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AXP(SM)Global
Bond Fund
1999 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
(picture of) compass
AXP Global Bond Fund
seeks to provide shareholders
with high total return
through income and
growth of capital.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send
money.)
AMERICAN EXPRESS(R) (logo)
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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. AXP 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.
AXP GLOBAL BOND FUND (This annual report is not part of the prospectus.)
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Table of Contents
1999 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
The 10 Largest Holdings 7
Making the Most of the Fund 8
The Fund's Long-term Performance 9
Independent Auditors' Report (Fund) 11
Financial Statements (Fund) 12
Notes to Financial Statements (Fund) 15
Independent Auditors' Report
(Portfolio) 20
Financial Statements (Portfolio) 21
Notes to Financial Statements
(Portfolio) 24
Investments in Securities 29
Federal Income Tax Information 38
1999 PROSPECTUS
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 4p
Past Performance 6p
Fees and Expenses 8p
Management 9p
Buying and Selling Shares 9p
Valuing Fund Shares 9p
Investment Options 10p
Purchasing Shares 11p
Transactions through Third Parties 14p
Sales Charges 14p
Exchanging/Selling Shares 18p
Distributions and Taxes 23p
Master/Feeder Structure 25p
Other Information 26p
Financial Highlights 27p
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
American Express(R) Funds held shareholder meetings in June 1999. Shareholders
approved all of the proposals advanced by management. Among the proposals were:
o The election of Board members and the selection of KPMG LLP as independent
auditors.
o Change in the Fund name from "IDS" to "AXP."
o A new shareholder service and distribution plan.
o Changes with respect to fundamental investment policies.
No other business was presented at the meeting, which was concluded by a report
to shareholders from the Investment Department of American Express Financial
Corporation.
Thanks to all of you for your effort in reviewing the proxy material and voting
your proxies.
Arne H. Carlson
(picture of) Ray Goodner
Ray Goodner
Portfolio manager
From the Portfolio Manager
On the whole, it was a difficult environment for bonds over the past 12 months,
as a rebound in the emerging markets was offset by poor results in most major
bond markets. AXP Global Bond Fund's performance reflected the conditions, as
its Class A shares (before sales charge) experienced a total-return loss of
0.35% for the fiscal year -- November 1998 through October 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 most of the period, making them the
best-performing segment of the global bond market for the 12 months. While they
made up a relatively small portion of the portfolio, their strong gains had a
distinctly positive effect on Fund performance.
AXP GLOBAL BOND FUND (This annual report is not part of the prospectus.)
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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. But from
that point, the environment turned negative, as higher interest rates and
concerns about potentially higher inflation in the U.S. took a heavy toll on the
market.
In Europe, sluggish economies prompted monetary authorities to lower interest
rates early in the period, which in turn helped bond prices. From then on,
though, bonds largely struggled, and generally weak currencies, especially the
new euro, reduced the ultimate return. To mitigate the effect of the currency
trend, I emphasized U.S. dollar-denominated bonds and euro-denominated bonds
hedged back into dollars. I also tilted investments toward countries not linked
to the euro, principally the United Kingdom and Scandinavia, which experienced
better relative performance thanks to stronger currencies.
Looking at changes to the portfolio, I reduced the portfolio's duration early in
the period to lessen the sensitivity of the portfolio to changes in interest
rates. Ultimately, this "defensive" strategy cushioned the Fund's net asset
value against the negative effect of rising rates. About mid-period, I added a
bit to holdings in Europe to take advantage of lower bond prices and also
removed the currency hedges in anticipation of a weakening dollar. Later in the
period, I sold holdings in emerging markets given that prices there had risen so
dramatically.
As the new fiscal year begins, I think the worst has passed for global bond
markets. While we may not see strong rallies in the U.S. and Europe, a
continuation of generally tame inflation should allow those markets to enjoy
better relative performance. Beyond that, an improvement in the strength of the
euro and yen appears likely, which would enhance returns from international
holdings.
Ray Goodner
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1999 $ 5.87
Oct. 31, 1998 $ 6.17
Decrease $ 0.30
Distributions -- Nov. 1, 1998 - Oct. 31, 1999
From income $ 0.26
From capital gains $ 0.01
Total distributions $ 0.27
Total return* -0.35%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1999 $ 5.87
Oct. 31, 1998 $ 6.17
Decrease $ 0.30
Distributions -- Nov. 1, 1998 - Oct. 31, 1999
From income $ 0.22
From capital gains $ 0.01
Total distributions $ 0.23
Total return* -1.10%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 1999 $ 5.87
Oct. 31, 1998 $ 6.17
Decrease $ 0.30
Distributions -- Nov. 1, 1998 - Oct. 31, 1999
From income $ 0.27
From capital gains $ 0.01
Total distributions $ 0.28
Total return* -0.19%**
* 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.
AXP GLOBAL BOND FUND (This annual report is not part of the prospectus.)
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The 10 Largest Holdings
Percent Value
(of net assets) (as of Oct. 31, 1999)
U.S. Treasury 8.97% $74,960,020
7.50% 2016
United Kingdom Treasury 5.61 46,897,218
8.00% 2003
Allgemeine Hypo Bank 4.90 40,905,881
5.00% 2009
U.S. Treasury 4.57 38,177,118
7.50% 2001
United Kingdom Treasury 4.31 36,016,588
9.00% 2000
Govt of Italy 3.39 28,316,914
8.50% 2004
Govt of Sweden 3.07 25,672,134
8.00% 2007
Govt of Spain 2.61 21,815,176
8.80% 2006
Federal Republic of Germany 2.54 21,256,929
8.00% 2002
Govt of Canada 2.37 19,833,313
7.00% 2006
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 42.34% of net assets
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Making the Most of the Fund
BUILD YOUR ASSETS SYSTEMATICALLY
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares fall or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Jan Feb Mar Apr May Jun
$15 $16 $18 $20
$10 $10 $12 $14
$ 5
Accumulated shares* Average market Your average
price per share cost per share
42.25 $15 $14.20
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Jan Feb Mar Apr May Jun
$15
$10 $10 $10
$ 5 $8 $5 $5 $8
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $6 $7
$ 5 $4 $4
Accumulated shares* Average market Your average
price per share cost per share
103.5 $6.50 $5.80
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$100 invested per month. Total invested: $600.
*Shares purchased is determined by dividing the amount invested per month by the
current share price.
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by the Fund
exceed losses
o you receive income when the Fund's stock dividends, interest and short-term
gains exceed its expenses.
All three make up your total return. You potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another fund.
AXP GLOBAL BOND FUND (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
How $10,000 has grown in AXP Global Bond Fund
$30,000
X $21,471
AXP Global
Bond Fund
Class A
$20,000 X Salomon Smith Barney
World Gov't Bond Index
X Lipper Global Income
Fund Index
$10,000
$9,500
11/1/89 10/90 10/91 10/92 10/93 10/94 10/95 10/96 10/97 10/98 10/99
Average annual total return (as of Oct. 31, 1999)
1 year 5 years 10 years Since inception
Class A -5.34% +5.28% +8.49% --%
Class B -4.91% --% --% +5.46%*
Class Y -0.19% --% --% +6.38%*
*Inception date was March 20, 1995.
Assumes: Holding period from 11/1/89 to 10/31/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $9,543. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, Salomon Smith Barney World Government Bond
Index and the Lipper Global Income Fund Index. In comparing AXP Global Bond Fund
(Class A) to the two indexes, you should take into account the fact that the
Fund's performance reflects the maximum sales charge of 5%, while such charges
are not reflected in the performance of the indexes.
Your investment and return values fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Average annual total return
figures reflect the impact of the applicable sales charge, up to a maximum of
5%. This was a period of widely fluctuating security prices. Past performance is
no guarantee of future results.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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Salomon Smith Barney 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 goverment bond securities. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
Lipper Global Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
AXP GLOBAL BOND FUND (This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #32 to
Registration Statement No. 33-25824 filed on or about December 27, 1999, are
incorporated herein by reference.
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Federal Income Tax Information
(Unaudited)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Global Bond Fund
Fiscal year ended Oct. 31, 1999
Class A
Income distribution taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
Dec. 22, 1998 $0.05820
March 24, 1999 0.08361
June 23, 1999 0.06662
Sept. 22, 1999 0.05241
Total $0.26084
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.01301
Total distributions $0.27385
AXP GLOBAL BOND FUND (This annual report is not part of the prospectus.)
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Class B
Income distribution taxable as dividend income, none qualifying for deduction by
corporations.
Payable date Per share
Dec. 22, 1998 $0.04673
March 24, 1999 0.07176
June 23, 1999 0.05544
Sept. 22, 1999 0.04128
Total $0.21521
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.01301
Total distributions $0.22822
Class Y
Income distributions taxable as dividend income, none qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.05963
March 24, 1999 0.08532
June 23, 1999 0.06904
Sept. 22, 1999 0.05497
Total $0.26896
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.01301
Total distributions $0.28197
(This annual report is not part of the prospectus.) ANNUAL REPORT - 1999
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American
Express(R)
Funds
AXP Global Bond Fund
IDS Tower 10
Minneapolis, MN 55440-0010
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.
AMERICAN
EXPRESS(R) (logo)
S-6309 N (12/99)
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) There are pictures, icons 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
