AXPSM
Emerging
Markets Fund
2000 SEMIANNUAL REPORT
American
Express
Funds
(icon of) compass
AXP Emerging Markets Fund seeks to provide shareholders with long-term capital
growth.
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Expanding Your Opportunities
As free enterprise expands around the world, so do investment opportunities.
Some of the most exciting ones can be found in the so-called "emerging markets"
-- smaller economies located largely in Asia, Latin America and Eastern Europe.
Attracted by their rapid growth potential, many aggressive investors have made
these markets, which have a higher-than-average risk level, an integral part of
their portfolios.
CONTENTS
From the Chairman 3
From the Portfolio Managers 3
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 23
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue this year,
accompanied by a modest rise in long-term interest rates. But no matter what
transpires, this is a great time to take a close look at your goals and
investments. We encourage you to:
o Consult a professional investment advisor who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable
through retirement plans of your employer.
o Learn as much as you can about your current investments.
The portfolio managers' letter that follows provides a review of the Fund's
investment strategies and performance. The semiannual report contains other
valuable information as well. The Fund's prospectus describes its investment
objectives and how it intends to achieve those objectives. As experienced
investors know, information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
On behalf of the Board,
Arne H. Carlson
From the Portfolio Managers
In a volatile but overall positive period for stocks in emerging markets, AXP
Emerging Markets Fund enjoyed a very successful six months. For the first half
of the fiscal year -- November 1999 through April 2000 -- the Fund's Class A
shares generated a return of 20.85% (excluding the sales charge).
The period got off to an extremely strong start, as an Internet-led buying
frenzy in technology and telecommunications stocks in the U.S. spilled over into
many emerging markets. Illustrating the strength of the rally, by the end of
December, the Fund was up approximately 30%.
NEW YEAR, NEW MARKET MOOD
But by the time the new year rolled around, concerns about potentially higher
inflation and higher interest rates had surfaced in the U.S. and were spreading
overseas. In addition, the stunning run-ups many stocks had experienced were
causing investors to question whether their sometimes-stratospheric price levels
could be justified on a sustained basis. Things finally came to a head in
mid-March, when most markets went into a month-long decline. The Fund held up
relatively well during that time, but still saw a good portion of its gain
eroded during the sell-off.
Despite their ups and downs, technology and telecommunications clearly
contributed the most to the Fund's return over the six months. They comprised
about 30% of assets. The next-biggest area of investment was utility stocks,
which made up about 25% of the portfolio and proved to be modestly positive
performers. Financial services stocks accounted for about 15%, and generated
weak results.
Looking at the geographic allocation, we kept about 40% of assets in Southeast
Asia, followed by about 25% in Latin America and about 20% in Eastern Europe. On
a country basis, the largest investment exposures were to Brazil, Taiwan, Korea
and Mexico -- each in the 10%-15% range during the six months. All told, we held
investments in approximately 20 countries.
Although the past period ended on a down note, we remain enthusiastic about the
potential for emerging markets, especially those that are rapidly becoming more
integrated with the global economic and political environment. Over the near
term, sustained progress probably will be difficult to come by, as investors are
likely to take a wait-and-see approach while the Federal Reserve tries to cool
off the U.S. economy and thereby head off a run-up in inflation. But once that
matter is resolved, we think the emerging markets will be in a good position to
advance.
Julian Thompson
Ian King
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 2000 $6.03
Oct. 31, 1999 $4.99
Increase $1.04
Distributions -- Nov. 1, 1999 - April 30, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return* +20.85%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 2000 $5.88
Oct. 31, 1999 $4.88
Increase $1.00
Distributions -- Nov. 1, 1999 - April 30, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return* +20.49%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
April 30, 2000 $6.03
Oct. 31, 1999 $4.99
Increase $1.04
Distributions -- Nov. 1, 1999 - April 30, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return* +20.84%**
*Returns do not include sales load. 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, 2000)
Taiwan Semiconductor Mfg (Taiwan) 3.77% $18,088,587
Samsung Electronics (South Korea) 3.63 17,449,876
Yapi Kredit Finance (Turkey) 3.11 14,941,439
Embratel Participacoes ADR (Brazil) 2.92 14,009,489
Lukoil Holding ADR (Russia) 2.64 12,676,643
United Microelectronics (Taiwan) 2.50 12,016,081
Telefonos de Mexico ADR Cl L (Mexico) 2.40 11,533,131
China Telecom (Hong Kong) 2.31 11,092,281
Hon Hai Precision Inds (Taiwan) 2.08 9,975,715
Organizacion Soriana Cl B (Mexico) 2.03 9,734,418
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 27.39% of net assets
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<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Emerging Markets Fund
April 30, 2000 (Unaudited)
Assets
<S> <C> <C>
Investment in Emerging Markets Portfolio (Note 1) $479,472,660
Capital shares receivable 8,344
-----
Total assets $479,481,004
------------
Liabilities
Accrued distribution fee 6,529
Accrued transfer agency fee 4,082
Accrued administrative services fee 1,228
Other accrued expenses 49,217
------
Total liabilities 61,056
------
Net assets applicable to outstanding capital stock $479,419,948
============
Represented by
Capital stock-- $.01 par value (Note 1) $ 802,380
Additional paid-in capital 479,947,853
Net operating loss (743,064)
Accumulated net realized gain (loss) (Note 4) (31,785,630)
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 31,198,409
----------
Total -- representing net assets applicable to outstanding capital stock $479,419,948
============
Net assets applicable to outstanding shares: Class A $314,730,628
Class B $164,589,438
Class Y $ 99,882
Net asset value per share of outstanding capital stock:
Class A shares 52,228,968 $ 6.03
Class B shares 27,992,483 $ 5.88
Class Y shares 16,554 $ 6.03
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
AXP Emerging Markets Fund
Six months ended April 30, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 3,503,006
Interest 1,052,564
Less foreign taxes withheld (299,547)
--------
Total income 4,256,023
---------
Expenses (Note 2):
Expenses allocated from Emerging Markets Portfolio 2,833,668
Distribution fee
Class A 400,880
Class B 829,238
Transfer agency fee 570,191
Incremental transfer agency fee
Class A 42,921
Class B 36,204
Service fee-- Class Y 43
Administrative services fees and expenses 231,140
Compensation of board members 3,554
Printing and postage 26,137
Registration fees 29,725
Audit fees 3,000
Other 2,769
-----
Total expenses 5,009,470
Earnings credits on cash balances (Note 2) (10,375)
-------
Total net expenses 4,999,095
---------
Investment income (loss) -- net (743,072)
--------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (includes foreign transaction tax of $247,360) 98,221,019
Foreign currency transactions (936,445)
--------
Net realized gain (loss) on investments 97,284,574
Net change in unrealized appreciation (depreciation) on investments and
on translation of assets and liabilities in foreign currencies (19,659,483)
-----------
Net gain (loss) on investments and foreign currencies 77,625,091
----------
Net increase (decrease) in net assets resulting from operations $76,882,019
===========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Emerging Markets Fund
April 30, 2000 Oct. 31, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ (743,072) $ (421,971)
Net realized gain (loss) on investments 97,284,574 8,866,980
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies (19,659,483) 110,378,637
----------- -----------
Net increase (decrease) in net assets resulting
from operations 76,882,019 118,823,646
---------- -----------
Distributions to shareholders from:
Net investment income
Class A (33,577) (289,880)
Class Y -- (77)
----- ---
Total distributions (33,577) (289,957)
------- --------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 116,549,969 170,245,380
Class B shares 27,106,217 28,172,307
Class Y shares 151,141 1,545,981
Reinvestment of distributions at net asset value
Class A shares 32,724 282,640
Class Y shares -- 77
Payments for redemptions
Class A shares (104,624,083) (184,535,441)
Class B shares (Note 2) (17,786,182) (35,974,427)
Class Y shares (111,396) (1,543,520)
-------- ----------
Increase (decrease) in net assets from capital
share transactions 21,318,390 (21,807,003)
---------- -----------
Total increase (decrease) in net assets 98,166,832 96,726,686
Net assets at beginning of period 381,253,116 284,526,430
----------- -----------
Net assets at end of period $479,419,948 $381,253,116
============ ============
Undistributed net investment income $ (743,064) $ 33,585
------------ ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Emerging Markets Fund
(Unaudited as to April 30, 2000)
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 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, incremental transfer agency fee and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on investments
are allocated to each class of shares based upon its relative net assets.
Investment in Emerging Markets Portfolio
The Fund invests all of its assets in Emerging Markets Portfolio (the
Portfolio), a series of World Trust (the Trust), an open-end investment company
that has the same objectives as the Fund. The Portfolio seeks to provide
shareholders with long-term growth of capital by investing primarily in stocks
of companies in developing countries offering growth potential.
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, 2000 was 99.84%.
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 accounting principles generally
accepted in the United States of America 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 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.
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 0.10% to
0.05% annually. A minor portion of additional administrative service expenses
paid by the Fund are consultants' fees and fund office expenses. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
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
o Class B $20
o Class Y $17
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a distribution 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 shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay 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
$672,094 for Class A and $106,706 for Class B for the six months ended April 30,
2000.
During the six months ended April 30, 2000, the Fund's transfer agency fees were
reduced by $10,375 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, 2000
Class A Class B Class Y
Sold 18,459,672 4,312,581 23,248
Issued for reinvested distributions 5,206 -- --
Redeemed (16,672,411) (2,893,842) (17,767)
----------- ---------- -------
Net increase (decrease) 1,792,467 1,418,739 5,481
Year ended Oct. 31, 1999
Class A Class B Class Y
Sold 38,402,305 6,532,285 317,355
Issued for reinvested distributions 77,135 -- 21
Redeemed (42,389,266) (8,663,035) (321,275)
----------- ---------- --------
Net increase (decrease) (3,909,826) (2,130,750) (3,899)
4. CAPITAL LOSS CARRYOVER
For federal income tax purposes, the Fund had a capital loss carryover of
$129,070,204 as of Oct. 31, 1999, that will expire in 2006 if not offset by
capital gains. It is unlikely the board will authorize a distribution of any net
realized capital gains until the available capital loss carryover has been
offset or expires.
5. 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 mutual funds, permits the
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 the credit facility at a rate of 0.05%
per annum. The Fund had no borrowings outstanding during the six months ended
April 30, 2000.
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<CAPTION>
6. FINANCIAL HIGHLIGHTS
The tables below show certain important finanicial information for evaluating
the Fund's results.
Fiscal period ended Oct. 31,
Per share income and capital changesa
Class A
2000c 1999 1998 1997b
<S> <C> <C> <C> <C>
Net asset value, beginning of period $4.99 $3.44 $5.33 $5.00
Income from investment operations:
Net investment income (loss) .01 .02 .04 .01
Net gains (losses) (both realized and
unrealized) 1.03 1.54 (1.79) .33
Total from investment operations 1.04 1.56 (1.75) .34
Less distributions:
Dividends from net investment income -- (.01) -- (.01)
Distributions from realized gains -- -- (.14) --
Total distributions -- (.01) (.14) (.01)
Net asset value, end of period $6.03 $4.99 $3.44 $5.33
Ratios/supplemental data
Net assets, end of period (in millions) $315 $251 $187 $243
Ratio of expenses to average daily
net assetsd 1.79%e 2.03% 1.93% 1.90%e,f
Ratio of net investment income (loss) to
average daily net assets (.05%)e .14% .82% .28%e
Portfolio turnover rate (excluding
short-term securities) 79% 143% 108% 87%
Total returng 20.85% 45.13% (33.74%) 6.84%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b For the period from Nov. 13, 1996 (commencement of operations) to Oct. 31,
1997.
c Six months ended April 30, 2000 (Unaudited).
d Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
e Adjusted to an annual basis.
f During the period from Nov. 13, 1996 to Oct. 31, 1997, AEFC reimbursed the
Fund for certain expenses. Had AEFC not done so, the annual ratio of expenses
would have been 1.92% for Class A.
g Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Fiscal period ended Oct. 31,
Per share income and capital changesa
Class B Class Y
2000c 1999 1998 1997b 2000c 1999 1998 1997b
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $4.88 $3.39 $5.29 $5.00 $4.99 $3.45 $5.33 $5.00
Income from investment operations:
Net investment income (loss) (.04) (.05) -- (.04) .01 .02 .04 .01
Net gains (losses) (both realized
and unrealized) 1.04 1.54 (1.76) .33 1.03 1.53 (1.78) .33
Total from investment operations 1.00 1.49 (1.76) .29 1.04 1.55 (1.74) .34
Less distributions:
Dividends from net investment income -- -- -- -- -- (.01) -- (.01)
Distributions from realized gains -- -- (.14) -- -- -- (.14) --
Total distributions -- -- (.14) -- -- (.01) (.14) (.01)
Net asset value, end of period $5.88 $4.88 $3.39 $5.29 $6.03 $4.99 $3.45 $5.33
Ratios/supplemental data
Net assets, end of period (in millions) $165 $130 $97 $114 $-- $-- $-- $--
Ratio of expenses to average daily
net assetsd 2.56%e 2.81% 2.71% 2.67%e,f 1.62%e 1.88% 1.86% 1.75%e,f
Ratio of net investment income
(loss) to average daily net assets (.81%)e(.63%) .07% (.50%)e .10%e 1.18% 1.03% .33%e
Portfolio turnover rate (excluding
short-term securities) 79% 143% 108% 87% 79% 143% 108% 87%
Total returng 20.49% 43.87%(34.24%) 6.07% 20.84% 45.29% (33.66% 6.86%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b For the period from Nov. 13, 1996 (commencement of operations) to Oct. 31,
1997.
c Six months ended April 30, 2000 (Unaudited).
d Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
e Adjusted to an annual basis.
f During the period from Nov. 13, 1996 to Oct. 31, 1997, AEFC reimbursed the
Fund for certain expenses. Had AEFC not done so, the annual ratios of expenses
would have been 2.69% and 1.77% for Class B and Y, respectively.
g Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Emerging Markets Portfolio
April 30, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C> <C>
(identified cost $433,810,207) $465,088,677
Cash in bank on demand deposit (including foreign currency
holdings of $17,302,075) 17,650,978
Dividends and accrued interest receivable 1,038,187
Receivable for investment securities sold 991,321
U.S. government securities held as collateral (Note 4) 27,375
------
Total assets 484,796,538
-----------
Liabilities
Payable for investment securities purchased 237,706
Payable upon return of securities loaned (Note 4) 4,148,475
Accrued investment management services fee 14,090
Other accrued expenses 154,004
-------
Total liabilities 4,554,275
---------
Net assets $480,242,263
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Emerging Markets Portfolio
Six months ended April 30, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 3,508,740
Interest 1,054,296
Less foreign taxes withheld (300,033)
--------
Total income 4,263,003
---------
Expenses (Note 2):
Investment management services fee 2,659,635
Compensation of board members 3,554
Custodian fees 160,731
Audit fees 9,000
Other 9,487
-----
Total expenses 2,842,407
Earnings credits on cash balances (Note 2) (4,091)
------
Total net expenses 2,838,316
---------
Investment income (loss) -- net 1,424,687
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (includes foreign
transaction tax of $247,760) 98,386,038
Foreign currency transactions (937,844)
--------
Net realized gain (loss) on investments 97,448,194
Net change in unrealized appreciation (depreciation) on investments and
on translation of assets and liabilities in foreign currencies (19,689,074)
-----------
Net gain (loss) on investments and foreign currencies 77,759,120
----------
Net increase (decrease) in net assets resulting from operations $79,183,807
===========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
Emerging Markets Portfolio
April 30, 2000 Oct. 31, 1999
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 1,424,687 $ 2,959,449
Net realized gain (loss) on investments 97,448,194 8,888,733
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies (19,689,074) 110,553,123
----------- -----------
Net increase (decrease) in net assets resulting
from operations 79,183,807 122,401,305
Net contributions (withdrawals) from partners 19,104,097 (25,443,819)
---------- -----------
Total increase (decrease) in net assets 98,287,904 96,957,486
Net assets at beginning of period 381,954,359 284,996,873
----------- -----------
Net assets at end of period $480,242,263 $381,954,359
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Emerging Markets Portfolio
(Unaudited as to April 30, 2000)
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 issuers in countries with developing or
emerging markets. 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 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. 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. Interest
income, including level-yield amortization of premium and discount, 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 in reducing
percentages from 1.10% to 1.00% annually. The fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of AXP Emerging Markets Fund to the Lipper
Emerging Markets Funds Index. The maximum adjustment is 0.12% of the Portfolio's
average daily net assets after deducting 1% from the performance difference. If
the performance difference is less than 1%, the adjustment will be zero. The
adjustment increased the fee by $2,869 for the six months ended April 30, 2000.
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 theTrust or Portfolio and approved by the board.
AEFC has a Sub-investment Advisory Agreement with American Express Asset
Management International Inc. (International), a wholly-owned subsidiary of
AEFC.
During the six months ended April 30, 2000, the Portfolio's custodian fees were
reduced by $4,091 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 $362,724,083 and $355,766,609, respectively, for the six
months ended April 30, 2000. For the same period, the portfolio turnover rate
was 79%. Realized gains and losses are determined on an identified cost basis.
4. LENDING OF PORTFOLIO SECURITIES
As of April 30, 2000, securities valued at $5,257,050 were on loan to brokers.
For collateral, the Portfolio received $4,121,100 in cash and U.S. government
securities valued at $27,375. As of April 30, 2000, due to fluctuating market
conditions, the Portfolio requested additional collateral which was received on
May 1, 2000. Income from securities lending amounted to $321,922 for the six
months ended April 30, 2000. 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.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Emerging Markets Portfolio
April 30, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (92.3%)(c)
Issuer Shares Value(a)
Argentina (0.9%)
Banks and savings & loans
<S> <C> <C>
Banco de Galicia - Buenos Aires ADR 261,239 $4,522,700
Brazil (12.0%)
Banks and savings & loans (0.9%)
Uniao de Bancos Brasileiros GDR 166,909 4,162,293
Energy (1.5%)
Petroleo Brasileiro ADR 32,602,000 7,222,819
Metals (1.3%)
Gerdau 260,492,736 6,348,202
Miscellaneous (0.6%)
Tele Centro Oeste Celular Participacoes ADR 238,500 2,742,750
Multi-industry conglomerates (0.9%)
Itausa - Investimentos Itau 5,284,269 4,507,214
Utilities -- electric (1.3%)
Companhia Paranaense de Energia 850,400 6,271,700
Utilities -- telephone (5.5%)
Embratel Participacoes ADR 622,644 14,009,489
Tele Norte Leste Participacoes ADR 350,767 6,248,029
Telesp Celular Particpacoes ADR 143,700 6,340,763
Total 26,598,281
Chile (1.1%)
Retail
Distribucion y Servicio D&S ADR 301,649 5,128,033
Czech Federal Republic (1.4%)
Utilities -- telephone
Cesky Telecom 365,137(b) 6,793,756
Greece (2.8%)
Banks and savings & loans (1.6%)
Alpha Credit Bank 87,416 4,847,520
Commercial Bank of Greece 54,300 2,950,959
Total 7,798,479
Utilities -- telephone (1.2%)
Hellenic Telecommunications Organization 247,460 5,553,873
Hong Kong (3.7%)
Communications equipment & services (2.4%)
China Telecom 1,536,000(b) 11,092,281
Multi-industry conglomerates (1.3%)
Citic Pacific 1,407,000(b) 6,448,660
Hungary (1.1%)
Banks and savings & loans
OTP Bank GDR 120,526 5,360,394
India (6.3%)
Automotive & related (0.7%)
Tata Engineering & Locomotive GDR 1,051,000 3,284,375
Banks and savings & loans (0.9%)
State Bank of India GDR 467,000 4,436,500
Building materials & construction (0.7%)
Gujarat Ambuja Cements GDR 772,000 3,535,459
Miscellaneous (1.2%)
Videsh Sanchar Nigam GDR 314,600 5,977,400
Textiles & apparel (1.9%)
Reliance Inds GDR 328,104(d,f) 8,538,907
Utilities -- telephone (0.9%)
Global TeleSystems Group 71,600 1,951,982
Himachal Futuristic Communications 129,700 2,478,563
Total 4,430,545
Israel (4.7%)
Banks and savings & loans (1.2%)
Bank Hapoalim 1,890,000 5,805,165
Communications equipment & services (1.0%)
NICE-Systems ADR 76,347(b) 4,995,957
Electronics (1.5%)
Orbotech 83,371(b) 7,107,378
Miscellaneous (1.0%)
Partner Communications ADR 428,150(b) 4,575,853
Malaysia (2.5%)
Electronics (1.1%)
Malaysian Pacific Inds Berhad 479,000 5,357,166
Utilities -- electric (1.4%)
Tenaga Nasional 2,010,000 6,664,649
Mexico (12.8%)
Beverages & tobacco (2.0%)
Fomento Economico Mexicano ADR 117,500 4,846,875
Grupo Modelo Series C 2,229,700 4,739,001
Total 9,585,876
Building materials & construction (1.0%)
Cemex ADR 216,500(b) 4,735,938
Energy equipment & services (1.6%)
Tubos de Acero de Mexico ADR 508,000 7,588,250
Media (0.9%)
Grupo Televisa 70,852(b) 4,494,674
Multi-industry conglomerates (1.3%)
Alfa Cl A 1,995,000 6,169,447
Paper & packaging (1.1%)
Kimberly-Clark de Mexico 1,634,400 5,262,733
Retail (2.0%)
Organizacion Soriana Cl B 2,452,500(b) 9,734,418
Utilities -- telephone (2.9%)
Nuevo Grupo Iusacell ADR 172,311(b) 2,746,207
Telefonos de Mexico ADR Cl L 196,100 11,533,131
Total 14,279,338
Russia (3.2%)
Energy (2.6%)
Lukoil Holding ADR 210,296 12,676,643
Miscellaneous (0.6%)
Surgutneftegaz ADR 190,619 2,811,630
South Africa (6.0%)
Banks and savings & loans (0.9%)
Nedcor 225,951 4,285,421
Metals (0.9%)
AngloGold ADR 216,200 4,202,388
Multi-industry conglomerates (3.1%)
Barlow 1,131,900 7,136,454
Johnnies Industrial ADR 628,000 7,965,194
Total 15,101,648
Paper & packaging (1.1%)
Sappi 722,600 5,062,090
South Korea (9.9%)
Communications equipment & services (2.3%)
LG Information & Communication 80,400 6,194,368
SK Telecom ADR 17,000 4,519,036
Total 10,713,404
Computers & office equipment (0.5%)
Trigem Computer 42,770 2,470,428
Electronics (5.0%)
LG Cable & Machinery 394,700 6,295,283
Samsung Electronics 64,550 17,449,876
Total 23,745,159
Utilities -- electric (1.2%)
Korea Electric Power 199,700 5,848,389
Utilities -- telephone (0.9%)
Korea Telecom 64,000 4,371,435
Taiwan (12.9%)
Computers & office equipment (1.9%)
Synnex Technology Intl 1,351,000 9,140,611
Electronics (9.6%)
Acer Peripherals 1,467,216 6,066,443
Hon Hai Precision Inds 1,034,600(b) 9,975,715
Taiwan Semiconductor Mfg 2,809,240(b) 18,088,587
United Microelectronics 3,552,000(b) 12,016,081
Total 46,146,826
Miscellaneous (1.4%)
Winbond Electronics GDR 2,243,000(b) 6,928,044
Thailand (3.5%)
Banks and savings & loans (1.3%)
Thai Farmers Bank 6,095,000(b) 6,403,152
Media (1.0%)
BEC World Public 741,000 4,865,397
Utilities -- telephone (1.2%)
Advanced Info Service Public ADR 481,700(b) 5,642,500
Turkey (7.5%)
Banks and savings & loans (4.6%)
Garanti Banking 413,045,696(b) 6,957,953
Yapi Kredit Finance 468,502,200 14,941,439
Total 21,899,392
Furniture & appliances (1.5%)
Arcelik 87,154,000 7,412,024
Media (1.4%)
Hurriyet Gazetecilik ve Matbaacilik 259,211,000 6,570,997
Total common stocks
(Cost: $412,124,522) $443,409,041
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (4.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (2.9%)
Federal Home Loan Bank Disc Nts
<S> <C> <C> <C> <C>
05-19-00 5.89% $1,300,000 $1,295,552
05-24-00 5.92 1,300,000 1,294,244
05-26-00 5.85 1,800,000 1,791,136
05-31-00 5.91 1,500,000 1,491,915
06-09-00 5.96 1,700,000 1,687,874
Federal Home Loan Mtge Corp Disc Nts
05-09-00 5.87 2,600,000 2,595,345
05-23-00 5.99 600,000 597,512
06-06-00 6.00 600,000 596,123
Federal Natl Mtge Assn Disc Nt
05-25-00 5.87 2,700,000 2,687,384
Total 14,037,085
Commercial paper (1.6%)
Alcoa
06-06-00 6.06% $3,300,000 $3,278,478
Barton Capital
06-27-00 6.19 1,600,000(e) 1,583,333
Ciesco LP
05-08-00 5.89 900,000 898,507
Delaware Funding
06-15-00 6.13 1,400,000(e) 1,388,651
Goldman Sachs Group
07-10-00 6.41 500,000 493,582
Total 7,642,551
Total short-term securities
(Cost: $21,685,685) $21,679,636
Total investments in securities
(Cost: $433,810,207)(g) $465,088,677
</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.
(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 board.
(e) 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.
(f) Security is partially or fully on loan. See Note 4 to the financial
statements.
(g) At April 30, 2000, the cost of securities for federal income tax purposes
was approximately $433,810,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $72,559,000
Unrealized depreciation (41,280,000)
Net unrealized appreciation $31,279,000
<PAGE>
American
Express
Funds
AXP Emerging Markets Fund
200 AXPFinancial Center
Minneapolis, MN 55474
TICKER SYMBOL
Class A: IDEAX Class B: IEMBX Class Y: N/A
PRSRT STD AUTO
U.S. POSTAGE
PAID
AMERICAN EXPRESS
S-6344 E (6/00)
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.
