AXP(R) Global
Balanced
Fund
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
(icon of) compass
AXP Global Balanced Fund seeks to provide shareholders with a balance of growth
of capital and current income.
(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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An International Blend
AXP Global Balanced Fund offers a logical first step for investors who want to
have some exposure to foreign markets, but also want to avoid the greater
volatility of a portfolio consisting of only foreign stocks.
Table of Contents
2000 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 3
From the Portfolio Managers 3
Fund Facts 5
The 10 Largest Holdings 6
Making the Most of the Fund 7
The Fund's Long-term Performance 8
Independent Auditors' Report 10
Financial Statements 11
Notes to Financial Statements 14
Investments in Securities 23
Federal Income Tax Information 29
AXP GLOBAL BALANCED FUND
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(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, 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 the
retirement plan 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 annual 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
(picture of) Elizabeth Tran
Elizabeth Tran
Portfolio Manager
From the Portfolio Managers
A late-period downturn in the major stock markets eroded what had been a
double-digit gain for AXP Global Balanced Fund, resulting in a modestly positive
result for the entire fiscal year. For the 12 months -- November 1999 through
October 2000 -- the Fund's Class A shares returned 2.62% (excluding the sales
charge).
Stocks had everything going their way when the period began. Generally strong
corporate profit growth, low inflation and expanding economies, particularly in
the U.S., set the stage for powerful rallies in many major equity markets.
Adding fuel to the
ANNUAL REPORT - 2000
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fire was increasing excitement about the potential for the
Internet, which propelled technology-related stocks to exceptionally strong
performance.
(picture of) Mark Fawcett
Mark Fawcett
Portfolio manager
(picture of) Michael Ng
Michael Ng
Portfolio manager
STOCKS STRUGGLE
But with the beginning of a new year came some concerns. The most prominent were
the red-hot U.S. economy, which, some feared, might soon spark a run-up in
inflation, and willingness on the part of central banks in the U.S. and Europe
to raise interest rates to head off that possibility. The major stock markets
responded by going into a slump during the spring. Then, after a relatively
uneventful summer, doubts about the strength of corporate profits spawned
another downturn in the fall. Compounding the situation in Europe was an ongoing
decline in the value of its new common currency, the euro, which diluted
investment returns from that region.
For the bond markets, the situation was just the opposite -- a poor start
followed by a strong finish. U.S. Treasury bonds exhibited the best performance,
as a decline in long-term interest rates and a shrinking supply combined to
spawn a powerful rally. Government bonds in Europe generally followed suit, but
to a lesser degree.
Looking at the Fund's holdings, our largest areas of investment were technology
and telecommunications stocks. They were typically at the forefront of the
markets' mood swings throughout the 12 months. As we grew more cautious on
earnings prospects for those companies, we began reducing such investments last
spring and putting more money into pharmaceutical and oil stocks. That strategy
benefited performance during the second half of the fiscal year. All told,
stocks made up about two-thirds of the portfolio, with nearly all the rest
comprised by bonds. On a country basis, we kept the greatest portion of assets
invested in the U.S., followed by Japan, Germany, France and the United Kingdom.
As we begin a new fiscal year, we are maintaining a somewhat conservative
investment strategy that centers on reasonably priced stocks of companies with
healthy and consistent profit growth, complemented by a mix of government bonds.
Elizabeth Tran
Mark Fawcett
Michael Ng
AXP GLOBAL BALANCED FUND
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 2000 $ 6.27
Oct. 31, 1999 $ 6.61
Decrease $ 0.34
Distributions -- Nov. 1, 1999 - Oct. 31, 2000
From income $ 0.32
From long-term capital gains $ 0.22
Total distributions $ 0.54
Total return** +2.62%
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 2000 $ 6.21
Oct. 31, 1999 $ 6.58
Decrease $ 0.37
Distributions -- Nov. 1, 1999 - Oct. 31, 2000
From income $ 0.31
From long-term capital gains $ 0.22
Total distributions $ 0.53
Total return** +1.95%
Class C -- June 26, 2000* - Oct. 31, 2000
(All figures per share)
Net asset value (NAV)
Oct. 31, 2000 $ 6.21
June 26, 2000* $ 6.58
Decrease $ 0.37
Distributions -- June 26, 2000* - Oct. 31, 2000
From income $ --
From long-term capital gains $ --
Total distributions $ --
Total return** -5.62%***
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
Oct. 31, 2000 $ 6.30
Oct. 31, 1999 $ 6.62
Decrease $ 0.32
Distributions -- Nov. 1, 1999 - Oct. 31, 2000
From income $ 0.33
From long-term capital gains $ 0.22
Total distributions $ 0.55
Total return** +2.99%
* Inception date.
** The total return is a hypothetical investment in the Fund with all
distributions reinvested. Returns do not include sales load. The
prospectus discusses the effect of sales charges, if any on the various
classes.
*** The total return for Class C is not annualized.
ANNUAL REPORT - 2000
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The 10 Largest Holdings
Percent Value
(of net assets) (as of Oct. 31, 2000)
U.S. Treasury (United States) 5.88% 2004 2.66% $5,004,699
General Electric (United States) 2.28 4,286,886
Citigroup (United States) 2.24 4,213,315
U.S. Treasury (United States) 7.50% 2016 2.12 3,986,023
Exxon Mobil (United States) 1.90 3,567,500
Merrill Lynch (United States) 1.81 3,405,500
Microsoft (United States) 1.63 3,074,580
Pfizer (United States) 1.63 3,056,379
EMC (United States) 1.61 3,029,016
Development Bank of Japan (Japan) 6.50% 2001 1.56 2,942,129
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 19.44% of net assets
AXP GLOBAL BALANCED FUND
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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 falls 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
_______________________________________________________________________________
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
_______________________________________________________________________________
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.
ANNUAL REPORT - 2000
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The Fund's Long-term Performance
How your $10,000 has grown in AXP Global Balanced Fund
$20,000
MSCI ALL Country
World Free Index
X
MSCI World Index
X
$13,446
AXP Global Balanced
Fund Class A
X
Lipper Global
Flexible Funds Index
$9,425
(The printed version of this chart contains a line graph with three lines
corresponding to the two Indexes and Fund noted above.)
12/1/96 10/97 10/98 10/99 10/00
Average Annual Total Returns (as of Oct. 31, 2000)
1 year Since inception*
Class A -3.28% +7.75%
Class B -1.83% +8.16%
Class Y +2.99% +9.62%
* Inception date was Nov. 13, 1996.
Assumes: Holding period from 12/1/96 to 10/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $2,085. 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 three
widely cited performance indexes, the MSCI All Country World Free Index, the
Lipper Global Flexible Funds Index and the MSCI World Index. Recently, the
Fund's investment manager recommended to the Fund that the Fund change its
comparative index from MSCI World Index to MSCI All Country World Free Index.
The investment manager made this recommendation because the new index more
closely represents the Fund's holdings. We will include both indexes this year.
In the future only the MSCI All Country World Free Index will be included. In
comparing AXP Global Balanced Fund (Class A) to the three indexes, you should
take into account the fact that the Fund's performance reflects the maximum
sales charge of 5.75%, while such charges are not reflected in the performance
of the 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
5.75%. This was a period of widely fluctuating security prices. Past performance
is no guarantee of future results. Class C became effective June 26, 2000 and
therefore performance information is not presented.
AXP GLOBAL BALANCED FUND
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Morgan Stanley Capital International (MSCI) All Country World Free Index, an
unmanaged index, is compiled from a composite of securities markets of 47
countries, including Canada, the United States, and 26 emerging market
countries. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees.
Lipper Global Flexible Funds Index, an unmanaged index published by Lipper,
Inc., includes the 30 largest funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.
Morgan Stanley Capital International (MSCI) World Index, an unmanaged market
index, compiled from a composite of over 1500 companies listed on the stock
exchanges of North America, Europe, New Zealand and the Far East. The index is
widely recognized by investors as the measurement index for portfolios of global
securities. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees.
ANNUAL REPORT - 2000
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The financial statements contained in Post-Effective Amendment #35 to
Registration Statement No. 33-25824 filed on or about December 22, 2000, 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 Balanced Fund
Fiscal year ended Oct. 31, 2000
Class A
Income distribution taxable as dividend income, 6.53% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.32805
Capital gain distributions taxable for long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.21532
Total distributions $0.54337
The distribution of $0.54337 per share, payable Dec. 22, 1999, consisted of
$0.02999 derived from net investment income, $0.29806 from net short-term
capital gains (a total of $0.32805 taxable as dividend income) and $0.21532 from
net long-term capital gains.
Class B
Income distribution taxable as dividend income, 6.53% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.31578
Capital gain distributions taxable for long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.21532
Total distributions $0.53110
The distribution of $0.53110 per share, payable Dec. 22, 1999, consisted of
$0.01772 derived from net investment income, $0.29806 from net short-term
capital gains (a total of $0.31578 taxable as dividend income) and $0.21532 from
net long-term capital gains.
ANNUAL REPORT - 2000
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Class Y
Income distribution taxable as dividend income, 6.53% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1999 $0.33175
Capital gain distributions taxable for long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.21532
Total distributions $0.54707
The distribution of $0.54707 per share, payable Dec. 22, 1999, consisted of
$0.03369 derived from net investment income, $0.29806 from net short-term
capital gains (a total of $0.33175 taxable as dividend income) and $0.21532 from
net long-term capital gains.
AXP GLOBAL BALANCED FUND
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American
Express(R)
Funds
AXP Global Balanced Fund
70100 AXP Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AMERICAN
EXPRESS (R) (logo)
S-6352 F (12/00)
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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.
