in good faith in
accordance with these procedures. If a development or event is so significant
that there is a reasonably high degree of certainty that the effect of the
development or event has actually caused the closing price to no longer
- --------------------------------------------------------------------------------
23 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
reflect the actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets, liabilities and contingent assets and liabilities) that could
differ from actual results.
Guarantees and indemnifications
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
- --------------------------------------------------------------------------------
24 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with AEFC to provide administrative services. Under an
Administrative Services Agreement, the Fund pays AEFC a fee for administration
and accounting services at a percentage of the Fund's average daily net assets
that declines from 0.06% to 0.035% annually as the Fund's assets increase. A
minor portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
American Express mutual funds. The Fund's liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in
accordance with the Plan.
AEFC has a Subadvisory Agreement with Threadneedle International Limited, an
indirect wholly-owned subsidiary of AEFC, to subadvise the assets of the
portfolio.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
In addition, AECSC is entitled to charge an annual closed account fee of $5 per
inactive account, charged on a pro rata basis from the date the account becomes
inactive until the date the account is purged from the transfer agent system
generally within one year. However, the closed account fee is currently not
effective.
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$315,026 for Class A, $42,902 for Class B and $346 for Class C for the six
months ended April 30, 2005.
- --------------------------------------------------------------------------------
25 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
During the six months ended April 30, 2005, the Fund's transfer agency fees were
reduced by $7,531 as a result of earnings credits from overnight cash balances.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 2005
Class A Class B Class C Class Y
Sold 6,158,949 2,115,046 137,753 224,835
Issued for reinvested distributions 417,667 -- 544 6,869
Redeemed (9,286,741) (3,085,135) (36,595) (76,086)
---------- ---------- ------- -------
Net increase (decrease) (2,710,125) (970,089) 101,702 155,618
---------- -------- ------- -------
Year ended Oct. 31, 2004
Class A Class B Class C Class Y
Sold 9,625,192 1,590,230 55,798 264,315
Issued for reinvested distributions 19,608 -- -- 504
Redeemed (18,107,612) (12,478,367) (81,146) (572,441)
----------- ----------- ------- --------
Net increase (decrease) (8,462,812) (10,888,137) (25,348) (307,622)
---------- ----------- ------- --------
4. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
The Bank of New York, whereby the Fund may borrow for the temporary funding of
shareholder redemptions or for other temporary or emergency purposes. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other American Express mutual funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are
payable within 60 days after such loan is executed. The Fund also pays a
commitment fee equal to its pro rata share of the amount of the credit facility
at a rate of 0.09% per annum. The Fund had no borrowings outstanding during the
six months ended April 30, 2005.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$631,430,152 at Oct. 31, 2004, that if not offset by capital gains will expire
as follows:
2009 2010 2011
$457,285,316 $143,634,885 $30,509,951
It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
26 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
6. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Class A
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.16 $4.62 $3.92 $4.69 $ 8.74
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) .03 -- .01 -- .02
Net gains (losses) (both realized and unrealized) .33 .54 .69 (.77) (2.71)
----- ----- ----- ----- ------
Total from investment operations .36 .54 .70 (.77) (2.69)
----- ----- ----- ----- ------
Less distributions:
Dividends from and in excess of net investment income (.03) -- -- -- (.02)
Distributions from realized gains -- -- -- -- (1.34)
----- ----- ----- ----- ------
Total distributions (.03) -- -- -- (1.36)
----- ----- ----- ----- ------
Net asset value, end of period $5.49 $5.16 $4.62 $3.92 $ 4.69
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $373 $364 $366 $406 $714
Ratio of expenses to average daily net assets(b) 1.54%(c) 1.41% 1.50% 1.39% 1.18%
Ratio of net investment income (loss) to average daily net assets .80%(c) .07% .26% .01% .39%
Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218%
Total return(d) 7.05%(e) 11.72% 17.86% (16.42%) (34.83%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
27 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Class B
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $4.87 $4.40 $3.76 $4.53 $ 8.53
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) -- (.03) (.03) (.04) (.02)
Net gains (losses) (both realized and unrealized) .33 .50 .67 (.73) (2.64)
----- ----- ----- ----- ------
Total from investment operations .33 .47 .64 (.77) (2.66)
----- ----- ----- ----- ------
Less distributions:
Distributions from realized gains -- -- -- -- (1.34)
----- ----- ----- ----- ------
Net asset value, end of period $5.20 $4.87 $4.40 $3.76 $ 4.53
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $106 $104 $142 $173 $309
Ratio of expenses to average daily net assets(b) 2.32%(c) 2.18% 2.27% 2.16% 1.95%
Ratio of net investment income (loss) to average daily net assets .02%(c) (.66%) (.52%) (.77%) (.38%)
Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218%
Total return(d) 6.78%(e) 10.68% 17.02% (17.00%) (35.38%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
28 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Class C
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $4.85 $4.38 $3.75 $4.52 $ 8.54
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) -- (.02) (.03) (.04) (.02)
Net gains (losses) (both realized and unrealized) .33 .49 .66 (.73) (2.64)
----- ----- ----- ----- ------
Total from investment operations .33 .47 .63 (.77) (2.66)
----- ----- ----- ----- ------
Less distributions:
Dividends from and in excess of net investment income (.01) -- -- -- (.02)
Distributions from realized gains -- -- -- -- (1.34)
----- ----- ----- ----- ------
Total distributions (.01) -- -- -- (1.36)
----- ----- ----- ----- ------
Net asset value, end of period $5.17 $4.85 $4.38 $3.75 $ 4.52
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $2 $1 $1 $1 $1
Ratio of expenses to average daily net assets(b) 2.32%(c) 2.19% 2.29% 2.19% 1.95%
Ratio of net investment income (loss) to average daily net assets .01%(c) (.69%) (.52%) (.78%) (.42%)
Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218%
Total return(d) 6.84%(e) 10.73% 16.80% (17.04%) (35.37%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
29 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Class Y
Per share income and capital changes(a)
Fiscal period ended Oct. 31, 2005(f) 2004 2003 2002 2001
Net asset value, beginning of period $5.20 $4.65 $3.94 $4.70 $ 8.76
----- ----- ----- ----- ------
Income from investment operations:
Net investment income (loss) .04 .01 .02 .01 .04
Net gains (losses) (both realized and unrealized) .34 .54 .69 (.77) (2.73)
----- ----- ----- ----- ------
Total from investment operations .38 .55 .71 (.76) (2.69)
----- ----- ----- ----- ------
Less distributions:
Dividends from and in excess of net investment income (.04) -- -- -- (.03)
Distributions from realized gains -- -- -- -- (1.34)
----- ----- ----- ----- ------
Total distributions (.04) -- -- -- (1.37)
----- ----- ----- ----- ------
Net asset value, end of period $5.54 $5.20 $4.65 $3.94 $ 4.70
----- ----- ----- ----- ------
Ratios/supplemental data
Net assets, end of period (in millions) $6 $4 $5 $8 $12
Ratio of expenses to average daily net assets(b) 1.37%(c) 1.23% 1.30% 1.21% 1.01%
Ratio of net investment income (loss) to average daily net assets .96%(c) .25% .43% .18% .55%
Portfolio turnover rate (excluding short-term securities) 49% 104% 132% 123% 218%
Total return(d) 7.36%(e) 11.88% 18.02% (16.17%) (34.78%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2005 (Unaudited).
- --------------------------------------------------------------------------------
30 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Fund Expenses Example
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2005.
Actual Expenses
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
31 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Beginning Ending Expenses Annualized
account value account value paid during expense
Nov. 1, 2004 April 30, 2005 the period(a) ratio
Class A
Actual(b) $1,000 $1,070.50 $7.95 1.54%
Hypothetical (5% return before expenses) $1,000 $1,017.25 $7.75 1.54%
Class B
Actual(b) $1,000 $1,067.80 $11.96 2.32%
Hypothetical (5% return before expenses) $1,000 $1,013.36 $11.65 2.32%
Class C
Actual(b) $1,000 $1,068.40 $11.96 2.32%
Hypothetical (5% return before expenses) $1,000 $1,013.36 $11.65 2.32%
Class Y
Actual(b) $1,000 $1,073.60 $7.08 1.37%
Hypothetical (5% return before expenses) $1,000 $1,018.10 $6.89 1.37%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2005: +7.05%
for Class A, +6.78% for Class B, +6.84% for Class C and +7.36% for Class Y.
- --------------------------------------------------------------------------------
32 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
Approval of Investment Management Services Agreement
American Express Financial Corporation (AEFC), a wholly-owned subsidiary of
American Express Company, serves as the investment manager to the Fund. Under an
Investment Management Services Agreement (the Agreement), AEFC provides
investment advice and other services to the Fund. Throughout the year, the
Funds' Board of Directors and the Board's Investment Review Committee monitor
these services.
Each year the Board determines whether to continue the Agreement by evaluating
the quality and level of service received and the costs associated with those
services. AEFC prepares detailed reports for the Board and its Contracts
Committee in March and April and provides data prepared by independent
organizations to assist the Board in making this determination. The Board gives
considerable weight to the work, deliberations and conclusions of the Contracts
and Investment Review Committees in determining whether to continue the
Agreement.
On February 1, 2005, American Express Company announced its intention to pursue
a spin-off of AEFC by distributing shares of the common stock of AEFC to
shareholders of American Express Company. At a meeting held in person on April
14, 2005, the Board, including a majority of the independent members, approved
the continuation of the Agreement for an interim period, not to exceed one year,
ending on the later of (i) the effective date of the spin-off or (ii) the
approval by the Fund's shareholders of a new investment management services
agreement with AEFC (the Interim Period). The spin-off will not result in an
"assignment" of the Agreement under the Investment Company Act of 1940 and,
therefore, will not cause the termination of the Agreement according to its
terms. In connection with the spin-off AEFC has proposed that going forward,
services under the Agreement be provided by an affiliate, RiverSource
Investments, LLC (RiverSource). Independent counsel advised the Board that it
would be prudent, in connection with the spin-off, to consider a new agreement
with RiverSource and to seek shareholder approval of that agreement as soon as
practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices. The
Board considered that over time the Fund's investment performance should be
above the median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 exceeded the median.
The Board noted that, in addition to portfolio management and investment
research, AEFC provides portfolio trading, daily net asset value calculation,
management of cash flow, product development, administration of its compliance
and legal departments, access to distribution, accounting and recordkeeping, and
reporting to the Board and shareholders. To evaluate these services, the Board
referred to surveys and benchmarks established by commercial providers, trade
associations and AEFC's internal processes. The Board concluded that the
services provided were consistent with services provided by investment managers
to comparable mutual funds.
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33 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
The Board also evaluated the price paid for the services provided by AEFC,
noting the existence of a pricing philosophy, established by the Board and AEFC,
that seeks to maintain total Fund expenses within a range of the median expenses
charged to comparable funds sold through financial advisors. The Board
considered detailed information set forth in an annual report on fees and
expenses, including, among other things, data showing a comparison of the Fund's
expenses with median expenses paid by funds in its comparison group and data
showing the Fund's contribution to AEFC's profitability. The Board determined
that while the Fund's expenses are somewhat higher than the median for its
comparison group, the Fund's strong performance justified the level of expenses.
The Board considered the economies of scale that might be realized by AEFC as
the Fund grew and took note of the extent to which Fund shareholders also might
benefit from such growth. The Board considered that the Agreement provided for
lower fees as assets increase at pre-established breakpoints and concluded that
the Agreement satisfactorily provided for sharing these economies of scale.
The Board took into account the Contract Committee's discussion comparing the
fees AEFC charges to the Fund with those it charges to institutional clients,
noting that the relatively higher fees paid by the Fund were principally
attributable to the additional services required to manage a regulated mutual
fund, like the Fund, and the operation of a large mutual fund family. The Board
also considered the profitability realized by AEFC and its affiliates from its
relationship with the Fund. The Board took into account the services acquired by
AEFC through the use of commission dollars paid by the Fund on portfolio
transactions. The Board concluded that AEFC's overall costs and profitability
were appropriate, although profitability may be too low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit AEFC to offer
competitive compensation to its personnel, make necessary investments in its
business and earn an appropriate profit. Based on the foregoing, the Board
concluded that the fees paid to AEFC under the Agreement were fair and
reasonable and determined to approve renewal of the Agreement for the Interim
Period.
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
(800) 862-7919; by looking at the website americanexpress.com/funds; or by
searching the website of the Securities and Exchange Commission
http://www.sec.gov. You may view the Fund's voting record for all portfolio
companies whose shareholders meetings were completed the previous quarter on
americanexpress.com/funds or obtain a copy by calling the Fund's administrator,
Board Services Corporation, collect at (612) 330-9283. In addition, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
34 --- AXP THREADNEEDLE GLOBAL EQUITY FUND --- 2005 SEMIANNUAL REPORT
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for
semi-annual reports.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing
date of this Form N-CSR, the registrant's Principal Financial
Officer and Principal Executive Officer have concluded that those
disclosure controls and procedures provide reasonable assurance
that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable for semi-annual reports.
(a)(2) Separate certification for the Registrant's principal
executive officer and principal financial officer, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a)
under the Investment Company Act of 1940, are attached as
EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) AXP GLOBAL SERIES, INC.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date June 30, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date June 30, 2005
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date June 30, 2005