<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. 1 (File No. 33-63951)
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 1 (File No. 811-7405)
EXPRESS DIRECT WORLD FUND, INC.
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Eileen J. Newhouse - IDS Tower 10, Minneapolis, Minnesota
55440-0010
(612) 671-2772
Approximate Date of Proposed Public Offering:
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay the effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
The Registrant is registering an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f of
the Investment Company Act of 1940.
World Trust has also executed this Registration Statement.<PAGE>
PAGE 2
Cross reference sheet for the Fund showing the location in its
prospectus and the Statement of Additional Information of the
information called for by the items enumerated in Parts A and B of
Form N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE><CAPTION>
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) The Funds in brief; Sales charge and Fund 11 Table of Contents
expenses
(b) The Funds in brief; Sales charge and Fund 12 NA
expenses
(c) The Funds in brief; Sales charge and Fund 13(a) Additional Investment Policies; all
expenses appendices except Dollar-Cost Averaging
(b) Additional Investment Policies
3(a) NA (c) Additional Investment Policies
(b) NA (d) Portfolio Transactions
(c) Performance
(d) NA 14(a) Board Members and Officers
(b) Board Members and Officers
4(a) The Funds in brief; Investment policies (c) Board Members and Officers
and risks; How the Funds and Portfolios
are organized 15(a) NA
(b) Investment policies and risks (b) NA
(c) Investment policies and risks (c) Board Members and Officers
5(a) Board members and officers 16(a)(i) How the Funds and Portfolios are organized*;
About the Advisor
(b)(i) Manager and distributor; About the Advisor (a)(ii) Agreements: Investment Management Services
(b)(ii) Investment manager; Administrator and Agreement, Plan and Supplemental
transfer agent Agreement of Distribution/Distribution Agreement
(b)(iii) Investment manager (a)(iii) NA
(c) Portfolio managers (b) NA
(d) Administrator and transfer agent (c) NA
(e) Administrator and transfer agent (d) Agreements: Administrative Services Agreement
(f) Investment manager; Administrator and (e) NA
transfer agent; Distributor (f) Agreements: Plan and Supplemental Agreement of
(g) About the Advisor Distribution/Distribution Agreement
(g) NA
5A(a) NA (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
6(a) Shares; Voting rights 17(a) NA
(b) NA (b) Brokerage Commissions Paid to Brokers Affiliated
(c) NA with American Express Financial Corporation
(d) NA (c) Portfolio Transactions
(e) Cover page; Special shareholder services (d) Portfolio Transactions
(f) Dividends and capital gains distributions; (e) Portfolio Transactions
Reinvestments
(g) Taxes 18(a) Shares; Voting rights*
(h) Special considerations regarding master/ (b) NA
feeder structure
7(a) Distributor 19(a) Investing in the Fund
(b) Valuing Fund shares (b) Valuing Fund shares*; Investing in the Funds;
(c) NA Redeeming Shares
(d) How to purchase shares (c) Redeeming Shares
(e) NA
(f) Distributor 20 Taxes
8(a) How to redeem shares; Special considerations 21(a) Agreements: Plan and Supplemental Agreement of
regarding master/feeder structure Distribution/Distribution Agreement, Placement
(b) NA Agency Agreement
(c) How to purchase, exchange or redeem shares:
Other important information (b) Agreements: Plan and Supplemental Agreement of
(d) How to purchase, exchange or redeem shares: Distribution/Distribution Agreement, Placement
How to redeem shares Agency Agreement
9 None 22(a) NA
(b) Performance Information (for all funds except
money market funds)
23 NA
*Designates page number in prospectus./TABLE
<PAGE>
PAGE 3
Express Direct World Income Fund
Prospectus
_______, 1996
Express Direct World Income Fund, a series of Express Direct World
Fund, Inc., is a non-diversified mutual fund whose goal is a high
total return through income and growth of capital.
The Fund, unlike most funds that invest directly in securities,
seeks to achieve its objective by investing all of its assets in a
corresponding Portfolio of World Trust, which is a separate
investment company. This arrangement is commonly known as a
master/feeder structure. The Portfolio in which the Fund invests
has the same investment objective, policies and restrictions as the
Fund.
This prospectus contains facts that can help you decide if the Fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the Fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated _______, 199_, is incorporated here by
reference. For a free copy, contact American Express Financial
Services Direct.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Financial Services Direct
P.O. Box 59196
Minneapolis, MN
55459-0196
1-800-AXP-SERV
TTY: 1-800-710-5260
<PAGE>
PAGE 4
Table of contents
The Fund in brief
Goal and types of Fund investments and their risks
Manager and distributor
Portfolio manager
Sales charges and Fund expenses
Performance
Total returns
Yield
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
How to purchase shares
How to exchange shares
How to redeem shares
Systematic purchase plans
Other important information
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund and Portfolio are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About the Advisor
Appendices
Appendix A: Description of corporate bond ratings
Appendix B: Descriptions of derivative instruments
<PAGE>
PAGE 5
The Fund in brief
Express Direct World Income Fund (the Fund) is a non-diversified
mutual fund that seeks to achieve its goal by investing all of its
assets in World Income Portfolio (the Portfolio) of World Trust
(the Trust) rather than by directly investing in and managing its
own portfolio of securities. The Fund is a series of Express
Direct World Fund, Inc. (the Company).
Goal and types of Fund investments and their risks
The Fund seeks to provide shareholders with high total return
through income and growth of capital. It does so by investing all
of its assets in the Portfolio, which has the same investment
objective as the Fund. The Portfolio is a non-diversified mutual
fund that invests primarily in debt securities of U.S. and foreign
issuers. Non-diversified mutual funds may have more market risk
than funds that have broader diversification. The Portfolio also
may invest in common and preferred stocks, derivative instruments
and money market instruments.
Because investments involve risk, the Fund cannot guarantee
achieving its goal. Risks arising from investments in foreign
securities include fluctuations in currency exchange rates, adverse
political and economic developments and lack of comparable
regulatory requirements applicable to U.S. companies. You should
invest in the Fund only if you are willing to assume such risks.
The foregoing investment goal is a fundamental policy of the Fund
and Portfolio, which may not be changed unless authorized by a
majority of the outstanding voting securities of the Fund or of the
Portfolio, as the case may be. However, the Fund may withdraw its
assets from the corresponding Portfolio at any time if the board of
directors of the Company determines that it is in the best
interests of the Fund to do so. In such event, the Company would
consider what action should be taken, including whether to retain
an investment advisor to manage the Fund's assets directly or to
reinvest all of the Fund's assets in another pooled investment
entity.
Manager and distributor
The Portfolio is managed by American Express Financial Corporation
(the Advisor), a provider of financial services since 1894. The
Advisor currently manages more than $__ billion in assets. Shares
of the Fund are sold through American Express Service Corporation
(the Distributor), an affiliated company of the Advisor.
Portfolio manager
Ray Goodner joined the Advisor in 1977 and serves as vice president
and senior portfolio manager. He began his career in portfolio
management in 1980. He has managed the assets of the predecessor
of World Income Portfolio since 1989 and also has managed the
assets of the predecessor of Quality Income Portfolio, a separate
portfolio in the Preferred Master Trust Group, since 1985.
<PAGE>
PAGE 6
Sales charge and Fund expenses
The purpose of the following table and example is to summarize the
aggregate expenses of the Fund and its corresponding Portfolio and
to assist investors in understanding the various costs and expenses
that investors in the Fund may bear directly or indirectly. The
Company's board of directors believes that, over time, the
aggregate per share expenses of the Fund and its corresponding
Portfolio should be approximately equal to (and may be less than)
the per share expenses the Fund would have if the Company retained
its own investment advisor and the assets of the Fund were
invested directly in the type of securities held by the
corresponding Portfolio. The percentages indicated as "Management
fee" and "Other expenses" are based on both the Fund's and
Portfolio's projected fees and expenses for the current fiscal year
ending Oct. 31, 1996. For additional information concerning Fund
and Portfolio expenses, see "How the Fund and Portfolio are
Organized."
Shareholder transaction expenses*
Maximum sales charge on purchases
(as a percentage of offering price) 0%
Annual Fund and allocated Portfolio operating expenses
(% of average daily net assets):
Management fee** %
12b-1 fee %
Other expenses*** %
Total %
*The Fund imposes a 0.50% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
**The management fee is paid by the Trust on behalf of the
Portfolio.
***Other expenses include an administrative services fee, a
transfer agency fee and other nonadvisory expenses.
The Advisor has agreed to reimburse World Income Fund for expenses
in excess of ___% of average net assets [for a period of ___
years/until the assets of the Fund reach $___ million], subject to
earlier termination by the Advisor on 30 days' notice. Without
this agreement, assuming average net assets of $___ million, the
estimated Other Expenses and Total Fund Operating Expenses for
World Income Fund would have been ___% and ___% respectively.
Example: Suppose for each year for the next 10 years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:<PAGE>
PAGE 7
1 year $
3 years $
The table and example do not represent actual expenses, past or
future. Actual expenses may be higher or lower than those shown.
Because the Fund pays annual distribution (12b-1) fees, long-term
shareholders may indirectly pay an equivalent of more than a __%
sales charge, the maximum permitted by the National Association of
Securities Dealers.
Performance
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
Total returns
Average annual total returns as of ___________________
Purchase 1 year 5 years Since
made ago ago inception*
World Income
Fund
Salomon Brothers
Global Govt.
Bond Composite
Index
*March 20, 1989
Cumulative total returns as of ____________________
Purchase 1 year 5 years Since
made ago ago inception*
World Income
Fund
Salomon Brothers
Global Govt.
Bond Composite
Index
*March 20, 1989
On _________, 1996, IDS Global Bond Fund transferred all of its
assets to the Portfolio. The performance information in the
foregoing tables represents performance of IDS Global Bond Fund <PAGE>
PAGE 8
prior to March 20, 1995 and of Class A shares of IDS Global Bond
Fund from March 20, 1995 through ____________, 1996, in each case
adjusted to reflect the absence of sales charges on shares of the
Fund sold through this prospectus. The historical performance has
not been adjusted for any difference between the estimated
aggregate fees and expenses of the Fund and historical fees and
expenses of IDS Global Bond Fund.
These examples show total returns from hypothetical investments in
the Fund. These returns are compared to those of a popular index
for the same periods.
For purposes of calculation, information about the Fund makes no
adjustments for taxes an investor may have paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of the Fund's future performance.
Salomon Brothers Global Government Bond Composite Index is a
representative list of government bonds of 17 countries throughout
the world. The index is a general measure of government bond
performance. Performance is expressed in the U.S. dollar as well
as the currencies of governments making up the index. The bonds
included in the index may not be the same as those in the
Portfolio. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or
other fees.
Yield
Yield is the net investment income earned per share for a specified
time period, divided by the net asset value at the end of the
period. From time to time the Fund may advertise its 30-day
annualized yield. The Fund calculates this 30-day annualized yield
by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the net asset value per share on the last day of the period,
and
o converting the result to a yearly equivalent figure.
The Fund's yield varies from day to day, mainly because share
values and offering prices (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest
rates rise and share values fall, yield tends to rise. When
interest rates fall, yield tends to follow. Past yields should not
be considered an indicator of future yields.
Investment policies and risks
Unlike mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment <PAGE>
PAGE 9
objective by investing all of its assets in a corresponding
Portfolio of the Trust, which is a separate investment company.
The Portfolio in which the Fund invests has the same investment
objectives, policies and restrictions as the Fund. The board of
directors of the Company believes that by investing all of its
assets in the corresponding Portfolio, the Fund will be in a
position to realize directly or indirectly certain economies of
scale inherent in managing a larger asset base, although there is
no assurance that this will occur. The policies described below
apply both to the Fund and its corresponding Portfolio.
The Portfolio invests primarily in debt securities of U.S. and
foreign issuers so under normal market conditions at least 80% of
the Portfolio's net assets will be investment-grade corporate or
government debt securities including money market instruments of
issuers located in at least three different countries. The
Portfolio also invests in debt securities below investment grade,
convertible securities, common stocks and derivative instruments.
The various types of investments described above that the portfolio
manager uses to achieve investment performance are explained in
more detail in the next section and in the SAI.
Facts about investments and their risks
Debt securities: The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The price of bonds below investment grade may react
more to the ability of a company to pay interest and principal when
due than to changes in interest rates. They have greater price
fluctuations, are more likely to experience a default, and
sometimes are referred to as junk bonds. Reduced market liquidity
for these bonds may occasionally make it more difficult to value
them. In valuing bonds the Portfolio relies both on independent
rating agencies and the investment manager's credit analysis.
Securities that are subsequently downgraded in quality may continue
to be held by the Portfolio and will be sold only when the
investment manager believes it is advantageous to do so.
The Portfolio invests in securities rated B or better by Moody's
Investors Services, Inc. (Moody's) or Standard & Poor's Corporation
(S&P).
<PAGE>
PAGE 10
<TABLE><CAPTION>
World Income Portfolio
Bond ratings and holdings for the period
ending March 31, 1996
Percent of
net assets
in unrated
S&P Rating Protection of securities
Percent of(or Moody's principal and assessed by
net assetsequivalent) interest the Advisor
<S> <C> <C> <C>
AAA Highest quality
AA High quality
A Upper medium grade
BBB Medium grade
BB Moderately speculative
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
Unrated Unrated securities
</TABLE>
(The information in the table above relates to IDS Global Bond
Fund, a fund that transferred its assets to World Income Portfolio
on _____________, 1996. See Appendix to this prospectus describing
corporate bond ratings for further information.)
Debt securities sold at a deep discount: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, the Portfolio has to recognize a computed
amount of interest income and pay dividends to unitholders even
though no cash has been received. In some instances, the Portfolio
may have to sell securities to have sufficient cash to pay the
dividends.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, the convertible securities
trade more like common stock.
Common stocks: Stock prices are subject to market fluctuations.
Stocks of foreign companies may be subject to abrupt or erratic
price movements. While most of the Portfolio's investments are in
established companies having adequate financial reserves, some
investments involve substantial risk and may be considered
speculative.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to currency
fluctuations and political and economic risks of the countries in
which the investments are made, including the possibility of
seizure or nationalization of companies, imposition of withholding
taxes on income, establishment of exchange controls or adoption of
other restrictions that might affect an investment adversely. If <PAGE>
PAGE 11
an investment is made in a foreign market, the local currency may
be purchased using a forward contract in which the price of the
foreign currency in U.S. dollars is established on the date the
trade is made, but delivery of the currency is not made until the
securities are received. As long as the Portfolio holds foreign
currencies or securities valued in foreign currencies, the value of
those assets will be affected by changes in the value of the
currencies relative to the U.S. dollar. Because of the limited
trading volume in some foreign markets, efforts to buy or sell a
security may change the price of the security, and it may be
difficult to complete the transaction. The limited liquidity and
price fluctuations in emerging markets could make investments in
developing countries more volatile. In addition, the Portfolio may
have limited legal recourse in the event a sovereign government is
unwilling or unable to pay its debt.
Concentration: Since the Portfolio is a non-diversified mutual
fund, it may concentrate its investments in securities of fewer
issuers than would a diversified fund. Accordingly, the Portfolio
may have more risk than mutual funds that have broader
diversification.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. The Portfolio
will use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Portfolio will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of the
Portfolio's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. The Portfolio is not limited
as to the percentage of its assets that may be invested in
permissible investments, including derivatives, except as otherwise
explicitly provided in this prospectus or the SAI. For
descriptions of these and other types of derivative instruments,
see the Appendix to this prospectus and the SAI.
<PAGE>
PAGE 12
Securities and derivative instruments that are illiquid: A
security or derivative instrument is illiquid if it cannot be sold
quickly in the normal course of business. Some investments cannot
be resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. The
portfolio manager will follow guidelines established by the board
and consider relevant factors such as the nature of the security
and the number of likely buyers when determining whether a security
is illiquid.
No more than 10% of the Portfolio's net assets will be held in
securities and derivative instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades or the equivalent are used to meet daily cash needs
and at various times to hold assets until better investment
opportunities arise. Generally less than 25% of the Portfolio's
total assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that
amount for a limited period of time.
The investment policies described above may be changed by the
board.
Lending portfolio securities: The Portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless holders of a majority of the
outstanding voting securities approve otherwise, loans may not
exceed 30% of the Portfolio's net assets.
Valuing Fund shares
The net asset value (NAV) is the value of a single Fund share. It
is the total value of the Fund's investments in the corresponding
Portfolio and other assets, less any liabilities, divided by the
number of shares outstanding. The NAV is the price at which you
purchase Fund shares and the price you receive when you sell your
shares. It usually changes from day to day, and is calculated at
the close of business, normally 3 p.m. Central time, each business
day (any day the New York Stock Exchange is open). NAV generally
declines as interest rates increase and rises as interest rates
decline.
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at amortized
cost.
<PAGE>
PAGE 13
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board of trustees.
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable.
How to purchase, exchange or redeem shares
How to purchase shares
You may purchase shares of the Fund exclusively through an
Investment Management Account (IMA) maintained with American
Express Service Corporation (the Distributor). Payment for shares
must be made directly to the Distributor.
If you already have an IMA account, you may buy shares in the Fund
as described below and need not open a new account.
If you do not have an IMA account, complete an IMA Account
Application (available by calling 1-800-AXP-SERV) and mail the
application to American Express Financial Services Direct, P.O. Box
59196, Minneapolis, MN 55459-0196. Corporations and other
organizations should contact the Distributor to determine which
additional forms may be necessary to open an IMA account.
You may deposit money into your IMA account by check, wire or many
other forms of electronic funds transfer (securities may also be
deposited). All deposit checks should be made payable to the
Distributor. If you would like to wire funds into your existing
IMA account, please contact the Distributor at 1-800-AXP-SERV for
instructions.
Minimum Fund investment requirements. Your initial investment in
the Fund may be as low as $2,000 ($1,000 for custodial accounts,
Individual Retirement Accounts and certain other retirement plans).
The minimum subsequent investment is $100. These requirements may
be reduced or waived as described in the SAI.
When and at what price shares will be purchased. You must have
money available in your IMA account in order to purchase Fund
shares. If your request and payment (including money transmitted
by wire) are received and accepted by the Distributor before 2 p.m.
Central time, your money will be invested at the net asset value
determined as of the close of business (normally 3 p.m. Central
time) that day. If your request and payment are received after
that time, your request will not be accepted or your payment
invested until the next business day. (See "Valuing Fund shares.")
Methods of purchasing shares. There are three convenient ways to
purchase shares of the Fund. You may choose the one that works
best for you. The Distributor will send you confirmation of your
purchase request.
<PAGE>
PAGE 14
By phone:
You may use money in your IMA account to make initial and
subsequent purchases. To place your order, call 1-800-AXP-
SERV.
By mail:
Written purchase requests (along with any checks) should be
mailed to American Express Financial Services Direct, P.O. Box
59196, Minneapolis, MN 55459-0196, and should contain the
following information:
o your IMA account number (or an IMA Account Application)
o the name of the Fund and the dollar amount of shares you
would like purchased
Your check should be made out to the Distributor. It will be
deposited into your IMA account and used, as necessary, to
cover your purchase request.
By systematic purchase:
Once you have opened an IMA account, you may authorize the
Distributor to automatically purchase shares on your behalf at
intervals and in amounts selected by you. (See "Systematic
Purchase Plans")
Other purchase information. The Fund reserves the right, in its
sole discretion and without prior notice to shareholders, to
withdraw or suspend all or any part of the offering made by this
prospectus, to reject purchase requests or to change the minimum
investment requirements. All requests to purchase shares of the
Fund are subject to acceptance by the Fund and the Distributor and
are not binding until confirmed or accepted in writing. The
Distributor will charge a $15 service fee against an investor's IMA
account if his or her investment check is returned because of
insufficient or uncollected funds or a stop payment order.
How to exchange shares
The exchange privilege allows you to exchange your investment in
the Fund at no charge for shares of other funds in the Express
Direct Group of Funds available in your state. For complete
information, including fees and expenses, read the prospectus
carefully before exchanging into a new fund. Any exchange will
involve the redemption of Fund shares and the purchase of shares in
another fund on the basis of the net asset value per share of each
fund. An exchange may result in a gain or loss and is a taxable
event for federal income tax purposes. When exchanging into
another fund you must meet that fund's minimum investment
requirements. The Fund reserves the right to modify, terminate or
limit the exchange privilege. The current limit is four exchanges
per calendar year. The Distributor and the Fund reserve the right
to reject any exchange, limit the amount or modify or discontinue <PAGE>
PAGE 15
the exchange privilege, to prevent abuse or adverse effects on the
Fund and its shareholders.
How to redeem shares
The price at which shares will be redeemed. Shares will be
redeemed at the net asset value per share next determined after
receipt by the Distributor of proper redemption instructions, as
described below.
The Fund imposes a 0.50% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
Payment of redemption proceeds. Payment for redeemed shares will
be credited directly to your IMA account no later than seven days
after the Distributor receives your redemption instructions in
proper form. Redemption proceeds will be held there or mailed to
you depending on the account standing instructions you selected.
If you recently purchased shares by check, your redemption proceeds
may be held in your IMA account until your check clears (which may
take up to 10 days from the purchase date) before a check is mailed
to you.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Redeeming shares held in an IRA or qualified retirement account may
subject you to certain federal taxes, penalties and reporting
requirements. Consult your tax advisor.
Methods of exchanging or redeeming shares
By phone:
You may exchange between any of the Express Direct Funds or redeem
your shares by calling 1-800-AXP-SERV. Telephone exchanges or
redemptions may be difficult to implement during periods of drastic
economic or market changes. If you experience difficulties in
exchanging or redeeming shares by telephone, you can mail your
exchange or redemption requests as described below.
To properly process your telephone exchange or redemption request
we will need the following information:
o your IMA account number and your name (for exchanges, both
funds must be registered in the same ownership)
o the name of the fund from which you wish to exchange or redeem
shares
o the dollar amount or number of shares you want to exchange or
redeem
<PAGE>
PAGE 16
o the name of the fund into which shares are to be exchanged, if
applicable
Telephone exchange or redemption requests received before 2 p.m.
(Central time) on any business day, once the caller's identity and
account ownership have been verified by the Distributor, will be
processed at the net asset value determined as of the close of
business (normally 3 p.m. Central time) that day.
By mail:
You may also request an exchange or redemption by writing to
American Express Financial Services Direct, P.O. Box 59196,
Minneapolis, MN 55459-0196. Once an exchange or redemption request
is mailed it is irrevocable and cannot be modified or canceled.
To properly process your mailed exchange or redemption request, we
will need a letter from you that contains the following
information:
o your IMA account number
o the name of the fund from which you wish to exchange or redeem
shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged, if
applicable, and
o a signature of at least one of the IMA account holders in the
exact form specified on the account
Telephone transactions. You may make purchase, redemption and
exchange requests by mail or by calling 1-800-AXP-SERV where
trained representatives are available to answer questions about the
Fund and your account. The privilege to initiate transactions by
telephone is automatically available through your IMA account. The
Fund will honor any telephone transaction believed to be authentic
and will use reasonable procedures to confirm that instructions
communicated by telephone are genuine. This includes asking
identifying questions and tape recording calls. If these
procedures are not followed, the Fund may be liable for losses due
to unauthorized or fraudulent instructions. Telephone privileges
may be modified or discontinued at any time.
Systematic purchase plans
The Distributor offers a Systematic Purchase Plan (SPP) that allows
you to make periodic investments in Express Direct Funds
automatically and conveniently. A SPP can be used as a dollar cost
averaging program and saves you time and expense associated with
writing checks or wiring funds.
Investment minimums: You can make automatic investments in any
amount, from $100 to $50,000.
<PAGE>
PAGE 17
Investment methods: Automatic investments are made from your IMA
account and you may select from several different investment
methods to make automatic investment(s):
a) Using uninvested cash in your IMA account: If you elect to
use this option to make your automatic investments, uninvested
cash in your IMA account will be used to make the investment
and, if necessary, shares of your Money Market Fund will
be redeemed to cover the balance of the purchase.
b) Using bank authorization on direct deposit: Bank
authorizations (transfers from a bank checking or savings
account) and direct deposit (automatic deposit of all or a
portion of a payroll or government check) are two of the
investment method options that are available through SPP.
Money is transferred into your IMA account and automatic
investments can be made using these amounts.
If you elect to use bank authorizations and/or direct deposit for
your automatic investments, you will select two dates: a transfer
date (when the money is transferred into your IMA account) and your
investment date. The automatic investment date selected may be the
same day of your bank authorization or direct deposit. Your
investment date should be on or close to the transfer/deposit date
in order to minimize uninvested cash in your IMA account.
If you make changes to your bank authorization or direct deposit
date, it may also be necessary to change your automatic investment
date to coincide with the new transfer/deposit date.
Investment frequency: You can select the frequency of your
automatic investments (twice monthly, monthly or quarterly) and
choose either the 5th or the 20th of the month for your automatic
investment dates. Quarterly investments are made on the date
selected in the first month of each quarter (January, April, July
and October).
Changing instructions to an already established plan: If you want
to change the fund(s) selected for your SPP you may do so by
calling 1-800-AXP-SERV, or by sending written instructions clearly
outlining the changes to American Express Financial Services
Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Written
notification must include the following:
o The funds with SPP that you want to cancel
o The newly selected fund(s) in which you want to begin
making automatic investments and the amount to be
invested in each fund
o The investment frequency and investment dates for your
new automatic investments
Information on changing bank authorization and direct deposit
instructions is included in the Systematic Purchase Plan Terms and <PAGE>
PAGE 18
Conditions brochure which you will receive after enrolling in SPP.
Terminating your SPP. If you wish to terminate your SPP, you may
call 1-800-AXP-SERV, or send written instructions to American
Express Financial Services Direct, P.O. Box 59196, Minneapolis, MN
55459-0196.
Terminating bank authorizations and direct deposit. If you wish to
terminate your bank authorizations, you may do so at any time by
notifying American Express Financial Services Direct in writing.
You must notify your employer or government agency to cancel direct
deposit. Your bank authorization and/or direct deposit will not
automatically terminate when you cancel your SPP.
IMPORTANT: If you are canceling your bank authorizations and/or
direct deposit and you wish to cancel your SPP, you must also
provide instructions stating that the Distributor should cancel
your SPP. You may notify the Distributor by sending written
instructions to the address above or telephoning 1-800-AXP-SERV.
Your systematic investments will continue using IMA account assets
if the Distributor does not receive notification to terminate your
systematic investments as well.
To avoid procedural difficulties, the Distributor should receive
instructions to change or terminate your SPP or bank authorizations
at least 10 days prior to your scheduled investment date.
Additional information. This information is only a summary of the
Systematic Purchase Plan Terms and Conditions brochure that you
will receive if you choose to enroll in SPP. Please read it
carefully and keep it for future reference.
Other important information
Minimum balance and account requirements. The Fund reserves the
right to redeem your shares if, as a result of redemptions, the
aggregate value of your holdings in the Fund drops below $1,000
($500 in the case of custodial accounts, IRAs and other retirement
plans). You will be notified in writing 30 days before the Fund
takes such action to allow you to increase your holdings to the
minimum level. If you close your IMA account, the Fund will
automatically redeem your shares.
Wire transfers to your bank. Funds can be wired from your IMA
account to your bank account. Call the Distributor for additional
information on wire transfers. A $15 service fee will be charged
against your IMA account for each wire sent.
No person has been authorized to give any information or to make
any representations not contained in this prospectus in connection
with the offering being made by this prospectus and, if given or
made, such information or representation must not be relied upon as
having been authorized by the Fund or its Distributor. This <PAGE>
PAGE 19
prospectus does not constitute an offering by the Fund or by the
Distributor in any jurisdiction in which such offering may not be
lawfully made.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFA provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
Quick telephone reference
American Express Financial Services Direct Team
Fund performance, objectives and account inquiries, redemptions and
exchanges, dividend payments or reinvestments and automatic payment
arrangements
1-800-AXP-SERV
TTY Service
For the hearing impaired
1-800-710-5260
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any net gains realized on its investments. The Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
Investment income is allocated to the Fund by the Portfolio, less
direct and allocated expenses. The Fund's net realized capital
gains or losses, if any, consist of the net realized capital gains
or losses allocated to the Fund from the Portfolio. The Fund's net
investment income from dividends and interest is distributed to you
at the end of each calendar quarter as dividends. Short-term
capital gains are distributed at the end of the calendar year and
are included in net investment income. The Fund will offset any
net realized capital gains by any available capital loss
carryovers. The net realized capital gains, if any, are
distributed at the end of the calendar year as capital gain
distributions. Before they're distributed, both net investment
income and net long-term capital gains are included in the value of
each share. After they're distributed, the value of each share <PAGE>
PAGE 20
drops by the per-share amount of the distribution. (If your
distributions are reinvested, the total value of your holdings will
not change.) Short-term capital gains earned by the Fund are paid
to shareholders as part of their ordinary income dividend and are
taxable as ordinary income.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of the Fund, unless you request the
Fund in writing or by phone to pay distributions to you in cash.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
Taxes
The Fund has received a Private Letter Ruling from the Internal
Revenue Service stating that, for purposes of the Internal Revenue
Code, the Fund will be regarded as directly holding its allocable
share of the income and gain realized by the Portfolio.
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in the
year the Fund declares them regardless of whether you take them in
cash or reinvest them.
Income received by the Fund may be subject to foreign tax and
withholding. Tax conventions between certain countries and the
U.S. may reduce or eliminate such taxes. You may be entitled to
claim foreign tax credits or deductions subject to provisions and
limitations of the Internal Revenue Code. The Fund will notify you
if such credit or deduction is available.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a capital gain distribution. You pay the
full pre-distribution price for the shares, then receive a portion
of your investment back as a distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
<PAGE>
PAGE 21
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, call 1-800-AXP-SERV for federal
Form W-9, "Request for Taxpayer Identification Number and
Certification."<PAGE>
PAGE 22
Important: This information is a brief and selective summary of
certain federal tax rules that apply to the Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Fund and Portfolio are organized
The Fund is a series of Express Direct World Fund, Inc., an open-
end management investment company, as defined in the Investment
Company Act of 1940. The Company was incorporated on Sept. 1, 1995
in Minnesota. The Company's headquarters are at IDS Tower 10,
Minneapolis, MN 55440-0010.
Shares
The Company is currently composed of two funds, each issuing its
own series of capital stock: Express Direct World Income Fund and
Express Direct World Growth Fund. The Fund is owned by its
shareholders. All shares issued by the Fund are of the same
class -- capital stock. Par value is 1 cent per share. Both full
and fractional shares can be issued.
The shares of each Fund making up the Company represent an interest
in that Fund's assets only (and profits or losses), and, in the
event of liquidation, each share of a Fund would have the same
rights to dividends and assets as every other share of that Fund.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Shareholder meetings
The Company does not hold annual shareholder meetings. However,
the board members may call meetings at their discretion, or on
demand by holders of 10% or more of the Company's outstanding
shares, to elect or remove board members.
Special considerations regarding master/feeder structure
An investor in the Fund should be aware that the Fund, unlike
mutual funds which directly acquire and manage their own portfolios
of securities, seeks to achieve its investment objective by
investing its assets in the Portfolio of the Trust with an
identical investment objective. This arrangement is commonly known
as a master/feeder structure. The Trust is a separate investment
company. Therefore, the Fund's interest in securities owned by the
Portfolio is indirect. The board has considered the advantages and
disadvantages of investing the assets of the Fund in the
corresponding Portfolio and believes that this approach will be in
the best interests of the Fund and its shareholders by positioning
the Fund to realize certain economies of scale inherent in managing
a larger asset base. Until recently, the Advisor sponsored and <PAGE>
PAGE 23
advised only traditionally structured funds that invest directly in
a portfolio of securities and retain their own investment manager.
Funds that invest all their assets in interests in a separate
investment company are a relatively new development in the mutual
fund industry and may be subject to additional regulations and
risks.
The investment objective, policies and restrictions of the
Portfolio are described under the captions "Goal and types of Fund
investments and their risks" and "Investment policies and risks."
In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds
and to institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio are not required to sell
their shares at the same price as the Fund due to variations in
sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the
different funds that invest in the same Portfolio. Information
regarding other funds or pooled investment entities that invest in
Portfolios of the Trust may be obtained by contacting
_________________ at ________________.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the board determines that it is in the
best interest of the Fund to do so. In the event the Fund
withdraws all of its assets from the Portfolio, the board would
consider what action might be taken, including investing all assets
of the Fund in another pooled investment entity or retaining an
investment advisor to manage the Fund's assets in accordance with
its investment objective. The investment objective of the Fund and
the Portfolio can only be changed with the approval of holders of
outstanding voting securities. If the objective of the Portfolio
changes and shareholders of the Fund do not approve a parallel
change in the Fund's investment objective, the Company would seek
an alternative investment vehicle for the Fund or retain an
investment advisor on its behalf.
Investors in the Fund should be aware that smaller funds investing
in the Portfolio may be adversely affected by the actions of larger
funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience
higher prorated operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk, and experience decreasing
economies of scale. Institutional investors in the Portfolio that
have a greater pro rata ownership than the Fund could have
effective voting control over the operation of the Portfolio.
Certain changes in the Portfolio's fundamental objectives, policies
and restrictions could require the Fund to redeem its interest in
the Portfolio. Any such withdrawal could result in a distribution
of in-kind portfolio securities (as opposed to cash distribution).
If securities are distributed, the Fund could incur brokerage, tax <PAGE>
PAGE 24
or other charges in converting the securities to cash. In
addition, a distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the
Fund.
Wherever the Fund as an investor in the Portfolio is requested to
vote on matters pertaining to the Portfolio, the Fund will hold a
meeting of Fund shareholders and will vote its interests in the
Portfolio for or against such matters proportionately to the
instructions to vote for or against such matters received from Fund
shareholders. The Fund will vote shares for which it receives no
voting instructions in the same proportion as the shares for which
it receives voting instructions. See "Sales charge and Fund
expenses" for a complete description of the management and other
expenses associated with the Fund's investment in the Portfolio.
Board members and officers
Shareholders of the Company elect a board that oversees the
operations of the Fund and chooses the Company's officers. The
Company's officers are responsible for day-to-day business
decisions based on policies set by the board. Information about
the board members and officers of both the Company and the Trust is
found in the SAI under the caption "Board Members and Officers."
Investment manager
The Trust, on behalf of the Portfolio, pays the Advisor for
managing the assets of the Portfolio. Under its Investment
Management Services Agreement, the Advisor determines which
securities will be purchased, held or sold by the Portfolio
(subject to the direction and control of the board of trustees).
The Advisor is paid a fee for these services based on the average
daily net assets of the Portfolio, as follows:
Assets Annual rate at
(billions) each asset level
First $0.25 0.770%
Next 0.25 0.745
Next 0.25 0.720
Next 0.25 0.695
Over 1.0 0.670
Under the agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses.
Administrator and transfer agent
Under an Administrative Services Agreement, the Fund pays the
Advisor for administration and accounting services at an annual
rate of 0.06% decreasing in gradual percentages to 0.04% as assets
increase.
In addition, under a separate Transfer Agency Agreement, the
Advisor maintains shareholder accounts and records for the Fund.
The Fund pays an annual fee of $_____ per shareholder account for
this service.<PAGE>
PAGE 25
Distributor
The Fund sells shares through the Distributor under a Distribution
Agreement. The distributor is located at IDS Tower 10,
Minneapolis, MN 55440-0010 and is a wholly owned subsidiary of
Travel Related Services, Inc., a wholly owned subsidiary of
American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center, New
York, NY 10285. Financial consultants representing the
Distributor provide information to investors about individual
investment programs, the Fund and its operations, new account
applications, exchange and redemption requests. The Fund reserves
the right to sell shares through other broker/dealers.
To help defray costs, including costs for marketing, sales
administration, training, overhead, advertising and related
functions, the Fund pays the Distributor a distribution fee, also
known as a 12b-1 fee. This fee is paid under a Plan and Agreement
of Distribution that follows the terms of Rule 12b-1 of the
Investment Company Act of 1940. Under this Agreement, the Fund
pays a distribution fee at an annual rate of [0.__%] of the Fund's
average daily net assets for distribution-related services. This
fee will not cover all of the costs incurred by the Distributor.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
The expense ratio of the Fund and Portfolio may be higher than that
of a fund investing exclusively in domestic securities because the
expenses of the Fund and Portfolio, such as the investment
management fee and the custodial costs, are higher. The expense
ratio generally is not higher, however, than that of funds with
similar investment goals and policies.
About the Advisor
The Advisor is located at IDS Tower 10, Minneapolis, MN 55440-0010.
It is a wholly owned subsidiary of American Express Company. The
Portfolio may pay brokerage commissions to broker-dealer affiliates
of the Advisor.
<PAGE>
PAGE 26
Appendix A
Description of corporate bond ratings
Bond ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change, which could
affect its price. Ratings by Moody's Investors Service, Inc. are
Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Ratings by Standard &
Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
The following is a compilation of the two agencies' rating
descriptions. For further information, see the SAI.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.
<PAGE>
PAGE 27
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
<PAGE>
PAGE 28
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the
Portfolio may use. At various times the Portfolio may use some or
all of these instruments and is not limited to these instruments.
It may use other similar types of instruments if they are
consistent with the Portfolio's investment goal and policies. For
more information on these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy and sell an instrument
for a set price on a future date. The Portfolio may buy and sell
options and futures contracts to manage its exposure to changing
interest rates, security prices and currency exchange rates.
Options and futures may be used to hedge the Portfolio's
investments against price fluctuations or to increase market
exposure.
Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of
the issuers and the creditworthiness of the parties involved. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. Stripped
mortgage-backed securities include interest only (IO) and principal
only (PO) securities. Cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments on the
underlying mortgage loans or mortgage-backed securities.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Inverse floaters. Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of inverse floaters. As
interest rates go down, the holders of the inverse floaters receive
<PAGE>
PAGE 29
more income and an increase in the price for the inverse floaters.
As interest rates go up, the holders of the inverse floaters
receive less income and a decrease in the price for the inverse
floaters.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 30
Express Direct World Growth Fund
Prospectus
_______, 1996
Express Direct World Growth Fund, a series of Express Direct World
Fund, Inc., is a diversified mutual fund whose goal is long-term
growth of capital.
The Fund, unlike most funds that invest directly in securities,
seeks to achieve its objective by investing all of its assets in a
corresponding Portfolio of World Trust, which is a separate
investment company. This arrangement is commonly known as a
master/feeder structure. The Portfolio in which the Fund invests
has the same investment objective, policies and restrictions as the
Fund.
This prospectus contains facts that can help you decide if the Fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the Fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated _______, 199_, is incorporated here by
reference. For a free copy, contact American Express Financial
Services Direct.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Financial Services Direct
P.O. Box 59196
Minneapolis, MN
55459-0196
1-800-AXP-SERV
TTY: 1-800-710-5260
<PAGE>
PAGE 31
Table of contents
The Fund in brief
Goal and types of Fund investments and their risks
Manager and distributor
Portfolio manager
Sales charges and Fund expenses
Performance
Total returns
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
How to purchase shares
How to exchange shares
How to redeem shares
Systematic purchase plans
Other important information
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund and Portfolio are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About the Advisor
Appendix
Descriptions of derivative instruments
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The Fund in brief
Express Direct World Growth Fund (the Fund) is a diversified mutual
fund that seeks to achieve its goal by investing all of its assets
in World Growth Portfolio (the Portfolio) of World Trust (the
Trust) rather than by directly investing in and managing its own
portfolio of securities. The Fund is a series of Express Direct
World Fund, Inc. (the Company).
Goal and types of Fund investments and their risks
The Fund seeks to provide shareholders with long-term growth of
capital. It does so by investing all of its assets in the
Portfolio, which has the same investment objective as the Fund.
The Portfolio is a diversified mutual fund that invests primarily
in equity securities of companies throughout the world. The
Portfolio also invests in debt securities, derivative instruments
and money market instruments.
Because investments involve risk, the Fund cannot guarantee
achieving its goal. Risks arising from investments in foreign
securities include fluctuations in currency exchange rates, adverse
political and economic developments and lack of comparable
regulatory requirements applicable to U.S. companies. You should
invest in the Fund only if you are willing to assume such risks.
The foregoing investment goal is a fundamental policy of the Fund
and Portfolio, which may not be changed unless authorized by a
majority of the outstanding voting securities of the Fund or of the
Portfolio, as the case may be. However, the Fund may withdraw its
assets from the corresponding Portfolio at any time if the board of
directors of the Company determines that it is in the best
interests of the Fund to do so. In such event, the Company would
consider what action should be taken, including whether to retain
an investment advisor to manage the Fund's assets directly or to
reinvest all of the Fund's assets in another pooled investment
entity.
Manager and distributor
The Portfolio is managed by American Express Financial Corporation
(the Advisor), a provider of financial services since 1894. The
Advisor currently manages more than $__ billion in assets. Shares
of the Fund are sold through American Express Service Corporation
(the Distributor), an affiliated company of the Advisor.
Portfolio manager
Richard Lazarchic joined the Advisor in 1979 and serves as
portfolio manager. He has managed the assets of the predecessor of
World Growth Portfolio since July 1995. He was portfolio manager
of IDS Utilities Income Fund from 1989 to 1993 and IDS Diversified
Equity Income Fund from 1990 to 1994.
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PAGE 33
Sales charge and Fund expenses
The purpose of the following table and example is to summarize the
aggregate expenses of the Fund and its corresponding Portfolio and
to assist investors in understanding the various costs and expenses
that investors in the Fund may bear directly or indirectly. The
Company's board of directors believes that, over time, the
aggregate per share expenses of the Fund and its corresponding
Portfolio should be approximately equal to (and may be less than)
the per share expenses the Fund would have if the Company retained
its own investment advisor and the assets of the Fund were
invested directly in the type of securities held by the
corresponding Portfolio. The percentages indicated as "Management
fee" and "Other expenses" are based on both the Fund's and
Portfolio's projected fees and expenses for the current fiscal year
ending Oct. 31, 1996. For additional information concerning Fund
and Portfolio expenses, see "How the Fund and Portfolio are
Organized."
Shareholder transaction expenses
Maximum sales charge on purchases*
(as a percentage of offering price) 0%
Annual Fund and allocated Portfolio operating expenses
(% of average daily net assets):
Management fee** %
12b-1 fee %
Other expenses*** %
Total %
*The Fund imposes a 0.50% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
**The management fee is paid by the Trust on behalf of the
Portfolio.
***Other expenses include an administrative services fee, a
transfer agency fee and other nonadvisory expenses.
The Advisor has agreed to reimburse World Growth Fund for expenses
in excess of ___% of average net assets [for a period of ___
years/until the assets of the Fund reach $___ million], subject to
earlier termination by the Advisor on 30 days' notice. Without
this agreement, assuming average net assets of $___ million, the
estimated Other Expenses and Total Fund Operating Expenses for
World Growth Fund would have been ___% and ___% respectively.
Example: Suppose for each year for the next 10 years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
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PAGE 34
1 year $
3 years $
The table and example do not represent actual expenses, past or
future. Actual expenses may be higher or lower than those shown.
Because the Fund pays annual distribution (12b-1) fees, long-term
shareholders may indirectly pay an equivalent of more than a __%
sales charge, the maximum permitted by the National Association of
Securities Dealers.
Performance
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
Total returns
Average annual total returns as of _______, 199_
Purchase 1 year 5 years Since
made ago ago inception*
World Growth Fund
EAFE Index
Lipper International
Fund Index
*May 29, 1990
Cumulative total returns as of _______, 199_
Purchase 1 year 5 years Since
made ago ago inception*
World Growth Fund
EAFE Index
Lipper International
Fund Index
*May 29, 1990
On _________, 1996, IDS Global Growth Fund transferred all of its
assets to the Portfolio. The performance information in the
foregoing tables represents performance of IDS Global Growth Fund <PAGE>
PAGE 35
prior to March 20, 1995 and of Class A shares of IDS Global Growth
Fund from March 20, 1995 through ____________, 1996, in each case
adjusted to reflect the absence of sales charges on shares of the
Fund sold through this prospectus. The historical performance has
not been adjusted for any difference between the estimated
aggregate fees and expenses of the Fund and historical fees and
expenses of IDS Global Growth Fund.
These examples show total returns from hypothetical investments in
the Fund. These returns are compared to those of popular indexes
for the same periods.
For purposes of calculation, information about the Fund makes no
adjustments for taxes an investor may have paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of the Fund's future performance.
The Morgan Stanley Capital International EAFE Index (EAFE Index),
compiled from a composite of securities markets of Europe,
Australia and the Far East, is widely recognized by investors in
foreign markets as the measurement index for portfolios of non-
North American securities.
Lipper International Fund Index, published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the
Portfolio, although some funds in the index may have somewhat
different investment policies or objectives.
The indexes reflect reinvestment of all distributions and changes
in market prices, but exclude brokerage commissions or other fees.
Investment policies and risks
Unlike mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment
objective by investing all of its assets in a corresponding
Portfolio of the Trust, which is a separate investment company.
The Portfolio in which the Fund invests has the same investment
objectives, policies and restrictions as the Fund. The board of
directors of the Company believes that by investing all of its
assets in the corresponding Portfolio, the Fund will be in a
position to realize directly or indirectly certain economies of
scale inherent in managing a larger asset base, although there is
no assurance this will occur. The policies described below apply
both to the Fund and its corresponding Portfolio.
The Portfolio invests primarily in common stocks and securities
convertible into common stocks of companies located both in
developed and emerging countries. Generally, these companies will
have over $200 million in market capitalization and under normal
market conditions at least 65% of the Portfolio's total assets will
be invested in the common stocks and convertible securities of
companies in at least three different countries. The Portfolio
also invests in preferred stocks, debt securities, derivative
instruments and money market instruments.
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The various types of investments described above that the portfolio
manager uses to achieve investment performance are explained in
more detail in the next section and in the SAI.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of foreign companies may be subject to more abrupt or
erratic price movements. While most of the Portfolio's investments
are in established companies having adequate financial reserves,
some investments involve substantial risk and may be considered
speculative.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, the convertible securities
trade more like common stock.
Debt securities: The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The price of bonds below investment grade may react
more to the ability of the issuing company to pay interest and
principal when due. These bonds have greater price fluctuations
and are more likely to experience a default. The Portfolio may
invest up to 20% of its net assets in bonds. The Portfolio will
not invest more than 5% of its net assets in bonds below investment
grade. Securities that are subsequently downgraded in quality may
continue to be held by the Portfolio and will be sold only when the
investment manager believes it is advantageous to do so.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to currency
fluctuations and political and economic risks of the countries in
which the investments are made, including the possibility of
seizure or nationalization of companies, imposition of withholding
taxes on income, establishment of exchange controls or adoption of
other restrictions that might affect an investment adversely. If
an investment is made in a foreign market, the local currency may
be purchased using a forward contract in which the price of the
foreign currency in U.S. dollars is established on the date the
trade is made, but delivery of the currency is not made until the
securities are received. As long as the Portfolio holds foreign
currencies or securities valued in foreign currencies, the value of
those assets will be affected by changes in the value of the
currencies relative to the U.S. dollar. Because of the limited
trading volume in some foreign markets, efforts to buy or sell a
security may change the price of the security, and it may be <PAGE>
PAGE 37
difficult to complete the transaction. The limited liquidity and
price fluctuations in emerging markets could make investments in
developing countries more volatile.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. The Portfolio
will use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Portfolio will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of the
Portfolio's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. The Portfolio is not limited
as to the percentage of its assets that may be invested in
permissible investments, including derivatives, except as otherwise
explicitly provided in this prospectus or the SAI. For
descriptions of these and other types of derivative instruments,
see the Appendix to this prospectus and the SAI.
Securities and derivative instruments that are illiquid: A
security or derivative instrument is illiquid if it cannot be sold
quickly in the normal course of business. Some investments cannot
be resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. The
portfolio manager will follow guidelines established by the board
and consider relevant factors such as the nature of the security
and the number of likely buyers when determining whether a security
is illiquid.
No more than 10% of the Portfolio's net assets will be held in
securities and derivative instruments that are illiquid.
Money market instruments: Short-term debt securities rated in the
top two grades or the equivalent are used to meet daily cash needs
and at various times to hold assets until better investment <PAGE>
PAGE 38
opportunities arise. Generally less than 25% of the Portfolio's
total assets are in these money market instruments. However, for
temporary defensive purposes these investments could exceed that
amount for a limited period of time.
The investment policies described above may be changed by the
board.
Lending portfolio securities: The Portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless holders of a majority of the
outstanding voting securities approve otherwise, loans may not
exceed 30% of the Portfolio's net assets.
Valuing Fund shares
The net asset value (NAV) is the value of a single Fund share. It
is the total value of the Fund's investments in the corresponding
Portfolio and other assets, less any liabilities, divided by the
number of shares outstanding. The NAV is the price at which you
purchase Fund shares and the price you receive when you sell your
shares. It usually changes from day to day, and is calculated at
the close of business, normally 3 p.m. Central time, each business
day (any day the New York Stock Exchange is open). NAV generally
declines as interest rates increase and rises as interest rates
decline.
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at amortized
cost.
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board of trustees.
o Assets and liabilities denominated in foreign currencies are
translated daily into U.S. dollars at a rate of exchange set
as near to the close of the day as practicable.
How to purchase, exchange or redeem shares
How to purchase shares
You may purchase shares of the Fund exclusively through an
Investment Management Account (IMA) maintained with American
Express Service Corporation (the Distributor). Payment for shares
must be made directly to the Distributor.
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PAGE 39
If you already have an IMA account, you may buy shares in the Fund
as described below and need not open a new account. If you do not
have an IMA account, complete an IMA Account Application (available
by calling 1-800-AXP-SERV) and mail the application to American
Express Financial Services Direct, P.O. Box 59196, Minneapolis, MN
55459-0196. Corporations and other organizations should contact
the Distributor to determine which additional forms may be
necessary to open an IMA account.
You may deposit money into your IMA account by check, wire or many
other forms of electronic funds transfer (securities may also be
deposited). All deposit checks should be made payable to the
Distributor. If you would like to wire funds into your existing
IMA account, please contact the Distributor at 1-800-AXP-SERV for
instructions.
Minimum Fund investment requirements. Your initial investment in
the Fund may be as low as $2,000 ($1,000 for custodial accounts,
Individual Retirement Accounts and certain other retirement plans).
The minimum subsequent investment is $100. These requirements may
be reduced or waived as described in the SAI.
When and at what price shares will be purchased. You must have
money available in your IMA account in order to purchase Fund
shares. If your request and payment (including money transmitted
by wire) are received and accepted by the Distributor before 2 p.m.
Central time, your money will be invested at the net asset value
determined as of the close of business (normally 3 p.m. Central
time) that day. If your request and payment are received after
that time, your request will not be accepted or your payment
invested until the next business day. (See "Valuing Fund shares.")
Methods of purchasing shares. There are three convenient ways to
purchase shares of the Fund. You may choose the one that works
best for you. The Distributor will send you confirmation of your
purchase request.
By phone:
You may use money in your IMA account to make initial and
subsequent purchases. To place your order, call 1-800-AXP-
SERV.
By mail:
Written purchase requests (along with any checks) should be
mailed to American Express Financial Services Direct, P.O. Box
59196, Minneapolis, MN 55459-0196, and should contain the
following information:
o your IMA account number (or an IMA Account Application)
o the name of the Fund and the dollar amount of shares you
would like purchased
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PAGE 40
Your check should be made out to the Distributor. It will be
deposited into your IMA account and used, as necessary, to
cover your purchase request.
By systematic purchase:
Once you have opened an IMA account, you may authorize the
Distributor to automatically purchase shares on your behalf at
intervals and in amounts selected by you. (See "Systematic
Purchase Plans")
Other purchase information. The Fund reserves the right, in its
sole discretion and without prior notice to shareholders, to
withdraw or suspend all or any part of the offering made by this
prospectus, to reject purchase requests or to change the minimum
investment requirements. All requests to purchase shares of the
Fund are subject to acceptance by the Fund and the Distributor and
are not binding until confirmed or accepted in writing. The
Distributor will charge a $15 service fee against an investor's IMA
account if his or her investment check is returned because of
insufficient or uncollected funds or a stop payment order.
How to exchange shares
The exchange privilege allows you to exchange your investment in
the Fund at no charge for shares of other funds in the Express
Direct Group of Funds available in your state. For complete
information, including fees and expenses, read the prospectus
carefully before exchanging into a new fund. Any exchange will
involve the redemption of Fund shares and the purchase of shares in
another fund on the basis of the net asset value per share of each
fund. An exchange may result in a gain or loss and is a taxable
event for federal income tax purposes. When exchanging into
another fund you must meet that fund's minimum investment
requirements. The Fund reserves the right to modify, terminate or
limit the exchange privilege. The current limit is four exchanges
per calendar year. The Distributor and the Fund reserve the right
to reject any exchange, limit the amount or modify or discontinue
the exchange privilege, to prevent abuse or adverse effects on the
Fund and its shareholders.
How to redeem shares
The price at which shares will be redeemed. Shares will be
redeemed at the net asset value per share next determined after
receipt by the Distributor of proper redemption instructions, as
described below.
The Fund imposes a 0.50% redemption fee for shares redeemed or
exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred.
This fee also helps assure that long-term shareholders are not
unfairly bearing the costs associated with frequent traders.
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PAGE 41
Payment of redemption proceeds. Payment for redeemed shares will
be credited directly to your IMA account no later than seven days
after the Distributor receives your redemption instructions in
proper form. Redemption proceeds will be held there or mailed to
you depending on the account standing instructions you selected.
If you recently purchased shares by check, your redemption proceeds
may be held in your IMA account until your check clears (which may
take up to 10 days from the purchase date) before a check is mailed
to you.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Redeeming shares held in an IRA or qualified retirement account may
subject you to certain federal taxes, penalties and reporting
requirements. Consult your tax advisor.
Methods of exchanging or redeeming shares
By phone:
You may exchange between any of the Express Direct Funds or redeem
your shares by calling 1-800-AXP-SERV. Telephone exchanges or
redemptions may be difficult to implement during periods of drastic
economic or market changes. If you experience difficulties in
exchanging or redeeming shares by telephone, you can mail your
exchange or redemption requests as described below.
To properly process your telephone exchange or redemption request
we will need the following information:
o your IMA account number and your name (for exchanges, both
funds must be registered in the same ownership)
o the name of the fund from which you wish to exchange or redeem
shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged, if
applicable
Telephone exchange or redemption requests received before 2 p.m.
(Central time) on any business day, once the caller's identity and
account ownership have been verified by the Distributor, will be
processed at the net asset value determined as of the close of
business (normally 3 p.m. Central time) that day.
By mail:
You may also request an exchange or redemption by writing to
American Express Financial Services Direct, P.O. Box 59196,
Minneapolis, MN 55459-0196. Once an exchange or redemption request
is mailed it is irrevocable and cannot be modified or canceled.
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To properly process your mailed exchange or redemption request, we
will need a letter from you that contains the following
information:
o your IMA account number
o the name of the fund from which you wish to exchange or redeem
shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged, if
applicable, and
o a signature of at least one of the IMA account holders in the
exact form specified on the account
Telephone transactions. You may make purchase, redemption and
exchange requests by mail or by calling 1-800-AXP-SERV where
trained representatives are available to answer questions about the
Fund and your account. The privilege to initiate transactions by
telephone is automatically available through your IMA account. The
Fund will honor any telephone transaction believed to be authentic
and will use reasonable procedures to confirm that instructions
communicated by telephone are genuine. This includes asking
identifying questions and tape recording calls. If these
procedures are not followed, the Fund may be liable for losses due
to unauthorized or fraudulent instructions. Telephone privileges
may be modified or discontinued at any time.
Systematic purchase plans
The Distributor offers a Systematic Purchase Plan (SPP) that allows
you to make periodic investments in Express Direct Funds
automatically and conveniently. A SPP can be used as a dollar cost
averaging program and saves you time and expense associated with
writing checks or wiring funds.
Investment minimums: You can make automatic investments in any
amount, from $100 to $50,000.
Investment methods: Automatic investments are made from your IMA
account and you may select from several different investment
methods to make automatic investment(s):
a) Using uninvested cash in your IMA account: If you elect to
use this option to make your automatic investments, uninvested
cash in your IMA account will be used to make the investment
and, if necessary, shares of your Money Market Fund will be
redeemed to cover the balance of the purchase.
b) Using bank authorization on direct deposit: Bank
authorizations (transfers from a bank checking or savings
account) and direct deposit (automatic deposit of all or a
portion of a payroll or government check) are two of the
investment method options that are available through SPP.
Money is transferred into your IMA account and automatic
investments can be made using these amounts.
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PAGE 43
If you elect to use bank authorizations and/or direct deposit for
your automatic investments, you will select two dates: a transfer
date (when the money is transferred into your IMA account) and your
investment date. The automatic investment date selected may be the
same day of your bank authorization or direct deposit. Your
investment date should be on or close to the transfer/deposit date
in order to minimize uninvested cash in your IMA account.
If you make changes to your bank authorization or direct deposit
date, it may also be necessary to change your automatic investment
date to coincide with the new transfer/deposit date.
Investment frequency: You can select the frequency of your
automatic investments (twice monthly, monthly or quarterly) and
choose either the 5th or the 20th of the month for your automatic
investment dates. Quarterly investments are made on the date
selected in the first month of each quarter (January, April, July
and October).
Changing instructions to an already established plan: If you want
to change the fund(s) selected for your SPP you may do so by
calling 1-800-AXP-SERV, or by sending written instructions clearly
outlining the changes to American Express Financial Services
Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Written
notification must include the following:
o The funds with SPP that you want to cancel
o The newly selected fund(s) in which you want to begin
making automatic investments and the amount to be
invested in each fund
o The investment frequency and investment dates for your
new automatic investments
Information on changing bank authorization and direct deposit
instructions is included in the Systematic Purchase Plan Terms and
Conditions brochure which you will receive after enrolling in SPP.
Terminating your SPP. If you wish to terminate your SPP, you may
call 1-800-AXP-SERV, or send written instructions to American
Express Financial Services Direct, P.O. Box 59196, Minneapolis, MN
55459-0196.
Terminating bank authorizations and direct deposit. If you wish to
terminate your bank authorizations, you may do so at any time by
notifying American Express Financial Services Direct in writing.
You must notify your employer or government agency to cancel direct
deposit. Your bank authorization and/or direct deposit will not
automatically terminate when you cancel your SPP.
IMPORTANT: If you are canceling your bank authorizations and/or
direct deposit and you wish to cancel your SPP, you must also
provide instructions stating that the Distributor should cancel
your SPP. You may notify the Distributor by sending written <PAGE>
PAGE 44
instructions to the address above or telephoning 1-800-AXP-SERV.
Your systematic investments will continue using IMA account assets
if the Distributor does not receive notification to terminate your
systematic investments as well.
To avoid procedural difficulties, the Distributor should receive
instructions to change or terminate your SPP or bank authorizations
at least 10 days prior to your scheduled investment date.
Additional information. This information is only a summary of the
Systematic Purchase Plan Terms and Conditions brochure that you
will receive if you choose to enroll in SPP. Please read it
carefully and keep it for future reference.
Other important information
Minimum balance and account requirements. The Fund reserves the
right to redeem your shares if, as a result of redemptions, the
aggregate value of your holdings in the Fund drops below $1,000
($500 in the case of custodial accounts, IRAs and other retirement
plans). You will be notified in writing 30 days before the Fund
takes such action to allow you to increase your holdings to the
minimum level. If you close your IMA account, the Fund will
automatically redeem your shares.
Wire transfers to your bank. Funds can be wired from your IMA
account to your bank account. Call the Distributor for additional
information on wire transfers. A $15 service fee will be charged
against your IMA account for each wire sent.
No person has been authorized to give any information or to make
any representations not contained in this prospectus in connection
with the offering being made by this prospectus and, if given or
made, such information or representation must not be relied upon as
having been authorized by the Fund or its Distributor. This
prospectus does not constitute an offering by the Fund or by the
Distributor in any jurisdiction in which such offering may not be
lawfully made.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFA provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
<PAGE>
PAGE 45
Quick telephone reference
American Express Financial Services Direct Team
Fund performance, objectives and account inquiries, redemptions and
exchanges, dividend payments or reinvestments and automatic payment
arrangements
1-800-AXP-SERV
TTY Service
For the hearing impaired
1-800-710-5260
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any net gains realized on its investments. The Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
Investment income is allocated to the Fund by the Portfolio, less
direct and allocated expenses. The Fund's net realized capital
gains or losses, if any, consist of the net realized capital gains
or losses allocated to the Fund from the Portfolio. The Fund's net
investment income from dividends and interest is distributed to you
by the end of the calendar year as dividends. Short-term capital
gains are distributed at the end of the calendar year and are
included in net investment income. The Fund will offset any net
realized capital gains by any available capital loss carryovers.
The net realized capital gains, if any, are distributed at the end
of the calendar year as capital gain distributions. Before they're
distributed, both net investment income and net long-term capital
gains are included in the value of each share. After they're
distributed, the value of each share drops by the per-share amount
of the distribution. (If your distributions are reinvested, the
total value of your holdings will not change.) Short-term capital
gains earned by the Fund are paid to shareholders as part of their
ordinary income dividend and are taxable as ordinary income.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of the Fund, unless you request the
Fund in writing or by phone to pay distributions to you in cash.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
<PAGE>
PAGE 46
Taxes
The Fund has received a Private Letter Ruling from the Internal
Revenue Service stating that, for purposes of the Internal Revenue
Code, the Fund will be regarded as directly holding its allocable
share of the income and gain realized by the Portfolio.
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in the
year the Fund declares them regardless of whether you take them in
cash or reinvest them.
Income received by the Fund may be subject to foreign tax and
withholding. Tax conventions between certain countries and the
U.S. may reduce or eliminate such taxes. You may be entitled to
claim foreign tax credits or deductions subject to provisions and
limitations of the Internal Revenue Code. The Fund will notify you
if such credit or deduction is available.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a net investment income or a capital gain
distribution. You pay the full pre-distribution price for the
shares, then receive a portion of your investment back as a
distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
<PAGE>
PAGE 47
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors
Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, call 1-800-AXP-SERV for federal
Form W-9, "Request for Taxpayer Identification Number and
Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to the Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Fund and Portfolio are organized
The Fund is a series of Express Direct World Fund, Inc., an open-
end management investment company, as defined in the Investment
Company Act of 1940. The Company was incorporated on Sept. 1, 1995
in Minnesota. The Company's headquarters are at IDS Tower 10,
Minneapolis, MN 55440-0010.
Shares
The Company is currently composed of two funds, each issuing its
own series of capital stock: Express Direct World Growth Fund and
Express Direct World Income Fund. The Fund is owned by its <PAGE>
PAGE 48
shareholders. All shares issued by the Fund are of the same
class -- capital stock. Par value is 1 cent per share. Both full
and fractional shares can be issued.
The shares of each Fund making up the Company represent an interest
in that Fund's assets only (and profits or losses), and, in the
event of liquidation, each share of a Fund would have the same
rights to dividends and assets as every other share of that Fund.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Shareholder meetings
The Company does not hold annual shareholder meetings. However,
the board members may call meetings at their discretion, or on
demand by holders of 10% or more of the Company's outstanding
shares, to elect or remove board members.
Special considerations regarding master/feeder structure
An investor in the Fund should be aware that the Fund, unlike
mutual funds which directly acquire and manage their own portfolios
of securities, seeks to achieve its investment objective by
investing its assets in the Portfolio of the Trust with an
identical investment objective. This arrangement is commonly known
as a master/feeder structure. The Trust is a separate investment
company. Therefore, the Fund's interest in securities owned by the
Portfolio is indirect. The board has considered the advantages and
disadvantages of investing the assets of the Fund in the
corresponding Portfolio and believes that this approach will be in
the best interests of the Fund and its shareholders by positioning
the Fund to realize certain economies of scale inherent in managing
a larger asset base. Until recently, the Advisor sponsored and
advised only traditionally structured funds that invest directly in
a portfolio of securities and retain their own investment manager.
Funds that invest all their assets in interests in a separate
investment company are a relatively new development in the mutual
fund industry and may be subject to additional regulations and
risks.
The investment objective, policies and restrictions of the
Portfolio are described under the captions "Goal and types of Fund
investments and their risks" and "Investment policies and risks."
In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds
and to institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio are not required to sell
their shares at the same price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, <PAGE>
PAGE 49
investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the
different funds that invest in the same Portfolio. Information
regarding other funds or pooled investment entities that invest in
Portfolios of the Trust may be obtained by contacting
_________________ at ________________.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the board determines that it is in the
best interest of the Fund to do so. In the event the Fund
withdraws all of its assets from the Portfolio, the board would
consider what action might be taken, including investing all assets
of the Fund in another pooled investment entity or retaining an
investment advisor to manage the Fund's assets in accordance with
its investment objective. The investment objective of the Fund and
the Portfolio can only be changed with the approval of holders of
outstanding voting securities. If the objective of the Portfolio
changes and shareholders of the Fund do not approve a parallel
change in the Fund's investment objective, the Company would seek
an alternative investment vehicle for the Fund or retain an
investment advisor on its behalf.
Investors in the Fund should be aware that smaller funds investing
in the Portfolio may be adversely affected by the actions of larger
funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience
higher prorated operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk, and experience decreasing
economies of scale. Institutional investors in the Portfolio that
have a greater pro rata ownership than the Fund could have
effective voting control over the operation of the Portfolio.
Certain changes in the Portfolio's fundamental objectives, policies
and restrictions could require the Fund to redeem its interest in
the Portfolio. Any such withdrawal could result in a distribution
of in-kind portfolio securities (as opposed to cash distribution).
If securities are distributed, the Fund could incur brokerage, tax
or other charges in converting the securities to cash. In
addition, a distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the
Fund.
Wherever the Fund as an investor in the Portfolio is requested to
vote on matters pertaining to the Portfolio, the Fund will hold a
meeting of Fund shareholders and will vote its interests in the
Portfolio for or against such matters proportionately to the
instructions to vote for or against such matters received from Fund
shareholders. The Fund will vote shares for which it receives no
voting instructions in the same proportion as the shares for which
it receives voting instructions. See "Sales charge and Fund
expenses" for a complete description of the management and other
expenses associated with the Fund's investment in the Portfolio.
Board members and officers
Shareholders of the Company elect a board that oversees the
operations of the Fund and chooses the Company's officers. The <PAGE>
PAGE 50
Company's officers are responsible for day-to-day business
decisions based on policies set by the board. Information about
the board members and officers of both the Company and the Trust is
found in the SAI under the caption "Board Members and Officers."
Investment manager
The Trust, on behalf of the Portfolio, pays the Advisor for
managing the assets of the Portfolio. Under its Investment
Management Services Agreement, the Advisor determines which
securities will be purchased, held or sold by the Portfolio
(subject to the direction and control of the board of trustees).
The Advisor is paid a fee for these services based on the average
daily net assets of the Portfolio, as follows:
Assets Annual rate at
(billions) each asset level
First $0.25 0.800%
Next 0.25 0.775
Next 0.25 0.750
Next 0.25 0.725
Next 1.0 0.700
Over 2.0 0.675
Under the agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses.
Administrator and transfer agent
Under an Administrative Services Agreement, the Fund pays the
Advisor for administration and accounting services at an annual
rate of 0.06% decreasing in gradual percentages to 0.035% as assets
increase.
In addition, under a separate Transfer Agency Agreement, the
Advisor maintains shareholder accounts and records for the Fund.
The Fund pays an annual fee of $__ per shareholder account for this
service.
Distributor
The Fund sells shares through the Distributor under a Distribution
Agreement. The Distributor is located at IDS Tower 10,
Minneapolis, MN 55440-0010 and is a wholly owned subsidiary of
Travel Related Services, Inc., a wholly owned subsidiary of
American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center, New
York, NY 10285. Financial consultants representing the
Distributor provide information to investors about individual
investment programs, the Fund and its operations, new account
applications, exchange and redemption requests. The Fund reserves
the right to sell shares through other broker/dealers.
To help defray costs, including costs for marketing, sales
administration, training, overhead, advertising and related <PAGE>
PAGE 51
functions, the Fund pays the Distributor a distribution fee, also
known as a 12b-1 fee. This fee is paid under a Plan and Agreement
of Distribution that follows the terms of Rule 12b-1 of the
Investment Company Act of 1940. Under this Agreement, the Fund
pays a distribution fee at an annual rate of [0.__%] of the Fund's
average daily net assets for distribution-related services. This
fee will not cover all of the costs incurred by the Distributor.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
The expense ratio of the Fund and Portfolio may be higher than that
of a fund investing exclusively in domestic securities because the
expenses of the Fund and Portfolio, such as the investment
management fee and the custodial costs, are higher. The expense
ratio generally is not higher, however, than that of funds with
similar investment goals and policies.
About the Advisor
The Advisor is located at IDS Tower 10, Minneapolis, MN 55440-0010.
It is a wholly owned subsidiary of American Express Company. The
Portfolio may pay brokerage commissions to broker-dealer affiliates
of the Advisor.
<PAGE>
PAGE 52
Appendix
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the
Portfolio may use. At various times the Portfolio may use some or
all of these instruments and is not limited to these instruments.
It may use other similar types of instruments if they are
consistent with the Portfolio's investment goal and policies. For
more information on these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy and sell an instrument
for a set price on a future date. The Portfolio may buy and sell
options and futures contracts to manage its exposure to changing
interest rates, security prices and currency exchange rates.
Options and futures may be used to hedge the Portfolio's
investments against price fluctuations or to increase market
exposure.
Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of
the issuers and the creditworthiness of the parties involved. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. Stripped
mortgage-backed securities include interest only (IO) and principal
only (PO) securities. Cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments on the
underlying mortgage loans or mortgage-backed securities.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 53
STATEMENT OF ADDITIONAL INFORMATION
FOR
EXPRESS DIRECT WORLD FUND, INC.
Express Direct World Income Fund
_________, 1996
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the Fund's prospectus which may be
obtained by calling American Express Financial Services Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260) or by writing to P.O. Box
59196, Minneapolis, MN 55459-0196.
This SAI is dated _______, 199_, and it is to be used with the
Fund's prospectus dated _______, 199_.
<PAGE>
PAGE 54
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p.
Portfolio Transactions........................................p.
Brokerage Commissions Paid to Brokers Affiliated
with the Advisor..............................................p.
Performance Information.......................................p.
Valuing Fund Shares...........................................p.
Investing in the Fund.........................................p.
Redeeming Shares..............................................p.
Pay-out Plans.................................................p.
Taxes.........................................................p.
Agreements....................................................p.
Board Members and Officers....................................p.
Custodian.....................................................p.
Independent Auditors..........................................p.
Prospectus....................................................p.
Appendix A: Foreign Currency Transactions....................p.
Appendix B: Options and Futures Contracts....................p.
Appendix C: Mortgage-Backed Securities.......................p.
<PAGE>
PAGE 55
ADDITIONAL INVESTMENT POLICIES
Express Direct World Income Fund (the Fund) is a series of Express
Direct World Income Fund, Inc. (the Company). The Fund is a
diversified mutual fund with its own goal and investment policies.
The Fund seeks to achieve its goal by investing all of its assets
in World Income Portfolio (the Portfolio) of World Trust (the
Trust), a separate investment company, rather than by directly
investing in and managing its own portfolio of securities.
Fundamental investment policies adopted by the Fund or Portfolio
cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as defined
in the Investment Company Act of 1940. Whenever the Fund is
requested to vote on a change in the investment policies of the
corresponding Portfolio, the Company will hold a meeting of Fund
shareholders and will cast the Fund's vote as instructed by the
shareholders.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
Investment Policies applicable to the Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless holders of a
majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the Portfolio's total assets, based
on current market value at time of purchase, can be invested in any
one industry.
<PAGE>
PAGE 56
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate, or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (the Advisor), to the board members and
officers of the Advisor or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the Portfolio's board is to make these loans,
either long- or short-term, to broker-dealers. In making such
loans, the Portfolio gets the market price in cash, U.S. government
securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board. If the
market price of the loaned securities goes up, the Portfolio will
get additional collateral on a daily basis. The risks are that the
borrower may not provide additional collateral when required or
return the securities when due. During the existence of the loan,
the Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
'Issue senior securities, except to the extent that borrowing from
banks and using options, foreign currency forward contracts or
futures contracts (as discussed elsewhere in the Portfolio's
prospectus and SAI) may be deemed to constitute issuing a senior
security.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without<PAGE>
PAGE 57
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of domestic
or foreign companies, including any predecessors, that have a
record of less than three years continuous operations.
'Invest more than 10% of its total assets in securities of
investment companies. The Portfolios have no current intention to
invest in securities of other investment companies.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of the Portfolio's net assets in securities
and derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
loans and loan participations, repurchase agreements with
maturities greater than seven days, non-negotiable fixed-time
deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of<PAGE>
PAGE 58
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
Loans, loan participations and interests in securitized loan pools
are interests in amounts owed by a corporate, governmental or other
borrower to a lender or consortium of lenders (typically banks,
insurance companies, investment banks, government agencies or
international agencies). Loans involve a risk of loss in case of
default or insolvency of the borrower and may offer less legal
protection to the Portfolio in the event of fraud or
misrepresentation. In addition, loan participations involve a risk
of insolvency of the lender or other financial intermediary.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. The Portfolio also may purchase short-term
notes and obligations (rated in the top two classifications by
Moody's Investors Service Inc. (Moody's) or Standard & Poor's
Corporation (S&P) or the equivalent) of U.S. banks and foreign
corporations and may use repurchase agreements with broker-dealers
registered under the Securities Exchange Act of 1934 and with
commercial banks. A risk of a repurchase agreement is that if the
seller seeks the protection of the bankruptcy laws, the Portfolio's
ability to liquidate the security involved could be impaired. As a
temporary investment, during periods of weak or declining market
values for the securities in which the Portfolio invests, any
portion of its assets may be converted to cash (in foreign
currencies or U.S. dollars) or to the kinds of short-term debt
securities discussed in this paragraph.
For a discussion on foreign currency transactions, see Appendix A.
For a discussion on options and futures contracts, see Appendix B.
For a discussion on mortgage-backed securities, see Appendix C.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board, the Advisor is authorized to
determine, consistent with the Portfolio's investment goal and
policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, the
Advisor has been directed to use its best efforts to obtain the
best available price and most favorable execution except<PAGE>
PAGE 59
where otherwise authorized by the board. In selecting broker-
dealers to execute transactions, the Advisor may consider the price
of the security, including commission or mark-up, the size and
difficulty of the order, the reliability, integrity, financial
soundness and general operation and execution capabilities of the
broker, the broker's expertise in particular markets, and research
services provided by the broker.
The Advisor has a strict Code of Ethics that prohibits its
affiliated personnel from engaging in personal investment
activities that compete with or attempt to take advantage of
planned portfolio transactions for any of the Trusts in the
Preferred Master Trust Group. The Advisor carefully monitors
compliance with its Code of Ethics.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has adopted a
policy authorizing the Advisor to do so to the extent authorized by
law, if the Advisor determines, in good faith, that such commission
is reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or the Advisor's overall responsibilities to
the portfolios advised by the Advisor.
Research provided by brokers supplements the Advisor's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. The Advisor has obtained, and in
the future may obtain, computer hardware from brokers, including
but not limited to personal computers that will be used exclusively
for investment decision-making purposes, which include the
research, portfolio management and trading functions and other
services to the extent permitted under an interpretation by the
SEC.
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge, the
Advisor must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits the
Advisor to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research
services it has provided. The second procedure permits the
Advisor, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded in the over-the-
counter market to a firm that does not make a market in that<PAGE>
PAGE 60
security. The commission paid generally includes compensation for
research services. The third procedure permits the Advisor, in
order to obtain research and brokerage services, to cause the
Portfolio to pay a commission in excess of the amount another
broker might have charged. The Advisor has advised the Trust it is
necessary to do business with a number of brokerage firms on a
continuing basis to obtain such services as the handling of large
orders, the willingness of a broker to risk its own money by taking
a position in a security, and the specialized handling of a
particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some portfolio
transactions may not be effected at the lowest commission, but the
Advisor believes it may obtain better overall execution. The
Advisor has assured the Trust that under all three procedures the
amount of commission paid will be reasonable and competitive in
relation to the value of the brokerage services performed or
research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if, in the professional opinion of the person responsible
for selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by the Advisor in providing advice to all the Trusts in
the Preferred Master Trust Group, their corresponding Funds and
other accounts advised by the Advisor, even though it is not
possible to relate the benefits to any particular fund, portfolio
or account.
Each investment decision made for the Portfolio is made
independently from any decision made for other portfolios or
accounts advised by the Advisor or any of its subsidiaries. When
the Portfolio buys or sells the same security as another portfolio
or account, the Advisor carries out the purchase or sale in a way
the Trust agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or
sold by the Portfolio, the Portfolio hopes to gain an overall
advantage in execution. The Advisor has assured the Trust it will
continue to seek ways to reduce brokerage costs.
On a periodic basis, the Advisor makes a comprehensive review of
the broker-dealers it uses and the overall reasonableness of their
commissions. The review evaluates execution, operational
efficiency and research services.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR
Affiliates of American Express Company (American Express) (of which
the Advisor is a wholly owned subsidiary) may engage in brokerage
and other securities transactions on behalf of the Portfolio
according to procedures adopted by the board and to the extent
consistent with applicable provisions of the federal securities
laws. The Advisor will use an American Express affiliate only if
(i) the Advisor determines that the Portfolio<PAGE>
PAGE 61
will receive prices and executions at least as favorable as those
offered by qualified independent brokers performing similar
brokerage and other services for the Portfolio and (ii) the
affiliate charges the Portfolio commission rates consistent with
those the affiliate charges comparable unaffiliated customers in
similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
The Advisor may direct brokerage to compensate an affiliate. The
Advisor will receive research on South Africa from New Africa
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send
research to the Advisor and in turn the Advisor will direct trades
to a particular broker. The broker will have an agreement to pay
New Africa Advisors. All transactions will be on a best execution
basis. Compensation received will be reasonable for the services
rendered.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past
performance. Average annual total return and current yield
quotations used by the Fund are based on standardized methods of
computing performance as required by the SEC.
Average annual total return
The Fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
the Fund over a specified period of time according to the following
formula:
ERV - P
P
<PAGE>
PAGE 62
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
The Fund may calculate an annualized yield by dividing the net
investment income per share deemed earned during a period by the
net asset value per share on the last day of the period and
annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = aggregate expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The Fund's annualized yield was ____ for the 30-day period ended
________, 199_.
The Fund's yield, calculated as described above according to the
formula prescribed by the SEC, is a hypothetical return based on
market value yield to maturity for the corresponding Portfolio's
securities. It is not necessarily indicative of the amount which
was or may be paid to the Fund's shareholders. Actual amounts paid
to the Fund's shareholders are reflected in the distribution yield.
Distribution yield
Distribution yield is calculated according to the following
formula:
D divided by POP F equals DY
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor
DY = distribution yield
The Fund's distribution yield was _____% for the 30-day period
ended __________, 199_.
<PAGE>
PAGE 63
In its sales material and other communications, the Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
On _________, IDS Global Bond Fund (the IDS Fund), an open-end
investment company managed by the Advisor, transferred all of its
assets, totaling $___ billion, to the Portfolio in exchange for
units therein. Also on ___________, the Fund transferred all of
its assets to the Portfolio in connection with the commencement of
its operations.
On March 20, 1995, the IDS Fund converted to a multiple class
structure pursuant to which three classes of shares are offered:
Class A, Class B and Class Y. Class A shares are sold with a 5%
sales charge, a 0.175% service fee and no 12b-1 fee.
Performance quoted by the Fund is based on the performance and
yield of the IDS Fund prior to March 20, 1995 and to Class A shares
of the IDS Fund from March 20, 1995 through _____________, adjusted
for differences in sales charge.
The historical performance has not been adjusted for any difference
between the estimated aggregate fees and expenses of the Fund and
historical fees and expenses of the IDS Fund.
The portfolio turnover rate for the Fund was ___% in the fiscal
year ended _____, 1995, and ___% in fiscal year 1994. Turnover
rates are based on the turnover rates of the IDS Fund, which
transferred all of its assets to the Portfolio on ______________,
for periods prior to _____ (the Fund's commencement of operations).
A higher turnover rate (in excess of 100%) results in higher fees
and expenses.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day and
dividing that figure by the number of shares outstanding at the end
of the previous day.
In determining net assets before shareholder transactions, the
securities held by the Fund's corresponding Portfolio are valued as
follows as of the close of business of the New York Stock Exchange
(the Exchange):
<PAGE>
PAGE 64
'Securities, except bonds other than convertibles, traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the
closing bid and asked prices, looking first to the bid and asked
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the Exchange. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at
the current rate of exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close
of the Exchange that will not be reflected in the computation of
the Portfolio's net asset value. If events materially affecting
the value of such securities occur during such period, these
securities will be valued at their fair value according to
procedures decided upon in good faith by the Trust's board.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value as
determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When<PAGE>
PAGE 65
possible, bonds are valued by a pricing service independent from
the Trust. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
The Exchange, the Advisor and the Fund will be closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
INVESTING IN THE FUND
The Fund's minimum initial investment requirement is $2,000 ($1,000
for Custodial Accounts, Individual Retirement Accounts and certain
other retirement plans). Subsequent investments of $100 or more
may be made. These minimum investment requirements may be changed
at any time and are not applicable to certain types of investors.
The Securities Investor Protection Corporation (SIPC) will provide
account protection, in an amount up to $500,000, for securities
including Fund shares (up to $100,000 protection for cash), held in
an Investment Management Account maintained with American Express
Financial Advisors Inc. Of course, SIPC account protection does
not protect shareholders from share price fluctuations.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of the Fund's securities is not reasonably practicable or
it is not reasonably practicable for the Fund to determine the fair
value of its net assets, or
'The SEC, under the provisions of the Investment Company Act of
1940 (the 1940 Act), as amended, declares a period of emergency to
exist.
Should the Fund stop selling shares, the board members may make a
deduction from the value of the assets held by the Fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all shareholders.
<PAGE>
PAGE 66
Redemptions by the Fund
The Fund reserves the right to redeem, involuntarily, the shares of
any shareholder whose account has a value of less than a minimum
amount but only where the value of such account has been reduced by
voluntary redemption of shares. Until further notice, it is the
policy of the Fund not to exercise this right with respect to any
shareholder whose account has a value of $1,000 or more. In any
event, before the Fund redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value
of the shares in the account is less than the minimum amount and
allow the shareholder 30 days to make an additional investment in
an amount which will increase the value of the accounts to at least
$1,000.
Redemptions in Kind
The Company has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates the Fund to redeem shares in cash, with
respect to any one shareholder during any 90-day period, up to the
lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Although redemptions in excess of this
limitation would normally be paid in cash, the Fund reserves the
right to make payments in whole or in part in securities or other
assets in case of an emergency, or if the payment of such
redemption in cash would be detrimental to the existing
shareholders of the Fund as determined by the board. In such
circumstances, the securities distributed would be valued as set
forth in the Prospectus. Should the Fund distribute securities, a
shareholder may incur brokerage fees or other transaction costs in
converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. While the plans differ
on how the pay-out is figured, they all are based on the redemption
of your investment. Net investment income dividends and any
capital gain distributions will automatically be reinvested, unless
you elect to receive them in cash. If you are redeeming a tax-
qualified plan account for which American Express Trust Company
acts as custodian, you can elect to receive your dividends and
other distributions in cash when permitted by law. If you redeem
an IRA or a qualified retirement account, certain restrictions,
federal tax penalties and special federal income tax reporting
requirements may apply. You should consult your tax advisor about
this complex area of the tax law.
To start any of these plans, please submit an authorization form
supplied by American Express Financial Services Direct. For a
copy, write or call American Express Financial Services Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260), P. O. Box 59196, Minneapolis,
MN 55459-0196. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you<PAGE>
PAGE 67
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. The Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete
redemption of all shares in your account with the Fund by the end
of the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value for each payment and that amount will be sent to
you. The length of time these payments continue is based on the
number of shares in your account with the Fund.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until your account with the Fund is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in the account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account with the Fund is $10,000 on
the payment date.
TAXES
Dividends received should be treated as dividend income for federal
income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Fund's dividend
that is attributable to dividends the Fund received from domestic
(U.S.) securities. For the fiscal year ended Oct. 31, 19__, __% of
the Fund's net investment income dividends qualified for the
corporate deduction. The exclusion for dividends received by
individuals is no longer generally available.
<PAGE>
PAGE 68
The Fund may be subject to U.S. taxes resulting from holdings in a
passive foreign investment company (PFIC). A foreign corporation
is a PFIC when 75% or more of its gross income for the taxable year
is passive income or 50% or more of the average value of its assets
consists of assets that produce or could produce passive income.
The Fund has no current intention to invest in PFICS.
Income earned by the Fund may have had foreign taxes imposed and
withheld on it in foreign countries. Tax conventions between
certain countries and the United States may reduce or eliminate
such taxes. If more than 50% of the Fund's total assets at the
close of its fiscal year consists of securities of foreign
corporations, the Fund will be eligible to file an election with
the Internal Revenue Service under which shareholders of the Fund
would be required to include their pro rata portions of foreign
taxes withheld by foreign countries as gross income in their
federal income tax returns. These pro rata portions of foreign
taxes withheld may be taken as a credit or deduction in computing
federal income taxes. If the election is filed, the Fund will
report to its shareholders the per share amount of such foreign
taxes withheld and the amount of foreign tax credit or deduction
available for federal income tax purposes.
Capital gain distributions, if any, received by individual and
corporate shareholders, should be treated as long-term capital
gains regardless of how long they owned their shares. Short-term
capital gains earned by the Fund are paid to shareholders as part
of their ordinary income dividend and are taxable as ordinary
income, not capital gain.
You may be able to defer taxes on current income from the Fund by
investing through an IRA, 401(k) plan account or other qualified
retirement account. If you move all or part of a non-qualified
investment in the Fund to a qualified account, this type of
exchange is considered a sale of shares. You pay no sales charge,
but the exchange may result in a gain or loss for tax purposes, or
excess contributions under IRA or qualified plan regulations.
Under the Internal Revenue Code of 1986 (the Code), gains or losses
attributable to fluctuations in exchange rates which occur between
the time the Fund accrues interest or other receivables, or accrues
expenses or other liabilities denominated in a foreign currency and
the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, gains or losses on disposition of debt securities
denominated in a foreign currency attributable to fluctuations in
the value of the foreign currency between the date of acquisition
of the security and the date of disposition also are treated as
ordinary gains or losses. These gains or losses, referred to under
the Code as "section 988" gains or losses, may increase or decrease
the amount of the Fund's investment company taxable income to be
distributed to its shareholders as ordinary income. If the Fund
incurs a loss, a portion of the dividends distributed to
shareholders may be considered a return of capital.
<PAGE>
PAGE 69
Under federal tax law, by the end of a calendar year the Fund must
declare and pay dividends representing 98% of ordinary income for
that calendar year and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. The Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with
federal tax law and avoid any excise tax.
For purposes of the excise tax distributions, "section 988"
ordinary gains and losses are distributable based on an Oct. 31
year end. This is an exception to the general rule that ordinary
income is paid based on a calendar year end.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor as to the
application of federal, state and local income tax laws to fund
distributions.
AGREEMENTS
Investment Management Services Agreement
The Trust, on behalf of the Portfolio, has an Investment Management
Services Agreement with the Advisor. For its services, the Advisor
is paid a fee from the assets of the Portfolio, based upon the
following schedule:
Assets Annual rate at
(billions) each asset level
First $0.25 0.770%
Next 0.25 0.745
Next 0.25 0.720
Next 0.25 0.695
Over 1.0 0.670
The fee is calculated for each calendar day on the basis of net
assets as the close of business two days prior to the day for which
the calculation is made. The management fee is paid monthly.
Under the Agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; Portfolio office expenses; consultants' fees;
compensation of board members, officers and employees; corporate
filing fees; organizational expenses; expenses incurred in
connection with lending portfolio securities; and expenses properly
payable by the Portfolio, approved by the board.
Administrative Services Agreement
The Company, on behalf of the Fund, has an Administrative Services
Agreement with the Advisor. Under this agreement, the Fund pays<PAGE>
PAGE 70
the Advisor for providing administration and accounting services.
The fee is payable from the assets of the Fund and is calculated as
follows:
Fund assets Annual rate at
(billions) each asset level
First $0.25 0.060%
Next 0.25 0.055%
Next 0.25 0.050%
Next 0.25 0.045%
Over 1.0 0.040%
Under the agreement, the Fund also pays taxes; audit and certain
legal fees; registration fees for shares; Fund office expenses;
consultant's fees; compensation of board members, officers and
employees; corporate filing fees; organizational expenses; and
expenses properly payable by the Fund approved by the board.
Transfer Agency Agreement
The Company, on behalf of the Fund, has a Transfer Agency Agreement
with the Advisor. This agreement governs the responsibility for
administering and/or performing transfer agent functions, for
acting as service agent in connection with dividend and
distribution functions and for performing shareholder account
administration agent functions in connection with the issuance,
exchange and redemption or repurchase of the Fund's shares. The
fee is determined by multiplying the number of shareholder accounts
at the end of the day by a rate of _______ per year and dividing by
the number of days in the year.
Placement Agency Agreement
Pursuant to a Placement Agency Agreement, the Distributor acts as
placement agent of the units of the Trust.
Plan and Agreement of Distribution/Distribution Agreement
To help the Distributor defray the costs of distribution and
servicing, the Company and the Distributor have entered into a Plan
and Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing Fund shares. Under the Plan, the
Distributor is paid a fee determined by ___________.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of board members who are not interested persons of
the Company and have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan,
or by vote of a majority of the outstanding voting securities of<PAGE>
PAGE 71
the Fund or by the Distributor. The Plan (or any agreement related
to it) shall terminate in the event of its assignment, as that term
is defined in the Investment Company Act of 1940, as amended. The
Plan may not be amended to increase the amount to be spent for
distribution without shareholder approval, and all material
amendments to the Plan must be approved by a majority of the board
members, including a majority of the board members who are not
interested persons of the Company and who do not have a financial
interest in the operation of the Plan or any agreement related to
it. The selection and nomination of such disinterested board
members is the responsibility of such disinterested board members.
No board member who is not an interested person has any direct or
indirect financial interest in the operation of the Plan or any
related agreement.
Total fees and expenses
Total combined fees and nonadvisory expenses of both the master
fund and this feeder fund cannot exceed the most restrictive
applicable state limitation. Currently, the most restrictive
applicable state expense limitation, subject to exclusion of
certain expenses, is 2.5% of the first $30 million of the fund's
average daily net assets, 2% of the next $70 million and 1.5% of
average daily net assets over $100 million, on an annual basis. At
the end of each month, if the fees and expenses of the Fund exceed
this limitation for the Fund's fiscal year in progress, the Advisor
will assume all expenses in excess of the limitation. The Advisor
then may bill the Fund for such expenses in subsequent months up to
the end of that fiscal year, but not after that date. No interest
charges are assessed by the Advisor for expenses it assumes.
BOARD MEMBERS AND OFFICERS
The following is a list of the Company's board members and
officers, who are also board members and officers of all other
funds in the Express Direct Mutual Fund Group. All shares of the
Fund have cumulative voting rights with respect to the election of
board members.
Directors and officers
[to be provided]
The following is a list of the Trust's board members and officers,
who are also board members and officers of all other Trusts in the
Preferred Master Trust Group and all funds in the IDS MUTUAL FUND
GROUP. All units have cumulative voting rights with respect to the
election of board members.
<PAGE>
PAGE 72
Trustees and officers
Lynne V. Cheney'
Born in 1941.
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley+**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+'
Born in 1929.
P.O. Box 5724
Minneapolis, MN
President and chief operating officer, Cargill, Incorporated
(commodity merchants and processors) from February 1991 to
September 1994. Executive vice president from 1981 to February
1991.
<PAGE>
PAGE 73
Anne P. Jones
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Donald M. Kendall'
Born in 1921.
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Chairman of the board, COMSAT
Corporation, former nine-term congressman, secretary of defense and
presidential counsellor. Director, Martin Marietta Corp.,
Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's
Digest Funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).
Lewis W. Lehr'
Born in 1921.
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota
Mining and Manufacturing Company (3M). Director, Jack Eckerd
Corporation (drugstores). Advisory Director, Peregrine Inc.
(microelectronics).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all Trusts in the Preferred Master Trust Group since
_________ and president of all funds in the IDS MUTUAL FUND GROUP
since June 1993. Former vice chairman of the board, Cargill,
Incorporated (commodity merchants and processors).
<PAGE>
PAGE 74
Edson W. Spencer+
Born in 1926.
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Chairman of the
board, Mayo Foundation (healthcare). Former chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise
Cascade Corporation (forest products) and CBS Inc. Member of
International Advisory Councils, Robert Bosch (Germany) and NEC
(Japan).
John R. Thomas**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934.
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging),
Donaldson Company (air cleaners & mufflers) and General Mills, Inc.
(consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person of the Trust by reason of being an officer and
employee of the Trust.
**Interested person of the Trust by reason of being an officer,
board member, employee and/or shareholder of AEFC or American
Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Trust's other
officers are:
<PAGE>
PAGE 75
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all Trusts in the
Preferred Master Trust Group and of all funds in the IDS MUTUAL
FUND GROUP.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all Trusts in the Preferred Master
Trust Group and of all funds in the IDS MUTUAL FUND GROUP.
Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all Trusts in the Preferred Master Trust Group and of
all funds in the IDS MUTUAL FUND GROUP. Director, senior vice
president and chief financial officer of AEFC. Director and
executive vice president and controller of IDS Life Insurance
Company.
The following is an estimate of compensation expected to be paid to
the Company's board members for the fiscal year ending
_______________, 1996:
<TABLE><CAPTION>
Compensation Table
Pension or
Retirement
Aggregate Benefits Accrued
Compensation as Part of the Estimated Annual Total Compensation
from the Company Company and the Benefit upon from the
Board Members and the Trust Trust Expenses Retirement Fund Complex*
<C> <S> <S> <S> <S>
*"Fund Complex" comprises _________.
</TABLE>
[On _________________, the Company's board members and officers as
a group owned less than 1% of the outstanding shares of the Fund.
During the fiscal year ended ________________, no board member or
officer earned more than $60,000 from the Company and its
corresponding Trust. All board members and officers as a group
earned $____________, including $___________ of retirement plan
benefits, from the Company.]
CUSTODIAN
The Trust's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, through a custodian agreement. The
Fund also retains the custodian pursuant to a custodian agreement. <PAGE>
PAGE 76
The custodian is permitted to deposit some or all of its securities
in central depository systems as allowed by federal law. For its
services, the Portfolio pays the custodian a maintenance charge and
a charge per transaction in addition to reimbursing the custodian's
out-of-pocket expenses.
INDEPENDENT AUDITORS
The Fund's and corresponding Portfolio's financial statements to be
contained in its Annual Report to shareholders at the end of the
fiscal year will be audited by independent auditors, KPMG Peat
Marwick LLP, 4200 Norwest Center, 90 S. Seventh St., Minneapolis,
MN 55402-3900. The independent auditors also provide other
accounting and tax-related services as requested by the Fund.
PROSPECTUS
The prospectus dated _____________________, is hereby incorporated
in this SAI by reference.
<PAGE>
PAGE 77
APPENDIX A
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since the Portfolio may hold cash and
cash-equivalent investments in foreign currencies, the value of the
Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, the Portfolio may incur costs
in connection with conversions between various currencies.
Spot Rates and Forward Contracts. The Portfolio conducts its
foreign currency exchange transactions either at the spot (cash)
rate prevailing in the foreign currency exchange market or by
entering into forward currency exchange contracts (forward
contracts) as a hedge against fluctuations in future foreign
exchange rates. A forward contract involves an obligation to buy
or sell a specific currency at a future date, which may be any
fixed number of days from the contract date, at a price set at the
time of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged
at any stage for trades.
The Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When the
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
The Portfolio also may enter into forward contracts when management
of the Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of the securities denominated in such foreign currency.
The precise matching of forward contract amounts and the value of
securities involved generally will not be possible since the future
value of such securities in foreign currencies more than likely
will change between the date the forward contract is entered into
and the date it matures. The projection of short-term currency
market movements is extremely difficult and successful execution of
a short-term hedging strategy is highly uncertain. The Portfolio
will not enter into such forward contracts or maintain a net
exposure to such contracts when consummating the contracts would<PAGE>
PAGE 78
obligate the Portfolio to deliver an amount of foreign currency in
excess of the value of the Portfolio's securities or other assets
denominated in that currency.
The Portfolio will designate cash or securities in an amount equal
to the value of the Portfolio's total assets committed to
consummating forward contracts entered into under the second
circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a
daily basis so that the value of the cash or securities will equal
the amount of the Portfolio's commitments on such contracts.
At maturity of a forward contract, the Portfolio may either sell
the security and make delivery of the foreign currency or retain
the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an offsetting contract with the
same currency trader obligating it to buy, on the same maturity
date, the same amount of foreign currency.
If the Portfolio retains the security and engages in an offsetting
transaction, the Portfolio will incur a gain or a loss (as
described below) to the extent there has been movement in forward
contract prices. If the Portfolio engages in an offsetting
transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline
between the date the Portfolio enters into a forward contract for
selling foreign currency and the date it enters into an offsetting
contract for purchasing the foreign currency, the Portfolio will
realize a gain to the extent that the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to
buy. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to buy
exceeds the price of the currency it has agreed to sell.
It is impossible to forecast what the market value of securities
will be at the expiration of a contract. Accordingly, it may be
necessary for the Portfolio to buy additional foreign currency on
the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver and a decision is
made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received on the sale of the
security if its market value exceeds the amount of foreign currency
the Portfolio is obligated to deliver.
The Portfolio's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of the securities against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange that can be
achieved at some point in time. Although such forward contracts
tend to minimize the risk of loss due to a decline in value of
hedged currency, they tend to limit any potential gain that might
result should the value of such currency increase.<PAGE>
PAGE 79
Although the Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and unitholders should be aware of currency
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Portfolio at one rate, while offering a
lesser rate of exchange should the Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. The Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such
diminutions in the value of securities, the Portfolio may buy put
options on the foreign currency. If the value of the currency does
decline, the Portfolio will have the right to sell such currency
for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on the Portfolio which otherwise would
have resulted.
As in the case of other types of options, however, the benefit to
the Portfolio derived from purchases of foreign currency options
will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do
not move in the direction or to the extent anticipated, the
Portfolio could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.
The Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, when the Portfolio
anticipates a decline in the dollar value of foreign-denominated
securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will
most likely not be exercised and the diminution in value of
securities will be fully or partially offset by the amount of the
premium received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
the Portfolio would be required to buy or sell the underlying
currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the
Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable
movements on exchange rates.<PAGE>
PAGE 80
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if the Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in the Portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting the Portfolio to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. The Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put and write covered call options on currency futures. <PAGE>
PAGE 81
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. The Portfolio may use currency futures for the
same purposes as currency forward contracts, subject to Commodity
Futures Trading Commission (CFTC) limitations, including the
limitation on the percentage of assets that may be used, described
in the prospectus. All futures contracts are aggregated for
purposes of the percentage limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of the Portfolio's investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect the Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of the Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of the Portfolio's
investments denominated in that currency over time.
The Portfolio will hold securities or other options or futures
positions whose values are expected to offset its obligations. The
Portfolio will not enter into an option or futures position that
exposes the Portfolio to an obligation to another party unless it
owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient
to cover its potential obligations.
<PAGE>
PAGE 82
APPENDIX B
OPTIONS AND FUTURES CONTRACTS
The Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. The Portfolio
may enter into stock exchange futures contracts traded on any U.S.
or foreign exchange. The Portfolio also may buy or write put and
call options on these futures and on stock indexes. The Portfolio
also may enter into interest rate futures contracts traded on any
U.S. or foreign exchange and may buy or write put and call options
on these futures. Options in the over-the-counter market will be
purchased only when the investment manager believes a liquid
secondary market exists for the options and only from dealers and
institutions the investment manager believes present a minimal
credit risk. Some options are exercisable only on a specific date.
In that case, or if a liquid secondary market does not exist, a
Portfolio could be required to buy or sell securities at
disadvantageous prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash or securities of equivalent value (in the case of a
put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition, the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price. The risk of
the writer is potentially unlimited, unless the option is covered.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options may benefit the Portfolio and its
unitholders by improving the Portfolio's liquidity and by helping
to stabilize the value of its net assets.
<PAGE>
PAGE 83
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, the Portfolio pays a premium and a commission. It then
pays a second commission on the purchase or sale of the underlying
security when the option is exercised. For record keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by the Portfolio for
investment purposes. Options permit the Portfolio to experience
the change in the value of a security with a relatively small
initial cash investment.
The risk the Portfolio assumes when it buys an option is the loss
of the premium. To be beneficial to the Portfolio, the price of
the underlying security must change within the time set by the
option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and sale (in the case of a call) or purchase
(in the case of a put) of the underlying security. Even then the
price change in the underlying security does not assure a profit
since prices in the option market may not reflect such a change.
Writing covered options. The Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the
Portfolio's goal.
'All options written by the Portfolio will be covered. For covered
call options if a decision is made to sell the security, or for put
options if a decision is made to buy the security, the Portfolio
will attempt to terminate the option contract through a closing
purchase transaction.
A call option written by the Portfolio will be covered (i) if a
Portfolio owns the security in connection with which the option was
written, or has an absolute and immediate right to acquire such
security upon conversion of exchange or other securities held in
its portfolio, or (ii) in such other manner that is in accordance
with the rules of the exchange on which the option is traded and
applicable laws and regulations. A put option written by the
Portfolio will be covered through (i) segregation in a segregated<PAGE>
PAGE 84
account held by the Portfolio's custodian of cash, short-term U.S.
government securities or money market instruments in an amount
equal to the exercise price of the option, or (ii) in any other
manner that is in accordance with the requirements of the exchange
on which the option is traded and applicable laws and regulations.
Upon exercise of the option, the holder is required to pay the
purchase price of the underlying security in the case of a call
option, or to deliver the security in return for purchase price in
the case of a put option. Conversely the writer is required to
deliver the security in the case of a call option or to purchase
the security in the case of a put option. Options that have been
purchased or written may be closed out prior to exercise or
expiration by entering into an offsetting transaction on the
exchange on which the initial position was established subject to
the availability of a liquid secondary market.
The Portfolio will realize a profit from a closing transaction if
the premium paid in connection with the closing of an option
written by the Portfolio is less than the premium received from
writing the option. Conversely, the Portfolio will suffer a loss
if the premium paid is more than the premium received. The
Portfolio also will profit if the premium received in connection
with the closing of an option purchased by the Portfolio is more
than the premium paid for the original purchase. Conversely, the
Portfolio will suffer a loss if the premium received is less than
the premium paid in establishing the option position.
The Portfolio may deal in options on securities that are traded in
U.S. and foreign securities exchanges and over-the-counter markets
and on domestic and foreign securities indexes.
The Portfolio will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the Portfolio, it will conform to the requirements of those
states. For example, California limits the writing of options to
50% of the assets of a portfolio.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Internal
Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.
If a covered call option is exercised, the security is sold by a
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. A
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding call options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
<PAGE>
PAGE 85
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a select price on a future
date. Futures contracts are commodity contracts listed on
commodity exchanges. Futures contracts trade in a manner similar
to the way a stock trades on a stock exchange and the commodity
exchanges, through their clearing corporations, guarantee
performance of the contracts. There are contracts based on U.S.
Treasury bonds, Standard & Poor's 500 Index (S&P 500 Index), and
other broad stock market indexes as well as narrower sub-indexes.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500).
Unlike other futures contracts, a stock index futures contract
specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the
termination of the contract. For example, excluding any
transaction costs, if the Portfolio enters into one futures
contract to buy the S&P 500 Index at a specified future date at a
contract value of 150 and the S&P 500 Index is at 154 on that
future date, the Portfolio will gain $500 x (154-150) or $2,000.
If the Portfolio enters into one futures contract to sell the S&P
500 Index at a specified future date at a contract value of 150 and
the S&P 500 Index is at 152 on that future date, the Portfolio will
lose $500 x (152-150) or $1,000.
Generally, a futures contract is terminated by entering into an
offsetting transaction. An offsetting transaction is effected by a
Portfolio taking an opposite position. At the time a futures
contract is made, a good faith deposit called initial margin is set
up within a segregated account at the Portfolio's custodian bank.
Daily thereafter, the futures contract is valued and the and the
payment of variation margin is required so that each day the
Portfolio would pay out cash in an amount equal to any decline in
the contract's value or receive cash equal to any increase. At the
time a futures contract is closed out, a nominal commission is
paid, which is generally lower than the commission on a comparable
transaction in the cash markets.
The purpose of a futures contract is to allow the Portfolio to gain
rapid exposure to or protect itself from changes in the market
without actually buying or selling securities. For example, a
Portfolio may find itself with a high cash position at the
beginning of a market rally. Conventional procedures of purchasing
a number of individual issues entail the lapse of time and the
possibility of missing a significant market movement. By using
futures contracts, the Portfolio can obtain immediate exposure to
the market and benefit from the beginning stages of a rally. The
buying program can then proceed and once it is completed (or as it
proceeds), the contracts can be closed. Conversely, in the early
stages of a market decline, market exposure can be promptly offset<PAGE>
PAGE 86
by entering into stock index futures contracts to sell units of an
index and individual stocks can be sold over a longer period under
cover of the resulting short contract position.
Risks of Transactions in Futures Contracts
The Portfolio may elect to close some or all of its contracts prior
to expiration. Although the Portfolio intends to enter into
futures contracts only on exchanges or boards of trade where there
appears to be an active secondary market, there is no assurance
that a liquid secondary market will exist for any particular
contract at any particular time. In such event, it may not be
possible to close a futures contract position, and in the event of
adverse price movements, the Portfolio would have to make daily
cash payments of variation margin. Such price movements, however,
will be offset all or in part by the price movements of the
securities owned by the Portfolio. Of course, there is no
guarantee the price of the securities will correlate with the price
movements in the futures contract and thus provide an offset to
losses on a futures contract.
Another risk in employing futures contracts is to protect against
the price volatility of portfolio securities is that the prices of
securities subject to futures contracts may not correlate perfectly
with the behavior of the cash prices of the Portfolio's securities.
The correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
In addition, the Portfolio's investment manager could be incorrect
in its expectations as to the direction or extent of various
interest rate or market movements or the time span within which the
movements take place. For example, if the Portfolio sold futures
contracts in anticipation of a market decline , and the market
rallied instead, the Portfolio would lose part or all of the
benefit of the increased value of the stock it has hedged because
it will have offsetting losses in its futures positions.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts give
the holder a right to buy or sell futures contracts in the future.
Unlike a futures contract, which requires the parties to the
contract to buy and sell a security on a set date, an option on a
futures contract merely entitles its holder to decide on or before
a future date (within nine months of the date of issue) whether to
enter into such a contract. If the holder decides not to enter
into the contract, all that is lost is the amount (premium) paid
for the option. Furthermore, because the value of the option is
fixed at the point of sale, there are no daily payments of cash to
reflect the change in the value of the underlying contract.
However, since an option gives the buyer the right to enter into a
contract at a set price for a fixed period of time, its value does<PAGE>
PAGE 87
change daily and that change is reflected in the net asset value of
the Portfolio.
The risk the Portfolio assumes when it buys an option is the loss
of the premium paid for the option. The risk involved in writing
options on futures contracts the Portfolio owns, or on securities
held in its portfolio, is that there could be an increase in the
market value of such contracts or securities. If that occurred,
the option would be exercised and the asset sold at a lower price
than the cash market price. To some extent, the risk of not
realizing a gain could be reduced by entering into a closing
transaction. The Portfolio could enter into a closing transaction
by purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate the
Portfolio's obligation, however, might be more or less than the
premium received when it originally wrote the option. Furthermore,
the Portfolio might not be able to close the option because of
insufficient activity in the options market. Purchasing options
also limits the use of monies that might otherwise be available for
long-term investments.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. The Portfolio exercising a put, for
example, would receive the difference between the exercise price
and the current index level. Such options would be used in the
same manner as options on futures contracts.
TAX TREATMENT. As permitted under federal income tax laws, the
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option, the Portfolio will either make a 1256(d) election
and treat the option as a mixed straddle or mark to market the
option at fiscal year end and treat the gain/loss as 40% short-term
and 60% long-term. Certain provisions of the Internal Revenue Code
may also limit the Portfolio's ability to engage in futures
contracts and related options transactions. For example, at the
close of each quarter of the Portfolio's taxable year, at least 50%
of the value of its assets must consist of cash, government
securities and other securities, subject to certain diversification
requirements. Less than 30% of its gross income must be derived
from sales of securities held less than three months.
<PAGE>
PAGE 88
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 89
APPENDIX C
MORTGAGE-BACKED SECURITIES
A mortgage pass through certificate is one that represents an
interest in a pool, or group, of mortgage loans assembled by the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association
(FNMA) or non-governmental entities. In pass-through certificates,
both principal and interest payments, including prepayments, are
passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and
the actual yield (or total return) to the Portfolio, which is
influenced by both stated interest rates and market conditions, may
be different than the quoted yield on certificates. Some U.S.
government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the Portfolio.
Stripped Mortgage-Backed Securities. The Portfolio may invest in
stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. On an IO, if prepayments of principal are greater than
anticipated, an investor may incur substantial losses. If
prepayments of principal are slower than anticipated, the yield on
a PO will be affected more severely than would be the case with a
traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Portfolio may
purchase mortgage-backed security (MBS) put spread options and
write covered MBS call spread options. MBS spread options are
based upon the changes in the price spread between a specified
mortgage-backed security and a like-duration Treasury security.
MBS spread options are traded in the OTC market and are of short
duration, typically one to two months. The Portfolio would buy or
sell covered MBS call spread options in situations where mortgage-
backed securities are expected to underperform like-duration
Treasury securities.<PAGE>
PAGE 90
STATEMENT OF ADDITIONAL INFORMATION
FOR
EXPRESS DIRECT WORLD FUND, INC.
Express Direct World Growth Fund
_________, 1996
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the Fund's prospectus which may be
obtained by calling American Express Financial Services Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260) or by writing to P.O. Box
59196, Minneapolis, MN 55459-0196.
This SAI is dated _______, 199_, and it is to be used with the
Fund's prospectus dated _______, 199_.
<PAGE>
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TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p.
Portfolio Transactions........................................p.
Brokerage Commissions Paid to Brokers Affiliated
with the Advisor..............................................p.
Performance Information.......................................p.
Valuing Fund Shares...........................................p.
Investing in the Fund.........................................p.
Redeeming Shares..............................................p.
Pay-out Plans.................................................p.
Taxes.........................................................p.
Agreements....................................................p.
Board Members and Officers....................................p.
Custodian.....................................................p.
Independent Auditors..........................................p.
Prospectus....................................................p.
Appendix A: Description of Bond Ratings......................p.
Appendix B: Foreign Currency Transactions....................p.
Appendix C: Options and Futures Contracts....................p.
Appendix D: Mortgage-Backed Securities.......................p.
<PAGE>
PAGE 92
ADDITIONAL INVESTMENT POLICIES
Express Direct World Growth Fund (the Fund) is a series of Express
Direct World Fund, Inc. (the Company). The Fund is a diversified
mutual fund with its own goal and investment policies. The Fund
seeks to achieve its goal by investing all of its assets in World
Growth Portfolio (the Portfolio) of World Trust (the Trust), a
separate investment company, rather than by directly investing in
and managing its own portfolio of securities.
Fundamental investment policies adopted by the Fund or Portfolio
cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as defined
in the Investment Company Act of 1940. Whenever the Fund is
requested to vote on a change in the investment policies of the
corresponding Portfolio, the Company will hold a meeting of Fund
shareholders and will cast the Fund's vote as instructed by the
shareholders.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
Investment Policies applicable to the Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless holders of a
majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the Portfolio's total assets, based
on current market value at time of purchase, can be invested in any
one industry.
<PAGE>
PAGE 93
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate, or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (the Advisor), to the board members and
officers of the Advisor or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the Portfolio's board is to make these loans,
either long- or short-term, to broker-dealers. In making such
loans, the Portfolio gets the market price in cash, U.S. government
securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board. If the
market price of the loaned securities goes up, the Portfolio will
get additional collateral on a daily basis. The risks are that the
borrower may not provide additional collateral when required or
return the securities when due. During the existence of the loan,
the Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
'Issue senior securities, except to the extent that borrowing from
banks and using options, foreign currency forward contracts or
future contracts (as discussed elsewhere in the prospectus and SAI)
may be deemed to constitute issuing a senior security.<PAGE>
PAGE 94
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of domestic
or foreign companies, including any predecessors, that have a
record of less than three years continuous operations.
'Invest more than 10% of its total assets in securities of
investment companies. The Portfolio has no current intention to
invest in securities of other investment companies.
'Invest in a company to control or manage it.
'Invest in exploration or development programs such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of the Portfolio's net assets in securities
and derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
<PAGE>
PAGE 95
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. The Portfolio also may purchase short-term
notes and obligations (rated in the top two classifications by
Moody's Investors Service Inc. (Moody's) or Standard & Poor's
Corporation (S&P) or the equivalent) of U.S. and foreign banks and
corporations and may use repurchase agreements with broker-dealers
registered under the Securities Exchange Act of 1934 and with
commercial banks. A risk of a repurchase agreement is that if the
seller seeks the protection of bankruptcy laws, the Portfolio's
ability to liquidate the security involved could be impaired. As a
temporary investment, during periods of weak or declining market
values for the securities in which the Portfolio invests, any
portion of its assets may be converted to cash (in foreign
currencies or U.S. dollars) or to the kinds of short-term debt
securities discussed in this paragraph.
For a description of bond ratings, see Appendix A. For a
discussion on foreign currency transactions, see Appendix B. For a
discussion on options and futures contracts, see Appendix C. For a
discussion on mortgage-backed securities, see Appendix D.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board, the Advisor is authorized to
determine, consistent with the Portfolio's investment goal and
policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, the
Advisor has been directed to use its best efforts to obtain the
best available price and most favorable execution except where
otherwise authorized by the board. In selecting broker-dealers to
execute transactions, the Advisor may consider the price of the
security, including commission or mark-up, the size and difficulty
of the order, the reliability, integrity, financial soundness and
general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services
provided by the broker.
<PAGE>
PAGE 96
The Advisor has a strict Code of Ethics that prohibits its
affiliated personnel from engaging in personal investment
activities that compete with or attempt to take advantage of
planned portfolio transactions for any of the Trusts in the
Preferred Master Trust Group. The Advisor carefully monitors
compliance with its Code of Ethics.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has
adopted a policy authorizing the Advisor to do so to the extent
authorized by law, if the Advisor determines, in good faith, that
such commission is reasonable in relation to the value of the
brokerage or research services provided by a broker or dealer,
viewed either in the light of that transaction or the Advisor's
overall responsibilities to the portfolios advised by the Advisor.
Research provided by brokers supplements the Advisor's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. The Advisor has obtained, and in
the future may obtain, computer hardware from brokers, including
but not limited to personal computers that will be used exclusively
for investment decision-making purposes, which include the
research, portfolio management and trading functions and other
services to the extent permitted under an interpretation by the
SEC.
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge, the
Advisor must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits the
Advisor to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research
services it has provided. The second procedure permits the
Advisor, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded in the over-the-
counter market to a firm that does not make a market in that
security. The commission paid generally includes compensation for
research services. The third procedure permits the Advisor, in
order to obtain research and brokerage services, to cause the
Portfolio to pay a commission in excess of the amount another
broker might have charged. The Advisor has advised the Trust it is
necessary to do business with a number of brokerage firms on a
continuing basis to obtain such services as the handling of large
orders, the willingness of a broker to risk its own money by taking
a position in a security, and the specialized handling of a <PAGE>
PAGE 97
particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some Portfolio
transactions may not be effected at the lowest commission, but the
Advisor believes it may obtain better overall execution. The
Advisor has assured the Trust that under all three procedures the
amount of commission paid will be reasonable and competitive in
relation to the value of the brokerage services performed or
research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if, in the professional opinion of the person responsible
for selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by the Advisor in providing advice to all the Trusts in
the Preferred Master Trust Group, their corresponding Funds and
other accounts advised by the Advisor, even though it is not
possible to relate the benefits to any particular fund, portfolio
or account.
Each investment decision made for the Portfolio is made
independently from any decision made for other portfolios or
accounts advised by the Advisor or any of its subsidiaries. When
the Portfolio buys or sells the same security as another portfolio
or account, the Advisor carries out the purchase or sale in a way
the Trust agrees in advance is fair. Although sharing in large
transactions may adversely affect the price or volume purchased or
sold by the Portfolio, the Portfolio hopes to gain an overall
advantage in execution. The Advisor has assured the Trust it will
continue to seek ways to reduce brokerage costs.
On a periodic basis, the Advisor makes a comprehensive review of
the broker-dealers it uses and the overall reasonableness of their
commissions. The review evaluates execution, operational
efficiency and research services.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR
Affiliates of American Express Company (American Express) (of which
the Advisor is a wholly owned subsidiary) may engage in brokerage
and other securities transactions on behalf of the Portfolio
according to procedures adopted by the board and to the extent
consistent with applicable provisions of the federal securities
laws. The Advisor will use an American Express affiliate only if
(i) the Advisor determines that the Portfolio will receive prices
and executions at least as favorable as those
offered by qualified independent brokers performing similar
brokerage and other services for the Portfolio and (ii) the
affiliate charges the Portfolio commission rates consistent with
those the affiliate charges comparable unaffiliated customers in
similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
The Advisor may direct brokerage to compensate an affiliate. The
Advisor will receive research on South Africa from New Africa <PAGE>
PAGE 98
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send
research to the Advisor and in turn the Advisor will direct trades
to a particular broker. The broker will have an agreement to pay
New Africa Advisors. All transactions will be on a best execution
basis. Compensation received will be reasonable for the services
rendered.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past
performance. An explanation of the methods used by the Fund to
compute performance follows below.
Average annual total return
The Fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
the Fund over a specified period of time according to the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
In its sales material and other communications, a Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report, <PAGE>
PAGE 99
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
On _________, IDS Global Growth Fund (the IDS Fund), an open-end
investment company managed by the Advisor, transferred all of its
assets, totaling $___ billion, to the Portfolio in exchange for
units therein. Also on ___________, the Fund transferred all of
its assets to the Portfolio in connection with the commencement of
its operations.
On March 20, 1995, the IDS Fund converted to a multiple class
structure pursuant to which three classes of shares are offered:
Class A, Class B and Class Y. Class A shares are sold with a 5%
sales charge, a 0.175% service fee and no 12b-1 fee.
Performance quoted by the Fund is based on the performance and
yield of the IDS Fund prior to March 20, 1995 and to Class A shares
of the IDS Fund from March 20, 1995 through _____________, adjusted
for differences in sales charge.
The historical performance has not been adjusted for any difference
between the estimated aggregate fees and expenses of the Fund and
historical fees and expenses of the IDS Fund.
The portfolio turnover rate for the Fund was ___% in the fiscal
year ended ________, 1995 and ___% in fiscal year 1994.
Turnover rates are based on the turnover rate of the IDS Fund,
which transferred all of its assets to the Portfolio on __________,
for periods prior to _____ (the Fund's commencement of operations).
A high turnover rate (in excess of 100%) results in higher fees and
expenses.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day and
dividing that figure by the number of shares outstanding at the end
of the previous day.
In determining net assets before shareholder transactions, the
securities held by the Fund's corresponding Portfolio are valued as
follows as of the close of business of the New York Stock Exchange
(the Exchange):
'Securities, except bonds other than convertibles, traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the
closing bid and asked prices, looking first to the bid and asked
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.<PAGE>
PAGE 100
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the Exchange. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at
the current rate of exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close
of the Exchange that will not be reflected in the computation of a
Portfolio's net asset value. If events materially affecting the
value of such securities occur during such period, these securities
will be valued at their fair value according to procedures decided
upon in good faith by the Trust's board.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value as
determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When
possible, bonds are valued by a pricing service independent from
the Trust. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
The Exchange, the Advisor and the Fund will be closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
INVESTING IN THE FUND
The Fund's minimum initial investment requirement is $2,000 ($1,000
for Custodial Accounts, Individual Retirement Accounts and certain
other retirement plans). Subsequent investments of $100 or more
may be made. These minimum investment requirements may be changed
at any time and are not applicable to certain types of investors.
<PAGE>
PAGE 101
The Securities Investor Protection Corporation (SIPC) will provide
account protection, in an amount up to $500,000, for securities,
including Fund shares (up to $100,000 protection for cash), held in
an Investment Management Account maintained with American Express
Financial Advisors Inc. Of course, SIPC account protection does
not protect shareholders from share price fluctuations.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of the Fund's securities is not reasonably practicable or
it is not reasonably practicable for the Fund to determine the fair
value of its net assets, or
'The SEC, under the provisions of the Investment Company Act of
1940 (the 1940 Act), as amended, declares a period of emergency to
exist.
Should the Fund stop selling shares, the board members may make a
deduction from the value of the assets held by the Fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all shareholders.
Redemptions by the Fund
The Fund reserves the right to redeem, involuntarily, the shares of
any shareholder whose account has a value of less than a minimum
amount but only where the value of such account has been reduced by
voluntary redemption of shares. Until further notice, it is the
policy of the Fund not to exercise this right with respect to any
shareholder whose account has a value of $1,000 or more. In any
event, before the Fund redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value
of the shares in the account is less than the minimum amount and
allow the shareholder 30 days to make an additional investment in
an amount which will increase the value of the accounts to at least
$1,000.
Redemptions in Kind
The Company has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates the Fund to redeem shares in cash, with
respect to any one shareholder during any 90-day period, up to the
lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Although redemptions in excess of this
limitation would normally be paid in cash, the Fund reserves the <PAGE>
PAGE 102
right to make payments in whole or in part in securities or other
assets in case of an emergency, or if the payment of such
redemption in cash would be detrimental to the existing
shareholders of the Fund as determined by the board. In such
circumstances, the securities distributed would be valued as set
forth in the Prospectus. Should the Fund distribute securities, a
shareholder may incur brokerage fees or other transaction costs in
converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. While the plans differ
on how the pay-out is figured, they all are based on the redemption
of your investment. Net investment income dividends and any
capital gain distributions will automatically be reinvested, unless
you elect to receive them in cash. If you are redeeming a tax-
qualified plan account for which American Express Trust Company
acts as custodian, you can elect to receive your dividends and
other distributions in cash when permitted by law. If you redeem
an IRA or a qualified retirement account, certain restrictions,
federal tax penalties and special federal income tax reporting
requirements may apply. You should consult your tax advisor about
this complex area of the tax law.
To start any of these plans, please submit an authorization form
supplied by American Express Financial Services Direct. For a
copy, write or call American Express Financial Services Direct,
1-800-AXP-SERV (TTY: 1-800-710-5260), P.O. Box 59196, Minneapolis,
MN 55459-0196. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. The Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete
redemption of all shares in your account with the Fund by the end
of the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value for each payment and that amount will be sent to
you. The length of time these payments continue is based on the
number of shares in your account with the Fund. <PAGE>
PAGE 103
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until your account with the Fund is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in the account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account with the Fund is $10,000 on
the payment date.
TAXES
Dividends received should be treated as dividend income for federal
income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Fund's dividend
that is attributable to dividends the Fund received from domestic
(U.S.) securities. For the fiscal year ended Oct. 31, 19__, __% of
the Fund's net investment income dividends qualified for the
corporate deduction. The exclusion for dividends received by
individuals is no longer generally available.
The Fund may be subject to U.S. taxes resulting from holdings in a
passive foreign investment company (PFIC). A foreign corporation
is a PFIC when 75% or more of its gross income for the taxable year
is passive income or if 50% or more of the average value of its
assets consists of assets that produce or could produce passive
income.
Income earned by the Fund may have had foreign taxes imposed and
withheld on it in foreign countries. Tax conventions between
certain countries and the United States may reduce or eliminate
such taxes. If more than 50% of the Fund's total assets at the
close of its fiscal year consist of securities of foreign
corporations, the Fund will be eligible to file an election with
the Internal Revenue Service under which shareholders of the Fund
would be required to include their pro rata portions of foreign
taxes withheld by foreign countries as gross income in their
federal income tax returns. These pro rata portions of foreign
taxes withheld may be taken as a credit or deduction in computing
federal income taxes. If the election is filed, the Fund will
report to its shareholders the per share amount of such foreign
taxes withheld and the amount of foreign tax credit or deduction
available for federal income tax purposes.
Capital gain distributions, if any, received by individual and
corporate shareholders, should be treated as long-term capital
gains regardless of how long they owned their shares. Short-term
capital gains earned by the Fund are paid to shareholders as part
of their ordinary income dividend and are taxable as ordinary
income, not capital gain.
<PAGE>
PAGE 104
You may be able to defer taxes on current income from the Fund by
investing through an IRA, 401(k) plan account or other qualified
retirement account. If you move all or part of a non-qualified
investment in the Fund to a qualified account, this type of
exchange is considered a sale of shares. You pay no sales charge,
but the exchange may result in a gain or loss for tax purposes, or
excess contributions under IRA or qualified plan regulations.
Under federal tax law, by the end of a calendar year the Fund must
declare and pay dividends representing 98% of ordinary income for
that calendar year and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. The Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with
federal tax law and avoid any excise tax.
For purposes of the excise tax distributions, "section 988"
ordinary gains and losses are distributable based on an Oct. 31
year end. This is an exception to the general rule that ordinary
income is paid based on a calendar year end.
Under the Revenue Reconciliation Act of 1989, if a mutual fund is
the holder of record of any share of stock on the record date for
any dividend payable with respect to such stock, the dividend is
included in gross income by the Fund as of the later of (1) the
date the share became ex-dividend or (2) the date the Fund acquired
the share. Because the dividends on some foreign equity
investments may be received some time after the stock goes ex-
dividend, and in certain rare cases may never be received by the
Fund, this rule may cause the Fund to take into income dividend
income which it has not received and pay such income to its
shareholders. To the extent that the dividend is never received,
the Fund will take a loss at the time that a determination is made
that the dividend will not be received.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor as to the
application of federal, state and local income tax laws to fund
distributions.
AGREEMENTS
Investment Management Services Agreement
The Trust, on behalf of the Portfolio, has an Investment Management
Services Agreement with the Advisor. For its services, the Advisor
is paid a fee from the assets of the Portfolio, based upon the
following schedule:
Assets Annual rate at
(billions) each asset level
First $0.25 0.800%
Next 0.25 0.775
Next 0.25 0.750
Next 0.25 0.725
Next 1.0 0.700
Over 2.0 0.675 <PAGE>
PAGE 105
The fee is calculated for each calendar day on the basis of net
assets as the close of business two days prior to the day for which
the calculation is made. The management fee is paid monthly.
Under the Agreement, the Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; Portfolio office expenses; consultants' fees;
compensation of board members, officers and employees; corporate
filing fees; organizational expenses; expenses incurred in
connection with lending portfolio securities; and expenses properly
payable by the Portfolios, approved by the board.
Administrative Services Agreement
The Company, on behalf of the Fund, has an Administrative Services
Agreement with the Advisor. Under this agreement, the Fund pays
the Advisor for providing administration and accounting services.
The fee is payable from the assets of the Fund and is calculated as
follows:
Fund assets Annual rate at
(billions) each asset level
First $0.25 0.060%
Next 0.25 0.055%
Next 0.25 0.050%
Next 0.25 0.045%
Next 1.0 0.040%
Over 2.0 0.035%
Under the agreement, the Fund also pays taxes; audit and certain
legal fees; registration fees for shares; Fund office expenses;
consultant's fees; compensation of board members, officers and
employees; corporate filing fees; organizational expenses; and
expenses properly payable by the Fund approved by the board.
Transfer Agency Agreement
The Company, on behalf of the Fund, has a Transfer Agency Agreement
with the Advisor. This agreement governs the responsibility for
administering and/or performing transfer agent functions, for
acting as service agent in connection with dividend and
distribution functions and for performing shareholder account
administration agent functions in connection with the issuance,
exchange and redemption or repurchase of the Fund's shares. The
fee is determined by multiplying the number of shareholder accounts
at the end of the day by a rate of $__ per year and dividing by the
number of days in the year.
Placement Agency Agreement
Pursuant to a Placement Agency Agreement, the Distributor acts as
placement agent of the units of the Trust.
<PAGE>
PAGE 106
Plan and Agreement of Distribution/Distribution Agreement
To help the Distributor defray the costs of distribution and
servicing, the Company and the Distributor have entered into a Plan
and Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing Fund shares. Under the Plan, the
Distributor is paid a fee determined by ___________.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of board members who are not interested persons of
the Company and have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan,
or by vote of a majority of the outstanding voting securities of
the Fund or by the Distributor. The Plan (or any agreement related
to it) shall terminate in the event of its assignment, as that term
is defined in the Investment Company Act of 1940, as amended. The
Plan may not be amended to increase the amount to be spent for
distribution without shareholder approval, and all material
amendments to the Plan must be approved by a majority of the board
members, including a majority of the board members who are not
interested persons of the Company and who do not have a financial
interest in the operation of the Plan or any agreement related to
it. The selection and nomination of such disinterested board
members is the responsibility of such disinterested board members.
No board member who is not an interested person has any direct or
indirect financial interest in the operation of the Plan or any
related agreement.
Total fees and expenses
Total combined fees and nonadvisory expenses of both the master
fund and this feeder fund cannot exceed the most restrictive
applicable state limitation. Currently, the most restrictive
applicable state expense limitation, subject to exclusion of
certain expenses, is 2.5% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million and 1.5% of
average daily net assets over $100 million, on an annual basis. At
the end of each month, if the fees and expenses of the Fund exceed
this limitation for the Fund's fiscal year in progress, the Advisor
will assume all expenses in excess of the limitation. The Advisor
then may bill the Fund for such expenses in subsequent months up to
the end of that fiscal year, but not after that date. No interest
charges are assessed by the Advisor for expenses it assumes.
BOARD MEMBERS AND OFFICERS
The following is a list of the Company's board members and
officers, who are also board members and officers of all other
funds in the Express Direct Mutual Fund Group. All shares of the
Fund have cumulative voting rights with respect to the election of
board members.
<PAGE>
PAGE 107
Directors and officers
[to be provided]
The following is a list of the Trust's board members and officers,
who are also board members and officers of all other Trusts in the
Preferred Master Trust Group and all funds in the IDS MUTUAL FUND
GROUP. All units have cumulative voting rights with respect to the
election of board members.
Trustees and officers
Lynne V. Cheney'
Born in 1941.
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power Light).
William H. Dudley**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+'
Born in 1929.
P.O. Box 5724
Minneapolis, MN
<PAGE>
PAGE 108
President and chief operating officer, Cargill, Incorporated
(commodity merchants and processors) from February 1991 to
September 1994. Executive vice president from 1981 to February
1991.
Anne P. Jones
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Donald M. Kendall'
Born in 1921.
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Chairman of the board, COMSAT
Corporation, former nine-term congressman, secretary of defense and
presidential counsellor. Director, Martin Marietta Corp.,
Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's
Digest Funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).
Lewis W. Lehr'
Born in 1921.
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota
Mining and Manufacturing Company (3M). Director, Jack Eckerd
Corporation (drugstores). Advisory Director, Peregrine Inc.
(microelectronics).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all Trusts in the Preferred Master Trust Group since
_______ and president of all funds in the IDS MUTUAL FUND GROUP
since June 1993. Former vice chairman of the board, Cargill,
Incorporated (commodity merchants and processors).
<PAGE>
PAGE 109
Edson W. Spencer+
Born in 1926.
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Chairman of the
board, Mayo Foundation (healthcare). Former chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise
Cascade Corporation (forest products) and CBS Inc. Member of
International Advisory Councils, Robert Bosch (Germany) and NEC
(Japan).
John R. Thomas**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934.
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging),
Donaldson Company (air cleaners & mufflers) and General Mills, Inc.
(consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person of the Trust by reason of being an officer and
employee of the Trust.
**Interested person of the Trust by reason of being an officer,
board member, employee and/or shareholder of AEFC or American
Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Trust's other
officers are:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN<PAGE>
PAGE 110
Vice president, general counsel and secretary of all Trusts in the
Preferred Master Trust Group and of all funds in the IDS MUTUAL
FUND GROUP.
Officers who also are officers and/or employees of AEFC.
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all Trusts in the Preferred Master
Trust Group and of all funds in the IDS MUTUAL FUND GROUP.
Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all Trusts in the Preferred Master Trust Group and of
all funds in the IDS MUTUAL FUND GROUP. Director, senior vice
president and chief financial officer of AEFC. Director and
executive vice president and controller of IDS Life Insurance
Company.
The following is an estimate of compensation expected to be paid to
the Company's board members for the fiscal year ending
_______________, 1996:
<TABLE><CAPTION>
Compensation Table
Pension or
Retirement
Aggregate Benefits Accrued
Compensation as Part of the Estimated Annual Total Compensation
from the Company Company and the Benefit upon from the
Board Members and the Trust Trust Expenses Retirement Fund Complex*
<S> <C> <C> <C> <C>
*"Fund Complex" comprises ________.
</TABLE>
On _________________, the Company's board members and officers as a
group owned less than 1% of the outstanding shares of the Fund.
During the fiscal year ended ________________, no board member or
officer earned more than $60,000 from the Company and its
corresponding Trust. All board members and officers as a group
earned $____________, including $___________ of retirement plan
benefits, from the Company.]
CUSTODIAN
The Trust's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, through a custodian agreement. The
Fund also retains the custodian pursuant to a custodian agreement.
The custodian is permitted to deposit some or all of its securities
<PAGE>
PAGE 111
in central depository systems as allowed by federal law. For its
services, the Portfolio pays the custodian a maintenance charge and
a charge per transaction in addition to reimbursing the custodian's
out-of-pocket expenses.
INDEPENDENT AUDITORS
The Fund's and corresponding Portfolio's financial statements to be
contained in its Annual Report to shareholders at the end of each
fiscal year will be audited by independent auditors, KPMG Peat
Marwick LLP, 4200 Norwest Center, 90 S. Seventh St., Minneapolis,
MN 55402-3900. The independent auditors also provide other
accounting and tax-related services as requested by the Fund.
PROSPECTUS
The prospectus dated _____________________, is hereby incorporated
in this SAI by reference.
<PAGE>
PAGE 112
APPENDIX A
DESCRIPTION OF BOND RATINGS
These ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price.
Ratings by Moody's Investors Service, Inc. are Aaa, Aa, A, Baa, Ba,
B, Caa, Ca, and C.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba are judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small.
<PAGE>
PAGE 113
Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or
interest.
Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any
real investment standing.
Ratings by Standard & Poor's Corporation are AAA, AA, A, BBB, BB,
B, CCC, CC, C and D.
AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB is regarded as having adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher-rated
categories.
BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating.
B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
<PAGE>
PAGE 114
CC typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC- rating. The C rating may be
used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the due
date, even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 115
APPENDIX B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since the Portfolio may hold cash and
cash- equivalent investments in foreign currencies, the value of
the Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, the Portfolio may incur costs
in connection with conversions between various currencies.
Spot Rates and Forward Contracts. The Portfolio conducts its
foreign currency exchange transactions either at the spot (cash)
rate prevailing in the foreign currency exchange market or by
entering into forward currency exchange contracts (forward
contracts) as a hedge against fluctuations in future foreign
exchange rates. A forward contract involves an obligation to buy
or sell a specific currency at a future date, which may be any
fixed number of days from the contract date, at a price set at the
time of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract
generally has no deposit requirements. No commissions are charged
at any stage for trades.
The Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When the
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
The Portfolio also may enter into forward contracts when management
of the Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all of the securities denominated in such foreign currency.
The precise matching of forward contract amounts and the value of
securities involved generally will not be possible since the future
value of such securities in foreign currencies more than likely
will change between the date the forward contract is entered into
and the date it matures. The projection of short-term currency
market movements is extremely difficult and successful execution of
a short-term hedging strategy is highly uncertain. The Portfolio
will not enter into such forward contracts or maintain a net
exposure to such contracts when consummating the contracts would
obligate the Portfolio to deliver an amount of foreign currency in
excess of the value of the Portfolio's securities or other assets
denominated in that currency.<PAGE>
PAGE 116
The Portfolio will designate cash or securities in an amount equal
to the value of the Portfolio's total assets committed to
consummating forward contracts entered into under the second
circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a
daily basis so that the value of the cash or securities will equal
the amount of the Portfolio's commitments on such contracts.
At maturity of a forward contract, the Portfolio may either sell
the security and make delivery of the foreign currency or retain
the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an offsetting contract with the
same currency trader obligating it to buy, on the same maturity
date, the same amount of foreign currency.
If the Portfolio retains the security and engages in an offsetting
transaction, the Portfolio will incur a gain or a loss (as
described below) to the extent there has been movement in forward
contract prices. If the Portfolio engages in an offsetting
transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline
between the date the Portfolio enters into a forward contract for
selling foreign currency and the date it enters into an offsetting
contract for purchasing the foreign currency, the Portfolio will
realize a gain to the extent that the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to
buy. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to buy
exceeds the price of the currency it has agreed to sell.
It is impossible to forecast what the market value of securities
will be at the expiration of a contract. Accordingly, it may be
necessary for the Portfolio to buy additional foreign currency on
the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver and a decision is
made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received on the sale of the
security if its market value exceeds the amount of foreign currency
the Portfolio is obligated to deliver.
The Portfolio's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of the securities against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange that can be
achieved at some point in time. Although such forward contracts
tend to minimize the risk of loss due to a decline in value of
hedged currency, they tend to limit any potential gain that might
result should the value of such currency increase.
Although the Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and unitholders should be aware of currency <PAGE>
PAGE 117
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Portfolio at one rate, while offering a
lesser rate of exchange should the Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. The Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in
the value of securities, the Portfolio may buy put options on the
foreign currency. If the value of the currency does decline, the
Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the
adverse effect on the Portfolio which otherwise would have
resulted.
As in the case of other types of options, however, the benefit to
the Portfolio derived from purchases of foreign currency options
will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do
not move in the direction or to the extent anticipated, the
Portfolio could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.
The Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, when the Portfolio
anticipates a decline in the dollar value of foreign-denominated
securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will
most likely not be exercised and the diminution in value of
securities will be fully or partially offset by the amount of the
premium received.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
the Portfolio would be required to buy or sell the underlying
currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the
Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable
movements on exchange rates.
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if the Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional <PAGE>
PAGE 118
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in the Portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting the Portfolio to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. The Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put and write covered call options on currency futures.
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
<PAGE>
PAGE 119
in U.S. dollars. The Portfolio may use currency futures for the
same purposes as currency forward contracts, subject to Commodity
Futures Trading Commission (CFTC) limitations, including the
limitation on the percentage of assets that may be used, described
in the prospectus. All futures contracts are aggregated for
purposes of the percentage limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of the Portfolio's investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect the Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of the Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of the Portfolio's
investments denominated in that currency over time.
The Portfolio will not use leverage in its options and futures
strategies. The Portfolio will hold securities or other options or
futures positions whose values are expected to offset its
obligations. The Portfolio will not enter into an option or
futures position that exposes the Portfolio to an obligation to
another party unless it owns either (i) an offsetting position in
securities or (ii) cash, receivables and short-term debt securities
with a value sufficient to cover its potential obligations.
<PAGE>
PAGE 120
APPENDIX C
OPTIONS AND FUTURES CONTRACTS
The Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. The Portfolio
may enter into stock index futures contracts traded on any U.S. or
foreign exchange. The Portfolio also may buy or write put and call
options on these futures and on stock indexes. Options in the
over-the-counter market will be purchased only when the investment
manager believes a liquid secondary market exists for the options
and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are
exercisable only on a specific date. In that case, or if a liquid
secondary market does not exist, the Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash or securities of equivalent value (in the case of a
put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price. The risk of
the writer is potentially unlimited, unless the option is covered.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options may benefit the Portfolio and its
shareholders by improving the Portfolio's liquidity and by helping
to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options <PAGE>
PAGE 121
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, the Portfolio pays a premium and a commission. It then
pays a second commission on the purchase or sale of the underlying
security when the option is exercised. For record keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by the Portfolio for
investment purposes. Options permit the Portfolio to experience
the change in the value of a security with a relatively small
initial cash investment.
The risk the Portfolio assumes when it buys an option is the loss
of the premium. To be beneficial to the Portfolio, the price of
the underlying security must change within the time set by the
option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and sale (in the case of a call) or purchase
(in the case of a put) of the underlying security. Even then the
price change in the underlying security does not assure a profit
since prices in the option market may not reflect such a change.
Writing covered options. The Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the
Portfolio's goal.
'All options written by the Portfolio will be covered. For covered
call options if a decision is made to sell the security, or for put
options if a decision is made to buy the security, the Portfolio
will attempt to terminate the option contract through a closing
purchase transaction.
A call option written by the Portfolio will be covered (i) if the
Portfolio owns the security in connection with which the option was
written, or has an absolute and immediate right to acquire such
security upon conversion of exchange or other securities held in
its portfolio, or (ii) in such other manner that is in accordance
with the rules of the exchange on which the option is traded and
applicable laws and regulations. A put option written by the
Portfolio will be covered through (i) segregation in a segregated
account held by the Portfolio's custodian of cash, short-term U.S.
government securities or money market instruments in an amount
equal to the exercise price of the option, or (ii) in any other
manner that is in accordance with the requirements of the exchange
on which the option is traded and applicable laws and regulations.
<PAGE>
PAGE 122
Upon exercise of the option, the holder is required to pay the
purchase price of the underlying security in the case of a call
option, or to deliver the security in return for the purchase price
in the case of a put option. Conversely the writer is required to
deliver the security in the case of a call option or to purchase
the security in the case of a put option. Options that have been
purchased or written may be closed out prior to exercise or
expiration by entering into an offsetting transaction on the
exchange on which the initial position was established subject to
the availability of a liquid secondary market.
The Portfolio will realize a profit from a closing transaction if
the premium paid in connection with the closing of an option
written by the Portfolio is less than the premium received from
writing the option. Conversely, the Portfolio will suffer a loss
if the premium paid is more than the premium received. The
Portfolio also will profit if the premium received in connection
with the closing of an option purchased by the Portfolio is more
than the premium paid for the original purchase. Conversely, the
Portfolio will suffer a loss if the premium received is less than
the premium paid in establishing the option position.
The Portfolio may deal in options on securities that are traded in
U.S. and foreign securities exchanges and over-the-counter markets
and on domestic and foreign securities indexes.
The Portfolio will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the Portfolio, it will conform to the requirements of those
states. For example, California limits the writing of options to
50% of the assets of a fund.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since the
Portfolio is taxed as a regulated investment company under the
Internal Revenue Code, any gains on options and other securities
held less than three months must be limited to less than 30% of its
annual gross income.
If a covered call option is exercised, the security is sold by the
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. The
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding call options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. Futures contracts are commodity contracts listed on
commodity exchanges. Futures contracts trade in a manner similar
to the way a stock trades on a stock exchange and the commodity
exchanges, through their clearing corporations, guarantee <PAGE>
PAGE 123
performance of the contracts. There are contracts based on U.S.
Treasury bonds, Standard & Poor's 500 Index (S&P 500 Index), and
other broad stock market indexes as well as narrower sub-indexes.
The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the
market values of those stocks. In the case of S&P 500 Index
futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract
would be $75,000 (150 x $500).
Unlike other futures contracts, a stock index futures contract
specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the
termination of the contract. For example, excluding any
transaction costs, if the Portfolio enters into one futures
contract to buy the S&P 500 Index at a specified future date at a
contract value of 150 and the S&P 500 Index is at 154 on that
future date, the Portfolio will gain $500 x (154-150) or $2,000.
If the Portfolio enters into one futures contract to sell the S&P
500 Index at a specified future date at a contract value of 150 and
the S&P 500 Index is at 152 on that future date, the Portfolio will
lose $500 x (152-150) or $1,000.
Generally, a futures contract is terminated by entering into an
offsetting transaction. An offsetting transaction is effected by
the Portfolio taking an opposite position. At the time a futures
contract is made, a good faith deposit called initial margin is set
up within a segregated account at the Portfolio's custodian bank.
Daily thereafter, the futures contract is valued and the payment of
variation margin is required so that each day the Portfolio would
pay out cash in an amount equal to any decline in the contract's
value or receive cash equal to any increase. At the time a futures
contract is closed out, a nominal commission is paid, which is
generally lower than the commission on a comparable transaction in
the cash markets.
The purpose of a futures contract is to allow the Portfolio to gain
rapid exposure to or protect itself from changes in the market
without actually buying or selling securities. For example, a
Portfolio may find itself with a high cash position at the
beginning of a market rally. Conventional procedures of purchasing
a number of individual issues entail the lapse of time and the
possibility of missing a significant market movement. By using
futures contracts, the Portfolio can obtain immediate exposure to
the market and benefit from the beginning stages of a rally. The
buying program can then proceed and once it is completed (or as it
proceeds), the contracts can be closed. Conversely, in the early
stages of a market decline, market exposure can be promptly offset
by entering into stock index futures contracts to sell units of an
index and individual stocks can be sold over a longer period under
cover of the resulting short contract position.
Risks of Transactions in Futures Contracts
The Portfolio may elect to close some or all of its contracts prior
to expiration. Although the Portfolio intends to enter into <PAGE>
PAGE 124
futures contracts only on exchanges or boards of trade where there
appears to be an active secondary market, there is no assurance
that a liquid secondary market will exist for any particular
contract at any particular time. In such event, it may not be
possible to close a futures contract position, and in the event of
adverse price movements, the Portfolio would have to make daily
cash payments of variation margin. Such price movements, however,
will be offset all or in part by the price movements of the
securities owned by the Portfolio. Of course, there is no
guarantee the price of the securities will correlate with the price
movements in the futures contract and thus provide an offset to
losses on a futures contract.
Another risk in employing futures contracts to protect against the
price volatility of securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of the Portfolio's securities. The
correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
In addition, the Portfolio's investment manager could be incorrect
in its expectations as to the direction or extent of various
interest rate or market movements or the time span within which the
movements take place. For example, if the Portfolio sold futures
contracts in anticipation of a market decline, and the market
rallied instead, the Portfolio would lose part or all of the
benefit of the increased value of the stock it has hedged because
it will have offsetting losses in its futures positions.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts give
the holder a right to buy or sell futures contracts in the future.
Unlike a futures contract, which requires the parties to the
contract to buy and sell a security on a set date, an option on a
futures contract merely entitles its holder to decide on or before
a future date (within nine months of the date of issue) whether to
enter into such a contract. If the holder decides not to enter
into the contract, all that is lost is the amount (premium) paid
for the option. Furthermore, because the value of the option is
fixed at the point of sale, there are no daily payments of cash to
reflect the change in the value of the underlying contract.
However, since an option gives the buyer the right to enter into a
contract at a set price for a fixed period of time, its value does
change daily and that change is reflected in the net asset value of
the Portfolio.
The risk the Portfolio assumes when it buys an option is the loss
of the premium paid for the option. The risk involved in writing
options on futures contracts the Portfolio owns, or on securities
held in its portfolio, is that there could be an increase in the
market value of such contracts or securities. If that occurred,
the option would be exercised and the asset sold at a lower price
than the cash market price. To some extent, the risk of not <PAGE>
PAGE 125
realizing a gain could be reduced by entering into a closing
transaction. The Portfolio could enter into a closing transaction
by purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate the
Portfolio's obligation, however, might be more or less than the
premium received when it originally wrote the option. Furthermore,
the Portfolio might not be able to close the option because of
insufficient activity in the options market. Purchasing options
also limits the use of monies that might otherwise be available for
long-term investments.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A Portfolio exercising a put, for
example, would receive the difference between the exercise price
and the current index level. Such options would be used in the
same manner as options on futures contracts.
TAX TREATMENT. As permitted under federal income tax laws, the
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option, the Portfolio will either make a 1256(d) election
and treat the option as a mixed straddle or mark to market the
option at fiscal year end and treat the gain/loss as 40% short-term
and 60% long-term. Certain provisions of the Internal Revenue Code
may also limit the Portfolio's ability to engage in futures
contracts and related options transactions. For example, at the
close of each quarter of the Portfolio's taxable year, at least 50%
of the value of its assets must consist of cash, government
securities and other securities, subject to certain diversification
requirements. Less than 30% of its gross income must be derived
from sales of securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, the
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. The
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be <PAGE>
PAGE 126
recognized as assets due from a broker (the Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.<PAGE>
PAGE 127
APPENDIX D
MORTGAGE-BACKED SECURITIES
A mortgage pass through certificate is one that represents an
interest in a pool, or group, of mortgage loans assembled by the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association
(FNMA) or non-governmental entities. In pass-through certificates,
both principal and interest payments, including prepayments, are
passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and
the actual yield (or total return) to the Portfolio, which is
influenced by both stated interest rates and market conditions, may
be different than the quoted yield on certificates. Some U.S.
government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the Portfolio.
Stripped Mortgage-Backed Securities. The Portfolio may invest in
stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. On an IO, if prepayments of principal are greater than
anticipated, an investor may incur substantial losses. If
prepayments of principal are slower than anticipated, the yield on
a PO will be affected more severely than would be the case with a
traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Portfolio may
purchase mortgage-backed security (MBS) put spread options and
write covered MBS call spread options. MBS spread options are
based upon the changes in the price spread between a specified
mortgage-backed security and a like-duration Treasury security.
MBS spread options are traded in the OTC market and are of short
duration, typically one to two months. The Portfolio would buy or
sell covered MBS call spread options in situations where mortgage-
backed securities are expected to underperform like-duration
Treasury securities.<PAGE>
PAGE 128
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Not Applicable.
(b) EXHIBITS:
1. Articles of Incorporation, dated Sept. 1, 1995, filed
electronically on November 1, 1995 as Exhibit 1 to
Registrant's initial Registration Statement, are incorporated
herein by reference.
2. Form of By-laws, filed electronically on Nov. 1, 1995 as
Exhibit 2 to Registrant's initial Registration Statement, is
incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Form of Distribution Agreement is filed electronically
herewith as Exhibit 6.
7. Not Applicable.
8. Form of Custodian Agreement, filed electronically on Nov. 1,
1995 as Exhibit 8 to Registrant's initial Registration
Statement, is incorporated herein by reference.
9.(a) Form of Transfer Agency Agreement is filed electronically
herewith.
9.(b) Form of Administrative Services Agreement, filed
electronically on Nov. 1, 1995 as Exhibit 9(b) to
Registrant's initial Registration Statement, is incorporated
herein by reference.
10. An opinion and consent of counsel to be filed by amendment.
11. Not Applicable.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Form of Plan and Agreement of Distribution is filed
electronically herewith.
16. Not Applicable.
17. Not Applicable.
<PAGE>
PAGE 129
18. Not Applicable.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Jan. 31, 1996
Common Stock 0
$.01 par value
Item 27. Indemnification
Reference is hereby made to Article IV of Registrant's Articles of
Incorporation filed electronically on Nov. 1, 1995 as Exhibit 1 and
Article X of Registrant's By-laws filed electronically on Nov. 1,
1995 as Exhibit 2 to Registrant's initial Registration Statement.
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<TABLE><CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
<S> <C> <C>
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
American Express Service Corporation Vice President
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President--Investment Accounting
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Accounting
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Financial Planning
Systems
American Express Service Corporation Vice President
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director and Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Harold E. Burke, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-American
Express Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
Alan R. Dakay, Vice President--Institutional Products Group
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Express Financial Advisors Vice President -
Institutional Products
Group
American Partners Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director, Senior Vice President and Technology Advisor
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Technology Advisor
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
IDS International, Inc. Vice President and
Portfolio Manager
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Tax & Business Director
Services Inc.
American Express Trust Company Director
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
Investors Syndicate Development Corp. Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, Vice President
and Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Director, Vice President
and Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Vice President-Investments
<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Services
American Express Trust Company IDS Tower 10 Director and President
Minneapolis, MN 55440
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and President
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Douglas R. Jordal, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corporation Vice President
James E. Kaarre, Vice President--Marketing Information
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Express Financial Advisors Senior Vice President-
Risk Management Products
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A and B Chairman of the Board of
Managers and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
American Express Service Corporation Vice President
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edward Labenski, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Service Corporation Director
American Express Trust Company Director
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
American Express Service Corporation Vice President
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International, Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Executive Vice President-
Marketing and Products
American Express Tax and Business Director
Services Inc.
IDS Certificate Company Director and Chairman of
the Board
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Communications
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Robert J. Neis, Vice President--Information Systems Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
James R. Palmer, Vice President--Insurance Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
George M. Perry, Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James M. Punch, Vice President--TransAction Services
American Express Financial Advisors IDS Tower 10 Vice President-Trans
Minneapolis, MN 55440 Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--1994 Program Director
American Express Financial Advisors IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
Robert A. Rudell, Vice President--American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
American Express Financial Advisors Vice President-
Assured Assets
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
<PAGE>
PAGE 18
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Express Financial Advisors Vice President-Senior
Portfolio Manager,
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 19
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
<PAGE>
PAGE 20
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
IDS Bond Fund, Inc. Director
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Select Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Vice President and
Corporate Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Vice Chairman
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 21
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Michael L. Weiner, Vice President--Corporate Tax Operations
American Express Financial Advisors IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Tax Operations
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS Fund Management Limited Director
IDS International, Inc. Director
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
<PAGE>
PAGE 22
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
<PAGE>
PAGE 23
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt
Fund, Inc.; IDS International Fund, Inc.; IDS Investment
Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New
Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy
Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money
Fund, Inc.; IDS Utilities Income Fund, Inc. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Services
Alvan D. Arthur Group Vice President- None
IDS Tower 10 Central California/
Minneapolis, MN 55440 Western Nevada
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
<PAGE>
PAGE 24
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Group Vice President- None
Ste 900 e Westside Tower Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
<PAGE>
PAGE 25
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
<PAGE>
PAGE 26
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Scott M. Digiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive Director
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President None
IDS Tower 10 and Technology Advisor
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 27
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
<PAGE>
PAGE 28
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 250 North Texas
801 E. Campbell Road
Richardson, TX 75081
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief Director
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
<PAGE>
PAGE 30
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
MInneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
<PAGE>
PAGE 31
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaronick Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
<PAGE>
PAGE 32
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
<PAGE>
PAGE 33
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Russell L. Scalfano Group Vice President- None
Suite 201 Exec Pk East Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Group Vice Presidnet- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
IDS Tower 10 Eastern Iowa Area
Minneapolis, MN 55440
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
<PAGE>
PAGE 34
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Brn Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Director
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and Treasurer
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
<PAGE>
PAGE 35
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
Thomas L. White Group Vice President- None
Suite 200 Cambridge Ct Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
<PAGE>
PAGE 36
Item 32. Undertakings
(a) Not Applicable.
(b) The Registrant undertakes to file a
post-effective amendment, using financial
statements which need not be certified, within
four to six months from the effective date of
Registrant's 1933 Act Registration Statement.
(c) Not applicable.
<PAGE>
PAGE 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Express Direct
World Fund, Inc., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Minneapolis and State of Minnesota on the 16th day
of February, 1996.
EXPRESS DIRECT WORLD FUND, INC.
By
William H. Dudley
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
By Director, February 16, 1996
William H. Dudley Treasurer
By Director February 16, 1996
James A. Mitchell
<PAGE>
PAGE 131
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, WORLD TRUST consents to the filing
of this Registration Statement signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis
and State of Minnesota on the 16th day of February, 1996.
WORLD TRUST
By:
William H. Dudley
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
By Trustee, February 16, 1996
William H. Dudley Treasurer
By Trustee February 20, 1996
David R. Hubers
<PAGE>
PAGE 132
CONTENTS OF THIS REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other Information.
The signatures.
<PAGE>
PAGE 1
EXPRESS DIRECT WORLD FUND, INC.
Registration Number 33-63951/811-7405
EXHIBIT INDEX
Exhibit 6. Distribution Agreement
Exhibit 9a. Transfer Agency Agreement
Exhibit 15. Form of Plan and Agreement of Distribution
<PAGE>
PAGE 1
DISTRIBUTION AGREEMENT
Agreement made as of the __ day of _____, 1996, by and between
Express Direct World Fund, Inc. (the "Company"), a Minnesota
corporation, for and on behalf of each class of its underlying
series funds, and American Express Service Corporation (AESC), a
Delaware corporation.
Part One: DISTRIBUTION OF SECURITIES
(1) The Company covenants and agrees that, during the term of
this agreement and any renewal or extension, AESC shall have the
exclusive right to act as principal underwriter for the Company and
to offer for sale and to distribute either directly or through any
affiliated or unaffiliated entity any and all shares of each class
of capital stock issued or to be issued by the Company.
(2) AESC hereby covenants and agrees to act as the principal
underwriter of each class of capital shares issued and to be issued
by the Company during the period of this agreement and agrees
during such period to offer for sale such shares as long as such
shares remain available for sale, unless AESC is unable or
unwilling to make such offer for sale or sales or solicitations
therefor legally because of any federal, state, provincial or
governmental law, rule or agency or for any financial reason.
(3) With respect to the offering for sale and sale of shares of
each class to be issued by the Company, it is mutually understood
and agreed that such shares are to be sold on the following terms:
(a) All sales shall be made by means of an application, and
every application shall be subject to acceptance or rejection by
the Company at its principal place of business. Shares are to be
sold for cash, payable at the time the application and payment for
such shares are received at the principal place of business of the
Company.
(b) No shares shall be sold at less than the net asset value
(computed in the manner provided by the currently effective
prospectus or Statement of Additional Information and the
Investment Company Act of 1940, and rules thereunder). The number
of shares or fractional shares to be acquired by each applicant
shall be determined by dividing the amount of each accepted
application by the public offering price of one share of the
capital stock of the appropriate class as of the close of business
on the day when the application, together with payment, is received
by the Company at its principal place of business. The computation
as to the number of shares and fractional shares shall be carried
to three decimal points of one share with the computation being
carried to the nearest 1/1000th of a share. If the day of receipt
of the application and payment is not a full business day, then the
asset value of the share for use in such computation shall be
determined as of the close of business on the next succeeding full
business day. In the event of a period of emergency, the
computation of the asset value for the purpose of determining the
number of shares or fractional shares to be acquired by the<PAGE>
PAGE 2
applicant may be deferred until the close of business on the first
full business day following the termination of the period of
emergency. A period of emergency shall have the definition given
thereto in the Investment Company Act of 1940, and rules
thereunder.
(4) The Company agrees to make prompt and reasonable effort to
do any and all things necessary, in the opinion of AESC to have and
to keep the Company and the shares properly registered or qualified
in all appropriate jurisdictions and, as to shares, in such amounts
as AESC may from time to time designate in order that the Company's
shares may be offered or sold in such jurisdictions.
(5) The Company agrees that it will furnish AESC with information
with respect to the affairs and accounts of the Company, and in
such form, as AESC may from time to time reasonably require and
further agrees that AESC, at all reasonable times, shall be
permitted to inspect the books and records of the Company.
(6) AESC or its agents may prepare or cause to be prepared from
time to time circulars, sales literature, broadcast material,
publicity data and other advertising material to be used in the
sales of shares issued by the Company, including material which may
be deemed to be a prospectus under rules promulgated by the
Securities and Exchange Commission (each separate promotional piece
is referred to as an "Item of Soliciting Material"). At its
option, AESC may submit any Item of Soliciting Material to the
Company for its prior approval. Unless a particular Item of
Soliciting Material is approved in writing by the Company prior to
its use, AESC agrees to indemnify the Company and its directors and
officers against any and all claims, demands, liabilities and
expenses which the Company or such persons may incur arising out of
or based upon the use of any Item of Soliciting Material. The term
"expenses" includes amounts paid in satisfaction of judgments or in
settlements. The foregoing right of indemnification shall be in
addition to any other rights to which the Company or any director
or officer may be entitled as a matter of law. Notwithstanding the
foregoing, such indemnification shall not be deemed to abrogate or
diminish in any way any right or claim AESC may have against the
Company or its officers or directors in connection with the
Company's registration statement, prospectus, Statement of
Additional Information or other information furnished by or caused
to be furnished by the Company.
(7) AESC agrees to submit to the Company each application for
shares immediately after the receipt of such application and
payment therefor by AESC at its principal place or business.
(8) AESC agrees to cause to be delivered to each person
submitting an application a prospectus to be furnished by the
Company in the form required by the applicable federal laws or by
the acts or statutes of any applicable state, province or country.
(9) The Company shall have the right to extend to shareholders of
each class the right to use the proceeds of any cash dividend paid
by the Company to that shareholder to purchase shares of the same<PAGE>
PAGE 3
class at the net asset value at the close of business upon the day
of purchase, to the extent set forth in the currently effective
prospectus or Statement of Additional Information.
(10) Shares of each class issued by the Company may be offered
and sold at their net asset value to the shareholders of the same
class of other companies in the Express Direct Group of Funds who
wish to exchange their investments in shares of the other funds in
the Express Direct Group of Funds to investments in shares of the
Company, to the extent set forth in the currently effective
prospectus or Statement of Additional Information, such net asset
value to be computed as of the close of business on the day of sale
of such shares of the Company.
(11) AESC and the Company agree to use their best efforts to
conform with all applicable state and federal laws and regulations
relating to any rights or obligations under the term of this
agreement.
Part Two: ALLOCATION OF EXPENSES
Except as provided by any other agreements between the parties,
AESC covenants and agrees that during the period of this agreement
it will pay or cause or be paid all expenses incurred by AESC or
any of its affiliates, in the offering for sale or sale of each
class of the Company's shares.
Part Three: COMPENSATION
(1) It is covenanted and agreed that AESC shall be paid:
(i) for a class of shares imposing a front-end sales charge,
by the purchasers of Company shares in an amount equal to the
difference between the total amount received upon each sale of
shares issued by the Company and the net asset value of such shares
at the time of such sale; and
(ii) for a class of shares imposing a deferred sales charge,
by owners of Company shares at the time the sales charge is imposed
in an amount equal to any deferred sales charge, as described in
the Company's prospectus.
Such sums as are received by the Company shall be received as Agent
for AESC and shall be remitted to AESC daily as soon as practicable
after receipt.
(2) The net asset value of any share of each class of the Company
shall be determined in the manner provided by the classes'
currently effective prospectus and Statement of Additional
Information and the Investment Company Act of 1940, and rules
thereunder.
<PAGE>
PAGE 4
Part Four: MISCELLANEOUS
(1) AESC shall be deemed to be an independent contractor and,
except as expressly provided or authorized in this agreement, shall
have no authority to act for or represent the Company.
(2) AESC shall be free to render to others services similar to
those rendered under this agreement.
(3) Neither this agreement nor any transaction had pursuant
hereto shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Company are
or may be interested in AESC as directors, officers, shareholders
or otherwise; that directors, officers, shareholders or agents of
AESC are or may be interested in the Company as directors,
officers, shareholders or otherwise; or that AESC is or may be
interested in the Company as shareholder or otherwise; provided,
however, that neither AESC nor any officer or director of AESC or
any officers or directors of the Company shall sell to or buy from
the Company any property or security other than a security issued
by the Company, except in accordance with a rule, regulation or
order of the federal Securities and Exchange Commission.
(4) For the purposes of this agreement, a "business day" shall
have the same meaning as is given to the term in the By-laws of the
Company.
(5) Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the parties to this
agreement at each company's principal place of business in
Minneapolis, Minnesota, or to such other address as either party
may designate in writing mailed to the other.
(6) AESC agrees that no officer, director or employee of AESC
will deal for or on behalf of the Company with himself as principal
or agent, or with any corporation or partnership in which he may
have a financial interest, except that this shall not prohibit:
(a) Officers, directors and employees of AESC from having a
financial interest in the Company or in AESC.
(b) The purchase of securities for the Company, or the sale
of securities owned by the Company, through a security broker or
dealer, one or more of whose partners, officers, directors or
employees is an officer, director or employee of AESC provided such
transactions are handled in the capacity of broker only and
provided commissions charged do not exceed customary brokerage
charges for such services.
(c) Transactions with the Company by a broker-dealer
affiliate of AESC if allowed by rule or order of the Securities and
Exchange Commission and if made pursuant to procedures adopted by
the Company's Board of Directors (the "Board").
(7) AESC agrees that, except as otherwise provided in this
agreement, or as may be permitted consistent with the use of a
broker-dealer affiliate of AESC under applicable provisions of the<PAGE>
PAGE 5
federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
agreement make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except securities issued by the
Company) or other assets by or for the Company.
Part Five: TERMINATION
(1) This agreement shall continue from year to year unless and
until terminated by AESC or the Company, except that such
continuance shall be specifically approved at least annually by a
vote of a majority of the Board who are not parties to this
agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval, and
by a majority of the Board or by vote of a majority of the
outstanding voting securities of the Company. As used in this
paragraph, the term "interested person" shall have the meaning as
set forth in the Investment Company Act of 1940, as amended.
(2) This agreement may be terminated by AESC or the Company at
any time by giving the other party sixty (60) days written notice
of such intention to terminate.
(3) This agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the Investment Company Act of 1940, as
amended.
<PAGE>
PAGE 6
IN WITNESS WHEREOF, The parties hereto have executed the foregoing
agreement on the date and year first above written.
EXPRESS DIRECT WORLD FUND, INC.
Express Direct World Income Fund
Express Direct World Growth Fund
By _____________________________________
[Title]
AMERICAN EXPRESS SERVICE CORPORATION
By _____________________________________
[Title]
<PAGE>
<PAGE>
PAGE 1
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of ________, 1996, between Express Direct World
Fund Inc. (the "Company"), a Minnesota corporation, on behalf of
its underlying series funds, and American Express Financial
Corporation (the "Transfer Agent"), a Delaware corporation.
In consideration of the mutual promises set forth below, the
Company and the Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Company hereby appoints
the Transfer Agent, as transfer agent for its shares and as
shareholder servicing agent for the Company, and the Transfer Agent
accepts such appointment and agrees to perform the duties set forth
below.
2. Compensation. The Company will compensate the Transfer Agent for
the performance of its obligations as set forth in Schedule A.
Schedule A does not include out-of-pocket disbursements of the
Transfer Agent for which the Transfer Agent shall be entitled to
bill the Company separately.
The Transfer Agent will bill the Company monthly. The fee provided
for hereunder shall be paid in cash by the Company to the Transfer
Agent within five (5) business days after the last day of each
month.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B. Reimbursement by the
Company for expenses incurred by the Transfer Agent in any month
shall be made as soon as practicable after the receipt of an
itemized bill from the Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from
time to time by attaching to this Agreement a revised Schedule A,
dated and signed by an officer of each party.
3. Documents. The Company will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to
be appropriate or necessary for the proper performance of its
duties.
4. Representations of the Company and the Transfer Agent.
(a) The Company represents to the Transfer Agent that all
outstanding shares are validly issued, fully paid and
non-assessable by the Company. When shares are hereafter issued in
accordance with the terms of the Company's Articles of
Incorporation and its prospectus, such shares shall be validly
issued, fully paid and non-assessable by the Company.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under
this agreement and to comply with all applicable laws.
<PAGE>
PAGE 2
5. Duties of the Transfer Agent. The Transfer Agent shall be
responsible, separately and through its subsidiaries or affiliates,
for the following functions:
(a) Sale of Company Shares.
(1) On receipt of an application and payment, wired instructions
and payment, or payment identified as being for the account of a
shareholder, the Transfer Agent will deposit the payment, prepare
and present the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance with the terms
of the prospectus. All shares shall be held in book entry form and
no certificate shall be issued unless the Company is permitted to
do so by the prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all shares owned by the purchaser
related to that payment, place a stop payment on any checks that
have been issued to redeem shares of the purchaser and take such
other action as it deems appropriate.
(b) Redemption of Company Shares. On receipt of instructions to
redeem shares in accordance with the terms of the Company's
prospectus, the Transfer Agent will record the redemption of shares
of the Company, prepare and present the necessary report to the
Custodian and pay the proceeds of the redemption to the
shareholder, an authorized agent or legal representative upon the
receipt of the monies from the Custodian.
(c) Transfer or Other Change Pertaining to Company Shares. On
receipt of instructions or forms acceptable to the Transfer Agent
to transfer the shares to the name of a new owner, change the name
or address of the present owner or take other legal action, the
Transfer Agent will take such action as is requested.
(d) Exchange of Company Shares. On receipt of instructions to
exchange the shares of the Company for the shares of another fund
in the [Express Direct Group of Funds] or other American Express
Financial Corporation product in accordance with the terms of the
prospectus, the Transfer Agent will process the exchange in the
same manner as a redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem shares of the Company or take any
action requested by a shareholder until it is satisfied that the
requested transaction or action is legally authorized or until it
is satisfied there is no basis for any claims adverse to the
transaction or action. It may rely on the provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Company shall indemnify the
Transfer Agent for any act done or omitted to be done in reliance
on such laws or for refusing to transfer, exchange or redeem shares
or taking any requested action if it acts on a good faith belief
that the transaction or action is illegal or unauthorized.
(f) Shareholder Records, Reports and Services.
<PAGE>
PAGE 3
(1) The Transfer Agent shall maintain all shareholder accounts,
which shall contain all required tax, legally imposed and
regulatory information; shall provide shareholders, and file with
federal and state agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare shareholder
mailing lists; shall cause to be printed and mailed all required
prospectuses, annual reports, semiannual reports, statements of
additional information (upon request), proxies and other mailings
to shareholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall cause
to be prepared and transmitted the payment of income dividends and
capital gains distributions or cause to be recorded the investment
of such dividends and distributions in additional shares of the
Corporation or as directed by instructions or forms acceptable to
the Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or through
periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against the
lost or stolen checks as it is economically desirable to do.
(j) Reports to Company. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as the
Company may request to ascertain the quality and level of services
being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to
this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent
agrees that all records prepared or maintained by it relating to
the services to be performed by it under the terms of this
Agreement are the property of the Company and may be inspected by
the Company or any person retained by the Company at reasonable
times. The Company and Transfer Agent agree to protect the
confidentiality of those records.
7. Action by Board and Opinion of Company's Counsel. The Transfer
Agent may rely on resolutions of the Board of Directors (the
"Board") or the Executive Committee of the Board and on opinion of
counsel for the Company.<PAGE>
PAGE 4
8. Duty of Care. It is understood and agreed that, in furnishing
the Company with the services as herein provided, neither the
Transfer Agent, nor any officer, director or agent thereof shall be
held liable for any loss arising out of or in connection with their
actions under this Agreement so long as they act in good faith and
with due diligence, and are not negligent or guilty of any willful
misconduct. It is further understood and agreed that the Transfer
Agent may rely upon information furnished to it reasonably believed
to be accurate and reliable. In the event the Transfer Agent is
unable to perform its obligations under the terms of this Agreement
because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not
be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect from year to year thereafter as the parties may
mutually agree; provided that either party may terminate this
Agreement by giving the other party notice in writing specifying
the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice
is given by the Company, it shall be accompanied by a vote of the
Board, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Company,
the Transfer Agent will deliver to such successor a certified list
of shareholders of the Company (with name, address and taxpayer
identification or Social Security number), a historical record of
the account of each shareholder and the status thereof, and all
other relevant books, records, correspondence, and other data
established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Company, and
will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.
11. Subcontracting. The Company agrees that the Transfer Agent may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that the Transfer Agent
remains fully responsible for the services. Except for
out-of-pocket expenses identified in Schedule B, the Transfer Agent
shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of
Minnesota.<PAGE>
PAGE 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers as of the day and year
written above.
EXPRESS DIRECT WORLD FUND, INC.
Express Direct World Income Fund
Express Direct World Growth Fund
By:
[Title]
AMERICAN EXPRESS FINANCIAL CORPORATION
By:
[Title]
<PAGE>
PAGE 6
Schedule A
EXPRESS DIRECT WORLD FUND, INC.
FEE
Effective the ____ day of _____, 1996, the annual fee for
services under this agreement is as follows:
<PAGE>
PAGE 7
Schedule B
OUT-OF-POCKET EXPENSES
The Company shall reimburse the Transfer Agent monthly for the
following out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return
postage for proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices,
dividend checks, records of account, purchase confirmations,
exchange confirmations and exchange prospectuses, redemption
confirmations, redemption checks, confirmations on changes of
address and any other communication required to be sent to
shareholders
o typesetting, printing, paper, envelopes and postage for
prospectuses, annual and semiannual reports, statements of
additional information, supplements for prospectuses and statements
of additional information and other required mailings to
shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Company
<PAGE>
<PAGE>
PAGE 1
Plan and Agreement of Distribution
This plan and agreement is made by and between Express Direct World
Fund, Inc. (the "Company") on behalf of its underlying series
funds, and American Express Service Corporation ("AESC"), the
principal underwriter of the Company, for distribution services to
the Company.
The Plan and Agreement has been approved by members of the Board of
Directors (the "Board") of the Company who are not interested
persons of the Company and have no direct or indirect financial
interest in the operation of the plan or any related agreement, and
all of the members of the Board, in person, at a meeting called for
the purpose of voting on the plan and agreement.
The Plan and Agreement provides that:
1. The Company will reimburse AESC for all sales and promotional
expenses attributable to the sale of the Company's shares,
including sales commissions, business and employee expenses charged
to distribution of shares, and corporate overhead appropriately
allocated to the sale of shares.
2. The amount of the reimbursement shall be equal on an annual
basis to 0.__% of the average daily net assets of the Company. The
amount so determined shall be paid to AESC in cash within five (5)
business days after the last day of each month. AESC agrees that
if, at the end of any month, the expenses of the Company, including
fees under this agreement and any other agreement between the
Company and AESC or American Express Financial Corporation, but
excluding taxes, brokerage commissions and charges in connection
with the purchase and sale of assets, exceed the most restrictive
applicable state expense limitation for the Company's current
fiscal year, the Company shall not pay fees and expenses under this
agreement to the extent necessary to keep the Company's expenses
from exceeding the limitation, it being understood that AESC will
assume all unpaid expenses and bill the Company for them in
subsequent months, but in no event can the accumulation of unpaid
expenses or billing be carried past the end of the Company's
fiscal year.
3. AESC agrees to provide at least quarterly an analysis of
distribution expenses and to meet with representatives of the
Company as reasonably requested to provide additional information.
4. The Plan and Agreement shall continue in effect for a period
of more than one year provided it is reapproved at least annually
in the same manner in which it was initially approved.
5. The Plan and Agreement may not be amended to increase
materially the amount that may be paid by the Company without the
approval of a least a majority of the Company's outstanding shares.
<PAGE>
PAGE 2
6. This agreement may be terminated at any time without payment
of any penalty by a vote of a majority of the members of the Board
who are not interested persons of the Company and have no financial
interest in the operation of the plan and agreement, or by vote of
a majority of the Company's outstanding shares, or by AESC. The
Plan and Agreement will terminate automatically in the event of its
assignment as that term is defined in the Investment Company Act of
1940.
Approved this day of , 1996.
EXPRESS DIRECT WORLD FUND INC.
Express Direct World Income Fund
Express Direct World Growth Fund
By __________________________________
[Title]
AMERICAN EXPRESS SERVICE CORPORATION
By __________________________________
[Title]
<PAGE>
