AXP(SM) Global
Bond Fund
1999 SEMIANNUAL REPORT
(icon of) compass
The goal of AXP Global Bond Fund is a high total return through income and
growth of capital.
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
<PAGE>
A Bounty of Bonds
In today's global economy, investment opportunities don't stop at the water's
edge. While bonds issued by the U.S. government and corporations once made up
almost all of the bond market, today more than half of the world's debt
securities are issued from outside the United States. This means expanded
opportunity for investors. Global Bond Fund's aim is to take advantage of
opportunities in bond markets at any time and in any place, providing investors
with greater portfolio diversification.
CONTENTS
From the Chairman 3
From the Portfolio Manager 4
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements (Fund) 7
Notes to Financial Statements (Fund) 10
Financial Statements (Portfolio) 16
Notes to Financial Statements (Portfolio) 19
Investments in Securities 25
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
It is an honor for me to join the American Express(R) Funds as chairman of the
board and chief executive officer for each of the funds. I have served for the
past eight years as governor of Minnesota and also for the past 20 years as a
constitutional officer responsible for the pension investments made on behalf of
government employees. My responsibility in the upcoming years is to serve your
interests.
By law, half the members of a mutual fund board must be independent of their
investment manager and distributor. I am one of those persons. I am not an
employee of American Express Financial Corporation (AEFC), nor do I own stock in
American Express Company. Both are fine companies, but the law clearly states
that to fully represent your interests I must be independent.
Having said that, I have a great deal of respect for the capabilities of AEFC
and for the services it provides to investors. Your financial advisor assists
you in financial planning, conducts regular investment reviews and responds to
your questions and needs. This is a very personal service that makes AEFC a
partner in your financial future. I know that AEFC has an investment focus on
the long-term performance of our economy and that it wants you to participate in
that growth. Consistent with that, our board is here to serve you and represent
your interests in a professional manner.
I also want to let you know that, on June 16, 1999, there will be a regular
meeting of shareholders. These meetings are held about every five years to elect
directors and consider other proposals. One proposal that is expected to be
approved is to change "IDS" to "AXP"in the Fund's name. We will discuss the
action taken on other proposals in future reports.
Arne H. Carlson
(picture of) Ray Goodner
Ray Goodner
Portfolio manager
From the Portfolio Manager
It was a mixed environment for bonds over the past six months, as a rebound in
emerging-market bonds was offset by lackluster results in some major markets.
AXP Global Bond Fund's performance reflected these conditions, as its Class A
shares generated a total return (net asset value change and dividends) of 0.37%
for the first half of the fiscal year -- November 1998 through April 1999.
The period got off to a good start, as falling interest rates in the U.S. and
Europe provided a boost for bond prices. The biggest beneficiaries of the
positive trend, though, were the smaller, or emerging, markets of Latin America
and Southeast Asia, which had been pummeled in previous months by a second bout
of the financial malady that came to be known as the "Asian flu." The upturn in
the emerging markets continued through the end of the period, making them the
best-performing segment of the global bond market for the six months. While they
made up a relatively modest portion of the portfolio (about 18% throughout the
period), their strong gains had a distinctly positive effect on Fund
performance.
U.S. RATES REVERSE DIRECTION
Here at home, government bonds experienced two very different environments. With
interest rates following an overall downward path through January, Treasury
bonds, a substantial area of investment for the Fund, rallied nicely. Then, over
the final three months, interest rates reversed direction, causing Treasuries to
lose ground.
In Europe, sluggish economies prompted monetary authorities to lower interest
rates, which in turn helped bond prices. However, generally weak currencies,
especially the new euro, reduced the ultimate return for the Fund. Investments
in Europe, which emphasized countries not linked to the euro, principally the
United Kingdom and Scandinavia, experienced the best overall performance thanks
to relatively strong currencies over the six months.
Looking at changes to the portfolio, I reduced its duration somewhat early in
the period to lessen the sensitivity of the Fund's value to changes in interest
rates. About mid-period, I added a bit to holdings in Europe to take advantage
of lower bond prices and currency values. Lastly, I sold some holdings in
emerging markets given that prices there had risen so dramatically.
As for the rest of the fiscal year, in light of the fact that the U.S. economy
remains quite strong and smaller foreign economies are showing signs of
recovery, global inflation may pick up moderately in the months ahead. That, in
turn, could put upward pressure on interest rates and cause bonds to struggle.
On the other hand, I do expect better performance from Europe. This stems from
my belief that the euro is likely to recover, thereby enhancing returns for
U.S.-based investors.
Ray Goodner
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 1999 $6.04
Oct. 31, 1998 $6.17
Decrease $0.13
Distributions -- Nov. 1, 1998 - April 30, 1999
From income $0.14
From capital gains $0.01
Total distributions $0.15
Total return* +0.37%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 1999 $6.04
Oct. 31, 1998 $6.17
Decrease $0.13
Distributions -- Nov. 1, 1998 - April 30, 1999
From income $0.12
From capital gains $0.01
Total distributions $0.13
Total return* -0.02%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 1999 $6.04
Oct. 31, 1998 $6.17
Decrease $0.13
Distributions -- Nov. 1, 1998 - April 30, 1999
From income $0.15
From capital gains $0.01
Total distributions $0.16
Total return* +0.44%**
*The prospectus discusses the effect of sales charges, if any, on the various
classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of April 30, 1999)
U.S. Treasury 9.88% $93,709,755
7.50% 2016
U.S. Treasury 6.90 65,432,363
7.50% 2001
United Kingdom Treasury 5.09 48,292,210
8.00% 2003
Federal Republic of Germany 4.46 42,287,041
7.50% 2004
United Kingdom Treasury 3.80 36,025,231
9.00% 2000
Govt of Canada 3.77 35,775,138
8.00% 2023
Govt of Italy 3.22 30,549,378
8.50% 2004
Govt of Sweden 2.95 27,999,264
8.00% 2007
Govt of Spain 2.54 24,077,290
8.80% 2006
Federal Republic of Germany 2.37 22,482,814
8.00% 2002
Note: Certain foreign investment risks include changes in currency exchange
rates, adverse political or economic order, and lack of similar regulatory
requirements followed by U.S. companies.
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) pie chart
The 10 holdings listed here
make up 44.98% of net assets
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<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Global Bond Fund
April 30, 1999 (Unaudited)
Assets
<S> <C>
Investment in World Income Portfolio (Note 1) $948,023,521
------------
Liabilities
Dividends payable to shareholders 4,412,209
Accrued distribution fee 5,371
Accrued service fee 4,541
Accrued transfer agency fee 4,539
Accrued administrative services fee 1,373
Other accrued expenses 28,863
------
Total liabilities 4,456,896
---------
Net assets applicable to outstanding capital stock $943,566,625
============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,562,792
Additional paid-in capital 945,072,157
Excess of distributions over net investment income (1,538,902)
Accumulated net realized gain (loss) (5,666,052)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 4,136,630
---------
Total -- representing net assets applicable to outstanding capital stock $943,566,625
============
Net assets applicable to outstanding shares: Class A $683,120,097
Class B $260,441,239
Class Y $ 5,289
Net asset value per share of outstanding capital stock: Class A shares 113,140,150 $ 6.04
Class B shares 43,138,149 $ 6.04
Class Y shares 876 $ 6.04
See accompanying notes to financial statements.
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<CAPTION>
Statement of operations
AXP Global Bond Fund
Six months ended April 30, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 194,123
Interest 32,069,270
Less foreign taxes withheld (2,298)
------
Total income 32,261,095
----------
Expenses (Note 2):
Expenses allocated from World Income Portfolio 3,830,795
Distribution fee-- Class B 997,013
Transfer agency fee 673,184
Incremental transfer agency fee
Class A 47,720
Class B 32,903
Service fee
Class A 619,458
Class B 231,644
Class Y 2
Administrative services fees and expenses 260,145
Compensation of board members 5,559
Registration fees 34,403
Reports to shareholders 155,885
Audit fees 3,812
Other 2,482
-----
Total expenses 6,895,005
Earnings credits on cash balances (Note 2) (21,539)
-------
Total net expenses 6,873,466
---------
Investment income (loss) -- net 25,387,629
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (5,175,391)
Financial futures contracts (940,706)
Foreign currency transactions 604,306
Options contracts written 346,728
-------
Net realized gain (loss) on investments (5,165,063)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (13,760,124)
-----------
Net gain (loss) on investments and foreign currencies (18,925,187)
-----------
Net increase (decrease) in net assets resulting from operations $ 6,462,442
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Global Bond Fund
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ 25,387,629 $ 55,468,216
Net realized gain (loss) on investments (5,165,063) (12,428,331)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (13,760,124) 3,657,756
----------- ---------
Net increase (decrease) in net assets resulting from operations 6,462,442 46,697,641
--------- ----------
Distributions to shareholders from:
Net investment income
Class A (18,970,616) (30,807,238)
Class B (6,076,439) (8,474,182)
Class Y (143) (73)
Net realized gain
Class A (1,512,779) (16,718,446)
Class B (559,859) (5,381,162)
Class Y (11) (25)
--- ---
Total distributions (27,119,847) (61,381,126)
----------- -----------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 58,120,525 156,778,992
Class B shares 32,480,010 82,100,674
Class Y shares -- 4,008
Reinvestment of distributions at net asset value
Class A shares 14,428,228 42,017,023
Class B shares 5,379,162 14,073,295
Class Y shares 136 98
Payments for redemptions
Class A shares (98,060,000) (212,414,877)
Class B shares (Note 2) (34,727,130) (60,697,671)
- ----------- -----------
Increase (decrease) in net assets from capital share transactions (22,379,069) 21,861,542
----------- ----------
Total increase (decrease) in net assets (43,036,474) 7,178,057
Net assets at beginning of period 986,603,099 979,425,042
----------- -----------
Net assets at end of period $943,566,625 $986,603,099
============ ============
See accompanying notes to financial statements.
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<PAGE>
Notes to Financial Statements
AXP Global Bond Fund
(Unaudited as to April 30, 1999)
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 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 and
automatically convert to Class A shares during the ninth calendar year of
ownership.
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 fee and service fee (class specific
expenses) differs 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 seeks to provide shareholders with
high total return through income and growth of capital by investing primarily in
debt securities 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 as of April 30, 1999 was 99.93%.
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).
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
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 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 daily and paid each calendar
quarter, are reinvested in additional shares of the Fund at net asset value or
payable in cash. Capital gains, when available, are distributed along with the
last income dividend of the calendar year.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund has an agreement with American Express Financial Corporation (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 in reducing percentages from 0.06% to
0.04% annually. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and employees.
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 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 Y $17.50
Under terms of a prior agreement that ended Jan. 31, 1999, the Fund paid a
transfer agency fee at an annual rate per shareholder account of $15.50 for
Class A and $16.50 for Class B. Under terms of a prior agreement that ended
March 31, 1999, the Fund paid a transfer agency fee at an annual rate per
shareholder account of $15.50 for Class Y.
The Fund has agreements with American Express Financial Advisors Inc. for
distribution and shareholder services. Under a Plan and Agreement of
Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the
Fund's average daily net assets attributable to Class B shares for distribution
services.
Under a Shareholder Service Agreement, the Fund pays a fee for service provided
to shareholders by financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of the Fund's average daily net assets
attributable to Class A and Class B shares and 0.10% of the Fund's average daily
net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $708,219 for Class A and $131,536 for Class B for
the six months ended April 30, 1999.
During the six months ended April 30, 1999, the Fund's transfer agency fees were
reduced by $21,539 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, 1999
Class A Class B Class Y
Sold 9,439,305 5,275,105 --
Issued for reinvested distributions 2,344,671 874,471 22
Redeemed (15,960,313) (5,660,352) --
----------- ---------- ----
Net increase (decrease) (4,176,337) 489,224 22
Year ended Oct. 31, 1998
Class A Class B Class Y
Sold 25,531,358 13,366,363 660
Issued for reinvested distributions 6,844,665 2,293,029 16
Redeemed (34,618,602) (9,912,014) --
----------- ---------- ----
Net increase (decrease) (2,242,579) 5,747,378 676
4. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express funds, permits borrowings up
to $200 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the
Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90
days after such loan is executed. The Fund also pays a commitment fee equal to
its pro rata share of the amount of credit facility at a rate of 0.05% per
annum. The Fund had no borrowings outstanding during the six months ended April
30, 1999.
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<CAPTION>
5. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended Oct. 31,
Per share income and capital changesa
Class A
1999d 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $6.17 $6.26 $6.28 $6.11 $5.76
Income from investment operations:
Net investment income (loss) .14 .39 .35 .38 .35
Net gains (losses) (both realized and unrealized) (.12) (.05) (.05) .18 .41
Total from investment operations .02 .34 .30 .56 .76
Less distributions:
Dividends from net investment income (.14) (.29) (.28) (.39) (.33)
Distributions from realized gains (.01) (.14) (.04) -- (.02)
Excess distributions of realized gains -- -- -- -- (.06)
Total distributions (.15) (.43) (.32) (.39) (.41)
Net asset value, end of period $6.04 $6.17 $6.26 $6.28 $6.11
Ratios/supplemental data
Net assets, end of period (in millions) $683 $724 $748 $689 $548
Ratio of expenses to average daily net assetsb 1.20%e 1.16% 1.16% 1.20% 1.25%
Ratio of net investment income (loss)
to average daily net assets 5.4%e 5.86% 5.74% 5.72% 6.15%
Portfolio turnover rate
(excluding short-term securities) 26% 27% 55% 49% 92%
Total returnc .37% 5.52% 4.91% 8.96% 13.58%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
c Total return does not reflect payment of a sales charge.
d Six months ended April 30, 1999 (Unaudited).
e Adjusted to an annual basis.
</TABLE>
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<TABLE>
<CAPTION>
Fiscal period ended Oct. 31,
Per share income and capital changesa
Class B Class Y
1999f 1998 1997 1996 1995b 1999f 1998 1997 1996g 1995b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $6.17 $6.26 $6.28 $6.11 $5.74 $6.17 $6.26 $6.30 $6.11 $5.74
Income from investment operations:
Net investment
income (loss) .12 .33 .31 .33 .24 .15 .40 .35 .29 .27
Net gains (losses)
(both realized and unrealized) (.12) (.04) (.05) .18 .41 (.12) (.06) (.06) .20 .41
Total from investment operations -- .29 .26 .51 .65 .03 .34 .29 .49 .68
Less distributions:
Dividends from net
investment income (.12) (.24) (.24) (.34) (.24) (.15) (.29) (.29) (.30) (.27)
Distributions from
realized gains (.01) (.14) -- -- -- (.01) (.14) -- -- --
Excess distributions of realized gains -- -- (.04) -- (.04) -- -- (.04) -- (.04)
Total distributions (.13) (.38) (.28) (.34) (.28) (.16) (.43) (.33) (.30) (.31)
Net asset value, end of period $6.04 $6.17 $6.26 $6.28 $6.11 $6.04 $6.17 $6.26 $6.30 $6.11
Ratios/supplemental data
Net assets, end of
period (in millions) $260 $263 $231 $141 $37 $-- $-- $-- $-- $2
Ratio of expenses to
average daily net assetsc 1.97%d 1.92% 1.92% 1.96% 2.05%d 1.07%d 1.09% 1.01% 1.01% 1.10%d
Ratio of net investment
income (loss) to average
daily net assets 4.63%d 5.11% 5.00% 4.96% 5.88%d 5.52%d 6.10% 5.89% 6.06% 6.68%d
Portfolio turnover rate
(excluding short-term securities) 26% 27% 55% 49% 92% 26% 27% 55% 49% 92%
Total returne (.02%) 4.73% 4.12% 8.15% 11.67% .44% 5.62% 5.06% 7.35% 12.18%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Effective fiscal year 1996, 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 Six months ended April 30, 1999 (Unaudited).
g Periods from Nov. 1, 1995 to Nov. 20, 1995 and from Dec. 4, 1995 to
Oct. 31, 1996. From Nov. 20, 1995 to Dec. 4, 1995 there were no Class Y
shares outstanding.
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<CAPTION>
Financial Statements
Statement of assets and liabilities
World Income Portfolio
April 30, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $929,785,671) $ 933,687,780
Cash in bank on demand deposit 1,103,077
Dividends and accrued interest receivable 23,346,415
Receivable for investment securities sold 1,248,838
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 818,120
U.S. government securities held as collateral for securities loaned (Note 5) 95,701,108
----------
Total assets 1,055,905,338
-------------
Liabilities
Payable for investment securities purchased 10,410,890
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 61,090
Payable upon return of securities loaned (Note 5) 96,649,108
Accrued investment management services fee 19,162
Other accrued expenses 75,016
------
Total liabilities 107,215,266
-----------
Net assets $ 948,690,072
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
World Income Portfolio
Six months ended April 30, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 194,250
Interest 32,091,758
Less foreign taxes withheld (2,300)
------
Total income 32,283,708
----------
Expenses (Note 2):
Investment management services fee 3,606,067
Compensation of board members 6,118
Custodian fees 160,327
Audit fees 11,438
Other 53,091
------
Total expenses 3,837,041
Earnings credits on cash balances (Note 2) (3,573)
------
Total net expenses 3,833,468
---------
Investment income (loss) -- net 28,450,240
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (5,179,084)
Financial futures contracts (941,375)
Foreign currency transactions 604,610
Options contracts written (Note 7) 346,961
-------
Net realized gain (loss) on investments (5,168,888)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (13,769,194)
-----------
Net gain (loss) on investments and foreign currencies (18,938,082)
-----------
Net increase (decrease) in net assets resulting from operations $ 9,512,158
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
World Income Portfolio
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss) -- net $ 28,450,240 $ 61,053,694
Net realized gain (loss) on investments (5,168,888) (12,436,385)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (13,769,194) 3,660,313
----------- ---------
Net increase (decrease) in net assets resulting from operations 9,512,158 52,277,622
Net contributions (withdrawals) from partners (49,200,200) (49,153,308)
----------- -----------
Total increase (decrease) in net assets (39,688,042) 3,124,314
Net assets at beginning of period 988,378,114 985,253,800
----------- -----------
Net assets at end of period $948,690,072 $988,378,114
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
World Income Portfolio
(Unaudited as to April 30, 1999)
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. World Income Portfolio
invests primarily in debt securities 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 generally accepted accounting
principles requires management to make estimates (e.g., on 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.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
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 at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
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. For U.S.
dollar denominated bonds, interest income, including level-yield amortization of
premium and discount is accrued daily. For foreign bonds the Fund amortizes
premium and original issue discount daily and market discount is recognized at
the time of sale.
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 in reducing
percentages from 0.77% to 0.67% annually.
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.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended April 30, 1999, the Portfolio's custodian fees were
reduced by $3,573 as a result of earnings credits from overnight cash balances.
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 $231,825,488 and $327,823,837, respectively, for the six
months ended April 30, 1999. For the same period, the portfolio turnover rate
was 26%. Realized gains and losses are determined on an identified cost basis.
<PAGE>
<TABLE>
<CAPTION>
4. FOREIGN CURRENCY CONTRACTS
As of April 30, 1999, the Portfolio has 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
<S> <C> <C> <C> <C>
May 3, 1999 10,471,980 9,853,199 $ -- $61,090
U.S. Dollar European Monetary Unit
May 5, 1999 70,000,000 8,537,522 241,281 --
Swedish Krona U.S. Dollar
May 17, 1999 13,440,000 14,603,635 390,762 --
European Monetary Unit U.S. Dollar
June 14, 1999 12,000,000 19,483,200 186,077 --
British Pound U.S. Dollar
Total $818,120 $61,090
5. LENDING OF PORTFOLIO SECURITIES
As of April 30, 1999, securities valued at $94,448,356 were on loan to brokers.
For collateral, the Portfolio received $948,000 in cash and U.S. government
securities valued at $95,701,108. Income from securities lending amounted to
$97,716 for the six months ended April 30, 1999. 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.
6. INTEREST RATE FUTURES CONTRACTS
As of April 30, 1999, investments in securities included securities valued at
$4,724,725 that were pledged as collateral to cover initial margin deposits on
150 open purchase contracts and 100 open sales contracts. The market value of
the open purchase contracts as of April 30, 1999 was $15,787,500 with a net
unrealized loss of $152,475. The market value of the open sales contracts as of
April 30, 1999 was $12,018,750 with a net unrealized gain of $205,850.
7. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows
Six months ended April 30, 1999
Puts Calls
Contracts Premium Contracts Premium
Balance Oct. 31, 1998 -- $ -- -- $ --
Opened 300 1,038,700 500 797,700
Expired (300) (1,038,700) -- --
Closed -- -- (500) (797,700)
Balance April 30, 1999 -- $ -- -- $ --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
World Income Portfolio
April 30, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Bonds (86.8%)(c)
Issuer Coupon Principal Value(a)
rate amount
Argentina (0.8%)
Republic of Argentina
(Japanese Yen)
<S> <C> <C> <C>
03-27-01 5.50% 880,000,000 $7,248,880
Australia (1.0%)
New South Wales Treasury
(Australian Dollar)
03-01-08 8.00 12,300,000 9,394,109
Bermuda (0.2%)
Central Euro Media
(European Monetary Unit) Sr Nts Series RG
08-15-04 8.13 3,925,000 1,738,733
Canada (3.9%)
Govt of Canada
(Canadian Dollar)
06-01-23 8.00 38,810,000 35,775,138
Rogers Cablesystems
(Canadian Dollar)
01-15-14 9.65 2,000,000 1,513,176
Cayman Islands (0.2%)
Roil
(U.S. Dollar)
12-05-02 12.78 4,149,900(d) 1,452,465
China (1.8%)
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-04 9.25 3,500,000(d) 1,925,000
06-15-07 9.50 8,750,000(d) 4,637,500
Total 6,562,500
People's Republic of China
(U.S. Dollar)
07-03-01 7.38 4,450,000 4,531,880
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 12.00 11,350,000(d) 6,015,500
Denmark (5.1%)
Govt of Denmark
(Danish Krone)
11-15-00 9.00 40,000,000 6,176,939
05-15-03 8.00 113,200,000 18,802,283
03-15-06 8.00 65,000,000 11,366,019
11-10-24 7.00 70,000,000 12,340,047
Total 48,685,288
France (1.2%)
Govt of France
(European Monetary Unit)
04-25-05 7.50 8,710,000 11,238,382
Germany (7.4%)
Federal Republic of Germany
(European Monetary Unit)
07-22-02 8.00 18,471,330 22,482,814
11-11-04 7.50 33,175,566 42,287,041
07-04-27 6.50 4,305,512 5,648,474
Total 70,418,329
Greece (2.7%)
Hellenic Republic
(Greek Drachma)
03-21-00 9.80 2,550,000,000 8,317,700
04-01-03 8.90 4,888,000,000 17,121,353
Total 25,439,053
Hong Kong (0.5%)
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 5,000,000(d) 4,501,008
Indonesia (0.9%)
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 4,350,000(b) 2,936,250
Indah Kiat Pulp & Paper
(U.S. Dollar)
11-01-00 8.88 2,500,000(b) 2,062,500
Tjiwi Kimia Finance Mauritius
(U.S. Dollar) Company Guaranty
08-01-04 10.00 2,450,000(b) 1,617,000
Tjiwi Kimia Intl
(U.S. Dollar) Company Guaranty
08-01-01 13.25 2,000,000(b) 1,620,000
Italy (4.3%)
Govt of Italy
(European Monetary Unit)
01-01-04 8.50 23,821,533 30,549,378
11-01-26 7.25 7,886,283 10,676,070
Total 41,225,448
Japan (0.1%)
Nippon Express
(Japanese Yen) Cv Series 4
03-31-04 1.00 120,000,000 1,055,316
Malaysia (0.4%)
Petronas
(U.S. Dollar)
08-15-15 7.75 4,550,000(d) 4,209,843
Mexico (1.5%)
Banco Nacional de Comercio Exterior
(U.S. Dollar)
02-02-04 7.25 4,150,000 3,815,406
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 2,639,406(d) 2,533,830
United Mexican States
(British Pound) Medium-term Nts Series E
05-30-02 8.75 5,000,000 7,996,303
Norway (1.6%)
Govt of Norway
(Norwegian Krone)
11-30-04 5.75 60,000,000 8,096,394
01-15-07 6.75 48,000,000 6,948,864
Total 15,045,258
Philippines (0.6%)
Philippine Long Distance Telephone
(U.S. Dollar) Medium-term Nts Series E
03-06-07 7.85 6,200,000(d,e) 5,516,970
Russia (0.2%)
Rostelecom
(U.S. Dollar)
02-15-00 9.38 5,000,000(b) 1,750,000
Slovenia (1.1%)
Republic of Slovenia
(European Monetary Unit)
06-16-04 5.75 17,750,000 10,319,789
South Korea (0.5%)
Korea Electric Power
(U.S. Dollar)
12-01-03 6.38 5,040,000 4,836,660
Spain (2.5%)
Govt of Spain
(European Monetary Unit)
04-30-06 8.80 17,441,371 24,077,290
Sweden (4.8%)
Govt of Sweden
(Japanese Yen) Medium-term Nts
06-21-99 3.88 600,000,000 5,050,251
(Swedish Krona)
02-09-05 6.00 44,500,000 5,911,591
08-15-07 8.00 185,200,000 27,999,264
Total 38,961,106
Paulson Enterprenad
(Swedish Krona)
12-15-00 4.75 56,560,000 6,733,848
United Kingdom (11.9%)
Abbey Natl First Capital
(U.S. Dollar) Sub Nts
10-15-04 8.20 5,000,000 5,492,094
Colt Telecom Group
(European Monetary Unit)
07-31-08 7.63 6,400,000 3,569,846
Texon Intl
(European Monetary Unit) Sr Nts
02-01-08 10.00 4,000,000 2,031,268
United Kingdom Treasury
(British Pound)
03-03-00 9.00 21,700,000 36,025,231
06-10-03 8.00 27,000,000 48,292,210
12-07-05 8.50 9,200,000 17,852,927
Total 102,170,368
United States (30.5%)
Chesapeake
(U.S. Dollar)
05-01-03 9.88 1,000,000 1,127,362
Citicorp
(European Monetary Unit)
09-19-09 3.47 10,800,000 6,389,682
Cleveland Electric Illuminating
(U.S. Dollar) 1st Mtge Series B
05-15-05 9.50 3,000,000 3,202,948
Dayton Hudson
(U.S. Dollar)
12-01-22 8.50 3,265,000 3,547,647
Executive Risk Capital
(U.S. Dollar) Company Guaranty Series B
02-01-27 8.68 3,500,000 3,728,347
Federal Natl Mtge Assn
(U.S. Dollar)
02-01-27 7.50 2,724,828 2,802,049
06-01-27 7.50 4,517,248 4,645,267
Total 7,447,316
Federal Natl Mtge Assn Global
(Japanese Yen)
12-20-99 2.00 500,000,000 4,234,076
General Motors
(U.S. Dollar)
07-15-01 9.13 2,000,000 2,131,916
GTE North
(U.S. Dollar) Series F
02-15-10 6.38 9,950,000 10,006,536
Nationwide CSN Trust
(U.S. Dollar)
02-15-25 9.88 7,000,000(d) 8,138,191
New York Life Insurance
(U.S. Dollar)
12-15-23 7.50 7,000,000(d) 6,793,151
Overseas Private Investment
(U.S. Dollar) U.S. Govt Guaranty Series 1996A
01-15-09 6.99 7,500,000 7,714,125
PDV America
(U.S. Dollar) Sr Nts
08-01-03 7.88 3,500,000 3,259,704
Phillips Petroleum
(U.S. Dollar)
04-15-23 7.92 3,115,000 3,209,975
Questar Pipeline
(U.S. Dollar)
06-01-21 9.38 1,000,000 1,078,029
Salomon Smith Barney Holdings
(U.S. Dollar)
01-15-03 6.13 10,400,000 10,424,352
Southern California Gas
(U.S. Dollar) 1st Mtge Series BB
03-01-23 7.38 900,000 899,361
Swiss Bank
(U.S. Dollar) Sub Deb
07-15-25 7.50 4,700,000 4,967,909
TU Electric Capital
(U.S. Dollar) Company Guaranty
01-30-37 8.18 6,150,000 6,404,840
U S WEST Communications
(U.S. Dollar)
11-10-26 7.20 6,000,000 5,978,527
U.S. Treasury
(U.S. Dollar)
02-15-00 5.88 10,000,000 10,076,619
11-15-01 7.50 62,000,000(e,f) 65,432,363
11-15-16 7.50 79,950,000(e,f) 93,709,755
(U.S. Dollar) TIPS
01-15-07 3.38 10,000,000(g) 10,017,394
Total 179,236,131
USX
(U.S. Dollar)
03-01-08 6.85 4,775,000 4,761,895
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 4,550,000(d) 4,820,836
Venezuela (1.1%)
PDVSA Finance
(U.S. Dollar)
02-15-10 9.75 10,000,000(d) 9,964,296
Total bonds
(Cost: $819,289,854) $823,557,986
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Preferred stock & other (0.5%)(c)
Issuer Shares Value(a)
Mexico Value
<S> <C> <C>
Rights 1,000(h) $--
Pinto Totta Intl Finance
7.77% 5,000(b,d) 4,650,000
Total preferred stock & other
(Cost: $5,000,000) $4,650,000
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (11.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (8.3%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
05-04-99 4.74% $12,300,000 $12,293,522
05-05-99 4.77 9,500,000 9,493,706
05-20-99 4.74 15,600,000 15,559,049
05-25-99 4.74 6,200,000 6,179,678
06-15-99 4.74 15,100,000 15,009,123
06-16-99 4.75 9,300,000 9,240,627
Federal Natl Mtge Assn Disc Nt
06-14-99 4.73 11,400,000 11,333,024
Total 79,108,729
Commercial paper (2.4%)
CAFCO
06-15-99 4.83 6,900,000(i) 6,857,680
Delaware Funding
05-11-99 4.86 900,000(i) 898,666
Deutsche Bank Financial
05-26-99 4.81 4,400,000 4,384,778
Falcon Asset
06-01-99 4.84 1,100,000(i) 1,095,287
Fleet Funding
06-09-99 4.83 8,200,000(i) 8,156,267
Westpac Capital
06-10-99 4.83 1,700,000 1,690,707
Total 23,083,385
Letter of credit (0.4%)
Bank of America-
AES Hawaii
05-28-99 4.82 3,300,000 3,287,680
Total short-term securities
(Cost: $105,495,817) $105,479,794
Total investments in securities
(Cost: $929,785,671)(j) $933,687,780
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Security is partially or fully on loan. See Note 5 to the financial
statements.
(f) 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
Purchase contracts
Japanese Yen, June 1999 $187,500
Sale contracts
U.S. Treasury Bonds, June 1999 100,000
(g) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(h) Negligible market value.
(i) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(j) At April 30, 1999, the cost of securities for federal income tax purposes
was approximately $931,431,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $29,410,000
Unrealized depreciation (27,153,000)
-----------
Net unrealized appreciation $2,257,000
<PAGE>
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